Regionally situated retailers have slowly been beaten out of business by the national chains. But not Belk Inc.
This story first appeared in the March 31, 2011 issue of WWD. Subscribe Today.
The 305-unit, Charlotte, N.C.-based traditional department store on Wednesday reported a 90.2 increase in profits for the year ended Jan. 29, and the momentum is continuing into the first quarter, Tim Belk, chairman and chief executive officer, told WWD.
“We are encouraged,” he said. “Spring is going to be good.”
Yet Belk did raise concerns about later in the year. “Fall is a question mark. The economy seems to be improving. That’s helping us and there is a little inflation in our spring assortment. But by September we should see a lot. When you combine that with higher gas and food prices, it’s hard to know what the outcome will be.”
Belk, considered the nation’s largest private department store group, battles the national chains like Macy’s, Kohl’s and J.C. Penney, for market share. The retailer reported Wednesday that year-end profits rose to $127.6 million off a 5.1 percent comparable-store sales increase to $3.51 billion.
Shoes, cosmetics, men’s wear and home were the best performing categories. Gross margins rose to 33 percent of sales from 32.1 percent in 2009.
In the fourth quarter, net income rose 67.6 percent to $95 million from $56.7 million. Total sales rose 7.1 percent to $1.18 billion from $1.1 billion, and gross margin rose to 34.6 percent of sales from 34.3 percent.
“We are seeing very good momentum out there, with a little more discretionary spending,” Belk said. The company’s comps for the year were anywhere from 0.5 percent to 2.5 percent higher than the major competitors, despite being in a region where the unemployment rate is currently about a percentage point higher than the national average. Belk pointed out that the regional and national unemployment rates were about even last fall, but noted that the South has lagged lately.
Belk’s does have an advantage in the South by operating stores in major metro, secondary and tertiary markets and knowing them well, whereas national chains tend to concentrate just in major urban areas. Customers are also said to be very loyal to the store with the Southern roots. The company was founded in 1888 by William Henry Belk in Monroe, N.C., and is in the third generation of Belk family leadership.
Furthering the loyalty factor are recent rebranding efforts which Belk said “have really connected with our customers.” They entail updating the conservative, traditional image; launching last year a slicker blue logo with store signs, shopping bags and charge cards brandishing the look, and connecting better with customers with trendier, more modern assortments while retaining the Southern charm and the more classic components of the assortment.
The overall goal is to pump up productivity, particularly in the shoe, jewelry and denim departments, which are undergoing expansions and renovations and have not performed as well as other categories, such as cosmetics. Last year, 16 new shoe departments, 209 new denim shops and 19 fashion jewelry remodels were opened. The company also launched e-commerce and is funding full-store remodels, with 60 over three years slated.
Belk said some of the merchandise initiatives, to further image updating, are “working really well.…There are some good fashion trends: modern and trendy as a lifestyle is doing really well; women’s sportswear is strong, and better sportswear is helping to drive the business. Special sizes, better and moderate — all three areas of women’s are strong, but shoes continue to set the pace. They’re up double digits.
“Along with gaining market share, we’re focused on the future as we make major investments in our company to assure long-term growth and success,” Belk added, citing investments to build up the merchant organization and information technology, as well as the new departmental prototypes.
In other Belk news, the board approved an offer to repurchase up to 2.2 million shares of the company’s common stock at a price of $33.70 a share. The retailer expects to launch the repurchase offer on or about April 18. Belk has shareholders other than the Belk family but is not traded on the markets.
The retailer opened one new store during the year in Port Orange, Fla., and completed four store remodeling projects at Hamilton Place Mall, Chattanooga, Tenn.; Hattiesburg, Miss.; Tuscaloosa, Ala., and South Boston, Va.