Shop Talk

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)

Check Out Line: More quarterly earnings to parse

Check out the latest quarterly earnings to size up.

Williams-Sonoma reported a better-than-expected profit on lower costs and strong holiday sales, and the home goods chain said it sees sales and earnings rising for the year.

The operator of the Pottery Barn, West Elm and Williams-Sonoma chains, which won many shoppers in the  holiday season by offering more lower-priced home decor items, also boosted its quarterly dividend by 8.3 percent.

PepsiCo and Kimberly-Clark, meanwhile, both backed their 2010 earnings outlooks.

Tiffany’s message was more mixed as the upscale jeweler’s profit was lower-than-expected, but its full-year forecast was above the Street’s expectations.

Also in the basket:

Pepsi to cut salt, sugar and saturated fats

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)

Affluent Chinese help Tiffany make up for stingy US shoppers

Normally double-digit sales declines don’t cheer investors.

But shares of jewelry chain Tiffany & Co rose 4 percent on Wednesday even though it reported that sales at its U.S. stores open for at least a year (“same-store-sales” in industry parlance) fell 10 percent in the third quarter. 

True, much of the hemorrhaging seems to have subsided since last year’s gruesome holiday fourth quarter when U.S. same-store sales fell 33 percent, and November is off to a promising start.

Seems that wealthy Asians and Europeans — in Asia outside Japan, overall sales rose 18 percent while European sales were up 10.5 percent in the quarter — are picking up the slack from rich Americans who seem to be curbing their shopping until the Dow Jones Index is more to their liking… like say 14,000. And analysts were encouraged that the jeweler is aggressively expanding overseas.

Tiffany is so bullish on China in particular that it is planning to triple the number of its stores on the mainland within 5 years. Outside China, the chain is also expanding. It is opening a second store at London’s Heathrow Airport next month and has opened new stores in Amsterdam, a Melbourne suburb, Toronto and Hong Kong this year.

While the affluent U.S. baubles buyer will eventually return, Tiffany is playing it smart by leveraging its strong brand and international footprint to get through the storm, analysts told Reuters.

(PHOTO: Reuters)

Check Out Line: At Tiffany, the cut is in the costs, not the diamonds

Check out cost cuts at Tiffany.   it is (was?) a recession and people aren’t buying as much expensive jewelry. Sales at Tiffany fell 16 percent in the latest quarter.   But even though profit also fell almost 30 percent, Tiffany shares still rose.   Cost cuts helped Tiffany beat analyst expectations. The company said SG&A expenses fell 14 percent. It’s also slowing its pace of store openings because of the recession.   “Breakfast at Tiffany’s?” Right now, it might be an Egg McMuffin and coffee from the deli on the corner.   Also in the basket:   Consumer spending lifted by “cash-for-clunkers”   L’Oreal H1 beats forecasts, ready to make purchase

(Photo: Reuters)

Check Out Line: Signs of brighter days ahead?

Check out hopeful signs that the recession may be abating.

While recent reports showed slumping sales at many big-box retailers, there are other signs that the economy may be bottoming.

U.S. retail sales rose in May and the number of workers who filed new applications for jobless benefits last week fell for the fourth straight week.

The Commerce Department today reported that U.S. retail sales rose 0.5 percent in May, thanks partly to gasoline sales that jumped 3.6 percent. Meanwhile, the Labor Department said initial jobless claims fell to their lowest levels since Jan. 24.

Discount retailer Target has increased its quarterly dividend, Clorox did the same while also affirming its 2010 profit outlook and financial targets for 2013, and Del Monte posted far stronger-than-expected quarterly earnings and provided a better-than-expected 2010 forecast.

Not all the news has been hopeful, however.

While last month’s U.S. foreclosure activity ebbed from April’s record high, homeowners were still struggling to keep up with house payments and May foreclosure filings were the third-highest on record.

Check Out Line: Austerity the “must-have” item for luxury buyers

Check out what top executives from the global luxury sector have to say.

Chief executives from Burberry Group, Hermes, Tiffany, Rolls-Royce and Richmont’s Van Cleef & Arpels are among the many officials who will speak this week at Reuters’ first-ever Global Luxury Summit about what their sector is facing amid a recession that has even well-heeled consumers dialing back spending.

In a new report, Bain & Co predicts sales of luxury goods are expected to drop 10 percent this year and not recover fully until 2012.

“Austerity is fashionable, even for the wealthiest consumers,” Bain partner Claudia D’Arpizio said.

Van Cleef & Arpels CEO Stanislas de Quercize said the French jeweler does not expect sales to rise this year even though it will open eight boutiques and Hermes CEO Patrick Thomas sees the luxury sector suffering for the next two years.

Some are more optimistic in the face of the slowdown. Burberry CEO Angela Ahrendts said the British luxury brand does not feel threatened by value-seeking shoppers, although she acknowledged “aspirational” consumers are unlikely to return to buying expensive coats and handbags any time soon.

Meanwhile, some retailers are already planning for something less luxurious: the back-to-school season.

Check Out Line: Diamonds no longer a girl’s best friend?

Check out the quarterly results at jeweler Tiffany & Co. It’s enough to make one question  Marilyn Monroe’s choice in songs.

The company posted a slightly weaker-than-expected first-quarter profit and said sales dropped 22 percent as shoppers avoided jewelry. Companies like Tiffany and even more-affordable peers such as Zale Corp have seen demand hurt in the past year as consumers focus on buying necessities in the recession.

In a sign that maybe things are at least stabilizing, Tiffany maintained its full-year profit outlook. Even better, the U.S. economy contracted slightly less than initially estimated in the first quarter.

However, consumers remain under pressure as plunging home prices, rising unemployment and a new wave of foreclosures are clouding prospects for a quick end to the U.S. real estate debacle.

Also in the basket:

J Crew beats in quarter, shares rise 17 percent

Organic Dairies Watch the Good Times Turn Bad (New York Times)

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

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.

Walgreen Co, which is in the midst of a major overhaul that includes job cuts, store remodeling and moving some pharmacy work to centralized locations, posted a better-than-expected quarterly profit as those efforts paid off.

The drug store chain also said it filled 4 percent more prescriptions in the quarter than a year earlier, while retail competitors filled 1 percent fewer prescriptions.

Walgreen is also promoting paper towels, tissues, food and other items in new advertising, touting itself as a place to shop for “Affordable Essentials.”

So goes Wall Street, so goes Fifth Avenue retailers

The fallout from the turmoil on Wall Street will be felt by retailers who have set up shop on one of Manhattan’s most prestigious avenues – Fifth Avenue.

In the past week, Lehman has failed, Merrill Lynch agreed to be acquired by Bank of America, and the government had to step in to keep giant insurer AIG from failing.

It has created chaos on Wall Street and expectations of thousands of impending job losses. In August alone, New York City’s securities companies axed 10,000 workers.

It is the exact opposite of what retailers needed headed into what is expected to be one of the worst holiday season in years.

In a research note, Goldman Sachs highlights which retailers may fare the worst.

Wall Street’s financial turmoil heading into the holiday season is likely to negatively impact key NY centric retailers with meaningful flagship presences.

Saks and Tiffany top the list with each of their flagships accounting for 20% and 10% of total sales, respectively. These key stores have been outperforming an already weakened store base as tourism has provided a bright spot. In light of a dampened worldwide wealth effect and strengthening dollar, more modest tourism gains should provide less of an offset to today’s worsening domestic demand.

….Luxury retailers and brands such as Coach, Nordstrom, and Ralph Lauren, are likely to also be pressured this season as waning Wall St bonuses and volatile equity markets erode confidence at the high end. While their NY flagships (Nordstrom is not in NYC) do not carry the same significance as those of Tiffany and Saks, we expect results to be impacted nonetheless

(Photo: Reuters)