Retail Industry Trends

[HenryTo]

Retailiers already bracing for the worst. The $64 billion question is, as always, how bad will this get and how much of this has already been factored into retail stocks?
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Retail Holiday Season May Be Modest
Tuesday October 30, 5:15 pm ET
By Betsy Vereckey, AP Business Writer
Sluggish US Economy May Weigh on Holiday Sales for National Retailers

NEW YORK (AP) -- U.S. retailers are bracing for a difficult holiday season, some industry watchers say, as higher gas prices and a sluggish housing market are expected to continue crimping consumer spending.

At a conference on Tuesday hosted by the Retail Marketing Society, a membership-based organization focused on the retail industry, some industry executives said holiday sales may be sluggish.

"This holiday season will be somewhat Grinch-like," said Carl Steidtmann, chief economist at Deloitte Research.

Steidtmann said retailers are preparing for the worst, especially given tightening credit and problems in the housing market. Steidtmann said it will be at least 18 months to two years before the housing market bottoms.

Merrill Lynch analyst Jaime Sheinheit said higher energy costs will weigh on consumer spending, noting that retailers have had trouble getting customers in the door. However, it's hard to tell whether the sluggish traffic is related to softening consumer spending or warm weather, Sheinheit said.

"Cold weather may spark shopping," she said.

In the luxury sector, Sheinheit said handbag maker Coach Inc. has warned of sluggish traffic in its U.S. stores. The company recently issued a fiscal second-quarter same-store sales outlook it called "conservative." Same-store sales are sales at stores open at least a year, and the industry metric is considered a key barometer of a retailer's health.

David Wolfe, creative director at Doneger Group, a buying office, said Coach has reached its saturation point with aspirational customers, who may not have the money to spend on these handbags but still want quality at a price.

Meanwhile, wealthy customers may help other luxury retailers this season, like Tiffany & Co., as spending patterns among the affluent tend to stay the same, regardless of changes in the economy.

Sectors that might fare better include teen retailers, Sheinheit said, noting that the income of their main customer, teenagers, usually stays the same. Companies in this sector include American Eagle Outfitters Inc. and Abercrombie & Fitch Co.

One company that may emerge stronger, Sheinheit said, is AnnTaylor Stores Corp., which has leaner inventory and a new product assortment at its lower-priced Loft division. In August, the company said it increased markdowns to reduce inventory heading into fall seasons at both its Ann Taylor and Loft stores.

"There is a lot of opportunity for Loft to improve margins this holiday season," Sheinheit said. "As always, what it comes down to is having the right product."

[HenryTo]

A brief update on the retail industry here in SoCal:

http://www.latimes.com/business/la-fi-retail21-2008aug21,0,128650.story

[HenryTo]

J.C. Penney guides lower for 3Q and see its stock price rise by 6%:
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J.C. Penney's 2Q profits fall 36 percent
Friday August 15, 9:21 am ET
By Anne D'Innocenzio, AP Business Writer
J.C. Penney's 2Q profits fall 36 percent amid tough economy

NEW YORK (AP) -- J.C. Penney Co. reported a 36 percent drop in second-quarter profits Friday and issued a downbeat outlook for the current quarter as shoppers cut back on clothing spending in a tough economy.

The Plano, Texas-based department store chain said it earned $117 million, or 52 cents per share, in the three-month period ended Aug. 2, compared with $182 million, or 81 cents per share, a year earlier.

Total net sales fell 2.5 percent to $4.28 billion from $4.39 billion. Same-store sales, or sales at stores opened at least a year, fell 4.3 percent. Same-store sales are considered a key indicator of a retailer's health.

Analysts polled by Thomson Reuters expected earnings of 50 cents per share on revenue of $4.28 billion.

Penney said it expects third-quarter earnings to be in the range of 70 cents to 75 cents per share. A poll by Thomson Reuters projects 76 cents per share. The company also predicted that total sales would drop by a low-single digit percentage and that same-store sales would drop in the mid-single digits in the same period.

"In this difficult consumer environment, we have continued to focus on tightly controlling all aspects of our business, and our second-quarter results show the benefits of our approach," said Myron "Mike" Ullman, chairman and chief executive, in a statement.

The company reported that comparable-store inventory levels at the end of the second quarter were below last year, and it remains on track for total inventory to be below 2007 levels by the end of the back-to-school season.

Penney and other apparel chains have been hard hit in a challenging economy as customers, aiming to save money for gas and food, focus their buying on necessities and shop at discounters and warehouse clubs that offer a breadth of merchandise. High-end department store chain Nordstrom Inc. reported a 21 percent drop in second-quarter profit on Thursday and cut its full-year forecast. Meanwhile, Kohl's reported a 12 percent drop in profits but upgraded its full-year outlook to reflect stricter inventory control that boosted profit margins.

In response to the slowing economy, Penney announced in June that it would further slow the pace of new department store openings and cut capital spending next year because of the weak economy. It now plans 20 new or relocated stores next year, down from the 36 it expects to open in 2008. Penney had once planned 50 new stores a year through 2011.

Meanwhile, Penney is expanding its repertoire of exclusive offerings. For the back-to-school season, it introduced six new lines aimed at teens and young adults, compared with only one last year. Earlier this year, Penney unveiled American Living, an exclusive collection that is part of an alliance with Polo Ralph Lauren Corp. The collection is the biggest brand launch in Penney's history. Ullman noted in a statement that the back-to-school launches had "good initial customer response."

[HenryTo]

Macy's missed estimates and lowers full-year outlook but the stock is only trading down 2% as I am typing this:
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Macy's says 2Q profit falls, cuts outlook for year
Wednesday August 13, 10:43 am ET
By Anne D'Innocenzio, AP Business Writer
Macy's posts 2Q profit decline amid challenging economy; cuts full-year outlook

NEW YORK (AP) -- Macy's Inc.'s saw its second-quarter earnings drop slightly and warned on Wednesday that full-year profits will be below Wall Street expectations as shoppers are more cautious about spending.

The department store operator earned $73 million, or 17 cents per share, in the quarter ended Aug. 2, compared with $74 million, or 16 cents per share, a year earlier.

This year's results include two unusual items that cut earnings by 12 cents per share. Excluding those items, Macy's earned 29 cents per share from continuing operations.

Revenues fell 3 percent to $5.7 billion from $5.9 billion. Macy's says that same-store sales, or sales at stores opened at least a year, dropped 2.1 percent. Same-store sales are considered a key indicator of a retailer's health.

Analysts surveyed by Thomson Reuters had expected earnings of 19 cents per share on revenue of $5.75 billion.

Macy's results came as the Commerce Department reported that July's retail sales were the weakest in five months as economic problems, from high gas prices to tighter credit and a weaker job market, combined to blunt the impact of billions of dollars in government stimulus payments to U.S. households. The monthly report showed that sales at department stores and other general merchandise stores rose by 0.3 percent, just half the 0.6 percent June increase.

"Our organization rose to the challenge and delivered strong second-quarter earnings and cash flow, despite the poor economic environment," said Terry J. Lundgren, Macy's chairman, president and chief executive in a statement. "While we are never fully satisfied when sales are down, we continued to outperform most of our major competitors in same-store sales and to gain market share with a combination of differentiated merchandise, current fashions and great value."

The company has seen disappointing sales and resistance from shoppers in some markets, where the Macy's name replaced local favorites it absorbed when it bought May three years ago. The company is aiming to fix the problems. A reorganization, announced in February, means the concentration of more managers in local markets where they will make more decisions.

Macy's unusual items this year related to that consolidation of three of the company's regional divisions announced in February, which is expected to save $100 million per year beginning in 2009. It also wrote down by $50 million the value of the private brands acquired in its acquisition of The May Department Stores Co. in 2005.

Like other apparel chains, Macy's is confronting a slowdown in clothing sales as shoppers focus increasingly on basics and not on discretionary splurges like skinny jeans.

Lundgren noted that he expects to see "a positive impact" on sales beginning in spring amid new merchandising initiatives. Starting this fall, Macy's will be the exclusive department-store retailer for Tommy Hilfiger U.S.A. men's and women's sportswear. In May, it announced a partnership with toy retailer FAO Schwarz, and plans to open toy stores in close to 700 Macy's department stores over the next two years. About 75 full-size FAO toy stores will open across the country this fall, along with about 200 smaller shops.

But Macy's acknowledged that it was difficult to forecast financial results with any level of certainty given the sour consumer confidence, which is at a 16-year low, and the slowing economy. The company said, however, that it expects earnings per share for the year to be in the range of $1.70 to $1.85. Analysts polled by Thomson Reuters had expected $1.86 per share for the full year.

Macy's also said that it currently expects same-store sales in the fall season to be anywhere from unchanged to down 1 percent, which would result in same-stores sales declines of as much as 1.6 percent for the year.

Shares in Macy's slipped 45 cents to $19.82 in morning trading Wednesday. They have traded from $35.76 to $14.33 over the past 52-week period.

[HenryTo]

From Briefing.com:

[HenryTo]

Boscov's the latest retailer to file for bankruptcy:

http://www.retailingtoday.com/story.aspx?id=75605&section=General

[rffrydr]

Some stats from Mastercard and trends:

http://www.cnbc.com/id/15840232?video=813842263&play=1
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

A Madman's observation:

[HenryTo]

Mervyn's restructures. This would've been bullish for other retailers if Mervyn's had liquidated instead - but alas, there is still enough capital sitting on the sidelines for the game to roll on:

http://www.bizjournals.com/losangeles/stories/2008/07/28/daily15.html

[HenryTo]

Another major retailer set to go under, as Mervyn struggles to stay open. According to the WSJ, the company could file for bankruptcy as early as later this month. The article says the PE firms made a bundle on the real estate - but who's going to buy the real estate given the tremendous slowdown we're seeing (and store closures) across the retail sector?

http://online.wsj.com/article/SB121659710322668977.html?mod=googlenews_wsj

[HenryTo]

Steve & Barry's expected to file bankruptcy very soon, as it was not able to get last-minute financing from Sears. This filing should eventually increase retail margins across the board:
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Steve & Barry's expected to file for Chap 11: report
Tuesday July 8, 10:44 pm ET

NEW YORK (Reuters) - Retail chain Steve & Barry's is expected to file for Chapter 11 bankruptcy as early as this week, the Wall Street Journal reported on its website on Tuesday.

The report, which cited people familiar with the matter, said the Port Washington, New York-based retail chain had been unable to raise rescue financing. It had been in last-minute discussions with Sears Holdings Corp (NasdaqGS:SHLD - News) for a bail-out, the paper said.

The paper reported last month that it needed some $30 million in rescue financing.

The company could not be immediately reached for comment.

[HenryTo]

Businessweek speculates that a bankruptcy filing is in the offing for Circuit City:

http://www.businessweek.com/bwdaily/dnflash/content/jul2008/db2008072_040726.htm?chan=rss_topStories_ssi_5

[HenryTo]

BBBY posts lower earnings from last year but beats Street's. Stock is up 8% in AH trading. Note that our local Linens & Things (in West LA, just a few doors away from BBBY) is now having a liquidation sale, so this should bode well for BBBY going forward.
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Bed Bath & Beyond posts lower 1st-qtr profit
Wed Jun 25, 2008 4:24pm EDT

ATLANTA, June 25 (Reuters) - Home-goods retailer Bed Bath & Beyond Inc (BBBY.O: Quote, Profile, Research, Stock Buzz) reported lower first-quarter profit on Wednesday, weighed down by higher expenses.

Net earnings dropped to $76.8 million, or 30 cents a share, for the quarter ended May 31, from $104.6 million, or 38 cents a share, a year earlier.

[HenryTo]

Retailers finding out that even their real estate assets can be a tough sell - especially in an "overstored" market:
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Distressed retailers' assets can be hard sell
Wed Jun 18, 2008 7:17pm EDT

By Martinne Geller

NEW YORK (Reuters) - As tightening credit and slow consumer spending fuel a rise in the number of U.S. retailers liquidating their assets, distressed chains are now finding that even their real estate can be a hard sell.

Right now is "probably the most active" period in about 15 years for Jim Schaye, chief executive of Hudson Capital Partners, a professional liquidator that buys, and then sells, the assets of retailers who are going out of business, or closing or relocating stores.

"The interesting thing is that it's very, very, very big projects," Schaye said on Wednesday at the Reuters Consumer and Retail Summit, citing the recent bankruptcy filings of retailers including Linens 'n Things, Sharper Image Inc, Wickes Furniture, Levitz Furniture and Goody's Family Clothing Inc.

"It's really just one right after the other ... $100 million-plus deals," Schaye said. "And I suspect what I'm seeing will continue on at least in the near future. Will it be a year? Could be. The asset-based lenders are tightening up like crazy."

In this tough climate, where retail spaces seem to be coming on the market all the time, Schaye said finding buyers for these assets "is a real challenge."

"As time goes on, you look at the portfolios of Linens, there just (aren't) buyers for that real estate. A couple years ago the 40,000 to 44,000 square foot box was in great demand ... now there just isn't a lot of demand for it," Schaye said, adding that many specialty retailers already had so many stores and are looking for smaller spaces.

"It's either they want 60 or they want 20 (thousand square feet of space)," he added, noting that grocery stores were often interested in the largest spaces.

With gasoline topping $4 a gallon, the housing market sagging and access to credit tight, U.S. consumers have become reluctant to spend, often doing without discretionary items and bargain-hunting for necessities.

[HenryTo]

Latest discount retail concept - Steve & Barry's - being taken to the cleaners?

http://online.wsj.com/article/SB121401142593693967.html?mod=hps_us_whats_news

[rffrydr]

Current state of retailers--and retail (mall) construction:

http://media.bloomberg.com/bb/avfile/Economics/On_Economy/vRHZOWtROnRM.mp3
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Today is the Tomorrow you worried about Yesterday!