Retail Industry Trends

[HenryTo]

Retailiers already bracing for the worst. The $64 billion question is, as always, how bad will this get and how much of this has already been factored into retail stocks?
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Retail Holiday Season May Be Modest
Tuesday October 30, 5:15 pm ET
By Betsy Vereckey, AP Business Writer
Sluggish US Economy May Weigh on Holiday Sales for National Retailers

NEW YORK (AP) -- U.S. retailers are bracing for a difficult holiday season, some industry watchers say, as higher gas prices and a sluggish housing market are expected to continue crimping consumer spending.

At a conference on Tuesday hosted by the Retail Marketing Society, a membership-based organization focused on the retail industry, some industry executives said holiday sales may be sluggish.

"This holiday season will be somewhat Grinch-like," said Carl Steidtmann, chief economist at Deloitte Research.

Steidtmann said retailers are preparing for the worst, especially given tightening credit and problems in the housing market. Steidtmann said it will be at least 18 months to two years before the housing market bottoms.

Merrill Lynch analyst Jaime Sheinheit said higher energy costs will weigh on consumer spending, noting that retailers have had trouble getting customers in the door. However, it's hard to tell whether the sluggish traffic is related to softening consumer spending or warm weather, Sheinheit said.

"Cold weather may spark shopping," she said.

In the luxury sector, Sheinheit said handbag maker Coach Inc. has warned of sluggish traffic in its U.S. stores. The company recently issued a fiscal second-quarter same-store sales outlook it called "conservative." Same-store sales are sales at stores open at least a year, and the industry metric is considered a key barometer of a retailer's health.

David Wolfe, creative director at Doneger Group, a buying office, said Coach has reached its saturation point with aspirational customers, who may not have the money to spend on these handbags but still want quality at a price.

Meanwhile, wealthy customers may help other luxury retailers this season, like Tiffany & Co., as spending patterns among the affluent tend to stay the same, regardless of changes in the economy.

Sectors that might fare better include teen retailers, Sheinheit said, noting that the income of their main customer, teenagers, usually stays the same. Companies in this sector include American Eagle Outfitters Inc. and Abercrombie & Fitch Co.

One company that may emerge stronger, Sheinheit said, is AnnTaylor Stores Corp., which has leaner inventory and a new product assortment at its lower-priced Loft division. In August, the company said it increased markdowns to reduce inventory heading into fall seasons at both its Ann Taylor and Loft stores.

"There is a lot of opportunity for Loft to improve margins this holiday season," Sheinheit said. "As always, what it comes down to is having the right product."

[HenryTo]

Steve & Barry's expected to file bankruptcy very soon, as it was not able to get last-minute financing from Sears. This filing should eventually increase retail margins across the board:
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Steve & Barry's expected to file for Chap 11: report
Tuesday July 8, 10:44 pm ET

NEW YORK (Reuters) - Retail chain Steve & Barry's is expected to file for Chapter 11 bankruptcy as early as this week, the Wall Street Journal reported on its website on Tuesday.

The report, which cited people familiar with the matter, said the Port Washington, New York-based retail chain had been unable to raise rescue financing. It had been in last-minute discussions with Sears Holdings Corp (NasdaqGS:SHLD - News) for a bail-out, the paper said.

The paper reported last month that it needed some $30 million in rescue financing.

The company could not be immediately reached for comment.

[HenryTo]

Businessweek speculates that a bankruptcy filing is in the offing for Circuit City:

http://www.businessweek.com/bwdaily/dnflash/content/jul2008/db2008072_040726.htm?chan=rss_topStories_ssi_5

[HenryTo]

BBBY posts lower earnings from last year but beats Street's. Stock is up 8% in AH trading. Note that our local Linens & Things (in West LA, just a few doors away from BBBY) is now having a liquidation sale, so this should bode well for BBBY going forward.
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Bed Bath & Beyond posts lower 1st-qtr profit
Wed Jun 25, 2008 4:24pm EDT

ATLANTA, June 25 (Reuters) - Home-goods retailer Bed Bath & Beyond Inc (BBBY.O: Quote, Profile, Research, Stock Buzz) reported lower first-quarter profit on Wednesday, weighed down by higher expenses.

Net earnings dropped to $76.8 million, or 30 cents a share, for the quarter ended May 31, from $104.6 million, or 38 cents a share, a year earlier.

[HenryTo]

Retailers finding out that even their real estate assets can be a tough sell - especially in an "overstored" market:
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Distressed retailers' assets can be hard sell
Wed Jun 18, 2008 7:17pm EDT

By Martinne Geller

NEW YORK (Reuters) - As tightening credit and slow consumer spending fuel a rise in the number of U.S. retailers liquidating their assets, distressed chains are now finding that even their real estate can be a hard sell.

Right now is "probably the most active" period in about 15 years for Jim Schaye, chief executive of Hudson Capital Partners, a professional liquidator that buys, and then sells, the assets of retailers who are going out of business, or closing or relocating stores.

"The interesting thing is that it's very, very, very big projects," Schaye said on Wednesday at the Reuters Consumer and Retail Summit, citing the recent bankruptcy filings of retailers including Linens 'n Things, Sharper Image Inc, Wickes Furniture, Levitz Furniture and Goody's Family Clothing Inc.

"It's really just one right after the other ... $100 million-plus deals," Schaye said. "And I suspect what I'm seeing will continue on at least in the near future. Will it be a year? Could be. The asset-based lenders are tightening up like crazy."

In this tough climate, where retail spaces seem to be coming on the market all the time, Schaye said finding buyers for these assets "is a real challenge."

"As time goes on, you look at the portfolios of Linens, there just (aren't) buyers for that real estate. A couple years ago the 40,000 to 44,000 square foot box was in great demand ... now there just isn't a lot of demand for it," Schaye said, adding that many specialty retailers already had so many stores and are looking for smaller spaces.

"It's either they want 60 or they want 20 (thousand square feet of space)," he added, noting that grocery stores were often interested in the largest spaces.

With gasoline topping $4 a gallon, the housing market sagging and access to credit tight, U.S. consumers have become reluctant to spend, often doing without discretionary items and bargain-hunting for necessities.

[HenryTo]

Latest discount retail concept - Steve & Barry's - being taken to the cleaners?

http://online.wsj.com/article/SB121401142593693967.html?mod=hps_us_whats_news

[rffrydr]

Current state of retailers--and retail (mall) construction:

http://media.bloomberg.com/bb/avfile/Economics/On_Economy/vRHZOWtROnRM.mp3
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

OfficeMax "delevers," courtesy of Briefing.com:
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OfficeMax (OMX 16.58, -0.17) said it is eliminating 2,700 positions, including 900 managers, in an attempt to streamline operations, according to ChicagoTribune.com. The job cuts are equivalent to roughly 7.5% of the company's employees. OMX hit a fresh 52-week low this session.

[HenryTo]

No inflation in the retail sector - as retailers never had any bargaining power over customers even in an economy that was growing at 3% to 4%:

http://www.nytimes.com/2008/03/23/business/23haggle.html?em&ex=1206417600&en=1f71cf57986b3fa8&ei=5087%0A

[rffrydr]

Calendar artefact may give us a badly needed boost. March sales will be up 1% due to the calendar shift despite the continuation of soft underlying fundamentals.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

JC Penney cutting back on store openings but overall is still targeting pretty ambitious expansion plans.
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JC Penney profit falls less than expected
Thursday February 21, 12:15 pm ET
By Nicole Maestri

NEW YORK (Reuters) - J.C. Penney Co Inc (NYSE:JCP - News) reported a smaller-than-expected fall in quarterly profit on Thursday as the mid-tier department store operator offset falling sales with tight control on expenses, sending its shares higher.

But the retailer, which caters to middle-income shoppers who are grappling with the slumping housing market and high energy costs, said there is no clear indication the consumer environment will improve in 2008.

"The economic climate and retail environment have not shown any signs of near-term recovery," CEO Myron "Mike" Ullman said on a conference call. "In fact, depending on the economic pundits you listen to, it may even get worse before it gets better."

To offset the tough environment, Ullman said Penney is planning conservatively and has cut its store opening plans for the year.

Penney's profit fell to $430 million, or $1.93 per share, for its fiscal fourth quarter that ended February 2, from $477 million, or $2.09 per share, a year earlier.

Earlier this month, it forecast fourth-quarter earnings to be at the high end of its original range of $1.65 to $1.80 per share. Analysts, on average, were expecting it to earn $1.77 per share, according to Reuters Estimates.

Shares rose 2.3 percent to $49.04 in late morning New York Stock Exchange trading.

DEPARTMENT STORE STRUGGLES

Many U.S. department store operators have faced declining sales in recent months as cash-strapped shoppers curb their trips to the malls amid the shaky economic environment.

Penney had warned its fourth quarter would be a difficult one, after poor third-quarter sales left it with excess merchandise that it had to mark down during the final months of the year, hurting its margins during the all-important holiday quarter.

For the quarter, total sales fell more than 4 percent to $6.39 billion from $6.66 billion. Sales at stores open at least a year, a key retail gauge known as same-store sales, fell 2.3 percent.

Penney said women's and children's clothing were the strongest selling categories, while fine jewelry and expensive items for the home were the weakest.

To offset the falling sales, it kept a close eye on expenses, saying selling, general and administrative expenses decreased 11.3 percent after it cut pension expenses and executive bonuses.

PLANNING CONSERVATIVELY

Ullman said that to navigate the tough environment, Penney has cut its store opening plans.

"For the balance of the year, we plan to open 36 stores, versus our original plan of 50," he said. "... We're reducing the pace of these openings to be in line with the consumer spending patterns we anticipate will remain for the rest of 2008."

While Penney has scaled back store opening and capital spending plans, the retailer is not backing down with the launch of a new brand, American Living.

Penney has said American Living, which began arriving in its stores this month, is the largest merchandise launch in its history. The brand's merchandise will eventually cover 40 categories, including clothes for men, women and children, as well as shoes, handbags, sheets, towels and drapes.

Executives said that while it is very early, they were "pleased" with how American Living is selling in stores so far. Penney will launch the marketing campaign for the brand on February 24, during the U.S. Academy Awards television broadcast.

Penney said it expects first-quarter total sales to "increase slightly," with full-year total sales rising in the low-single digit range.

Same-store sales should fall low-single digits for both the first quarter and full year, it said, with gross margins under pressure for the first half of the year.

It forecast first-quarter earnings per share of 75 cents to 80 cents, and full-year earnings of $3.75 to $4.00 per share.

Analysts, on average, had been expecting it to earn 81 cents per share in the first quarter and $4.02 for the full year, according to Reuters Estimates.

[HenryTo]

Is the guy trading retail sales (ex. gasoline and inflation-adjusted) or recession futures?

With the 25% decline in the S&P Retail Index from the 1st half of 2007 (most severe decline since 2001 to 2002), and with the valuations I am now seeing with some of our favorite retail stocks, I would argue that has already been priced into stock prices (excluding Sharper Image of course).

[rffrydr]

Retail sales inflation adjusted:

http://bigpicture.typepad.com/comments/2008/02/retail-sales-ga.html

Auto Deliquencies:

http://www.forbes.com/feeds/ap/2008/02/14/ap4657184.html

[rffrydr]

The Yuppie is dead:

http://new.quote.com/news/story.action?id=RTT802201147002152

Does his spending live on?
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

All else equal, these closings are good for the other retailers that are still doing well:

http://www.costar.com/News/Article.aspx?id=DAF9E98E8F8A2E0EFF898D104926AF29&ref=100

[rffrydr]

Recession may be the cure:


http://www.post-gazette.com/pg/08039/855748-28.stm
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Today is the Tomorrow you worried about Yesterday!