Shop Talk

Check Out Line: More corporate earnings to parse

Check out the latest raft of quarterly earnings.

With investors and denizens of Main Street alike dissecting various government reports and company press releases for hints on the relative strength or weakness of the U.S. economy, the latest slew of quarterly earnings arrived to parse, including better-than-expected results from Wal-Mart Stores and Home Depot.

Wal-Mart posted a better-than-expected profit helped by cost cuts and growth in international markets as sales at U.S. stores open at least a year fell. The world’s largest retailer also raised its full-year profit forecast.

Home Depot, the largest home improvement chain, reported a slightly better-than-expected profit on tighter cost controls, but sales missed analysts’ expectations as consumers curbed purchases in the grim U.S. economy. The results prompted the company to boost its profit outlook and shave its sales forecast for the year.

Apparel retailer Abercrombie & Fitch also posted a profit that topped expectations as the company’s discounts drew customers and lifted sales, while Danish brewer Carlsberg’s higher profit surprised and it raised its 2010 outlook.

Even for those in negative territory, there were silver linings as apparel maker Perry Ellis said it expects to post a narrower-than-expected quarterly loss and earn more than it had previously forecast for fiscal 2011. Department store Saks reported a smaller-than-expected loss due to an uptick in luxury spending and its ability to sell more items at full price.

Also in the basket:

from DealZone:

Markdown poster child: I’d do it again

With the luxury of hindsight, Saks Chief Executive Stephen Sadove said he wouldn't hesitate to repeat the big markdowns of the 2008 holiday season if faced with the same tough environment that made the retailer the poster child of recessionary sales.

"It was the right thing to do to generate the cash," Sadove said at the Reuters Global Luxury Summit in New York.

The sale slashed prices on high-fashion, designer merchandise by as much as 70 percent, prompting a flood of media coverage and a slew of shoppers.

"It took some months to clear out the inventory. All the  questions of vendor relationships --- every one understood very quickly it was the right thing for the business. I would have done it again," Sadove said.

"It was a function of supply and demand when you have an excess of supply over demand you have to clear out the product. It allowed us more quickly to get back to a normalized state -- healthy margins," he said.

Sadove declined to take credit for the decision, saying it was made by a large management at Saks.

"My career has been about building teams and teamwork  -- that was an example where all the right players had a seat at the table," he said.

Retailers eye some expansion in 2010

After their abysmal 2009, nearly half of all U.S. retail chains plan on at least maintaining their number of stores this year, according to a survey released on Thursday by consultancy KPMG and industry group the National Retail Federation.

Far more retailers were planning to open stores than close them, according to the survey of 310 retail industry executives, representing 138 companies, conducted late last year.

Anecdotally, those intentions seem to be playing out, based on what we’ve been hearing from CEOs on conference calls and webcasts.

Most companies have said they plan to open new stores this year, or were at least considering it. Tiffany, for example, is planning to open another 17 locations worldwide in 2010 (it now has 220). And Saks is opening more of its off price Off 5th stores but is closing its Portland store and could shut others.

Another sign of easing pressure on U.S. retailers: their plan to up spending on the technology which allows them to gather crucial information on their shoppers and their habits.  More than 67 percent of respondents said customer database and data mining will be a priority this year.  That may be just one small factor why investors are so bullish on the tech sector again.

(Reuters photo)

Luxe CEOs bemoan encroachment of social media on privacy

No one wants it broadcast to the world when one is submitting to the indignities of airport security screening.

But that’s just what happened to luxury designer Tory Burch awhile back, when a fan tweeted to thousands that Burch was barefoot at the airport.  The upside, Burch said, was that the tweet and subsequent discussion gave her the idea to create a travel sock for women.

New business ideas notwithstanding, Burch told an audience at the National Retail Federation conference that social media was taking a toll on her.

“You want to maintain a level of mystique in a way, you don’t want to be accessible,” she said.  “Being the face of our brand I want to maintain a level of privacy … but  you have to stay interesting, be quippy and funny and not boring, but at the same time, not too personal.”

Fellow panelist Saks CEO Steve Sadove also finds there are limits to our electronic age. He recently went on Facebook but within a matter of minutes was besieged by friend requests and ran the other way. “No, this isn’t for me,” he thought. And don’t expect him to start tweeting any time soon, he told the audience of about 2,000.

He has reason to be skeptical: not long ago he went on holiday to Mexico with his family, and was none too pleased to see photos of himself at the beach on the web.

Check Out Line: Saks doesn’t sell

Check out the recession. It appears it was still alive and well at Saks in the second quarter.   The upscale retailer posted a $54.5 million loss in the quarter, wider than the $32.7 million seen a year earlier.   Same-store sales fell 15.5 percent in the quarter and Saks expects that measure to fall in the mid-to-high single digits in the second half of the year.   The company has been cutting expenses and controlling inventory. The loss also was not as bad as analysts expected.   But unless a Versace dress becomes the “must-have” back to school item, the tough sales environment at Saks is likely to continue.   Also in the basket:   Cost cuts help Home Depot beat estimates   Big part of U.S. back-to-school sales still ahead: NRF   CKE same-store sales off 3.6 pct in latest four weeks   Target profit falls, but beats Wall Street view

(Reuters photo)

Saks CEO ‘staycation’ing in slump

Many U.S. consumers are not really in the mood to go on vacation. That’s understandable, with all that’s happening in the economy right now.   Guess who else is staying home this summer?  “As a family — my wife, my kids and I — are making sure we’re doing more in the way of ‘staycations’ as opposed to traveling as much,” Stephen Sadove, chief executive of upscale retailer Saks, said at the Reuters Global Luxury Summit in New York on Tuesday.   The retailer’s top executive said he was paring back expenses and planning to forgo his annual ritual of getting himself a new watch in the light of the economy.    Sadove, who has personally paid to take his wife along in the past on a few of his European buying trips, said, “I didn’t think that sent the right signal … We decided that wasn’t the right thing to be doing.”   One can only hope the struggling retailer’s sales figures start sending the right signals soon.

(Reuters photo)

Check Out Line: Retailers’ results surprise Street

Check Out better-than-expected quarterly results from Home Depot and Saks, as retailers across the spectrum succeed in cutting costs. 

Home Depot, the top specialty home improvement retailer, said its quarterly profit was 35 cents per share in the first quarter, excluding items, topping Wall Street estimates for profit of 28 cents.

Aggressive cost cuts – such as closing its Expo Design Center chain and laying off about 7,000 workers – helped offset a 9.7 percent decline in sales.

The same phenomenon occurred at high-end retailer Saks, whose 3 cent-per-share loss, excluding items, blew away analysts’ average expectation for a loss of 26 cents per share.

Saks shares jumped nearly 13 percent in premarket trade, while Home Depot shares slumped 1.7 percent as the results, while still better than expectations, were not as good as those from rival Lowe’s, which reported better-than-expected profit on Monday due to strong sales of outdoor goods.

Saks raised its target for cost cuts, even as it expects sales to decline throughout the rest of the year.

Also in the basket:

If only All Mankind would buy Premium Denim

Premium jeans are a chic — and profitable — addition to department stores when consumers flush with cash are willing to shell out over $200 per pair. But when the economy goes south, stores and shoppers start to balk.      On Tuesday, VF Corp, maker of 7 For All Mankind jeans, said that brand’s total business was down about 10 percent in the quarter, thanks to the weak U.S. wholesale environment.      “It is absolutely a piece of the market that has been most challenged in this economy and that is the more premium luxury sector,” Chief Executive Eric Wiseman told analysts in a call following the release of first-quarter results, which were lower than the year-ago quarter.      7 For All Mankind competes with a small group of premium brands including True Religion, which announces quarterly results in early May.      The brand is sold in specialty shops, some of which are shuttering their doors in the recession, and upper-tier department stores, including Nordstrom, Bloomingdale’s and Saks Fifth Avenue.   “You see their comps so you see how they’re struggling right now to get traffic into the store,” Wiseman said.      VF’s international jeans business, too, is struggling for a good fit with the global economy.       The company, which makes Wrangler and Lee jeans sold around the world, said it was lowering its full-year earnings guidance in large part due to “a severe contraction” in the economies of Scandinavia and Eastern European countries, where jeans are apparently not at the top of the shopping list.

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. 

Check Out Line: The discretionary downtown

Check out the effect of splurge-resistant shoppers on quarterly results.

With newly frugal shoppers sticking to newly shrunk budgets, Saks posted a quarterly loss that was much steeper than Wall Street expected, and said same-store sales in its fourth quarter fell 15.3 percent.

“During the quarter, the company experienced continued weakness across all geographies, merchandise categories, and channels of distribution,” said Chairman Stephen Sadove.

Saks grabbed headlines this holiday for slashing prices on designer merchandise after it realized its stores were stocked with too much inventory. The aggressive price cutting may have long-term consequences if shoppers, accustomed to discounts, balk at paying full price once again.

Saks said it expects the environment will be “extremely challenging” throughout 2009 so it is cutting its capital spending plans and said it is targeting a 20 percent decrease in inventory receipts for the year.

Meanwhile, Zale also posted a quarterly net loss after it cut prices in the face of lower consumer spending during the holiday shopping season. The jewelry retailer said it was taking additional actions to cut costs that include reducing inventory and closing about 115 stores with weak sales when their leases mature. The company said it cut 245 jobs this month.

But it did say that sales trends improved from January through Valentine’s Day.