Archive for January, 2011

December retail sales: Were expectations too high?

Most of the post-mortems on December comp sales — after sales reports were released on Thursday the 6th — noted that the numbers came in lower than expected. And there were a couple of legitimate disappointments in the numbers; both Target and Gap delivered significantly lower sales results than their November results would lead observers to believe. But the overall comp gains of about 3.5% would have had most of us feeling pretty bullish based on the pessimistic climate six months ago.

Historically, it’s hard to deliver big back-to-back sales increases in both November and December, and there is little doubt that stores were promoting hard to capture market share before Thanksgiving instead of waiting for Black Friday. Add the effects of the post-Christmas blizzard on a wide swath of the East Coast, and the numbers really aren’t a negative surprise. Let’s wait and see what the full 4th quarter looks like — and what quater-end inventories — before jumping to too many conclusions.

New apparel management at Sears: Try, try again?

RetailWire panelists routinely take shots at Sears Holdings, and today is no exception — with the news of a new hire to run their apparel business. Here’s my skeptical take:

While Sears has hired an experienced apparel exec with a track record especially at JCP and (back in the 90’s) at Sears itself, I’m skeptical that one person can turn around this battleship. Sears Holdings still suffers from faulty strategic leadership at the top and its ongoing failure to hire a CEO for its retail operations. And Lana Cain Krauter is walking into a far different situation than she left several years ago at Sears: The competitive landscape has shifted dramatically, the physical plants have been allowed to decline and the intended synergies from the Kmart merger never materialized. It’s a threefold challenge, and a big one: Can Ms. Krauter convince consumers, vendors and her own team that Sears has a viable future in the apparel business?

Do rising gas prices threaten the recovery?

I think I’m in the minority among RetailWire panelists in discussing the effect of rising gas prices upon economic recovery. My contrarian view is that some inflation is reflective of higher demand…a good thing. I think we have more to worry about other rising commodity┬ácosts and their ripple effect on retail prices:

If gas prices hover at $4 or below (let’s hope not), the economic recovery can withstand it. In fact, you can make a case that rising demand for energy is a sign of economic health. It’s all about the drop in unemployment…if and when it starts to happen. There is going to be just as much inflationary pressure based on the cost of raw materials — in particular, cotton and other commodity prices have already spiked dramatically and it’s only a matter of time before wholesale costs convert to higher retail prices. The question for 2011 is whether the apparent rise in discretionary spending on apparel will continue in light of these higher commodity prices.

The blizzard of 2010: What impact on retail sales?

The snowstorms affecting up to 80 million shoppers on tne Sunday and Monday after Christmas may put a dent in retailers’ otherwise strong December results. December 26th has for many years become a day to drive sales, not just manage returns, as stores have learned to leverage traffic and gift cards with aggressive promotions. It’s possible that some of these sales will shift to the latter part of the week (even with New Years’ Day falling on a Saturday). And specialty retailers can react faster by extending promotions into January…but big chains with longer lead times will probably need to revisit their MLK weekend sales to recover some lost volume.

Do store visits reveal retail’s winners and losers?

From a recent RetailWire discussion where panelists commented on a WSJ article about what can be learned from store visits:

I enjoyed the article in the Wall Street Journal but — let’s admit it — this kind of anecdotal evidence based on a small sample is not very scientific. I shopped one particular mall in the Milwaukee area on Black Friday and again on Christmas Eve (with other visits in between) and noted last Friday whether department and specialty stores had pockets of inventory. I didn’t see a glut of sweaters anywhere…I saw one specialty apparel chain with too many peacoats…I saw a few stores that took a deeper position on flannel plaid shirts instead of having a more balanced inventory. But to assume that I know who the winners and losers will be is flattering myself. So take those “expert opinions” with a grain of salt until you see what the December comps look like, along with quarter-ending margins and guidance about 1st quarter 2011.

Was holiday 2010 the most promotional ever?

RetailWire panelists weighed in (just before Christmas) about the promotional pace this season. My take…there are plenty of ways to save above and beyond the “standard” 50% off discount, but the pace seemed pretty consistent with 2009 promotional levels:

There are plenty of extra savings to be had, especially for department stores’ proprietary cardholders, on top of the deep discounts being offered. So it’s not just “50% off” but potentially “50 + 20%” depending on which card you use, which coupon you clip and which hours you shop. Nevertheless, the pace of these types of discounts looks pretty similar to 2009, with the profit outcome dependent on top-line sales and clean inventories going into the first quarter. And the unusually cold weather across the country is probably helping to drive down inventories of seasonal goods at exactly the right time.

With all the promotional noise right now, it’s a smart tactic for stores to differentiate themselves through convenience. This may mean extended hours, more sales associates on hand, more efficient checkout lanes or — most importantly — good in stock. The customer will reward the stores that handled her time — not just her budget — most efficiently this month.

Consumers gain control of pricing decisions

Price comparison apps are yet another example of the customer taking control of the shopping experience, similar to a recent panel discussion about blogs and social networking. The technology certainly brings transparency to the pricing process that wasn’t there before; plus, the customer doesn’t have to drive across town for the lower price if there is a direct link to a website (with free shipping). The merchandising implications are profound, with increased movement toward exclusive brands and models to avoid just this sort of “wrong price” situation.