Wall Street Dragged Lower

June 15, 2009

U.S. stocks fell broadly on Monday as regional manufacturing data dented optimism about the economy’s health and resource shares fell alongside commodity prices.

Economists had expected to see slight improvement in the New York Fed’s “Empire State” index, but the survey showed the factory sector shrank at a more severe rate in June than the previous month. After a series of signs the economy may be stabilizing, investors are looking for more definitive signals of its improving health.

“The New York manufacturing index hinted that the improvement in economic data may be slowing down after the rapid recovery we’ve seen over the past one to three months,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

The stronger U.S. dollar helped pull the price of oil below $70 a barrel from a near eight-month high. The decline hit energy companies’ shares, including Chevron , down 3 percent at $70.50. The S&P energy index slid 3.3 percent.

The S&P 500 eased off gains of about 40 percent from March’s 12-year low, but was still up about 36 percent from that trough.

The Dow Jones industrial average fell 210.25 points, or 2.39 percent, to 8,589.01. The Standard & Poor’s 500 Index slid 25.74 points, or 2.72 percent, to 920.47. The Nasdaq Composite Index gave up 53.23 points, or 2.86 percent, at 1,805.57.

While the recent run-up in commodity prices had helped stocks extend their rally, there has also been concern that a surge in oil and other commodities could hamper any budding economic recovery. Higher energy costs are a drag on consumer spending and corporate profits.

Also dampening sentiment, Goldman Sachs cut its rating on Wal-Mart Stores Inc to “neutral” from “buy,” saying it did not see a lot of positive catalysts to drive shares higher in the near-term as expense pressures and tougher sales comparisons persist.

The Dow component fell 2.9 percent to $48.42, and was among the top drags on the index. The S&P’s retail index fell 2.3 percent.

Technology shares, which have been among the biggest gainers in the three-month market rally, also fell heavily as investors took profits. The PHLX semiconductor index fell 2.2 percent. Shares of tech bellwethers, such as Qualcomm Inc , down 4.4 percent at $44.04, led the Nasdaq lower.

For further information, visit: http://www.publicbroadcasting.net/wned/news.newsmain/article/0/0/1518117/Business/Economy.concerns..commodities.drag.Wall.St.lower

Economic Recovery Not Yet Arriving

June 12, 2009

With a rise in the number of people continuing to receive jobless aid and companies holding off on hiring, analysts warn an economic recovery is still far off.

The Labor Department said Thursday that initial claims for unemployment benefits fell last week by 24,000 to a seasonally adjusted 601,000. That’s below analysts’ estimates of 615,000, reported the Associated Press.

However, the number of people claiming benefits for more than a week rose by 59,000 to more than 6.8 million, the highest on records dating to 1967. The Labor Department also revised last week’s data on continuing claims, replacing what had been a drop of 15,000 with an increase of 6,000.

The Commerce Department said Thursday total retail sales rose 0.5 percent in May, the first advance in three months, lifted by strong gasoline and building material receipts. Consumers also spent more on food and clothing. Sales fell 0.2 percent in April.

The sales report fed optimism that consumer spending would probably be flat to modestly lower in the second quarter, instead of falling sharply as expected by most analysts.

Spending, which accounts for about 70 percent of U.S. economic activity, rose 1.5 percent in the January-March period, after a 4.3 percent dive in the fourth quarter.

Because rising gasoline prices aided last month’s retail sales gain, consumer purchasing could slow in other areas.

Meantime, the number of U.S. households on the verge of losing their homes dipped in May from April, and the annual increase was the smallest in three years, the AP also reported.

Foreclosure filings fell 6 percent in May from April, according to RealtyTrac Inc. More than 321,000 households received at least one foreclosure-related notice last month–18 percent more than a year earlier–but the smallest annual gain since June 2006.

As layoffs, rather than risky mortgages, become the main reason that borrowers default on their home loans, many economists expect foreclosures likely will remain elevated this year and into 2010.

Banks repossessed about 65,000 homes in May, up from 64,000 in April, due to big increases in several states including Michigan, Arizona and Nevada.

The Obama administration announced a plan in March to provide $50 billion from the financial industry rescue fund as an incentive for the mortgage industry to modify loans at lower monthly payments.

On Wall Street, investors welcomed the better-than-expected report on jobless claims and growth in retail sales, pushing stocks higher Thursday morning. Rising interest rates have recently become a concern and had sent stocks lower on Wednesday.

For further information, visit: http://www.pbs.org/newshour/updates/business/jan-june09/economy_06-11.html

Department Store Sales Down

June 12, 2009

While specialty stores joined with the overall economy in registering small gains in retail sales last month, department store sales were down and yearly comparisons still show the depths of the struggling economy.

Sales at specialty stores advanced a seasonally adjusted 0.4 percent compared with April, while department stores dropped 0.7 percent, the Commerce Department reported Thursday. However, compared with a year earlier, specialty store sales decreased 7 percent to $17.3 billion and department store sales fell 7.1 percent to $15.8 billion.

All retail and food service providers reported an increase of 0.5 percent last month, but compared with May 2008, sales were down 9.6 percent to $340 billion. The uptick in overall retail sales was driven primarily by higher gas prices. The retail sales change from March to April was revised to a decline of 0.2 percent from a previously reported drop of 0.4 percent.

“Nothing in the May data suggests that the retail picture has improved,” said Bob Duffy, leader of the retail industry practice for global advisory firm FTI Consulting.

The meaningful comparison for retail sales figures is the year-to-year picture, he said, and in that respect, apparel retailers continued to struggle in May. Sales for specialty stores and department stores also declined in April and March after showing early resiliency in the first two months of the year.

“At best you could describe retail sales as being mediocre, and that may be stretching it a bit,” said John Lonski, chief economist at Moody’s Investor Services. “The severity of the contraction incurred by retailers may be easing, but make no mistake about it, retail sales are well under what had been expected as recently as a year ago.”

Investors concurred, sending the S&P Retail Index down 6.09 points, or 1.8 percent, to 329.59 on a day when the major indices barely managed to hold onto gains earlier in the session. The Dow Jones Industrial Average finished ahead 31.90 points, or 0.4 percent, at 8,770.92, after hitting a new high for the year of 8,877.93 earlier on Thursday. The S&P 500 and Nasdaq Composite finished with larger gains, advancing 0.6 percent and 0.5 percent, respectively, to 944.89 and 1,862.37.

Consumers are still coping with negative macroeconomic trends like a weak housing market and job uncertainty. Economists said consumers are willing to spend on staple items in the current climate, but not on much else. Sales of luxury goods or discretionary items, like apparel, have not improved.

“Financially stressed consumers continued in May to concentrate their spending on essentials,” said Charles McMillion, president and chief economist at MBG Information Services.

Sales in most categories were “generally either up or down modestly,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight. “Overall, the state of retail sales remains weak.”

Lonski said, “Some of the gloom hanging over consumer spending is lifting; nevertheless, the outlook remains treacherous.”

Economists said retail sales results are likely to remain weak through the third quarter. Fourth-quarter results could show some year-over-year improvements, primarily because of easier comparisons to a dismal fourth quarter in 2008. As year-to-year comparisons continue to be weak for the remainder of the year, additional store closures or further market contraction should be expected, economists said.

“We will stabilize, but we’ll stabilize at the new lows,” said Duffy.

On Wall Street, retail declines were the norm, with only a few exceptions. Destination Maternity Corp. checked in with an 11 percent rise, to $17.17, one day after reporting that it will relaunch its Two Hearts Maternity collection in Sears stores and introduce it in 100 units of Kmart, Sears’ sister division at Sears Holdings Corp.

The Talbots Inc. also went against the grain, picking up 19 cents, or 3.8 percent, to close at $5.16. The company announced the sale of its J. Jill brand to an affiliate of Golden Gate Capital on Tuesday and reported a smaller-than-expected first-quarter loss and plans for additional staff reductions on Wednesday.

For further information, visit: http://www.wwd.com/business-news/retail-sales-fall-year-on-year-2165051

Aeropostale Heading Towards Success During the Recession

June 9, 2009

While most members of the U.S. retail industry are focused on cutbacks and survival tactics, Aeropostale continues to defy the recession and post numbers that would be impressive even in the best of economic conditions. The teen apparel chain has been killing its competition, topping the same store sales charts, and rocking Wall Street investors with a 40% rise in stock prices since the recession officially began.

U.S. retailers aren’t the only ones asking how Aeropostale is doing it, and stock analysts aren’t the only ones wondering how long the winning streak will last.

Aeropostale’s CEO, Julian Geiger actually seems very eager to tell people how they do what they do. In an interview with Business Week way back in 2004, Geiger very openly revealed the company’s marketing tactics, which are relentless and somewhat unconventional for an apparel retailer. Specifically, Geiger revealed that the Aeropostale marketing team employs these strategies:

* Following trends instead of trying to be a trendsetter

* Looking at what’s on the backs of their target market, instead of what’s on the sales floors of their competitors

* Observing teens in theme parks, concerts, and airports instead of observing them on the streets of international fashion cities

* Allowing teens to view potential new styles, and stocking stores with the teens’ favorites

* Using 50 locations as test stores where new merchandise and merchandising is tried out prior to system-wide rollout

* Remembering that most teens are fashion followers, not fashion leaders

Either Aeropostale’s competitors didn’t read that interview or, if they did, they weren’t savvy enough to realize the brilliance hidden within the simplicity of the approach.

While cutting edge manufacturing, distribution, and operations management are supporting its success, there’s one timeless retailing principle that’s really the driving force behind the Aeropostale chain. That is, the customers get what they want.

This simple tenet is quite antithetical to the more popular marketing approach of working really hard to convince customers to want what you have, which is a strategy, by the way, that isn’t working very well for any retailer right now. In contrast, Aeropostale has discovered that when you ask teenagers what they want to spend their money on, and then you make those things available, the kids actually bring their money to your store. How radical!

Aeropostale works hard to engage consumers in other ways besides marketing research. This year the store bonded with its youthful customer base at an emotional level with its “Teens for Jeans” charity project. More than 200,000 pairs of “gently used” jeans were gathered and donated by teen customers to be redistributed to their homeless peers. The project was green, it was activist, it was compassionate, and it was the perfect hip program for the store to insert itself into. With its active participation in the project, Aeropostale gave a human dimension to its brand that advertising dollars and publicity hype could never manufacture.

The Aeropostale we see today is miles away from it where it began, as a small department within the Macy’s chain in the 1980’s. After spinning off and floundering, Aeropostale was rescued from obscurity by Geiger, who defined the brand, built the chain’s identity, and gave Aeropostale a unique selling proposition that is clearly uniquely appealing to its niche. It would be great if its birth parent chain could reinvent itself in a similar way.

In June Aeropostale is bucking the recession again, by opening up a new concept store, P.S. Aeropostale, which is really just a younger version of itself. The new stores are aimed at the 7-12 year olds who have been shadowing their older siblings through the Aeropostale stores, but leaving empty-handed. While moms have worked hard to ignore the whines of their younger children, Aeropostale has worked hard to listen to them, and create a whole store based on their pleadings. If the chain continues to employ its own successful strategies with these spinoff concept stores, there will undoubtedly be a second reason for investors to be happy, and for retailers to shake their heads in wonder.

All of this because customers are getting what customers want? It’s hard to believe that it could really be that simple. Perhaps somewhere along the way retailing got more complicated than it ever really needed to be.

According to the Stocks, the Worst of the Recession is Over

May 26, 2009

A more upbeat mood among consumers is spreading to Wall Street.

Stocks jumped Tuesday after a research group reported consumer sentiment rose in May to the highest level since September.

The Conference Board’s Consumer Confidence Index vaulted to 54.9 from 40.8 last month, soaring past the 42.3 figure that economists surveyed by Thomson Reuters were expecting.

Investors watch that indicator closely to get a sense of whether consumers may start shopping more or making bigger purchases such as cars and homes, which could help get the economy going again. Spending by consumers makes up more than two-thirds of U.S. economic activity.

Stocks had opened lower after North Korea reportedly defied the United Nations by firing two short-range missiles after detonating a nuclear bomb underground on Monday. The U.N. Security Council condemned the test.

Jim King, chief investment officer at National Penn Investors Trust Co., said the improvement in consumer confidence surprised investors. With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.

“I think the consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” he said.

In midday trading, the Dow Jones industrial average rose 175.62, or 2.1 percent, to 8,452.94. The Standard & Poor’s 500 index rose 19.27, or 2.2 percent, to 906.27, and the Nasdaq composite index rose 52.60, or 3.1 percent, to 1,744.61.

Stocks dependent on strong consumer spending jumped. Macy’s Inc. (M, News) rose 52 cents, or 4.7 percent, to $11.71, while Best Buy Co. (BBY, News) advanced $2, or 5.7 percent, to $37.18. Home builder KB Home rose 76 cents, or 5.2 percent, to $15.40.

The gains in home builder stocks came as investors shook off a mostly downbeat reading on the housing market. S&P/Case Shiller reported a 18.7 percent drop in its March home price index. The decrease was a little bigger than in February, and slightly larger than economists predicted.

Investors have been questioning whether the stock market’s massive two-month rally can be sustained given the continuing weakness in the global economy. The Dow is still up 26.4 percent from its 12-year low hit on March 9.

After mixed economic data over the last couple weeks, as well as a huge number of stock offerings by banks, the market is likely to stay volatile in the coming weeks, said Steven Goldman, chief market strategist at Weeden & Co. “The market’s had a pretty huge gain here,” he said.

Last week, the major market indexes ended modestly higher, but only after seesawing on worries about the economy and banks.

This week, the market is not only hoping for signs of global stability, but also watching General Motors Corp. (GM, News) as the automaker’s June 1 restructuring deadline approaches. GM is expected to close more plants and force more employee concessions as it tries to avoid bankruptcy court.

On Friday, GM borrowed another $4 billion from the U.S. government, after already received $15.4 billion. GM shares fell 20 cents, or 14 percent, to $1.23.

In other trading, the Russell 2000 index of smaller companies rose 19.02, or 4 percent, to 496.64.

About five stocks rose for every one that fell on the New York Mercantile Exchange, where volume came to 488.3 million shares.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.47 percent from 3.46 percent late Friday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell 7 cents to $61.60 per barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average fell 0.4 percent. In afternoon trading, Britain’s FTSE 100 rose 1.1 percent, Germany’s DAX index rose 1.4 percent, and France’s CAC-40 rose 1.2 percent. For further information, visit: http://www.examiner.com/a-2034924~Stocks_jump_after_consumer_confidence_level_surges.html

Recession-Proof Denim

May 26, 2009

For fashion blogger Jessica Morgan, finding the right jeans is almost a religious experience.

Morgan just bought a pair of $100 Madewell jeans, but her denim nirvana comes from True Religion Apparel Inc. of Vernon. Even at $170 to more than $300, the designer dungarees represent a sacrifice she’s willing to make despite the fraying economy.

“They make my butt look perky,” said Morgan, 33, who owns five pairs of True Religion Brand jeans. “That is the Holy Grail of jeans.”

“For women in Los Angeles, who wear jeans almost all of the time, it’s an investment,” said Morgan, half of the duo responsible for the popular “Go Fug Yourself” blog devoted to outing celebrity fashion victims. “If I wear them every day, they really are not that expensive.”

While consumer spending remains woefully depressed, expensive designer jeans have been one of the few bright spots for manufacturers and retailers, according to NPD Group Inc., a market research company.

Sales of premium brand jeans grew by 17% during 2008 and eked out a 2.3% increase in the most recent three-month period that ended in February, making premium denim one of a few “pockets of growth in an otherwise fizzling fashion market,” NPD Group said.

“That is the time period that was the most challenging in terms of consumer spending, so any growth during that time is significant,” said Marshal Cohen, NPD Group’s chief industry analyst. “With the newfound focus on fit by some of the commodity brands coupled with women’s never-ending quest for the perfect pair of jeans, the passion for denim is alive and well.”

Denim is one area in which some of the most fundamental rules of the global economy don’t appear to apply. Other industries turn to the least expensive foreign labor pools for production. Jeans makers have found that the high cost of manufacturing in the U.S. is actually a selling point.

“In the U.S., people care that their jeans are manufactured here,” said Eric Beder, an analyst for Brean Murray, Carret & Co. “To consumers outside the U.S., it’s crucial. Jeans are considered an American tradition. To be considered a real premium brand, you need to have the ‘made in the USA’ label on it.”

Adriano Goldschmied, the Italian designer of European jeans brands Diesel, Replay, Goldie and Rivet, agrees. In 2007, Goldschmied’s luxury denim label GoldSign merged with Paris-born Jerome Dahan’s Citizens of Humanity, based in Huntington Park.

“Nothing more than jeans represent the spirit of America,” Goldschmied said. “It’s about going to the mall, driving, having fun at the beach. Jeans still represent the life.”

Denim buyers aren’t going to pull the U.S. economy out of recession, but “it does show that there are people out there who are willing to pay for this sort of thing,” Beder said. “It’s a relative bargain. The most you are going to pay is $200 to $300. It’s affordable luxury. It lasts, and it has a lot of versatility that other clothing items do not have.”

Karen Short, an analyst with Friedman, Billings, Ramsey, said that this year has been tough for even the most resilient brands. Short noted that it is difficult to maintain sales at boutique clothing stores when the boutiques are folding.

Recent financial results show that the few publicly held premium jeans manufacturers are holding up fairly well.

True Religion beat analysts’ expectations with first-quarter net income that increased 10% to $7.6 million and net sales that rose 19% to $63.6 million, year over year. Joe’s Jeans Inc., a Commerce company whose pants retail for $120 and up, saw net income more than double to $800,000 and sales increase 8% to $16.5 million. Guess Inc. posted a 12% boost in adjusted net earnings of $55.3 million, excluding a $22.3-million non-cash impairment charge, and a 9% increase in revenue to $561.1 million in its most recent quarter.

But VF Corp., which owns brands such as low-cost Wrangler and high-cost 7 for All Mankind, said first-quarter profit fell 32% to $100.9 million and revenue slipped 7% to $1.73 billion as shoppers shied away from its upscale denim.

Some companies are trying to combat faltering consumer spending, in part by opening more of their own stores.

Joe’s Jeans and True Religion made up for weakness at department stores and boutiques by going directly to customers with their own stores and websites. True Religion’s direct sales increased 96% to $23.1 million. The company had 49 of its own stores by the end of the first quarter, up from 18 stores in March 2008.

“The most important thing about my jeans is the fit,” said True Religion chief Jeffrey Lubell, whose products are made in L.A. “I try to make your jeans feel like they have been in your closet for 30 years.”

At the recent opening of the True Religion store at the Westfield Century City Shopping Center, the retailer’s 51st, Scott Icenogle, a marketing director at MGM, bought a pair of straight-leg Ricky jeans. Icenogle, 39, said he was treating himself after getting a break on his 2008 taxes.

“They fit me well and I know they are going to last a long time,” the Hancock Park resident said.

Joelle Forte Casady of Castle Heights is another true believer in quality denim. The wardrobe stylist recently added to her collection of about 30 pairs, which includes five by Hudson Brand and 12 by Frankie B.

“I wear jeans five out of the seven days of the week. If I’m spending $150 to $250 a pair, I feel I’m getting my money out of it if I wear them 10 times, and I wear them a lot more than that,” Casady said. “That’s instead of some sexy heel shoes I might wear six times a year.”

“When you think it looks nice and feels right on you,” she said, “then it is worth every penny.”

For more information, visit: http://www.latimes.com/business/la-fi-jeans22-2009may22,0,2251065.story