No Turn On Red

Imagine it is Friday at 5:00PM and someone just posted, on their blog, about a horrible shopping experience they had at your store. Maybe a cashier was rude or maybe a store was disgusting - but whatever their frustration, they just posted their thoughts online and now it’s gotten linked to from two dozen websites and now people are talking about it across the country.

In this day, do you really want to wait until corporate PR gets into the office at 9:00AM on Monday morning before someone even thinks about reacting to this story? Monday is too late when there’s the potential that someone, reading the blog post, has decided not to shop at your store on Sunday.

Think it is far-fetched? I talked about this earlier in the year, when one consumer posted about their bad experience at a Kohl’s.

Think something like this can’t happen to your business? I can tell you that no matter how well you think you are training your employees, something somewhere is going to happen and someone is going to talk about it online. The next big story could be affecting your retail chain.

Today I read, over at Consumerist, about an unpleasant experience a person had returning items at Victoria’s Secret. Look through the comments and you will see a range of responses - some agree with the poster and complain about Victoria’s Secret customer service, while some stick up for Victoria’s Secret, while others debate the quality of merchandise Victoria’s Secret carries.

You know what I would love to see? Someone from Limited Brands posting a comment in that thread. Maybe they say that they are sorry for the experience, that they will look into it, and get in touch with the original poster privately. They could talk about how they are going to look into the policy and figure out if the sales person was poorly trained, rude, or even correct in what they do. A personal face of the corporation, being honest and engaging conversation, could stop an already bad experience from spiraling out of control. A personal face who could prevent the same situation from happening again.

This is the role of an online Community Manager: someone who represents a brand, online, and engages in honest communication with managers. It’s not hard to go through blogs, social networks, and community websites to find out what is being said about your brand. It’s not that hard to engage and welcome conversation and criticism. It’s not that hard to admit that, hey maybe someone made a mistake at the store level but it was due to poor training and we are going to correct that.

People make mistakes and they want to see big businesses admit that they do, as well. But a retailing remaining silent and ignoring the conversation around them is going to hurt their business and drive away customers.

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CNBC television is reporting that Limited Brands has made three headlines:

- Limited Brands has reached an agreement with private equity firm Golden Gate Capital to sell a 67% stake in the Express brand for $548m

- They are still exploring “strategic options” for Limited Stores

- They have slashed their Q1 earnings forecast in half from $0.25 - 0.28/share to $0.12 - 0.14/share.

LTD Stock has reopened after being halted at $27.14 at 2:27 and has immediately dropped to around $26.

More from CNBC and a just issued press release by Limited Brands.

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CNBC television is reporting that Limited Brands stock (LTD) has been halted on the NYSE pending breaking news.

Jim Cramer on CNBC’s “Street Signs” speculates that they could be going to announce some sort of spinoff.

Speculation lately has been that the chain was shopping the under performing Express Fashion and Limited stores to potential sellers. Previous spinoffs from Limited Brands have included Abercrombie & Fitch, Lane Bryant, Lerner New York, & Limited Too/Tween Brands.

Could be an interesting shakeup to the mall landscape.

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If you look at the retail comp store sales numbers for the month of April, you are looking at one ugly picture. But this was to be expected when taking into account the early Easter holiday this year.

For the month of April, the mall posted lackluster numbers: Abercrombie & Fitch saw a decrease of 14% (further breakdown of the brands: A&F adult -13, abercrombie, -18, Holister -17, & Ruehl -6), American Eagle down 10, Aeropostale down 14, Ann Taylor -12.8 (further breakdown of the brands: Ann Taylor -8.2 & Ann Taylor LOFT -17.4), Gap Inc down 16 (further breakdown of the brands: Gap North America -14, Banana Republic -13, Old Navy -20, and the International division -5), Hot Topic -9.1, Limited Brands -1.0, PacSun -14.

Some department stores saw slightly better numbers, but not all of them. Winners included Nordstrom (up 3.1) and Saks Fifth Avenue (up 11.7!!). On the flipside, Kohl’s was down 10.5, Federated was down 2.2, JCPenney was down 4.7, and Dillard’s was down 14.0.

Target saw a drop of 6.1 and Wal-Mart was down 3.5.

These numbers are bad, but are the indiciative of a worrisome trend? Look at March’s numbers and remember that these April numbers don’t include Easter. I think there are some retailers who are struggling, but the industry as a whole is just fine. A better picture of retail health will be seen over the next two weeks as retailers release their second quarter earnings results.

More information from Minyanville and the New York Times.

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July sales came out and they were mixed, with a positive lean towards department stores. Second quarter results starting coming out, with very positive results from JC Penney and Kohl’s and strong results from Target. The bulk of the retail industry will be reporting their results this week. The Street has a great rundown on this week’s expected results (see: Coming Week: Attention Shoppers).

I am looking forward to seeing what the Second Quarter results look like this week. The numbers will be the tale of the tape in the battle of A&F vs. AE. Will there be anything positive in Gap’s results on Thursday? Did Limited Brands have a good quarter, July withstanding? Will Sears Holdings increase their bottom-line performance even though it appears that there sales haven’t? What is Home Depot doing to get them through the year? We’ll know everything this week.

Walking around the mall this week, I am very suprised at how well most retailers look. Everyone seems to be putting on a good face for the BTS season, plans are well underway, and now we’re all just hoping that the consumers will respond.

Denim, denim, denim.

PacSun’s got a big display of Levi’s 514 and 511 jeans for men. Hadn’t seen this before, so I’m assuming it is a fairly new relationship - but I think it’s a win. PacSun’s got a great brand and they’re riding the wave of the current trend with one of the harder to find styles of Levis. Credit goes to PacSun for getting it out there while Sears and JC Penney still have the 514 jean buried in the back of the department. Although it is a risky merchandising move, I think there will be a pay off for retailers like PacSun who are being so fashion-forward with this particular trend.

Came across a good story by Reuter’s today about denim marketing and BTS sales for retailers (see: Retailers step up marketing to hawk denim).

The Unlawyer talks about the effect this week’s terrorism threat has on duty-free sales and the retail enviroment in airports (see: No Liquids, No Duty-Free Sales).

Very detailed article in this month’s Apparel Magazine about Boscov’s Department store (see: Boscov’s: In a League of Its Own). This Pennsylvania-based, regional department store is making strides to better compete against the national chains in an increasingly consolidated marketplace.

And finally, kudos to The Writing on the Wal for their coverage of the Wal-Mart wage cap announcement and the effect on & reaction from Wal-Mart employees. I talked about the initial announcement here, but as I pointed out here and here, The Writing on the Wal was one of the sites I was going to for coverage.

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A few days late on this one, but July’s same store sales numbers came out on Thursday and the brightest spot was how well department stores did. Federated up 3.3%, JC Penney up 4.9%, Kohl’s up 5.9%, Nordstrom up 5.3%, and Saks up 2.4%. All of these beat or were in line with analysts predictions.

Mall retailers posted mixed results: Abercrombie & Fitch posted an increase of 3% (with A&F namesake stores up 1%, abercrombie kids up 5%, Hollister up 5%, and Ruehl up 36%), American Eagle Outfitters up 7%, Ann Taylor up 5.1%, Gap Inc. down 4% (with Gap nakesake stores down 13%, Old Navy & Banana Republic reporting flat sales, and Gap International stores down 6%), Hot Topic was down 7.2%, Limited Brands up 7.0%, and PacSun was down 10.6%.

Target was up 3.1% while Wal-Mart was up 2.4%. Costco was up 7.0% while BJ’s Wholesale was up 1.9%.

Interesting results as it seems shoppers are going to the department stores for their Back to School shopping. Department stores were up 4.1% this month compared with a 0.5% increase in July of 2005. Will this trend continue through August?

As I mentioned the other day, I’m not suprised to see flat sales at Abercrombie & Fitch namesake stores with stronger comp numbers coming from American Eagle Outfitters. But like I said, the real interesting numbers will be out next week with the Q2 results from these retailers.

Still think Gap can start a turnaround. Like I’ve said, I already like the new store experiences and merchandise from Old Navy and Gap. I think it will take longer to execute the turnaround and will be a prolonged process, lasting several seasons, before we really see any true signs of a turnaround. Q2 numbers are going to be ugly judging from the amount of markdowns I’ve seen at some of the Gaps and Old Navys that I’ve been in.

More coverage from Minyanville’s Retail Roundup, Investor’s Business Daily, and Reuters.

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June retail sales came out on Thursday and, since I was tied up with working on the redesign, I did not get to comment on them at the time.

According to the New York Times:

Consumers proved fickle in June, bypassing popular chains like Wal-Mart and Abercrombie & Fitch and heading instead for department store like J.C. Penney and Kohl’s, new sales figures indicate.

Sales at retail chains rose 2.8 percent last month from the same month a year earlier, less than the forecast 3 percent gain, according to Retail Metrics, a research firm.

The results, though hardly dismal, unnerved industry executives, who are worried that higher gasoline prices may be crimping consumer spending on other goods.

Taking a look at some of the specifics: In the mall - Abercrombie & Fitch was down 4% (namesake stores were down 10%, Hollister stores were down 1%, and the small a, abercrombie kids, was up 9%), Aeropostale was up 5.3%, American Eagle was up 6.4%, Ann Taylor beat all estimates with a 12.5% gain, Gap as a company was down 6% (namesake stores were down 4%, Banana Republic was down 4%, Old Navy was down 6%, and Gap International was down 14%), Hot Topic slipped 3.4%, Limited Brands rose 3% but didn’t beat estimates, and Pacific Sunwear dropping 2.7%.

Department stores led the way this month with JC Penney rising 4.3%, Federated up 1.7%, Kohl’s posting a positive 7.1% comp, Nordstrom up 4.7%, and Saks up 4.7%.

And like the trend over the past few months, Wal-Mart blames gas prices for it’s weak 1.2% comp while Target says nothing and posts a positive 4.8% comp.

The New York Times has a few good roundups of the trends in their articles Retail Sales Fall Short of Forecast and Department Stores Staged a Comeback In June. For two more roundups, there is also the Associated Press and the always reliable and funny Minyanville.

For reference, you can review the results from May and April.

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Friday I took a walk around to mall to see how the retailers were preparing for the upcoming transition from Summer to Back to School. I also wanted to take advatange of the early-clearance and Father’s Day sales to pick up some new clothes. I was successful on both accounts.

All of the stores are in different stages of the transition, with Abercrombie & Fitch looking spotless as they’ve completed the first phase of their set. Look for their full BTS floorplan to be set by June 29. Limited Brands is running Summer clearance sales at their stores (Limited, Limited Too, Victoria Secret & Express), while Gap Inc. is starting the markdowns at Old Navy and Gap. Gap has previously stated that they will re-launch all of their stores on July 20th, which is the same date they have also announced that Old Navy will begin their BTS advertising blitz.

Some notes from around the world this week:

Wal-Mart gets sued by Prada for selling fake bags, a week after Fendi filed suit against them for fake goods as well. Is this the start of a larger trend that will unravel to the core of what drives Wal-Mart’s business model, or is this just two more examples of the litiguous society we live in today? [via Wake Up Wal-Mart]

Also on the Wal-Mart front, they’ve opened a new store in Kearny, New Jersey at the same time that activists in the Bronx gear up to fight Wal-Mart coming into that part of New York City. The fight to enter New York City is going to be tough for Wal-Mart. Target, Kohl’s, Best Buy and numerous other “big box” retailers have locations within the five boroughs, but expect a long, drawn out fight against Wal-Mart as they continue to look for reality in the City.

Monday’s New York Times reports that Playskool will be expanding into Baby Care, via a partnership with drug store chain CVS. Will parents react? September will tell. Hasbro will have a lot of work to do in order to build more brand loyalty in an area that is completely new to them, but they may be able to do it. I don’t have kids, but it seems that shoppers in this area respond to name recognition second and value first. When everything is unveiled, baby care could be a very lucrative area for Hasbro.

A lot of retailers (and investors) are banking on this Father’s Day being very good to them. June 2005 was very good to a lot of retailers, so this month’s numbers will be scrutinized as we go into the BTS season. I can’t believe we’re only a little more than half way through June.

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The May comp store numbers for the retail industry:

In the mall: Abercrombie up 3.0, Aeropostale down 1.1, American Eagle up 11.0, Ann Taylor up 12.0 , Hot Topic down 6.0, Limited Brands up 7.0, and Pacific Sunwear down 2.6. Gap as a company was down 6.0, however the break down between companies is interesting. Gap North America was down 5.0, Gap International is down 13.0, Old Navy was down 8.0, but Banana Republic is starting to show signs of a turnaround with a 3.0 positive comp.

In the department store sector: Dillard’s up 3.0, Federated up 9.2, JC Penny up 11.1, Kohl’s up 3.1, Nordstrom up 7.8, and Saks up 5.7.

In the battle of Target v. Wal-Mart and warehouse stores v. warehouse stores, Target was up 5.7 & Wal-Mart was up 2.0. Sam’s Club was up 4.0 while BJ’s Wholesale was up 4.2 and Costco was up 10.0.

Generally a pretty positive month across the board. Gap continues to struggle and Kohl’s is curiously one of the few companies with positive marks that didn’t beat investor estimates. Pacific Sunwear was down 2.6 after a fantastic April in which they posted a 14.0 positive comp.

Minyanville posts a good roundup of the May numbers, covering some retailers I didn’t cover here.

Interesting month and a good start to the Summer season in retail.

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