No Turn On Red

Retail sales in July continued to be a mixture of disappointment and mediocrity.

Retailers catering to teens saw a mixed bag of results as teens decided to spend more money at Aeropostale (same store sales up 6%) and Buckle (same store sales up 2.8%), but both retailers missed analysts projections. American Eagle saw an 11% drop in same store sales, on top of the 7% drop they saw this time last year. Abercrombie & Fitch continued their terminal velocity fall with a 28% drop in same store sales. No good.

Macy’s saw a 10.7% drop in same store sales, JCPenney reported a 12.3% drop in same store sales, while Kohl’s managed to eek out a nearly flat month (0.4% increase in same store sales). I guess shoppers are really going nuts over that new line by Avirl Lavigne.

Besides the general state of the economy and unemployment through the course of the year, some analysts suggest that the, recently enacted and more recently refueled, Cash for Clunkers program is diverting money from the retail industry:

“One of the unintended negative side effects of the cash for clunkers program was that it’s going to remove money that probably would have been spent in retail stores and restaurants and is now going to go toward a car payment,” said Purdue Consumer Sciences Professor Dr. Richard Feinberg.

And not just “spare change.”

Feinberg estimates the nation’s retailers could lose up to $300 million a month as consumers spend their disposable income on loans instead of lunch. By the end of what’s expected to be another tough holiday shopping season, losses could add up to between $1.5 billion and $2.5 billion, Feinberg says.

More information on retail sales from the New York Times and Los Angeles Times.

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The stimulus checks have been (presumably) spent, back to school shopping is underway, and the retail sales numbers for July are in and they are, well, pretty ugly. A lot of retailers posting negative same-store-sales numbers for the month, many of them posting numbers that fell below Wall Street’s expectations. Wall Street is responding – as of 12:30, the S&P Retail Index is down around $7.

The negative results are hitting all segments of retailers – from department stores to the mall, teen retailers to mass market merchandisers. Wal-Mart posted a positive sales increase of 3.0%, but that is less than the 3.5% increase that Wall Street was looking for. Target saw same store sales drop 1.2% in the month of July and warn that August isn’t going to be much better. JCPeneny’s sales dropped 6.5% but raised their Q2 guidance “due to better than expected sell-through of promotionally priced merchandise and continued expense management measures.” Kohl’s saw a steep 10.4 drop in same store sales in the month.

Gap saw negative numbers across all brands – Old Navy down 16%, Banana Republic down 8%, and Gap North America down 6%. When are they going to spin off the Old Navy brand, sell it, and let someone else deal with the turnaround?

Teen retailers aren’t seeing the Back to School numbers they hoped for with American Eagle down 7%, PacSun was down 4%, Abercrombie & Fitch (as a company) was down 7% (with only A&F proper posting flat numbers, up 1% for the month. Hollister was down 11% – blowing away the 4.1% decrease expected by analysts), but Aeropostale saw sales jump 13%.

More coverage from CNN/Money, Forbes, and Marketwatch.

Reminder, all of July’s numbers are available to analyze over at our partner site, Retail Numbers.

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As always, I’m looking at a ton of e-commerce sites lately. Decided to run through some of the landing pages that I am seeing around the web right now to show off the variety of promotions and marketing going on. Though it’s not as denim-centric as it was two years ago, it’s obvious denim is still the #1 push in the back to school season.

Continue reading this entry

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In case you didn’t get the BTS memo, the trends for this season are as follows:

You may finish shopping now.

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A couple of posters on the A&F Lifestyle Forums are saying that CEO Mike Jeffries visited and shut down three stores in the Los Angeles area (Glendale Galleria, Topanga Mall, and Sherman Oaks) that weren’t meeting company standards. One poster says:

Not having any stock on the floor.
Stockroom a mess.
Clothes not properly folded.
Store is Dirty.
Forms are not properly dressed.

and that doesn’t even begin to describe it.

I wonder what the truth is in this and I wonder if he actually did temporarily close these stores during normal business hours. If so, that is a pretty big commitment to quality and consistency on his part. Close the store, sacrafice that day’s sales, and get the store back up to standards, realizing there is much more to be gained in the long run.

Does anyone have more of this scoop, or know the truth in the matter?

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First in maybe a weekly column? Hopefully.

Some quick retail notes for this lazy Sunday:

I hear that the new Abrecrombie & Fitch Back To School Preview floorset is this week. The seasonal transition at A&F is very impressive and seamless. Sales will be strong but it will be tough for A&F to compete with themselves and the high comps they had with BTS 2005 (June, July & August had comps of 38%, 22% & 24% in 2005). Look for solid increases in the gross margin with decreases in markdowns and sales for this upcoming season. This will be another great season for A&F.

Two quickies from the Loss Prevention blog: Cop kills man in grocery store shoplifting and Kroger manager jumps on hood of shoplifter’s car. I have nothing to say about the unfortunate shooting, but I’m sure Kroger’s corporate management doesn’t look fondly on employees jumping on cars to apprehend shoplifters. There has to be more to the story than that.

Last week, the Chicago Sun-Times ran an article showing where some of the former Sears executives have gone: Life After Sears.

And finally, a story from Starbucks showing how a good idea from worker, combined with the support of co-workers, the corporate office and customers can lead to a very positive outcome: Starbucks worker brews plan to get java to GIs in Afghanistan. A Starbucks employee from Maine organized a campaign where her co-workers donated their weekly bag of coffee they recieve as a benefit and, with corporate approval, solicited donations from customers. The result? 106 pounds of coffee sent to troops in Afghanistan. [via Starbucks Gossip]

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The numbers from Abercrombie & Fitch: revenue up 20%, comp sales up 6% and net profit up 39%, beating Wall Street Estimates.

When digging into the numbers, some very interesting trends within the different brands: A&F comps were down 6%, abercrombie comps were up 30% and Hollister comps were up 13%. A&F menswear comps decreased by low single digits while womens apparel comp decrease was in the mid single digits. They didn’t talk specifics about RUEHL, except to say that it is performing well in comp and net sales perspective.

Some quick key points from the call that I found interested are that they seem to be that they are reducing the amount of promotional events, reducing the amount of clearance cycles, reducing floor space devoted to clearance, putting $50 million back into the stores in capital improvements this year. These are all geared towards improving the gross margin, which came in at an astounding 65.4%.

The thing that is amazing me about A&F is that they are able to get away with all of this. In such a tight retail market, they are now in their twentieth month of overall comp store gains (minus a slight hiccup this March). They have created the ultimate lifestyle destination brand and they are able to get away with charging top dollar for it. They have played with pricing, tweaking the price points at RUEHL and Hollister to be more competitive (they say they are pricing Hollister to be more competitive with American Eagle and they have brought the price points of RUEHL to an average of 12% more than A&F, down from the original 30% increase over the average A&F price point).

I do like their honesty when talking about the decline in A&F womens comps they said “I think we simply could have done better in that business. I don’t think that we flowed units and fashion as aggressively as we might have.” The decline, they say, is out of line with the womens business at the other brands. It’s good to see a retailer own up to a mistake like that and look for ways to improve.

Another good quarter for company as a whole. Going into the Back to School season, the company has some very impressive comp numbers to contend with (May, June, July & August of 2005 had comps of 29%, 38%, 22% and 24% companywide) which will make the numbers look flat or soft. Their challenge for the rest of 2006 is to improve upon inventory management and pricing to drive the gross margin. However, if Abercrombie & Fitch is able to reasonably build on these comp numbers, look for this to continue to be one of the hottest retailers going into the second half of the year.

More coverage of the Q1 results from Businessweek and Bizjournals.

Transcript of the conference call from Retail Stock Blog.

Full SEC form 8-k filing from Yahoo.

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Minyanville has posted a great roundup of all of the retail sales reports for April. They’ve got comp percentages for just about everyone and snarky comments for about half. I love it.

Retailers benefitted from the late Easter and most were really able to drive sales through the roof. Great numbers for some of the chains, not so great for others. Department and discount stores mainly show positive results: Federated down .8, Target up 10.4, Wal-mart up 6.8, Kohls up 13.4, Jc Penny up 2.6, Dillards up 10, Nordstrom up 7.3. Teen specialty retailers continue to show positive results: Abercrombie up another 17, Aeropostale up 8.4, American Eagle up 19, Pacsun up 14. The rest of the mall is hit and miss with Ann Taylor up 10.9, Children’s Place up 22, Claire’s Stores up 9 but Gap continues it’s downward trend, down 3 and Hot Topic was down 6.5.

Generally a pretty positive month but those with few suprises in retailers who didn’t beat their estimates or show a positive trend.

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I’m not really sure how to take this, but Salon has an excellent article entitled The Man Behind Abercrombie & Fitch. It is an in-depth interview/profile with the CEO of A&F, Mike Jeffries.  The company is doing extremely well these days and this article relaly examines what is going on behind the scenes.  As expected, it turns out that he is one part business revolutionary and one part creepy cult leader.  Very interesting read.

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