Shop Talk
Retailers, consumers and prices
Check Out Line: Frugality — Part Two?
Check out the apparent return of the frugalista.
Worries about stubbornly high U.S. unemployment and a tempermental economic recovery has shoppers reeling in spending on all but the essentials.
The 28 retailers tracked by Thomson Reuters reported an overall 2.9 percent rise in July sales at stores open at least one year, missing Wall Street forecasts of 3.1 percent. Seventeen of those retailers reported lower-than-expected sales, while nine — including Macy’s and Kohl’s — beat estimates.
“We are now in an environment where the dollars in consumers’ pockets are fewer, so the competition for those dollars has increased,” said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors.
U.S. consumer sentiment hit its lowest level in nine months in July on bleak prospects for jobs and income, according to Thomson Reuters/University of Michigan’s Surveys of Consumers. On Thursday, the government reported that new U.S. claims for unemployment benefits unexpectedly rose in the latest week.
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Barnes & Noble draws interest, but a tough sell
Check Out Line: Department stores ready to duke it out
Check out department stores’ forecasts coming in below expectations as they try to gain market share.
On Friday, JC Penney became the latest chain to issue outlook that falls a little bit short of what Wall Street had already expected.
Thursday we saw mid-priced chain Kohl’s and upscale department store operator Nordstrom issue their own modest expectations.
Wait, wasn’t March a great month? Weren’t shoppers coming back? What gives? Let’s take a look at what the executives had to say.
“We know that our customers remain concerned about their budgets,” but like new, trendy merchandise at “compelling prices,” JCPenney Chairman and CEO Myron “Mike” Ullman III said in a statement.
Kohl’s CEO Kevin Mansell told analysts “we don’t want to get ahead of ourselves.” He also told Reuters: “Demand in the categories in which we operate is flat or down over the last couple of years. Therefore, the successful retailers are going to have take business from others.”
Now it looks like chains are revving up to do their best to grow at the expense of rivals as consumers keep close tabs on their spending.
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: Madonna goes back-to-school
Check out the big M’s: Madonna and Macy’s.
What could possibly say “back-to-school” more in 2010 than a fashion line named after song released in 1985.
That’s what licensing and marketing firm Iconix is developing for Macy’s, in collaboration with rock icon Madonna and her daughter, Lourdes.
The “Material Girl” fast-fashion line will be sold in about 200 Macy’s stores in August for the key back-to-school season. The clothes will sell for $12-$40 and the companies also plan expansion into fragrance and other areas in 2011.
Okay, Madonna is still a huge name and packs them in on tour. But our serious question for readers is: how much does she resonate with teens in 2010? (Our not-so-serious question: Which “Twilight” movie was she in again?)
Of course, the cast from the “Breakfast Club” — also released in 1985 — looked great during the Oscars this year. Maybe the Judd Nelson grooming line from Axe will be next.
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Check Out Line: Holidays not looking so holly, jolly
Check out the lackluster start to the holiday season for major U.S. retailers.
The Thomson Reuters same-store sales index rose 0.5 percent in November, while Wall Street experts had been expecting 2.1 percent growth, and 81 percent of companies missed expectations.
Talk about shaking Wall Street’s optimistic belief that this year’s holiday shopping season would be off to a much stronger start than in 2008, when the global economy seemed to be in free fall.
Youth apparel chains such as Abercrombie & Fitch and American Apparel posted some of the most disappointing results, though department stores such as Macy’s and Dillard’s also fell short of expectations. And upscale retailers such as Saks took an unexpectedly large hit, with sales at established stores falling 26.1 percent in November.
The retailers blamed everything from the weather to the timing of sales to explain the disappointing November sales. For example, TJ Maxx and Macy’s both blamed a warm November (though blaming the weather seems to be the retail industry’s version of the “My dog ate my homework” excuse) and Saks said a clearance event that had taken place in November last year was taking place in December this year.
But the tepid start to the holidays may leave some retailers no choice but to offer steeper discounts if they want December to save the season, according to some analysts.
“The consumer is delaying purchases to see if there will be better deals in December,” said Michael Dart, a partner at retail consulting firm Kurt Salmon Associates’ private equity practice. He predicts retailers will respond with more discounts though not as steep or across as many product categories as last year.
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: Growing Penney’s-Macy’s rivalry
Check out the growing J.C. Penney-Macy’s rivalry.
Liz Claiborne’s plan, announced last week, to sell its namesake sportswear only at Penney stores and on a TV shopping network will end a decades-long tie between the Claiborne franchise and Macy’s.
The deal will give Penney more exclusive products, guarantee revenue and profits for Claiborne and free up Macy’s to better differentiate itself as its customer base increasingly overlaps with Penney’s, analysts and consultants said.
Macy’s has traditionally been positioned as a little higher-end than Penney, but the 2005 merger of Macy’s owner Federated Department Stores with May Department Stores broadened the customer base and brought the company into more direct competition with Penney, analysts said. Penney, meanwhile, has been expanding its reach into Macy’s territory.
Department stores like Macy’s and Penney have beefed up their exclusive label offerings to woo shoppers to their stores and reduce competition centered on price. Also in the basket:
This is good news for Macy’s, who can now free up more floor space for better goods. Liz Claiborne’s styles and quality has plummeted in the past decade, especially in the Woman division. Selections are so small, there’s only a few styles at any one time from which to select. I imagine this will extend to handbags and accessories also (there’s quite a range of style and quality but nothing that can’t be replaced with another brand) and there’s a men’s division called Claiborne which probably will go too (their styles are nice). In all, good news for Macy’s.
Check Out Line: Retailers’ ad strategies face “Tipping point”
Check out the quickly shifting media landscape putting retailers’ ad strategies at risk.
In a research note this week, Credit Suisse analyst Michael Exstein examined what changes in the media world mean for retailers who are used to reaching consumers through traditional channels — like the newspaper.
In the past five years, there has been a modest shift from print toward digital media, but Exstein warned that: ”We may in effect be reach a ‘tipping point’ where past media strategies will no longer be sustainable.”
Promotional national retailers that cater to a younger demographic and rely on national media to communicate to customers may be most exposed to changes in the media landscape, he said.
“This is a particularly acute problem for retailers that are used to (some would say dependent on) driving sales and marketshare through promotions such as Target, Kohl’s, Macy’s, and JCPenney,” he said.
“How will they promote in the future if the Sunday newspaper can not be counted on to distribute an insert or an television network can not be counted on to deliver an audience at a specific time/day?”
Retailers like Target that have a large number of younger shoppers — shoppers who rarely, if ever, read a newspaper and instead spend large amounts of time using Facebook or Twitter – there is less time to respond to the changing way consumers consume media, he said.
Check Out Line: Earnings-palooza!
Check out all the earnings in the consumer world.
Several retailers and food companies posted quarterly results, offering different views on where they stand in a recession that has consumers dialing back spending.
Macy’s posted a better-than-expected profit as it cut costs, but the department store operator’s new, higher earnings forecast shows full-year profit could still fall short of analysts’ expectations.
Sara Lee, the maker of baked goods and Jimmy Dean sausage, also reported a stronger-than-expected profit before one-time items on improvements in North America and said it was still considering divesting its international household and personal care business.
Underwear maker Maindenform also saw a profit that topped expectations, thanks largely to strong demand for its shapewear products, and raised its full-year outlook.
However, Liz Claiborne, owner of the Juicy Couture, Kate Spade and Lucky Brand chains, posted a deeper-than-expected quarterly loss as the recession kept many shoppers from buying the company’s clothing and accessories.
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Check Out Line: July pain for retailers
Check out the continuing struggle in the retail world.
U.S. retailers reported disappointing sales declines for July, suggesting shoppers are still searching for bargains and basics in the downturn.
July’s results mark the 11th consecutive month of falling sales at stores open for at least one year, a measure known as same-store sales.
Rising unemployment, cool weather and a lack of tax-free holidays like those held last year disheartened shoppers, who bought just daily essentials last month.
Still, some companies like Gap and Macy’s managed to forecast better-than-expected earnings for the quarter, as they managed their expenses better.
But retailers’ true test? September, according to one analyst.
“The true month to watch will be September because it will mark the first month that started the streak of negative same-store sales in 2008,” said Jharonne Martis, senior research analyst with Thomson Reuters.
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