Retail Holding Up

Bloomberg just chimed in on retail earnings, noting that J.C. Penney, Kohl's, and Nordstrom beat analyst profit estimates.

The retailers accomplished the feat by "clamp[ing] down on inventory, operating costs and store growth". Same store sales declined at all three retailers.

Macy's is the only retailer so far to report a net loss, due to consolidation costs.

Just something to chew on for those mulling retail right now...

J.C. Penny, Kohl's, Nordstrom Profit Beat Estimates - Bloomberg

Seriously?: Brooks Brothers Edition

The Brooks Brothers cotton plaid madras suit, presented without comment. Please do give us yours, however.

Lululemon Packs Its Bags

Lululemon (NASDAQ: LULU, TSX:LLL), the Vancouver-based yoga-wear retailer reported earnings today and announced some surprising news: they're shutting the doors of their Japanese stores. Their first store opened in Japan in 2005 and operated through a joint venture with Japanese apparel company, Descente, Ltd. There are currently 4 stores, which will be shuttered before the end of the second quarter. Lulu CEO Robert Meers has filled us in on the reasons, noting that Japan represents less than 1.5% of revenues, yet "[takes up] a disproportionate amount of management time/attention" to warrant its existence. Lulu management is going to continue on with their strong US expansion, and they're rolling out their e-commerce platform, which they have high hopes for. Lululemon plans on opening 35 stores in the US next year.

Also of note, Lulu's sales more than doubled in the last 14 months due to strong same-store sales and a healthy addition of new stores in North America. Margins inched higher, to 54.1% from 51.4 a year ago.

Children's Apparel: No longer just for young ones

As recession fears draw near, fashion weeks all over the world have looked to children's clothing for more inspiration. Today we salute you, Mr. stay-at-home father who apparently has spent hours teeming over the newest issues of Men's Vogue, Details, and GQ to find the hottest summer trends. Industry sources apparently are in the process of designing full S/S '09 lines of baby-inspired couture including bibs, booties and pacifiers. V.F. Corp's Mackey J. McDonald announced yesterday that they are integrating these emerging trends.

J.C. Penny Cuts Economic Outlook

Some unsurprising news today, apparently J.C. Penny (NYSE:JCP) CEO Mike Ullman is predicting a slowdown in the retail sector due to the recent economic downturn.

"J.C. Penney Co. Inc.'s slashing of its first-quarter profit projections by a third after a disappointing Easter could be a warning for the overall retail sector that the proverbial wall is just ahead. While retailers have been dancing around the impact of the economic slowdown for the last few months, evidence is mounting that the second half might not be pretty." -WWD

It must be an easy job running a crappy department store chain (see futile attempt American Living) and blaming the store's inadequate measures to join us in the 21st century solely on macroeconomic events... I think your product buyers and brand strategists belong in the proverbial 'fail' dumpster directly up against that proverbial economic wall.

"Consumer confidence is at a multiyear low... J.C. Penney counts half of American families as its customers and they are feeling macroeconomic pressures from many areas, including higher energy costs, deteriorating employment trends and significant issues in the housing and credit markets." JC Penny's CEO Mike Ullman

Keep on trucking J.C. Penny, we are always amazed by your utter incompetence and and inability to run a successful, modern retail firm.

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

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."