EVENTS TO WATCH
COST - Earnings Call: 8:30am
FDO - Earnings Call: 5:00pm
ICSC Same Store Sales
Takeaway: Sales trends are holding steady, with 3.9% growth for the week, and about 2.8% on a 2 and 3-year trend.
KATE, KORS, COH, Luxury
H.K. Retail Chains See 50% Sales Drop, Survey Shows
- "Sales at major Hong Kong retailer chains have fallen as much as 50 percent during the bulk of the Chinese National Day holidays after pro-democracy protests disrupted the shopping season, according to a survey."
- "Sales dropped at least 15 percent during the first five days of the holidays known as Golden Week, versus a year earlier, the Hong Kong Retail Management Association said in a statement yesterday, citing a survey on its members. Retailers selling watches and jewelry were among the most affected, according to the group."
Takeaway: The situation in Hong Kong is clearly a concern for luxury retailers. Our biggest initial concern was Kate Spade -- that is, until we did the math. KATE closed on the acquisition of Globalluxe on Feb 12th. That includes Hong Kong, Macau, Taiwan, Singapore, Malaysia, Taiwan, and Indonesia. For some reason the Philippines is not in there. Globalluxe sales of Kate Spade were $44mm in 2013. About a quarter of their stores are in Hong Kong. That’d equate to about 1.5% of Revenue if it went away entirely. But that’s probably not going to happen. Let’s say it’s off by 50%. We’re talking 0.8% hit to sales for a company that’s otherwise growing 40%. For KATE in aggregate, we're really not worried.
TGT - Target Rolls Out Online Tools
- "Target Corp. is aiming at the Millennial customer with its launch of competitive omnichannel efforts and features that will roll out in the next few weeks."
- "On Monday, the retailer unveiled many new initiatives that would cater to its young consumer, who will soon be able to readily shop with a full omnichannel experience via e-commerce and separate iPhone and iPad applications."
Takeaway: Props to Target for adding to its omnichannel toolbox. But the reality is that separate iPhone and iPad apps is not something to be celebrated -- it's something that every retailer needs to have. Our sense is that TGT needs to fix what's inside the store and make the brand relevant again to Millennials before it gives that consumer more ways to not shop there.
KSS - Kohl’s Pioneers New Approach to Customer Engagement with Launch of Yes2You Rewards Loyalty Program
- "Kohl’s Department Stores today launched Yes2You Rewards™ nationwide, introducing an innovative approach to customer loyalty focused on building deeper relationships to provide a more personalized, value-driven shopping experience at Kohl’s stores and Kohls.com."
Takeaway: Put in simple terms, this is a decoupling of KSS' credit card from its loyalty program. Previously, anyone that wanted to enroll in the 'rewards program' also had to have a KSS Credit Card. This is a program with CapitalOne, switched three years ago from Chase. It's worth noting that the average credit scores for CapitalOne's portfolio range from 600-650 compared to Chase at 700-750. Earlier this year KSS decoupled it in Pittsburgh, Milwaukee, and most markets in Texas and California. In our recent survey, 18% of people said that they are members of KSS rewards program, which is the highest rate of any department store in our survey. The interesting thing is that 57% of KSS Sales flow through the credit card -- up from 47% 5-years ago. While it's possible that Kohl's 'Pioneered Approach to Customer Engagement' increases customer loyalty, we'd actually wonder if this gives an outlet for current rewards members to no longer use the KSS card. KSS flowed $407mm in credit card income through its P&L as an offset to SG&A last year -- that's 9.5% of total SG&A. That's probably headed down, not up.
AMZN - Amazon’s Luxembourg Taxes Under Fire as EU Expands Global Probe
- "Amazon.com Inc. faces an in-depth European Union probe into a 2003 fiscal deal with Luxembourg over suspicions the company unfairly shifted profits to the country to lower its taxes."
- "Most European profits of Amazon are recorded in Luxembourg but are not taxed there as a result of the pact, which is still in force today and applies to a subsidiary in the Grand Duchy, the EU said in a statement."
TGT - Target in same-day curbside pickup pilot with startup Curbside
- "Curbside, a new startup that specializes in same-day pickup from local stores, launched its service on Monday with several retailers on board, including a pilot with Target Corp."
- "The new service is currently available in 10 Target stores across the greater San Francisco Bay area, including the retailer’s Metreon and Geary St. locations downtown."
WMT - Walmart expands role in health care with in-store one-stop insurance shopping
- "Walmart is expanding its role in health care. The retail giant is teaming up with DirectHealth.com, an online health insurance comparison site and agency, to set up counters in its stores where shoppers can speak with licensed agents about available health insurance options. Walmart’s expanding role in health care comes as drug store chains, including Walgreens and CVS, continue to beef up their own healthcare services."
WMT - Wal-Mart Moves Forward on Made in USA Push
- "Wal-Mart Stores Inc. has been making good on its pledge to spend $250 million over 10 years on products made in the U.S."
- "Since the initiative was launched in January 2013, the retail giant has been forging ahead. In July, Wal-Mart held its first open call for products made in the U.S. The event attracted 500 suppliers and generated 800 meetings. Buyers had their pencils out."