RETAIL FIRST LOOK: ENVELOPE PUSHING 101
SEPTEMBER 11, 2009
TODAY’S CALL OUT
I was typing an overnight callout based on an analysis my team did on retail employment, when Zach forwarded me the most bizarre brand-building experiment I have ever seen by an apparel company. I can try to describe Puma’s marketing campaign, but could not even begin to do it justice. It’s clean enough to show on YouTube, so I’ll point you in that direction. But it definitely pushes the envelope…
As for retail employment, check out the chart below, which shows that year on year job openings are down a full 35% vs last year. The trend year-to-date is even more notable in that it is not getting better. Compares will be easier within a few months, but man, are these numbers ugly, or what?
LEVINE’S LOW DOWN
Some Notable Call Outs
- Despite generally consistent and solid results overall, Walmart continues to paint a picture of a challenging backdrop for its customers. The payroll cycle remains particularly pronounced, including data that suggests sales increases are taking place after midnight on the first of the month (suggesting consumers are waiting for payroll checks to clear and then immediately restocking). Additionally, Walmart research showed that their customers spent approximately 25% less on vacation this summer. Despite these challenges, Walmart continues to gain market share as evidenced by traffic increases which have continued through August.
- Lululemon is one of a few retailers that actually may be missing sales due to tight inventory controls. The company highlighted on its 2Q conference call that the pulling forward of Fall goods drove quicker sell throughs and as a result, same store sales rose and fell commensurate with new product flows. Management went on to suggest that they may have reported positive same store sales if they have made a bigger inventory commitment.
- Admittedly behind the times, Carter’s CFO highlighted ecommerce as an untapped opportunity for the company. They are one of the few brands with a retail presence that does not transact directly with its consumers. The company is now building a team to build out its ecommerce effort, and with the help of third parties will launch a platform some time next year. We applaud the effort but still wonder why it has taken more than a decade since ecommerce began for iconic brands such as Carters and Oshkosh to realize they can sell onesies and overalls online.
-Led by Vietnam, textile and apparel imports to the U.S. from South Asia increased in July as shipments from most other countries fell - The Commerce Department’s Office of Textiles & Apparel said Thursday that shipments of textiles and apparel to the U.S. fell 8.7% in July. Apparel and textile imports from Vietnam increased 16.7%, Bangladesh was up 3.1%, India increased its imports 1.7%. Shipments from South Korea fell 30%, Indonesia declined 7.9%, China declined 1%. Apparel shipments from China to the U.S. increased 10.9% in 12-month comparisons. <wwd.com/business-news>
-New Balance sues Louis Vuitton - New Balance Athletic Shoe Inc. accused Louis Vuitton of crossing the line between homage and infringement in a trademark lawsuit filed Wednesday. The company filed a complaint in U.S. District Court in Boston alleging that LVMH Moët Hennessy Louis Vuitton’s Minstrel sneaker, released as part of the luxury firm’s winter 2009 collection, borrows too heavily from its own 574 model. The suit accuses LVMH of intentionally mimicking the 574’s shape and coloring with the Minstrel. <wwd.com/business-news>
-Wal-Mart Stores Inc. reached outside the company to hire a leader for its Asia business - The retailer on Thursday named Scott Price, a former top DHL executive, as president and chief executive officer of Wal-Mart Asia. The world’s largest retailer traditionally chose leaders from its own talent pool, but that has changed in recent years. Wal-Mart recruited from outside the company Leslie Dach, executive vice president of corporate affairs and government relations, who was vice chairman of Edelman, a global public relations firm, and Brian Cornell, president and ceo of Sam’s Club, who was ceo of Michael’s Stores. <wwd.com/business-news>
-Procter & Gamble Co. Thursday lifted its full-year earnings guidance and said that it expects sales to rebound this fall as it cuts prices, invests in new products and continues restructuring. Earnings are still expected to be 95 cents to $1 a share. Analysts are looking for 97 cents. “We clearly see that we are approaching an inflection point in P&G’s organic sales trends,” said chief financial officer Jon Moeller. “The innovations we are launching and the investments we are making are having an impact in the market. In addition, prior-year results will get easier as we move into the second quarter.” The maker of household and beauty products reaffirmed fiscal 2010 sales guidance of flat to up 3%, as well as the outlook for organic sales growth of 1 to 3%. Full-year earnings guidance was raised to $3.99 to $4.12 a share, up from $3.65 to $3.80 a share, due largely to the $3.1 billion sale of its pharmaceutical business to Ireland’s Warner Chilcott plc announced last month. <wwd.com/business-news>
-Mexico adds transition duties on top of antidumping duties towards Chinese imports - Mexico’s Ministry of Economy recently issued a notice advising importers that apparel imports from mainland China, which were subject to antidumping duties as recently as May 2009, are now subject to transition duties. Mexico and China signed an agreement last year under which Mexico eliminated the AD duties it maintained on a broad range of products from the mainland, effective from 15 October 2008. As part of the agreement, many of these products will be subject to so-called transition duties through 11 December 2011. <fashionnetasia.com>
-Pakistan hopes to achieve textile exports of US$25 billion in the coming five years - Federal Textile Minister Rana Farooq Saeed Khansaid that as the textile industry was an important sector of the economy, if the sector was given a proper boost, it could provide sufficient jobs for the whole country. The textile sector was now getting electricity to function smoothly, but any problems related to load shedding would be sorted out by December this year and the sector would also get un-interrupted supply of gas in winter season, he said. He added that President Zardari during his recent visits to the US and Europe, had discussed market access for Pakistani textile products in these markets and those visits would help improve the economy of the country and trade. <fashionnetasia.com>
-More trade without the US dollar: Turkey-Russia bilateral trade - The head of Turkish Leather Garment Manufacturers' Association (TDKD) said that the leather sales to Russia would increase by 50% if Turkish lira and Russian ruble were used in trade with this country. In an initiative to boost leather exports to its neighbor the chairman of the TDKD, Ramazan Hazar said that Turkish leather sector would be promoted in various fashion capitals of the world including Russia's capital city, Moscow. Commenting on the project aiming at the using of Turkish and Russian currencies in the bilateral trade between the two countries, Hazar said that Turkish leather sector's sales to Russia would increase remarkably if such project was implemented. "Both parties are interested in this project. Accountants and finance experts from both countries are currently working on it. If it is implemented, there will be a 50 percent increase in our sales," Hazar said. This project comes on the heels of Brazil’s plan to trade with China using local currency instead of the US dollar as a medium of exchange. The growing lack of confidence in the US currency has also resulted in China calling for a new reserve currency based on a basket of currencies similar to the SDR’s used by the IMF. <fashionnetasia.com>
-Australian department store IPO - Australia’s largest department store group Myer said Friday it will return to the Australian stock market before Christmas with an initial public offering that analysts anticipate will be worth 2 to 3 billion Australian dollars, or $1.7 to $2.6 billion, pending market conditions. The ipo comes three years after the Coles Group sold Melbourne-based Myer to a consortium led by US private equity group Texas Pacific for 1.4 billion Australian dollars, or $1.2 billion. The company did not provide any further information on pricing or the size of the offer. An ipo prospectus is due to be lodged with the Australian Securities and Investments Commission (ASIC) on approximately Sept. 28. There are signs that the ipo market for retail companies might be starting to pick up- albeit slightly. Earlier this week, Italy's online discount retailer Yoox said it is pushing ahead with its plans to list on the stock market in the first half of next year. Originally the Bologna-based company had planned to go public this year. <wwd.com/business-news>
-J.C. Penney rolls out its first contemporary label created by its own design team - The line is called "she said" and will be in 600 stores and have a significant presence on jcp.com. “It’s really a younger customer under 35 that we are going after here. It just so happens that we are resonating with those under 35,” said Liz Sweney, J.C. Penney Co. Inc.’s executive vice president of women’s. Most big box and department stores fail to project a sharp fashion image, given their wide range of merchandise, prices, customers and propensity to promote markdowns to the extent of overshadowing the actual styles. But Penney’s has been ramping up its contemporary offerings for the past 18 months and says that, despite generally depressed sales, the strategy is resonating with customers and that younger, trendier styles are outselling basics and conservative looks geared to older customers. With the recent additions of contemporary lines done in collaboration with designers and brands like Bisou Bisou, I [Heart] Ronson, Allen B., Oxford & Regent and Twelfth of Eleven, the percentage of younger women shopping the store is growing, executives said. About 45 percent of women’s apparel sold at Penney’s is to women under 35; four or five years ago it was 40 percent. <wwd.com/retail-news>
-The luxury category may be tapped out, according to a new study conducted by The Luxury Institute - In the New York-based firm’s latest WealthSurvey, conducted in cooperation with Evins Communications, more than half of all wealthy consumers and millionaires said there are too many brands in most high-end categories, while 77% believe luxury is less important in today’s economy. <wwd.com/footwear-news>
-JJB Sports investigated for fraud - JJB Sports Plc and Sports Direct International Plc's activities are being investigated by the U.K. Serious Fraud Office in conjunction with the Office of Fair Trade. <sportsonesource.com>
-Dubai Investment Fund That Acquired Barneys Is Said to Be Up for Sale - Istithmar World, the Dubai sovereign wealth fund, is halting investments as part of a restructuring effort after spending more than $25 billion this decade on stakes ranging from a yacht marina to luxury retailer Barneys New York, according to people familiar with the plan. <bloomberg.com/news>
-UK recovery evident as consumer spending patterns mirror recovery stages of 2001 downturn - The UK economy is beginning to show signs of recovery, according to improved online consumer spending patterns evidenced in research from Maximiles. The 2009 Consumer Confidence Report analyses the online spending habits of approximately two million British consumers across Maximiles UK's shopping portal, ipoints.co.uk. While consistent consumer spending and a booming housing market were key factors in Britain's narrow escape from official recession in 2001, the latest 2008-9 spending patterns reveal that now may be a time for cautious optimism. However, consumers are looking for more value online as the average spend per person on these products each month has dropped from £9.61 to £6.04. This mirrors the shifting consumer trends during the recovery periods of the last downturn when the proportion of our cash that we were spending on consumer electronics products per month peaked at 26 per cent at the height of the downturn and then decreased as the recovery began, slowing to 25 per cent. <theretailbulletin.com>
-Dick’s Sporting Goods and American Eagle ride the m-commerce wave - Earlier this month, the number of retailers that have introduced mobile commerce sites and/or smartphone apps surged past 100, and last month leading m-commerce technology vendors reported nearly 20 more clients preparing to launch mobile sites or apps before the holidays. Today e-retailing heavy hitters American Eagle Outfitters Inc., No. 54 in the Internet Retailer Top 500 Guide, and Dick’s Sporting Goods Inc., No. 121, both have launched m-commerce sites. Multichannel retailer Dick’s Sporting Goods’ site, DSports.mobi, is organized by category and enables shoppers to search for products, locate stores, download coupons and more. The m-commerce site, built by online marketing firm Branding Brand, enables consumers to shop on their mobile phones Dick’s Sporting Goods’ complete selection of merchandise. The home page features buttons for a list of product categories where mobile shoppers can begin the quick process of drilling down to a desired sub-category or product. <internetretailer.com>
-Juicy Couture’s new online Club Couture boosts conversion rate by 162% - Social shopping features at Club Couture let shoppers create, share and view looks created by others. The retailer has also driven up page views per visit by 141% and average time spent on the site by 150%. <internetretailer.com>
-New York City, for one night, seemed to forget that there was a recession - Streets were packed, stores were crowded and gobs of people were carrying shopping bags on Madison Avenue. More than 800 stores held parties and kept their doors open until 11 p.m. Mr. Kors, the fashion designer, said they were “beating the tom-toms” for starving retailers. The scene was utterly chaotic, and it was not entirely clear that many people had bought much more than a Fashion’s Night Out charity T-shirt to benefit the National September 11 Memorial and Museum and the New York City AIDS Fund, so they could have it autographed by Ms. Wintour. Terry J. Lundgren, chief executive of Macy’s, said the chain had sold more than half its 6,000 T-shirts, for $30 apiece, by 5 p.m. Similar events intended to encourage shopping were being held in Paris, Milan and other cities around the world on Thursday. It was impossible to gauge the immediate impact of the shopping parties, or whether they will have a long-term effect on consumer attitudes. <nytimes.com>
-The new iPhone app from Puma has all the ingredients of scoring plenty of viral buzz - The free app is called the Puma Index and here’s how it works. When the Dow goes up, the models on your iPhone put on their Puma clothes. When the Dow goes down, they start taking their Puma clothes off. If the market goes down enough, the models strip down all the way to their Puma bodywear, a line extension the company has just launched. “We’ve seen a lot of branded applications and a lot of them play it too straight down the middle,” said Antonio Bertone, Puma’s chief marketing officer. “We thought that if we could do this right and have models take off clothes when the market was going down, this could really work.” The app, which will get you a 20 percent discount if you show it at a Puma store, is already available on the iPhone. A web application of the “Puma Index” will launch in a couple of weeks. Puma is hoping this will appeal internationally. The models will soon strip to the German (DAX) and Australian (ASX) markets, Bertone said. As for what would happen if the market started crashing again? Bertone: "They'll be in their bra and underwear having a pillow fight." <cnbc.com>
INSIDER TRANSACTION ACTIVITY:
GES: Carlos Alberini, President & COO, sold 162,000shs ($5.7mm) roughly 40% of total common holdings.
JOSB: Robert Wildrick, Director, sold 262,500shs ($12.1mm) nearly 90% of total common holdings pursuant to 10b5-1 plan.
KSWS: David Nichols, Executive VP, sold 10,000shs ($44k) up exercising the right to buy 10,000 shares.
PSS: Michael Massey, Senior VP, sold 3,000shs ($52k) nearly 20% of total common holdings.