Specialist
Former VP at Belk Inc
Agenda
- Key trends and developments impacting Belk and the wider department store industry
- Merchandising trends and holiday season performance
- Liquidity enhancement measures amid a reported cash crunch
- Longer-term outlook and department store viability
Questions
1.
Can you give us your high-level overview of the US department store sector, pulling out a few key trends and themes you think the investment community should monitor?
2.
What did you think of Belk’s bankruptcy filing from earlier this week, and why? Does it surprise you, if at all?
3.
What operational and strategic changes do you think might need to be made in a bankruptcy filing that could help the company re-emerge longer term and why?
4.
Do you think we could expect significant store reductions over the next couple of months, and even into 2022?
5.
What factors go into the decision-making process for store opening and closures, besides the real estate quality?
6.
I have heard in Belk’s bankruptcy projections as part of the Chapter 11 process, that it expects most of its growth to come from online sales, yet it thinks it can stabilise margins despite this. Do you expect that it can profitably do e-commerce over the next couple of years the way it claims to?
7.
I think with the online business it’s reasonable to expect some return to normality in the coronavirus environment. Do you think that 40-50% e-commerce presence can drop into the 30s, or even lower?
8.
If Belk were to reduce its debt load in the bankruptcy and free up more capital to use, what would you recommend it do with that? Do you think it could reinvest it in the stores, or is there more to be done on the omnichannel e-commerce infrastructure?
9.
How do you think the vendor community views Belk, and how might this develop in the longer term? Do you think any vendors could drop Belk altogether as a result of the filing?
10.
How might the relationships with vendors be permanently altered due to the filing? Do you think the company’s ability to obtain merchandise could be permanently damaged by this?
11.
Is there anything Belk can do in the near term to revamp and transform its brand, or do you expect this to be a longer-term effort that will take many years?
12.
What would you recommend Belk do to transform the brand, even if it is a longer-term process?
13.
Is there an awareness issue around Belk’s private label brands, ie is there something it can do on the marketing and advertising spend side to promote its private label brands that it isn’t doing right now?
14.
What are your expectations for foot traffic recovery over the next couple of months and what might drive a customer back into a Belk store, if anything at all?
15.
It sounds like Belk is in this dangerous cycle where it’s constantly promoting. Is there a way it can drive foot traffic over the next six months, without getting too promotional?
16.
Is there anything Belk can do to drive customer loyalty in the near term?
17.
Is there any value intrinsically in the heritage nature of Belk’s brand, ie given that, as you’ve said, it’s been around for 130 years and it’s a staple in the southeast?
18.
You alluded to Belk’s demographic problem. Can you unpack this? To what extent is it a challenge to get millennials in the door in a post-bankruptcy world?
19.
Where do you expect the split between private brands and national brands to shake out over the next couple of years? Do you think we could expect 30% or 40% of sales to be private brands?
20.
Other department stores have used creative strategies to bring in new revenue, such as using their real estate in creative ways, as Macy’s has done, or even Nordstrom with Rack. Are those achievable strategies, in your opinion, for Belk, even over a longer period of time?
21.
Can you give us your high-level view on Belk’s store footprint? Do you think any relocations or refreshes of the stores themselves could drive any foot traffic?
22.
How do you assess the growth outlook and Belk’s long-term viability of buy online, pick up in store? I know it has been a focus for Belk and other department stores.
23.
Is there anything in the near term that you think Belk could do to improve its cash or liquidity position that we haven’t discussed?
24.
Do you think there’s a strategy of reorganising a portion of Belk’s stores, such as the ones you had mentioned where it’s the only game in town, and focusing on those markets and abandoning others?
25.
What intrinsic value and advantage do markets where Belk is the only game in town bring to the company?
26.
If the private equity sponsor for Belk were to put the company up for sale, even in a post-bankruptcy world, do you think anyone would be interested in acquiring Belk and/or might the private equity sponsor be interested in exiting, in your opinion?
27.
Is there room for Belk in a department store landscape 10 years from now? I’ve heard conflicting opinions on whether or not the department store will be with us in 10 years or 15 years.
28.
What do you think is the best- and the worst-case scenario for the company over the next 2-3 years and, if Belk were to make some of the changes that you discussed, what’s the upside scenario?
29.
Do you have any sense of the share of Belk stores not making any money, as you termed it?
30.
Is that a general rule of thumb, that for stores in favourable locations, the overhead, specifically the rent, will be really high and denting profitability?
31.
What do you think about Belk’s management team and why? If they were to get replaced in the Chapter 11 filing, what qualities would you say a new management team should have if they were to successfully turn the company around?
32.
Is there anything we haven’t discussed that you wanted to highlight or expand on before we close?
