Shop Talk
Retailers, consumers and prices
Check Out Line: Modest gains expected for U.S. retailers
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.
Most retailers will report same-store sales on Thursday.
Meanwhile, in the consumer world, Procter & Gamble posted a weaker-than-expected quarterly profit as higher spending on marketing offset sales growth, while leather goods maker Coach reported better-than-expected earnings as demand picked up in North America and China.
Check Out Line: Easter bounce
Check out how high March retail sales bounced off last year’s weak results — and how April sales are expected to falter.
March same-store sales topped expectations for retailers ranging from teen-focused stores to discounters and department stores, helped by an early Easter, warmer weather and a recovering job market.
But some retail executives rained on the parade, saying that some consumers had shifted their shopping into March due to the earlier timing of the holiday and that sales in April could suffer.
“March was a very solid month, but I think there’s more than enough hints that the American consumer is still fully not back,” said Brean Murray, Carret & Co analyst Eric Beder. “We’re going to see, barring a miracle, materially weaker numbers for April.”
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Check Out Line: Macy’s starts retail earnings parade
Check out Macy’s disappointing fourth-quarter forecast.
Apparently, the Thanksgiving Day Parade may be the highlight of the quarter.
The department store chain operator forecast fourth-quarter profit below analysts estimates and its shares fell Wednesday morning.
The retailer also expects same-store sales to drop 1 percent to 2 percent in the quarter. While that is less of a decline than the full year, it is also off a pretty easy comparison. Same-store sales fell 7 percent in the year-earlier fourth quarter, when the country was waist deep in a recession and credit crunch.
Macy’s, which grew through acquisitions into a national brand, has shifted its focus to offering local items in specific markets in order to try to boost sales.
So far, that might have staunched the bleeding. But most department stores are still out of favor as consumers stay at shops like Wal-Mart in order to save money.
But hey, Wal-Mart doesn’t have the cool balloons in Manhattan in November, does it?
Check Out Line: Penney pinching in Manhattan
Check Out J.C. Penney’s new store in Manhattan.
On July 31, J.C. Penney will open its first Manhattan store in the midtown area, promising to deliver trendy yet affordable items for New York’s notoriously savvy shoppers.
Penney is taking direct aim at rival Macy’s, whose flagship Herald Square store is a block away.
In fact, the department store chain, which signed the lease for the space in December 2007 just as the U.S. slipped into recession, hopes the store will give its sales a much-needed boost and help it snag some of the city’s higher-income shoppers, just when they may need it most.
“I think they will be glad to save some money too, don’t you, especially if they are bankers?” Penney District Manager Pete Sadler said during a walk-through of the store ahead of its opening later this month.
The store, located inside the Manhattan Mall at 34th Street, occupies a space that once included a food court.
The 153,000 square foot store is smaller than some other J.C. Penney stores and stocks merchandise ranging from women’s clothing and accessories to home goods. It has a Sephora makeup boutique, and fine jewelry store and will even deliver to people’s homes for a $15 charge.
Manhattan real estate market is definitely one of the most competitive in the World. But in this economy JC Penny made the right move.
Check Out Line: Not so hot June expected for U.S. retailers
Check out the expected June sales declines at U.S. retailers.
Cooler and wetter weather made things tough for companies, especially those selling summer products in the first three weeks. Overall same-store sales for the month are expected to be down 4.8 percent, according to Thomson Reuters.
“The consumer is still up against too many hurdles to be spending too much money,” Storehouse Partners retail analyst Patricia Edwards said.
Department stores and apparel chains are expected to post the worst drops at 9.4 percent and 5.1 percent, respectively, as consumers turn thrifty and focus on essentials in the recession.
Meanwhile, in another bad sign for a recovery, delinquencies on credit card debt rose to an all-time high in the first quarter as a record number of cash-strapped consumers fell behind on their bills, according to the American Bankers Association.
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Check Out Line: October sales — worst since 2000?
Check out the October monthly sales results due this week.
Think of an adjective for “bad” and that pretty much describes Wall Street analysts’ current view for how the month shaped up.
Retail chains, like Wal-Mart, Costco and J.C. Penney, will release October results on Wednesday and Thursday, and Thomson Reuters is forecasting a decline of 0.1 percent.
“If the index actually comes in at -0.1 percent, this would be the weakest same-store sales result ever registered since Thomson Reuters began collecting estimates in 2000,” Thomson Reuters said.
Department stores and specialty retailers are expected to be the worst hit, mitigated only slightly by shoppers seeking bargains at discount chains or drugstores.
“Most Americans have been caught like deer in headlights, not knowing what financial or economic disaster is around the corner,” Susquehanna Financial Group analyst Thomas Filandro wrote in a note. “More and more consumers are broadly pulling back, leaving the retailer with little choice other than to promote.”
One positive for retailers in October was gas prices. The average price for a gallon of regular gasoline, which was $3.63 at the end of September, fell to $2.65 by the end of October, according to the Energy Information Administration.
Check Out Line: Coach stores keep popping up
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) (Reuters photo)
Saks goes Canadian, eh
Canadian fashionistas will now be able to order from Saks.com, as the luxury department store bids to snatch part of the estimated US$16 billion Canadian market for online retail goods.
This is the first time orders submitted on Saks.com will be shipped outside the United States, says Saks spokeswoman Julia Bentley.
“Being able to ship internationally has been a top priority for saks.com in 2008,” said Roger Scholl, VP of operations for Saks Direct, in a release.
Canadian online spending for retail goods in 2009 is forecast to grow 21 percent and total $16 billion, according to eMarketer.
U.S. fashion brands are looking outside the country to bolster sales during a challenging retail environment, encouraged by a wave of foreign shoppers that has buoyed profits.
(Photo/Reuters)
Check Out Line: Bloomingdale’s to open in Dubai
Check Out Macy’s opening up shop in Dubai.
Two Bloomingdale’s department stores are scheduled to open in the United Arab Emirates’ largest city in February 2010. Macy’s, which owns the Bloomingdale’s chain, says the store’s merchandise and upscale ambiance will be similar to Bloomingdale’s in the U.S., while being ”sensitive to local preferences and customs” of the oil-rich states.
In another sign the Middle East remains a robust market for foreign retail brands, Kuwaiti retailer Villa Moda is partnering with the Dubai International Financial Center, which is owned by the Dubai government. The DIFC is buying a majority stake in Villa Moda, which operates seven multibrand shops in the Gulf region and offers high-luxury brands such as Gucci, Prada and Dolce & Gabbana.
The two Bloomingdale’s, including a three-level clothing and accessories store and a one-level home store, will anchor The Dubai Mall, scheduled for completion later this year.
The stores will be managed and operated by Al Tayer Insignia, a company of Al Tayer Group, under a licensing agreement. Al Tayer Group operates in 12 countries in the Middle East and beyond and represents brands such as Harvey Nichols, Armani, Gucci, Emilio Pucci, Bvlgari and Boucheron, as well as stores such as Gap and Banana Republic.
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JP Morgan cuts Buckle to neutral (Reuters)
Check Out Line: It’s a bad idea to raise the turkey you sell
Check out why Heinz didn’t suffer like Hormel did in the past quarter.
H.J. Heinz came in with a quarterly profit that beat Wall Street expectations, helped by price increases and new product sales, while Jennie-O turkey seller Hormel Foods saw its earnings dip.
Food companies have found it tough going as commodity costs shoot up, but Hormel was particularly hard hit. The reason? It raises the turkeys that it eventually sells — meaning spiking corn feed costs hurt its results.
Also in food news – Burger King reported quarterly numbers that easily beat analysts’ expectations, as consumers headed to its restaurants for a burger or two. It also issued a fiscal 2009 outlook within Wall Street’s expectations.
On the apparel end, Children’s Place posted a small quarterly profit, helped by summer clothing sales and cost cuts. Still, the kids’ apparel retailer said it expects further pressure on consumer spending due to the weak U.S. economy.
To round up news in the sector, Kohl’s Corp, a mid-tier department store operator, named its president Kevin Mansell as its chief executive, replacing Larry Montgomery, who will remain the company’s chairman.
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