FOOTSTAR’S WIND-DOWN PLAN: Footstar Inc. reiterated in a filing with the Securities and Exchange Commission last week that it will cease its business effective Dec. 31. The firm, which operates the footwear departments in Kmart and Rite Aid locations, said it will distribute its remaining assets to shareholders upon the end of its business “as promptly as practicable.” The firm’s board has appointed its chairman, Jonathan Couchman, as chief wind-down officer, to expedite the dissolution of the company. Couchman was appointed chairman in February 2006 and is also managing member of Couchman Capital LLC and general partner of Couchman Investments. Under his employment agreement, Mahwah, N.J.-based Footstar can appoint Couchman its president and CEO on Jan. 1, upon which time he will cease to serve as chief wind-down officer. Couchman’s base salary will be about $42,000 a month. The employment agreement with the firm’s current president and CEO, Jeffrey Shepard, terminates on Dec. 31.
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ADJUSTING CFOS: Retail finance executives took unprecedented steps to limit the damage a battered economy could do to their holiday businesses, and they’re ready to go further as they deal with the likelihood of an even more challenging 2009. In a survey of CFOs from 35 national retail chains conducted by the Karabus Management consulting firm of Toronto, 90 percent of CFOs were able to reduce their inventories on a comparable square-footage basis by midsingle- digit percentages to 15 percent. There was unanimous agreement that receipts would be cut materially for spring based on the “universal recognition of near-term lower consumer demand,” the study found. Among the highlights of the survey: Nearly all CFOs reported cuts in capital expenditures for next year; a majority of these executives are revisiting their real estate portfolios; a third are seeking to renegotiate rental agreements; and nearly all were looking to reduce transportation costs through renegotiation.
Of the 35 retail organizations participating, 29 were specialty stores focused on apparel, jewelry, or footwear, and the remainder were department stores. Annual revenues of participating retailers ranged from $250 million to more than $20 billion. A quarter of those interviewed said they had canceled orders from suppliers based on the lateness of the vendor. All but 3 percent said they felt margin pressure based on the need to take markdowns earlier, even though most were unable to cut inventories sufficiently to match the drop in demand among consumers. Antony Karabus, CEO of the firm that bears his name, commented, “Given the concerns regarding women’s apparel this holiday, a number of retailers surveyed described how they were cutting out weaker brands and focusing more on accessories, which were performing well.” — ARNOLD J. KARR
NEIMAN QUARTER FALTERS: Further supporting the end of the reign of luxury spending, Neiman Marcus Group last week posted an 84 percent drop in fiscal first-quarter earnings on a decline in revenues. Burton Tansky, president and CEO, acknowledged the difficult operating environment for retail. “As the quarter progressed, the sales trends worsened along with the sharp decline in the stock market. Throughout the quarter, we remained focused on stimulating sales through promotional events, reducing inventory levels and implementing expense reductions,” he said on the firm’s post-earnings conference call.
But Tanksy noted that though Neiman’s believes its “most loyal customer still has the financial ability to shop with us,” the economic climate has caused that customer to pull back on the amount of purchases. As the economy improves, Tanksy said he believes “this customer will return to a more normal pattern of shopping.” Still, the firm has reevaluated its plans for store openings and some future dates have been pushed back, while remodels are temporarily on hold, amid plans to reduce overall expenses. Neiman’s said last Wednesday that first-quarter earnings fell to $12.9 million from $78.8 million, when results were propped up by a $32.5 million pension gain. Sales for the three months ended Nov. 1 dropped 13 percent to $985.8 million from $1.13 billion, as comparable-store sales decreased by 14.5 percent.