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WWD Year In Fashion issue 12/15/2008

This year will be remembered as one of transition for mass market retailers. Expansion plans were curtailed and capital expenditures slashed as signs of the economy’s deterioration came into focus.

There was a changing of the guard in the executive suites of both Target and Wal-Mart, where longtime leaders announced their retirement. Bob Ulrich, chairman and chief executive officer of Target, retired in May, leaving former president Gregg Steinhafel in charge.

This story first appeared in the December 15, 2008 issue of WWD. Subscribe Today.

Wal-Mart ceo H. Lee Scott said in November that he would step down and hand the reins to Michael Duke, vice chairman of the international division, on Feb. 1. Another long time Wal-Mart executive, Eduardo Castro-Wright, was promoted vice chairman of Wal-Mart Stores, adding global procurement to his responsibilities.

One of Scott’s key initiatives has been making the giant Wal-Mart environmentally friendly. The Bentonville, Ark.-based behemoth’s companywide sustainability goals include using 100 percent renewable energy, creating zero waste and selling environmentally friendly products. Wal-Mart said it is moving toward these goals by using sustainable sourcing practices such as energy efficiency, waste reduction, renewable energy and life cycle management. In early December, Wal-Mart created the Green Jobs Council with representatives from the retailer’s divisions and suppliers across a variety of industries. Wal-Mart also reviewed its operations in China, issuing new guidelines that hold suppliers responsible for quality and other issues.

Wal-Mart plans to aggressively pursue business in emerging markets around the world such as Mexico, China and Brazil with 53 percent of allocations shifting to those markets over the next five years. International accounted for 24 percent of Wal-Mart’s $374.5 billion in net sales last year. Duke’s appointment underscores the importance of foreign markets to Wal-Mart. As the retailer begins to inch toward saturation in the U.S., it has looked to its international division for growth.

In what has been a harrowing holiday season so far for most retailers, Wal-Mart managed to post a stronger-than-expected 3.4 percent increase in November same-store sales, while most retailers reported declines. After initial stumbles in apparel, such as the trendy Metro 7 line, Wal-Mart seems to be sticking to its knitting with fashion basics, and activewear and career wear by Norma Kamali.

Struggling Sears Holdings Corp., parent of Sears and Kmart, added to its management team, tapping Nick Coe to be senior vice president of the company and president of Lands’ End. Scott Freidheim was named executive vice president of operating and support businesses.

The demise of Mervyns sent a chill through the retail industry. The 59-year-old, $2.5 billion chain filed for Chapter 11 bankruptcy protection in July and began holding going-out-of-business sales at its remaining 149 locations and auctioning off its store leases. Target was said to be a beneficiary of Mervyns’ collapse and might attract some of its customers, as well as acquire leases.

Bowing to the realities of the weakest consumer market in a generation, Target cut its capital expenditure plans next year by $1 billion. The company has been stressing the “Pay Less” part of its “Expect More, Pay Less” tag line in light of the economy, and said it’s making sure its prices match those of Wal-Mart in all local markets. Target continues to make inroads on the fashion front with the McQ Alexander McQueen for Target line and a Loomstate for Target collection of eco-friendly designs.

Target, however, was facing pressures from other sources. Unhappy with the company’s stock performance, activist investor William Ackman proposed spinning off the land under Target stores into what would become the largest real estate investment trust in the country. Target rejected his proposal.

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