FIELD’S PLAYBOOK FOR ZELLERS
Byline: Valerie Seckler
NEW YORK — Three months after landing the top job at Hudson’s Bay Corp. in Toronto, Bill Fields has charted a plan to fuel the $6 billion retailer’s expansion and fight more aggressively with Zellers against Wal-Mart Canada.
For one thing, the chairman and chief executive officer is converting the company’s 102-unit apparel-driven discount chain, coincidentally called Fields, into small general merchandise discount stores for more mass appeal.
Like small, so-called neighborhood discount stores in this country, the redone Fields units will carry basic and consumable merchandise at everyday low prices. Apparel assortments will be pruned sharply and focused on commodities such as T-shirts and hosiery.
“I see room for 800 or 900 more stores, representing the potential of a Family Dollar-type chain,” Fields said at a Goldman, Sachs retail seminar held at The Plaza Hotel here last Thursday. Family Dollar is expected to generate sales of $1.9 billion this year in its chain of 2,600 neighborhood discount stores in the U.S.
The new format is just one potential growth vehicle at HBC, Fields contended, citing the company’s roughly 8 percent share of Canada’s retail sales excluding food and cars. Zellers controls about 45 percent of the nation’s discount store market and The Bay has roughly 38 percent of its department store sector.
Additional growth paths for Hudson’s Bay include the marketing of retail services and the merchandising of proprietary brands in 15,000-to-20,000-square-foot specialty units under The Bay banner, Fields related. One such specialty concept for hard and soft goods is being tested. Fields did not specify its location.
“I see a huge opportunity in services such as carpet cleaning, optical services and window cleaning,” Fields said.
Currently, Hudson’s Bay operates 101 department stores called The Bay, 296 Zellers discount stores, as well as the Fields chain.
“Overall, The Bay has done well, but Zellers has lost some market share,” Fields admitted. “Wal-Mart’s competitiveness in Canada is an issue we have to deal with. They’ve gained a bit more market share than Zellers with a lot fewer stores.”
Wal-Mart, with 144 stores in Canada, is about half the size of Zellers. Retail analysts estimate Zellers controls about 45 percent of Canada’s discount market, versus roughly 47 percent held by Wal-Mart.
This year, Zellers is opening 10 stores, expanding seven and closing five units, boosting its space by 1.1 million square feet, or 4.7 percent.
The “ideal” Zellers format occupies between 90,000 and 115,000 square feet, Fields said, though the units range from 15,000 to 148,000 square feet. The national chain serves about 8.6 million households weekly.
Significant improvements need to be made on in-stock positions and in sales service at Zellers, Fields observed. “If you went into some of the smaller Zellers, you’d think you were back in the Seventies,” he added. “We have a ways to go.”
“With the arrival of Bill Fields, we expect heightened competition in the future from Zellers,” said John B. Menzer, executive vice president and chief financial officer of Wal-Mart Stores, at a different Goldman Sachs presentation.
Securities analysts also are anticipating improvements under Fields, projecting that HBC’s earnings will surge by 20 to 30 percent this year, totaling $1.50 to $1.60 a share. Hudson’s Bay netted $1.22 a share in 1996.
Meanwhile, Wal-Mart Canada is consistently producing comparable-store sales gains in the double digits, Menzer said. That growth has been powered by apparel, footwear and consumer electronics, the Wal-Mart executive added.
In contrast, first-half comps at Zellers were up only 4.1 percent.
However, Fields pointed out that Zellers “does micromarket to some extent,” potentially boosting the same-stores sales down the road.
He showed a slide of a Zellers print ad in English and Japanese, for the sizable Asian population in the Vancouver market.
Fields is new to Canada’s markets, having joined HBC in June, following a 13-month stint as chairman and ceo of Viacom’s Blockbuster Entertainment Group. Previously, he spent 25 years in merchandising posts at Wal-Mart Stores Inc., eventually rising to become president and chief executive of the Wal-Mart Stores division.
However, in discussing his transition to department store retailing while keeping one foot in the world of mass chains, he displayed an awareness of the Canadian market, such as regional apparel tastes and the nation’s preference for high-low pricing at discount chains rather than everyday low prices.
Assessing Canada’s competitive retail scene, Fields acknowledged, “We’ve been a bit fearful that someone else will take over Eaton’s,” which is in bankruptcy.
Eaton’s creditors approved the company’s reorganization plan Monday, paving the way for it to emerge from bankruptcy this fall. The plan calls for closing 17 department stores and continuing to operate 67 department stores, two warehouse stores and one home furnishings store.
Other initiatives to boost business at Hudson’s Bay Co. will include:
Offering more competitive promotions to extend its credit programs beyond the 8.6 million cards issued by Zellers and the 7.5 million accounts opened by The Bay.
Developing targeted marketing campaigns through the use of its credit card database.
Leveraging the Club Z customer loyalty rewards program aimed at Zellers shoppers.
Operating loyalty rewards programs for third parties, including two deals just signed in Asia and the U.S. Fields didn’t identify the parties.
Continuing to expand shoe departments at The Bay.
“We believe shoes can be a drawing card for The Bay like they are at Nordstrom,” said Fields.
“How and what we merchandise can bring us within 20 percent of U.S. productivity levels,” Fields maintained. The Bay department stores are averaging sales of $130 per square foot, “much lower” than the $160 typically produced by department stores in the U.S., he conceded.
“Some differences in disposable income may partly explain the gap, but we can cater more effectively to this culturally and ethnically diverse market,” Fields said. He noted the sharp contrast, for example, between basics-driven apparel shoppers in Nova Scotia and fashion-forward consumers in Montreal and Toronto.
The performance of The Bay will also be helped, said Fields, by “dropping some categories such as sporting goods and Rubbermaid housewares, where we aren’t offering competitive prices or broad assortments.
“You’ve got problems when you’re merchandising 90,000 square feet of Rubbermaid housewares producing just $9 per square foot,” Fields offered.
Going forward, Fields envisions The Bay as a marketer of a sharply edited group of core brands such as Lauren Ralph Lauren, Tommy Hilfiger, Liz Claiborne Collection and Jones New York.
“We’re expanding our Hilfiger and Lauren merchandise,” Fields related. “We’re moving into more sharply focused, branded assortments.” The Bay is remerchandising 15 stores in a test of this plan, the ceo noted. He declined to furnish details.
“I believe that by offering places to eat as well as by merchandising prepared foods, we can enhance the social nature of the shopping experience,” Fields noted. “We think it’s time to put more theater back into the retail business.
“We also have the potential to capitalize on the recognition of The Bay’s ‘B’ logo,” he added. “Market research shows that it is second only to the Nike swoosh in Canada.”
Mass Monitor: Zellers
’96 Sales: $3.58 billion
’96 Operating Profit: $116.4 million
Market Share: 45 percent
Households Served: 8.6 million weekly
’96 Growth Plan: 10 new stores, 7 expansions, 5 closings