The death of the department store

As reported by the BBC, "The death of the department store," by Stephen Evans a BBC North America business correspondent, on 1 March, 2005  --  Is the department store on its last legs? Should we get ready to mourn an institution that served us well some decades ago but whose time has come and gone?

The questions are begged by the take-over of May Department Stores by Federated Department Stores for $11bn.

There's no doubt the combination is better able to fight its corner - but the question is whether habits and changing ways of shopping make department stores a losing format.

Of course, Terry Lundgren, Federated's chairman, president and chief executive, was confident (how could he not be?): "We have taken the first step toward combining two of the best department store companies in America, creating a new retail company with truly national scope and presence".

But presence where exactly?

There was a time relatively recently when no shopping mall in America seemed complete without a Macy's or a Bloomingdale's (both owned by Federated).

Under threat

But now, not even that is true - Target, Sears and a string of other chains are taking their place as the corner anchors of the big malls.

And the traditional place of department stores in city centres is clearly under threat.

They grew in an age of new urban wealth. Now, the car and supermarkets have changed shopping habits and switched the direction of customers to out-of-town.

And though department stores have tried to follow the customers haven't followed in droves.

Mr Lundgren may well decide to hammer away at the new, merged company's two big brand names, Macy's and Bloomingdale's, perhaps losing some of the lesser known brands to concentrate the strength of the well-known names.

Spruced up

And he may well push through a revamping of the stores.

Federated under his rule has pared down the merchandise on offer to focus on more popular items.

It's jazzed up sections for young people by introducing plasma screens on which teenagers can view themselves and the clothes they're trying on. There are computers for customers to send the pictures to their pals. It's introduced bigger fitting rooms.

But it makes you wonder if it's just like your lovely old auntie trying to look younger by wearing trendy clothes.

After all, Federated's sales in the last year were not much changed from what they were six years ago.

It's true they might have been worse without Lundgren's efforts but they're hardly statistics to inspire cries of joy in the elevators of the nation's venerable stores.

Distinguished history

Venerable they are. Department stores were invented by the French.

Macy's has a long, distinguished history

One Aristide Boucicaut opened the Bon Marche store in Paris in 1838 and that evolved into a department store (a store with different departments for different types of good) in 1852.

The point was that all the departments were under one roof, offering goods at a fixed price.

In 1858, Rowland Hussey Macy founded a "dry goods store" at Broadway and Chambers Street in Manhattan. He was a Quaker whaler from Nantucket who had a red star tattooed on his hand so he took that symbol as the store's logo.

Macy's Herald Square store

By the time Macy died in 1877, the store that bore his name stretched to eleven buildings.

In 1902, the current Macy's was built on Herald Square in New York and it became one of the wonders of the new world as the "largest store on earth" with nine storeys and thirty-three elevators and a pneumatic tube system to whoosh money and messages around the complex.

All very modern at the time. But that was then and this is now. When was the last time you shopped at a department store?  (source: BBC)

The Vanishing Mall

As reported by The Week, "The vanishing shopping mall:  Enclosed shopping centers, clobbered by the recession, are closing by the hundreds. Is our love affair with the mall over?" By The Week Staff, on 26 March 2009 -- Enclosed shopping centers, long the cathedrals of American consumerism, are closing their doors by the hundreds as the recession continues to clobber retail sales. Is America’s love affair with the mall over?

Are malls dying?

The vital signs are not good. Even before the recession hit, consumers had developed mall fatigue, and the classic enclosed shopping mall was in decline. More than 400 of the 2,000 largest malls in the U.S. have closed in the past two years. The last new major mall in the U.S. opened in 2006, and only one big mall is scheduled to open this year—the troubled Xanadu mega-mall in Rutherford, N.J. (See below.) With some 150,000 retail stores projected to fail in the U.S. this year, more mall closings are imminent. Mall mainstays such as Mervyn’s department stores, Linens ’n Things, and KB Toys have already disappeared into bankruptcy, and mall vacancy rates topped 7 percent last year, the highest level since 2001. “It’s an absolute disaster,” says Howard Davidowitz, an investment banker specializing in retailers. “What a mall represents is discretionary spending, and discretionary spending is in a depression.”

Is it really that bleak?

The data suggests that it is. For decades, American consumers could always be counted on to spend more than they did the year before—the only question was, by how much. But in the past 12 months, retail sales in the U.S. have dropped an unprecedented 9.8 percent. The economic collapse has landed especially heavily on the old-line department stores, such as Sears and JCPenney, that anchor many malls. As their sales and profits have tanked, they’ve been pulling out of malls, to the distress of the smaller merchants that depend on the larger stores to feed them traffic. The Turfland Mall in Lexington, Ky., recently lost Dillard’s as an anchor tenant, setting off a cascade of closings. “We have no choice but to leave now that Dillard’s is leaving,” says Bill Parker, who just closed his shoe store.

Have people simply stopped shopping?

No, but they’re increasingly patronizing discounters such as Wal-Mart and Target, not the full-price department stores and high-end boutiques. Sales are growing at Wal-Mart, where shoppers can pick up groceries, fill their prescriptions, and buy socks without leaving the store. Many consumers are also shopping online. “I can’t take a couple of hours out of my weekend to drive down and browse the mall,” says Burlington, N.J., teacher Kari Holderman. Hard times have also meant that consumers are passing up the nonessential items that malls specialize in—things like scented candles, $25 baseball caps, $250 back massagers, and battery-operated guinea pigs spinning on exercise wheels. “The most important fact about our shopping malls,” says social scientist Henry Fairlie, “is that we do not need most of what they sell.”

What happens when a mall dies?

It can devastate the surrounding community. The mall’s site can rapidly turn into a wasteland of overgrown weeds, cracked concrete, and stray animals, with looters picking sites clean of copper tubing, light fixtures, and anything else that can be sold for scrap. When the Riverside Center in Utica, N.Y., closed around Christmas 2007, its owner didn’t even bother to take down the holiday display. The following July, says Peter Blackbird of Deadmalls.com, the roof sprang a leak that drenched the display’s cotton “snow,” which quickly “turned into mold stew.” The fallout goes beyond aesthetics, of course. When a mall closes, unemployment rolls in the region swell, and the loss of property, sales, and business taxes can leave municipalities with serious shortfalls. The city of North Randall, Ohio, is nearly bankrupt following the closing late last year of the Randall Park Mall, once the largest mall in the Cleveland area. “It could simply cease to exist as a city,” says Cuyahoga County Commissioner Peter Jones.

Will anything replace the mall?

Some are being razed to make room for “big box” stores such as Home Depot and discount clubs such as BJ’s and Costco. Still others are being turned into open-air “lifestyle centers,” ersatz Main Streets to replace the real Main Streets that were decimated when malls lured away their customers in the first place. The stores in these centers are at ground level and have entrances facing the street, which helps boost store traffic and sales. Like real Main Streets, lifestyle centers include restaurants, movie theaters, and pedestrian plazas, as well as shopping. The amenities “draw the consumer in for reasons other than to just purchase items,” says Erin Hershkowitz of the International Council of Shopping Centers.

If malls go, could downtowns come back?

In this economy, not likely. Some developers have already tried building “lifestyle centers” in downtown areas left blighted when stores and shoppers fled to the outskirts. But there is no single “big fix” that will pump life back into downtowns full of boarded-up stores, says development expert Teresa Lynch. That means some communities will soon be without a mall or a thriving shopping district, leaving them with no central gathering place. “One of the biggest consequences of mall closings is the loss of a sense of community,” says David Birnbrey of The Shopping Center Group, “a place where people gather and socialize.” And exercise. Retirees Dick and Anne Saplata work out by walking around the largely empty halls of the Metcalf South Mall in Leawood, Kan. It’s likely to close soon, and there’s talk that a developer will raze the place. If the mall goes under, Dick Saplata asks, “where are we going to walk?”

The last mega-mall?

Talk about bad timing. June is supposed to mark the opening of the Xanadu mall on a stretch of New Jersey swampland just across the Hudson River from Manhattan. But it might not happen. When developer Larry Siegel broke ground on the $2.2 billion, 2.4-million-square-foot mall in 2004, he promised that Xanadu would be the ultimate “shoppertainment” experience, with an indoor ski slope, a fishing pond, and even a 30-foot-high chocolate waterfall. But as the recession has deepened, plans have been repeatedly scaled back. Prospective tenants, including Virgin Megastore and Borders, have bailed out, and no anchor tenants have yet been signed. Siegel is vowing to carry on. “We’re not building this for the next 18 months,” he says “but the next 50 years.” The chocolate waterfall, though, has been scaled down to 4 feet.  (source: The Week)

The End of Saks Fifth Avenue?

As reported by the New Yorker Magazine, "THE END OF SAKS AS WE KNEW IT," on 30 JULY 2013, by Amy Merrick -- When Saks Fifth Avenue opened, between Forty-ninth and Fiftieth Streets, on September 15, 1924, shoppers in fur coats and pearls mobbed the sales floors. The first package out its doors was a silk top hat, sent to President Calvin Coolidge. The Roaring Twenties had brought sudden prosperity to a nation tired of sacrifice, and wealthy shoppers were ready to spend. Then came the Great Depression. By 1931, Saks was advertising price cuts on its fur coats. The frenzy was over.

Now, some ninety years later, that narrative is repeating itself, but this time the gilded days may be over for good. The Great Recession halted another boom in luxury retail, when chains like Saks were posting double-digit quarterly sales gains. The announcement, on Monday, that the Canadian retailer Hudson’s Bay was buying Saks seemed to signal the end of an era.

Saks, which tends to change owners every decade or two, was a palace of hushed elegance—the type of store that, as Fitzgerald wrote in “The Great Gatsby,” promised that “the rock of the world was founded securely on a fairy’s wing.” Adam Gimbel, who became the president of Saks in 1926, redecorated the Fifth Avenue store in the Art Moderne style of the Paris Exposition, with velvety sofas and elaborate moldings. His wife, Sophie, was the first American designer on the cover of Time magazine; women crowded into Sophie’s Salon Moderne at Saks for private fashion shows and had their dresses hand sewn in the store. Customers had their hair cut into newly stylish bobs and took golf and ski lessons—indoors—from professional instructors.

Later on, when Saks opened branch stores, shoppers in Palm Beach, Chicago, Miami Beach, and Beverly Hills, and then in smaller markets, could have their own Fifth Avenue experience. The Saks shoe salon in Manhattan grew so vast that it earned its own Zip Code, 10022-SHOE.

As Saks expanded, so, too, did the ways in which people made purchases. Cubicle dwellers developed new routines, starting the work day with a Starbucks latte and a quick browse of their favorite shopping Web sites. Once retailers adopted complex, computerized pricing strategies—similar to those used by airlines to move unsold seats—people realized they could hold out for a bargain, even at the high end.

To purchase Saks, Hudson’s Bay (a chain with its own lengthy pedigree—it began as a fur-trading business, in 1670) agreed to pay sixteen dollars a share, or almost three billion dollars including assumption of debt, a thirty-per-cent premium to the stock price, before merger rumors surfaced. For the Hudson Bay C.E.O., Richard Baker, the deal represents a chance to open Saks locations in Canada, where there is much less luxury competition. Baker, an experienced real-estate investor who bought the upper-mid-scale chain Lord & Taylor, in 2006, and then engineered a takeover of Hudson’s Bay, told analysts that he plans to form a real-estate investment trust to generate cash from Saks’s prestigious addresses.

When executives begin touting minor markets and rejiggering the balance sheet, it’s a sign that their main business doesn’t have much room to grow. The Canadian economy is about the size of California’s—a modest opportunity at a time when the U.S. is opening few malls, but, then, California has Saks Fifth Avenue stores in only five cities. Although sales at Saks rose 4.4 per cent last year, they are still far below their 2008 peak. A hundred dollars invested in Saks stock in February, 2008, was worth only $58.51 five years later.

The sale to Hudson’s Bay is a sign that high-end retailers are struggling to regain the client base they lost during the recession. Over the past few years, as the economy has navigated an uneven recovery and a technological revolution, luxury shoppers have learned to buy differently. At Internet retailers such as Net-a-Porter, which now stocks three hundred and fifty brands, customers will happily purchase high-end merchandise online ($2,990 Proenza Schouler dresses; $1,870 Haider Ackermann blazers), taking advantage of generous shipping and return policies.

They’re even hunting on Amazon, which is stretching into rarefied price ranges by encouraging third-party sellers to hawk expensive clothes and accessories through its site. For customers who want to try on the goods first, it’s becoming easier to visit the fitting rooms at a Saks or Neiman Marcus and then go online for a better deal. (The phenomenon is called “showrooming.”) Buyers have also learned to score bargains on Gilt and other discount Web sites that hold limited-time “flash” sales on designer brands.

By opening so many off-price outlets, Saks and other high-end chains are themselves encouraging shoppers not to pay full price. Saks and Nordstrom now have more outlet locations than they have regular stores. At the Saks annual shareholder meeting in June, the C.E.O., Stephen Sadove, told investors that the retailer has closed twelve Saks stores in the past three years, and that the company will drop to forty locations (from a peak of more than sixty) by the beginning of next year. Meanwhile, the company is opening six or seven Off 5th outlets a year, and it plans to launch Off5th.com this fall. “We see a lot of opportunity there,” Sadove said. Saks has also been working to improve its Web site in response to shoppers’ changing habits.

Luxury retailers argue that there’s little overlap between their regular shoppers and their outlet shoppers; a Saks spokeswoman said that about ten per cent of its customers visit both types of stores, a figure that hasn’t changed significantly in recent years. But that, too, could be shifting. Outlet malls, as a matter of strategy, have traditionally been inconveniently located and designed as sprawling, often open-air centers. Yet on Thursday, the mall developer AWE Talisman LLC is opening a $250-million outlet mall just outside of Chicago, near the O’Hare Airport, where shoppers can admire contemporary art work and bask in the air-conditioning. Among its hundred-plus stores will be an Off 5th and a Neiman Marcus Last Call.

“The reason somebody shops in a regular Saks is for service and the latest fashion,” Sadove said at the shareholder meeting. “The reason someone shops in an outlet is for brand and a deal.” If outlet malls get cushier, however, those customers could increasingly be one and the same. Department stores argue that they can’t afford to be snobbish about where and how they sell their merchandise. “We have to be relevant with all the different ways that a customer chooses to interact with us,” said Colin Johnson, a spokesman for Nordstrom, which bought the flash-sale site HauteLook more than two years ago, for $270 million. E-commerce is the fastest-growing part of Nordstrom’s business, Johnson said, and it’s where the company expects most of its future growth to come from. (Nordstrom also plans to open its first Manhattan store, on Fifty-seventh Street between Broadway and Seventh Avenue, in 2018—around the time driverless cars are predicted to hit the market.)

The next test of the value of luxury stores could be the initial public offering of Neiman Marcus, which filed plans with the Securities and Exchange Commission last month but hasn’t yet set a date for offering shares. For Saks, the sale to Hudson’s Bay is an acknowledgment that, in years to come, high-end shopping will be a whole lot less glamorous than it used to be.[http://www.newyorker.com/online/blogs/newsdesk/2013/07/the-end-of-saks-fifth-avenue-as-we-knew-it.html Amy Merrick, a writer and a former Wall Street Journal reporter, teaches journalism at DePaul University in Chicago.]

Good to Gone to Great: The Circuit City Story

From the Wall Street Journal's Bankruptcy Beat, "An inside look at companies in trouble from Daily Bankruptcy Review," on 25 October 2012, "Lessons From the Death of Circuit City," by By Rachel Feintzeig -- Alan L. Wurtzel spent his adolescence putting antennas on roofs, delivering televisions and listening in on the Sunday night strategy sessions his father—the ambitious, optimistic founder of a Virginia electronics retailer—held in their home.

Over the course of the next sixty years, Circuit City Stores Inc. would grow into a company with 700-plus stores and $12 billion-in-sales—and then quickly collapse into bankruptcy and liquidation. Wurtzel would go on to helm the company and then cut his ties with it only to eventually be drawn back in by the aftermath.

“I wanted to understand what happened,” Wurtzel said.

The former Circuit City chief executive spent years sifting through filings and interviewing scores of former employees, directors, suppliers and analysts in an effort to unravel how the concept that came to his dad in a barber shop devolved into a victim of the global downturn and shifting consumer shopping patterns. His research recently yielded “Good to Great to Gone: The 60 Year Rise and Fall of Circuit City.” The book, which went on sale on Tuesday, is a case study, he says, of a business that found its stride and then refused to speed up when the pace of the industry quickened.

Circuit City wasn’t necessarily fated to collapse in 2009, Wurtzel said in an interview Wednesday, “had it woken up sooner.” Instead, management ushered in the new century with largely the same strategy Wurtzel had developed in 1980, focusing on services that customers didn’t need or want anymore. 2000 was technically the company’s best year, but even in the late 1990s, competitors like Best Buy BBY -1.98% Costco COST +0.05% and Kmart had already begun to chip away at the business’s foundation.

“It wasn’t obvious in sales and earnings, but the rot had set in,” Wurtzel said.

At that time, Wurtzel was a member of the company’s board, having stepped down as CEO in 1986. By 2000, he had also left the board and was completely uninvolved with the company.

“I sold my stock because I didn’t believe in the future,” he said.

Inside the business, management was aware of the retailer’s shortcomings, “but there was an arrogance,” Wurtzel said. He believes Circuit City’s decision makers weren’t scared enough by the shifting pressures in the industry nor nimble enough to quickly change course.

Two former chief executives and a former attorney for Circuit City and its management couldn’t immediately be reached for comment Thursday in response to Wurtzel’s criticisms.

Wurtzel believes that once management finally came up with a plan, it failed to execute it, deterred by pressure from Wall Street. The investments that would have moved Circuit City’s business forward also would have threatened its stock price, he said.

“I don’t think you can turn around a failing company in the full glare of publicity,” he said.

That observation led Wurtzel to a tangible recommendation for struggling businesses: Go private before executing a turnaround. But many of the lessons he learned from studying his family business are vaguer and read almost like maxims. He calls them “habits of mind,” and they include mantras like “be humble,” “run scared” and “curiosity sustained the cat.”

“Don’t think you know all the answers, because once you get complacent, you’re in trouble,” he said.

Wurtzel’s father, Sam Wurtzel, opened a television store known as Wards, the first location in the eventual Circuit City empire, in Richmond, Va., in 1950. The idea came to him when he was passing through the city, stopped for a haircut and heard the barber talking about the South’s first television station, which had just debuted there.

“The day he opened the store, he thought it would be a billion-dollar company,” Alan Wurtzel said of his father.

The business evolved over the years, shifting from smaller hi-fi stores, selling gadgets like tuners and speakers, to bigger footprints offering a wider variety of electronics. The company faced bankruptcy in the 1970s but prevailed, and a name change and billions in sales followed. When the most recent economic crisis struck, Circuit City headed for Chapter 11 and tried to downsize but ultimately failed to pull off a reorganization. Some 43,000 workers were left unemployed.

Wurtzel said it was painful to see the company shut down.

“I think in some ways it’s like losing a child,” he said, adding that he had expected to survive the business and “found it contrary to the natural order of things” to see it dissolve.

Circuit City’s lifespan proves that businesses have to fight hard every day, Wurtzel said.

“The world is always changing, and you can’t rely on your past accomplishments,” he said. (source: The Wall Street Journal)

Good to Gone to Great: The Circuit City Story

Borders Bookstore Bankruptcy

Are malls a dying breed?

Some former titans of shopping are coping with vacant storefronts

Sunday, February 22, 2009 By Mark Belko, Pittsburgh Post-Gazette

From shuttered storefronts to near-empty corridors, hard times have hit some of the region's largest shopping malls.

Once the pillars of local consumerism, malls from Frazer to Monroeville to West Mifflin are struggling with vacancies as the nation's deepening recession takes its toll on retailers and shopper confidence.

At Century III Mall, one wing of the sprawling West Mifflin complex is nearly empty because of an exodus of stores. By a Pittsburgh Post-Gazette count, more than 30 storefronts are empty.

In Frazer, the Galleria at Pittsburgh Mills is coping with some 37 vacancies, as the huge ranch-style mall continues to struggle to find a niche since its opening in 2005.

And in the east suburbs, Monroeville Mall, where the 1978 cult classic "Dawn of the Dead" was filmed, finds itself amidst a real-life retail horror story, with roughly 20 empty storefronts by the newspaper's count.

Some local malls are bucking the climate, most notably Ross Park Mall, which has become an upscale mecca with stores like Nordstrom, Tiffany's, Michael Kors and L.L. Bean. But even it isn't immune. About a dozen stores were vacant during a recent visit, although new tenants have been named for six of them.

Experts say it's no surprise that area malls are taking it on the chin, with retail sales slumping nationwide and big-name chains such as Circuit City, Boscov's, KB Toys and Steve & Barry's going bankrupt.

"It's a tough environment for anybody serving consumers," said George Whalin, chief executive officer of Retail Management Consultants near San Diego.

Nor are the struggles limited to the Pittsburgh region. Erin Hershkowitz, spokeswoman for the New York-based International Council of Shopping Centers, said malls throughout the country are grappling with similar issues.

"People are afraid of losing their jobs as unemployment is on the rise. People are losing their homes. This certainly is going to have an impact on malls," she said. "There are just a lot of consumers who are unable to spend like they used to."

It could get worse before it gets better. The shopping center group reported earlier this month that chain-store sales were down 1.6 percent in January compared to the same month in 2008. It is predicting sales in February will fall one to two percent.

Too many stores, too much spending

The gloomy retail climate prompted one expert, Burt P. Flickinger III, managing director of SRG Insights, to predict 2,000 to 3,000 shopping malls and shopping centers nationwide could go belly-up this year.

He also estimates 200,000 retail stores and restaurants will file for bankruptcy in 2009, about 70,000 more than average.

"With consumer credit being cut and so many people being laid off, shoppers just don't have sufficient spending power for all the new shopping centers and shopping malls and retailers to produce a profit," he said.

Mr. Flickinger blames the industry crisis on a combination of factors, from overbuilding by developers to overspending by consumers. Last year, he said, it came home to roost.

"After 25 years of overspending and 25 years of overbuilding, retail went into the tank," he said.

Mr. Flickinger believes the retail industry is about 400 days into a 1,000-day recession. He doesn't expect things to bottom out until next year before a "good bounce back" in 2011.

As far as recessions go, "This will be the worst one in nearly 70 years," he said.
One recent survey found 40 percent of the people who redeemed gift cards at Wal-Mart did so for groceries.

"People can't afford the basics, so shoppers aren't buying discretionary items," he said.

That's not good news for shopping malls and the plethora of specialty retailers in them. Ms. Hershkowitz said specialty apparel spending is down significantly, along with luxury and department store buying.

Les Morris, a spokesman for Indianapolis-based Simon Property Group, said the occupancy rate at that company's 164 malls has slipped from 93.5 percent to 92.4 percent -- still "pretty healthy" but also an indication of the retail slump.

"It's a harder environment out there, no question about it," he said. Simon owns Ross Park, South Hills Village and Century III malls.

Peter Schiff

' Worst economic collapse ever'

Three stores closing at DeSoto Square mall

 As dismal retail conditions continue nationwide, three stores at the DeSoto Square mall are scheduled to close.

Corporate and mall officials Wednesday confirmed Old Navy, Waldenbooks and Lady Footlocker will close by the end of the month.

DeSoto Square mall spokeswoman Kimbra Hennessy said the last day of business for Waldenbooks is Jan. 24. Old Navy’s last day will be Jan. 26, and Lady Foot Locker will close Jan. 31.

The scheduled closings come at a time when U.S. retailers saw sales drop by 2.7percent in December, the sixth straight month of sales declines.

“Given the challenging economic environment, these closings aren’t surprising,” said Les Morris, spokesperson for Simon Property Group, which owns De-Soto Square mall. “All three closings are due to corporate decisions.”

At the DeSoto Square mall on Wednesday morning, closing signs were posted throughout Waldenbooks, whose parent company is Borders Group, Inc.

Bonnie Schmick, spokeswoman for Borders, said the Waldenbooks was an underperforming store.

“It’s closing as part of our previously announced initiative to right-size the Waldenbooks segment by closing underperforming stores,” Schmick said. 

In March 2007, Borders announced it was planning to close 250 underperforming Waldenbooks over a two-year period. Waldenbooks closed 124 stores from the fourth quarter of 2006 through 2007.

Borders Group Inc. reported an 11.7 percent decline in its holiday sales for the nine-week period ending Jan. 3. Schmick said each store usually has about 10 employees.

“We certainly will make every effort to place qualified employees at a nearby Waldenbooks or Borders store,” Schmick said.

No closing signs were posted at the Old Navy on Wednesday, however, there was limited inventory on the sales floor.

Several shelves and display tables were vacant near the back of the store and clearance signs of up to 75 percent off were posted through much of the store.

Reasons for Old Navy’s closing weren’t disclosed by Catherine Rhoades, spokeswoman for Gap Inc., which owns Gap, Old Navy and Banana Republic.

Also, Rhoades would not disclose how many employees work at the Old Navy. 

However, she said performance, the number of stores on the market and lease terms are common factors that lead to a store closing.

Rick McAllister, president of the Florida Retail Federation, said closing underperforming stores has always been a common practice by corporations, regardless of the economy. 

“Typically, that’s OK because they’re opening a similar number of stores elsewhere,” McAllister said. “But what you’ll see in this economy is retailers being more careful about the number of stores they’re opening.”

Store closures in a mall can often be due to costly lease terms, he said.

“What you see in a lot of mall situations is the lease factors,” McAllister said. “A lot of those contracts were made when times were booming, now retailers are asking malls what these leases should be.”

Simon Property Group and mall officials wouldn’t discuss specifics regarding leases at the DeSoto Square mall.

Morris said most of Simon’s 164 regional malls had an average occupancy rate of 92.5percent.

According to Hennessy, the DeSoto Square mall has at least 100 shops.

“Our retailer mix remains strong at DeSoto Square mall and we will fill the space with interesting and compelling retail concepts that will further enhance the shopping experience at DeSoto Square mall,” she said.

Civil Rights - Eyes on the Prize 8 - Boycott Victory

SUPPLY AGREEMENT: Cone Mills and Levi Strauss

Here is a sample contract agreement between Levi Strauss and Cone Mills:

SUPPLY AGREEMENT

----------------THIS IS A SUPPLY AGREEMENT dated as of the 30th day of March, 1992(the "Agreement"), between CONE MILLS CORPORATION, a North Carolina corporation("Cone"), and LEVI STRAUSS & CO., a Delaware corporation ("LS&CO.").

WHEREAS, Cone is a major supplier of LS&CO. and LS&CO. is Cone'slargest customer; and

WHEREAS, Cone and LS&CO. have maintained, for more than 75 years, aunique, cooperative supplier/customer relationship for the development of ConeXXX denim fabrics used in the LS&CO. 501(R) family of jeans, a relationshippremised in part on management compatibility and continuity; and

WHEREAS, Cone and LS&CO. desire to solidify their relationship andassure its continuity;

NOW, THEREFORE, in consideration of the premises and other good andvaluable consideration, receipt of which is acknowledged, it is agreed: (Source: onecle.com)

When Walmart Met Levi Strauss

Fast Company 17 Dec 2007 reports in an article entitled "The Wal-Mart You Don't Know" by Charles Fishman:

But as Wal-Mart has grown in market reach and clout, even manufacturers known for nurturing premium brands may find themselves overpowered. This July, in a mating that had the relieved air of lovers who had too long resisted embracing, Levi Strauss rolled blue jeans into every Wal-Mart doorway in the United States: 2,864 stores. Wal-Mart, seeking to expand its clothing business with more fashionable brands, promoted the clothes on its in-store TV network and with banners slipped over the security-tag detectors at exit doors.

Levi's launch into Wal-Mart came the same summer the clothes maker celebrated its 150th birthday. For a century and a half, one of the most recognizable names in American commerce had survived without Wal-Mart. But in October 2002, when Levi Strauss and Wal-Mart announced their engagement, Levi was shrinking rapidly. The pressure on Levi goes back 25 years--well before Wal-Mart was an influence. Between 1981 and 1990, Levi closed 58 U.S. manufacturing plants, sending 25% of its sewing overseas.

Sales for Levi peaked in 1996 at $7.1 billion. By last year, they had spiraled down six years in a row, to $4.1 billion; through the first six months of 2003, sales dropped another 3%. This one account--selling jeans to Wal-Mart--could almost instantly revive Levi.

Last year, Wal-Mart sold more clothing than any other retailer in the country. It also sold more pairs of jeans than any other store. Wal-Mart's own inexpensive house brand of jeans, Faded Glory, is estimated to do $3 billion in sales a year, a house brand nearly the size of Levi Strauss. Perhaps most revealing in terms of Levi's strategic blunders: In 2002, half the jeans sold in the United States cost less than $20 a pair. That same year, Levi didn't offer jeans for less than $30.

For much of the last decade, Levi couldn't have qualified to sell to Wal-Mart. Its computer systems were antiquated, and it was notorious for delivering clothes late to retailers. Levi admitted its on-time delivery rate was 65%. When it announced the deal with Wal-Mart last year, one fashion-industry analyst bluntly predicted Levi would simply fail to deliver the jeans.

But Levi Strauss has taken to the Wal-Mart Way with the intensity of a near-death religious conversion--and Levi's executives were happy to talk about their experience getting ready to sell at Wal-Mart. One hundred people at Levi's headquarters are devoted to the new business; another 12 have set up in an office in Bentonville, near Wal-Mart's headquarters, where the company has hired a respected veteran Wal-Mart sales account manager.

Getting ready for Wal-Mart has been like putting Levi on the Atkins diet. It has helped everything--customer focus, inventory management, speed to market. It has even helped other retailers that buy Levis, because Wal-Mart has forced the company to replenish stores within two days instead of Levi's previous five-day cycle.

And so, Wal-Mart might rescue Levi Strauss. Except for one thing.

Levi didn't actually have any clothes it could sell at Wal-Mart. Everything was too expensive. It had to develop a fresh line for mass retailers: the Levi Strauss Signature brand, featuring Levi Strauss's name on the back of the jeans.

Two months after the launch, Levi basked in the honeymoon glow. Overall sales, after falling for the first six months of 2003, rose 6% in the third quarter; profits in the summer quarter nearly doubled. All, Levi's CEO said, because of Signature."They are all very rational people. And they had a good point. Everyone was willing to pay more for a Master Lock. But how much more can they justify?"

But the low-end business isn't a business Levi is known for, or one it had been particularly interested in. It's also a business in which Levi will find itself competing with lean, experienced players such as VF and Faded Glory. Levi's makeover might so improve its performance with its non-Wal-Mart suppliers that its established business will thrive, too. It is just as likely that any gains will be offset by the competitive pressures already dissolving Levi's premium brands, and by the cannibalization of its own sales. "It's hard to see how this relationship will boost Levi's higher-end business," says Paul Farris, a professor at the University of Virginia's Darden Graduate School of Business Administration. "It's easy to see how this will hurt the higher-end business."

If Levi clothing is a runaway hit at Wal-Mart, that may indeed rescue Levi as a business. But what will have been rescued? The Signature line--it includes clothing for girls, boys, men, and women--is an odd departure for a company whose brand has long been an American icon. Some of the jeans have the look, the fingertip feel, of pricier Levis. But much of the clothing has the look and feel it must have, given its price (around $23 for adult pants): cheap. Cheap and disappointing to find labeled with Levi Strauss's name. And just five days before the cheery profit news, Levi had another announcement: It is closing its last two U.S. factories, both in San Antonio, and laying off more than 2,500 workers, or 21% of its workforce. A company that 22 years ago had 60 clothing plants in the United States--and that was known as one of the most socially reponsible corporations on the planet--will, by 2004, not make any clothes at all. It will just import them.

In the end, of course, it is we as shoppers who have the power, and who have given that power to Wal-Mart. Part of Wal-Mart's dominance, part of its insight, and part of its arrogance, is that it presumes to speak for American shoppers.

If Wal-Mart doesn't like the pricing on something, says Andrew Whitman, who helped service Wal-Mart for years when he worked at General Foods and Kraft, they simply say, "At that price we no longer think it's a good value to our shopper. Therefore, we don't think we should carry it."

(Source: Fast Company)

Levi's jeans ride into the sunset

Oliver Poole from the UK Telegraph reports from Los Angeles on 26 Sep 2003:

Levi Strauss, the jeans company that became an icon of American culture, is heading west - so far west that its clothes will no longer be made in the United States.

The firm is to close its last factories in North America and will instead rely on plants in the Far East.

It blamed high labour costs for the decision, ending a history of producing jeans in America that stretches back to the California Gold Rush of the 1850s.

Although the company's headquarters will stay in San Francisco, its two remaining plants in the United States, in San Antonio in Texas, will close at the end of the year. Its final two North American factories, in Canada, will cease production next March. In total, nearly 2,000 jobs will be lost.

The news was greeted with dismay, even among people associated with the firm. Stephen Walker, who conceived Levi's British advertisements in the 1980s, said few items were as linked in the public's mind with being all-American.

"Cowboys and cars driving in the desert, Harley-Davidsons and rebellious young men: no other brand had the authenticity,"he said.

Union leaders said the decision went against everything the family-controlled company used to stand for. The image of the cowboy in his Levi's, rivets glittering in the desert sunlight, has been one of the most potent and enduring of all-American images for decades.

Levi's plants once dotted south Texas from San Angelo to the Rio Grande. The jeans' design was originally produced to cope with the rigours demanded of it by miners heading to California with the dream of finding gold.

But Levi's maintains that the move is an inevitability of global economics and that even Americans on minimum wages cannot compete with cheap overseas labour.

In the past few years the company suffered as fashion moved away from its classic 501 line, worn by teenagers and adults alike in the 1980s and early 1990s. New competitors, such as Gap and Diesel, became the designer label of choice for consumers.

After hitting all-time record sales of $7.1 billion (£4.5 billion) in 1996, last year it posted sales of $4.2 billion (£2.6 billion).

Phil Marineau, the company's chief executive, said that to cut costs the company would in future be producing none of its own jeans, contracting out the process instead.

All orders will now be produced by businesses located in countries such as China and Bangladesh and the world's most famous denim company will no longer make jeans, just design and market them.

It is a business model that most of its rivals have already adopted. Levi's main American competitors - Lee and Wrangler - led the way in moving out of manufacturing at home.

On Wednesday the Cone Mills Corporation, the largest denim manufacturer in the US, declared bankruptcy as it lost its struggle to compete with labour wages abroad.

Bruce Raynor, the president of Unite, the largest apparel workers' union, said the job losses in the clothing industry were the result of US trade policies that allowed companies to "scour the globe for the cheapest, most vulnerable labour".

By 2010, only 10 per cent of the US economy is predicted to be in manufacturing.

Ghosts in the Department Store

From the New York Times on 24 December 2005 in an article by Michael Barbaro:

WASHINGTON - Perhaps no city in America has buried more hometown department stores than this one. First it was Lansburgh's in 1972, then S. Kann Sons in 1975, Garfinckel's in 1990 and Woodward & Lothrop in 1995. Each closing, from bankruptcy or buyout, brought more grief than the last.

So now, with Washington's last local department store, the Hecht Company, set to disappear after Christmas, what kind of public outpouring can be expected?
"It's not a big deal to me," said Deloris Scott, 49, who has shopped at the chain for more than a decade.

Dietrich Maager, 62, standing in the men's department of the chain's downtown store, asked and answered his own question: "Will I miss it? No."

So much for nostalgia. For nine regional department stores whose grand family names have defined communities for the better part of a century - Kaufmann's in Ohio, Famous-Barr in Missouri, Meier & Frank in Oregon, to name a few - it has come to this.

Shoppers say the stores have already lost their local identities and, with it, their customers' loyalty.

So when it became clear that these storied local brands would be unceremoniously replaced by Macy's stores as part of a merger of the Federated and May chains, consumers responded, for the most part, with a collective shrug. In Boston, the excitement was tangible when rumors began to swirl that the downtown Filene's building, which will be sold by its new owner, might be replaced by a Target.

It is an ignoble denouement for a collection of family merchants that profoundly shaped American culture, turning what had merely been an idea - a consumer democracy, where fashion and luxury were available to anyone to try on, buy or aspire to - into a brick-and-mortar reality.

But it is not, in the end, a surprising one. The regional department store has struggled for relevance and profits for decades. Its sprawling, one-stop-shopping structure, so vital to its early success, made it an all-too-easy target for competitors. Entrepreneurs began to bite off business, one department at a time, until there was nothing left for the department store to call its own.

Suddenly, there was Crate and Barrel for furniture; Circuit City for electronics; Gap for casual clothes. Department stores retrenched, focusing on fashion, but not even that worked. Over the last decade, apparel sales at department stores have fallen by $7 billion, according to the NPD Group, a market research firm.

Mergers, intended to give department stores strength in numbers, seemed only to hurt them, turning companies with local quirks into purveyors of "numbing sameness" said Robert F. Buchanan, a retail analyst at A. G. Edwards, the financial company. (This holiday season, eight of the nine May chains feature the same purple cashmere sweater, digital camcorder and diamond necklace on their Web sites.)

Now it is a merger, once again, that will try to save the department store. Federated, which operates Macy's and Bloomingdale's, has purchased May, owner of Hecht's, Filene's, Robinson-May, Famous-Barr, Foley's, Meier & Frank, Marshall Field's, Strawbridge's, Kaufmann's and Lord & Taylor.

By fall 2006, Federated will turn about 390 of the 487 May stores into Macy's. The 54 Lord & Taylor stores, which may eventually be sold, will keep their name. Federated plans to eliminate 6,200 jobs and sell or close 80 stores in malls and downtowns where there is overlap between the chains.

Federated executives are fond of arguing that shoppers' lack of loyalty for their local department stores will make it easier for Macy's to win over communities. They hint at internal polls, never released publicly in full, that show a majority of consumers would be happy to shop at a Macy's.

But there are plenty of skeptics. "There is a high hurdle for Macy's to clear," said Burt Flickinger III, a retail consultant, who says department stores rely too heavily on aging designers, like Ralph Lauren, who have lost their connection with the legions of young consumers who have turned retailers like Abercrombie & Fitch into a white-hot success.

A. G. Edwards says sales at Federated stores open at least a year, a widely used measure of a retailer's health, have fallen three of the last four years. "They are the best in the industry, but they are losing market share year after year after year," said Mr. Buchanan, the analyst.

In an interview, Terry J. Lundgren, the chief executive of Federated, said the size of the new company would give it greater negotiating power with clothing manufacturers, and he held out the possibility that top designers would create exclusive lines for Macy's once the name change turns it into a national department store. Designers, he said, "are now coming to us" rather than the other way around.

But if consumer reaction - or lack thereof - to the coming name change is any indication, Federated faces an uphill battle. In interviews around the country, shoppers at the chains scheduled to become Macy's talked about the stores as if they were beloved family members whom they had not spoken to in years.

They expressed fondness for the brands, but many confessed they rarely bought much at the stores, relying on them for quick purchases like a pair of gloves or a bottle of perfume.

Andrew and Laree Eby, who live in Portland, Ore., came to Meier & Frank with their young daughter to see the annual Santaland display, which includes a monorail.

Mr. Eby called the chain's demise "sad, because it's a tradition." But asked if he shopped at the store, he responded, "No, and we probably won't shop at Macy's either." "We'd go to Target," he said.

There is at least one notable exception to all of this ambivalence: Marshall Field's, whose elegant State Street store in downtown Chicago, elaborate Cinderella holiday windows and widespread charitable giving have inspired fierce opposition to the name change.

A grass-roots campaign, called Keep It Fields, has created an online petition to stop Macy's from marching into the city. So far, 47,000 people have signed it.
Mr. Lundgren was worried enough about the reaction that he flew to Chicago to announce his decision to retire the Marshall Field's name, even meeting with Mayor Richard M. Daley to placate angry city leaders, who recently passed an ordinance that designates the Chicago store a city landmark.

For the most part, the diplomacy has not worked. "It's horrible," said Susan Brell, 56, as she plucked a box of Marshall Field's famed Frango mints from a Christmas tree at the flagship store. "Marshall Field's is Chicago, it's everything about Chicago and especially at Christmastime," she said. Macy's, Ms. Brell said, "is doing our city a disservice."

But there is no such organized campaign to preserve the May department stores in Portland, Boston or Washington.

Paula Bress, 52, a teacher who lives outside Boston, said the nation's remaining department stores ran together in her mind. "I think of them as all pretty similar now," she said.

A resident of Portland, Kristin Watkins, said she often browsed the 10-story downtown Meier & Frank store, with its Georgian Room restaurant on the top floor, but prefers Pioneer Place, a mall across the street. Meier & Frank, she said, has lost its luster. "Just look at the carpet," she said, pointing to a worn gray carpet in the picture-frames section of the store. "It's just not pleasant aesthetically anymore."

In Boston, home of Filene's, some shoppers mistakenly believed, after the merger of Federated and May, that the discount chain Filene's Basement, a separate entity that is owned by Retail Ventures Inc., would close, setting off a momentary panic. "I don't care about Filene's" department store, said Natalia Navarro, 22, who works at an insurance company in Boston. "So long as Filene's Basement stays here, I'm fine."

In Washington, where the four-story flagship Hecht's store rises like a stone fortress in the middle of downtown, consumers, not to mention the chain's holiday window design staff, appeared resigned to the company's fate. One sparse display, facing G Street, consisted of three perfume bottles on a podium, with a white orchid nearby. "Euphoria," read the writing on the walls. "A new fragrance from Calvin Klein."

Stephanie Weber, a 43-year-old engineer who tried to sneak some Christmas shopping into her lunch break, recalled setting up her wedding registry at Hecht's and buying "the most fabulous dress I own" there, a fancy blue sequined gown. But she is not mourning the chain.

"It's not really a local chain anymore," she said.

Reporting for this article was contributed by Brian Libby in Portland, Ore.; Gretchen Ruethling in Chicago; and Katie Zezima in Boston.