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The fiscal first quarter of 2015 is in the books for many of the largest retailers, and the results tend to bear out the idea that the current year will be one of struggle and uncertainty despite signs that the economy is rebounding from the recession that plagued it so sorely in recent years.
The good news concerns Target, which surprised many observers by posting strong numbers in its most recent quarter, particularly as those numbers relate to earnings.
Target returned to prosperity by doing all the things it used to do so easily — emphasize the uniqueness of its offering, improve service, satisfy its customers as to the soundness of its pricing program, experiment with new store types and product offerings. At bottom, the retailer’s new chief executive, Brian Cornell, must get much of the credit for grasping those threads that had thrust Target into the forefront of U.S. retailing and insisting that they be reemphasized and reexecuted.
Simply put, Target has been too good a retailer for too long to vanish into that giant hole of ordinary retailers. And Cornell insisted that it resume its place in the retail firmament. It is a position that Target will reoccupy for a long time to come.
As for Walmart, if first quarter results are any indication, the country’s largest retailer still has work to do. For a variety of reasons, sales continued to disappoint — with the inevitable result that earnings came in at well below reasonable expectations. At bottom, Walmart’s failure is a failure to reconnect with its customers, those shoppers who supported the company by shopping in its stores and believing in its proposition: Always the low price.
The good news for Walmart is that its top two executives, CEO Doug McMillon and Walmart U.S. CEO Greg Foran understand what steps Walmart needs to take going forward, and they are already busy putting those steps into practice. Even now, the retailer is reemphasizing its core discount and the merchandise assortment that has made that store an indispensable part of the consumer’s shopping experience. Gone are the experiments with other retailing formats. Gone as well are the efforts to skimp on service, reduce the customer’s merchandise choices, and meddle with the low-price formula.
Going forward, the retailer will rely on a formula that has worked in the past; the question is, can it work in a retailing marketplace that is vastly different than it once was?
Other results raise more questions than can be easily answered here. Walgreens continues to baffle the retailing community as it attempts to integrate its traditional store model with its new model, the Alliance Boots enterprise that is now a key component of the new organization.
Surprisingly, many observers still, at this late date, misunderstand the nature of the Alliance Boots organization and insist that the Walgreens drug store, as presently constituted, will disappear, especially the front-end component that for so long highlighted the store.
Truth is, the retailer’s top managers are working to put the best of both models into the Walgreens drug store. Though a challenging assignment, it is also a reachable goal — and one certainly within Walgreens’ grasp. Look for positive results in the very near future.
Speaking of drug chains, CVS/pharmacy continues to mystify, primarily because it continues to outperform expectations. Right now, the retailer is defying all projections and setting new records. Still, the old questions continue to follow the company: How influential is the retailer’s pharmacy benefit unit in the drug chain’s performance? How solid is the retailer’s front-end contribution? What role will private label play going forward?
In the end, the one factor about which all agree is the wisdom of naming Helena Foulkes president of CVS/pharmacy. By all accounts she has injected wisdom, experience, energy and confidence into an organization that had appeared to be losing those elements. Thus, it can be accurately said that the CVS drug chain is performing well — and that Helena Foulkes is a key reason why.
More results will be forthcoming shortly. But perhaps the biggest retailing story is one that is only now emerging: The Albertsons/Safeway story. Initially, there is ample reason to believe that this new retailing entity will emerge, before the year is over, as one of the most influential retailers in America — and one of the most successful.
