Retailers are reining in their spending — with most broadline players slashing millions from their budgets as they try to counter withering sales. Although some, such as Wal-Mart Stores Inc., continue to pump money into their businesses to grab market share, the majority are drastically slimming down within their business models.
And if consumer spending doesn’t bounce back, retailers will have to start making more drastic and ultimately transformational changes that could reshape the industry, said experts.
Sears Holdings Corp., Macy’s Inc., Dillard’s Inc., J.C. Penney Co., Saks Inc., Nordstrom Inc., and Target Corp. cut a collective $668 million in selling, general and administrative expenses in the first quarter, pushing their SG&A expense down 6.3 percent from a year earlier. That means fewer dollars supporting brands and driving foot traffic, the axing of information technology projects and cramped cross-country plane rides for executives who can’t afford to be seen in first or business class as they lay off workers.
“From travel to supplies to benefits to marketing to information technology, we’re leaving no stone unturned,” said Stephen I. Sadove, chairman and chief executive officer of Saks, which reduced first-quarter expenses by $44 million, more than it planned to cut for the whole year. “How we have always done it is irrelevant. We’re approaching every area of the business asking how should we do it going forward.”
Saks rival Neiman Marcus last week revealed plans to reduce expenses by $125 million a year. “Our team has done an excellent job of decreasing their spend,” said Burt Tansky, president and chief executive officer of Neiman Marcus. “We are undergoing a comprehensive process that we believe has been thoughtful and significant.”
About 60 percent of planned expense reductions already have been realized. Neiman’s cut $38 million from selling, general and administrative expenses in the most recent quarter versus its 2008 counterpart.
Sears, which has 3,900 doors under its namesake and Kmart brands and has been criticized in the last few years for not investing enough in its stores, is the industry’s most aggressive cost cutter. The firm surprised Wall Street with first-quarter earnings after it reduced advertising spending by $107 million and payroll and benefit expenses by $84 million.
Cuts are even being made in the off-price channel, despite the competitive advantage that comes from having a value orientation during the downturn. Earlier this year Stein Mart Inc. laid off 178 assistant managers, while the rest of its managerial staff took a 5 percent pay cut and store associates’ hours were cut by 17 percent. Like other retailers, the company stopped paying shareholders a dividend, eliminated its stock buyback plan and halted contributions to employees’ 401(k) retirement plans.
All of this feeds into a vicious economic cycle, where the slowdown in consumer spending prompts businesses to cut workers, increasing the ranks of the unemployed and further weakening spending. Department stores alone eliminated a total of 10,800 jobs in February, March and April, according to government statistics that adjust for seasonal variations in workforce. Last month, the department store channel actually added 4,500 positions, although specialty stores cut 3,300 jobs.
But to every cost-cutting trend, there are exceptions.
Wal-Mart and, to a lesser extent, Kohl’s Corp., actually spent more in the first quarter, investing in their businesses in hopes of grabbing market share while most of the competition is biding its time and many are slimming down their store portfolios.
Wal-Mart upped its operating, selling, general and administrative expenses by $386 million in the first quarter. That spending increase is almost exactly what Macy’s and Sears, the two biggest cost cutters, stripped away.
“This is still Wal-Mart’s game,” said Dean Hillier, consultant and a partner at A.T. Kearney. “They are definitely taking advantage of the circumstances. The market is certainly heading their way and it seems to be sticking somewhat. The others are in a tougher spot and therefore are having to do what they need to do to eke out their profitability.”
@moncler unveiled its latest project, #MonclerGenius, yesterday at Milan Fashion Week. The Italian outwear maker gave show-goers a preview of the monthly collections – which were created by eight designers and creative talents including Pierpaolo Piccioli, Simone Rocha, Craig Green and more – that will start rolling out in the summer.
In honor of Rihanna’s 30th birthday, we took a look back at an interview with the Barbados-native when she was just 18 years old. Here, she talked about her second album, “A Girl Like Me” in 2006. “I want to be me. I want people to fall in love with who Rihanna is, and that’s why I want the album to be about me so people can really find out who this girl Rihanna is, because they only know the ‘Pon de Replay’ girl.” Fast forward 12 years, and she’s released six more albums and has become a powerhouse in both the fashion and music industries. Happy birthday, @badgalriri 🎈(📷: Pavel Antonov) #wwdarchive