The Week In Retail News: The Good, The Bad And The Ugly

Barbara Thau

Contributor

This week in retail news brought a revived court battle between Macy’s and J.C. Penney over the Martha Stewart home collection, and more signs that Sears is shifting from a brick-and-mortar chain to some sort of retail landlord/e-commerce entity.

But there’s more.

Here’s some of the notable performance updates — good and not so good — executive moves and strategic initiatives revealed by the nation’s big retailers this week.

Sears’ Shifting Identity

Struggling Sears Holdings SHLD +4.21% is working to raise more than $2 billion in cash by spinning off up to 300 of its stores into a real estate investment trust by June. Sears would lease the spaces back, but they could house new tenants if the stores close, CEO Edward Lampert said in his “chairman’s letter.”

This landlord role is becoming an increasingly (unusual) facet of Sears’ strategy: Last fall, Lampert said Sears would start leasing spaces to retailersranging from Dick’s Sporting Goods to Whole Foods and Forever 21 . Toward the end of last year, the retailer closed 234 Sears and Kmart stores.

Meanwhile, Sears continues to lose money. The retailer posted a loss of $159 million for the fourth quarter and a 24% drop in revenue continuing almost a decade of steady sales declines.

Still, Lampert insists that Sears will prevail. “Without the aggressive steps we have already taken to transform Sears Holdings from the predominantly brick-and-mortar retailer it once was to a best-in-class multi-channel integrated shopping experience for our members, we would be stuck on the same path that has claimed retailers like Circuit City, Borders, Radio Shack and others,” he said in the letter.

Appeals Court Revives Macy’s Beef With J.C. Penney Over Martha, Martha, Martha

Meanwhile, Macy’s courtroom brawl with J.C. Penney over the latter’s Martha Stewart-branded home collection is poised for a second bout.

In January 2014, Martha Stewart Living Omnimedia and Macy’s settled a lawsuit that accused MSLO of violating an exclusivity agreement by selling home products at J.C. Penney in 2011, in a deal brokered by ousted CEO Ron Johnson. (Macy’s debuted an exclusive line of home products from the domestic diva in 2006.) Terms of the settlement were not disclosed.

But last week, a New York State appeals court revived parts of the Macy’s lawsuit, arguing that a trial judge should not have dismissed Macy’s claims, and that J.C. Penney did indeed engage in unfair competition and violated its contract with MSLO.

During the 2013 trial, the testimonies given by stars of the retail world, such as Terry Lundgren, CEO of Macy’s, played out like a “Days Of Our Retail Lives” soap opera.

Things got ugly: Lundgren testified that when Stewart called him to deliver the news that she would be selling a line of home goods at J.C. Penney — the night before the retailer would formally announce the collection to the world — he hung up on her. “I was literally sick to my stomach,” Lundgren said then.

Target Posts Best Sales Growth In Three Years

But things appear to be looking up for Target. The retailer posted its best sales growth in three years.

It’s been a rough patch for the retailer, which has been marred by a high-profile data breach that compromised the credit and debit card information of millions of shoppers, which led to the departure of its longtime CEO Gregg Steinhafel, as well as a botched expansion into Canada, a market it’s now exiting.

What’s more, Target, known for its cheap-chic designer collections, seemed to have lost its merchandising groove.

However, for the fourth quarter ended January 31, Target’s sales rose 3.8%, reflecting a solid holiday selling season at the chain, when retailers generate a disproportinate percentage of their annual sales.

Target executives noted a strong performance in its “signature categories,” apparel, home, healthcare and beauty, during a conference call with analysts.

What’s more, they said its limited-edition partnership with TOMS, the hot footwear company that donates a pair of shoes to a needy child with every pair purchased, was a bright spot.

New Gap CEO Hires Head Of Design To Revive Lackluster Flagship Brand

The Gap’s new CEO Art Peck is betting on fresh talent to rejuvenate its struggling Gap brand.

Peck announced during the company’s fourth quarter conference call last week that Wendy Goldman has been named executive vice president of product design and development for its Gap brand.

In a newly created position, she’ll spearhead the retailer’s global design team, and work with merchandising, product operations, and customer experience. Goldman’s prior posts include co-president at L Brands, formerly known as Limited Brands. She rejoins the Gap where she earlier held merchandising roles at sister chain Banana Republic.

At the same time, Rebekka Bay, the brand’s creative director, has left, as her position has been eliminated.

“None of us are satisfied with the performance that we are seeing at Gap,” Peck said during the call. “I made a very quick change with senior leadership there. I did this because we were not seeing the performance improvement in the business that we needed to see and specifically I was not seeing the women’s product back on track the way it needed to be for the brand to perform to its potential.”

Can Goldman help Gap get its mojo back? Stay tuned.

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