Shop Talk

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.

Also in the basket:

Mega Brands seeks U.S. bankruptcy court protection

Check Out Line: Bargain hunters trolling the web

Check out consumers stepping up their online bargain hunting ahead of the holiday shopping rush.

According to Hitwise, searches for retailer promo codes rose 19 percent last week compared with 2008.

Those numbers should rise headed into “Cyber Monday” – the Monday after Thanksgiving when retailers shift from in-store to online promotions.

Last year, Hitwise said searches on a portfolio of search terms for specific retailers (i.e. ‘target coupons’, ‘target coupon codes’ and ‘target free shipping code’) peaked during the week of Cyber Monday, up 76 percent from 2007.

So who is doing this searching? Hitwise looked at the demographics of online bargain hunters in the 8 weeks ending Dec. 27, 2008. It found the split is even for male and female searchers. Just over half of the searchers were between the ages of 25 to 44, and Hitwise said the younger searchers, aged 25 to 34, were more likely to search for retailer coupons than the rest of the online population.

It also found the greatest share of searches are from those making between $30,000-$60,000 and $60,000-$100,000.

Also in the basket:

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.

How about some lipstick to go with that lawn mower?

Sears, the low-priced retailer known for its selection of Craftsman tools and kitchen appliances, is jumping on the beauty bandwagon.

The retailer is debuting beauty departments  — called Sears Beauty — in 13 mall locations in Chicago, Los Angeles and New York.

Sears Beauty will sell cosmetics, skin care, bath and body products, and fragrances by brands like L’Oreal, Maybelline, and CoverGirl. The offering, Sears says, is designed to help shoppers “achieve their ideal beauty results.”

Sears isn’t alone in wanting to help shoppers put their best face forward. JC Penney has installed Sephora locations inside many of its department stores, while Wal-Mart has reached a deal to sell an exclusive line of Hard Candy makeup in its discount stores.

Retailers look at cosmetics as a way to drive consumers into their stores more frequently, because shoppers typically need to purchase a new lipstick or restock their favorite body wash more often than they need to buy a new suit or replace their ride-on lawn mower.

To mark the opening of the beauty departments, Sears is offering a free cosmetic bag and brush set with any $25 cosmetics, fragrance or bath purchase, and a $10 Sears reward card with any $50 cosmetics, fragrance, or bath purchase.

(Photo: Reuters)

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.

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: Consumer spending shows a tiny rise

Check out a government report showing that U.S. consumer spending rose 0.3 percent in May after an upwardly revised flat reading in April.

It was the first gain in spending since February, as government stimulus pushed incomes higher.

“Probably the increase in personal income was due to the increasing transfer payments coming from the government right now as you’re starting to see some of the stimulus kick in,” said Doug Roberts, chief investment strategist at Channel Capital Research.

“But right now what you have to look at is, though consumption is positive, it’s kind of a tepid rebound versus the huge bounce back everyone was expecting. So we have to see if this is stabilization.”

Meanwhile, personal income in May surged 1.4 percent from April as social benefit payments included in the government’s massive economic stimulus jumped. The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income and other benefits.

But much of that stimulus money has not yet been spent. The data showed the savings jumped to a record annual rate of $768.8 billion — the highest level since records began in 1959. The saving rate climbed to 6.9 percent, the highest since December 1993.

“The rise in consumption was normal, but the rise in income was abnormally high because of government payments to people with the stimulus and social security, etc,” said Richard Hoey, chief economist at Mellon Financial Corp.

Check Out Line: Apparel apathy endures

By Nicole Maestri Check out the ongoing struggle to sell clothes to recession weary Americans.   J.C. Penney and Abercrombie & Fitch both reported quarterly results that show consumers are still cutting back on non-essential items, with Penney also warning profit for the year would be worse than analysts expected.   Consumers have been hammered by the recession, mounting job losses and credit worries, and it appears they are sticking to shopping lists for groceries and other essentials, rejecting unnecessary purchases and seeking deep discounts.   While the conviction to buy only what they need has hit sales for department stores like Penney, consumers’ desire for bargains has battered Abercrombie, which has stubbornly kept prices higher than rivals, other than discounting clearance items.   “With a challenging economic environment, the consumer continues to show a reluctance to spend on premium brands; a price consciousness dictating shopping habits unlike anything I have ever seen,” said Abercrombie Chief Executive Mike Jeffries, a retail industry veteran. The teen clothing retailer posted a first-quarter loss wider than Wall Street’s expectations, and in an abrupt change, said it is conducting a strategic review of its struggling Ruehl chain. Meanwhile, Penney posted an in-line quarterly profit, but forecast second-quarter and full year results below analysts’ expectations. “We expect consumer spending and mall traffic to remain weak, which will be particularly evident against tough comparisons in the second quarter,” CEO Mike Ullman said. Also in the basket: Kohl’s, Nordstrom beat forecasts, raise 2009 views H&M April sales rebound boosts recovery hopes Target pilot pays employees to monitor health (Photo: Reuters)

Check Out Line: This week in retail wasn’t pretty

Check out a stream of extremely sobering news from – and for – retailers.

This week, quarterly reports came in from Macy’s, Kohl’s, Nordstrom, JC Penney, Charlotte Russe, and Abercrombie & Fitch.

What did they all have in common? All reported profit drops and in the case of Macy’s and Charlotte Russe, quarterly losses.

Those dreary results followed a bankruptcy filing by Circuit City at the start of the week and then a large profit warning from competitor Best Buy.

Wal-Mart, the retailing behemoth, was able to post a nearly 10 percent rise in its quarterly earnings. But investors were somewhat taken aback when it provided a fourth-quarter earnings forecast that could possibly fall below Wall Street expectations, as it gets hit by a stronger U.S. dollar — which lowers the value of its international sales.

To cap it all off, government data showed on Friday that sales at U.S. retailers suffered a record decline in October. Sales slumped 2.8 percent last month to a seasonally adjusted $363.7 billion, the largest decline since the series began in 1992, the Commerce Department said. This compared with a revised 1.3 percent fall in September, previously reported as a 1.2 percent decrease.

It all comes just two weeks before retailers try to get consumers into their stores — and then actually spending money — during the Thanksgiving holiday shopping week. Get ready for a discount bonanza!