R3: JCP, ANF, BONT, PSS, and E-com

R3: REQUIRED RETAIL READING

September 29, 2010

More evidence that e-commerce continues to rise in importance to the overall retail sector, as positive data from Shop.org supports a building trend.  And, finally JCP decides to call it quits on paper-based catalogs next year, instead planning to focus exclusive on the internet for its direct business.

 

 

RESEARCH ANECDOTES

  • Add Donna Karan to the list of brands entering the world of e-commerce for the first time. The site features an extensive selection of apparel and accessories from the higher-end “New York” line as well the moderate DKNY line.
  • For the first time, a female has designed a pair of Air Jordans for Nike. The lavender limited edition Ladies Air Jordan 2 Retro shoes were designed by Vaq$htie Kola, former girlfriend of hip-hop star Pharrell. Hard to believe the idea of a female designing for a female is a new concept at the world’s largest athletic footwear company.
  • According to Nielsen, IPad owners are the most male-dominated group of mobile computing owners. 65% of owners of the hot new device are male and 63% are under the age of 34. Surprisingly, the Playstation Portable skews slightly more female than the iPad, with just 63% of its owners being male. What does all this mean? At least for now, a whole lot of male targeted advertising will begin making its way onto the iPad very soon.

 

OUR TAKE ON OVERNIGHT NEWS

JC Penney Steps Ups Store Growth - J.C. Penney Co. Inc. on Tuesday said it will open three stores next year as part of its plan to generate $1 billion in sales growth through new retail expansion over the next five years. Penney’s long term plans call for opening 75 new stores by 2014. The first three stores are slated for Dallas; Daly City, Calif., which borders San Francisco, and Glenarden, Md., about 10 miles east of Washington. Penney’s has existing stores in all three markets, which cater to middle-income shoppers. While Wal-Mart Stores Inc. slowed construction of SuperCenters amid the weakening economy and Gap Inc. has said it’s not planning to open new stores in the near term, Penney’s believes the markets it’s identified are underserved by its stores, so it will intensify its presence. <wwd.com>

Hedgeye Retail’s Take: While this technically counts as “stepped up” growth, it’s hardly worthy of a press release. Three store openings in 2011 implies there are 72 additional locations needed to reach the company’s goal by 2014. Recall that JCP hasn’t opened a meaningful amount of new stores in years, leaving this goal to appear lofty (and back-end weighted) at best.

 

JCP Getting Out of Catalog Business - Just 10 months after axing its twice-yearly Big Book, J.C. Penney Co. is getting out of the catalog business altogether. In 2011, J.C. Penney will cease publishing about 25 other specialty catalogs, says a spokeswoman. Instead, J.C. Penney, No. 16 in the Internet Retailer Top 500, will publish more direct marketing pieces such as its 43-page “Little Red Book” and “Matter of Style” publications that showcase current merchandise such as men’s and women’s fashions available in the chain’s 1,107 department stores in the U.S. and Puerto Rico and online at JCP.com. “We will no longer be publishing our specialty catalogs which were being used as ‘look books’ by our customers to see what was new in the stores or online,” the spokeswoman says. “We have always served our customers by how they want to shop and now and in the future that’s online and in stores.” <internetretailer>

Hedgeye Retail’s Take:  Good move to not wait until the paper catalog was completely dead.  Near death, yes.

Juicy Hires Nealz - Juicy Couture, a division of Liz Claiborne Inc., has poached LeAnn Nealz, executive vice president and chief design officer at American Eagle Outfitters Inc., as its new president and chief creative officer. Nealz will be responsible for all creative aspects of the business, including product design, marketing and store design, and will report to Edgar Huber, chief executive officer of Juicy. Nealz succeeds Juicy co-founders and co-designers Gela Nash-Taylor and Pamela Skaist-Levy, who left their day-to-day responsibilities in January and took on nonoperating creative roles at the company. The duo plan to launch their own brand next year when their non-compete runs out. Nealz’s influence will be evident in late 2011.<wwd.com>

Hedgeye Retail’s Take: Finally, a new leader at Juicy, but the wait for an improving trend, updated product, and new strategy will still have to wait. Getting a leader however, is definitely a step in the right direction. 

 

A&F Fined for Hiring Practices - U.S. Immigration and Customs Enforcement said Tuesday it reached a $1.05 million settlement with teen retailer Abercrombie & Fitch Co. for violating federal immigration laws by failing to adequately verify that employees in its Michigan stores were eligible to work in the U.S. According to ICE’s Office of Homeland Security Investigations, the settlement stems from a November 2008 inspection that uncovered numerous deficiencies in the chain’s electronic I-9 verification system, which is supposed to verify that workers are eligible to work in the U.S. ICE said they knew of no illegal aliens who were actually hired by A&F as a result of the technology deficiencies and that Abercrombie had since addressed the problems and implemented new company practices to prevent any future violations. <wwd.com>

Hedgeye Retail’s Take: Not quite as bad as hiring based on appearance, but still another negative HR related issue coming out of ANF.

 

Simmon's ArgyleCulture Relaunched at Macy's - ArgyleCulture, the three-year-old men’s collection for the “urban graduate” moving beyond the Phat Farm, hip-hop look, hasn’t exactly set the fashion world on fire. But the breakout moment has arrived, at least according to the designer and music mogul behind the brand, Russell Simmons. On Thursday, ArgyleCulture gets relaunched at Macy’s Herald Square with a new 750-square-foot shop, and Simmons starts his road show at Macy’s stores around the country to promote the brand. In addition, a fall advertising campaign with Tyson Beckford as the face of ArgyleCulture launches Oct. 11, and a tuxedo-ed Simmons will be splashed across the side of city buses. After that, Simmons takes another dive into reality TV with an eight-part series beginning Nov. 2 chronicling the making of ArgyleCulture. Terry Lundgren, chairman, chief executive and president of Macy’s Inc., which sells ArgyleCulture exclusively, will appear in several episodes with Simmons. <wwd.com>

Hedgeye Retail’s Take: Not many new apparel lines (especially men’s) get an entire reality show/tv series dedicated to it. Clearly Macy’s and Simmons are pulling out all the stops to make this work.

Big & Tall at Bon-Ton - The Bon-Ton Stores Inc. has signed an agreement with Casual Male Retail Group Inc. for Casual Male to supply big and tall men’s apparel through Bon-Ton’s e-commerce site and, beginning next spring, in a limited number of Bon-Ton’s 277 department stores. With the new alliance, Bon-Ton will expand the size and scope of its big and tall offerings, which will include sportswear, activewear, tailored clothing and accessories. A Bon-Ton spokeswoman said the availability of big and tall men’s wear will be flagged on Bon-Ton’s Web site, at bonton.com, but not the Casual Male association. <wwd.com>

Hedgeye Retail’s Take: Probably a low risk way for Bon-Ton to expand its offering without taking on too much risk. Will it move the needle? No. Still, an interesting combo and one that may open further doors for Casual Male’s big and tall expertise.

 

Vision Street Wear (PSS) Going South - Collective Licensing International reached a new three-year agreement with Town Connection of Buenos Aires to license apparel and skateboarding hardgoods for the Vision Street Wear brand in Argentina. Under the design and manufacturing agreement, Town Connection will hold the exclusive license for Vision Street Wear in Argentina and will initiate and drive the growth of the brand in this important international market for the brand. Town Connection's inaugural collection will debut in Spring of 2011 and this introduction will mark the first time Vision Street Wear has been available in Argentina since the brand's re-launch in 2009. <SportsOneSource>

Hedgeye Retail’s Take:  Collective Brands has had success in South America with its other brands primarily in Columbia, but expanding branded product is right in-line with its strategy and what we expect to see more of through 2010.

Barefoot Run in NYC - Vivobarefoot and Tip Top Shoes, the leading independent family footwear store in New York City, will sponsor the largest-ever official barefoot and minimalist shoe run in New York City. The race will take place on Sunday, Oct. 10th, 2010 on Governors Island, NYC at 8:30 a.m. The first-of-its-kind event, entitled Barefoot Runners NYC, also includes "a weekend of educational, social, and athletic happenings to support the growing recognition that going barefoot, or as close to it as possible, is the healthiest way to be." <SportsOneSource>

Hedgeye Retail’s Take: Another positive step in the right direction for the barefoot/minimalist running movement. Recall that new players including New Balance are launching footwear to address the growing trend.

 

Retailer Online Performance Report - Online retailers’ web sales, conversion rate and average order value are all up this year, says a report released today by Forrester Research Inc., a research and consulting firm, and Shop.org., the e-retailing arm of trade association National Retail Federation.

Here are some of the most important metrics from the survey of 87 retailers:

  • Average online conversion rate is 2.9%. 54% of respondents say their conversion rate is up this year, 29% down.
  • Shopping cart abandonment rate is 55%, with 17% saying it’s higher than last year and 31% lower.
  • Average order value is $132; 47% say it’s higher than last year and 27% lower.
  • Web sales increased on average by 12% in the first quarter and 15% in the second quarter year over year for the retailers responding.
  • 80% of retailers say their e-commerce business was profitable in 2009, and 70% say it was more profitable last year than in 2008.

<internetretailer>

Hedgeye Retail’s Take:  More support for continued growth in e-commerce, as all key metrics for the industry are moving in the right direction. Interesting to see on an absolute basis just how low the conversion rate is for an online transaction. 

Small Businesses Recalibrating Social Media Expectations - After climbing steeply, according to research from Network Solutions and the Center for Excellence in Service at the University of Maryland’s Robert H. Smith School of Business, small-business adoption of social media marketing has plateaued at 24%. The study of US small business found that those that do market via social media primarily use Facebook (82%), and that the most common activities are maintaining a company page on a social network and posting status updates or links to interesting content. About half of businesses that used social media also monitored brand chatter on social networks. As small businesses have gained experience with social media, some have realized their expectations for the channel did not line up with the reality of the social web. As the wider marketing world begins to look at social as more of a loyalty channel than one for acquisition, small businesses are also finding that their hopes for spreading brand awareness and attracting new customers have not been fully met. By contrast, somewhat fewer small businesses had expected to use social media as an engagement channel, but nearly two-thirds have had success in that area. <emarketer>

Hedgeye Retail’s Take:  Perhaps the plateau has been hit as marketers and businesses alike are still trying to figure out how to effectively market via social networking.  Clearly this is still a work in progress, even for large multi-billion dollar companies.  Nonetheless, the real benefit to a small business lies within the fact that this is a low cost, low risk way to reach broader audiences. 

R3: JCP, ANF, BONT, PSS, and E-com - R3 9 29 10

Just For the Heck of It - Yusuke Sato says a man walked into his tobacco store in Atsugi, southwest of Tokyo, this month and bought 100 cartons of Mild Seven cigarettes. While they may not be good for his health, he may have saved $1,300. The man is one of thousands of smokers across Japan stocking up before Oct. 1 to beat a record 40 percent tax increase on tobacco. Their hoarding may add as much as 1.4 percentage points to this quarter’s annualized economic growth rate, according to estimates from the Japan Research Institute. <bloomberg.com>

Hedgeye Retail’s Take:  Should be a good month for Costco Japan and other discounters selling cigarettes.