Shop Talk
Retailers, consumers and prices
Starbucks, coffee shops see collateral benefit from Black Friday
Black Friday bargain hunting is a marathon, requiring a shopper to be alert and aggressive to outmaneuver rivals for that last $200 LCD TV at Target. But with so many retailers opening their doors at midnight, why bother going to sleep? Even if you shopped at Kohl’s, which opened at 3 am or J.C. Penney, at 4 am, you were in for very short night for most.
So bleary-eyed shoppers turned out in drove at U.S. malls on Friday, with lines at coffee shops among the longest.
Mall operator Macerich said on Friday that the Starbucks at its Tysons Corner Center in suburban Washington had lines 30 people deep at 11 a.m. At the Newport Center mall in Jersey City, exhausted shoppers could be seen forming a line of 20 to get much needed java.
After all, no one wants to be caught unawares when cashmere sweaters for 50 percent off are at stake.
(Reuters photo)
Check Out Line: Penney gives market positive surprise
Check out the better-than-expected quarterly results and earnings forecast from J.C. Penney.
The department store operator also said same-store sales would improve during 2010 — it expects same-store sales to be flat in the first quarter and up in the “low-single digits” for the full fiscal year.
Like many retailers, Penney kept inventories tight to avoid having to slash prices to clear merchandise. That helped to boost its profits even as sales lagged.
Still, the company has underperformed several of its main competitors. Its same-store sales fell 3.8 percent in December and 4.6 percent in January, even as rivals such as Kohl’s and Nordstrom saw their sales shoot up. Penney has been hampered by a higher exposure to malls, where traffic has suffered particularly during the downturn.
But in a promising note, Penney CEO Mike Ullman said on a conference call that while he expects the economy to remain tough in 2010, he was “encouraged” by February and Valentine’s Day sales.
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Like many retailers, Penney kept inventories tight to avoid having to slash prices to clear merchandise. That helped to boost its profits even as sales lagged.
Promotional Wear
Check Out Line: Ready for the after-Christmas sales
Check out retailers’ post-holiday push.
Shop Talk remembers when after-Christmas sales were advertised in the newspaper on Christmas Day itself. Times have changed a bit. Walmart is already letting you know what deals will be available, including ones that could lead you to spend more at its stores.
J.C. Penney, meanwhile, said it would open its doors at 5 a.m. on the day after Christmas, the earliest start ever. While online shoppers get 99-cent per item shipping, J.C. Penney is still going a little old school. Those who get its Christmas Day newspaper circular will get good ol’ coupons to use in stores.
So what are the deals? Let’s take a quick look at Walmart. Right now, you can buy the Xbox 360 Arcade Console for $199. If you wait until Dec. 26, you get it for the same price plus a $50 gift card. It’s all part of the retailer’s “After-Christmas Week of Savings” push.
But we checked. That $8 Zhu Zhu Pet special only runs through today. Parents, you’ve been warned.
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Not even online sales can save J.C. Penney’s November
The going continued to be tough in November for U.S. retailers. Most reported disappointing sales at their stores open for at least a year in a month that kicked off the decisive holiday season.
J.C. Penney reported that same store sales fell 5.9 percent last month compared to a year earlier. But more worryingly, J.C. Penney’s online sales fell 7.7 percent in November even as many rivals have reported internet sales that helped mitigate weakness in their stores.
For example, Macy’s same-store sales fell 3.9 percent between August and September, but online sales rose 21.1 percent. Mid-priced jeweler Zale last week announced same store sales fell 6.8 percent and online sales rose 17 percent over the same period.
And while Black Friday sales were sluggish, Cyber Monday was good for retailers.
To be sure, online sales only make up about 5 percent of overall retail sales in the United States. But they are growing and will help determine which retailers will thrive.
J.C. Penney said on a prerecorded call that its website is one of the most popular sites and that online sales had picked up over the Black Friday weekend. For the sake of Penney, it will need to continue to do so, lest the retailer miss out on one of the few slivers of growth in retail.
(Photo: Reuters)
This holiday’s shiny new toy: social media
Companies that cater to consumers are always chasing after the latest consumer technology trend (anyone remember Second Life?), and this holiday season that means following them into the world of social media.
Companies ranging from Wal-Mart and Panda Express to J.C. Penney and Target are experimenting with Facebook, Twitter, YouTube or Flickr. Some are tweeting special coupons or limited-time deals, while others are doling out fashion advice or providing play-by-plays from product launch parties on Facebook. M.A.C. said it is using its Facebook page to feature artists, color collections, and what is happening backstage at fashion shows.
While figuring out if all this tweeting, posting and friending is increasing sales is difficult, companies said one thing is certain: Social media is giving them a direct, unfiltered link to consumers.
For instance, when Target asked its Facebook fans what they thought of its mens clothing line, they got suggestions like: “MORE MLB, NFL, NBA merchandise…” and “Could use a better selection of mens jeans, and tall mens shirts (not just dress shirts) too.”
Target is now using the responses to tweak its merchandise selection.
When Panda Express wanted to celebrate its new SweetFire chicken breast, it allowed Facebook fans to print a coupon so they coud visit a restaurant on Sept. 25 and try it for free. Chief Marketing Officer Glenn Lunde said 25,000 coupons were redeemed and traffic in its restaurants rose that day.
Larry Weintraub, the chief executive of marketing agency Fanscape, said that unlike traditional media, social media can give companies tangible results.
Why is the company Fanscape even mentioned? The only thing that company is worth is getting press on themselves. Worthless as this article.
Check Out Line: Losses in the retail world
Check out the quarterly losses reported by J.C. Penney and former teen darling, Abercrombie & Fitch.
Penney reported a net loss of $1 million, or nil per share, compared with a year-earlier profit of $117 million, or 52 cents per share. Analysts on average expected a loss of 1 cent per share, according to Reuters Estimates.
The loss was bigger over at Abercrombie.
The clothing retailer recorded a net loss of $26.7 million, or 30 cents a share, compared with a net profit of $77.8 million, or 87 cents a share, a year earlier.
Penney has fashioned itself as a value destination in the downturn, and said on Friday that it sold more merchandise at regular promotional prices and less at clearance prices. Shoes and women’s clothing were the strongest sellers, while children’s apparel sales were weakest.
Abercrombie, which has been reluctant have its name associated with value, faced sliding sales, higher markdowns and increased costs in the quarter.
As the economic downturn has deepened, teenagers are overlooking its high-priced fashions and turn to rivals with cheaper prices like Aeropostale or Forever 21. Abercrombie has slowly begun to discount or lower the starting ticket prices on some items to address the consumer aversion to high prices in the downturn.
Latest back-to-school outlook brings little cheer
Citigroup retail analysts held a call with the media to discuss their outlook for this year’s back-to-school season and, as we’ve been hearing, there are few bright spots on the horizon.
Deborah Weinswig, who covers retailers including Costco, Wal-Mart and Nordstrom, said Citi expects back-to-school same-store sales for those retailers to fall 3 percent to 4 percent.
That compares with a gain of 0.9 percent last year.
“This is the first year since at least 1995 that we are projecting a decline in back to school same store sales,” she said. “In addition, if back-to-school sales don’t materialize early we believe that retailers could become very promotional in an attempt to drive traffic and sales.”
She said Citi’s proprietary back-to-school survey found that 45 percent of consumers plan to spend less for this year’s new school season than they did a year ago. The survey found that most consumers plan to buy apparel (75% vs. 79% last year), while the second most common purchase is expected to be a personal computer (15% vs. 19% last year) –although, as you can see, the percent planning to buy in both categories is down year-over-year.
J.C. Penney is one of Weinswig’s top picks for back to school – helped mainly by the fact that they have very easy comparisons to a year ago when sales fell.
Kimberly Greenberger, another analyst, said she is cautiously optimistic for improving sales and profit trends for the back to school season for softline retailers, or chains like Aeropostale and Pacific Sunwear. Greenberger said she was bullish on the outlook for American Eagle Outfitters and Urban Outfitters.
I am planning on saving money this year by reducing spending on clothing, stationery is a small aspect but I suppose I won’t spend more than I have to. But I have to live up to the promises that I made like if my son did well I would buy him a cell phone which he did so I need to keep up my end. He has agreed that in this economy I can’t give him an expensive smartphone so he has chosen a Motorola W376 from Tracfone. It is less than $30 and comes with DMFL, games, camera and FM radio and web aces so he’s really happy and I’m not breaking the bank which is great.
Check Out Line: Can a $298 laptop jump-start back-to-school?
Check out efforts to get serious back-to-school shopping underway.
Wal-Mart announced plans to start selling on Sunday a Compaq Presario laptop for $298.
Gary Severson, Wal-Mart U.S.’s senior vice president of home entertainment, told Reuters he thought the deal represented a “screaming value.”
The retailer also plans to cut the price of an Acer laptop with an 8-hour battery by $50 to $548. The computer has 3 gigabytes of memory, a 320 gigabyte hard drive and qualifies for a free upgrade to the Windows 7 operating system when it is released.
Retailers ranging from Wal-Mart, to Target, to J.C. Penney have outlined their plans to lure back-to-school shoppers. Penney is using a special website, jcp.com/teen, to reach web-savvy teenagers who shop for themselves in the back-to-school period but may have less money to do so this year.
But retailers are confronting cash strapped shoppers, who are watching their pennies as the unemployment rate rises and the housing market remains depressed.
Asked for his view of the back-to-school season, the Chief Executive of UPS, Scott Davis, said on a conference call it was too early to tell.
Check Out Line: Less money for pencils and school books
Check out the expected lower spending on back-to-school items.
Parents plan to spend less money on back-to-school gear for their children this year in another worrisome sign for retailers heading into what is normally their second biggest selling period behind Christmas.
The average family with children in kindergarten through 12th grade is expected to spend $548.72 on back-to-school merchandise this year, down 7.7 percent from 2008, according to the National Retail Federation.
Retailers can take some heart, however, as college students and their parents are expected to boost spending 3 percent to buy the latest pricey electronics and dorm-room decor. Of course, total college spending is expected to fall 4 percent as fewer attend college.
Retailers are taking action to deal with such pressures as department store operator J.C. Penney is launching a website for teens to drive back-to-school sales.
And there are some positive signs of a modest recovery.
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I for one have been cutting back on some extras for my kids but I promised to give my son a cell phone if he did well last year so I can’t go back on my word now. I bought a prepaid Tracfone Motorola W376, I think I found a good deal. It comes with DMFL and a camera, FM radio, web access and blue tooth. It also has games like Suduko and Tetras built in which I think are good for math and co-ordination. Anyway, I got it on promotion for less than $30 which means that I only really paid something like $6 for the phone considering what the DMFL costs. I would rather cut back on my luxuries than deprive my kids.
Check Out Line: Buying basics buoys big chains
Check out the ten largest U.S. retailers.
The National Retail Federation’s STORES magazine is out with its annual ranking of the top 100 retailers.
The list shows that U.S. consumers have been focused on bargains and basic necessities, such as food and medicine. Wal-Mart tops the lineup, followed by Kroger and Costco. Home Depot fell from No. 2 in 2007 to the fourth spot in 2008 as many shoppers decided to cut back on costly home-improvement projects.
Home Depot, Lowe’s and Sears Holdings were the only members of the top 10 to see their revenue fall in 2008.
Some other rankings that may interest you: Amazon.com is the 19th largest retailer, ranking higher than well-known chains such as J.C. Penney, 7-Eleven and Gap. Apple’s stores and iTunes combined hold the 40th spot, topping chains such as Nordstrom, Whole Foods and Barnes & Noble.
The companies were listed by annual revenue, which may include estimates for private or closely-held companies. Revenue from major non-retail operations were excluded when possible.
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This is a worldwide trend, bargain and dollar stores are flourishing and businesses selling products with higher profit margins see their revenue fall sharply. Could it be that we’re in a recession?
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Resident Shop Talk Expert
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