No Turn On Red

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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Someone forgot to merchandise these products in the J.Crew store:

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It’s official:

Boscov’s Inc., the 9,500-employee department-store chain founded in 1911 in Reading, Pennsylvania, filed for Chapter 11 bankruptcy protection in Wilmington, Delaware, today, citing decreased consumer spending.

Boscov’s, which said in court papers that it’s the biggest family-owned full-service department store chain in the U.S., will immediately close 10 of its 49 stores. The company said it will borrow as much as $250 million from a group of lenders led by Bank of America Corp. to help it restructure.

The Associated Press has the full list of stores that are closing:

MARYLAND
Marley Station Mall, Glen Burnie
Owings Mills Mall, Owings Mills
White Marsh Mall, Baltimore

NEW JERSEY
Monmouth Mall, Eatontown

PENNSYLVANIA
Harrisburg East Mall, Harrisburg
Monroeville Mall, Monroeville
Montgomery Mall, North Wales
Oxford Valley Mall, Langhorne
South Hills Village Mall, Bethel Park

VIRGINIA
Piedmont Mall, Danville

More coverage from the Associated Press, Wall Street Journal, and Reuters.

This is a blow to the retailer that touts itself as American’s largest family owned department store. In an age of consolidation and rapid, national, retail expansion, Boscov’s was one of the last regional department store chains that we had here in the Mid-Atlantic.

I wonder how many of these locations are being scouted by JC Penney and Kohl’s.

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The twitterverse is abuzz with the fact that Amazon.com is down. Reports of the outage seem to have come in around 1:25 PM EDT. Users trying to reach the site are greeted with a “Http/1.1 Service Unavailable” error.

Pretty significant outage for this major e-commerce retailer. My rough estimate is that the site outage costs Amazon 1.7 million dollars in revenue for every hour they are down. Pretty crazy.

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Linens ‘n Things has announced they are filing for bankruptcy protection. They expect to be able to continue to operate as normal, pay employee salaries, and stock new merchandise. They just have an issue of several hundred million dollars in debt that they need to take care of.

I’d expect store closures, of some level, are imminent and Linens ‘n Things are going to enter the Back to School season with a significant reduction in their number of stores. Where are people going to go for Nautia comforter sets and Yankee Candles? I guess they will have to cross the street to Bed, Bath, and Beyond.

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You may have noticed a severe shortage of posts lately. Due to some server issues and business/travel commitments, some posts of mine have not been appearing. I’ll be working on this later today to get the old posts from last week up, but I wanted to say hello and let everyone know that I am still here.

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To update last week’s story about the sweatshop allegations levied against a factory that produces Daisy Fuentes clothing for Kohl’s, it appears that things are straight now and they have agreed to update their policies and follow proper labor laws:

A Guatemalan factory that makes some of Daisy Fuentes’ clothing for Kohl’s Corp. has agreed to make changes following allegations it was a sweatshop, a workers’ rights group said Thursday.

The National Labor Committee issued a report on the Fribo factory last month, saying workers told a related group they are humiliated and forced to work unpaid overtime.

[...]

The NLC said the factory owner, a South Korean national, has agreed to weekly inspections by CEADEL, the Center for Studies and Support of Labor Development in Guatemala, which told NLC of workers’ complaints.

More on this from Forbes.

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Looks like Kohl’s is on the receiving end of some sweatshop allegations:

Kohl’s Corp. removed some lines of its Daisy Fuentes clothing brand following allegations that the Guatemalan factory where the clothes are made is a sweatshop, where workers are humiliated and forced to work unpaid overtime.

The National Labor Committee, a New York-based workers rights group, issued a report after learning of complaints by workers at the Fribo factory in rural Santa Maria Cauque de Sacatepequez, Guatemala.

Kohl’s (nyse: KSS - news - people ), based in Menomonee Falls, Wis., has pulled only a few styles of Daisy merchandise, from its stores and online, spokeswoman Vicki Shamion said. Kohl’s buys Fuentes merchandise from P.A. Group LLC and does not oversee production, she said.

Workers at the Guatemalan factories say they were forced to work overtime, much of it unpaid, and forced to endure harsh conditions in hot factories with little access to bathrooms or clean water.

More coverage from Forbes.

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Last month I mentioned that crafts retailer Rag Shop had filed for Chapter 11 Bankruptcy protection. Just over a month later, they have announced that they cannot find a buyer for the stores and will be closing. Their website is already changed over to reflect the liquidation sale.

The retailer cited increasing competition as a reason for closing. On average, it did not seem like Rag Shop stores were as large as competitors like Michaels or AC Moore. They probably also faced strong competition from Wal-Mart’s fabric department. The irony is that Wal-Mart has downsized the size of the cut-to-size fabric department over the past few years.

Assets were sold to Hilco Merchant Resources LLC. The company recently oversaw the closing of 76 d.e.m.o by PacSun stores and previously oversaw the closings of stores from Radioshack, Sam Goody, Suncoast, Winn Dixie, and Wegman’s.

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Cocaine energy drink is a drink marketed by Redux Beverages, LLC. Last month, it was announced that the FDA had issued a warning letter to them suggesting that it was not proper to market an energy drink under that name with the slogan “a legal alternative”. In response to mounting pressure against the drink name, the drinkmaker said that it was ceasing distribution of the Cocaine energy drink and shortly after announced that they would be renaming it as Censored.

As I wrote last month, this was the first time I had ever heard of the drink. I agree that the name of the drink was quite silly and they were trying to build a brand about something controversial without actually investing the time to build an lasting brand. It was a horrible attempt to be edgy.

Last night, while at my local deli, I noticed that they still had several cans of the energy drink. I figured I would give it a try to see if maybe, just maybe, there was something there. If the drink is great, maybe the company can spin the band press and use that level of awareness during the rebranding. All PR is good PR, right?

But boy, is this drink putrid. I’m sorry, I’ve drank a lot of energy drinks and weird sodas, but this one was pretty nasty. I couldn’t even finish the can without getting heartburn, so I put it down and moved along.

Maybe the drinkmaker was right to try to brand themselves in an edgy, controversial way in order to gain marketshare. It’s obvious they don’t have much else going for them. The product, in this case, seems like an afterthought. It’s almost as if the brand was conceived of first and then the product was developed.

Lesson learned: develop a great product first and build a brand around that. Focus on what sets you apart from the competition and what you deliver to the customer. Don’t rely on a gimmick when sculpting your brand, today’s consumers are too smart for that and eventually, they will move on.

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