Weak Holidays Force Retailers to Shrink, Rethink Web -- 2nd update
25 Febbraio 2016 - 11:02PM
Dow Jones News
By Suzanne Kapner
Dismal holiday results from retailers are prompting executives
across the industry to shrink or adapt their stores, and rethink
the cost of growing their online operations.
On Thursday, Kohl's Corp. said it would close 18 stores after
reporting weak sales, while Sears Holdings Corp. is looking to sell
$300 million in assets after reporting yet another loss. Best Buy
Co. warned of weak demand for electronics, and shares of
Restoration Hardware Inc. plunged as much as 29% Thursday after it
blamed poor sales on a "pullback by the high-end consumer."
Declining shopper traffic is prompting companies such as Macy's
Inc. and Wal-Mart Stores Inc. to close low-performing locations
this year. The shift to online shopping also is vexing chains:
Nordstrom Inc. said it would curtail technology spending after
profits fell 29% last quarter, in part because of costs related to
Web sales.
In his annual letter to shareholders, Sears CEO Edward Lampert
noted Thursday that 2015 was the year when the impact from
e-commerce and other factors reshaping the industry "spread more
broadly to retailers that had previously proven to be relatively
immune to such shifts," including Wal-Mart, Nordstrom and
Macy's.
Sears has been trying for years to adapt to the changes with
limited success. Its loss widened to $580 million for the period
ended Jan. 30, compared with a loss of $159 million a year ago. The
loss in the recent period included a $180 million write-down of the
Sears trade name.
Revenue fell nearly 10% to $7.3 billion. Sales excluding newly
opened or closed stores declined 7.1%.
Sears said last month that it planned to close 50 stores, but on
Thursday it hinted that it likely would reduce its footprint even
further. The company noted that more than half the leases on 1,253
stores expire in less than five years.
Moreover, Sears has the right to terminate space with respect to
266 stores that it contributed to Seritage Growth Properties, a
real-estate investment trust it created last year.
Kohl's, in addition to closing 18 stores, plans to open seven
smaller locations. The smaller stores will average 35,000 square
feet, compared with about 88,000 square feet for its full-line
locations.
The retailer said the fast pace of digital sales, which
increased 30% in the fourth quarter and exceeded its expectations,
prompted it to take a harder look at its store base. Categories
that have a high level of digital demand will have less space in
the smaller stores, though Kohl's didn't elaborate.
Kohl's profit plunged 20% to $296 million for the three months
ended Jan. 30. Total sales for the period fell 0.8% to $6.39
billion, while sales excluding newly opened or closed stores rose
0.4%.
The company said it expects to fall short of a previously set
goal of reaching $21 billion in sales by 2017. It ended its most
recent financial year with sales of $19.2 billion.
In addition to a shift to online shopping, retailers are
grappling with other issues, including rising wages and unusually
warm weather that left them awash in inventory.
Kohl's CEO Kevin Mansell said the company was experiencing "wage
pressure" in its stores, but hoped to offset that by reducing
marketing costs and inventory. The company plans to reduce
inventory by 10% per store, and is looking to use more personalized
advertising to reduce its overall marketing costs.
On Thursday, Best Buy warned weak electronics sales during the
holidays are expected to continue in the first half of 2016. CEO
Hubert Joly said the smartphone market, which has buoyed its sales,
is approaching a saturation point.
In the quarter that ended Jan. 30, domestic sales excluding
newly opened or closed stores slipped 1.7% after rising 2.8% a year
earlier. The company said weaker sales of mobile phones and tablets
dragged down revenue. Earnings fell 7.7% to $479 million.
Furnishings retailer Restoration Hardware warned Wednesday that
profit would fall 20% in the quarter ended Jan. 30. The company
blamed shipping delays and weak demand, as slumping energy prices
and stock market swings sapped demand for its upscale goods.
Gap Inc. ended the fourth quarter with 73 fewer stores in North
America, part of a continuing strategy to prune underperforming
locations. Profit fell 33% to $214 million in the three months that
ended Jan. 30, including $25 million in restructuring costs. Total
sales slid nearly 7% to $4.39 billion. Sales excluding newly opened
or closed stores fell 4 %.
--Drew FitzGerald contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
February 25, 2016 16:47 ET (21:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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