Shop Talk
Retailers, consumers and prices
Check Out Line: Retailers don’t see yuan move as all bad
Check out what retailers are thinking about China’s revaluation of the yuan.
Western retailers may pay more for goods they import from China as the yuan appreciates, but the flip side is that the move may create significant selling opportunities by putting more money in the pockets of consumers in the world’s biggest market.
Executives at the Reuters Consumer and Retail Summit took solace in the idea that any appreciation following China’s weekend statement it would let the yuan appreciate against the dollar would likely be gradual. They also see room to move more manufacturing out of China and into other countries with lower labor and other costs. “I don’t think that there is any sense that there is going to be any immediate impact … The open question is how quickly and how far they’ll actually let the currency revalue,” said Matthew Shay, president and CEO of the U.S. National Retail Federation, a retail trade group. Some retailers will see margins hit because their goods manufactured in China will be more expensive in dollars or euros. Retail stocks dropped more than the broad market on Monday in the wake of the yuan announcement. Beyond the retail industry, the yuan’s move is expected to help companies that supply commodities or heavy equipment to China’s fast-growing economy, like Caterpillar, and other foreign brands that source and sell goods locally, such as fast-food operator Yum Brands, the parent of KFC.
Also in China, a new strike at an auto supplier plant forced Toyota to suspend production at its Chinese assembly plant, the latest in a string of labor-related disruptions at foreign-owned manufacturers across the country.
Also in the basket:
Nothing to do but eat? Click on the Reuters holiday shopping cornucopia!
Attention all eaters (and shoppers)! Today, as the scent of turkey and spice wafts through your cozy abode ahead of the big meal, you may feel frustrated that your natural instinct to hunt and gather — remember our forefathers? — is thwarted by store opening hours. But never fear! You don’t have to wait for the stroke of midnight, when many retailers will open wide their doors. Assuage your instincts now by clicking on Reuters’ selection of holiday shopping stories, from women shoppers finally buying for themselves to food donations by Wal-Mart. Or how about a look at retailers vying for more full-price sales, or social media providing a boost to sales. Reuters will be sending its reporters across the country to visit stores, interview shoppers and retailers throughout the long weekend, providing an advance look for investors, and shoppers, of how the crucial holiday sales season is shaping up.
(Reuters photo)
from Raw Japan:
Retailers do the limbo
For some of Japan's retailers trying to jumpstart consumer spending, setting prices is like doing the limbo: How low can they go?
Japanese retailers reported mostly dismal first-half earnings results, with the industry stuck in a slump as shoppers remain reluctant to open their wallets even as the economy emerges from recession.
With no sales pick-up in sight, stores seem to have no choice but to continue their race to undercut rivals, with prices dropping for everything from cars to clothes to milk.
On the surface it sounds like a shopper's paradise: Who wouldn't mind paying less than 1,000 yen ($11) for a pair of jeans?
But it could also lead to a deflationary spiral in which consumers put off spending in hopes of further falls in prices.
And what's more, these price cuts are slicing into already razor-thin profits at companies, which are then forced to pass on the pain to employees in the form of lower paychecks.
"It's a death march," said Junji Ueda, CEO of FamilyMart, Japan's No. 3 convenience store chain.
from Raw Japan:
Cheap treat keeps Japan sweet
What is sticky, shaped like a fish and helps Japanese people shrug off the lingering effects of the country's worst recession since World War Two?
The economy is struggling but sales of a traditional, fish-shaped sweet snack are going along swimmingly, thanks to its low price and auspicious name.
Taiyaki, which means baked sea bream, is a pancake stuffed with a sweet bean jam and served hot and cheap in stalls all over the country.
The name helps. "Tai", Japanese for sea bream, sounds similar to the word for happiness.
With a price tag of as little as 130 yen ($1.45), the snack, which celebrates its 100th anniversary this year, is making a lot of people happy -- including those needing a job as the stalls are easy to get going.
"Taiyaki has been around from ancient days but I still want to eat one once in a while," Masako Kano, a 69 year-old housewife queuing outside a new store, told me. "Compared to other cakes, which normally cost around 200 yen to 300 yen, its price is attractive."
Fancy Corporation recently opened its 45th taiyaki outlet in Kawasaki, just south of Tokyo, saying the cheap snack is as popular as ever in tough times.
Check Out Line: Warning! Murky outlook ahead for retailers
Check out the latest outlook on October sales at U.S. retailers.
While most industry experts expect a 1.2 percent rise thanks to the weather gods and easy comparisons, the forecast doesn’t really say it all.
For instance, while sales trends have improved from a disastrous October 2008, data on the economy and consumer spending gives mixed signals and indicates shoppers remain cautious.
News of the U.S. economy returning to growth may have renewed some hopes of a revival in spending late last week, but the Commerce Department talked about consumer spending falling 0.5 percent in September.
It may be too early to raise hopes based on expectations for October. One thing is certain — the future is unclear.
Also in the basket:
FWIW, the retail store I work at is in a mall. In October, we had essentially the same customer count and were down about 6%.
Check Out Line: Saving money, beating estimates
Check out retailers beating earnings expectations.
Today it is Family Dollar and Costco — both being places where people usually shop to save money.
Family Dollar saw sales rise in the quarter, though sales at stores open at least a year were less than expected as the company has been reorganizing its stores to stock more food and other items that shoppers want as they stick to necessities.
Costco sales fell and so did its profits, in part due to a stronger dollar, higher labor costs and also because of the weak economy.
But its earnings still beat Wall Street’s expectations and Costco’s stock rose in the morning.
Retailers will be heard from a lot this week as many report September sales.
Also in the basket:
from Raw Japan:
Denim deflation
James Dean smouldered in his, the Marlboro men looked rugged in theirs, and now me and hordes of other Japanese people can feel frugal in ours. Jeans -- practical, durable and with just a hint of rebelliousness -- are at the centre of a price war in Japan, as struggling retailers look to lure cash-strapped customers back through their doors.
With the country slipping deeper into deflation and its jobless rate rising, shops have for some time been marking down almost everything from bags of cereal, to laundry detergent and bicycles.
But curiously it is jeans that have emerged as a symbol of this deflationary race as major retailers roll out dirt-cheap denim in bids to undercut each other.
Fast Retailing, which operates the Uniqlo casual fashion chain, started the phenomenon in March when it said it it would start flogging jeans for 990 yen (about $11) a pair at its g.u. stores.
Back then, this was widely seen as an astoundingly cheap offer -- the price was around a quarter of some jeans sold at Uniqlo, a chain known for its competitive pricing. The 990-yen jeans drove up sales at g.u., which had suffered from little consumer recognition until that point.
And the move sparked a round of tit-for-tat discounting, that this week continued with supermarket operator Seiyu, a Japanese unit of Wal-Mart, starting to sell jeans for 850 yen. "We would like to keep our price leadership," a Seiyu spokeswoman said.
The trend could also indicate that deflation in Japan is worse than government statistics show as this kind of price competition is not fully reflected in official figures.
Consumer industry eyes more cost cuts than other sectors
Consumer product manufacturers and retailers have a relatively sharp eye for cost-cutting, speed and expanding into new markets, a report released on Thursday showed.
Sixty two percent of consumer and retail firms see additional opportunities to lower costs in their supply chains, compared with just 48 percent across all sectors, according to Ernst & Young‘s Opportunity in Adversity research. That means cuts above and beyond the trimming that has already been completed.
Of course, many companies in the consumer and retail space have been able to navigate the recession better than the overall business world since people still need to eat, drink and — occasionally, these days — buy clothes and shoes. At the same time, manufacturers in the space face the added pressure of retailers cutting back inventory levels as they try to boost margins.
Others have also seen consumer industry companies taking a closer look at their supply chains. Carlos Niezen, head of Bain & Co‘s purchasing practice, told Reuters that smarter firms take a step back to see if they can revise their cost structures, rather than just looking for quick fixes to trim spending in the short term. Still, in a Bain survey of 60 executives from various industries earlier this year, 85 percent said they lacked best-in-class purchashing capabilities at their companies.
Ernst & Young’s report was based on responses from senior executives at 39 global companies in areas such as food, beverage, tobacco, personal products, apparel and retail.
It showed that 79 percent have undertaken a review of their current cash management and cash flows, versus 73 percent of the overall tally from 569 firms across a wide range of businesses. The survey was completed in June.
As they look for ways to drive growth, 56 percent of consumer companies planned to accelerate the time it takes to get products to market, compared with just 30 percent of the overall group. Consumer and retail respondents were also more likely to say they would expand into new geographical markets compared with the larger pool.
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.
Check Out Line: Want growth? Buy up.
Check Out retail strategy for growth.
A list of the top 10 companies from a “Hot 100 Retailers list” compiled by Planet Retail for the National Retail Federation showed that while a few companies grew organically, most grew as a result of a merger or acquisition.
Topping the list of companies that grew through a deal was DineEquity, which bought Applebee’s last year.
Others in that category include Susser Holdings after its purchase of Town & Country Food Stores and Village Market grocery stores, as well as the combination of fast food chains Wendy’s and Arby’s into Wendy’s/Arby’s.
Of the companies that grew on their own, Los Angeles-based American Apparel was “tops,” with revenue growth of 57.6 percent, the list showed.
Another not-so-surprising name in the top 10 was Apple, known for its iPod, Mac computer and one of the latest favorites in the market — the iPhone. “Still opening new locations, Apple also uses its stores as a way to build brand awareness,” according to the survey.
Some retailers actually managed to maintain growth, averaging a 10.8 percent compound annual growth rate, the list showed. Those on the growth chart include GameStop, Urban Outfitters, Best Buy and J. Crew to name a few.
-
Resident Shop Talk Expert
-
