Tuesday, August 13, 2013

Back-to-School: WHAT THE CONSUMER MAY NOT KNOW!

We completed another mall walk this past weekend and are VERY concerned about the latest traffic and sales patterns. Our mall walk was focused in the Northeast and our perspective is focused on only those stores and locations we were able to observe.


Urban Outfitters (URBN)On June 11,2013 URBN commented on the strong pace of business they were experiencing in Q2. Since that time our independent research leads us to warn about a significant slowdown at both Urban Outfitters and Anthropologie . We see  the most significant downturn occurring in the second half of July through this past weekend. Wefeel Urban is having trouble comping even to last year for the  back half  of July and August to date. We did not see any additional markdowns on the selling floors nor have we heard of any additional unplanned events taken place to date. We are watching this name very closely.

Aeropostale (ARO)On August 8,2013 ARO warned of both slower traffic and sales than anticipated for the month of July. Our mall walk indicates this trend has not changed in the last week. In fact we are taking the position that ARO will be the first among all the teen retailers(ANF and AEO) to take unplanned markdowns in order to stimulate traffic and sales. We have noticed that with an additional flow of newer product due in the stores towards the end of this week, we feel additional unplanned markdowns are on the way. This is our opinion alone but based on a very slow start to B-T-S and at most 32 days remaining in the BTS cycle we are not convinced that ARO in particular can achieve their reduced guidance.

Abercrombie & Fitch (ANF)To date the only teen retailer to not update guidance based on July and month to date traffic and sales trends. We strongly feel that ANF is not immune to the softness that both AEO and ARO have expressed in the last 14 days. Consensus seems to feel negative LSD sales are to be expected on top of a negative LDD sales in Q2 of 2012. As we indicated in early July, we felt the product at both Hollister and adult ANF is uninspired, The proportional of outerwear was a liability in our opinion and though the denim sale event is providing positive traffic, we question the effect it has to other categories in ANF's assortments. We have had trouble getting ahead of this name in the past but don't see how ANF can be immune to disappointing sales and traffic at the other teen retailers.

Gap (GPS)we noticed they extended the friends and family event one additional day this week. This is not an actionable event ,we just want our followers to be aware.

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