Will Retailer Cutbacks Continue?


Everybody’s Doing It: Cutting Jobs, Closing Stores, etc. – 2/1/08


Retailers are in pull back mode. Ann Taylor, Eddie Bauer, Home Depot, J.C. Penney, Sears, Starbucks and Wal-Mart are among the companies that have recently announced that they’d be taking a variety of actions to deal with what each sees as a challenging retailing environment in the months to come.

Discussion questions: Does it seem to you that many retailers misjudged the degree to which consumers would pull back on spending? Do you think we will be seeing many more announcements about layoffs, store closings, etc. from retailers? Generally speaking, are the retailers cutting back now going to be in a better or worse competitive position as a result of their actions when the economy picks up again?

My post:

I don’t think anyone can honestly say they foresaw the severity of the pullback in consumer spending.  The current spending slowdown is likely to continue for the next few months at least.  I do think we will hear of more layoffs, closings, etc.  The weaker retailers will likely fold, or be bought.  But even the stronger retailers will use this time as an opportunity for “pruning” their structure.  This can mean a desired restructuring that would be difficult to explain to internal and external stakeholders during rosier times.  It can and should include trimming poor performing locations from the real estate portfolio or at least renegotiating rents.  The JC Penney example is a good one, where Ullman is making prudent structural changes that will strengthen their competitive position as the economy improves.

Mike Osorio, your Dare to be Contagious! ™ strategist




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