Consumers Spending Less On Clothes For This Year’s Back-To-School Shopping

July 21, 2009

Higher-end retailers and clothing stores nationwide are expected to see another year of declining sales during 2009’s important back-to-school season, the consulting firm Deloitte said Monday.

Sixty-four percent of respondents to an online survey that Deloitte conducted earlier this month said they plan to spend less money than last year on back-to-school items. Forty-three percent said they will cut back spending by more than $100, and 81 percent said they specifically plan to pare back clothes-buying.

The results show a slight bit more optimism than last year, when 71 percent of respondents said they would scale back purchases. But considering that consumers are anticipating closing their wallets even more after an already down year, some stores could be hit hard, said Dave Rooney, who leads Deloitte’s consumer business practice in Colorado.

“Folks are going to focus on necessities, necessities sort of being in and niceties being out,” Rooney said. “Discounters and the dollar stores are going to do well. And higher-end retailers and clothing stores will bear the brunt of this (spending decrease).”

Back-to-school sales typically make up about 15 percent of retailers’ total sales, making it the second most important season of every year behind the Christmas season.

Though it is a less discretionary season than in December — school children have to have a certain amount of items to begin the year — many retailers look at it as an indicator of what is to come, Rooney explained.

According to the 1,044 U.S. consumers polled for the survey, 70 percent said that economic conditions will impact their buying behavior. The biggest ways in which that will play out include people looking to buy more items on sale (74 percent), buying only what their family needs (65 percent), buying more lower-priced items (55 percent) and using more store coupons (55 percent).

Almost half of the respondents — 45 percent — also said they plan to shop at less expensive stores than they usually do. Discount stores like Wal-Mart and Target are likely to be the beneficiaries of such consumer down-scaling, Rooney said.

Clothing was by far the item that respondents felt likely to cut back on the most, followed by shoes (49 percent) and supplies (32 percent). However, 41 percent of customers, about the same percentage as last year, said they still will seek out “green” products, which are typically more expensive than other products.

While shoppers last year were cautious in their spending mostly because of the escalating prices of gas and food at the time, this year’s jitters revolve around the unemployment rate, which has hit 7.6 percent in Colorado. Twenty-two percent of survey respondents indicated that someone in their household had lost a job, while an additional 17 percent expressed fears of job loss.

Also, 32 percent of those surveyed said they are saving more money, a boost of 10 percentage points from last year and a figure that Rooney used to argue that the changes in back-to-school buying habits may be permanent rather than temporary.

“To the extent that people have extra money nowadays, they’re saving that money, where in the past they used to tend to spend it,” he said.

The Deloitte survey came six days after the National Retail Federation released a survey predicting that back-to-school spending will decline 7.7 percent this year. The average family is likely to spend $548.72 on school merchandise, compared to $594.24 in 2008, that survey stated.

“The economy has clearly changed the spending habits of American families, which will likely create a difficult back-to-school season for retailers,” NRF President and CEO Tracy Mullin said in a news release. “As people focus primarily on price, strong promotions and deep discounts will ultimately win over back-to-school shoppers this year.”

For further information, visit: http://www.bizjournals.com/denver/stories/2009/07/20/daily14.html

Consumers Planned To Spend More Money In May

June 22, 2009

A survey conducted by America’s Research Group revealed that 30% of American consumers planned to spend more money in May than they had in April, but 27% would only purchase merchandise that was marked down 50% or more. The Mother’s Day Holiday promised to give May sales a boost, but rising gas prices cut shopping budgets even more. Last year’s May had the infusion of $50 billion in tax refund money, while this year’s May had the inclusion of the entire Memorial Day weekend, a phenomenon that happens only once every 11 years.

When you factor all those conditions and look at the May same store sales numbers compared to charts which no longer include Wal-Mart’s numbers, what do you get? You get a whole bunch of numbers interpreted from a whole bunch of different angles. What you don’t get are many surprises or clear conclusions.

As is the case with so many aspects of retailing, same store sales analysts were looking for a new normal in May, since monthly same store figures no longer include Wal-Mart’s numbers. The easy solution for analysts was to pull up the spreadsheets, strip Wal-Mart out of the equation for the past 15 years, and redraw the charts as if the world’s largest retailer was not part of the U.S. retail industry. Simple enough.

This statistical manipulation makes the recent past look a lot worse, but it also provides a big picture look that is somewhat comforting as well. There are other points in the past when Wal-Mart significantly outperformed the rest of the U.S. retail industry, but everybody got back into alignment eventually. We can all find comfort in the hope that retail history will repeat itself in this way again. The big question is how long “eventually” will take.

Without the Wal-Mart benchmark, and the easy Wal-Mart story angle, the significance of monthly same store sales primarily lies in the comparison of individual retailer numbers with their own past performance. Perhaps that makes more sense anyway.

For the first time in seven months, Hot Topic saw a minus sign in front of its same store sales figure in May. So far, Hot Topic has been impervious to recession due to the willingness of its fickle teen customer base to chase after trends on tees, and the adeptness of the chain to spot and deliver those trends.

The teen apparel chain deserves a lot of credit for its “Twilight” fashions inspired by last summer’s movie blockbuster, and for drawing fresh blood out of that trend for almost a year. But since “Twilight” is no longer a red hot topic, and the sequel won’t be released until November, the store needs to find another big “it” to fill in the gap. Otherwise teens won’t have a good reason to spend their hard-earned money from their hard-to-find summer jobs, and Hot Topic might find itself in the middle of this recession thing that all of its mall neighbors have been whining about for so long.

Right now Harry Potter has a prominent position on the home page of Hot Topic’s website. But if the May same store sales are an indication, the fashion of wizards is nowhere near as popular as the fashion of vampires. Perhaps that will change once the half-blood prince works its magic on box office receipts.

While Hot Topic ventured into the negative in May, another chain found its way to the plus side for the first time in over a year. Stein Mart’s same store sales in May inched onto positive territory by a fraction of a percentage point. It’s a small victory that signals huge progress for the chain. After two years of net losses, store closings, salary cuts, layoffs, and a change in leadership, a 0.2% same store sales increase looks pretty darn good.

With a selling proposition of “spending less without getting less,” it might be expected that Stein Mart would be thriving more in this budget-conscious economy. When positioned, though, against competitors like TJ Maxx and Ross, which have been faring quite well lately, Stein Mart is the high-priced luxury retailer of the discount sector. A look at the bottom of the same store sales list for the past six months will tell you everything you need to know about how well luxury retailing has been doing.

Stein Mart’s new CEO, David Stovall, said what’s helped the chain recently is a “fresh, more shoppable assortment” of clothing. I think that may be corporate speak for creating a product mix that is more affordable to more people. While shoppers have been getting 70% discounts at Bloomingdales and finding bargains galore at Saks Off 5th, Stein Mart has been getting squeezed by competition from every direction.

Stein Mart helped its numbers with more aggressive marketing lately too. “We’ve been guilty of not telling our customer what a great value we have,” Stovall said. Full TV screen shots of 50% off price tags should change that.

A well-publicized national 12-hour sale staged this weekend, and the use of real customers discovered through a public casting call in an upcoming advertising campaign should help the chain too. Like other retailers who have profited in recession, Stein Mart is gaining ground by improving its visibility.

As for everybody else, May’s same store sales numbers tell the story of an industry that has shuffled its players around a bit, and then settled into a new recessed norm. A look at the 2009 same store sales comparison chart reveals few deviations for any individual retailer with the addition of its May numbers.

New rankings, new sales levels, and new patterns have been established in the new norm. Barring any major bursts of brilliance, the new status quo will probably continue until the U.S. retail industry phoenix rises from the ashes of economic recession. That, of course, will happen “eventually.”

For further information, visit: http://retailindustry.about.com/b/2009/06/21/us-retail-industry-may-same-store-sales-holiday-boosts-and-shopping-budget-cuts-compared-to-tax-refund-spending-and-charts-without-wal-mart.htm

Consumers Are Not The Only Ones Cutting Back

June 16, 2009

Consumers aren’t the only ones cutting back.

Retailers are reining in their spending — with most broadline players slashing millions from their budgets as they try to counter withering sales. Although some, such as Wal-Mart Stores Inc., continue to pump money into their businesses to grab market share, the majority are drastically slimming down within their business models.

And if consumer spending doesn’t bounce back, retailers will have to start making more drastic and ultimately transformational changes that could reshape the industry, said experts.

Sears Holdings Corp., Macy’s Inc., Dillard’s Inc., J.C. Penney Co., Saks Inc., Nordstrom Inc., and Target Corp. cut a collective $668 million in selling, general and administrative expenses in the first quarter, pushing their SG&A expense down 6.3 percent from a year earlier. That means fewer dollars supporting brands and driving foot traffic, the axing of information technology projects and cramped cross-country plane rides for executives who can’t afford to be seen in first or business class as they lay off workers.

“From travel to supplies to benefits to marketing to information technology, we’re leaving no stone unturned,” said Stephen I. Sadove, chairman and chief executive officer of Saks, which reduced first-quarter expenses by $44 million, more than it planned to cut for the whole year. “How we have always done it is irrelevant. We’re approaching every area of the business asking how should we do it going forward.”

Saks rival Neiman Marcus last week revealed plans to reduce expenses by $125 million a year. “Our team has done an excellent job of decreasing their spend,” said Burt Tansky, president and chief executive officer of Neiman Marcus. “We are undergoing a comprehensive process that we believe has been thoughtful and significant.”

About 60 percent of planned expense reductions already have been realized. Neiman’s cut $38 million from selling, general and administrative expenses in the most recent quarter versus its 2008 counterpart.

Sears, which has 3,900 doors under its namesake and Kmart brands and has been criticized in the last few years for not investing enough in its stores, is the industry’s most aggressive cost cutter. The firm surprised Wall Street with first-quarter earnings after it reduced advertising spending by $107 million and payroll and benefit expenses by $84 million.

Cuts are even being made in the off-price channel, despite the competitive advantage that comes from having a value orientation during the downturn. Earlier this year Stein Mart Inc. laid off 178 assistant managers, while the rest of its managerial staff took a 5 percent pay cut and store associates’ hours were cut by 17 percent. Like other retailers, the company stopped paying shareholders a dividend, eliminated its stock buyback plan and halted contributions to employees’ 401(k) retirement plans.

All of this feeds into a vicious economic cycle, where the slowdown in consumer spending prompts businesses to cut workers, increasing the ranks of the unemployed and further weakening spending. Department stores alone eliminated a total of 10,800 jobs in February, March and April, according to government statistics that adjust for seasonal variations in workforce. Last month, the department store channel actually added 4,500 positions, although specialty stores cut 3,300 jobs.

But to every cost-cutting trend, there are exceptions.

Wal-Mart and, to a lesser extent, Kohl’s Corp., actually spent more in the first quarter, investing in their businesses in hopes of grabbing market share while most of the competition is biding its time and many are slimming down their store portfolios.

Wal-Mart upped its operating, selling, general and administrative expenses by $386 million in the first quarter. That spending increase is almost exactly what Macy’s and Sears, the two biggest cost cutters, stripped away.

“This is still Wal-Mart’s game,” said Dean Hillier, consultant and a partner at A.T. Kearney. “They are definitely taking advantage of the circumstances. The market is certainly heading their way and it seems to be sticking somewhat. The others are in a tougher spot and therefore are having to do what they need to do to eke out their profitability.”

Retailers have tried to hide their newfound austerity from consumers by working on inventory controls and cutting corporate staff while attempting to maintain the shopping experience. But chains are now tiptoeing up to cost cuts and other changes that could change the character of the industry. Both Neiman’s and Saks, for instance, said their customers want to spend less while not switching to other brands, and the retailers are trying to accommodate them by urging brands to develop lower entry-level price points.

“If Saks were to go to a lower price-point item on the same brand, would that reduce the brand impact for Saks as a company?” wondered Hillier. “Retailers are pushed into a position now, quite frankly, where they have to take risks with their business. They’ve got to start placing strategic bets. This is a new reality that retailers are dealing with.”

The next cost-saving step for retailers would entail bigger, deeper cuts and strategic moves, such as the shuttering of whole divisions, he said. That’s already occurred for a number of specialty stores, and last month Abercrombie & Fitch Co. indicated it might join them, saying it was undertaking a strategic review of its fledgling Ruehl unit.

A survey by Credit Suisse showed cash capital spending at 80 retailers fell 14.4 percent last year, the first decline since 2002. Spending by specialty apparel retailers dropped 24.2 percent to $3.71 billion and is slated to fall another 34.8 percent this year. Mall anchors cut expenditures by 22.4 percent to $4.26 billion in 2008 and plan to slash another 37.4 percent this year.

Despite the decline in spending, apparel specialty stores are expected to increase their gross selling space by 1.9 percent this year to 784.2 million square feet, while mall anchors add 1.2 percent for 506 million square feet — even as analysts at Credit Suisse say both sectors already have too much selling space.

“Capacity is not coming out of the soft-lines space fast enough,” Credit Suisse said of the apparel specialty stores. “We believe many retailers in this group are now faced with structural issues, primarily that they have too many stores, and would expect a decrease in square footage in 2010 as retailers come to this realization.”

Chains wanting to save money need not look at just their own operations. They can also take new approaches with their suppliers.

The savings so far, as large as they’ve been, are just the tip of the iceberg, said David McTague, executive vice president of partnered brands at Liz Claiborne Inc.

“They haven’t even started yet; it should be in the billions of dollars,” McTague said at the company’s annual meeting.

Together, he said, retailers and vendors can move product more efficiently from factory to selling floor and better manage inventories.

The financial stress of the moment could help set new directions on both sides of the supply/retail divide.

“Hopefully it means that they’re open to a much more collaborative relationship,” McTague said. “It’s a zero-sum game. All of us are trying to move profit dollars. It’s forcing everyone to be a lot more creative.”

For now, though, major changes appear to be mostly in the future. The more immediate question is whether retailers are cutting wisely. And there’s plenty of room for error.

“Some retailers have cut too far because they’ve cut from the top down,” said Antony Karabus, ceo of Karabus Management, noting a 10 or 15 percent across-the-board cut will trim some areas too much and others not enough.

Spending varies across the industry, meaning each company will have to cut in its own way.

According to the Karabus SG&A Retail Benchmark study, which looked at spending across 68 chains for the fiscal year ended January 2008, merchandising expenses range from 0.8 percent to more than 3 percent of sales. Supply chain costs range anywhere from 1.2 percent to 3.5 percent of sales.

As retailers lay off workers, many are concentrating their regional field staffs; for instance, giving district managers more stores to oversee or eliminating a layer of management altogether, said Karabus.

For department stores the danger is an increasingly national stance when customers want local flavor and attention — which is what Macy’s Inc. is trying to prevent with its My Macy’s program.

“When you cut expenses as a department store, you’ve still got to make sure that you’re staying relevant to your local consumer,” Karabus said. “What you’re seeing with a number of chains is that they’re cutting significantly to become more national.”

For further information, visit: http://www.wwd.com/business-news/stores-cost-cutting-may-transform-retail-2167503#/article/business-news/stores-cost-cutting-may-transform-retail-2167503?page=2

Consumer History Data Is Irrelevant: Forecasting On Current Consumer Buying Behaviors

June 9, 2009

During the first day of IE Group’s Consumer Packaged Goods Forecasting and Planning Summit last week, almost every speaker reiterated that historical trends and year-over-year comparisons do not carry the same weight that they have in the past. And although these metrics are still valuable for forecasting, many other factors now need to be considered due to the rapidly changing economy and buying behaviors of consumers.

One of the main thoughts behind this reconsideration of traditional methods is that consumers are saving again and, thereby, taking money out of the market. Pat Conroy of Deloitte Consulting estimated that if consumers save just seven percent more than they have in the past – not an unlikely scenario, according to his research – they will be removing $500 billion from the economy. He also made an excellent point that, as consumer spending goes down, a greater percentage of the money that they do have to spend may be allocated toward services vs. products – his theory being that their expendable income will go toward fixing products they already own to stretch their investments.

We also heard in the presentations that there is a new attitude – “Frugal is cool.” People are buying fewer luxury items. Even those consumers who can afford them are leaning toward purchasing less conspicuous and more “everyday” products. Another factor affecting purchasing is the general fear in the market coming about due to the government’s explosive spending, the housing crisis, the banking and auto crisis and more.

Tim Weidenhaft of General Mills echoed the sentiment that shifts in demand patterns due to economics also makes purchase history less relevant. He pointed out that this is causing higher demand volatility and a resurgence of coupon redemption.

A key sentiment in many presentations was that automating the integration of POS scan and forecast data and integrating it with things like promotions, shipments, forecasts and orders through applications like POSmart, is a critical factor. Also, leveraging panel data, weather trend data, syndicated data and even economic data that can be purchased through third party sources are several more ways to improve forecasts.

For further information, visit: http://www.retailwire.com/discussions/sngl_discussion.cfm/13781

The End Of May Results For Retail

June 5, 2009

Macy’s Inc. reported a 9.1 percent drop in same-store sales in May, as consumers continued to put off unnecessary spending.

The Cincinnati-based department store chain said sales at stores open at least a year are in line with management expectations. Total sales declined to $1.7 billion from $1.9 billion a year ago, or 9.5 percent.

For the year, Macy’s said its same-store sales declined by 9.1 percent, with total sales down 9.5 percent, to $6.9 billion from $7.7 billion.

Macy’s, like most retailers, has been struggling to attract parsimonious shoppers while not giving away the store through deep discounts, a strategy that erodes profit margins. But recent reports regarding rising manufacturing activity and home sales gave a lift to retail stocks earlier in the week, based on hopes that consumers may be encouraged to go out and splurge on a few summer items.

Total May retail sales were projected to drop by 3.6 percent, according to Retail Metrics, a Massachusetts firm that tracks store sales. This compares with a 2.7 percent decline in April. Department stores were forecast to post the weakest results, down 8.5 percent, with “discretionary spending still in hiding,” according to its monthly report.

The retailer has projected full-year profits of 40 cents to 55 cents per share, excluding restructuring costs stemming from its companywide reorganization, part of its My Macy’s merchandising program. That said, Macy’s hedged that it will beat this guidance if the economy improves in the second half of the year. Annual sales, it has said, are expected to decline by 6 percent to 8 percent, with spring expected to be weaker than the fall, in part due to stronger performances last spring.

Macy’s operates roughly 845 department stores under the names Macy’s and Bloomingdale’s.

Other retailers reporting recent sales figures:

• Target Corp. said its May same-store sales fell 6.1 percent from the same month a year ago. Total sales, at $4.56 billion, were down 2.3 percent from May 2008. Target has consistently posted monthly same-store sales declines during the recession, as consumers have pulled back their spending on clothes, home furnishings and some of the other discretionary items that had boosted the company’s sales during better times.

• Kohl’s Corp. said its comparable store sales in May decreased by 0.4 percent and total sales increased 4.1 percent, better than management had expected. The Menomonee Falls, Wis.-based retailer (NYSE: KSS) said Thursday sales for the four-week month ending May 31 were $1.26 billion, compared with $1.21 billion in the same period of 2008. Year-to-date sales also are ahead of 2008 at $4.9 billion, compared with $4.8 billion in 2008, an increase of 1.3 percent. Comparable store sales year-to-date decreased 3.2 percent, Kohl’s said.

• Gap Inc. said that its comparable-store sales were down 6 percent year over year in May, and net sales were down 5 percent to $1.03 billion. Gap North American and Banana Republic were hit the hardest in comparable-store sales — going down 11 percent and 14 percent, respectively. International sales were down 7 percent. Old Navy was the one Gap brand that saw an increase — It was up 3 percent.

For further information, visit: http://www.bizjournals.com/louisville/stories/2009/06/01/daily36.html

Steeper Declines In May Than Analysts Expected

June 5, 2009

Macy’s Inc., Dillard’s Inc. and Saks Inc. reported steeper May sales declines than analysts estimated as rising unemployment prompted U.S. consumers to save instead of spend. 

Sales at U.S. stores open at least a year fell 9.1 percent at Macy’s, the second-biggest U.S. department-store chain, compared with the 8.8 percent average of analysts’ estimates compiled by Retail Metrics Inc. Sales at Dillard’s department stores dropped 12 percent, a bigger decline than the 7 percent analyst projection. Luxury retailer Saks’s sales plunged 26.6 percent; analysts had predicted 14.5 percent, on average.

Consumers are still limiting purchases and allocating leftover funds to necessities rather than discretionary items, according to Brian Sozzi, an analyst at research firm Wall Street Strategies in New York. Sales at higher-end department stores slumped as shoppers cut purchases of handbags, shoes and clothes, forcing the chains to offer more and deeper discounts.

“Diminished job prospects, wealth evaporation and weak wage growth continues to be at the forefront of consumer psyche, meaning fewer dollars sloshing around the world of retail and lack of visibility into the back half of 2009,” Sozzi said in a June 1 note.

Macy’s fell 44 cents, or 3.3 percent, to $12.88 at 4:05 p.m. in New York Stock Exchange composite trading. Dillard’s declined 71 cents, or 6.9 percent, to $9.65. Saks fell 1 cent to $4.04. The Standard & Poor’s 500 Retailing Index declined 1.2 percent today, and has climbed 20 percent this year.

Saks, based in New York, has cut 1,100 jobs in recent months and said it would reduce merchandise orders 20 percent this year. Cincinnati-based Macy’s has slashed prices to clear inventories.

Retailers that managed to attract some consumer dollars included Aeropostale Inc., Gap Inc.’s Old Navy division and TJX Cos. Their May sales beat analysts’ estimates, helped by lower prices and a focus on value. Kohl’s Corp. and J.C. Penney Co. also exceeded predictions as the budget-conscious opted to shop at lower-priced department stores.

“Kohl’s and Penney’s may be pulling share from both the traditional department stores and from discounters,” Jeffrey Klinefelter, an analyst at Piper Jaffray Cos. in Minneapolis, said today in a telephone interview.

Retail Metrics said today that U.S. comparable-store sales in May dropped 4.4 percent, worse than its projected 3.6 percent decline. Yesterday, the Swampscott, Massachusetts-based researcher said that while housing, construction spending and new factory orders are coming in “less worse” than expected, retailers and consumers remain under pressure as job cuts continue.

May accounts for the smallest portion of retailers’ second-quarter sales, according to Betty Chen, an analyst at Wedbush Morgan Securities in San Francisco.

Wal-Mart Stores Inc., the world’s largest retailer, said on May 14 that sales at U.S. stores and its Sam’s Club membership warehouse division may rise as much as 3 percent in the 13 weeks through July 31. The chain stopped reporting monthly same-store sales as of May 1, citing the difficulty of predicting shoppers’ behavior.

U.S. consumer spending fell for a second straight month in April as concern over rising unemployment and record wealth destruction prompted households to boost savings rates to the highest level in 14 years, according to the Commerce Department. The 0.1 percent drop followed a 0.3 percent decrease in March, Commerce Department figures showed. The savings rate rose to 5.7 percent, spurred by an unexpected jump in incomes linked to the fiscal stimulus.

“Until people feel confident in their employment and feel confident in their ability to maintain their housing situation, they’re going to continue to rebuild their rainy-day fund to the extent that they possibly can, and that translates to higher savings rates,” said Bryan Eshelman, managing director in the retail practice at Alix Partners LP, a consulting firm.

Retailers continue to cut prices. Aeropostale was offering 20 percent off women’s dresses. American Eagle Outfitters Inc. was giving 50 percent off the purchase of a second graphic t- shirt.

Companies in the U.S. cut an estimated 532,000 workers from payrolls in May, according to yesterday’s ADP Employer Services report. Economists surveyed by Bloomberg predict the U.S. unemployment rate for May will rise to 9.2 percent from 8.9 percent in April.

Still, confidence among U.S. consumers jumped in May by the most in six years. The Conference Board’s index surged more than forecast to 54.9, the New York-based research group said May 26.

“There is a bit of unfounded optimism out there,” Eshelman said yesterday in a telephone interview. “Once this economy turns the corner, I think it will turn the corner rather quickly, but the conditions have just not aligned to get to that point.”

The International Council of Shopping Centers said that May same-store sales dropped 4.6 percent, more than its forecast of a 2 percent decline. The New York-based trade group’s figure is based on results at 32 chains.

The comparison to a year ago was difficult because federal tax rebate checks spurred more spending last May, Michael Niemira, chief economist at the ICSC, said today in a telephone interview. June sales may drop as much as 4 percent, he said.

For further information, visit: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0rrp1uLy8B4

High-End Shoppers Turn To Walmart During These Times

June 4, 2009

A 30-something mom heads toward her Infiniti luxury SUV with bedding-in-a-bag she just purchased for her teenage daughter.

The Plano resident was leaving the Wal-Mart on Central Expressway and Spring Creek Parkway, where she said she’s stepped up her shopping – especially for groceries – in the last six months.

“I still buy a lot at Kroger, things like Boar’s Head lunchmeat, but for staples I’m shopping more at Wal-Mart,” she said. The comforter set was an impulse buy, one from Wal-Mart’s new home brands by Better Homes and Gardens. She was happy to talk about her new shopping habits but declined to give her name.

Meet the new Wal-Mart secret shopper: Someone who has become a regular but may not be ready to tell the world.

Wal-Mart knows these new customers are in their stores, and it doesn’t want to lose them when the economy improves. Mostly overnight but while stores remain open, the company is remodeling 650 to 700 U.S. Supercenters, including 15 in Dallas-Fort Worth, this year to make them “cleaner, faster and friendlier.”

For years, the world’s largest retailer has been trying to be cool like Target, to gain the attention of higher-income shoppers and to persuade its grocery clientele to cross over into its home, apparel and consumer electronics aisles.

While the global recession and a stronger U.S. dollar have hit Wal-Mart’s international operations hard, the retailer says it is gaining market share in Dallas and across the U.S.

In June, Wal-Mart’s Dallas-Fort Worth grocery market share hit 40 percent for the first time as Supercenters gained 0.86 percentage points.

This remains Wal-Mart’s biggest market, with 70 Supercenters, 21 Neighborhood Markets, 21 Sam’s Clubs and one original Wal-Mart discount store. Replicating that footprint in other major metro areas leaves Wal-Mart with huge growth potential in the U.S., especially with new shoppers acquiring a taste for Wal-Mart.

Wal-Mart vice chairman Eduardo Castro-Wright recently told analysts that new households represented 17 percent of store traffic growth and 27 percent of U.S. sales growth in February. Those new customers are spending 40 percent more than the average Wal-Mart shopper, and 55 percent of them had incomes greater than $50,000 a year, he said.

“Wal-Mart has proven itself a winner in this tough economy. Shoppers have really resonated with the retailer’s ‘Save money, live better’ brand promise,” said Jennifer Halterman, senior consultant at Retail Forward. “Wal-Mart also is positioning itself to retain shoppers post-economic turnaround with its newly remodeled stores, enhanced portfolio of brands and overall improved shopping experience.”

Wal-Mart’s U.S. sales have increased every month during the recession. In April, traffic increased for the seventh consecutive month, said Todd Slater, analyst at Lazard Capital Markets, in a May research note.

On Wednesday, major chain stores report May results, but Wal-Mart won’t be propping up the group, as it has been. Last month, Wal-Mart said it will stop reporting sales monthly, joining a growing list of retailers reporting sales only with quarterly earnings.

Wal-Mart has slowed its store growth over the last two years and focused on replacing discount stores with larger Supercenters. Average sales at its Supercenters had been declining since 2004, but early estimates indicate improved performance in 2008, Retail Forward’s Halterman said.

Whether Wal-Mart can sustain its recession momentum is a big question mark, hence its aggressive remodeling program, called “Project Impact.” So far, remodeled stores get a sales lift of 0.75 to 1.25 percentage points, Castro-Wright said.

In North Texas, three of the 15 stores scheduled for remodeling in 2009 are done. After that, the pace will continue to be about 15 remodelings per year in the area, said John Murphy, Wal-Mart regional general manager and vice president.

High-volume stores and high-traffic stores, which get the most wear and tear, were redone first, he said.

Consumers can tell their store has the latest interior when the exterior loses the flag blue in favor of a tan facade with the new, no-hyphen Walmart sign punctuated by a yellow starburst.

Stores are being reorganized, grouping together the most popular merchandise. Lower shelves allow clearer sightlines. Brighter wall paint and lighting and easier-to-read signs point to departments with wider aisles.

The difference is jarring for regular customers, who have also noticed what Wal-Mart has told analysts: There’s less inventory in these remodeled stores.

Murphy said he’s heard the complaints, and he’s making adjustments. He said it’s a combination of space issues and priorities. For example, the remodeled stores have more consumer electronics and less hardware.

Shoppers Tuesday evening at the newly remodeled Supercenter at 6001 Central Expressway said the store was cleaner, but they weren’t quite ready to call it friendlier.

Plano resident Terry Millspaw said he “grew up on Wal-Mart” in eastern Oklahoma. “That’s all we had. When I moved here after college in 2003, all my friends kept talking about going to Target.”

He’s noticed that prices have gone up in the last six or seven months, and he’s stopped buying some items, such as individual pizzas that recently spiked from $2.25 to $3.50.

“It looks nice, but they don’t have as much stuff,” said Gail Thompson of Plano, noting that the store is missing the frozen chicken that her two school-age daughters prefer.

Jan Ammons said the store is cleaner and she isn’t used to the new layout, but she’s noticed fewer lines of vitamins, biscuits and ice cream. As for Wal-Mart’s plan for stores to be friendlier, she and other shoppers said it’s not quite there yet.

“The checkout person didn’t say a word to me,” Ammons said.

For further information, visit: http://www.dallasnews.com/sharedcontent/dws/bus/industries/retail/stories/060409dnbuswalmart.3cad825.html

No High Hopes For A Better Christmas This Year

June 4, 2009

May’s disappointing same-store-sales are exacerbating jitters about the all-important Christmas season, as consumers continue to pare purchases at a time when many retailers are planning or booking their orders for the holidays.

With the year nearly half gone and each passing month showing sales declines, Madison Riley, senior partner at retail consulting firm Kurt Salmon Associates, said he didn’t “know if we will see a better Christmas from 2008.”

Without data from Wal-Mart Stores Inc. (WMT), which as of May stopped issuing monthly same-store sales figures, comparable store sales for the other 30 retailers that Thompson Reuters tracks fell 4.8%, compared with expectations for a 4.1% decline.

The poor numbers may force retailers to reduce already spartan inventory plans further to avoid the 2.8% drop in holiday sales they rang up last year and the margin crushing markdowns they had to take to move excess inventory. The Christmas season can account for a third or more of retailers’ annual sales.

Retailers are aware of the risks and are trying to act accordingly, but it is tough given no consistent signs of an economic turnaround.

“We expect our average inventory position for the fourth quarter to be below last year’s fourth-quarter levels, and that our consumer messaging will continue to highlight J.C. Penney’s (JCP) stepped up style and value proposition,” said Darcie Brossart, spokeswomen for the giant department store chain.

Macy’s Inc. (M), at least right now, is sticking to a projection it gave earlier this year for same-store sales to drop 6% to 8% in fiscal 2009, with fall expected to be stronger than spring. “Merchandise and inventories are planned consistent with our guidance,” said spokesman Jim Sluzewski.

As for getting the word out, highly promotional Macy’s is still considering just how dramatic its approach will be. “Holiday marketing plans will be announced shortly before the season begins,” Sluzewski said.

Lead times vary for retailers, with the upper-end generally making commitments sooner, while lower-end retailers have much more latitude.

“We buy very close to need and opportunistically react to market trends in doing so,” said Sherry Lang, senior vice president of investor relations at TJX Cos. (TJX), parent of off-price stores Marshalls and T.J. Maxx.

Wal-Mart representatives declined to discuss the chain’s holiday plans.

In general, though, shoppers should expect less merchandise this year after many retailers went into the 2008 holiday season way overbooked.

The three big months for bulking up on Christmas time inventory are August through October, said J. Craig Shearman, vice president for government affairs at the National Retail Federation.

The majority of merchandise – including apparel, appliances, consumer electronics and home furnishings – comes from overseas, and for each of the three big months for receiving holiday merchandise, cargo traffic is expected to drop in the 16.5% area compared with the year before.

“This gives you insight into (the) inventory retailers are thinking about – less on expectations of less buying,” Shearman said.

Fewer goods in stores does not necessarily mean less discounting, said Craig Rowley, global practice leader for retail at the Hay Group. “We aren’t really seeing sale trends improve enough to support a very robust Christmas.”

Retailers may end up beginning big promotions earlier in the holiday season this year “to prevent massive markdowns at the end,” Rowley said. “Vendors may have a terrible Christmas. If their merchandise isn’t selling in November, we could see cancelled orders.”

What retailers are doing is “staying on top of trend,” Rowley said.

Right now the trend is accessorizing what’s already in the home or the closet, not buying whole outfits, furniture sets or entertainment systems.

“People are looking to supplement and will continue to for the foreseeable future,” said Riley of Kurt Salmon. “They are willing to buy, but still want to pay less for quality and items, like exclusives, that are different from what they already have.”

The retailers that hit it right could actually end up short of inventory, Riley said, but “this Christmas, conservative is the right stance to take.”

For further information, visit: http://online.wsj.com/article/BT-CO-20090604-715048.html

Retailers Exceeding Expections Because Expectations Were Low

May 28, 2009

Several apparel makers and retailers, including Polo Ralph Lauren, posted better-than-expected quarterly results Wednesday, helped by tight management of expenses and inventories.

American Eagle Outfitters, which topped expectations by a penny, said it was seeing early indications of its business stabilizing.

Expectations have declined for apparel retailers and manufacturers, which are among the hardest hit sectors in the recession as consumers trim spending for items other than essentials like food.

Polo, a fashion wholesaler and retailer with upscale brands like Polo and Club Monaco, said net income tumbled to $45 million, or 44 cents a share, from $103.5 million, or $1 a share, a year earlier.

But excluding charges, Polo said it earned 86 cents a share, soaring past analysts’ average estimate of 40 cents, according to Reuters Estimates.

Revenue in the period, which ended March 28 and was the fourth quarter of Lauren’s fiscal year, fell 1 percent to $1.22 billion, hurt by same-store sales declines and the stronger dollar, which reduced the value of overseas sales.

Stock in Lauren, which is based in New York, declined 35 cents, to close at $54.03 a share.

American Eagle, which caters to teenagers, posted a profit of $22 million, or 11 cents a share, down from $43.9 million, or 21 cents a share, a year earlier.

Excluding one-time items, profit was 8 cents a share, better than the 7 cents a share forecast by analysts.

Sales in the period, which ended May 2 and was the first quarter of American Eagle’s fiscal year, fell 4 percent, to $612 million.

Stock in American Eagle, which is based in Pittsburgh, fell 15 cents, to close at $14.33 a share.

For further information, visit: http://www.nytimes.com/2009/05/28/business/28retail.html

Uncertainty Still In the Air

May 27, 2009

Apparel retailers Chico’s FAS Inc, Charming Shoppes Inc, American Eagle Outfitters Inc and Polo Ralph Lauren Corp posted better-than-expected quarterly results Wednesday, helped by tight management of expenses and inventories.

American Eagle also said it is seeing early indications of its business stabilizing, though it forecast second-quarter earnings that could be below Wall Street estimates.

Apparel retailers and manufacturers have been among the hardest hit sectors in the recession as consumers cut back on spending for anything other than essentials like food.

Retailers have responded by cutting inventories and sharply reducing expenses in order to preserve profits or mitigate losses as sales fall.

While consumer confidence has improved, unemployment continues to rise, credit remains tight and home values continue to fall, keeping pressure on consumer spending, which makes up more than two-thirds of the U.S. economy.

“We are now two months into fiscal 2010 and there is still tremendous uncertainty regarding how long the current retrenchment in consumer spending will last or how much additional deterioration in personal consumption may occur,” Polo Chief Financial officer Tracey Travis said on a conference call with analysts.

PROFIT FALLS AT AMERICAN EAGLE, POLO

American Eagle, which caters to teenagers and young adults, said net income tumbled to $22.0 million, or 11 cents per share, in its first quarter, ended on May 2, from $43.9 million, or 21 cents per share, a year earlier.

Excluding items, profit was 8 cents per share. Analysts on average were expecting 7 cents per share, according to Reuters Estimates.

Sales fell 4 percent to $612 million.

On the women’s apparel side, Chico’s said net income in its first quarter was $14.5 million, or 8 cents per share, up from $12.7 million, or 7 cents per share, a year earlier.

Excluding charges, the company earned 11 cents per share, topping analysts’ average estimate of 8 cents per share, according to Reuters Estimates.

Chico’s cited a higher gross margin and lower expenses for its improved profit.

As previously reported, sales edged up to $410.6 million from $409.6 million. Same-store sales fell 3.2 percent versus the 17.5 percent drop in the year-ago quarter.

Charming Shoppes, which specializes in plus-size clothing with chains like Lane Bryant, had a surprise profit of 1 cent per share, excluding items, according to Reuters Estimates. Analysts were expecting a loss of 5 cents per share.

Charming Shoppes’ sales fell 16 percent, but total expenses also fell 16 percent.

Polo Ralph Lauren, the fashion company that makes upscale brands like Polo and Club Monaco, said net income was $45 million, or 44 cents a share in its fiscal fourth quarter ended March 28, down from $103.5 million, or $1 per share, a year earlier.

Excluding impairment and restructuring charges, the company said it earned 86 cents per share.

Analysts on average forecast 40 cents a share, according to Reuters Estimates.

Polo shares rose $3.20 to $57.58 on the New York Stock Exchange on Wednesday morning, while Chico’s rose 67 cents $9.52, and American Eagle rose 71 cents to $15.19. Charming Shoppes rose 15 cents to $3.73 on Nasdaq. For more information, visit: http://www.nytimes.com/reuters/2009/05/27/business/international-usa-retail-apparel.html