Retailers, consumers and prices
The leather goods company posted a lower quarterly profit, but said business was stabilizing at its North American stores at pre-December levels. The company has refrained from deep profit-sapping discounts in a strategy that has preserved the status of its brand but hurt sales.
Chief Executive Lew Frankfort said consumers have some optimism that the worst of the uncertainty is behind them and Coach has greater visibility into how shoppers will behave in the coming months.
Coca-Cola also reported a lower profit, but its results met analysts’ expectations. That came a day after rival PepsiCo posted a better-than-expected quarterly profit and offered $6 billion to buy the remaining stakes in its two largest bottlers as it seeks to better control its distribution and cut costs.
According to a survey by research firm NPD Group, total U.S. sales of beauty products (sold mainly in department stores) fell 3 percent to $8.38 billion in 2008.
Check out Avon’s declining sales.
The world’s largest direct seller of cosmetics just spent however much money you have to spend to get an ad on NBC right before the Super Bowl, trying to recruit people to sell for Avon.
The pitch was that in these tough economic times, being an Avon rep was a good idea. It’s a good way to earn extra money, and, since it was essentially your own business you couldn’t be fired, the commercial said.
One question: who are all these new Avon Ladies going to be selling to?
The global economy is in tatters. Avon posted fourth-quarter profit below analysts expectations and sees more difficulty in 2009.
Sales fell 9 percent, though that was due to the stronger dollar. But even a 2 percent sales increase in local currencies was somewhat anemic.
So, who is Avon calling on?
Also in the basket:
Walgreen January sales up 0.4 percent
Liz Claiborne to cut 725 U.S. jobs
A CEO gets a rare second act (WSJ)
Check out people buying only what they use.
Remember when every time you went to the store you bought toilet paper, paper towels and other basics just so that you wouldn’t run out?
Well, those days appear to be gone.
As companies like Colgate-Palmolive and Procter & Gamble report earnings, one thing becoming clear is that consumers are now using up everything they have in their cupboards before buying replacements.
Call it “destocking,” “pantry deloading,” or “inventory drawdowns,” but whatever it’s called, it cuts into sales — for retailers and manufacturers. As consumers are using up the shampoo or soup they have on their shelves before buying more, retailers are also getting rid of excess inventory before buying more from manufacturers.
With the economy in recession, consumers have every reason to be frugal. On top of that, manufacturers have raised prices over the past two years in order to cope with soaring commodity costs.
But with fewer items being purchased, the next question is whether those manufacturers will have to lower prices to maintain market share.
Also in the basket:
GDP sees biggest drop in 27 years
Unilever faces slowdown just as new CEO takes over
Check out the National Retail Federation’s sales outlook.
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)
Black Friday has come and gone but what on earth happened at the cash registers over the Thanksgiving weekend? The data is trickling in, and so are the early critiques. (See our previous blogs: Treat Black Friday reports cautiously and Black Friday data spurs more questions than answers)
Here is a break down of the latest reports and what data is still to come:
According its 2008 Black Friday Weekend survey, conducted by BIGresearch and published on Sunday, the NRF said more than 172 million shoppers visited stores and websites over Black Friday weekend (which includes Thursday, Friday, Saturday and projections for Sunday), up from 147 million shoppers last year.
Not only are they thinking twice about shopping, consumers are also losing faith in gift cards, according to the America’s Research Group/UBS 2008 Christmas survey.
While such cards were among the top gifts for holiday 2007, consumers this year are worried that stores could slip into bankruptcy and leave gift card recipients out in the cold.
U.S. retailers, some of them on the brink of complete ruin, are already slashing prices ahead of Black Friday next week. We’ll be covering the fallout of the financial crisis and how it is changing the consumer psyche in great detail, both here and on the Reuters Holiday Shopping coverage page. To start off, here are a few images of how “recession” is the new sexy when it comes to luring shoppers, from our reporters in the trenches.
New York City, where the sign says it all, via Nick Zieminski:
It almost looks like the Entire Store is for Free, though that is not the case:
These are from Atlantic City, if anyone is looking for diamonds, via Martinne Geller:
Check out the falling same-store sales at Costco.
Okay, October was a pretty rancid month for most retailers, and most did worse than Costco.
But the warehouse club operator had a 1 pct same-store sales decline in October that was its worst performance since Thomson Reuters began tracking such data for Costco in 1997.
Warehouse clubs had been holding in with cash-strapped consumers looking to save money with bulk purchases of toilet paper, food and other essential items.
But consumers have really cut back on the nonessentials, so sales of items like computers, toys and jewelry suffered.
Wonder how the 1,000-count bottles of aspirin are selling as consumers cope with the economic headache.
Also in the basket:
Anheuser profit meets view; silent on deal
For Wal-Mart, a Christmas that’s made to order (N.Y. Times)
President Obama’s Era: Low-Key and Modern, From Society to Style (WWD, subscription required)