10,000 retail store closures expected by year end; industry challenges bring opportunities, says Grant Thornton LLP

NEW YORK, August 25, 2009 - Retail distress experts at Grant Thornton LLP's Corporate Advisory and Restructuring Services (CARS) say as many as 10,000 retail stores are expected to close by the end of 2009. To be among the survivors, companies should focus on financial management and process improvement. In a recent report, the CARS group reveals the five recession-driven trends transforming the retail sector, along with tips to capitalize on them.

1. Buyers are choosing clicks over bricks: Consumers may not be buying much, but online sales have suffered less and, in certain categories, grown more than in-store sales. Retailers are also using social networking sites to expand their business. Balancing and integrating the use of traditional stores and on-line resources is going to be increasingly important. Individual store performance will improve if retailers rely on sophisticated sales analysis to drive their store location planning.
2. Private labels are gaining ground over name brands: Private labels are growing in popularity and are especially successful in the grocery sector. Nine percent of consumer packaged goods are now private-label brands. Retailers should consider whether their products may be suitable for private-label treatment by reviewing consumers' price consciousness and a product's complexity.
3. Going green is bringing in the green: With consumers focused on the environmental impacts of their consumption, sustainability continues to influence customer behavior. This means retailers should review their product lineup strategies and analyze which green products to offer and emphasize. Retailers also need to invest in green practices to cash in on this trend because it's just as important to be green as it is to sell green.
4. A loyal customer is the best customer: Loyalty programs produce long-term benefits, and many retailers are inviting customers to wine tastings or fashion shows, providing rewards and discounts, or offering free shipping. The bottom line is retailers are getting more creative with incentives. Besides discounts, loyalty can be created by offering guarantees and generous return policies, as well as by providing information on how to get the most out of consumers' purchases. Retailers should determine which incentives are likely to attract the best customers and which rewards carry the highest value and increase sales. Localization - tailoring product and service offerings to local markets - is producing benefits for those retailers who apply this strategy effectively.
5. Improving processes lowers costs, boosts satisfaction: Retailers have vast potential to cut costs and are experiencing increased efficiency in customer-facing and back-end processes. They can do this by reviewing whether buying decisions are based on the best price at high volumes, strengthening inventory management, ensuring suppliers can accommodate process improvements, and focusing on lean operations and waste reduction.

These trends offer opportunity and potential growth for this suffering sector. According to Grant Thornton CARS National Managing Principal Marti Kopacz, retailers were faced with their biggest declines at the end of 2008. Now, more than halfway through 2009, consumers still aren't in the mood to spend.

"Falling sales hit all regions of the country and nearly all retail sectors, challenging stores and pushing many to the brink of failure," said Kopacz. "Either retailers are contemplating bankruptcy, have already declared it or are announcing significant reductions."

In addition to capitalizing on retail trends, Grant Thornton CARS Principal Scott Davis believes financial management is critical during a downturn and recovery. Retailers should:

• Calculate and assess ROI for pricing and inventory levels
• Determine funding capital for redesigns, new signage or point-of-sale systems
• Reevaluate real estate and leverage information for lease reductions or improvements
• Consider tax ramifications for inventory levels and gift card revenues
• Manage costs by using a structured sourcing approach, ongoing measurement of suppliers and contract compliance.

"Although there's high risk in the retail industry, now is the time for companies to fine-tune their business and take advantage of new opportunities," said Davis. "The winners will be the disciplined companies investing the time, effort and resources to reexamine their strategies and position themselves for growth."

Grant Thornton's full report, Reviving Retail, is available through the National Retail Federation or by visiting www.GrantThornton.com/retail.

About Grant Thornton LLP Corporate Advisory and Restructuring Services
Grant Thornton LLP's Corporate Advisory and Restructuring Services (CARS) launched its U.S. practice in 2007 and has grown to include more than 100 professionals in 12 offices. The CARS team works with underperforming and transitional companies and their stakeholders. They quickly evaluate the financial and operational issues adversely affecting performance, assess the strategic alternatives and develop and execute comprehensive plans to address the challenges. Grant Thornton's advisory team delivers in-depth evaluations and balanced insight through a comprehensive, holistic approach.

About Grant Thornton LLP
The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.

In the U.S., visit Grant Thornton LLP at www.GrantThornton.com.