Shop Talk

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.

Black Friday: Tourists rescue New York

Though many New Yorkers complain that tourists are underfoot and in their way, retailers across the city see them, and their strong euros, pounds and Canadian dollars, as a blessing.

Tourists helped Saks Fifth Avenue’s flagship store last quarter perform in line with the chain’s other stores, and Macy’s CEO Terry Lundgren told Reuters on Friday that lately he was hearing more languages besides English than ever on the store floor.

Judging by some of the shoppers Reuters interviewed this week, visitors from abroad plan to spend plenty in New York:

- “Stuff is always cheaper here anyway and even more so with the dollar,” said Katy Moore, a visitor from Ireland, who was shopping at Foot Locker on Thanksgiving day.

-  Laurence Moran, a 30 year-old actor visiting from London, was waiting in line with a couple hundred people outside the Abercrombie & Fitch in Manhattan to splurge… on himself. Weak pound or not, Moran said he could not resist the Black Friday sales.

- Deb Curley, a British tourist in her 60s, said , “The toy stores here are crazy. We have nothing like this in England.”

In addition to these shoppers, Reuters encountered tourists from Israel, the Netherlands, Canada, Belgium, Venezuela, Vietnam and many other countries intent on shopping til they drop.

Black Friday: No riff-raff, please

Bargain shoppers turned out en masse across the land on Friday morning to observe Black Friday rituals, while retail temples from Target to Macy’s to Saks slashed prices to get people to do one simple thing: buy more stuff.

But upscale stores — and some their shoppers — seemed to think the Black Friday extravaganza beneath them.

I got a sense of this while I was interviewing people outside Saks’s flagship store on Manhattan’s Fifth Avenue this morning. I asked a customer exiting with a Saks bag full of merchandise what she thought of the sales. She sniffed:“I’m not here for Black Friday. All the stuff I bought was full price!”

Peter Bertling, a lawyer visiting from Santa Barbara, California, had a different point of view about discounts. “I hadn’t planned on buying a suit,” Bertling said as he left Saks. “If not for the Black Friday sale, I’d probably be at the hotel with my wife right now.”

While Saks discounts many items by 40 percent between 8 a.m. and noon on Friday, other upscale rivals seemed to the think holiday discounts were déclassé. At 9 a.m. on Friday, while Saks and Tiffany were open, other upscale stores that line Fifth Avenue, such as Cartier, Versace, Prada, Piaget and even Bergdorf Goodman, were closed.

(Photo: Reuters)

A Runway Paved with Gold

   Who needs the runway when Goldfinger’s got your back?    Fashion industry watchers wonder whether more designers will use Times Square’s neon signs as a virtual runway in the future, like Carmen Marc Valvo  did with his spring/summer 2010 show during New York Fashion Week. More to the point, will more designers follow his lead next time by asking the World Gold Council  and the Nasdaq OMX Group Inc. – or other financial markets players — to help foot the bill?

A Valvo spokesman says the cost was “about half” that of a runway show in the Bryant Park Tents.  The tab usually starts at $100,000 and can run $250,000 or more, depending on how many models and special effects are involved. This was perhaps the flashiest example of how designers, hit hard by the recession, are seeking more sponsorships to finance their New York shows than in the past. Check out this video of the Times Square show, which ran on the neon signs of Nasdaq, Thomson Reuters and Fox:        Even with gold trading above $1,000 an ounce, that’s still less than what some of Valvo’s gowns go for at  Bergdorf Goodman, Neiman Marcus and Saks Fifth Avenue.    The World Gold Council’s Duvall O’Steen said the group paid 10 models and other show expenses — the first time it’s taken such a high-profile role at Fashion Week. Check out this video as O’Steen talks about fashion and gold jewelry:        In fact, the World Gold Council is getting more requests now for corporate event sponsorships than it can accommodate, O’Steen said. And it’s happening after a year when a drop in world gold mining production curbed its budget for such affairs.         Bruce Aust, Nasdaq’s executive vice president of the corporate client group, also explains why the made its first foray into fashion:      Michael Quintanilla, who covers fashion for the San Antonio Express-News and two other Hearst newspapers, told Reuters: “Times Square was the perfect place for a fashion show. With all that neon, it’s very ‘Blade Runner.’ I loved the format. You could drop in when you wanted, have a cocktail, talk to Carmen, see the clothes and leave, without being herded into a space like cattle and being forced to wait.”

         What’s next? DeBeers Presents Dennis Basso?

Reuters Photo by Yuriko Nakao

Luxury apparel, redefined

American luxury retail has been, well, in shambles.

Since department store revenues began to plummet in September, luxury’s glossy image transformed to one that brings to mind strewn-about merchandise on a Saks Fifth Avenue floor.

Pricing structures have come under pressure as shoppers seek deep discounts, or worse, question price guidelines after aggressive reductions at the end of last year.  In the spring, markdowns crept dangerously close to the start of the season.  Clearly, discounts really are not what designers want their labels to be known for.

“For younger, newer designers, image is everything,” said fashion consulting firm Launch Collective’s Rob Spira, who recently co-curated the New York City Save Fashion pop-up shop to celebrate independent designers.

“Before, designers were coming to us for ideas to build funding,” Spira told Reuters at the Save Fashion store, which popular style Web site Refinery29 also co-curated.  “Now they’re looking for creative ways to sustain in this kind of environment.”

Refinery29 Editorial Director Christene Barberich said many rising designers complained recently that upscale department stores were canceling orders despite interest in their brands.

Just how wonderful is your brand?

Just how “wonderful” consumers think your brand is can help your stock price, especially in a recession, according to a study by market research agencies Kadence, Brand Care and So What Research.

The study looked at consumer perceptions of 650 leading U.S. brands and found there is a link between the affection consumers hold for a brand — or the “wonderfulness” of the brand – and its stock performance.  

According to the study, the ten most wonderful brands in the eyes of U.S. consumers are (in descending order) Hershey’s, Google, Sony, Kraft, Crayola, Kellogg’s, Scotch Tape, Wii, Rolls Royce and Johnson & Johnson.

The ten least wonderful brands are (from bottom up) National Enquirer, AIG, Botox, Kia, alli, Hummer, O The Oprah Magazine, Dress Barn, ChemLawn and Direct Buy.

In terms of value, brands that were seen as offering the best ratio of wonderfulness to cost were Wal-Mart, Google, Amazon, Hershey’s, Target, Cheerios, Campbell, PBS, Yahoo and eBay.

Brands that were seen as offering the worst ratio of wonderfulness to cost were Hummer, Botox, Prada, Land Rover, Gucci, AIG, Saks Fifth Avenue, Louis Vuitton, Maserati and Ferrari.

“Detailed analysis of responses shows a strong correlation between the level of consumer affection and stock performance in 2008,” said Owen Jenkins, CEO of Boston-based Kadence Business Research, in a statement. 

Recession Sells: Slashing prices, outlet-style

Outlet malls are known for their low prices, but the discounts being offered this weekend at Woodbury Common Premium Outlets in Central Valley NY, roughly 45 miles north of Manhattan, were truly eye-popping.

From Geoffrey Beene to Izod to Van Heusen, store windows were plastered with signs offering 40 to 60 to 75 percent off:

Takeover talk again swirls around Saks

Might Saks be taken over at some point? This rumor got new life on Friday when Citigroup analyst Deborah Weinswig noted that Iceland’s Baugur Group has consolidated and/or rolled over forward contracts for Saks shares into new ones that mature in July.

“We view this news as an incremental positive for our investment thesis for Saks as it increases our confidence that there is a probability of a takeout deal in Saks’s future,” Weinswig said in a research note.

The Saks takeover rumor picked up steam last year, when Baugur disclosed in an October filing that it could make a joint bid for the parent of Saks Fifth Avenue with Dubai-owned Landmark Group. Baugur repeated that in a filing this week.

The executive chairman of Baugur, Jon Asgeir Johannesson, told Reuters at the World Retail Congress in April that his company was content with its Saks holding and did not intend to make a takeover bid. Baugur, Johannesson and Landmark own about 9.7 percent of Saks common shares.

Saks shares shot up about 4 percent on Friday. Spokeswoman Julia Bentley said in an email that Saks doesn’t comment on rumors or speculation.

Stay tuned.