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For Big Retailers, It's Back to the Basics

Posted by: Jena McGregor on August 19, 2008

Today’s headlines are filled with bad news from retailers. Target posted second quarter profits that were down 7.6%. Staples warned its quarterly results would be lower. Even tony Saks, whose well-heeled customers, you’d think, might be immune from rising gas and food prices, reported lower-than-expected numbers, prompting shares to tumble.

The long-struggling home improvement retailers didn’t fare well either. Today, Home Depot posted second quarter results that were down 24% from the year before. And while rival Lowe’s reported higher than expected profits, it set its third quarter forecast below Wall Street analysts’.

Still, there was some good news mixed in with the bad. Both Home Depot and Lowe’s beat expectations, and analysts referred to Lowe’s quarter as being strong. Both attributed better operating efforts, merchandising initiatives, or tighter expense controls as help.

While that comes as little surprise in this economy, it’s a stark reminder of how much the pendulum has swung. Gone, it seems, is the touting of new store openings, innovation initiatives, or eco-friendly campaigns as the path to good results. While those are still important, of course, the dominant management credo today seems to have shifted from hot new innovations to operating a better-run company. Will it be enough to surmount a housing market and inflationary environment worse than we’ve seen in decades? Who knows. But those who do both well—innovation and operations—are most likely to come out on top in the end.



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