Retailers, consumers and prices
Check out the modest gains expected for U.S. retailers in July.
U.S. retailers look set to report a small improvement in same-store sales for July as anxious consumers cut back on spending and big chains returned to discounting to lure them into stores.
Analysts are expecting same-store sales growth of 3.1 percent, compared with a decline of 5.1 percent last year, with department stores and discounters showing the biggest gains, according to Thomson Reuters.
July would be the 11th straight month of improving sales, but analysts warn beating last year’s weak results isn’t anything to crow about and new threats are on the horizon as consumer sentiment in July sagged to its lowest level since November.
“The consumer confidence numbers are hideous, and the promotions we’re seeing in the malls are pretty intense,” said Cowen & Co analyst Laura Champine.
Check out the cautious notes being sounded in the global luxury market.
Industry executives voiced concerns about everything from unemployment to Europe’s brewing economic crisis, but are nonetheless banking on growth from China and a recovering U.S. market.
Leading officials speaking at the Reuters Global Luxury Summit said the debt crisis in Europe is threatening to halt luxury’s rebound, but demand for fine merchandise was picking up in the United States while China’s shoppers were venturing frequently into Tokyo for top brands.
Check out the boost Coach is getting from its new Poppy line.
The leather goods retailer reported higher than expected quarterly profit and sales on Tuesday.
Coach said its new Poppy line, which is aimed at younger women with its bright colors and lower prices, helped increase store traffic from the previous quarter.
Check out the lack of interest in pens and purses.
Retailers as varied as Coach and Office Depot reported lower quarterly sales, continuing to show that despite some forecasts that the recession may be at an end, consumers are cutting back on just about everything.
Coach sales fell 1 percent and profit, excluding one-time items, dropped 21 percent.
Sales at Office Depot fell 22 percent and the company posted a wider than expected loss, sending its shares down 14 percent.
Oh, and it isn’t just office supplies and fancy bags consumers are cutting back on.
Grocery chain operator Supervalu reported a 4.5 percent drop in quarterly sales as it cut prices to try to keep consumers from going to stores like Walmart.
Economists are looking for “green shoots” everywhere these days, but the consumer still doesn’t seem to be buying it … or anything.
Also in the basket:
CIT courts creditors, plans large debt exchange
Under Armour posts surprise second-quarter profit
PepsiAmericas Q2 profit beats estimates, ups FY outlook
Italian group makes offer for Christian Lacroix (N.Y. Times)
The leather goods company posted a lower quarterly profit, but said business was stabilizing at its North American stores at pre-December levels. The company has refrained from deep profit-sapping discounts in a strategy that has preserved the status of its brand but hurt sales.
In an interview with Reuters on Wednesday, Frankfort said he was confident the new U.S. president can help ease the minds of consumers, who spent much less on Coach bags and accessories during the 2008 holiday season than they did a year ago, leading the company to scale back expansion and lower prices.
Check out Coach opening stores.
The pricey leather handbag maker saw earnings fall in the quarter and also ratcheted down its sales forecast for fiscal 2009. But that sales forecast still calls for a 10 percent increase from a year ago.
And even in what some economists say is already a U.S. recession, the company is moving ahead with dozens of store openings and, in fact, those openings are ahead of the company’s plan, CEO Lew Frankfort said.
Coach plans to open 40 stores in this year in North America, 10 in Japan and five in China.
“Our new store openings are profitable from the first day,” Frankfort said in an interview. “All new stores are opening ahead of plan.”
And that isn’t just because it’s easier to get better terms from landlords as other retailers go bankrupt. Frankfort told Reuters the retail bankruptcies have had no near-term impact on Coach’s leasing arrangements, though the company should be able to get better terms over the midterm.
Like other retailers, Coach is also managing expenses. While there is not a hiring freeze, the company is tightly managing recruitment of new personnel through a “hiring frost,” Frankfort said.
Ahh, the first frost of the season. Can Christmas be far?
Also in the basket:
Ferragamo says uncertain on Q4, no IPO hurry
Brinker quarterly profit falls on weak demand
Owners say franchisers are passing on more costs (WSJ)
Fashion trends toward Obama in presidential race (WWD, subscription required)
Sparks flew at an investor conference when a male retail analyst asked Coach Chief Executive Lew Frankfort a question that has confounded men for ages — how many handbags do women really need?Here’s the transcript from that exchange:Analyst: What is the pantry load or the handbag inventory of most women? And what happens to older handbags? Obviously women pay quite a lot of money for them. I’m just wondering how many they keep… I mean, can there be a significant detriment to sales in the future, just because there are a lot of handbags in women’s closets?Frankfort: Let me ask you, are there any women in your life that you might be able to ask how many handbags are too many? Most of us men in the audience know that women do spend, and we see it in all of our homes. In terms of how much is too much? It’s a theoretical question.We also have a very large segment of America who do not own Coach bags, and we continue to bring new consumers in to our franchise at a very attractive rate, and what women tend to do with bags is they retire the bags. They go to a place deep into the closet, and they purchase a new one, and that’s the reality. I’m not sure where you are traveling with your questions.Analyst: I’m traveling towards a consumer retrenchment and how people are going to retrench, and what their inventory of handbags may be for whenever the right occasion comes up. It’s — you know, we’re in uncharted (territory) here economically.Frankfort: Everything is uncharted. Everything is empirical, starting with this very moment. What you need to do is make calculated bets based on what you know, and what you think. And if you are bearish on handbags, be bearish.At that point, a female Coach executive cut in: I have never heard a man say, I am so sick of my black wallet, I need a red one. I cannot tell you how many times I have heard women say, I have to have this year’s red handbag.So it’s a perceived need for a woman … I have to say something as the woman at the table.So, how many handbags (or wallets) do you have stashed away?(Photo: Reuters)
The survey, conducted by a research firm called The Luxury Institute, found Leiber scored highest on its “Luxury Brand Status Index”, which includes measurements for quality, exclusivity, social status and self-enhancement (meaning the brand can make the buyer feel special).