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The first quarter of the new calendar year is history — and the mass retailing community still bubbles with more questions than answers.
Few major mass retailers have dramatically altered course in response to changes in the marketplace. Many grocery retailers have continued to perform well during trying times. Target, notably, has recovered its stride and found itself once more pacing the industry. Indeed, given the obstacles Target had to overcome — the ill-fated entry into Canada was only the most obvious one — the Minneapolis-based retailer’s return to retailing’s front ranks has been nothing short of remarkable. The retailer’s dynamic new chief executive, Brian Cornell, gets much of the credit, but he is the first to acknowledge that Target benefits from a deep, newly revamped management team that has become the envy of the mass retailing community.
But it’s a mistake to attempt to choose one Target factor as a barometer of the retailer’s strength. Better to say that many of the chain’s new endeavors are paying dividends. In the process, the retailer’s new formats, those tailored to particular communities, are outperforming the most optimistic projections.
Other mass retailers have had a more challenging time. To take the most obvious examples first, Walmart’s once-legendary performance continues to elude it. It’s not that the retailer is performing poorly. Rather, the financial numbers it once churned out routinely now are more difficult to produce. Traffic, sales growth, earnings — none are what they once were. Some observers cite an absence of talent among middle-management staffers as the primary reason. Others note that the demographics, which once favored Walmart, have now turned against the world’s largest retailer. Still others point to the changing nature of the competition, adding the fact that competitors are not only more focused but more accomplished. In short, Walmart faces serious competition, something not always true in the past.
Whatever the reasons, Walmart faces some challenges ahead, mostly those relating to its own performance. Put another way, the retailer once stood for prices that were the lowest in the marketplace. It no longer does. And nothing else has come along to replace that position.
In the chain drug community, both Walgreens Boots Alliance and CVS Health continue to face challenges. The former continues to work toward assimilating its various components, while waiting to finalize its Rite Aid purchase. Hanging over its head through this is the final determination of how many Rite Aid units Walgreens will be asked to shut down or divest, a number that remains anyone’s guess.
The talk surrounding CVS these days is that the company has become in some ways more difficult to do business with. CVS’ house brands remain important. Perhaps too important. And its merchants, when they have an expectation of perfection, are perhaps even more difficult to satisfy.
To counterbalance this, CVS is in the forefront of marketing innovation, altering its merchandise assortment and the marketing approach to its customers. Moreover, its Caremark unit has started to consistently pay some of the dividends predicted for it when CVS acquired it nine years ago.
Finally, there’s Helena Foulkes, named CVS/pharmacy president a year ago. Simply put, she has exceeded the most optimistic projections since assuming the job, leading the drug chain, bolstering its confidence and instilling in the retailer a pride that had been missing.
For the remainder of the mass retailing community, performance thus far in 2016 has been erratic. With the notable exception of the grocery channel — many of whose practitioners are setting records.
Thus, at the start of the second calendar quarter, the rosiest predictions call for improvement, while the more realistic forecasts insist that we will see more of the same.
