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Over the past few weeks we have heard from many companies speaking at conferences, reporting earnings, or just in our normal course of research.  The economic health and purchasing behavior of the American consumer remains top of mind for everyone.  As I listened to Rite Aid’s call yesterday, I was reminded that there is still a tremendous amount of uncertainty facing many U.S consumers.  Non-discretionary, consumables driven retailers are painting quite a different picture than those in the mall.  Contrary to grocers, most anecdotes and data points suggest sales of apparel and footwear are showing signs of acceleration during September.  Many of us have heard the talk about improving trends, but let’s take a look at some quotes highlighting the other side of the story:

9/10/09, Mike Duke, Wal-Mart CEO:  “…we talk about even years past that the end-of-month cycle, when you would see some drop-off in selling and then on the first of the month, when customers get paid, then you see acceleration. Of course, during this period of time, that is exaggerated even more. So the drop-off at the end of the month and the pickup at the first of the month on the paycheck cycle is even more pronounced than it would be in the past.”

“And it is really interesting seeing the customers that come in on midnight and the increase in sales of that period after midnight on the first of the month. I think in some ways, it really shows that strain on that end-of-month cycle.”

“When you look at specific product sales, it is in some ways challenging for all of us to think about, but it is part of getting to know customers with the drop-off in sales of even very basic items like infant formula at the end of the month and then the spike in sales on the first and second of the month. And it shows that, over these last few quarters, our customers have been under strain, but our customer now is smarter and enjoys being smarter about purchasing even during difficult times and this will continue on into the future.”

9/10/09, Steve Burd, Safeway CEO:  “Our private label volumes have routinely been running at a growth rate 10 times that of national brands.”

“I would, however, say that I think the trading-down that took several quarters to become complete across all categories is now pretty pervasive and it's hard to imagine that there's more room to trade down from where we are.”

In response to a question about growth in food stamp usage, “Yes. I would tell you that the last time I looked at those numbers, it was more pronounced than 50%. I don't know if the number I have in mind -- is it the US number? We're probably closer to 70%.”

9/15/09, Randy McMullen, Kroger President/COO: “Consistent with the past two quarters, customers are buying more of what have they need and less of what they want.” 

“Another trend we are seeing is in food stamps and other benefits. Government data indicates an increase in these benefits due to the economy. At Kroger, we are seeing an even sharper increase in our sales from customers using food stamps.”

“We're seeing a change in the customer behavior in our store a little bit. For instance, the end of the month selling is noticeably lower levels than what it used to be. So, it's more impacted. We saw that through this last quarter and we actually saw earlier signs of it before but I think it's even more clear now.” 

“But the picture, as we see it, is people are spending money when they need to. That is for meals for the day or for the week but they're only spending what they need to. And then, they're having to come back a little bit more often.”

“…it's a pretty clear picture that the consumers around the US and the customers of Kroger are experiencing some trauma in this environment.”

9/24/09, Mary Sammons, Rite Aid CEO:  “As for front end sales although we've seen improvement in September they continue to be negatively impacted by a value driven customer searching for discounts buying more items on sale than they have in the past.”


- Eric Levine


an they have in the past.”


Some Notable Call Outs

  • Pearl Jam’s latest album, Backspacer, was released Sunday and is on track to become the No. 1 album in the U.S in its first week of sales. Interestingly, this success was achieved through exclusive distribution arrangements with Target, iTunes, Pearl Jam’s website, and independent music stores (are there that many left?). As part of Target’s marketing and merchandising of the album, the retailer is also selling a limited edition t-shirt in collaboration with Loomstate with all proceeds going to charity.
  • Zappos’ prospects for growth, tie-in with Amazon, and unique brand positioning all likely contributed to a hotly contested competition for the company’s advertising business. Approximately 100 agencies participated in the recent review. Most surprising was the relatively small amount of business that was up grabs, at least for now. Zappos spent only $12 million on measured media in 2008 on a gross sales base of over $800 million. So far this year, Zappos has only spent $2 million. As the facts continue to come out post Amazon’s acquisition, the uniqueness of Zappos certainly continues to be revealed.
  • In an interview this week CEO Susan Lyne of Gilt Groupe, the luxury online discount retailer, discussed the concept of retail as ‘repackaged entertainment’ whereby better retailers are able to grab customers in the ‘first act.’ With new product daily and no inventory to speak of, Gilt’s concept allows it to do just that. When asked for other retailers that stand out in this regard, Lyne highlighted offline retailer J. Crew’s The Collection Store in NYC and Zara.  Whether you consider it ‘entertainment’ or not, the company’s growth leaves it looking to fill more than 100 positions, as the concept continues to gain share of wallet and mind. (Check out the interview)


-Signs of export-led recovery in China - The China Leather Industries Association (CLIA) has reported that the value of the sector's exports (including footwear) for the month of July fell by 10% compared to July 2008. In the overall context of collapse in world trade since September 2008, a fall of 10% is almost comforting. When seen in terms of the total value of industry exports for the first seven months of 2009, the total export decline was just 7.5% compared to last year. Total exports for the first seven months of 2009 still managed to reach US$22.1 billion. In addition, the CLIA pointed out that the pace of year-on-year decline is now slowing, having reduced by 0.8% from the previous month.


-Big Names Join WWF Climate Savers Program - Nike is one of 22 participants, including HP, National Geographic, The Coca-Cola Company, IBM, and Johnson & Johnson, in WWF’s Climate Savers program. Collectively, WWF’s Climate Savers partners will reduce emissions by an estimated 50 million tons by 2010, an amount equivalent to the annual emissions of Switzerland. Overall, the partners say these efforts are resulting in greater operational efficiency and significant cost reductions. <sportsonesource.com>

-Unilever to Buy Sara Lee Soaps in Biggest Purchase Since 2000 -  Unilever, the maker of Dove soap, agreed to buy Sara Lee Corp.’s personal-care and European detergent unit for 1.28 billion euros ($1.88 billion), gaining Sanex shower gel in its biggest purchase in nine years. Unilever, based in London and Rotterdam, will pay cash for the business, which makes Duschdas and Radox soap and had sales of more than 750 million euros for the year ending June 2009, according to a statement today. Sara Lee, which has been shedding units to focus on coffee and food, said the proceeds would help it buy back up to $1 billion in stock. <bloomberg.com>

-JBS merges with Bertin to form the world’s biggest tanner - JBS, the world's leading beef and protein products producer, has agreed to merge with Bertin SA, following the recent purchase earlier this year of Brazilian tanning group BMZ by JBS, combined with the tanning capacity of Bracol, Bertin's leather division, to become the largest leather processor in the world by volume.  <fashionnetasia.com>

-Rite Aid Lowers Its Forecast, Citing ‘Tough Economy’ -  Rite Aid Corp., the third-largest U.S. drugstore chain, cut its full-year forecast, saying it expects customers will remain focused on discounts in a “tough economy.” The shares declined 12 percent. The net loss for the fiscal year will be $390 million to $615 million, the Camp Hill, Pennsylvania-based company said today in a statement. Sales will be as much as $26.2 billion, Rite Aid said. In June, the company forecast a loss of $265 million to $490 million.


-ASICS to Open First U.S. Store, Expands into Golf and Lacrosse - ASICS plans to open its first store in the U.S. this fall. At an event showcasing its spring 2010 collections in New York City,  ASICS officials also revealed plans to enter the golf and lacrosse categories in the U.S. for the first time.  <.sportsonesource.com>

-H&M Third-Quarter Profits Rise 4 Percent -  Hennes & Mauritz AB, the world’s third-largest fashion retailer, beat expectations with a 4 percent rise in third-quarter net profit, but reported a worse-than-expected sales drop in August, reflecting a shortage of marked-down inventories. Without providing a specific outlook for 2009, H&M said it remains “positive toward future expansion” and accelerated its store expansion plan to open 240 stores in the full year, up from 225 previously expected. The Swedish fast-fashion company also revealed plans to start online sales in the U.K. beginning next fall, following rival Inditex’s move to sell its cheap-chic brand Zara online in 2010. H&M’s online shop is available for customers in Sweden, Denmark, Finland, Norway, the Netherlands, Germany and Austria. <wwd.com>

-Finish Line Struggles in Q2 - The second quarter was unkind to the Finish Line Inc., as a tardy back-to-school season kept spending at a minimum. As a result of a $12.6 million loss, or 23 cents a share, from the discontinued operations of its Man Alive unit, Finish Line reported a second-quarter loss of $900,000, or 2 cents. During the second quarter of 2008, the Indianapolis-based company posted a $13.1 million profit, or 24 cents a share. Same-store sales dropped 9.9 percent for the quarter, versus a 4.9 percent increase last year. Sales dipped by 11 percent to $298.7 million, from $337 million in the year-ago period. <wwd.com>

-Foot Locker Opens Fourth House of Hoops;  Plans Stores in Europe - Foot Locker opened its fourth House of Hoops store at the Cherry Hill Mall in South Jersey. The location is only the fourth House of Hoops in the U.S. and the first in the suburbs. <sportsonesource.com>

-Hanesbrands Agrees To Pay $13.8M To Strengthen Pension Plan - Hanesbrands Inc., the parent of Champion, reached a $13.8 million settlement with the Pension Benefit Guaranty Corp., agreeing to strengthen the funding of its retirement plan. Under the agreement, the underwear and hosiery apparel maker put $7 million into the pension plan this month and will make an additional $6.8 million payment within a year. The payments are in addition to any required contributions to the plan. <sportsonesource.com>

-Shoppers reluctant to splash out at Christmas - A third of consumers intend to spend less this Christmas than they did last, indicating retailers will need to be at the top of their game to reap rewards during the traditional golden sales period. Exclusive research by ICM for Retail Week shows that consumers remain reluctant to splash out. Last December was the worst Christmas on record for the sector, when like-for-likes fell 3.3%. The ICM study reveals that only 9% of consumers plan to increase their spending this year, but half plan to maintain it at last year’s level. <retail-week.com>

-Geiger Stepping Down at Aéropostale - Julian Geiger, the only chief executive officer in the history of Aéropostale Inc. and the chief architect of the growth and success of the teen retailer, will step down from his post at the end of the company’s current fiscal year on Jan. 31. Geiger, who has been ceo of the specialty store chain since 1996, will continue to serve as chairman. He will be succeeded by two of the firm’s existing managers, Mindy Meads and Thomas Johnson, who will serve as co-ceo’s upon Geiger’s departure. On the same date, Michael J. Cunningham will be elevated to president and chief financial officer.  <wwd.com>

-Gordon Bros. Wins Finlay Auction - Gordon Brothers Retail Partners on Thursday won the bidding auction for Finlay Enterprises Inc. The liquidation firm had been the stalking-horse bidder for the liquidation of Finlay’s assets. Finlay filed for Chapter 11 bankruptcy court protection in August in Manhattan. Manhattan bankruptcy court approval of the winning bid is still required and a hearing is set for today. According to Finlay, Gordon Brothers will conduct “store closing” sales at all the jewelry firm’s retail locations and its two distributions centers. <wwd.com>

-Vitacost.com looks to raise $47.7 million through an IPO - Online vitamin and health products retailer VitaCost.com Inc. is planning an initial public offering of stock to repay debt, fund capital expenditures and provide working capital. The company expects to raise about $47.7 million, based on an average share price of $12. <internetretailer.com>

-Canada refusing import ban on cat and dog fur - Canada will continue to import cat and dog fur despite a ban adopted by the United States and the UK to avoid undermining the country's position against the implementation of foreign import bands on Canadian seal products. This summer, the European Unionvoted to ban seal products from Canada, upsetting Canada's Conservative government, which plans to contest this at the World Trade Organization. <fashionnetasia.com>

-Li & Fung to participate at first-ever Sustainable Fashion Forum - Fashion Access, a fair organized by APLF Ltd, is launching Sustainable Fashion Forum in order to meet the evolving needs of the fashion professionals. The event will bring together industry experts to explore the challenges of achieving sustainable fashion, and present ideas that are accessible and practical to fashion businesses.  <fashionnetasia.com>


LULU: John Currie, CFO, sold 20,000shs ($460k) after exercising the right to buy 22,000 shares nearly 50% of total common holdings.

JCG: Jenna Lyons, Creative Director, sold 56,848shs ($2.1mm) after exercising the right to buy ~71,848 shares roughly 25% of total common holdings.

ROST: James Fassio, EVP, sold 8,225shs ($399k)after exercising the right to buy 8,225 shares less than 5% of total common holdings.