March 29, 2024

Economix Blog: Inflation Out of Sight

Since the Great Recession began in December 2007, the overall consumer price index is up 7.5 percent, or 1.9 percent a year. But there are plenty of people who insist that the figure must understate actual inflation, citing their own impressions from visits to stores.

In researching my Off the Charts column for this week, which looks at trends in apparel prices, I came across two categories that have been moving in opposite directions, for no reason I could discern. In one, inflation appears to be out of control. In the other there is deflation.

The government puts out a little-noted series on department store inventory prices. It covers goods sold in department stores, but includes prices from other stores. So prices charged at Wal-Mart and the Gap presumably count. It is not just a measure of what Macy’s and Nordstrom are charging.

Such prices can be volatile (SALE! SALE!), so the chart following uses three-month moving averages of seasonally adjusted prices, and shows changes from the level in the three months ended in December 2007.

Bureau of Labor Statistics, via Haver Analytics

Prices of a category called Women’s Outerwear and Girls’ Wear are down 4.8 percent, although that index has begun to rise recently. Other than shoes, that category includes most everything women wear that is supposed to be visible, including coats, dresses, skirts, pants and blouses.

Then there is the category Women’s Underwear, which by the way does not include stockings. It is up 32.5 percent, an annual rate of 7.8 percent.

What is going on? Cotton prices went up, as Stephanie Clifford reported a year ago. But cotton prices are lower now than they were then, and the underwear index is higher.

Would anyone care to explain why, as the economy went down, the prices of undergarments went up?

There is, alas, no separate category for men’s underwear.

Article source: http://feeds.nytimes.com/click.phdo?i=cfb86315e2bd15e3634c38c85771bb7f

DealBook: Leonard Green and CVC Bid for BJ’s Wholesale

Leonard Green Partners and CVC Capital Partners have teamed up with to buy BJ’s Wholesale Club, which announced earlier this year that it was exploring a sale.

The two private equity firms said in a regulatory filing on Friday that they had submitted a joint proposal to buy the retailer. They did not disclose a specific bid price.

Leonard Green, which had previously expressed interest in acquiring BJ’s, is already the company’s largest shareholder, with roughly 9.3 percent of the stock.

Both Leonard Green and CVC are active players in the retail industry.

Leonard Green, based in Los Angeles, has investments in the Container Store, David’s Bridal, Neiman Marcus and Whole Foods. In December, the buyout shop agreed to buy Jo-Ann Stores for $1.6 billion. The deal followed a bid from TPG Capital for the clothier J. Crew.

CVC, located in London, has a more global perspective. Its holdings included C1000, the Netherlands supermarket chain; Matahari Department Stores in Indonesia; and Cortefiel, the clothing retailer in Spain.

Massachusetts-based BJ’s operates more than 190 warehouse in 15 states, mainly located on the East Coast. Amid speculation it was on the block, the company confirmed in February that it had decided “to explore and evaluate strategic alternatives.” Morgan Stanley was hired to help facilitate the sales process.

Article source: http://feeds.nytimes.com/click.phdo?i=17399a8151e1cb40267708f4b9cf80af

Where Others Have Gone Without Success, J.C. Penney Goes Again

It converted stores not attached to malls to Sears Grand stores, which carried food and pharmacy items beside traditional merchandise. A nostalgia-themed store with banjo music and glass jars of candy was tested in suburban Atlanta. The company tried new marketing slogans: “Sears. Where it begins” (2007); “Reimagine You” (2008); “Sears. Life. Well Spent” (2009).

It also improved online efforts, including introducing MyGofer, which allows people to order groceries online.

None of those efforts reversed Sears’s fortunes since Mr. Lampert took over in 2005. Last year, same-store sales in the United States at the company, which owns Sears and K-mart, dropped 1.6 percent. Revenue fell 1.7 percent, to $43.3 billion, results that were “completely unacceptable,” Mr. Lampert wrote in his annual letter to shareholders.

Reinventing retailing, as many chains have learned, is not easy. Yet J. C. Penney is setting out to rethink the shopping experience, announcing on Tuesday that it had hired Ron Johnson, who is in charge of Apple’s stores, as chief executive.

Analysts have said that if anyone can revive tired mall stores, Mr. Johnson is a good candidate to succeed. But the question remains whether tired mall stores can be revived.

“The way malls and department stores are now, I’m not sure there’s a compelling reason” to go, said Denise Lee Yohn, a marketing consultant who works with retailers. “It’s much easier right now to find what I’m looking for on the Internet.”

Mr. Johnson has not detailed his plans for Penney, but in an interview on Tuesday, he suggested that Penney and its competitors needed to change.

“In the U.S., the department store has a chance to regain its status as the leader in style, the leader in excitement,” he said, adding that he and the board could “take this great American brand and make it become something unbelievably exciting.”

Penney’s 2010 revenue rose 1.2 percent to $17.76 billion, and same-store sales — sales at stores open at least a year — increased 2.5 percent. But it “struggles with continued market share loss,” Michelle Clark, of Morgan Stanley, wrote this week in a note. Apple’s case study, however, has given hope to the industry. With its in-house tutorials, and products liberated from their boxes, Apple’s retail stores have earned admiration from shoppers and competitors alike and made the shopping experience cool again. It is that success that helped Penney’s stock rise 17.5 percent on Tuesday after Penney wooed Mr. Johnson from Apple.

Still, Mr. Johnson cannot merely clone Apple’s in-store features. Analysts said that the immediate problems involve changing consumer attitudes toward stores.

“The only reason I would go inside any kind of department store anymore is to return something I ordered online,” said Dorothy Duder, 58, who lives in North Hollywood, Calif.

She said she recently walked through a Penney store, and was unimpressed. “There was way too much merchandise on the floor,” she said. “I’d rather sit in my jammies at home, and have a cup of tea and shop.”

That sentiment is one the entire industry is trying to combat, analysts said.

“Penney’s is in the same boat as a lot of midtier department stores, which is, you’re not really differentiating yourself in the luxury space, and you’re not a value dollar store, a low-income driven retailer,” said Sherif Mityas, of the consulting firm A. T. Kearney. “So you need to create basically a reason for people to come into your store. Department stores in general are really almost too generic at this point, and you’re seeing it in their results.”

Several national store chains have devised strategies that have resulted in financial success.

Macy’s stores still look much as they did years ago, but now the merchandise is different. Macy’s chooses what it carries based on each store’s location and typical shopper profile. It also asks clerks to suggest items.

With localization, Macy’s has an “elevated consumer experience,” said Michael Dart, head of private equity and strategy at the consultancy Kurt Salmon.

In 2010, Macy’s same-store sales rose 4.6 percent, and revenue jumped 6.4 percent to $25 billion, which the company attributed largely to localization. PetSmart took another tack. It was facing intense competition from Wal-Mart, which generally offered lower prices on pet gear, and Amazon.com, which let shoppers avoid hauling boxes of cat litter around a parking lot.

So PetSmart redesigned its stores, relegating commodity items like food to the middle of stores. In the front and on the sides, to grab the attention of shoppers as they enter, it offers services like grooming, training, veterinary care and boarding.

“They said, what would Wal-Mart not do — dog grooming is on the list — and what is Amazon incapable of doing?” said Fiona Dias, executive vice president of strategy and commerce at GSI Commerce, a technology company that works with PetSmart.

Services contributed 10.9 percent of PetSmart sales in 2010, and the company’s total revenue grew 6.7 percent to $5.69 billion. Same-store sales rose 4.8 percent.

Converting shopping into an entertainment experience has helped Kiehl’s, which sells skin and hair care products at kiosks in department stores and stand-alone stores. It revamped its original East Village store, which now features a photo booth and a counter where visitors can order an egg cream.

The store has clerks who give consultations on skin care, an Indian motorcycle that Steve McQueen once rode and old-fashioned crank machines that dispense sample products.

The president of the United States division of Kiehl’s, Chris Salgardo ticked off the multitude of concepts that analysts predicted would crush retailers.

“Through the years, and certainly once QVC came on board — check, the death toll for the stores,” Mr. Salgardo said. “Then came the Web; we were all going to stay at home and shop in our pajamas — check, second death toll,” he said.

But worldwide sales for Kiehl’s increased 43 percent in 2010, compared with 2009. Though people can order from Kiehl’s online, “there are things that you’re going to be able to experience here that you won’t see at home,” he said. “It engages you, and it’s something that you’re never going to get online.”

Article source: http://www.nytimes.com/2011/06/16/business/16penney.html?partner=rss&emc=rss