Monday, March 31, 2008

Inditex Announces New Brand, Global Expansion

Grupo Inditex (Euronext MC: ITX), the maker of Zara, has just announced a slew of things at an analyst conference today, including plans to launch an accessories brand to be called Uterqüe. The brand is to sell bags, shoes, sunglasses and scarves, and the company is planning on having 20 to 30 of the shops open by year-end.

Also of note was the news that Zara stores will be opening up at a faster clip throughout Asia (Inditex already has some stores in Japan and China). Seoul's first Zara location will open in April, with at least four more openings planned in the city before year-end. These openings come as the company is busy rolling out heaps of new stores in Italy, France, Russia, and eastern Europe.

So, when is Inditex going to start seeing problems from over-saturation? Or is Inditex immune because they have so many brands?

It would serve Inditex's management to take a good look at what happened to Ford and General Motors. In the 80's and 90's, both sported portfolios of profitable brands whose products became more and more alike. Those brands began poaching sales from one-another, and in the end, GM axed their underperforming Oldsmobile marque. Both companies soldiered on with portfolios of less-than-original nameplates and continue to lose market share to their more concentrated Japanese/German rivals to this day.

Inditex has got to continue to ensure that their brands are distinct from one-another in order to safeguard their relevance in the marketplace.

Inditex abrirá entre 20 y 30 tiendas de complementos en el segundo semestre de 2008

Monday, March 17, 2008

Opportunities in a recession?

The US economy has certainly seen better days: projected economic indicators are pointing towards lower consumer spending and resulting weaker sales in consumer-cyclical spaces. This downward pressure on retail has already crushed market values of many specialty retail firms (See Saks: SKS, Nordstrom:JWN, Ralph-Lauren:RL). None of these declines have found any significant support, however from a value perspective, many of these firms still have incredible growth potential. At lower valuations, firms like Macy's (M) are looking much cheaper at PE's near 10. As stores like Nordstrom continue to open new stores throughout the US, they are posed to capture a significant amount of sales growth in the next 3-5 year period. American Apparel's (APP) earnings report give us some hope that brands capturing a younger market may still be able to maintain positive sales growth in the coming months. Additionally, strong foreign currencies in both Asia and Europe may allow designer brands to continue to overstep the US retail slump. Do you have any fashion value plays brewing in your head?

Related Articles:

Retail sales data heightens recession fears (FT)

"With the housing market in turmoil amid rising foreclosures, rising energy prices, and a deteriorating job market, discretionary spending by consumers appears to be slowing sharply. The resilience of the US consumer in the face of such challenges was one of the trademarks of the economy last year."
Soft NZ Jan retail sales slow NZ economy
"Soft retail sales are the latest piece of data revealing slowing in the domestic economy. January's retail sales rose by a seasonally adjusted 0.3%, as expected and following a 0.1% rise in December, largely due to a 2.1% increase in supermarket and grocery store sales. Excluding vehicle-related industries, the core retail figure was also an increase of 0.3%, against expectations of a 0.1% decline."
Singapore shares close higher on strong retail sales data(CNN/MONEY)
"Retail sales rose 7.8 percent in January from a year earlier, helped by higher fuel prices. The increase beat the 3.2-7.6 percent growth forecast by economists polled by Thomson Financial."
American Apparel Reports Fourth Quarter and Full Year 2007 Financial Results (BusinessWire)
"American Apparel reported unaudited consolidated net sales for the quarter ended December 31, 2007 of $111.2 million, a 48% increase over sales of $75.1 million for the quarter ended December 31, 2006. Retail sales increased 85% to $68.3 million for the fourth quarter of 2007 as compared to $37.0 million for the same period in 2006, with same-store sales for stores open at least 12 months rising 40%. Wholesale sales were $42.9 million for the 2007 fourth quarter as compared to $38.1 million for the 2006 fourth quarter, an increase of 13%. American Apparel ended the quarter with 182 stores, having added 19 net new stores in the period."

Monday, March 10, 2008

American Apparel Trading At 52-Week Low

American Apparel (AMEX: APP) has been getting hammered in the market over the last 4 weeks. After debuting around $15/share in December, American Apparel promptly fell to $11 not more than forty days later (24th of January). It rebounded north of $13.20 by February 5th, and has sold off since, closing at $10.95/share today.

Some of the selloff is due to general macroeonomic concerns including a retail spending slowdown, but there's something else driving the negativity on APP: CEO Dov Charney is in the middle of a potentially damaging lawsuit. Charney has recently won an appeal, and the case is back in arbitration, which could delay settlement for up to a year.

American Apparel has fallen more than double that of the S&P Retail ETF since its listing in December.

What do you guys think of American Apparel right now?

Monday, March 3, 2008

Retail Customer Service All-Stars

BusinessWeek has published a list of the American firms with the best customer service, gathered by J.D. Power. A few retailers made the grade, including L.L. Bean, Land's End, Nordstrom,, and Neiman Marcus.

Some interesting tidbits in the survey:

Land's End doubled its presence in Sears stores in 2007 and added in-store monogramming. They let customers bring back merchandise that's 20 years old. made shipping free for all orders above $25, which seemed like a dangerous margin-killing move, but ended up increasing sales by 42% and doubling profit in the 4th quarter of 2007.

At Neiman Marcus, new hires receive 160 hours of training so they know how to develop customer relationships and understand the designer goods the chain sells (retail success story Lululemon requires similarly-lengthy training). Also, Neiman has been recruiting at top universities to increase the caliber of its associates.

Another study
published in the Journal of Marketing shows that firms in the top quintile of customer service rank beat the return of the broader stock market in good times and bad. Indeed, there's something to be said for providing good customer service.

Businessweek - The Customer Service Elite
Consumerist - How To Beat The Stock Market: Buy Companies With High Customer Satisfaction Scores