By and  on September 7, 2011

Late summer and back-to-school sales have turned out relatively well, but retailers of all stripes are looking at the economic storm clouds over Europe and the U.S. and steering a cautious course as they head into the fall and holiday seasons.

“When I’m here, everybody is worried — all [the] questions are focused on Europe,” said Emanuel Chirico, chairman and chief executive officer at PVH Corp., at Goldman Sachs’ Eighteenth Annual Global Retailing Conference. “And when I’m traveling throughout Europe and doing this, everybody is worried that the United States is falling into the ocean.”

Although Chirico said back-to-school selling has been “strong,” the company is pulling back slightly given the sketchy outlook.

“We’re not hiring,” he said. “We’re [doing] all the things you would expect us to do as far as inventory. We slowed down some of our store opening plans and we are really monitoring the unit inventory levels in our own stores and department stores to really manage the gross margin in the back half of the year and going into spring 2012.”

The story is the same around the world.

“I have not seen anything, if I look at the whole globe, that causes me to feel like things are going to get a lot better,” said Doug McMillon, president and ceo of Wal-Mart Stores Inc.’s international unit. “Jobs are a big issue virtually everywhere. Jobs are a big issue in South Africa, even though it’s a young nation that’s growing, unemployment rates are high. So everywhere that’s an issue. Gas prices are a second issue that I would mention; they are putting pressure on disposable income everywhere.”

Those who took the longer view were also dour.

“It’s a 10-year cycle,” said Glen Senk, ceo of Urban Outfitters Inc. “I’m not an economics expert, but I look at unemployment, I look at housing prices, and I feel firsthand what my customers are feeling on a day-in, day-out basis. So, I don’t see this getting any better anytime soon.”

And Myron E. “Mike” Ullman 3rd, chairman and ceo of J.C. Penney Co. Inc., said retail concepts that weren’t working would be pressured when interest rates finally start to rise.

“We have way too much space per capita in the U.S....Whether it be too many malls or too much off-the-mall space, there will be a shakeout,” Ullman said. “The customer has a lot of choices and as the choices become more focused, I think that allows the strong operators, the strong merchants to perform better.”

Here are some of highlights from the first day of the two-day conference:

Doug McMillon, president and ceo, Wal-Mart International

■ “We are focused on large high-growth markets, it’s the reason why we went to Sub-Saharan Africa. Not only because of the opportunity in South Africa but the opportunity throughout the region.”
■ “Technology is changing the way customers shop virtually everywhere. Every market that we’re in around the world, something is happening, whether it’s with the handset in India or it’s with a laptop in Canada. Things are moving from a technological point of view and they are moving quickly.”

Robert Shearer, senior vice president and chief financial officer of VF Corp.
■ VF plans to about double its current fleet of 750 stores to 1,500 in the next five years. “But when you think about 700-plus stores today on a global basis, there’s a lot of room to grow without getting a high level of penetration,” Shearer said.
■ Inventories at the close of the second quarter were $1.29 billion, 16.7 percent over the year-ago level. Shearer said about half of the increase was “related to cost [increases] and the rest associated with growth that we are anticipating for the later part of the year. So we are feeling pretty good about that.”

Mike Koppel, executive vice president and cfo, Nordstrom Inc.
■ “The recession of 2008 and 2009 is still very fresh in our minds, and I think we’ve developed some pretty good responses to an accelerating business that does soften, if it should, and we’re prepared to do so, but at the same time I think we’re also prepared to respond if demand continues to be where it is.”
■ “While you’ve heard us talk a lot about the growth in the online space, we are seeing very consistent strength in our bricks-and-mortar business.”
Stephen I. Sadove, chairman and ceo, Saks Inc.
■ “We’re continuing to see improvement in full-price selling. We’ve probably taken 30 percent to 40 percent of the promotion out over the last several years.”
■ “Mobile is a very fast growing tool for us. Purchases on the iPad, for example, are growing dramatically. We’ll have an app in the next several months available.”

Glen Senk, ceo, Urban Outfitters

■ “In the Urban brand we share 60 locations with Forever 21 and those 60 Urban Outfitters stores performed favorably to the group at large. So, competition is good for us.”
■ “We are lucky in that every channel makes money, I don’t think we have a single store that’s not profitable.”

Jonathan Ramsden, cfo and executive vice president, Abercrombie & Fitch Co.
■  “Our absolute top priority [for capital allocation]...is on funding our international growth. The return on invested capital for Hollister in particular is extremely strong. ANF is also very strong and certainly part of all the best returns we see for our capital at this point. So our top priority is to make sure we can fund those.”

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