Retail finance executives took unprecedented steps to limit the damage a battered economy could do to their holiday businesses, and they’re ready to go further as they deal with the likelihood of an even more challenging 2009.
In a survey of chief financial officers from 35 national retail chains conducted by the Karabus Management consulting firm of Toronto, 90 percent of cfo’s were able to reduce their inventories on a comparable square-footage basis by midsingle-digit percentages to 15 percent. There was unanimous agreement that receipts would be cut materially for spring based on the “universal recognition of near-term lower consumer demand,” the study found.
Among the highlights of the survey:
• Nearly all cfo’s report cuts in capital expenditures for next year.
• A majority of these executives are revisiting their real estate portfolios.
• A third are seeking to renegotiate rental agreements.
• Nearly all were looking to reduce transportation costs through renegotiation.
Of the 35 retail organizations participating, 29 were specialty stores focused on apparel, jewelry or footwear, and the remainder were department stores. Annual revenues of participating retailers ranged from $250 million to more than $20 billion.
A quarter of those interviewed said they’d canceled orders from suppliers based on the lateness of the vendor. All but 3 percent said they felt margin pressure based on the need to take markdowns earlier, even though most were unable to cut inventories sufficiently to match the drop in demand among consumers.
Antony Karabus, chief executive officer of the firm which bears his name, commented, “Given the concerns regarding women’s apparel this holiday, a number of retailers surveyed described how they were cutting out weaker brands and focusing more on accessories, which were performing well.”
The downturn has put more pressure on stores’ supply chains “as the margin for error is now much lower,” he said. “There is significant work under way to reduce in-transit times and ‘just-in-case,’ as opposed to ‘just-in-time,’ inventory.”
Three-quarters of respondents are working diligently to flow receipts of replenishment items closer to need and are working with suppliers to establish more favorable receipt dates.
Ninety-five percent of those surveyed are reducing capital expenditure budgets for 2009, with cuts, on average, ranging from 10 to 25 percent.
Six out of 10 cfo’s said they either have undertaken or will undertake comprehensive analyses of their real estate portfolios and plans for new stores, remodels and relocations. One-third of that group is “aggressively” pursuing landlords for rent renegotiation, with some willing to vacate existing space if relief isn’t provided. Three-quarters were “meaningfully raising” the performance criteria for remodels and relocations.
In another illustration of how the push for square footage and market share has been replaced by the need for cash conservation, only 25 percent said they were working hard to take advantage of real estate deals to increase share, as opposed to 80 percent who said they are slowing the pace of expansion when new hurdle rates can’t be met. The executives expect more deferrals and cessations of planned mall developments because of the problems developers and landlords are having.
Asked if they were rebidding transportation contracts to offset rate increases associated with benefits and energy costs, 95 percent responded affirmatively.
While marketing and advertising costs have been among the first to feel the sting of reductions, the Karabus study suggested the approach to these cuts has been strategic in nature. Seven out 10 respondents said they are “critically evaluating” zip code distribution, methods of distributing circulars to homes and the size and frequency of those circulars. Half the retailers with circulars and-or catalogues believe that up to 10 percent of that distribution was producing little return.
The cfo’s were open to new media, however. Fifteen percent said they are increasing their spend on social networking sites as well as analyzing their media mixes harder and issuing more e-mail blasts to attract business to their Internet sales channels, which continue to grow. And the same percentage reported they are shifting more of their marketing budgets to loyalty-related initiatives to get more of their existing customers’ available retail dollars. About one in 10 said they were working on CRM,or customer relationship management, initiatives to create more accountability at the store level for “outbound outreach to customers.”
The study partially debunked the theory that high-cost retailers generate the best profits. Some of those retailers in the top 25 percent of margin and-or comparable-store sales performances had the lowest cost structures, Karabus noted.
“The best managed retailers are now saying that ‘minus 5 percent comps is the old plus 5 percent’ and are now planing materially lower overhead structures accordingly in order to position 2009 for the best possible year given the economic times,” he added.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast