R3: REQUIRED RETAIL READING
November 17, 2010
RESEARCH ANECDOTES
- While traffic remains relatively flat at Saks, the luxury retailer highlighted an uptick in average dollar per transaction in Q3 suggesting improved confidence among consumers. Additionally, sales at the New York store are not yet seeing a disproportionate increase in sales percentage coming from tourism. In fact, management commented that it remains in the typical 20%-25% range.
- In one of the first major retail campaigns to support Foursquare, the social network/recommendation site, Radio Shack is offering 10% off for every store check-in, 15% off for store "mayors," and 20% off for unlocking the "Holiday Heroes" badge during the holiday season. For those looking to cash in on the 20% offer, a badge only requires checking in at two ‘hero hotspots.’
- After confirming consumer appetite for Sperry Top-Sider retail locations with an initial 5 store pilot, Collective Brands opened its latest store in Burlington, MA last week and will open its seventh location in the Westchester Mall (NY) this Friday. With new stores in A malls locations and actually within eyeshot of the water, we expect even better results to materialize as the company begins to rollout the concept more aggressively in 2011.
OUR TAKE ON OVERNIGHT NEWS
Google's Boutiques.com Launches - Google’s new fashion site, Boutiques.com, set to launch today, is poised to quickly become one of the biggest fashion sites online — turning the Web giant into an even bigger force in driving sales to retailers and brands. The site is based on the visual search and shopping referral site Like.com, which Google acquired earlier this year. Several dozen celebrities are setting up their own shops on Boutiques.com, including Anna Paquin, the Olsen twins, Elisabeth Moss, Iman, Kelly Osbourne, Olivia Palermo, Ashlee Simpson-Wentz, Carey Mulligan, Sarah Michelle Gellar and Rashida Jones. More than 30 designers are involved and will have designer boutiques on the site. Some of the celebrities and bloggers were paid for their participation; others did it for the exposure, said Munjal Shah, Like.com founder and Google Inc. director of product management. Google will not actually sell clothing on the site, but will charge small fees for directing traffic and purchases to other retailers’ sites. “What we set out to do is rethink the entire process of shopping for soft goods,” said Shah, who compared Boutiques.com to Pandora, the music site that plays selections of music based on what others with similar tastes like. “Boutiques.com nicely complements our existing digital strategy, which includes Foursquare and other social media platforms,” said Peter Arnold, president of Cynthia Rowley, which is setting up a shop on the site. “The combination of a behavioral marketing model and Google-sized resources will bring significant change to the way users interact with fashion online.” <WWD>
Hedgeye Retail’s Take: It’s now easier than ever to look like your favorite star – how you afford it is your problem.
Gift Cards Back En Vogue - Gift cards could make a resurgence this year as consumers shift their gaze from heavily discounted merchandize back to America's favorite gift, according to NRF’s 2010 Gift Card Consumer Intentions and Actions survey. NRF estimates Americans will spend an average of $145.61 on gift cards, up from $139.91 last year. Total gift card spending is expected to reach $24.78 billion. Meanwhile, gift cards have topped consumers’ wish lists for the fourth year in a row. “This holiday season we expect Americans to gravitate toward both sale and non-sale items, including gift cards, which in recent years have been passed up for heavily discounted merchandise,” said NRF President and CEO Matthew Shay. “With people focusing less on price and more on value this holiday season, Americans may choose to buy gift cards due to their convenience and popularity among gift recipients.” <SportsOneSource>
Hedgeye Retail’s Take: This is consistent with the recent 2010 Morepace Omnibus study results citing the percent of consumers not willing to put holiday purchases on credit is up to 40% from 35% last year.
Wholesale Prices for U.S. Apparel Increase - Wholesale prices for U.S.-made apparel increased 0.7 percent in October compared with September and rose 0.2 percent against a year earlier, the Labor Department reported Tuesday in its Producer Price Index. Women’s apparel prices were up a seasonally adjusted 0.3 percent month-to-month, but fell 0.1 percent compared with October 2009. Men’s domestic apparel prices rose 1.8 percent in October compared with the prior month, but dipped 0.1 percent year-over-year. Prices for all goods and services increased 0.4 percent in October, due primarily to surging oil-based energy prices, according to the Labor Department’s report. Energy prices were up 3.7 percent overall. Core producer prices, which exclude the volatile food and energy sectors, fell 0.6 percent, driven primarily by declining prices for new autos. “There is upward pressure on input costs from rising commodity prices, which was clear in sharp rises in intermediate and crude material costs,” said Nigel Gault, chief U.S. economist for IHS Global Insight. “It is not true to say that no cost increases are filtering through. For example, tire manufacturers have announced price increases to reflect higher rubber costs and grocery-store prices have started to rise to reflect higher food costs. But there’s still so much excess capacity in the economy that core inflation will remain quiet despite higher costs.” <WWD>
Hedgeye Retail’s Take: Just the beginning of escalating PPI results with multiple headwinds starting to flow through the chain.
U.K. Trade Show Demand/Attendance Reflects Optimism - Trade shows in the U.K. are expanding to accommodate more exhibitors as sales are holding up and the future appears promising. “There’s a sense of optimism returning,” said Samantha Bleasby, marketing manager at Pure London. Pure London, a premium high street fashion show, increased its exhibitor numbers by 15 percent this year and its visitors by 23 percent. The company also plans to expand with the launch of a younger upscale show called Pure Spirit, which will take over almost 43,000 square feet in West London’s Earls Court exhibition center in February, in collaboration with men’s show Stitch Menswear. Pure isn’t the only show in expansion mode. This year, the British Bridal Exhibition Harrogate added 19,923 square feet of space and said many exhibitors reported a “record-breaking” year in sales. “We can’t say that the bridal industry has not been affected by the recession, but we do feel lucky,” said Wendy Adams, an organizer at BBEH. “Girls are still spending for that dream dress, even if it means their guests have less Champagne.” Top Drawer, a fashion and gifting show, saw a 15 percent increase in exhibitors and a 23 percent increase in attendance. Bubble London, a boutique children’s show, said footfall was up 21 percent from last year. <WWD>
Hedgeye Retail’s Take: Clearly a sign of optimism after prolonged expense cutbacks for most designers and brands – keep in mind the greatly reduced base these shows are referencing from last year.
Robust Chinese Trade Show Activity Expected - China’s buoyant bounce-back from the global financial meltdown has brought a resurgence of enthusiasm, alongside higher manufacturing and trade numbers, ahead of the spring and summer 2011 trade show seasons. “The scale of our exhibition overall will be 50 percent larger than last year, so we’ll have more companies and visitors,” said Ma Ying, media organizer for Mode Shanghai, which takes place March 16 to 18. Still, there are trouble spots, noted Yang Chunhua, marketing manager for the 2011 Shenzhen International Clothing OEM Expo, set for March 7 to 9. Yang said Chinese companies are still looking for new markets and domestic customers amid fears over changing currency values. Orders have not resumed their fast pace of pre-crisis spending, and Chinese textile and apparel markets are hungry to recommence trade. “The increase in prices of raw materials, possible changes in currency and the labor shortage in the south are still causing problems,” said Yang. “[Manufacturers] have started paying more attention to the domestic market, as the domestic market is comparatively stable.” At the same time, as foreign customers return to China and find the manufacturing glut over, they’ll need to find new sources and companies with which to do business, Yang noted, adding those factors should make for a brisk trade show season. Another trend on the horizon: More clients will be looking for research and development, potential innovation from China, rather than just top-down ordered clothing and textile manufacturing. Chinese companies are aiming to increase their worth on the global value chain, in part by coming up with their own products and ideas. Yang said many companies will bring new ideas and products to apparel and textile fairs this season. <WWD>
Hedgeye Retail’s Take: In addition to comments above related to higher traffic in the UK, many retailers and brands are increasingly focused on establishing more stable relationships with Chinese vendors if they haven’t done so already in an effort to manage costs adding a key dynamic to higher attendance figures in the near-term.
Turkey Quickly Becoming More Prominent Fashion Exporter - Turkey’s last fashion week, held in August, showed how much hope the country is investing in its fashion industry. Apparel exports rose 10.7 percent to $12 billion in the first 10 months of 2010 from a year earlier, and made up 13 percent of all of Turkey’s exports, the largest category after automobiles. The pace of export growth in general was strong: an 11.4 percent increase in the same period, according to the Turkish Assembly of Exporters. Even more impressive is the overall economic expansion, at a time when many of Turkey’s peers are still barely out of recession. Gross domestic product grew at a pace of about 11 percent in the first half of 2010 from a year earlier, rivaling China and exceeding all other countries in the G-20 group of developed countries. That is likely to slow in the second half of the year owing to base-year effects, the government said, but it is still forecasting growth of close to 7 percent this year and 4.5 percent next year. That doesn’t mean that Turkey is immune from global economic problems, and that’s particularly true in the textile industry, where the troubled European Union is the country’s largest export market. Exports to the EU rose 15 percent from a year earlier in the first nine months of 2010, according to the Turkish Statistics Authority, yet there are doubts about whether that kind of growth can be maintained, given the scale of Europe’s problems. There’s some relief, though, since Germany — one of Europe’s healthier economies — is the leading market for Turkish ready-to-wear, with sales exceeding $3 billion in the first 10 months of 2010, according to the assembly of exporters. <WWD>
Hedgeye Retail’s Take: Given its exposure to Germany, and position as a China-alternative, we expect Turkey’s role as a global exporter to become more prominent over the intermediate-term.
Forecast Calls for Robust e-Commerce Holiday Sales - eMarketer predicts US online holiday season sales, defined as all online sales in November and December, will build on a strong 2009 showing and rise a further 14.3% over the same period last year. “Holiday shopping is ideally suited to the internet,” said Jeffrey Grau, eMarketer principal analyst and author of the new report “Online Holiday Sales Forecast: Optimism Is in the Air.” “Consumers appreciate the convenience and product selection online, as well as the abundance of resources available for finding good deals, especially for cost-conscious shoppers trying to weather the tough economy.” This season’s growth of 14.3% will bring retail ecommerce holiday season sales to $38.5 billion, up from $33.7 billion last year. Strong online holiday sales will push annual ecommerce sales to $162.4 billion for full-year 2010, up 12.7% over 2009. Online holiday sales will represent 23.7% of online retail sales in 2010, underlining the importance that November and December have on retailers’ annual ecommerce sales. <emarketer>
Hedgeye Retail’s Take: Certainly up against a tough compare for the holidays, but with online spending up the most since 2007 and strides made to greatly improve the shopping experience there may even be room for upside.
