No Turn On Red

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.

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Another mixed month for retail sales.  While some retailers rebounded and look to go into Back to School on a positive note, it was another dark month for some mall and teen retailers.

Wal-Mart beat expectations with a 5.8% increase in June (showing 6.1% increase at their US name-brand stores and a 4.6% increase at their Sam’s Club locations). Target ended up in positive territory with a 0.4% uptick in same store sales. Costco showed a 9% increase, Kohl’s beat estimates with a 2.3% increase, and even mall retailer Aeropostale showed gains with a 12% increase in June.

The month was not as kind to mall and teel retailers such as Gap (company down 7%), Abercrombie (down 3%), and American Eagle (down 11%).

June’s numbers have been posted to Retail Numbers, which allows you to chart and track the retail industry monthly same-store sales.

More coverage from Fox Business and the Associated Press.

Photo above from Flickr user James@mannequindisplay. com, used under Creative Commons.

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A bit of lingo that I’ve learned lately: turns out that Target refers to the the impact of the Back to School/Back to College season on their stores, by classifying them into levels. The levels are No Affected, Affected, Freaky, and Super Freaky. It doesn’t appear that there are a lot of Super Freaky stores in the company, but those that are classified as such, are situated within close proximity to college campuses. I wonder what kind of percentage increase these stores see, over the rest of the company, during the season.

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Four pictures from work. The first three are our new Back to School/Dorm Shop and the last is our local NCAA Collegiate Shop:

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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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I know – no updates for a week? What is up with that. Obviously not a good slump to fall in to.

Retail is an interesting industry to work in. The busiest times throughout the year are generally periods of time where most other industries are slow and people are relaxing. Some of my friends in advertising or IT are relaxing a little bit as work has slowed to a managable 40-hours a week instead of the usual 60 hours per week overload. But as the Summer months begin, retail is all about the Back to School season. Obviously, this is no different for me and things are gearing up to be pretty busy over the next few weeks.

All week I had a sharp pain in my lower abdomen that caused me to miss a little bit of work. I saw a doctor and they are having me see a surgeon to see if it could be a hernia. Hernia? Not good. The pain has subsided, leading me to believe it is more of a muscle thing than an actually hernia, but I am still seeing a surgeon this week to rule everything out.

So that’s where I’ve been this past week. Sorry for the little absence!

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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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