Survival Steps for Retailers in Today`s Economic Environment: Karabus Management Recommendations

NEW YORK--(Business Wire)--
In order to help retail companies manage through the downturn, retail advisory
firm Karabus Management, a subsidiary of PricewaterhouseCoopers LLP (PwC)
Canada, today announced critical next steps retailers should take in order to
meet the demands of this challenging economic environment.

"The majority of retailers have already taken initial actions to reduce overhead
costs and eliminate most discretionary capital expenditures," said Antony
Karabus, CEO of Karabus Management. "Unfortunately, as the retail landscape
continues to remain uncertain, this may not be enough to satisfy investors or
compensate for the dramatic fall-off in consumer spending, coupled with the
substantial debt many retailers have taken on as a result of leveraged financial
transactions. To successfully navigate these unchartered waters, retailers must
operate much differently than ever before and take the difficult next steps in
order to succeed and grow in today`s environment."

"The near term shift in shopping behavior is expected to alter the retail
landscape for the long-term," said John Maxwell, PricewaterhouseCoopers U.S.
retail and consumer practice leader. "The consumer's psychology around
consumption has been significantly impacted by the housing price and stock
market declines and the unavailability of consumer credit. This has led to
increased consumer saving rates and reduced spending on retail items. We expect
retailers to continue to carefully assess their retail store growth strategies
as well as continue the evolving retail trend of focusing on downsizing their
offerings to specific customer segments as they deal with the increasing
challenging marketplace reality."

Recommended "next steps" for survival include:

Take costs even lower - Align costs with lower demand by establishing targets
for reduction that total at least 10% - 15% of total cost infrastructure
expenditure. Use approaches that ensure sustainability of a company`s ability
once they emerge from this tough macro economic climate.

There are three approaches retailers should consider:

1. Reduce costs with a bottom up view. Cost
optimization can not be a reactive one-off
initiative. Operational excellence demands a
bottom-up analysis of every cost in every
area with no exceptions or sacred cows. This
is an ideal time to re-assess real estate
strategies and store portfolio profitability
and then develop a strategy for
renegotiating leases.

2. Eliminate all discretionary spend. In the
key areas of marketing/advertising, travel,
utilities, store wages and other areas,
retailers should conduct a rigorous review
of spend that is least tied to short term
sales.

3. Consider firm-wide pay reductions for staff
at certain compensation levels. Significant
savings can be realized without people
losing their jobs. This is a good short term
move without losing sustainability of
operations.

Reduce inventory strategically and improve gross margin return on inventory
investment simultaneously:

1. Eliminate fringe businesses and merchandise
items - Tough economic times require a
definitive merchandising point of view.
Retailers need to truly focus on their
differentiation in a way that will drive
traffic and sales. Further, they should
explore and implement creative solutions
with vendors to reduce their cost structure.
Focusing on the most profitable areas of
merchandise is probably more beneficial than
wholesale cuts across the board.

2. Manage Open-to-Buy (OTB) flexibly - Re
-engineering the merchandise planning and
OTB process to move a greater percentage of
purchases closer to or even in season will
help retailers manage risk. There are
significant opportunities throughout the
supply chain, which should afford retailers
much greater flexibility in purchasing
activities.

3. Impose greater markdown disciplines - While
capital is tight, this is the time to apply
science to markdowns to better manage
inventory and margin risk. Markdown
optimization technology, supported by
changes to processes, provides Merchants
with more accurate, timely and granular
information about consumer demand. Retailers
that are using this technology - and are
changing age-old merchandising practices,
further defining roles and skills and
creating accountabilities - are getting
impressive results.

As the difficult environment continues to demand that retailers seek new ways to
improve cost-efficiencies, Karabus Management continues to assist numerous chain
retailers in uncovering hidden value in their cost infrastructure, working
capital and their merchandising margin and inventory optimization, coupled with
getting most value from their installed application systems.

About Karabus Management Inc.

Karabus Management Inc., a subsidiary of PricewaterhouseCoopers (PwC) Canada
LLP, is a leading North American retail advisory firm that helps retailers
significantly improve their operational and financial performance. The firm`s
more than 50 dedicated retail consultants work with many of North America`s
leading retailers. Karabus Management has worked extensively with numerous
retailers to develop and execute turnaround and other business improvement plans
in the face of challenging retail economic climates. For more information,
please visit the company`s website at www.karabus.com.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax
and advisory services to build public trust and enhance value for its clients
and their stakeholders. More than 155,000 people in 153 countries across our
network share their thinking, experience and solutions to develop fresh
perspectives and practical advice.

"PricewaterhouseCoopers" refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a separate and
independent legal entity.

© 2009 PricewaterhouseCoopers LLP. All rights reserved

PricewaterhouseCoopers LLP
Clare Chachere, 512-867-8737
clare.chachere@us.pwc.com
or
Berns Communications Group
Melissa Jaffin / Jessica Liddell, 212-994-4660
mjaffin@bcg-pr.com / jliddell@bcg-pr.com

Copyright Business Wire 2009