I need help filling in an Exec Level report on a class. It is about the Airline Industry. We are focusing on buying American Airlines as if we are Delta Airlines. I just need assitance filling in the below outline with a report. I have attached an example of what would be helpful. Mainly help on points 1-4.

1EXECUTIVE SUMMARY. 1

2INDUSTRY OVERVIEW... 1

2.1Industry Snapshot. 1

2.2Organization and Structure. 1

2.3Background and Development. 1

2.4Current Condition. 1

2.4.3Key Statistics for 2010:Industry. 1

3INDUSTRY LEADERS. 1

3.1Competitor 1. 1

3.2Competitor 2. 1

3.3Competitor 3. 1

3.4.1Revenue / Income History. 1

3.7Corporate Overview.. 2

3.7.1Table 1 ? Revenue and Income (in thousands) 2008 through 2010. 2

3.7.2Table 2 ? EPS 2008 through 2010. 2

4SWOT. 2

4.1Strengths. 2

4.2Locations. 2

4.3Growth. 2

4.4Cost. 2

4.5Range of Merchandise. 2

4.6Weaknesses. 2

4.7Ability to Gain Market Share. 2

4.8Profitability is Vulnerable to Cost Increases. 2

4.9Pressure from Competitors May Reduce Their Sales and Profits. 2

4.10Opportunities. 2

4.11Threats. 2

4.12New Entrants. 2

4.13Concentration. 2

4.14Product Differentiation. 2

4.15Legal Problems. 2

4.16Substitute Products. 2

5CORPORATE CULTURE. 2

5.1Business Strategy. 3

Table of Contents PPaPage 1 EXECUTIVE SUMMARY..........................................................................................................................7 2 INDUSTRY OVERVIEW..........................................................................................................................11 2.1 3 ORGANIZATION AND STRUCTURE.......................................................................................................14 3.1 History...................................................................................................................................14 3.1.2 Organizational development.................................................................................................14 3.1.3 Marketing Strategies.............................................................................................................15 3.1.4 Growth and profitability........................................................................................................15 3.1.5 Acquisition Risks....................................................................................................................15 Kohl's Corporation........................................................................................................................16 3.2.1 History...................................................................................................................................16 3.2.2 Organizational Structure and Corporate Issues.....................................................................17 3.2.3 Executive Officer Overview...................................................................................................17 3.2.4 Product Development...........................................................................................................18 3.3 5 Belk, Inc........................................................................................................................................14 3.1.1 3.2 4 Industry Snapshot........................................................................................................................11 J.C. Penney Company, Inc.............................................................................................................19 3.3.1 History...................................................................................................................................19 3.3.2 Organization..........................................................................................................................20 3.3.3 Product Development...........................................................................................................21 3.3.4 Legal Proceedings..................................................................................................................21 INDUSTRY LEADERS.............................................................................................................................23 4.1 Kohl's............................................................................................................................................23 4.2 Macy's Inc....................................................................................................................................23 4.3 Sears Holding Corporation...........................................................................................................24 4.4 J.C. Penney...................................................................................................................................25 4.5 Target Corporation.......................................................................................................................25 SWOT..................................................................................................................................................27 5.1 Strengths......................................................................................................................................27 5.1.1 Kohl's.....................................................................................................................................27 5.1.2 J.C. Penney............................................................................................................................29 5.2 Weaknesses..................................................................................................................................30 Page 2 5.2.1 Kohl's.....................................................................................................................................30 5.2.2 J.C. Penney............................................................................................................................31 5.3 Opportunities...............................................................................................................................33 5.3.1 Kohl's.....................................................................................................................................33 5.3.2 J.C. Penney............................................................................................................................35 5.4 Threats.........................................................................................................................................37 5.4.1 Consumer Confidence...........................................................................................................37 5.4.2 Exhibit 5.4.2 - Trend in Self-Reported U.S. Average Daily Spending.......................................38 5.4.3 Shopping Trends....................................................................................................................38 5.4.4 Government Regulations.......................................................................................................39 5.4.5 Economic Conditions.............................................................................................................39 Page 3 1 EXECUTIVE SUMMARY The retail industry has seen many changes over the decades. Most of the changes have been due to economic recessions and rocky consumer confidence in the past. The trend amongst retailers in 2013 has been utilizing more technology solutions and customer feedback to drive the direction of the retail industry. The National Retail Federation expects a 3.4% increase in retail sales across the industry for 2013. Furthermore, they forecast a 9 to 12% increase in online retail sales for 2013 (Brown & Grannis, 2013). Belk was not chosen as either the parent or target company. The company has been showing steady growth of the last 5 years; however, it is determined to only explore new opportunities where the company is recognized and well known. This would limit expansion to the three regional areas that the company has established. It would also mean that a new acquisition by Belk would cause the closing of stores outside the target area if it were the parent company. Another risk factor is the amount of debt that Belk has in variable rate debt. The company currently holds $97.8 million in variable debt as well as $80 million in notional swap rate that is fixed and set to expire in 2013. Kohl's was chosen as the parent company. To offer the widest possible variety of products with price points to meet every family's needs, Kohl's employs the use of private, national, and exclusive brands. In the beginning, Kohl's department stores had a wide variety of offerings. In today's stores, Kohl's has limited their product offerings to six areas including clothing for women (31%), men (19%), and children (13%), accessories (10%), home (18%), and footwear (9%) (Kohl's Corporation, 2013a). Page J.C. Penney was chosen as the target company. Though the company has reported repeated losses in sales each quarter, J.C. Penney still saw an annual revenue run rate of $2.635 billion in the first quarter of 2013. J.C. Penney has a long history selling affordable clothing. When first opened in 1902, the company catered to farmers and their families, selling blue jeans, blue-collar work clothes, shoes, fabrics, and sewing needs. Since its opening, J.C. Penney has established 1,104 department stores in 49 states and Puerto Rico as of February 2013. Some of Kohl's key competitors are Target, Macy's and J.C. Penney. Due to recent struggles, J.C. Penney has fallen behind in the list of industry frontrunners. Kohl's achievements have proved to be enough to push them past competitors like J.C. Penney over the years. Their internet presence can be assisted with the addition of J.C. Penney's internet marketing presence. Recent shopping trends have shown that internet shopping is continuing to grow exponentially. Kohl's will potentially realize more financial gains with the merger along with an increased market presence. Kohl's customer satisfaction focus will point them in a direction to achieve such gains. They will have to stay aware of future economic conditions and consumer confidence to maintain their growing annual sales track. One of the important steps of analyzing a potential acquisition is determining any risks that may result. During our analysis we identified several risks that require management to plan accordingly for including reputational, operational, procedural, financial, and human resource risks. The acquisition of J.C. Penney should require the planning necessary to prevent a drop in reputation for Kohl's by implementing Kohl's philosophies into the J.C. Penney model such as customer service standards and Kohl's Cash. Completing an overall analysis of both organizations supply chain, minimizing overlap, and implementing systems to prevent disruptions should prevent operational risks, such as supply chain disruptions. Page Both organizations have unfortunately faced breaches of PII from their systems and Kohl's will need to implement a corporate wide policy for internal controls and fraud checks to prevent catastrophic losses on either side. The acquisition of J.C. Penney will require Kohl's to form a plan for the future of the organization to mitigate the overwhelming financial risk it could face by taking on the failing organization. In addition to all other risks, Kohl's will be required to delicately balance the need to overhaul the human capital aspect of J.C. Penney with the need to revitalize the retail store in order to redirect the pathway of J.C. Penney to a successful member of the industry. The valuation of Kohl's and J.C. Penney is an important part of the merger process. In order to determine if the merger is viable, we needed to determine the intrinsic valuation of the Company. The steps involved many ratios and formulas including the weighted average cost of capital for both Kohl's and J.C. Penney. The weighted average is needed to determine how much the company is paying for their use of capital. This resulted with a 6.94% for Kohl's and 15.42% for J.C. Penney, which is more than double the cost for Kohl's and thus, makes J.C. Penney the weaker company. In our evaluation, J.C. Penney's intrinsic value equated to $5,337 million and resulted in the net equity value of $2,469 million by reducing the value of debt of $2,868 million. It's also important to point out that we provided a forecasted financial statement for one year which is also important in the process of mergers and that is to provide Kohl's management with a sneak peak of the prospective merger or the inherent risk. We used 2011 figures because J.C. Penney's 2012 fiscal year end reflected a substantial net loss that we feel is an anomaly and will not occur again. Page There are several ratios that a company can analyze in order to determine how successful the company will be and whether or not it is a good investment. Some of the most important ratios to take into consideration are the days of working capital ratio, the cash to working capital ratio, the cash debt coverage ratio, the quick test ratio, the inventory turnover ratio, return on assets and the earnings per share. When looking at the big picture of an investment it is important to determine how important each category of these ratios are and what they tell management and investors about the company. It is also important to gauge the priority that these ratios should be considered since some ratios may show positive results while other may not. Management also has the responsibility to determine if making reasonable changes among the company and implementing new policies and procedures can change some of the negative ratios. With the optimal capital structure for Kohl's at 40% debt and 60% equity, it is in the best interest of Kohl's to finance the acquisition using existing treasury stock inventories rather than long term debt. While Kohl's has a higher than optimal amount of debt, the use of treasury stock to finance the acquisition would bring the organization back in line with the best interests of the shareholders in mind. The acquisition of J.C. Penney will benefit Kohl's in a number of ways including doubling their footprint across the United States, speeding up fulfillment abilities by doubling distribution centers, and implementing some of J.C. Penney strategies that have proven profitable in the past. J.C. Penney will benefit from the success Kohl's has experienced in customer service and marketing strategies. Overall, both organizations will mutually benefit from the acquisition as long as it is adequately planned. Page 2 INDUSTRY OVERVIEW 2.1 Industry Snapshot The retail industry has gone through several changes in climate over the years. Many retailers have begun to take on a great deal of online sales more than traditional brick and mortar sales. The retail industry has seen many changes over the decades. Most of the changes have been due to economic recessions and rocky consumer confidence in the past. Some retailers have decided to no longer report monthly sales results such as Kohl's, Macy's and Nordstrom (Zacks Equity Research, 2013). The trend amongst retailers in 2013 has been utilizing more technology solutions and customer feedback to drive the direction of the retail industry. For example, Macy's saw a sales growth of 47.7% for their fourth quarter online sales in 2012 (Russell, 2012). Retail giant JC Penny has begun to reevaluate its operations to create sales growth. Management implemented new company logo, cost reduction and new pricing strategies to enhance the company's image and growth potential. As of 2012, JC Penny was ranked 153 on the Fortune 500. Kohl's was ranked 146 and Macy's was ranked 110 on the Fortune 500 in 2012. The retail industry reported more than 4.7 trillion in total sales for 2011. This was the largest increase in sales since 1999 (Farfan, 2011). The U.S. has more than 5 of the top retailers in the world; with Wal-Mart being the largest retailer in the world. The industry is segmented into hard retailers and soft retailers. Hard retailers are considered appliances, electronics and furniture for example. Soft retailers often sell clothing and apparel (N.A., 2013a). Kohl's, JC Penny and Belk all fall under soft retailers. Also there are store retailers and non-store retailers. Store retailers have displays that attract customers to make purchases on site. Retailers such as vending machines and e-commerce are labeled as Page non-store retailers. Many store retailers have crossed into both sides of retailing. Two-thirds of the United States GDP comes from the retail industry (Brown & Grannis, 2013). The industry was affected tremendously by the recession in 2007. The recession affected the industry for nearly two years before beginning a recovery process. Many of the larger retailers are in the process of recovering and reporting pre-recession sales. Furthermore, the National Retail Federation expects a 3.4% increase in retail sales across the industry for 2013. They forecast a 9 to 12% increase in online retail sales for 2013 (Brown & Grannis, 2013). This agrees with the trends that online retail is growing rapidly. The industry has seen a great deal of their sales coming from the non-traditional method of sales. The retail online sales grew 11% in the months of November and December. The retail store industry has 38 firms and 16.85% growth rate as of January 2013 (Damodaran, 2013). Consumer spending and economic conditions affect the retail industry profitability. Consumer spending affected the industry during the economic recession and drove many retailers' profits down. This affected retailers and they began to use creative ways to increase consumer spending. Consumer confidence has been down over the years and this has affected the retail industry sector. Also technology trends have affected the retail industry and retailers' have used strategic ways to utilize technology into their business. The National Retail Federation has stated that \"Stores spend $34.5 billion a year on all kinds of technology, from the cables and routers behindthe-scenes, to in-store devices such as price checkers, self-service checkout stations and electronic kiosks for customers\" (Aversa, 2007). For example, retailers such as JC Penny have begun to use the iPhone during checkout at the sales counter. Consumers use this as the new signature pad when completing debit and credit sales. The retail industry has several regulations depending upon the state that the retail store operates. At the moment nineteen states and two Page territories have regulations in place for unit pricing. Also eight states currently have mandatory item pricing regulations. Some of the states included are New York, Connecticut, New Hampshire and Massachusetts (Sefcik, 2013). Analysts' breakdown many retail stores performance by analyzing their inventory turnover and sales per square feet. Many of the larger retail store chains such as Macys have a large inventory turnover and a great deal of sales per square feet. Kohl's as of 2012 had an average of $190 per square feet in sales and JC Penny had an average of $155 per square feet in sales (N.A., 2013a). Kohl's had one of the best sales per square feet amongst their competitors. Some of their competitors are Nordstrom, Macy's, JC Penny, and Dillard's. Dillard's posted the lowest amount of sales per square feet amongst the group of competitors. Page 3 ORGANIZATION AND STRUCTURE 3.1 Belk, Inc. 3.1.1 History Belk began in 1888 as a small store in Monroe, NC. William Henry Belk and his brother Dr. John Belk founded it. The original name was \"New York Racket\" followed by \"Belk Brothers\" and finally shortened to Belk. It has grown into one of the largest privately held department stores. Belk started from the humble beginnings of a small loan and savings and a couple of items taken in consignment. In 1908 the headquarters of this growing company were moved to Charlotte, NC. It is known as a southern style for all members of the family, although its focus has been women's' fashion. Its main product lines are composed of clothing, footwear, bedding, housewares, and beauty products among others (Belk, 2013a). 3.1.2 Organizational development Belk currently has 306 locations across the southern part of the United States. The largest concentration of Belk stores is currently in the Atlanta metro area. And the westernmost location is in Texas. Even though it became a public company, the business is still family-operated with over 90% of the class A stock still held by the Belk family. Belk looks for opportunity to continue a steady business. In 2005 they sold their private-label credit card to GE Money Bank. Following this transaction they purchased 47 Proffitts and McRae's department stores and converted 39 of them to their name brand. Furthermore, the following year they purchased 38 Parisian stores and converted most of them as well. Although it has continued to expand its stores, the department chain has opted to maintain limited online merchandising and does not offer all of its products online. Belk operates in three regional divisions that are headed by a Page division chair followed by a director of stores. The division offices are in charge of implementing initiatives to each individual store including support for management and employees, and maintenance and operations (Belk, 2013b). 3.1.3 Marketing Strategies The chain embarked on a $70 million marketing campaign with the launch of their new logo and slogan in 2010. As part of their product development strategy, Belk has implemented the first phase of Project IMPACT. This consists of restructuring on merchandising, organizational planning and development of more sophisticated planning processes and tool. In order to begin this initiative additional planners were hired and teams implemented. These teams work together to implement stronger merchandise assortments that are tailored to the key players of Belk's target market. Also Project SMART was implemented to upgrade the systems and technological structure of the company. This project has allowed the team to develop and execute more advanced merchandising practices in the areas of purchasing, planning, replenishment, pricing and promotion and financial planning (Belk, 2013b). 3.1.4 Growth and profitability The company has been showing steady growth of the last 5 years. There was an increase in total revenue of 5.3% from 2011 to 2012 and an increase of store sales of 5.5%. Belk has focused its growth strategy on remodeling and expanding their current stores as oppose to acquiring new ones in new markets. It is determined to only explore new opportunities where the company is recognized and well known. This would limit expansion to the three regional areas that the company has established. It would also mean that a new acquisition by Belk would cause the closing of stores outside the target area if it were the parent company. Page 3.1.5 Acquisition Risks As an acquisition, the area would also limit the expansion of the department store into other territories. Another risk factor is the amount of debt that Belk has in variable rate debt. The company currently holds 97.8 million in variable debt as well as 80 million in notional swap rate that is fixed and set to expire in 2013. Belk is also not hesitant to close stores. In 2012 the company had 3.5 million net changes for exit costs due to a single store closing as well as 1.3 million charges. Due to the above limitations our group did not chose Belk for either a parent company or an acquisition venture (Belk, 2013b). 3.2 Kohl's Corporation 3.2.1 History \"Super\" stores are becoming the big trend in the 21 st century shopping experience for the average consumer. One stop shopping where consumers can purchase their groceries, furniture, and auto care needs all in one spot. Kohl's Corporation has done just the opposite of the intense movement towards the all in one shopping experience. Mr. Max Kohl established his brand as the \"largest supermarket chain in the Milwaukee [Wisconsin] area\" with his Kohl's grocery stores prior to opening his first Kohl's department store in 1962 (Kohl's Corporation, 2013d). In the late 70s and into the early 80s, Kohl's food and department stores were bought out by BATUS, Inc. and the grocery side of the business was sold to an outside party (Kohl's Corporation, 2013d). In 1986, Kohl's Corporation was formed when a subset of investors purchased the company from BATUS, Inc. (Kohl's Corporation, 2013d). In 1992, Kohl's Corporation made its initial public offering with over 11 million shares (Kohl's Corporation, 2013d). Since that time the stock has split multiple times vastly increasing the shareholder's wealth. As of the current 2012 SEC 10-K filing, Kohl's Corporation does not have any material Page legal proceedings that would greatly affect the shareholders of the company (Kohl's Corporation, 2013a). 3.2.2 Organizational Structure and Corporate Issues While the corporate headquarters are still based in the suburbs of Milwaukee, Wisconsin (specifically Menomonee Falls), Kohl's has dramatically expanded their presence across the nation. As of end of their 2012 fiscal year, Kohl's Corporation had 1,146 stores across the country with a presence in every state except Hawaii (Kohl's Corporation, 2013a). In addition to their physical stores they have several distribution centers strategically located across the country to service all 1,146 stores and their blossoming online business. The distribution centers and their areas of coverage are included in 12.1.7 of the Appendix. While they have a tremendous presence in the state of California with 128 stores, the states with the least amount of physical presence is in Vermont and Alaska with one store each (Kohl's Corporation, 2013a). In support of the numerous stores across the country, Kohl's has a tremendous social awareness initiative called \"Kohl's Cares\" to give back to the communities for which they service (Kohl's Corporation, 2013d). Not only do they provide quality products for various price points, they express and act on concern for the health and well being of women, children, and the environment. Kohl's Cares has had a tremendous impact on the community by raising over $200 million in support for Kohl's Kids and $57 million in support of local community service (Kohl's Corporation, 2013d). 3.2.3 Executive Officer Overview The executive management of the Kohl's Corporation has a tremendous amount of knowledge and experience in the retail industry. Each member of the executive management has Page at least 20-30 years of retail experience. The following are members of Kohl's Corporation executive management team (Kohl's Corporation, 2013a): Kevin Mansell, Chairman, CEO Don Brennan, Chief Merchandising Officer John Worthington, Chief Administrative Officer Kenneth Bonning, Senior Executive VP Peggy Eskenasi, Senior Executive VP Wesley S. McDonald, Senior Executive VP and CFO Richard D. Schepp, Senior Executive VP, General Counsel, and Secretary Mr. Mansell has been proudly serving Kohl's Corporation for over a quarter of a century. He began as a low level manager and has gradually worked his way through the ranks of management to his currently held position of Chairman and CEO. According to his biography on the Kohl's Corporation website, Mr. Mansell started his career with Kohl's Corporation in 1982 and was promoted to divisional merchandising manager in 1987 (Kohl's Corporation, 2013c). Over the following decade, he was selected for Senior Executive VP of Merchandising and Marketing and then promoted to President in 1999 (Kohl's Corporation, 2013c). His current appointments of CEO and Chairman of the Board came in 2008 and 2009, respectively (Kohl's Corporation, 2013c). Mr. Brennan and Mr. Worthington have not been with Kohl's Corporation as long as Mr. Mansell; however, they both have a tremendous amount of experience in the retail industry through other department store/corporations. Mr. Brennan started his career with Kohl's Corporation in 2001 and has held various management positions throughout his 12 years with the company (Kohl's Corporation, 2013c). Mr. Worthington started his career with Kohl's Page Corporation in 1993 and has moved up from district level management positions to executive management in his 20 years with the company (Kohl's Corporation, 2013c). 3.2.4 Product Development Since the late 80s, Kohl's Corporation has been gradually crafting their business into a profitable art form. Over the last 2.5 decades Kohl's department stores have refined the product offerings and removed the excess products that were weighing the operations of the corporation down. In the beginning, Kohl's department stores had a wide variety of offerings. In today's stores, Kohl's has limited their product offerings to six areas including clothing for women (31%), men (19%), and children (13%), accessories (10%), home (18%), and footwear (9%) (Kohl's Corporation, 2013a). To offer the widest possible variety of products with price points to meet every family's needs, Kohl's employs the use of private, national, and exclusive brands. The private label brands provide Kohl's with the opportunity to compare with national and exclusive brands on the price point aspect while earning a higher profit off of the individual sale. Kohl's attracts certain consumers by carrying exclusive brands such as Jennifer Lopez, Rock & Republic, and Food Network (Kohl's Corporation, 2013d). Kohl's has been able to identify three different lifestyles and three different price points for its consumer base for which they have constructed \"Nine-Box Merchandising Grid\" as seen in 12.1.8 of the Appendix (Kohl's Corporation, 2013d). 3.3 J.C. Penney Company, Inc. As the target company, J.C. Penney can bring a lot to the table. The recent revolving door of Chief Executive Officers leaves the company ripe for a new path. Though the company has had known issues, reporting repeated losses in sales each quarter, J.C. Penney still saw an annual revenue run rate of $2.635 billion in the first quarter of 2013. The beleaguered company Page would do well to come to an agreement with Kohl's where there exists some synergy, and where a known method of success has been achieved. 3.3.1 History J.C. Penney Company (JCP) was founded in 1902 by James Cash Penney. Incorporated in 1924 as JCP, and then again in 2002 as J.C. Penney Company Inc., when the holding company structure was implemented. J.C. Penney has a long history selling affordable clothing. When first opened in 1902, the company catered to farmers and their families, selling blue jeans, bluecollar work clothes, shoes, fabrics, and sewing needs. Mr. Penney originally referred to his stores as the Golden Rule, because he wished to treat customers the way he himself would want to be treated (J.C. Penney, 2013a). 3.3.2 Organization As of April 2013, top Senior Executives at J.C. Penney consists of: Mike Ullman, recently reinstated Chief Operating Officer; Kenneth Hannah, Executive Vice President and Chief Financial Officer; Janet Dhillon, Executive Vice President, General Counsel and Secretary, and Mark Sweeney, Senior Vice President and Controller. J.C. Penney has had several CEOs in the past few years. In June 2011, Ron Johnson replaced retiring CEO Mike Ullman. Johnson, a former Senior Vice President of Apple, Inc. had planned on bringing a newer, hipper vibe to J.C. Penney. However, after a nearly $170 million loss over the course of Johnson's tenure, the board of directors could no longer allow the performance to continue and officially fired him in April 2013. They reinstated former CEO Mike Ullman, who now has a long battle ahead of him to try to turn the company around. J.C. Penney operates within: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Page Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and Puerto Rico (J.C. Penney, 2013b). The only state J.C. Penney is not currently conducting business in is Hawaii. There were several stores in the island state in the 1960s; however, all were closed in 2003 due to the high cost of maintaining operations combined with low profits (Fujimori, 2002). 3.3.3 Product Development In the 1960s J.C. Penney expanded outside of clothing and fabrics and started selling appliances, sporting goods, garden merchandise, restaurants, and auto parts. The company also expanded into services like portrait studios and auto centers. In 1963 J.C. Penney issued its first catalog distributed by the Milwaukee Catalog distribution center. In 1969, the company acquired Thrift Drug (rebranded Eckerd in 1997) and Supermarkets Interstate, thus starting its ventures into drugstores, pharmaceuticals, and as a food retailer. Its foray into the auto industry was short lived however; in 1983 J.C. Penney phased out its hardware and auto departments and sold its auto repair shops to Firestone (Wikipedia, 2013). In 1984 J.C. Penney acquired the First National Bank and began issuing its own MasterCard and Visa cards. In 1993 J.C. Penney became the largest catalog retailer in the United States when Sears closed its catalog business. In 2004 J.C. Penney exited the drug store and pharmaceutical division with the sale of Eckerd. In 2007 J.C. Penney launched its own lingerie label, Ambrielle, and partnered with Sephora, a cosmetics company, to set up \"stores-within-astore\" inside some J.C. Penney locations. The catalog business remained strong until January Page 2011, when J.C. Penney announced it would be phasing out of catalogs in favor of furthering its online business (Wikipedia, 2013). Since its opening, J.C. Penney has established 1,104 department stores in 49 states and Puerto Rico as of February 2013. 3.3.4 Legal Proceedings. J.C. Penney is involved in a couple of current legal proceedings. A bond litigation suit claims that J.C. Penney filed to prevent debt holders from claiming that it defaulted on a bond. J.C. Penney had received a letter from Brown Rudnick on February 4, 2013 on behalf of bond holders, stating that J.C. Penney had breached a covenant of the a bond indenture agreement by granting lien on its inventory. CFO, Ken Hannah gave an official statement that the default was invalid and without merit, and that J.C. Penney was filing lawsuit to protect nearly $3 billion of debt from being due within months of the letter (Hals, 2013). On March 18, 2013 the courts ordered a hearing for summary judgment; immediately following the hearing J.C. Penney received a withdrawal of the notice of default from the Bondholders' Counsel (J.C. Penney, 2013b). In addition, there is a Macy's litigation that concerns an ongoing and escalating battle between J.C. Penney and Macy's over the rights to sell Martha Stewart merchandise. On August 16, 2012, Macy's intensified the battle by filing a lawsuit that accused J.C. Penney of interfering with its contract with Martha Stewart Living Omnimedia, Inc. As of April 2013, there has been no resolution and both companies have been ordered into mediation during a month long recess. Though J.C. Penney is not sure what the ultimate outcome will be, the company does not feel that it will have an adverse material effect on their operations, financial position, liquidity, or capital resources (J.C. Penney, 2013b). Page 4 INDUSTRY LEADERS This section will focus on Kohl's key competitors in the multiline retail industry. According to Forbes, the key competitors are Macy's, Sears Holding Corporation, and J.C. Penney; however the main competitor is Target. (Forbes, 2012). We've chosen these companies because of their well-known status in the community and their rankings in the industry. 4.1 Kohl's The financial data obtained from Morningstar and reflected in the charts in the appendix shows that in 2012 the revenue was $18 million with operating income of $2,158 million and net income of $1,167 million. Even with the economic crisis, according to the charts in the appendix, Kohl's has steadily achieved small but persistent growth in revenue and net income even though in 2009 and 2010 there was a minor decrease, in 2011 the Company started increasing again (Morningstar, 2013c). Kohl's overcame J.C. Penney, which is significant since the two chains are considered to be in direct competition for the same customer base. 4.2 Macy's Inc. Macy's, Inc. has not always been known as Macy's, Inc. Up until June of 2007 it was known as Federated Department Stores, Inc. (Macy's, Inc., 2013a). In 1929, a group of 4 department stores banded together to form Federated Department Stores, Inc.: Abraham & Straus of Brooklyn, Filene's of Boston, F&R Lazarus & Co. of Columbus, OH, and Bloomingdale's of New York (Macy's Inc., 2013a). While all 4 department stores kept their individual names and appearances, they combined their financial aspects to become a solid competitor during World Page War II and the Great Depression (Macy's, Inc., 2013a). Federated Department Stores, Inc. acquired Macy's in 1994 and Broadway Stores in 1995 (Macy's, Inc. 2013a). Macy's operate under two different names for their storefronts: Macy's and Bloomingdales with $27.7 billion in sales in fiscal year 2012 (Macy's, Inc., 2013b). They have over 840 stores between the two brands that span across \"45 states, the District of Columbia, Guam and Puerto Rico\" (Macy's, Inc., 2013b). In addition to their standard stores, Macy's also has outlet and website sales. They maintain 12 Bloomingdales outlet stores spread out amongst 9 states with Florida have 3 (Macy's Inc., 2013b). Macy's also has a wide presence on the internet with both storefronts having respective websites for access to previously inaccessible areas of the U.S. and around the globe (Macy's, Inc., 2013b). 4.3 Sears Holding Corporation Sears Roebuck & Co. and Kmart Holding Corporation merged in 2005 when Sears Holding Corporation was formed. We all recognize the name Sears and Kmart; however they are subsidiaries of the Sears Holding Corporation. According to the Sears Holding website, it \"is a leading integrated retailer with more than 2,500 full-line and specialty retail stores in the United States and Canada. Sears Holdings is the leading home appliance retailer as well as a leader in tools, lawn and garden, fitness equipment and automotive repair and maintenance (Sears Holding Company, n.d.). The retail industry is very competitive and throughout the long rich history of Sears, it has flourished, emerged from Bankruptcy and now in 2012, the \"Adjusted EBITDA of $429 million for the fourth quarter of 2012 and $626 million for the year, which were both in line with our guidance provided on January 7, 2013. Adjusted EBITDA for the prior year fourth quarter and year were $351 million and $277 million, respectively; Gross margin rate increased 130 Page basis points for the fourth quarter of 2012 and 90 basis points for the year from the comparable prior year periods; Sears Domestic's comparable store sales improved 0.8% in the fourth quarter of 2012 and declined 1.4% for the year. Kmart's comparable store sales declined 3.7% in the fourth quarter and for the year. Sears Canada's comparable store sales declined 3.8% in the fourth quarter and 5.6% for the year (Sears Holding Company, n.d.). 4.4 J.C. Penney In 1902 JC Penny opened as a dry goods store and has emerged as one of the leading retailers in its early years having more than 2000 chains. 2012 has not been kind to the retailer with the hiring of Ron Johnson; the Company has suffered, according to a story on Yahoo, J.C. Penney's dwindling, aging customer base left in droves. Sales were down a jaw- dropping 32% in the 4th quarter of 2012; an almost impossible feat for a company like J.C. Penney. The company was boring but not widely feared to be heading for a financial meltdown as recently as 2011. Now it's pure excitement but not of the right kind (Macke, 2013). 4.5 Target Corporation According to Forbes, Target is Kohl's main competitor in the retail industry (2012). Target started as a dry goods store in Dayton, Ohio in 1902. In 1967 the Company expanded to become a national retailer and the following year it created the now famous logo of the bull'seye. The Target store hit a major milestone when it became the #1 revenue producer of the Dayton-Hudson Corporation and the following year the Company achieved an organizational milestone by reaching $1 billion in sales. Throughout the years the Company expanded nationally by opening stores and purchasing other retailers like Marshall Fields and Mervyns, however they were later sold. In the year 2000, the Dayton-Hudson Corporation changed its Page name to the Target Corporation to better reflect its core business. Target reached a major milestone in 2005 by exceeding $50 billion in annual sales. The Company has grown even through the economic downturn and has emerged as a top industry leader in the retail business. According to Morningstar, in 2012, the Company was very close to reaching $70 million in revenue with 30% gross profit and $3 million in net income (Morningstar, 2013b). The aforementioned retailers have been innovative to maintain a profit especially in the last few years with the economic downturn. According to SAS.com: Throughout 2012, retailers will continue to adapt and adjust their brands and operations to fit with different cultures. Through store openings and brand expansion, US retailers are opening their arms to international shoppers like never before. Domestic and international expansion was another strategic initiative for retailers last year, as one-quarter of respondents in our Retail Horizons report said global expansion would be a major focus for their company (Shay, 2012). Page 5 SWOT 5.1 Strengths 5.1.1 Kohl's Customer Satisfaction Kohl's builds its brand out of a commitment to family, good values and national brands. The stores carry a variety of items to satisfy the needs of every shopper. From clothing to accessories to small electronics and housewares, Kohl's strives to make it an easy one-stop shop for the entire family. They are an innovative company that is currently committed to developing the convenience of shopping by expanding their online selection and making it simple to shop. Part of this initiative is the layout of their stores, which includes centralized checkout aisles and a racetrack style layout that circles the entire store (Kohl's Corporation, 2013b). Quality Merchandise and Competitive Edge Kohl's is committed to offering quality merchandise at a great price. As a company, their marketing strategy focuses on setting a brand standard. They remove products that are not profitable and offer a wide variety. They limit their product selection to six key areas. These areas include men's, women's, and children's clothing as well as accessories, housewares and footwear. Kohl's focuses on using national, private and exclusive brands to attract their target clientele. By doing this, it provides the buyer with the option of obtaining the desired product at a variety of prices to fit every budget. The exclusive brands like Jennifer Lopez, Mark Anthony, and Rock & Republic, attract the consumer that likes to have a certain standard in their fashion. The private brand gives Kohl's a competitive edge. The consumer can compare prices and value between the three options. If the consumer chooses the private brand it gives the company a great Page advantage while it earns a higher profit due to the price point of the items sold. The variety is one of the key strengths of this company. The consumer is free to choose one of the three key price points to fit their budget and lifestyles. (Kohl's Corporation, 2013d). Store Expansion Another notable strength of this company is their management team and their expansion of stores. Kohl's currently has over 1,100 nationwide and, with the exception of Hawaii, it does not limit its expansion to a certain geographical area. This gives this company a tremendous marketing advantages since they are able to develop clientele across the nation and online. Furthermore, the locations of their distribution centers nationwide make the products available in a timely manner to all their stores and their online customers (Kohl's Corporation, 2013d). Kohl's executive management team is composed of members with more than 20 years of experience. The current CEO, Kevin Mansell, has been a part of the Kohl's family for over twenty-five years and worked his way up from lower management. This allows him to have a perspective and understanding of the company that could otherwise be overlooked by someone new to the industry. Social Responsibility Another important strength of this company is the reputation it holds within the communities it operates. One of their initiatives is \"Kohl's Cares.\" This program supports a variety of causes throughout communities in the nation, including kid's health, breast cancer awareness, and education among others. Kohl's Cares merchandise gives 100% of the profit to support the fight against breast cancer, while the scholarship rewards students with outstanding volunteer service. Another part of this program sponsors U.S. Youth Soccer and partners with local hospitals to educate kids about the prevention of childhood obesity and injuries (Kohl's Page Corporation, 2013e). Furthermore, in 2009 it was recognized by Newsweek magazine as 18th out of 500 of the largest corporations and 1st in the industry in their environmental track record by having the largest solar power program of any retailer globally (Kohl's Corporation, 2013b). 5.1.2 J.C. Penney Affordable Clothing J.C. Penney is well known for affordable clothing. Their targeted clientele at the time of inception was farmers and their families. Their clothing was specially crafted to attract this consumer and consisted mostly of work clothes, fabrics and sewing supplies. It slowly started expanding to hit many other areas of interest for consumers including appliances, lawn and garden, portrait studios and sporting goods among others. It currently has over 1,100 stores across all fifty states as well as Puerto Rico. Diversification J.C. Penney has a diversity of departments that are leased within its stores in order to attract clientele and maximize profits. These include Sephora, optical centers and portrait studios among others. They strive to enhance the consumer's shopping experience by providing these value added services in their department stores. J.C. Penney has private and national brands that are competitive. Among their brands is \"American Living\" developed by Ralph Lauren, this was the largest private brand launch performed by the company. The brands target men's, women's, children's and baby clothing. They also launched a home collection named \"Linden Street\" that is exclusively sold by J.C. Penney. (J.C. Penney, 2013c) Online Expansion J.C. Penney is currently renovating and remodeling stores and expanding its online shopping availability and experience. Their online store has become one of the largest apparel Page and home furnishing retails sites serving over 30 countries around the world. J.C. Penney has about 2,500 suppliers and does not depend on any of them exclusively. (J.C. Penney, 2013b) It also reached an agreement to offer full service cafes in its stores which added value to the shopping experience. J.C. Penney has stated aggressive marketing strategies and inventory management. It plans to incorporate \"mini-Martha Stewart shops\" during 2013 and has also begun a new pricing method, which uses sale prices as every day prices. They have the marketing initiatives including: \"Monthly Value\" and \"Best Price\". Ellen DeGeneres has become the spokesperson for the company\" (J.C. Penney, 2013c). 5.2 Weaknesses 5.2.1 Kohl's Lack of Internet Presence Kohl's has several weaknesses that can be rectified with the acquisition of J.C. Penney's. There is a lack of internet presence, which greatly hinders sales. Internet presence is something J.C. Penney has been focusing much attention on and would provide a needed synergy to Kohl's lacking in this area. Though J.C. Penney declined to publically report their 2012 4 th quarter internet sales, their history of climbing Internet Retailer's top 500 list to number 20 in 2011 shows that they were marketing their internet presence well. Whereas Kohl's ranked at No. 28 in 2012, which is not a bad spot out of 500, but we feel this could climb even higher with a stronger internet presence (Woodard, 2013). Internal Oversight and Impartiality Another weakness that Kohl's possesses is a concern with internal oversight among the company's board. Six directors are long tenured with over 10 years of service, comprising of four board members who have served for about 25 years. It may be difficult for long tenured Page members to act independently as they can often form relationships that may compromise their impartiality and consequently impede their ability to give effective oversight. (Rallis, 2012). An influx of new board members from J.C. Penney would help correct this situation, though it would mean a loss of some members from both companies. Ineffective Compensation In addition, executive officers' annual bonuses are built on a single financial performance measure of annual net income. To inhibit executives from being tempted to rig results, and to ensure that they do not damage one goal while trying to achieve another, it is better if bonuses are based off of a mix of performance metrics. Additionally, market-priced stock options that vest based on timeframes are long-term incentives for named executive officers. To be effective, equity rewards established for long-term incentives should contain performance-vesting features, not features based solely on timeframes. Also, executive officers are entitled to performancevesting restricted stock rewards; however, the rewards are dependent on Kohl's merely exceeding its peer performance index in either 2011 or 2012. \"This means not only that executives may be rewarded even if the company underperforms or severely underperforms peers in one of two years, but annual measuring periods are contrary to correctly designed longterm awards\" (Rallis, 2012, para 9). J.C. Penney seems to have a similar structure for bonuses and awards, so this system weakness will have to be reviewed for improvement among both companies. 5.2.2 J.C. Penney Decline in Sales J. C. Penney's number one weakness is the drastic decline in comparable store sales for 2012. On the company's 2012 SEC10-K report, J. C. Penney reported a decline of 25.2% in Page stores open for one year or more (J.C. Penney, 2013b). A number of factors contributed to a decline in the store sales and can be reasonably expected; however, J. C. Penney lost one quarter of their sales in one year. The double-digit decline is a slippery slope for the company to fall onto and will be fighting an uphill battle to overcome. Market Share As a result of the double-digit decline in comparable store sales, the stock price has had an extreme decline in its stock price and return on investment for shareholders. On May 23, 2008, the J. C. Penney stock price closed on the NASDAQ for $39.93 per share while 5 years later the stock closed for $18.98 per share [NAS13]. The 52.4% drop in stock price represents investors' lack of confidence in J. C. Penney's ability to turn their operations into a profitable organization that it has been since 1902 (J. C. Penney, 2013b). As presented in Appendix, J. C. Penney's return on investment is struggling compared with S&P 500 Stock Index and S&P 500 Retail Index (J. C. Penney, 2013b). Legal Issues Over the last couple of years, J. C. Penney has been party to a handful of legal proceedings that could negatively affect its operations in the future. Most recently, they were part of a lawsuit filed by a portion of their bondholders that claimed J. C. Penney violated certain covenants of the bond agreements (J. C. Penney, 2013b). While the plaintiff in the legal proceedings withdrew their complaint, the potential for future proceedings is evident. With $2.868 billion in long-term debt via indentures, if the company were to be found in violation, \"holders of a certain percentage of such debt instruments may declare such obligations immediately due and payable\" (J. C. Penney, 2013b). If the company were forced to repay a portion of its bonds, the financial stability of the organization would be in jeopardy. Page Unfavorable Credit Rating A 4th and 5th weakness of J. C. Penney relates back to their ability to finance the operations in an economical manner. As presented in the Appendix, J. C. Penney is trending a mediocre to unfavorable credit rating among the top 3 rating companies. With less than ideal credit ratings, J. C. Penney will be less likely to obtain financing at in the amounts they need and at the interest rates sustainable by the corporation. The lack of financing or increase in interest rates could drastically affect J. C. Penney's ability to operate in the future. Overextended J. C. Penney's existing credit line was reissued multiple times over the last two years with increases to the maximum allowed amount each time and is secured by their accounts receivables and inventory (J. C. Penney, 2013b). The company is walking a line balancing its needs for capital to fund operations and its potential for immediate repayment of the credit document. The $1.850 million credit document has been able to fund J. C. Penney's operations and strategies for turning the company around (J. C. Penney, 2013b); however, if the value of its collateral is impaired in any way, the company would be open to a financial weakness that it may not be able to overcome. 5.3 Opportunities 5.3.1 Kohl's Financial Gain With Kohl's acquiring J.C. Penney, there are several opportunities that may be fruitful with this new business venture. Creating synergy and financial gain are important components in Page any acquisition. J.C. Penney has a long and rich history with the public and until the last couple of years it's had its share of troubles, however with that being said, this creates an opportunity for Kohl's to acquire J.C. Penney for the same reasons. While J.C. Penney's market share has been decreasing, this will benefit Kohl's by improving their negotiation power. This puts Kohl's in a strong cash position while J.C. Penney has liquidity issues and a disadvantage of refusing an offer. Tax Benefits Additionally with the acquisition of J.C. Penney, there may be potential to take advantage of net operating losses generated in 2012 from J.C. Penney. The tax treatment would depend on the type of acquisition or merger and potential to generate tax benefits on the side of Kohl's. The tax benefit would be tremendous opportunity and reduce the income tax debt. Any and all consideration should be provided towards minimizing corporate tax, by using the net operating losses, credits and/or additional depreciation from the acquiring company. Dominance Market Share While Kohl's and J.C. Penney complement each other, public brand perception is at an all time low for J.C. Penney, however this can be turned around and the public can gain confidence with Kohl's acquiring J.C. Penney and create a potential turnaround situation. Old customers can come back while still keeping the new customers. According to a Forbes article \"Their old customers...feel unwelcome. But the people..., who they hope become their new customers, are so far just lukewarm. They kicked the old customers out before making sure new customers would arrive\" (Marzilli, 2013). This could possibly create dominance over the market share by combining complementary businesses (Frost & Sullivan, 2013). Social Media Page Another opportunity is the value of how well J.C. Penney is holding strong on social media. According to an industry study through Didgiday \"Overall, JCP is winning in social media. Although, the numbers would say otherwise, from a social media standpoint, JCP's social strategy follows all of the best practices for engagement. Its posts are well thought out and do a good job of delighting consumers and addressing their needs. Both experiences are user friendly\" (Abramovich, 2012). Kohl's could learn how J.C. Penney is standing strong on the social media sites and thus grow both brands as well as create positive feedback for both companies. This will not only eliminate the competition and bring two competitors as one. 5.3.2 J.C. Penney Expand and Rebuild As with any S.W.O.T. analysis, opportunities are always a brighter side of the analysis and J. C. Penney is no different. While they are currently trying to rebound from a dramatic decline in comparable store sales in 2012, there are many opportunities for J. C. Penney to succeed in the future. The first and probably the most profitable opportunity for J. C. Penney is expanding and rebuilding their private label brand, an area that Kohl's will be able to help rebuild. Private label brands yield the most profit for their respective company. J. C. Penney has a very strong history of private label brands, but is looking to move back in that direction. Analysts believe J. C. Penney will move to have 50% of their merchandise private label brands such as Worthington and Arizona Jeans [Loe13]. Increasing the private label brand percentage in the overall merchandise for the stores will produce greater profit margins for the bottom line of the organization. Return of Old Customer Base Page Over the past couple of years, J. C. Penney has left behind a large chunk of its customer base. They moved away from sales, coupons, and promotions thereby removing the incentive for customers to shop at their beloved retailer. Recently, the CEO had mentioned that the company would be moving back towards the historical pricing system to include \"promotions 26 times a year, often around holidays like Mother's Day\"[Cli13]. The old customer base has been surveyed and more than 50% of the population surveyed said, \"they would return if the company stocked its old merchandise and used its old pricing mechanisms\"[Cli13]. If the company were able to build that customer base back, the organization would reap the benefits of a loyal fan base previously cast to the side. Promotions The introductions of a similar mechanism offered by Kohl's would also prove to be a fantastic and untouched opportunity by J. C. Penney. One of the promotional tools Kohl's uses is Kohl's Cash to draw customers into their stores during certain periods of time. If J. C. Penney were able to introduce a similar promotional mechanism in their own stores, the additional incentive for customers to shop would prove to be profitable endeavor for the organization. Gift card logic transfers to potential for JCP Bucks. According to a study completed by First Data, \"two-thirds of consumers who received a gift card spent more than the card's value, bringing in additional revenue for merchants\" which averaged $20.79 in 2012 [Fir12]. JCP Bucks could be a tremendously profitable opportunity for the organization. Higher End Customer As of the 2012 SEC filing for J. C. Penney, they only had 386 Sephora stores within the 1,104 department stores (J. C. Penney, 2013b). The Sephora in J.C. Penney stores lure the higher income customers into the store with their brand name beauty care products. The higher income Page customers have to physically walk through the J. C. Penney store to get to the Sephora store. With only a 34.9% coverage rate for Sephora stores within J. C. Penney stores across the nation, the company could greatly benefit from expanding that subsection. Greater saturation of Sephora stores would bring a wider base of customers into the store for associates to close more sales on higher profit items outside of Sephora. 5.4 Threats Kohl's and JC Penny have several elements that can be considered to be threats to them and their entire industry. Threats are important for organizations to keep in mind. Some threats for the retail industry to consider are consumer confidence, shopping trends, government regulations and economic conditions. 5.4.1 Consumer Confidence According to the New York Times, consumer spending has increased \"2.4 percent in 2010, 1.8 percent in 2011 and 2.2 percent in 2012\" (Huh, 2013). Sales at retail stores dropped in March and it was the most in the past nine months. The growth in consumer spending has been slow since the recession ended in 2009 (Huh, 2013). Personal income for many Americans has been affected across the board due to increases in Social Security and increases in gas prices. Consumer spending rose 0.7 percent in February of 2013 (Huh, 2013). U.S. Consumer spending increased to an average of $89 daily in March. This was up from an average of $83 per day in February. Higher income groups, which are considered $90,000+/year, have increased spending greatly since the recession began in 2008. They have increased $56 per day in monthly spending from 2008 to 2013. Lower income groups have only increased $1 per day spending average since 2008 (Jacobe, 2013). Consumer confidence is very important for the retail industry. This is essential for the industry and drives growth for Kohl's and J.C. Penney. As can be seen below, Page consumer confidence has grown since 2008 and this has led to rises in sales industry wide (Jacobe, 2013). 5.4.2 Exhibit 5.4.2 - Trend in Self-Reported U.S. Average Daily Spending (Jacobe, 2013) 5.4.3 Shopping Trends Consumer shopping trends of recent have shown an increase in online sales across the industry. According to IBM, consumer spending increased online 30 percent from 2011 to 2012. Cyber Monday 2012 sales were up more than 36 percent compared to Black Friday sales for 2012. Many sales promotions enticed consumers to spend online and sales increase 43 percent for Department stores and 25 percent for Apparel over 2011. More than 58 percent of consumers used smart phones and 41 percent used tablets to shop on Cyber Monday (Fraim, 2012). One reason that led to the increase was the offer of free shipping from many retailers. Internet sales increased 22 percent for Christmas 2012 versus the previous year. Over 139 million consumers shopped online for the holiday season for 2011. Amazon.com third party sellers had a 40 percent increase in sales over the 2012 Christmas holiday season (Farfan, 2013). Shopping trends have Page been heading towards increasing online sales for the past decade. Retailers are facing ever changing shopping trends that have caused them to adapt. 5.4.4 Government Regulations Currently the National Retail Federation is opposing the settlement of credit card swipe fees charged by Visa and MasterCard. Retailers who agree with settlement will split 7.5 billion for the credit card fees charged. The suit was filed in 2005 by individual retailers and 19 trade associations (Shearman, 2013). The government has stiff regulations when it comes to retailers. For example, advertising is scrutinized and is not allowed to make false claims. The Federal Trade Commission governs advertising and forces retailers to only make truthful claims. Also consumer protection laws guard against retailers offering discounts to consumers and not honoring them. Retailers can be held liable for not honoring such discounts (Lister, n.d.). Consumer protection laws are some of the most important for the retail industry to keep in mind. Some regulations that are important to recognize is that regular priced items can't be advertised as being a sale price. Regulations such as consumer protection laws keep the retailers in the industry honest. 5.4.5 Economic Conditions Economic conditions have a great deal of impact on the retail industry. Potential consumers use disposable income to make purchases and economic conditions can affect amount income available. One economic factor that affects the retail industry is employment opportunities. Also bank interest rates can shake up the retail industry and create turmoil that will influence consumer spending (Coles, 2012). Retailers can at times enhance the local economy that it expands into by opening new stores and creating additional jobs for the people. Population growth is a factor that is considered by the retail industry. For example, baby boomers are at a Page point where they have moved towards retiring and not spe