Highlights from March 22nd Retail Roundtable with John Kyees and Dwight Hill

March 28, 2012

Our March 22nd Retail Roundtable featuring Dwight Hill and John Kyees focused on department stores and the recent changes at JC Penney. John is pessimistic about the potential profitability of the retailer’s decisions, as the changes were company-wide, not tested in select districts or regions. He also feels that the profits must be driven by new, better merchandise. Dwight is more optimistic about Penney’s and said that decreased merchandise, friendlier employees, and focus on consistently low prices rather than coupons and sales will appeal to the “busy mom” in their customer base. Penney’s will not alienate their target customer, but rather offer enhanced brands at similar prices for bargain shoppers. Penney’s has the potential to pull the market share from Kohl’s because of their customer similarities, but is also expected to pull from Macy’s.  

John discussed Urban Outfitters and was complementary of new CFO Frank Conforti. He is also optimistic about the company as a whole, saying its customer-base is there and that their problem is procuring the right merchandise. Urban seems to have consistent traffic to their stores but lacks high conversion rates, which may be due to their recently homogenous merchandise; John feels Urban is best when they have a more diverse selection of clothing. For general retail trends, cotton prices are expected to be half of what they were last year, allowing companies like Urban with short lead time to recover more quickly, and the higher cost of precious metals may somewhat adversely affect jewelers. Regional grocers, particularly Winn Dixie, are still feeling pressure from chains like Walmart, and to compete they must procure unique merchandise and create a better shopping experience, as they cannot compete with the low costs of larger chains.

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