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Retailers reflect on 2003, optimistic for 2004

Since retailers by nature are an optimistic bunch — as Crate & Barrel's founder Gordon Segal said this week during the National Retail Federation's annual convention — most expect this year to be good for the industry, topped with incredible growth on the Internet.

In addition, RFID (Radio Frequency Identification) was the acronym du jour this week as Wal-Mart announced its intentions to incorporate the technology, which can track pallets of goods or individual items from the manufacturer to the shelf, into its chain. For most retailers, however, this technology is years away.

"Business has been good," said Allen Questrom, chairman and CEO, JCPenney. For this year, "We're optimistic on the consumer. We think the economy is getting better," and the tax refund will help stimulate it.

"The best part of business is the Internet," he added, and JCPenney's site has seen 40 percent growth. "I was the last person on the Internet because I couldn't figure out how to make money off of it." Regarding its recovering catalog business, it has posted positive sales in recent months and, "Home furnishings is a big piece of that."

Crate & Barrel's Segal agreed that this year will be good, and noted his pleasure with Internet sales, which are now on a growth pattern of 40 to 45 percent. Overall, the Internet accounts for 12 percent of the company's sales, compared to catalog sales of 6 to 7 percent.

Segal was happy when the holidays ended. "Christmas became very promotional — we look forward to January with fresh goods coming in," he said.

The strong holiday performance of Internet sales and lean inventories also negatively impacted the stores. With the holiday catalog mailing in September, its best sellers sold out by December. "We did well on gross margins, but we were too lean," he said. "We didn't realize how much inventory the Internet was going to suck up."

Rugs and textiles are also one of the fastest growing areas of business for Crate & Barrel.

Its one-unit CB2 format will add another store in June, in Lincoln Park, Ill. "Rents are so high; it's hard to start new concepts," Segal added.

For Sears, it was disappointed in its home textiles sales last year, said Alan Lacy, chairman and CEO, though it was very pleased with its launch of Whole Home. "We achieved what we looked to achieve in this environment," he said.

As for textiles overall, he added, "The shoppability is not where it should be," and the company will work on the fixturing and presentation, added Lacy. Inventories will remain conservative.

Its Sears Grand prototype in Utah "finished off nicely," Lacy added, and he was "pleasantly surprised with the strength of home fashions," one of two businesses it emphasized in the new format.

The Land's End merchandise is still being repositioned in markets, he added, putting less cold-weather products in warm-weather areas, for example. But the brand also has better distribution thanks to Sears, and that will give it more immediateness and scale, resulting in lower prices for consumers.

It also continues to work with The Great Indoors concept, he added, which was on plan for third quarter.

And though Wal-Mart asked its top 100 suppliers to implement RFID technology within the year, the rest of the retail industry still has a while to go before it follows suit.

The only reason people are asking about it is because of Wal-Mart's involvement, said Questrom. "When it has a lower cost, it will be part of everyone's business in the future."

Segal agreed. Maybe it would work for higher price items such as furniture, but for the housewares category, it's too expensive at 60 to 70 cents a tag. "You can't put the tag on a glass — unless it goes down to five cents," but that's still two to four years away. "It will be a fabulous thing once it's done and will get rid of a tremendous amount of inaccuracies." The consumer is not going to notice it, he added, and right now it's more important for grocery stores.

Lacy said, "We will adapt it as it makes economic sense."

The push into textiles at Ethan Allen, said Farooq Kathwari, chairman, CEO and president, has resulted in a good business. Window and bedding are a critical part of the Solutions approach to home furnishings. He added that 75 percent of its merchandise never goes on sale.

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