RETAIL FIGHT BRUISING

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Emerging turf wars and increased advertising are helping, ever so slowly, to push retailers out of the doldrums of the first quarter when consumer confidence, bruised by war concerns, rising unemployment and a lingering economic slowdown, hit bottom.

Thirteen of the nation's largest retailers-all members of the Advertising Age 100 Leading National Advertisers-recorded combined first quarter sales growth of 4.3% to $103.9 billion, but hidden in the numbers was a median same-store sales decline of 2.4%. In fact, only three of these retailers-Gap, Wal-Mart and Lowe's (see chart)-grew in store-for-store sales in the period.

Same-store sales are gaining some life. All of these elite retailers have recorded improved same-store sales for the January-May period over their January-March quarter. Advertising, up 6.5% to $954.6 million in the first quarter, is expected to increase further. These 13 retailers are likely to be the locomotive that propels all retail media advertising-at $2.72 billion in the first quarter 2003, down 1.6%, according to TNS Media Intelligence/CMR-into the plus column for the full year.

STRUGGLING WITH DECLINES

Specialty retailers like Gap have started to see the positive effects of increasing their ad spending, says Tom Holliday, president, Retail Advertising & Marketing Association. Gap, struggling with a string of declines in same-store sales covering almost two years, increased its ad budget and "scared away the clouds hanging over the chain," he says.

Federated Department Stores is expected to boost its ad budget this year as it tests a major branding campaign for Macy's, part of a national effort to take better advantage of the well-known Macy's name. Federated also is adding the Macy's name to all its regional chains such as Bon Marche in the Pacific Northwest. The new name in Seattle: The Bon-Macy's. Kohl's, the department store-discount hybrid moving into California and the Southwest markets, will fuel ad spending in the region as competitors react to hold their ground. At the same time, Wal-Mart this year will introduce supercenters in California and likely ignite an ad war.

Home improvement heats up

In home improvement, Lowe's is expanding rapidly into larger markets where it confronts head-to-head Home Depot, category leader with 10% of retail sales. Lowe's in 2002 boosted its media spending by 18.4% to $263.9 million vs. Home Depot's 10.2% advance to $397.3 million. Lowe's slowed its ad flow in the first quarter, down 1.4% from the prior-year period, as Home Depot jacked up spending 31.5%.

Sears is among the bevy of retailers striving to get better performance out of their ad budgets. "It's appalling that[Sears] has had 20 months of negative comparables, even with Land's End in the mix," says Burt Flickinger, managing director of Strategic Resources Group/Flickinger Consulting, New York.

Growth in retailer ad spending in 2003 is likely to be modest. "Because many retailers have positioned themselves with low inventory levels, I don't see overall retail ad spending being up more than 3% in 2003," says Mr. Holliday.

Additionally, several key retailers have cut the number of pages and the distribution of their weekly preprint ads, says Mr. Flickinger, noting three major supermarket chains have moved the distribution dates of circulars from Sunday to Friday and Saturday to cut costs.

If retail ad spending turns around in 2003, thank the wars being waged on a number of retail fronts.