HBC should be $16.00 by end of next week.
Great article in the Toronto Star.
==============
thestar.com
March 11, 2000
Battle of retail giants
The Bay, Sears fight for market dominance in
department store sector
By Steven Theobald
Toronto Star Business Reporter
With the old Eaton's chain just a memory, morale is riding
high at the Bay these days.
``This is a good time to be here,' said Bay president Marc
Chouinard.
``We have momentum on our side,' he added, referring to
robust fourth-quarter earnings made public Thursday.
Not that Paul Walters, chief executive of rival Sears Canada
Inc., took much notice.
``To be honest, I don't even look at what the Bay is doing. I
focus on what my customers want.'
Chouinard is just as quick to brush aside the thought of
confrontation.
``I would say we are not going head-to-head.'
`I don't even look at what
the Bay is doing. I focus on
what my customers want . .
. The future lies with
understanding the buying
habits of individual
customers.'
- Paul Walters
CEO of Sears Canada Inc.
But make no mistake, Canada's two remaining full-line
department store chains know who the enemy is. So get
ready to be wooed like never before.
When sizing up the showdown, Sears Canada has got
bullets in all six cylinders.
The company, which was struggling in the first half of the
1990s, has chalked up three consecutive years of stellar
performance.
On top of that, Walters grabbed the core assets of Eaton's,
paying less than $80 million and pocketing roughly $175
million in tax savings.
Sears' success comes down to two things: revamping the
chain just in time for the spending boom and building an
unparalleled multi-channel retail network, including
stand-alone furniture stores, catalogues and the Internet.
``They have managed to define themselves as the definitive
department store in the minds of average Canadians,' said
retail consultant Anthony Stokan of Toronto-based Anthony
Russell.
Meanwhile, the Bay was busy duking it out with Eaton's
over who could sell the most merchandise at the biggest
discounts. The Bay also lost its status as a one-stop
shopping destination, dropping many product categories in
favour of more fashion goods and apparel.
On the plus side, the tired management ranks have been
gutted by Hudson's Bay Co. chief executive George Heller.
Importantly, the company is in much better debt, cash-flow
and inventory positions than a year ago.
The Bay has also started listening to the retail gurus
preaching that the lack of time, not price, is the determining
factor for shoppers.
A couple of ``express' Bay stores, featuring a centralized
cash system, were tested in past few months in the GTA.
As many as 35 suburban stores will be converted to
centralized cashiers this year.
But when it comes to knowing your customer, the Bay has
a long way to go to catch up with database savvy Sears,
which boasts of 4 million catalogue customers and 8.9
million credit card holders.
``The future lies with understanding the buying habits of
individual customers,' said Walters, noting at 62 per cent of
his total sales - about $6 billion last year - were made using
the Sears card.
While the Bay only has 2.3 million card holders, Chouinard
said he's considering doing cross marketing with Zellers,
including offering Club Z points as an alternative to Air
Miles.
``There is so much cross-shopping, it's phenomenal,' he
said. ``A Zellers customer probably buys their cosmetics
with us and a Bay customer probably buys their health and
beauty aids at Zellers.'
Despite the Bay's notion that its core customers are baby
boomer-run households, a lot of their customers also shop
at Sears, particularly for home furnishings and hardware.
When it comes to higher-end fashion labels, Sears is
threatening to take a big chunk of business away from the
big downtown Bay stores once Sears relaunches the
Eaton's banner.
The seven Eaton's stores bought by Sears took in $406
million in 1998 - their last full year of operation - including
$151 million at the Toronto Eaton Centre.
Dave Brodie, a retail analyst with CIBC World Markets,
expects the seven stores to have $600 million in annual
sales.
``In my mind they will do well, and the costs of getting into
it are modest.'
Deep pockets and Walters' proven merchandising skills
bode well for Eaton's rebirth.
Not everyone is convinced.
Gordon Harris, a Vancouver-based retail consultant, is one
of a number of observers who think the relaunch of the
Eaton's banner may be Sears' Achilles heel.
``The Bay could be a threat to the new Eaton's,' he said.
``They have the experience.'
If Chouinard is nervous about a worthy adversary taking
bites out of his flagship store sales, he's trying not to show
it.
``Running big downtown stores is not something anyone
can pick up and do overnight,' he said, adding that
intensive staff training sessions will start in three months to
prepare for Eaton's fall opening.
Walters has no doubt about the strategy.
``You won't be able to convince people about the strategy
until it's there for everyone to see,' he said.
``These stores were profitable as Eaton's, and how we are
going to execute is going to be drastically different than
before.'
After the dust settles, people will see that there is room in
Canada for both department store chains, said George
Hartman, a retail analyst with Dundee Securities Corp.
``They both can survive and live quite profitably. If they
mess up it's their problem.' |
