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LNT pushes productivity

Linens 'n Things will look to enhance store productivity this year through the rollout of a new merchandise allocation system, the expansion of its store-based inventory ownership strategy, and a focus on key items, executives said last week during the Lehman Brothers Retail Seminar here.

The company also expects an accounting shift in the way it reports vendor allowances to knock about 24 cents per share off full-year earnings, according to Bill Giles, executive vice president and chief financial officer.

Late last month, that same accounting shift drained away nearly all the company's first quarter profit, which came in at $30,000. The retailer had previously applied vendor allowances against operating costs as a percentage of sales. Had it not been for the shift, LNT would have reported a first quarter profit of $4.9 million, more than double the $2.1 million it earned the preceding year.

LNT now expects fully diluted earnings per share to reach $1.67 to $1.72 for the year. Without the change, EPS would have been projected at $1.91 to $1.96, he said. Giles also said the retailer expects to achieve sales gains of 11 percent to 14 percent this year, with fiscal year comps expected to reach the low to mid single digits.

To help drive those results, LNT this year will devote "significant resources" to its merchandise-assortment-planning process, said David Coder, senior vice president of store operations.

The system sorts according to climate, demographics and lifestyle, as well as regional considerations such as distinguishing beach and mountain communities.

Currently, about 25 percent of LNT's departments are using the program for forecasting, with another 30 percent to 40 percent of departments to be added this year. The program most strongly impacts lower- and middle-priced goods.

"We're still in the early stages," Coder said.

Focus areas for the initiative will be advertised merchandise and key items, the latter of which Coder characterized as "now a key part of our merchandise strategy." The overarching goal is to churn higher transactions, a higher conversion rate and higher traffic counts to enhance productivity.

LNT also will roll out its inventory-ownership strategy by the end of the year to most of the 461-store chain. The program allows supervisors to manage inventory rates on their top 10 percent to 15 percent of skus, and lets them eliminate the bottom 10 percent through rationalization, Giles explained.

"Stores that have anniversaried the program continue to show comp store sales performance above the chain average," Giles said, adding the company has intensified field training to boost the strategy.

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