By Mitchell Schnurman
mschnurman@star-telegram.com
'Tis the season for retailers to be measured, ready or not.
Most companies will report holiday sales next week, and industry surveys forecast an encouraging 3.8 percent rise, with some estimates higher. But the gains won't be even.
"The tide isn't rising enough to lift all ships," said New York retail consultant Howard Davidowitz. "So the winners are eating somebody's lunch."
On Tuesday, Sears reported a 5.2 percent drop in holiday sales and said it would close up to 120 stores. In recent weeks, the Gap, Kohl's and Best Buy posted disappointing numbers, while Macy's, Nordstrom and Limited Brands had healthy increases in same-store sales in November.
This bifurcation of the retail market is on display here, too, with a pair of Fort Worth companies heading in opposite directions.
Pier 1 Imports has posted higher same-store sales for nine consecutive quarters, while RadioShack barely eked out a third-quarter profit.CNBC's Jim Cramer put Pier 1 on his list of holiday stock picks, calling it the best turnaround story in all of retail. He panned RadioShack as a value trap, and Zack's Equity Research dubbed it "bear of the day." Two months ago, Fitch also downgraded RadioShack debt with a negative outlook.
RadioShack's stock (ticker:
RSH), at $9.47 on Wednesday, has lost almost half its value this year. Pier 1 (
PIR), at $13.46, has gained 28 percent in 2011. Each company's results support the stock trends.
RadioShack's same-store sales fell 4 percent in the third quarter, and net income plunged to $300,000, down from $46 million a year earlier. The company struggled in switching wireless vendors, along with other problems,
Pier 1's profit rose to $23 million, with merchandise margins at 60.5 percent of sales. In the past three years, same-store sales have increased a cumulative 31 percent.
One explanation for the gulf between the companies: contrasting management styles.
Pier 1's Alex Smith is a lifelong merchant who bulked up the buying staff, even though the company was in dire trouble. His all-in bet on unique merchandise and freshly designed stores paid off, reviving Pier 1 despite the housing slump.
RadioShack's Jim Gooch is a finance man like his former boss, Julian Day, who was a protege of Eddie Lampert. A hedge fund manager, Lampert took over Sears and Kmart and hasn't been able to fix the stores.
Day and Gooch had some notable success at RadioShack. They cut costs, closed stores and eliminated hundreds of jobs before the economy melted down, allowing the retailer to keep generating profits through the recession. But RadioShack faces stiff competition at every turn and always seems to struggle to find the next hot thing, at least before it's everywhere else.
"Pier 1 is a great example of how you create exclusive product with strong design," said Rich Last, a former J.C. Penney executive who lectures at the University of North Texas.
Pier 1 kept investing and planning for recovery, even as it took longer than expected. When shoppers started looking again, Pier 1 had the right items at the right price.
"In a downturn, it's easy to retrench and cut back, but Pier 1 never let up on the merchandising," Last said.
Last accepted a buyout offer and left Penney in September after 37 years. He said former colleagues have been energized by new CEO Ron Johnson, who created Apple's retail stores and led Target's initiatives with name designers.
Johnson took the reins at Penney in November and has added two other Apple alums -- a chief operating officer and chief talent officer. Johnson is expected to elaborate on his plans next month and has already raised expectations with a major investment in Martha Stewart and talk about transforming Penney.
In an interview in this month's
Harvard Business Review, Johnson said department stores have suffered from a lack of imagination and execution. Apple succeeded in a most difficult niche by re-imagining everything about the process.
"In retailing, you've got to trust your intuition much more than you trust the data," Johnson told the magazine. "There's a tension there, but ultimately if everyone just followed the data, they'd all end up in the same place. And that's part of the problem in retail today. The department stores are redundant.
"They import the same products, they price the same way, they carry the same percentage of their private label to national brands. They're also redundant because they're driven by people whose primary strength is data analytics. But to break through the clutter and do things that haven't been done before, you need to trust your intuition."
Inspiring words, and the kind of approach that makes Penney one of the must-watch business stories for 2012.
The numbers are important, of course. And Pier 1, like every retailer, respects them. It tried to sell specialty foods, for instance, and decided there were better ways to use its store space.
That's using your head. But the winners in tough, uneven times also rely on their gut.
Mitchell Schnurman's column appears Sundays and Thursdays.817-390-7821Twitter: @mitchschnurman
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