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]

OfficeMax "delevers," courtesy of Briefing.com:
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OfficeMax (OMX 16.58, -0.17) said it is eliminating 2,700 positions, including 900 managers, in an attempt to streamline operations, according to ChicagoTribune.com. The job cuts are equivalent to roughly 7.5% of the company's employees. OMX hit a fresh 52-week low this session.

[HenryTo]

No inflation in the retail sector - as retailers never had any bargaining power over customers even in an economy that was growing at 3% to 4%:

http://www.nytimes.com/2008/03/23/business/23haggle.html?em&ex=1206417600&en=1f71cf57986b3fa8&ei=5087%0A

[rffrydr]

Calendar artefact may give us a badly needed boost. March sales will be up 1% due to the calendar shift despite the continuation of soft underlying fundamentals.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

JC Penney cutting back on store openings but overall is still targeting pretty ambitious expansion plans.
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JC Penney profit falls less than expected
Thursday February 21, 12:15 pm ET
By Nicole Maestri

NEW YORK (Reuters) - J.C. Penney Co Inc (NYSE:JCP - News) reported a smaller-than-expected fall in quarterly profit on Thursday as the mid-tier department store operator offset falling sales with tight control on expenses, sending its shares higher.

But the retailer, which caters to middle-income shoppers who are grappling with the slumping housing market and high energy costs, said there is no clear indication the consumer environment will improve in 2008.

"The economic climate and retail environment have not shown any signs of near-term recovery," CEO Myron "Mike" Ullman said on a conference call. "In fact, depending on the economic pundits you listen to, it may even get worse before it gets better."

To offset the tough environment, Ullman said Penney is planning conservatively and has cut its store opening plans for the year.

Penney's profit fell to $430 million, or $1.93 per share, for its fiscal fourth quarter that ended February 2, from $477 million, or $2.09 per share, a year earlier.

Earlier this month, it forecast fourth-quarter earnings to be at the high end of its original range of $1.65 to $1.80 per share. Analysts, on average, were expecting it to earn $1.77 per share, according to Reuters Estimates.

Shares rose 2.3 percent to $49.04 in late morning New York Stock Exchange trading.

DEPARTMENT STORE STRUGGLES

Many U.S. department store operators have faced declining sales in recent months as cash-strapped shoppers curb their trips to the malls amid the shaky economic environment.

Penney had warned its fourth quarter would be a difficult one, after poor third-quarter sales left it with excess merchandise that it had to mark down during the final months of the year, hurting its margins during the all-important holiday quarter.

For the quarter, total sales fell more than 4 percent to $6.39 billion from $6.66 billion. Sales at stores open at least a year, a key retail gauge known as same-store sales, fell 2.3 percent.

Penney said women's and children's clothing were the strongest selling categories, while fine jewelry and expensive items for the home were the weakest.

To offset the falling sales, it kept a close eye on expenses, saying selling, general and administrative expenses decreased 11.3 percent after it cut pension expenses and executive bonuses.

PLANNING CONSERVATIVELY

Ullman said that to navigate the tough environment, Penney has cut its store opening plans.

"For the balance of the year, we plan to open 36 stores, versus our original plan of 50," he said. "... We're reducing the pace of these openings to be in line with the consumer spending patterns we anticipate will remain for the rest of 2008."

While Penney has scaled back store opening and capital spending plans, the retailer is not backing down with the launch of a new brand, American Living.

Penney has said American Living, which began arriving in its stores this month, is the largest merchandise launch in its history. The brand's merchandise will eventually cover 40 categories, including clothes for men, women and children, as well as shoes, handbags, sheets, towels and drapes.

Executives said that while it is very early, they were "pleased" with how American Living is selling in stores so far. Penney will launch the marketing campaign for the brand on February 24, during the U.S. Academy Awards television broadcast.

Penney said it expects first-quarter total sales to "increase slightly," with full-year total sales rising in the low-single digit range.

Same-store sales should fall low-single digits for both the first quarter and full year, it said, with gross margins under pressure for the first half of the year.

It forecast first-quarter earnings per share of 75 cents to 80 cents, and full-year earnings of $3.75 to $4.00 per share.

Analysts, on average, had been expecting it to earn 81 cents per share in the first quarter and $4.02 for the full year, according to Reuters Estimates.

[HenryTo]

Is the guy trading retail sales (ex. gasoline and inflation-adjusted) or recession futures?

With the 25% decline in the S&P Retail Index from the 1st half of 2007 (most severe decline since 2001 to 2002), and with the valuations I am now seeing with some of our favorite retail stocks, I would argue that has already been priced into stock prices (excluding Sharper Image of course).

[rffrydr]

Retail sales inflation adjusted:

http://bigpicture.typepad.com/comments/2008/02/retail-sales-ga.html

Auto Deliquencies:

http://www.forbes.com/feeds/ap/2008/02/14/ap4657184.html

[rffrydr]

The Yuppie is dead:

http://new.quote.com/news/story.action?id=RTT802201147002152

Does his spending live on?
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

All else equal, these closings are good for the other retailers that are still doing well:

http://www.costar.com/News/Article.aspx?id=DAF9E98E8F8A2E0EFF898D104926AF29&ref=100

[rffrydr]

Recession may be the cure:


http://www.post-gazette.com/pg/08039/855748-28.stm
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

S&P Retail Index up 3.7% today.

[rffrydr]

Retail Breakdown



Bullish

· WTSLA has weak comps down 5.7%, but said gross margin is up and EPS comfortably above consensus

· URBN has comps at +11%. Sales numbers better than expected

· HOTT stronger than expected comps and EPS guided upward

· COST comps are 7%. 6.5% expected

· ANN comps are unchanged. -3.5% expected

· GPS comps are -2% vs. -6% -- guides EPS higher

· BJ has comps of 7.8%. 4.5% expected

· TJX guides higher. Comps are 3% vs. expectation of 4%

· JCP EPS to the higher end of the range. Sees $1.65 to $1.80. Estimate is $1.65. Comps -2% vs expectation of -6%

· ROST is guiding EPS up



Bearish

· PLCE comps +6%. +3% expected

· KSS guides to lower end of the range, but this is not out of line with consensus. Comps down 8% in line.

· CHS has comps down 22%. -11% expected.

· LTD comps are -8%. -7.5% expected. Revenues fall slightly short of estimate

· TLB has weak guidance

· JOSB comps are -1.2%. 1.0% expected.

· AEO has weak sales

· CBK comps are -6%. -3% expected. EPS taken down

· NWY weak numbers

· TGT comps are -1.1% -- slightly less than expected -0.5%

· WMT comps are 0.5% 2% expected. Ex-fuel up 1.4%. Sees EPS of EPS of $.99 to $1.03. $1.02 expected. Feb sales expected flat to +2%
Notes gift card use lower than expected and being used for food.
Weather hurt sales

· JWN misses sales -6.6%. About -.5% expected

· DDS comps are -12%. -5% expected

· ARO looks a bit light on EPS



Neutral

· PSUN has weaker than expected comps down 7.4% (1.5% expected), but guides EPS upward

· GYMB confusing. Guides up for current quarter, down for coming quarter, and up for FY 2009.

· ANF in line comps although overall sales are light

· FDO reports comps about in line. Sees Feb flat
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Two hours ago, if you had told me that AEO would be up 8%, BBBY up 6%, CC up 5%, HD up 8%, and SHLD up 12% this morning, I would have sent for the doctor. And yet, here it is.

Many active managers are still heavily underweight retailers and consumer discretionary stocks (and overweight energy and materials) relative to their benchmarks and they are probably panicking right now.

[HenryTo]

BBBY now in positive territory. I have to say: Mr. Konrad is definitely one of the best value analysts out there.

We also got some luck as well, as the stock had been upgraded just this morning.

[rffrydr]

Cards or no cards, worst Christmas since 2002.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

I'm seeing alot of people looking for something to spend their gift cards on Amazon. And I'm not seeing much on sale.

"The real season starts tues.":

http://www.mercurynews.com/breakingnews/ci_7933122?nclick_check=1
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Today is the Tomorrow you worried about Yesterday!