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Day 6

2012 4th Quarter Results
by

Chris Jackson

on 10 February 2013

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Transcript of Day 6

2012 December Results Overall Retail
December 2012 Results And the winners are... Promotional sales eroded Margins Revenue Dec 11 vs Dec 12 Up 14% ($1.15 bil vs $1.0 bil) Down 4%
2012 Same Store Sales: Up 6.6% Online Sales: UP 35.8%
2012 Same Store Sales: Up 8.7% Stock Value Rose 3.1% to 55.27 Gap Stock increased 2.3% to $32.09 December Same Store Sales were unchanged Stocks rose 2.3% to $60.16 this year compared to 16% last year 3.4% increase in same store sales They cut 4th quarter earnings forecasts by $1.62/share. Stock rose. .3% For December 2012: For December 2012: Stock price: fell 2.2% ($37.47) Sales rose 3% Stock price dropped 5.7% to $44.71 For December 2012: Poor results from Neiman Marcus collaboration: 50-70% off 4th quarter expectations:
28% or $4.2 Billion less than LY According to Walter Webb, They should:
1-Add high profile boutiques
2-Devote 40% of selling space to JCPMarketPlace seasonal promos
3-Appoint JCP exec responsible for strong promos
4-Promote in all 1100 stores including 400 small stores
5-coupons sent to best customers
6-Emphasize fashion messages in ads and promos
7-Develop a new slogan "Young peoples place to save"
8-Once a month sales in all departments Customer is in search of real value!!! The Showrooming Effect The act of going to retail stores like Best Buy and Walmart to check out certain products and then once satisfied with the look and feel, purchasing the item online on Amazon or other retailers. 43% of US adults have showroomed Best Buy: 24%
Walmart: 22%
Target: 9%
Home Depot: 4% In 2012 Target and Walmart quit carrying the Kindle What Can You Do About
Showrooming??? 1-Price Matching Earlier this month, Target announced a year-round price-matching policy that included online prices from Amazon, Wal-Mart, Best Buy, and Toys ‘R’ Us. 2-Exclusive Products At the start of 2012, Target sent a letter to its suppliers requesting special products “that would set it apart from competitors and shield it from the price comparisons that have become so easy for shoppers to perform on their computers and smartphones,” the Wall Street Journal reported. Unfortunately for Target, Colin McGranahan, retail analyst at Sanford C. Bernstein, told the Wall Street Journal that the chain’s various exclusive products “are completely immaterial” to its bottom line. 3-Mobile Technology The shares dropped 9.7 percent to $464.08
47.8 million I Phones (biggest generator of revenue)
23.0 million I Pads (didn't have enough to meet demand) Tim Cook Strategy-sell more product at lower margins:
IPAD Price: Sept 2011-$617
Dec 2012-$467 Record Sales in 4th Quarter!! Stock prices plunged the most in two years Profit growth was slowest since 2003 Weakest sales increase in 14 quarters Rising costs and competition may curtail growth BUT
“Do you know what the difference in cost is between peanuts and Snickers?” KEY MOMENTS IN SOUTHWEST AIRLINES HISTORY Example of "Differentiation" The best advice he’s ever been given? “Life’s very short. None of us is getting out of here alive, therefore we should go for it. Don’t try to play it safe because there is no safety. So follow your heart, follow your passions. Life will be a grand adventure and it will be a lot of fun.” GMROI key points -#1 retail metric-measures productivity of inventory Buyer is an investor for the retailer It is a "gross" number-expenses have to be deducted Measures how much capital was wrapped up in the inventory. Short margins and fast turns or
Long margins and slow turns Profit margins in Chipotle restaurants have been in the 25% to 26% range -- among the highest in the fast-food industry. That's all the more notable since Chipotle says it spends more on food and more time preparing it. The high margins can be explained by other efficiencies, like that its top-performing locations can move 300 customers an hour; that rate of service -- "throughput" -- is a Chipotle obsession. "Slow food, fast," the company boasts. hipotle's margins, along with its rate of growth and its decision not to franchise, accounts for its generous market capitalization relative to other fast-food chains. Thus, Chipotle's relative value per restaurant -- $9 million or so -- is more than triple that of McDonald's. hipotle is a niche in a huge market. American fast food is dominated by burger joints. Fast casual emerged in the 1990s as a refinement of conventional fast food. Instead of frozen fare processed elsewhere, dishes are made from scratch. Instead of products from agribusiness, ingredients are local and raw. The fast-casual segment remains a small part -- 3% -- of the overall restaurant market, The Chipotle rules can be very specific. For example, the menu is limited to four core basics, but it offers a range of garnishes like salsa and cheese and guacamole that can produce scores of combinations. et despite a rigid focus, Ells's system also offers employees the chance to advance quickly. His best store managers -- who often begin in the service line and are paid near minimum wage -- can become "restaurateurs," which often means annual compensation above $100,000, including performance bonuses and stock options. (His youngest restaurateur is 23.) et despite a rigid focus, Ells's system also offers employees the chance to advance quickly. His best store managers -- who often begin in the service line and are paid near minimum wage -- can become "restaurateurs," which often means annual compensation above $100,000, including performance bonuses and stock options. (His youngest restaurateur is 23.) He bought organic when he could and vowed to avoid products with hormones. Ells did so not because he necessarily thought customers appreciated it, but because it struck him as ethical. He's nothing if not resolute in his convictions. He bought organic when he could and vowed to avoid products with hormones. Ells did so not because he necessarily thought customers appreciated it, but because it struck him as ethical. He's nothing if not resolute in his convictions. He bought organic when he could and vowed to avoid products with hormones. Ells did so not because he necessarily thought customers appreciated it, but because it struck him as ethical. He's nothing if not resolute in his convictions. Expect rapid rise in online shopping to peak, expert says

By Susan Thurston, Times Staff Writer
In Print: Monday, January 14, 2013 Where online sales used to be a small part of a retailer's business, it has become a powerful tool, she said, amounting to about 10 percent of a company's sales on average. Online retail sales totaled $226 billion in 2012, up from $177 billion in 2010. Benchmarks for GMROI and Turns 4.1% to $586.1 Billion 20 to 40% of Retailer's Annual Revenue-November and December Down 2% Down 4% December 2012 Same Store Sales Promotional Sales Eroded Margins THE SHOWROOM EFFECT Even though they spend more $ and more time preparing the food What is it? High Margins 25%-26% "Throughput" is a Chipotle Obession 300 customers per hour "Slow food fast" Relative Value Per Restaurant
More than triple McDonald's Don't Franchise $9,000,000 Fast Food Casual Segment 3% of overall restaurant market Local and raw indgredients Menu limited to 4 core Ingredients Made from scratch Great to employees $100K to managers 1998-Sent business plan to McDonalds
2001-McDonalds owned majority share
2006-Chipotle went public-stock doubled in first day of trading These guys disappointed JCP Stock is Heading South


On February 1, JCPenney will be holding a sales event, sources told us.

But it's still not calling the "event" a "sale."

The event seems to be a Valentine's Day sale for fine jewelry.

It's happening precisely one year after JCPenney changed its pricing strategy to "every day low prices" as part of CEO Ron Johnson's initiative to wean customers off of sales and coupons. Exactly One Year After JCPenney Swore Off Sales, It's Having A Sales Event Helps brick and mortar retailers better understand their customer's the way online stores do. Web tracking tools Builds apps that track where customers walk Could guide customers through their stores "Offering people personalized prices through their mobile devices may be the most effective way to beat showrooming-Anne Zybowski, director of retail insights for Kantar Retail 2 Success Stories For tenth year in a row, Fortune magazine has recognized them as one of the most admired corporations Began service on June 18, 1971 between the Texas cities of Houston, Dallas and San Antonio using three Boeing 737-200s "Long Legs and Short Nights" Committee including the same person who had selected hostesses for Hugh Hefner's Playboy jet selected the first flight attendents Herb Kelleher Get More for Less Save on maintenance and parts Wouldn't have to train mechanics Still run a single model of plane today 737 Competitors dropped prices that Southwest couldn't match So they gave frequent flyer passengers a free bottle of whiskey each time they flew For a few months Southwest was the biggest distributor of whiskey in Texas. Competitors eventually raised their prices back up. Whiskey Peanuts Major influence on low-cost carriers and its business model repeated many times around the world. Strategy combines high level of employee and aircraft productivity by reducing aircraft turn around time at a particular gate "Love is Still Our Field" "Just Plane Smart" "The Somebody Else Up There Who Loves You" "Grab Your Bag, Its On" "A Symbol of Freedom" Today we will talk about.....
2012 December Retail Performance
The Showroom Effect
Two Success Stories
Chipotle
Southwest Airlines
GMROI revisted On Wednesday we will discuss: Financial documents
Income Statement
Balance Sheet
Cash Flow Report Check out Oncourse for reading assignment
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