Shop Talk

Retailers, consumers and prices

Check Out Line: From beef jerky to jewelry, cost cuts pay off

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USA-RETAILSALES/Check out retailers at the high end and the mass level topping Wall Street profit expectations after cutting costs.

Tiffany & Co’s fourth-quarter profit  handily topped analysts’ estimates, after the luxury jeweler took aggressive steps to tighten its cost structure as even wealthy consumers pare back spending in the recession.

Tiffany said earlier this month it would close its 16 Iridesse stores, since the chain, which specialized in pearl jewelry, recorded an operating loss ever since it started a few years ago. In January, the company said it was reviewing all elements of its cost structure. On Monday, it said it would suspend buying back its own shares until further notice.

Historically, retailers at the high end and low end were more shielded than those in the middle from the impact of a recession, as wealthy consumers were less affected and mass retailers and drug stores sold necessary items like medicines and toiletries.  Yet the scope of the current downturn has meant all levels of retailers felt the pain and have therefore sought ways to preserve costs as sales slow.

Check Out Line: Survey says…. ugghhh!

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Check out how it ain’t getting any better any time soon. clouds
 
The latest evidence is a new survey by America’s Research Group that showed that nearly a third of U.S. households think it will be a year before their families are better off.
 
That might not seem like so many, until you see that another quarter think that it will take even longer.
 
“We’re looking at a retail meltdown much worse than anyone could have imagined six months ago,” said Britt Beemer, founder of America’s Research Group.
 
Half of the consumers said their shopping budgets were significantly lowered from last year. And almost all of the rest said they were only the same.
 
More than half also said they had stopped using credit cards for purchases. And 47 percent said they would probably or definitely not buy something if it wasn’t on sale.
 
So, how’s that stimulus going?
 
Also in the basket:
 
Bon-Ton Stores swings to Q4 loss on charges
 
American Eagle meets Street view
 
Staples posts weak Q4, says will not give ’09 outlook
 
Tide, Woolite tout their fashion sense (WSJ)
 
Wal-Mart plans to market digital health records system (N.Y. Times)

(Reuters photo)

Check Out Line: Picture this bankruptcy

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ritzcamera1Check out this development at Ritz Camera Centers. 
 
The largest U.S. specialty camera and imaging chain filed for Chapter 11 bankruptcy protection.
 
In some ways, what happened at Ritz is typical of the pressures put on many retailers in this recession. The company said lenders ordered it to boost reserves, which reduced available credit.
 
Also, the recession caused holiday sales to be “materially lower” than a year earlier.
 
But the company was also offering a service fewer and fewer consumers needed: photo processing. With more people using digital cameras and “developing” the pictures on their computers, Ritz was coming under more pressure.
 
“The loss of revenues and profit margins from the diminution in the photo-finishing business proved too much of a burden,” Chief Restructuring Officer Marc Weinsweig said in an affidavit.
 
Also in the basket:
 
Toymaker Lego sees rising 2009 sales
 
Consumer-goods makers heed ‘paycheck cycle’ (WSJ)
 
Campbell Soup profit falls
 
PepsiCo scraps changes to Tropicana (N.Y. Times)

(Photo\Reuters)

Check Out Line: Unemployment line grows

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Check out more than half a million more people looking for work.USA-ECONOMY/
 
The layoffs have been all over the news, but when you see them all added together it shows just how bad this economy is.
 
The economy shed a worse-thank-expected 598,000 jobs in December. That’s the worse one-month drop since Richard Nixon was president
 
“The report is awful. it’s even worse than it looks, because people did not hire workers prior to Christmas, but they still did enormous layoffs after Christmas,” Cary Leahey, economist at Decision Economics.
 
Retailers shed 45,000 jobs in January and have cut 219,000 jobs since November as they went through the worst holiday shopping season in at least four decades.
 
And the hits just keep on coming. Macy’s  cut another 7,000 jobs on Monday.
 
Where’s that stimulus again?
 
Also in the basket:
 
Tim Hortons, Cold Stone to wed doughnuts and ice cream
 
Hermes, LVMH bring relief to luxury sector
 
Amazon New York event spurs talk of new Kindle model

(Photo: Reuters)

At Banana, never having to pay full price — until May 1

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USA/The retail industry  is debating what the drastic discounts that were offered during the holiday season now means for “full priced” selling in 2009.

After becoming accustomed to discounts of 50, 60 or 70 percent, will consumers tolerate paying the full amount listed on a price tag? And if so, when will that happen? And does “full price” now mean selling items for 10 percent to 20 percent below what they were sold for a year ago?

Check Out Line: Even NRF sees 2009 sales down

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Check out the National Retail Federation’s sales outlook. clouds1
 
Even the retail industry’s trade group is expecting sales to fall 0.5 this year. The NRF, known for its optimistic sales forecasts, is expecting the first decline since it began tracking sales in 1995.
 
Oh, and things could even get worse.
 
If the government does not quickly pass an economic stimulus package, “then all bets are off,” NRF Chief Economist Rosalind Wells told Reuters.
 
With the U.S. in the throws of a recession, preliminary figures showed that retail sales rose 1.4 percent in 2008, well below the 3.5 percent increase the NRF originally forecast. 
 
The year culminated with the worst holiday season in four decades or more, according to some analysts.
 
Retailer bankruptcies, job cuts and store closings have continued into 2009, and the NRF forecast is the latest sign that things are not expected to get better any time soon.
 
Also in the basket:
 
Hershey profit beats estimates, sticks by 2009 view
 
UK retailers predict worst February on record – CBI
 
Hartmarx seeks to stay whole (WWD, subscription required)

Check Out Line: Job cuts on Aisle 4!

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USA-ECONOMY/Check out the retail belt tightening.

Not belt tightening by retail customers (if there are any left), but the latest round of cost cuts by retailers themselves.

Williams-Sonoma is cutting 18 percent of its workforce and also paired back capital spending.

Check Out Line: Liz gets new credit line — at a price

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Check out the amendment to Liz Claiborne’s credit facility. USA-HOLIDAYSALES/
 
The owner of the Juicy Couture, Kate Spade and Lucky Brand chains worked out a new credit agreement that will not mature until 2011, replacing a current one that was set to mature in October.
 
Liz will get less credit — $600 million, down from $750 million — which the company says is appropriate given recent divestitures.
 
The agreement also comes with higher fees and interest rates, but eliminates some covenants.
 
The financial markets have closely watched Liz and other retailers to see if they can weather the tight credit markets and for any signs that those markets are loosening up.
 
The news of the new credit agreement helped boost Liz’s stock more than 12 percent in morning trading.  Investors shrugged off the fact that the company now expects to break even or post a loss for continuing operations in the fourth quarter, rather than the profit of 19 cents to 24 cents per share it previously forecast.
 
Who needs to make money during the holiday season when your banks will let you extend your credit terms … As long as you can pay the higher prices.
 
Also in the basket:
 
Wendy’s scales back breakfast plans
 
Tesco, Metro show scars of downturn, but coping
 
Dumpster couture gets a boost at Green Inaugural Ball (WSJ)

(Photo: Reuters)

Check Out Line: December sales slump

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Check Out the drop in sales.

It was no surprise that sales were weak in December, though some retailers stood out Thursday for their worse-than-expected performance.

WALMART/Wal-Mart, the world’s largest retailer, said sales at U.S. stores open at least a year rose just 1.7 percent, while analysts were expecting a 2.8 percent increase.  Wal-Mart and other chains such as Macy’s cut guidance for the fourth quarter ending later this month.
 
Shares of Wal-Mart fell more than 9 percent on Thursday morning, dragging the Dow Jones industrial average into negative territory as well.

Check Out Line: How low will retailers go?

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cloudsCheck out the days of reckoning for retailers.
 
This week most U.S. retailers will tell us how December sales went. The news is not likely to be good.
 
According to Thomson Reuters data, Wal-Mart is about the only one that saw an increase in same-store sales. With a recession, job losses, falling home values and tighter credit, it’s not surprising that most people cut back and that sales fell for most retailers.
 
But what will be more telling is how much the big sales — like Jos A Bank’s three-for-one suit sale — lead to profit warnings by retailers. Those deep discounts may move merchandise (though even that is debatable in this environment), but they come at the expense of profits.
 
Retail stocks have actually outperformed the broader market in the past month. But the depth of the profit warnings will likely determine whether those retail stocks also go back on the discount rack.
 
Also in the basket:
 
UK retailers ease Christmas fears, but gloom lingers
 
Smoking ban in cafes puts French off cigarettes
 
Coming down on tobacco (N.Y. Times)

(Photos/Reuters)

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