Tuesday, July 23, 2013

Store Intel: July 23, 2013

We are at the very beginning of back to school season---(hard to believe its still July)--and we will stay in touch each week with updates and opinions as it relates to top line sales and potential issues that might be cause for concern. Our first visit to the names we discussed below,was more of an overview with a more detailed process to take place as we progress through period. At this time we feel overall in the entire teen space business has been very choppy for July. Each of the names we have reviewed have made similar comments regarding the pace of business and through our observations, it appeared that the consumer was shopping more clearance items than regular price back to school product.

Urban Outfitters (URBN) - At this early stage of back to school, URBN is our favorite. The product is on trend , pricing more in line with the $39-$69 lane which we feel is the correct space for a bit more upscale of a consumer relative to ARO and AEO. Some particular callouts are:
  • Great dress presentation in both short and maxi lengths. Whether it be crochet, prints or knits URBN has the absolute strongest assortments in this category . The value is very evident with most of the items in this category priced between $59-$69. 
  • Outstanding novelty printed bottoms in jeggings, rayon printed pieces are very novel and not seen in any of their competitors
  • Fantastic presentation of the "military" inspired trend in novelty tops as well as color direction.
The uniqueness of the product makes this one of our favorite names in the space. Keep in mind URBN is not in direct competition with ARO,AEO,ANF because their demographic are skewed to an older teen customer. We have always felt a URBN customer goes into their late 20's and early 30's which separates them from the other names.

Abercrombie & Fitch (ANF) - The denim event from this past week which was up to 50% off in all denim categories seems to be very disappointing. Of all the stores we previewed ANF was the least prepared for back to school at this early date. The product we reviewed was too logo driven, and lack newness in both the top and bottom categories. Noticeable misses in most categories such as dresses, sweaters, knit and woven tops for girls. Many of the stores we reviewed had a surprising amount of empty shelves which we have never seen before at ANF. For the most part ANF is well stocked with product at all times. At this time we are very concerned about this name.

Aéropostale (ARO) - Several stores visits leads us to believe, like the other names we have mentioned, business through July has been challenging. Very impressed with their lifestyle presentation of product in the stores. Each display had footwear, accessories, cosmetic's shown within each assortment to provide this YOUNG teen customer fabulous options. We feel the back to school presentations that we saw were skewed to a younger teen consumer relative to AEO ,ANF and URBN. As we had stated in previous notes, at this time it is difficult to gauge how much of an increase in foot traffic is taking place but we feel that the B and C locations are making an improvement in foot traffic while the more affluent areas are still seeing some résistance. In conclusion, we see a significant amount of upside with this name but not sure if back to school is where it is going to happen. ARO has made monumental strides forward in product assortments and presentations so we applaud the improvements and are confident a significant upside turn is in the very near future.

American Eagle Outfitters (AEO) - Very much the same conversation regarding current business. Most of the customers we saw in the various stores were shopping clearance merchandise. Regarding back to school assortments we found many compelling product categories such as jeggings and knit tops for girls. We liked the color assortments in bottoms which were quite focused , not too over assorted and excellent wear now items in all categories including sweaters. We would rank AEO the second best in the teen space.

Thursday, July 18, 2013

20 Thursday Retail Reads

Enjoy our carefully curated retail reading list on your morning commute this Thursday morning:
  • How Big Data Can Help Retailers Optimize Mobile (CIO)
  • The new JC Penney is like nothing retail has seen in 30 years...and will most likely be a financial disaster (Robin Report)
  • Retailers Shifting Digital Marketing Spend To Capitalize On Growing Mobile Traffic (NRF)
  • Video: How Hugo Boss Uses Body Heat to Track Shoppers (Bloomberg)
  • Analyzing Influences in the Consumer’s Purchase Decision: Athletic Footwear (Compete)
  • Wayfair aims to become a household name for home products (Fortune)
  • The Store is Everywhere: The fast-approaching future of "everywhere computing" and the implications for retailers (Business of Fashion)
  • Facebook Commerce May Be Better Run by Twentysomethings (Adweek)
  • Why Are Walmart Stores Such A Mess? (Forbes)
  • The Distraction of Data: How Brand Research Misses The Real Reasons Why People Buy (FastCo)
  • Amazon vet’s robot-powered apparel startup now beating Amazon prices, partners with Google Shopping (GeekWire)
  • The Power of the In-Store Experience (Nielsen)
  • Mobile devices account for two-thirds of traffic and half of sales at Jackthreads (Internet Retailer)
  • 10 Tech Innovations That Will Change How You Shop (PC Mag)
  • Why Outlet Stores Are the Hottest Thing in High-End Retail (Businessweek)
  • Back-to-School Shoppers Plan to Cut Back on Spending (NRF)
  • Developing a fine-grained look at how digital consumers behave (McKinsey & Co)
  • RadioShack Revamps Stores, Merchandise As it Tries to Reinvent Itself (AP)
  • At only one year young, Poppin makes waves in multichannel retail (Shop.org)
  • When it comes to retail tracking, shoppers prefer being watched in their homes (Quartz)

Tuesday, July 16, 2013

Tuesday Morning Retail Reads

  • Why Walmart Still Hasn't Crushed the Regional Grocery Store (The Atlantic Cities)
  • Attention Shoppers: Stores Are Tracking Your Phone (NY Times)
  • Top 10 U.S. Brands With the Most Buzz (YouGov)
  • With ‘Touch-Enabled’ Shoppable Videos, Product Placement Might Not Be So Bad (TechCrunch)
  • Retail Store Openings Seen Reaching New High (CoStar Group)
  • Restoration Hardware's Renovation Is Private-Equity Boon (WSJ)
  • Favorite brands of the ultra-wealthy (The Luxury Institute)
  • Fab Gets Personal, Will Email You About Products It Knows You Like (FastCo)
  • CPG sells more direct to consumers (Facts, Figures and the Future)
  • Serendipity and Samples Can Save Barnes & Noble (Bloomberg) and Should Barnes & Noble Turn into a Mini-Mall? (HBR)
  • New data on how social media drives purchasing (Vision Critical)
  • The digital hard-sell behind Burberry's traditional image (The Guardian)
  • Could TV Commerce Catch On With Consumers? (eMarketer)
  • Retailers keep inventories low for back-to-school sales (Reuters)
  • Best Buy’s Unlikely Return From the Dead (Time)
  • Shopping on a smartphone sucks. Payvia (and everyone else) wants to fix it (PandoDaily)
  • Harrods Seeks All Things for All People in Store Revamp (SF Chronicle)
  • 15 of the Coolest Stores You've Ever Seen (The Storefront)

Monday, July 15, 2013

Quick View: June Retail Sales Miss Estimates

Retail sales in the U.S. rose less than expected in June as weakness in building materials and restaurant receipts offsets strong sales of autos, furniture and the continued strength of e-commerce.

The U.S. Department of Commerce reported that Advance Estimates of U.S. Retail and Food Services sales for June increased 0.4% (vs. an estimate of +0.8%) from the prior month to a seasonally adjusted $422.8 billion, while sales rose 5.7% compared to the year-ago period. Year-over-year, this was the 44th straight monthly rise and the strongest gain since last March.

Total sales excluding autos were up 4.5% compared to last June and were flat from the prior month, while total sales less autos and gas stations showed a 4.5% year-on-year increase, but fell 0.1% from May.

8 of 13 sectors posted growth over the prior month, led by Motor Vehicle & Parts Dealers (+1.8% MoM / +11.4% YoY), Furniture & Home Furnishings Stores (+2.4% MoM / +4.6% YoY), Clothing & Accessories Stores (0.7% MoM / +4.8% YoY) and Non-Store Retailers (+2.1% MoM / +13.8% YoY).

However, weakness was apparent at Building Material and Garden Equipment & Supplies Dealers (-2.2% MoM / +9.4% YoY), which fell by the most since last May, and Food Services & Drinking Places (-1.2% MoM / +3.1% YoY), which posted the biggest month-over month drop in more than 5 years. 

Electronics & Appliance Stores (-0.1% MoM / -0.3% YoY) and Department Stores (-1.0% MoM / -5.1% YoY) continue to be the biggest laggards and are the only 2 sectors showing a year-to-date decline from 2012.

Friday, July 12, 2013

Quick View: Same-Store Sales Rise in June

Back in 2006, there were 68 retailers reporting monthly sales; in 2010 that number had fallen to just 32 retailers...and now just 10 remain. Combine that with the fact that most chains blend brick-and-mortar and online sales, and same-store sales have certainly lost their luster as the go-to metric of performance. Nonetheless, it's still a useful measure of industry and company-specific trends.

In June, the 10 chains that still report posted a total sales increase of 5.5% to $20.7 billion, as same-store sales rose 4.2%, the best gain since November 2011. Excluding drug stores, total sales rose 7.6% and comparable sales jumped 5.5% on top of a 2.8% rise last June.

Friday's BIG Reading List

  • Online merchants buying into retail storefronts (Seattle Times)
  • Mormon-Backed Mall Breathes Life into Salt Lake City (NY Times)
  • Retailers in the rich world are suffering as people buy more things online. But they are finding ways to adapt (The Economist)
  • A Disloyalty Movement? Supermarkets and Customers Drop Loyalty Card Programs (Time)
  • Why Costco Rules in Hearing Aids...and Gummy Bears (Businessweek)
  • The death and rebirth of the mall. You don’t drive there, you live there (The Globe and Mail)
  • Pumped Up Kicks? What's Behind Soaring Sneaker Sales (CNBC)
  • Online Sales Growth Expected To Slow In 2013, But Mobile Commerce Still Soars (Siemer & Associates)
  • Here are the differences between the US and European retailer plans to make Bangladeshi factories safer (Quartz)
  • Retailers Knock Down Walls Between In-Store and Digital (Digiday)
  • Mid-Market Grocers Continue to Struggle in Fiercely Competitive Sector (NREI)
  • How Square Market Could Revolutionize Indie Shopping (Racked)
  • A big challenge for retail: turning online “saves” into offline purchases (GigaOM)
  • Strong Growth in Merchandise Imports to Resume in Fall (NRF)
  • Digital Performance of 40 The World's Top Department Stores (L2)
  • To Sell Stuff Online, Make It Easy to Buy in the Bathroom (Wired)
  • Do bricks-and-mortar stores matter in digital era? (Mobile Commerce Daily)
  • Glimcher Finds Gold in Malls With 38% REIT Return (Bloomberg)
  • Retailers have high hopes for back-to-school shopping season (NBC News)
  • How Millennials Shop Online (eMarketer)
  • At Sears, Eddie Lampert's Warring Divisions Model Adds to the Troubles (Businessweek)

Tuesday, July 9, 2013

Tuesday's Retail Reading List

  • The Big Mobile Lie: It's Not Really Driving Purchase (AdAge)
  • Kors Designs for Moms Swapping $125 Jeans With Daughters (Bloomberg)
  • Omni-Channel Integration Still a Major Roadblock in Enabling a Seamless Retail Experience in Stores (EKN)
  • Do-It-Yourself Checkout: Love It or Hate It, Barcode Scanning Is In Your Future (Time)
  • RadioShack Debuts New Store Concept, Logo To Woo Millenials (Brand Channel)
  • Strip mall owners struggle with lack of demand in second quarter (Reuters)
  • How Wal-Mart Became the World's Biggest Retailer (Motley Fool)
  • The world's most developed online retail markets (Cushman & Wakefield)
  • Are Tablets Becoming a Retailer's Best Friend? (Fox Business)
  • Mega Trends Such as Connectivity and Convergence Spur Retail Industry's Shift to Online Channels (Frost & Sullivan)
  • Walgreens Gets A Makeover As It Tries To Win Back Customers (HuffPost)
  • Who Is the Mobile Shopper? (Nielsen)
  • Trymbl wants to be the Warby Parker of beauty products (PandoDaily)
  • People Are Willing to Pay More to Not Do Math When Shopping (MSN Money)
  • Lululemon at a crossroads as it confront hard questions about its performance and future (BuzzFeed)
  • Checkout Counters That Track Shoppers' Emotional States, Offer Customized Discounts (FastCo)
  • HSN Enjoys a Mobile-Shopping Rebirth in the Digital Era (WSJ)
  • Retail Sales, Traffic to Increase in Back-to-School Season (ShopperTrak) and Back-to-School Ad Campaigns Start Jarringly Early as Marketers Seek Tight Budgets (AdAge)
  • Kroger Agrees to Buy Grocer Harris Teeter for $2.5 Billion (Bloomberg)

StoreIntel: Teen Retailers

We have been very sensitive to the teen space over the last 60 days (since Q1 earnings were reported). We expected more favorable weather to provide the needed boost that typically comes with spring seasonal temperatures. However, we don't feel this has taken place for most of the retail space with few exceptions (see later note), and this applies especially to the teen retailers. Lets look at a few of these names in more detail:

American Eagle Outfitters (AEO) - Our first concern is driven by fashion misses which can be quite contagious. A significant fashion misstep can lead to multiple months of misses until the retailer gets back on track. Compared to their competition, we found that AEO had a very uninspired assortment during this 60 day cycle - in general it felt uninspired and lacked newness  The most glaring miss was the lack of dresses in all lengths and fabrications. We felt AEO had the weakest presentation relative to their competition, hands down. The overabundance of men's cargo shorts was also critical miss, which we believe is one of many factors that might lead to an increase in markdowns and a GM deficit. We have been closely monitoring traffic patterns and felt the foot traffic has decreased. We would rate this period of May 1 through July 4 to be worthy of a 5 out of 10.

Abercrombie & Fitch (ANF) - Without question the most promotional name in the space. Though many of the events are anniversary events from last year, the feel of both Hollister and Abercrombie is of great concern. On consecutive weeks during the month of June, the level of promotion increased from 40% off up to 60% off. Coming off a very disappointing projection of this quarter, we feel ANF has the greatest risk of missing already low expectations. Inventory levels, which they said on their last conference call would be light for this quarter, could potentially lead to an even greater miss than expected. Our last visit prior to July 4th found many ANF stores to be dangerously light in inventory, leading us to believe that they might be "giving up" on the quarter and reloading for the important back to school period which begins in less than 10 days. We will closely monitor the new floor sets which will be hitting most of their stores by the end of this week, but ANF is one of our favorite fashion leaders in this space and we are hoping for a significant rebound for back-to-school. ANF is not and never has been as promotional in recent memory, and this raises our concern to its highest level. We are always hesitant to get aggressive in this name due to the unknown factors of both online sales and off-shore business.Taking historical trends in both of these categories into account, we still are very negative on this name. Combining low inventory levels in a highly promotion time period leads us to believe there is tremendous gross margin pressure over and above the expectations they voiced during the Q1 2013 conference call. We see little opportunity for GM increase and therefore are quite negative on this name. We would rate ANF a 4 out of 10.

Aéropostale (ARO) - We are quite impressed by the dramatic improvement in product assortments throughout this time period of May 1 though July 4th. There was a drastic reduction in logo wear and a significant improvement in trend-right categories, with dresses being one of many bright spots in their assortments. Our concerns are the initial markups which leave us questioning the strategy. We see ARO as the value driven retailer in this space and wish their pricing policies reflected our sentiments. If the product continues to show enormous strides of improvement, which we have no doubt they will, our last hurdle is foot traffic. Our recent mall checks still raise concern regarding foot traffic. We are seeing the "B" and "C" locations getting more foot traffic and our assessment is that the value-driven locations are seeing both improved foot traffic and top line sales, while the "A" locations are having a more challenging time. We see ARO having the greatest upside in this space. We would like to rate ARO as the best in class, but the concerns on all important foot traffic leads us to give them a 6 out of 10 rating.

Tuesday, July 2, 2013

20 Tuesday Retail Reads

  • Shopping Then and Now: Five Ways Retail Has Changed and How Businesses Can Adapt (Google Think Insights)
  • MAP: The Most Famous Brand From Every State (The Atlantic)
  • Gap’s Partnerships With Music Festivals Scoring With Millennials (BuzzFeed)
  • Why Retailers Are Becoming Meteorologists (FastCo)
  • Volatility Squeezing Global Private Label Supply Chain (Deloitte)
  • Yahoo! Bets on Brit + Co...And the Future of Retail (Wired)
  • State of the E-Conomy: E-commerce sales soar, mobile commerce explodes (Bigcommerce)
  • Walgreens Cashes In On Department Stores' Pain (NPR)
  • Smaller U.S. companies vying for shelf space at Wal-Mart in "American Idol"-style competition (CNN Money)
  • Why Online Grocery Growth Faces Headwinds (Fitch Ratings)
  • Retail and the future of touch marketing (Mobile Commerce Daily)
  • Near-Term Store Opening Plans Keep Increasing (NREI)
  • Bricks-and-mortar remain the foundation of the nation’s retail power players (STORES)
  • Men's Clothier Bonobos Uses Online To Jump Offline (IBD)
  • Using Pinterest’s social cred to get in-store shoppers to make purchases (GigaOM)
  • Wall Street continues to lavish love on Best Buy (Star Tribune)
  • SkyMall: The Strange Story of America's Most Delightfully Weird Catalogue (The Atlantic)
  • Online sales of athletic footwear soaring (NPD)
  • Email Still Crushes Twitter, Facebook in Customer Acquisition (Wired)
  • Experience Matters: The Science Behind The Resurgence Of Physical Stores (FastCo)