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American Eagle Outfitters to Expand in Jordan, Morocco, & Egypt

December 27, 2011

American Eagle Outfitters Inc. announced the opening of stores in three new international markets—Morocco, Jordan and Egypt. The company also opened its third store in Saudi Arabia, and has plans for a second store in Lebanon in early 2012.

The leading lifestyle brand, with a fleet of more than 1,000 stores worldwide, currently operates in Egypt, Jordan, Kuwait, Lebanon, Morocco, Saudi Arabia, and the UAE through its franchise partner, M.H. Alshaya, one of the most experienced retailers in the world.

American Eagle Outfitters opened in Jordan on November 30 in Taj Mall. Morocco’s store opened in Casablanca at Morocco Mall on December 1. The Egypt store is located in Cairo’s City Stars Mall, and opened on December 10.

The partnership with Alshaya, signed in May 2009, was AEO’s first foray into bricks-and-mortar stores outside of North America. Since then, AEO has opened stores in Russia, China and Hong Kong, and signed franchise agreements for stores in Japan and Israel as well, working with various franchise partners.

“American Eagle Outfitters’ ongoing international expansion is evidence of the success and positive customer response, as well as the expertise of our valued partner, M.H. Alshaya,” said Simon Nankervis, vice president of global business development, American Eagle Outfitters, Inc. "

“We are continuously delighted by consumers’ excitement and passion for the American Eagle Outfitters brand as we pursue our international expansion strategy around the globe. We look forward to announcing new stores and additional countries in the coming months.”

Even before American Eagle Outfitters began opening stores abroad, customers around the world were fans of the brand. The company’s e-commerce site shipped internationally beginning in 2004, and today ships to 77 countries, with Italy being the latest to join.

All American Eagle Outfitters international stores offer a similar product assortment as those in the U.S., which is well known for being high-quality, on-trend fashion at affordable prices. Most stores also feature the company’s Aerie brand, a confident, sexy intimates and apparel line for young women in their twenties.

American Eagle Outfitters Inc., through its subsidiaries, (AEO, Inc.) offers high-quality, on-trend clothing, accessories and personal care products at affordable prices.



American Eagle Outfitters Inc


Sears Reduce Expenses By Closing Stores

December 27, 2011

Sears Holdings Corporation is providing an update on its quarter-to-date performance and planned actions to improve and accelerate the transformation of its business.

Kmart's quarter-to-date comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales. Sears Domestic's quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics. Sears apparel sales were flat and Lands' End in Sears stores was up mid-single digits.

The combination of lower sales and continued margin pressure coupled with expense increases has led to a decline in our Adjusted EBITDA. Accordingly, we expect that our fourth quarter consolidated Adjusted EBITDA will be less than half of last year's amount. For reference, last year we generated $933 million of Adjusted EBITDA in the fourth quarter ($795 million domestically and $138 million in Canada).

Due to our performance in 2011 we expect that we will record in the fourth quarter a non-cash charge related to a valuation allowance on certain deferred tax assets of $1.6 to $1.8 billion. Although a valuation adjustment is recognized on these deferred tax assets, no economic loss has occurred as the underlying net operating loss carryforwards and other tax benefits remain available to reduce future taxes to the extent income is generated.

Further, we may recognize in the fourth quarter an impairment charge on some goodwill balances for as much as $0.6 billion. These charges would be non-cash and combined are estimated to be between $1.6 and $2.4 billion.

"Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce on-going expenses, adjust our asset base, and accelerate the transformation of our business model. "

"These actions will better enable us to focus our investments on serving our customers and members through integrated retail – at the store, online and in the home," said Chief Executive Officer Lou D'Ambrosio. Specific actions which we plan to take include:

• Close 100 to 120 Kmart and Sears Full-line stores. We expect these store closures to generate $140 to $170 million of cash as the net inventory in these stores is sold and we expect to generate additional cash proceeds from the sale or sublease of the related real estate. Further, we intend to optimize the space allocation based on category performance in certain stores. Final determination of the stores to be closed has not yet been made.


• Excluding the effect of store closures, we currently expect to reduce 2012 peak domestic inventory by $300 million from the 2011 level of $10.2 billion at the end of the third quarter as a result of cost decreases in apparel, tighter buys and a lower inventory position at the beginning of the fiscal year.

• Focus on improving gross profit dollars through better inventory management and more targeted pricing and promotion.

• Reduce our fixed costs by $100 to $200 million.

In addition to the specific store closures listed above, we will carefully evaluate store performance going forward and act opportunistically to recognize value from poor performing stores as circumstances allow.

While our past practice has been to keep marginally performing stores open while we worked to improve their performance, we no longer believe that to be the appropriate action in this environment.

We intend to accentuate our focus and resources to our better performing stores with the goal of converting their customer experience into a world-class integrated retail experience.

We currently expect the store closure and inventory reduction actions to reduce peak inventory in 2012 by $500 to $580 million and reduce our peak borrowing need by $300 to $350 million in 2012 from levels that may have resulted in 2012 without such actions.


At December 23rd, we had $483 million of borrowings outstanding on our domestic revolving credit facility leaving us with over $2.9 billion of availability on our revolving credit facilities ($2.1 billion on our domestic facility and $0.8 billion on our Canadian facility). There were no borrowings outstanding last year at this time.


During the fourth quarter through December 23, 2011, we have not repurchased any of our common shares under our share repurchase program. As of December 23, 2011, we had remaining authorization to repurchase $524 million of common shares under the previously approved programs.


Fourth Quarter Earnings Release
The company currently plans to release financial results for its fiscal 2011 fourth quarter and full year on or about February 23, 2012, before the market opens.

Sears Holdings Corporation



The Release of Air Jordans: Several People in Jail and Several Others Wounded.

December 27, 2011

Fights, vandalism and arrests marked the release of Nike’s new Air Jordan basketball shoes as a shopping rush on stores across the United States led to unrest that nearly turned into rioting.


The outbursts of chaos stretched from Washington state to Georgia as shoppers — often waiting for hours in lines — converged on stores Friday in pursuit of the shoes, a retro model of one of the most popular Air Jordans ever made.


In suburban Seattle, police used pepper spray on about 20 customers who started fighting at the Westfield Southcenter mall. The crowd started gathering at four stores in the mall around midnight and had grown to more than 1,000 people by 4 a.m., when the stores opened, Tukwila Officer Mike Murphy said. He said it started as fighting and pushing among people in line and escalated over the next hour.


Murphy said no injuries were reported, although some people suffered cuts or scrapes from fights. Shoppers also broke two doors, and 18-year-old man was arrested for assault after authorities say he punched an officer. “He did not get his shoes; he went to jail,” Murphy said.


The mayhem was reminiscent of the violence that broke out 20 years ago in many cities as the shoes, endorsed by former Chicago Bulls star Michael Jordan, became popular targets for thieves. It also had a decidedly Black Friday feel as huge crowds of shoppers overwhelmed stores for a must-have item.


In some areas, lines began forming several hours before businesses opened for the $180 shoes that were selling in a limited release.


As the crowds kept growing through the night, they became more unruly and ended in vandalism, violence and arrests.


A man was stabbed when a brawl broke out between several people waiting in line at a Jersey City, New Jersey mall to buy the new shoes, authorities said. The 20-year-old man was expected to recover from his injuries.


In Richmond, Calif., police say crowds waiting to buy the Air Jordan 11 Retro Concords at the Hilltop Mall were turned away after a gunshot rang out around 7 a.m.


No injuries were reported, but police said a 24-year-old suspect was taken into custody. The gun apparently went off inadvertently, the Contra Costa Times reported.


Seventeen-year-old Dylan Pulver in Great Neck, New York, said he’s been looking forward to the release of the shoes for several years, and he set out at 4:30 a.m. to get a pair. After the first store he tried was too crowded, he moved on to a second location and scored a pair.


“I probably could have used a half a size smaller, but I was just really happy to have the shoe,” he said.


The frenzy over Air Jordans has been dangerous in the past. Some people were mugged or even killed for early versions of the shoe, created by Nike Inc. in 1984.


The Air Jordan has since been a consistent hit with sneaker fans, spawning a subculture of collectors willing to wait hours to buy the latest pair. Some collectors save the shoes for special occasions or never take them out of the box.


The Associated Press



Black Friday results-- some win, some lose!

November 28, 2011


The results are in: Black Friday was lucrative for most retailers, thanks to some early doorbuster deals. But not every store was a winner.


Shops like Toys R Us and Walmart made gambles that paid off this year by opening earlier than ever on Thanksgiving evening. Others, including Macy's and Target, opened at midnight, also drawing praise from retail analysts, who think the move to earlier opening hours will be repeated by more retailers next year.


“We wonder if next year you will just be able to have your turkey dinner in the mall,” joked Nomura analyst Paul Lejuez in a report. His comment may not be far from the truth, as almost 25% of Black Friday consumers were shopping or waiting for stores to open at midnight, compared with 10% of shoppers last year and 3% in 2009, according to the National Retail Federation.


Since all stores were offering promotions, those that traditionally rely on shoppers seeking value may have missed out. Mr. Lejuez estimated that teen retailer Aeropostale Inc. lost out to competitors such as American Eagle Outfitters Inc. Womenswear stores such as Talbots and Ann Inc., owner of Ann Taylor and Loft, also saw weak traffic, he noted, because women are typically not shopping for themselves during Black Friday.


Though the day started out with robust traffic, shopping petered out after consumers scooped up the main promotional attractions. Retail research firm NPD Group Inc. reported that 56% of consumers who shopped on Black Friday said they would not likely shop again over the course of the holiday weekend.


“Black Friday may have come in with a roar, but it is going out with a whimper,” said Marshal Cohen, chief industry analyst at NPD, in a statement. He noted that “the consumer is tapped out or spent out.”


Even so, retailers were also banking on Cyber Monday, the Monday following Thanksgiving when most consumers shop online, to generate sales. Many, including the Gap and J Crew, were offering 30% off discounts for different apparel divisions. In the past, sites such as Target, Bloomingdale's and J Crew were overwhelmed with traffic on Cyber Monday, and experienced temporary shutdowns throughout the day. This year, however, the majority of e-commerce sites were better prepared and functioning properly by mid-afternoon on Monday.



For more information: http://www.crainsnewyork.com/article/20111128/RETAIL_APPAREL/111129924#ixzz1f2ojR0az

Retailers Rising Security and Anti-Theft Technology!

November 22, 2011

Retail shrink, including shoplifting and internal theft, has hit its highest level since 2007, according to a recent study that saw the shrink rate hit $119 billion worldwide.


Shoplifting, employee fraud and organized retail crime are on the rise, according to the Global Retail Theft Barometer, an annual independent survey underwritten by Checkpoint Systems Inc., which monitored the cost of shrink (including losses from shoplifting, employee theft and administrative errors) at retailers from July 2010 to June 2011.


The survey found that retailers increased spending on loss prevention and security by 5.6 percent—or $28.3 billion globally—over last year. However, much of that money went to security personnel and training, said Joshua Bamfield, director of the Centre for Retail Research in Nottinghamshire, England, and author of the study.


“Security employees represent the largest share of the security dollar, and retailers have emphasized the renewed importance of training,” Bamfield said. “Security-equipment spending tends to be ‘lumpy’—meaning that a retailer decides to buy equipment for, say, one-half its stores but then may not spend much for 18 months. Retailers spent a great deal on security equipment in 2010. Because this was capital spending (i.e., the equipment would last for several years) they do not need to keep spending but can spend on other areas such as checking new employees.”


Bamfield said retailers who reported a decline in shrink “worked across their operations to systematically combat shoplifting, employee theft, vendor loss and administrative errors.” An overwhelming majority—96 percent—employed audit programs to ensure loss-prevention policies were being followed and increased their loss-prevention spending nearly twice as much as the global average, he said. 
 “As global economic growth stalled in the past year, retailers did not increase capital equipment expenditures at the same rate as the rest of their loss-prevention expenditures,” said Farrokh Abadi, president of shrink-management solutions for Checkpoint Systems. 
 “The result, unfortunately, may be seen in higher shrink numbers. The retailers who most successfully combated shrink last year invested judiciously in comprehensive loss-prevention solutions.”


Apparel and accessories are among the categories with the highest losses, according to the report.


“Apparel is normally at the top of the list,” Bamfield said. “Top-end merchandise, baby clothes and accessories face particular problems. Since the recession, apparel retailers have been under pressure, and the rise in shrinkage is yet another source of cost that retailers could do without.”


Shrinkage rates were greater for high-end merchandise than low-end, Bamfield said, adding, “But all types of apparel retailers suffered [from organized retail crime] and shoplifting.”


The top losses were due to customer theft, including shoplifting and organized retail crime, which accounted for 43.2 percent, or $51.5 billion worldwide. Employee theft accounted for 35 percent, or $41.65 billion worldwide. In North America and Latin America, employee theft accounted for the top losses. Internal theft in North America accounted for 44.1 percent of shrink. In Latin America, internal theft accounted for 42.6 percent. The report also found the “average amount admitted stolen by employees was more than eight times the average stolen by shoplifters.”


Bamfield offered a checklist of advice for retailers looking to reduce theft, including:

• “Retailers need to create a good working environment in which employees feel that they are treated fairly and adequately remunerated.”

• “[Perform] checks on new employees to ensure that the bad apples are kept out.”

• Provide training to ensure that employees know the systems and procedures.

• “Employees should know that there are penalties for trying to cheat the system. EAS [electronic article surveillance] systems can be used to prevent goods being illegally moved by employees to the wrong area (where they can steal).”

• Conduct employee searches at the end of a shift.

• Establish a reporting hot line.

• “Use training and publicity to ensure that the issue of shrinkage (and shrinkage reduction) is a ‘hot’ issue on a permanent basis.”


The Centre for Retail Research launched the “Global Retail Theft Barometer” study in 2007 after conducting a similar survey for Europe for six years. The study covers trends in retail shrink and crime in 43 countries and regions, including the United States, China, India, Europe, Russia, Japan and Australia. This year, South Korean retailers were added for the first time. The report surveyed 1,187 largest retailers (representing more than 250,000 retail outlets). Of the respondents, 15 percent were apparel specialists, and 5 percent included apparel-focused department stores.


The Global Retail Theft Barometer is underwritten by an independent grant from Checkpoint Systems, global provider of shrink management, merchandise visibility and apparel-labeling solutions. Checkpoint solutions included a broad mix of apparel-labeling solutions, RFID (radio frequency identification) applications, high-theft solutions and the company’s Web-based Check-Net data-management platform.—Alison A. Nieder


For more information: http://www.apparelnews.net/news/retailing/112111-Retail-Spending-on-Anti-Theft-Technology-Lumpy-Study-Finds/

March Retail Sales Indicate Confident, but Cautious Consumer

April 14, 2011

Washington, April 13, 2011 – From clothing and electronics to home furnishings and building materials, retail sales in March increased across the board for the ninth straight month. According to the National Retail Federation, retail industry sales (which exclude automobiles, gas stations, and restaurants) for March increased 0.6 percent seasonally adjusted from February and 3.9 percent unadjusted year-over-year. “Shoppers last month were eager to take advantage of retailers’ spring promotions on everything from apparel to outdoor furniture,” said NRF President and CEO Matthew Shay. “While current indicators point to a more confident consumer, increasing gas prices and a cramped job market could hamper consumer spending during the upcoming summer months, a key time of year for retailers.” “Improving financial situations including the temporary payroll tax cut, wage gains and a strengthening labor market likely supported March spending gains,” said NRF Chief Economist Jack Kleinhenz. “If gasoline prices can stabilize over the next few months, consumer spending may continue to grow, but it remains to be seen what consumers will cut out of their budgets because of the cost of filling up their tank.” March retail sales released today by the U.S. Commerce Department show total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.4 percent seasonally adjusted over February and 7.3 percent unadjusted year-over-year. Warmer weather helped building material, garden equipment and supplies dealers see increased sales last month, increasing 2.2 percent seasonally adjusted from the previous month and 5.5 percent unadjusted over last year. Consumers also stocked up on new spring attire, boosting clothing and clothing accessory stores sales 0.6 percent seasonally adjusted month-to-month and 3.4 percent unadjusted year-over-year. Electronics and appliance stores also saw solid gains; sales increased 2.1 percent seasonally adjusted from the previous month and 3.6 percent unadjusted over last year in those stores. Sales at grocery stores increased 0.3 percent seasonally adjusted month-to-month and 4.1 percent unadjusted year-over-year. Health and personal care stores sales increased 0.7 percent seasonally adjusted over February and 5.1 percent unadjusted over last year. Also benefitting from warmer weather, furniture and home furnishing stores sales increased 3.6 percent seasonally adjusted month-to-month and 3.8 percent unadjusted year-over-year. As the world's largest retail trade association, NRF has the unique ability to represent the full breadth and scope of the retail industry. NRF's global membership includes retailers of all sizes, formats and channels of distribution including department stores, discount retailers, grocers, chain restaurants and drug stores. Membership also includes industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2010 sales of $2.4 trillion.

Tips to Avoid Chargebacks

March 7, 2011

At Roundhouse, we know that one of the most frustrating things about doing EDI with your retailers is being hit with chargebacks. We also know that sometimes your retailers change their rules before you know it and you receive a surprise invoice for chargebacks. That’s why we provide you with Tips to Avoid Chargebacks – so you can avoid those annoying chargeback invoices.

Cotton prices soaring

December 28, 2010

High fiber prices are expected to create some upheaval throughout the supply chain in the coming months.

Rising costs of raw materials deep in the supply chain haven’t yet made their way through to retail apparel prices, but that can’t continue indefinitely, experts said. Volatile cotton prices in the last year have soared to record highs, wool prices are higher than they have been in years and synthetic fiber prices, while not seeing upward pressure anywhere near the natural fiber industries, are also elevated.

“Once these higher fiber prices filter through the supply chain, it’s going to be painful,” said Gary Raines, vice president of economics and analysis with FCStone Fibers & Textiles. “Who’s going to crack first? Will consumers willingly pay higher year-over-year prices for apparel? I’m not sure. 2011 is shaping up to be unlike any year we’ve seen. There is a major disjoint between retail trends and what’s happening on the fiber side.”

Prices will eventually come down from current elevated levels, but it could take some time and they won’t fall far enough to avoid creating reverberations in the apparel industry, Raines said, impacting profits all along the supply chain.

“The assumption is they’re going to have to pass some of this on at the retail level; the question is how much,” said Nate Herman, vice president of international trade for the American Apparel & Footwear Association. “It won’t be the full amount of the additional costs people are paying in the supply chain.”

Retail prices for apparel are likely to register increases in the low- to midsingle digits next summer or fall given the production schedule of apparel, Herman said. Pushing costs back up the supply chain is trickier now because of a consolidation of the sourcing base following the economic crisis, when many factories were forced to close.

Cotton prices were driven higher this year by a supply-and-demand ratio that is wildly out of whack, experts said. A surprise increase in demand for cotton followed the steep drop-off precipitated by the global economic crisis. Combining that with already high demand from China helped create a cotton shortfall. The supply side outlook was further impacted by inclement weather in some of the major cotton-producing countries such as China and Pakistan and export policies in India limiting cotton exports earlier this year. In addition, high prices of other commodities like corn and soybeans have stolen acreage from cotton in recent years as farmers shifted to other crops.

“The world supply-and-demand situation remains the tightest in the modern globalized era,” Cotton Incorporated said in its Monthly Economic Letter for December. “Much of the tightness at the world level can be attributed to China.”

India’s export policies were also under scrutiny this year. The country imposed a ban on raw cotton exports last spring in response to pressure from domestic manufacturers, who said they needed relief from high prices. While the outright ban was lifted several weeks later, India continues to eye its export levels.

“This year every bale counts,” said Jon Devine, an economist with Cotton Inc.

Despite high prices, demand for cotton remains so high that four months into the crop year for 2010-2011 almost 100 percent of the projected U.S. crop is already sold, he said.

World cotton production in 2010-2011 is forecast to be 115.5 million bales, a 14.5 percent increase over the prior year, the U.S. Department of Agriculture said in a December report. The U.S. crop is predicted to be 18.3 million bales.

The USDA predicted that cotton usage worldwide will decline slightly in crop year 2010-2011 as cotton prices continue at “unprecedented levels amid tight supplies.” The drop is predicted to be only 2 percent, signaling it could be some time before a market correction in cotton prices takes hold.

The continued high prices could drive manufacturers to substitute other fibers, Raines said. While shipments of cotton apparel to the U.S. rose in October compared with a year earlier, its share of total textile and apparel imports sank to 38.3 percent, the second-lowest in more than two decades, according to a research note from FCStone.

Wool prices are also elevated more than they have been in years. Some of the price increase could be attributed to a slight rise in demand, but for the most part sources said the prices were driven by a production decline.

Wool production worldwide peaked around 1990, but it has been on the decline since then due to a range of factors, including profitability, and land and labor issues for sheep farmers, said Rita Kourlis Samuelson, wool marketing director for the American Sheep Industry Association, based in Englewood, Colo. Wool prices have fluctuated, but they have been trending up, especially recently, she said.

Worldwide, wool production and demand are roughly the same now following previous overproduction that had driven prices down. That ratio has evened out, Samuelson said. Depending on the indicator used, prices in October were close to a 10-year high, she said.

Synthetic prices are also up, a natural function of higher demand for the product driven by staggeringly high cotton prices and elevated oil prices, Raines said. But prices for polyester and other synthetics have not seen the steep increases that natural fibers have.

For more information, visit: http://www.wwd.com/business-news/raw-material-costs-taking-a-toll-3409343?module=recent_home

Retailers face big challenges after robust Holiday sales

December 28, 2010

American shoppers expanded their year-end purchases this holiday season by the biggest margin since the boom year of 2005, but retailers still face daunting challenges in the new year, from rising gasoline and cotton prices to an overabundance of stores.

U.S. retail sales, excluding automobiles, rose 5.5% between Nov. 5 and Dec. 24 compared with a year ago, according to MasterCard SpendingPulse, a unit of MasterCard Advisors that tracks sales by all types of payment.

Last year, sales rose 4.1% during the 50 day period, but those results were easy comparisons against the recession in 2008, when sales fell 6.1%.

“To sum up, the holiday season is a joyous one,” said Sherif Mityas, a partner in the retail practice of A.T. Kearney, a global management consulting firm. “Consumers are looking to spend again. They are more confident than they had been.”

The numbers were not reflective of a late December storm, which did not hit most of the East Coast until Christmas Day or later. The day after Christmas is traditionally one of the season’s biggest shopping days but retailers are expecting that shoppers will simply delay their purchases, not abandon them.

Just how long retailers’ confidence will last for shoppers and stores alike is the big question.

A consumer sentiment index released Thursday showed consumer moods were at their highest level in December since June. Recent surveys of chief executives and chief financial officers likewise show a growing number of companies expecting to increase hiring and spending over the next year.

This year’s improved job and stock markets, and the two percentage-point cut in employees’ payroll taxes that’s coming in January should make people a little freer with their money, according to J.P. Morgan Chase economist Michael Feroli. He forecasts U.S. consumer spending will rise 3.5% next year, the fastest pace since 2004.

During the holiday season, clothing posted the strongest gain, up 11.2% over the same period last year when apparel sales were roughly flat. Electronics sales rose only 1.2% this year, as a glut of televisions drove prices down and shoppers shied away from innovations such as 3D TVs. After several years of lackluster sales, jewelry was a standout category notching an 8.4% sales gain.

The day after Christmas, Kim Beaver, a 51-year-old housewife and mother of four from San Jose, Calif., was at NorthPark Center in Dallas shopping with family and sporting a white gold and diamond key necklace her husband had put under the tree for her.

“We definitely spent more this Christmas, because we had more to spend,” said Mrs. Beaver. “My husband got a new job as the chief financial officer at a solar energy company.”

But risks to consumer spending loom. Strained state and local governments may be forced to lay off more workers than previously expected, said UBS economist Maury Harris.

And rising energy prices could pinch spending on other items in the months ahead. This month, the average price for a gallon of gasoline has topped $3 a gallon for the first time in two years.

Rising oil prices hasn’t damped consumer spending yet, said Kip Tindell, chief executive of the closely held Container Store, a 49-store chain of home storage and organizing merchandise based in Coppell, Texas. But if oil prices rise significantly in 2011 “it will definitely affect retailers,” he said.

Another potential hurdle: The housing market. If slipping prices set off a new round of foreclosures, banks may rein in lending again. The saving rate has recently slipped—in November, consumers saved 5.3% of their after tax income, compared with 6.3% in June. Any fresh shocks to confidence could prompt them to start saving more, and spending less, said economists.

Oslyn James, a Brooklyn elementary school teacher, represents the shopper zeitgeist, a desire to spend tinged by caution. Ms. James arrived at Roosevelt Field Mall in Garden City, N.Y., ahead of the blizzard the day after Christmas to avail herself of the steep store discounts of between 60% and 70%.

Ms. James said she spent more on Christmas gifts this year, but plans to pare back her spending after the holidays. “I don’t know what the New Year will bring,” she said.

Over the past four quarters, consumer spending accounted for 68.6% of demand in the economy, up from 66.5% in 2007. The reason: With housing contributing less to the economy than at any time since World War II, and with businesses spending also down sharply, consumer spending is taking a larger piece of the overall pie.

Even if shoppers continue to loosen purse strings in the year ahead, the retail landscape is still littered with too many stores for all to prosper. The U.S. now has some 40 square feet of retail space for each person—the most per person in the world.

With the growing momentum of Internet sales—Web sales grew 15.5% during the holiday season—competition is going to get even more fierce, he said.

Meanwhile, retailers that specialize in creating inexpensive fashionable clothing such as Uniqlo, Zara and H&M have big expansion plans in the U.S. “Get ready for a whole new battle for market share amidst a stable consumer pie,” said A.T. Kearney’s Mr. Mityas.

Retailers have learned to better align inventory with the rate of sales to avoid panic discounting that erodes profits. Saks Inc. has been working to wean customers off of the hefty discounting that began in the throes of the recession two years ago, but has done so at a cost.

Offering fewer promotions, “clearly does affect growth,” Saks Chief Executive Steve Sadove said in an investor conference call earlier this month.

Saks forecast a “mid-single digit” sales growth for the second half of the year. But Mr. Sadove said growth would have been in the double-digit range had the company offered more discounts.

A major concern for apparel and home goods makers in 2011 is the impact of rising cotton costs on the price of products. Andrew Tananbaum, chief executive of Capital Business Credit, which finances small and medium-sized manufacturers, predicts that the wholesale price of items with “high cotton content” will likely rise at least 10% for goods that consumers will start to see in the summer of 2011.

The increase marks the first time apparel will be inflationary in at least 20 years. Retailers will likely take a between 3% and 5% hit on margins for cotton-heavy products to avoid raising prices too drastically, he said.

Rising cotton prices “is a real issue,” said Pete Nordstrom, president of merchandising at Nordstrom Inc. If prices go up by 10% or more, as predicted, retailers will have no choice but to pass along price increases to consumers, he said.

For more information, visit: http://online.wsj.com/article/SB10001424052970203731004576045742629998416.html?mod=WSJ_business_whatsNews

Retail sales rebound, beating forecasts

December 28, 2010

Americans are splurging as though it’s 2007 again.

Shoppers spent more money this holiday season than even before the recession, according to preliminary retail data released on Monday. After a 6 percent free fall in 2008 and a 4 percent uptick last year, retail spending rose 5.5 percent in the 50 days before Christmas, exceeding even the more optimistic forecasts, according to MasterCard Advisors SpendingPulse, which tracks retail spending.

The rise was seen in just about every retail category. Apparel led the way, with an increase of 11.2 percent. Jewelry was up 8.4 percent, and luxury goods like handbags and expensive department-store clothes increased 6.7 percent. There was even a slight increase in purchases of home furniture, which had four consecutive years of declining sales. The figures include in-store and online sales, and exclude autos.

“For the past year or two, when I’ve seen growth in one area, it seems to come at the expense of another,” said Michael McNamara, vice president for research and analysis at SpendingPulse. “Here, things are actually all moving in the right direction.”

Of course, the broad increase was driven in part by higher spending on necessities like gas and food. And even with the across-the-board gains, some categories, like furniture and electronics, have still not climbed back to their prerecession levels.

Several retailers will report December sales in January, and they are trying to finish the month strong. A blizzard on the East Coast may have kept away shoppers on Dec. 26, when stores typically try to capitalize on store traffic for exchanges, returns and gift cards. But analysts said that the stores would not lose those sales — they would just be pushed later in the month, or into January.

The MasterCard data suggests that the pre-Christmas sales increase was the biggest in five years. Spending reached about $584.3 billion, compared with $566.3 billion in that period in 2007.

The 5.5 percent rise beat even the retail industry’s projections. The National Retail Federation was expecting a 3.3 percent improvement, and the ShopperTrak research service anticipated a 4 percent increase (both excluded automobiles, gas and restaurants).

“In the face of 10 percent unemployment and persistent housing woes, the American consumer has single-handedly picked himself off the mat, brushed his troubles off and strapped the U.S. economy on his back,” Craig R. Johnson, the president of the consulting firm Customer Growth Partners, wrote in an e-mail.

Analysts offered several theories for the rebound in spending while the unemployment rate remained stubbornly high.

Stocks have soared to their highest levels in more than two years, giving those with higher incomes greater freedom to spend. Luxury stores like Tiffany and Saks Fifth Avenue, for example, have been posting big sales increases.

Pent-up demand is also showing up among middle-income shoppers: in government surveys, consumers have been expressing rising confidence for the last five months.

The luxury segment started heating up in late summer, said Joel Bines, a director in the global retail practice at AlixPartners.

“That trickled down to the upper- to midtier consumer, and then the midtier consumer,” he said. Once the luxury market stabilized, confidence seems to have spread, “in the media, at work, with your friends,” he said.

The sales figures were bolstered by improved inventory controls among many retailers. After two years of heavy discounting, retailers cut the number of products they held in stock rooms, in an attempt to train shoppers to buy items at full price rather than wait for sales. The strategy seems to have worked.

Shoppers browsing through after-Christmas sales said in interviews that they were still hunting for deals, but they were also feeling that the economy was stabilizing after three years of merciless uncertainty.

In Pontiac, Ill., Gwen Hilsabeck rose at 4 a.m. Sunday for a 90-minute drive through snow flurries from her house to the upstate Woodfield Mall in Schaumburg, northwest of Chicago.

“I bought two dresses on sale at Ann Taylor, and I bought four dresses on the clearance rack at Nordstrom,” said Ms. Hilsabeck, a manager at a hospice company who said she had spent $800 to $900 so far.

“I’m spending more on myself because I’m starting to feel a little more at ease,” she said, “and my 401(k) has stopped going down.”

Where the snowstorms were not a factor, stores prepared for a wave of shoppers using gift cards. At J. C. Penney, Dec. 26 is usually the second-biggest day of the year in volume of transactions, including returns, exchanges and new purchases, said Myron E. Ullman III, the company’s chairman and chief executive.

J. C. Penney tries to attract teenagers, who are frequent recipients of gift cards, on Dec. 26 by bringing in new merchandise. People “have got money in their hand if they’ve got a gift card,” Mr. Ullman said.

Indeed, gift cards continued to be popular this year, and some shoppers said they were trying to maximize their value by using them during after-Christmas sales.

“It lets you shop the day after Christmas, so you can save a lot of money,” Shelly Lara, 42, an in-home nurse from Ashtabula, Ohio, said on Sunday.

She said that even though her family was doing fine financially, the Cleveland Clinic, which owned her company, had announced some layoffs, and her husband’s company had stopped contributing to his 401(k) for six months.

“There were some scares,” Ms. Lara said. “We wanted to make sure we got the most for our money.”

Stores seemed to have planned for the holiday season appropriately, with few resorting to the huge price slashing of the last couple of years.

“There was a good match between inventory and demand,” Mr. McNamara of SpendingPulse said. “I didn’t see any evidence of unusual discounting.”

For shoppers, that meant that the hunt for deals was a bit harder after Christmas this year.

“I remember a few years ago when you could double your money if you went shopping the day after Christmas,” said Kim Rayburn, 40, a hairdresser who was looking at costume jewelry at Forever 21 at Polaris Fashion Place in Columbus, Ohio, with her daughter Samantha, 12. “It’s not like that anymore. Now it seems just like a regular shopping day.”

For more information, visit: http://www.nytimes.com/2010/12/28/business/28shop.html?src=busln&scp=4&sq=retail&st=cse