I have two boys whom I love equally, but differently. They each have strengths and weaknesses. It would be wrong to treat them exactly the same since they aren't exactly the same.
Walking the mall today, it became so apparent that this holiday season is going to have it's share of winners AND losers, even though so many would like to paint all retail with the same brush.
There were a number of teen retailers full of merchandise that was marked down offering an additional savings of 25-33% with purchases of $75-100. It amused me that a couple of these retailers belong to a company that swore they weren't going to discount because it would damage the brand. I could report that these discounts drove scores of customers and purchases into their stores, but my parents taught me early that lying was the wrong thing to do. The mall I was at didn't have an Aeropostale, but I'm pretty sure that they had to be doing better business than what I saw at their competition.
On the other side of the equation, J Crew was running with a moderate amount of inventory at most, had some sales going which projected value, and all of it made me want to buy.
Certain large national department stores with more than 850 stores had a lot of merchandise, few clerks, and not a lot of purchasers among the folks wandering through the store. Those cash registers are more profitable if people line up to buy things at them.
Oh yeah, and if you're at the mall with your significant other and just can't take the hustle and bustle anymore... fear not. There's plenty of peace and quiet in just about any jewelry store in the mall.
There's a lot more detail rattling inside my head about this, but my bottom line is simple: don't believe all the hype that "The Consumer" is back. "The Consumer" doesn't exist, just like "The Retailer" doesn't. Unlike the Borg (yeah, I've been known to watch some sci-fi, so what?), there are differing levels of consumer rebounds and retailers' success isn't homogeneous. If you're not going to do your own homework, or pay to peek at someone else's... stay out of the game.
Be careful out there.
Showing posts with label retailers. Show all posts
Showing posts with label retailers. Show all posts
Sunday, December 13, 2009
Sunday, November 29, 2009
With apologies to Clement Clarke Moore
Twas the eve'n after Turkey Day and all through the mall,
There were creatures a-stirring, but not buying all.
The discounts were posted in the stores with care,
In hopes that the shoppers soon would be there.
The security teams were nestled all snug at their posts,
While visions of safety were bigger than most.
Shoppers in PJs, some with hot plates,
Had just settled in for a cold morning's wait.
When out in the parking lot there arose such a clatter,
Security sprang to attention to see what was the matter.
Away to stores I flew like a flash,
Held on to my credit cards, I'd only pay cash.
The fluorescent lights gleamed on the newly arrived stuff,
Gave a glimmer of hope to the retailers who'd had it so tough.
When what to my wondering eyes should appear,
But a whole slew of shoppers, with Christmas lists for those dear.
They clutched at the flyers, all glossy and slick,
And I knew in an instant that it was bargains that would stick.
More rapid than hordes, the shoppers they came,
Crowding home and electronics, gotta get that new game.
Now toasters, now iPods, now board games and toys,
Grab discounts, grab bargains, can't afford to be coy.
To Kohls and to Target, To Walmart and the mall,
Shop away, shop away, shop away all.
As dry leaves that before the wild hurricane fly,
Grew the lines at the checkouts with items to buy.
So up to the next floor, the hordes they plain flew,
They wanted those bargains, apparently more than did you.
And then in a twinkling, I heard from the clerks,
'Next in line please,' they were glad to have work.
As I talked with consumers, the people in line,
It was really apparent they weren't feeling too fine.
They were clutching their wallets, a glaze in their eyes,
'No credit left for me this year,' was often their cry.
Their choices were careful, each item a find,
Yet the retailers had obviously kept margins in mind.
Their steps they were quick, but eyes were quite bleery,
Still yawns they were stifled, due to caffeine with dairy.
Their bags didn't bulge, despite purchases paid,
A few less per family than they'd previously made.
Still some shopped for sport and had good fun,
Twas quite the excitement to watch where they'd run.
A quick look through stores when I should be in bed,
Soon gave me to know retailers might have a tough time ahead.
The customers they shopped where stuff was on sale,
But no discount equaled no purchase despite their avail.
And leaving the mall to hit the next store,
The consumers weren't confined to stores they adore.
The shoppers want value, not just cheap price.
And retailers win who know naughty from nice.
We're still not done with the shopping this season,
But retailers will win who use their good reason.
There were creatures a-stirring, but not buying all.
The discounts were posted in the stores with care,
In hopes that the shoppers soon would be there.
The security teams were nestled all snug at their posts,
While visions of safety were bigger than most.
Shoppers in PJs, some with hot plates,
Had just settled in for a cold morning's wait.
When out in the parking lot there arose such a clatter,
Security sprang to attention to see what was the matter.
Away to stores I flew like a flash,
Held on to my credit cards, I'd only pay cash.
The fluorescent lights gleamed on the newly arrived stuff,
Gave a glimmer of hope to the retailers who'd had it so tough.
When what to my wondering eyes should appear,
But a whole slew of shoppers, with Christmas lists for those dear.
They clutched at the flyers, all glossy and slick,
And I knew in an instant that it was bargains that would stick.
More rapid than hordes, the shoppers they came,
Crowding home and electronics, gotta get that new game.
Now toasters, now iPods, now board games and toys,
Grab discounts, grab bargains, can't afford to be coy.
To Kohls and to Target, To Walmart and the mall,
Shop away, shop away, shop away all.
As dry leaves that before the wild hurricane fly,
Grew the lines at the checkouts with items to buy.
So up to the next floor, the hordes they plain flew,
They wanted those bargains, apparently more than did you.
And then in a twinkling, I heard from the clerks,
'Next in line please,' they were glad to have work.
As I talked with consumers, the people in line,
It was really apparent they weren't feeling too fine.
They were clutching their wallets, a glaze in their eyes,
'No credit left for me this year,' was often their cry.
Their choices were careful, each item a find,
Yet the retailers had obviously kept margins in mind.
Their steps they were quick, but eyes were quite bleery,
Still yawns they were stifled, due to caffeine with dairy.
Their bags didn't bulge, despite purchases paid,
A few less per family than they'd previously made.
Still some shopped for sport and had good fun,
Twas quite the excitement to watch where they'd run.
A quick look through stores when I should be in bed,
Soon gave me to know retailers might have a tough time ahead.
The customers they shopped where stuff was on sale,
But no discount equaled no purchase despite their avail.
And leaving the mall to hit the next store,
The consumers weren't confined to stores they adore.
The shoppers want value, not just cheap price.
And retailers win who know naughty from nice.
We're still not done with the shopping this season,
But retailers will win who use their good reason.
Tuesday, November 17, 2009
Sandbagging or realism?
Interesting debate going on today after more retailers reported earnings. Several folks insinuated that management teams are sandbagging earnings expectations for Q4 so they can knock it out of the park. Let's be clear...no sane retail management team is going to be pumping up expectations when headline unemployment is 10.2% and the more realistic U-6 number that includes discouraged workers and the under employed is 17.5%. If people can't get jobs, they can't spend.
Yes, last year things were so dire, folks were so scared, that the sales were totally abysmal. It almost seemed Apocalyptic. And we have absolutely come back from that brink. But this time last year unemployment was only 6.8%, most folks had credit cards that hadn't had limits reduced, retailers had way too much inventory that they sold to us at 60% off, and we were still in the mindset that retail therapy worked.
But this year, we don't have the same level of inventories so there won't be the same sales. Oh sure, expect retailers to have promotions. Just don't expect that there will be the smell of fear when you walk in the stores. Retailers know you expect a discount, and they've procured items at costs that will allow them to put them "On Sale" while they still make decent margins. And if you buy it when it isn't "On Sale", they'll make even more.
The major retailers are saying November is starting weak. Smaller retailers are saying November is starting weak. JC Penney, Kohl's and Walmart have all started Black Friday discounting earlly. If I was managing a retailer, I wouldn't be enthusiastic about what's happening out there.
Caveat - one semi bright spot came from the CEO of American Express this morning when he said on CNBC that his cardholders spent 3% more in October. Maybe it will continue to holiday... maybe it won't. Most major outlets are expecting a fall in sales.
The trick right now is to find the best operators in retail and cling to them if you feel you must own a retailer. Discounters will do better than mainline departmetn stores. Higher end stores seem to be stronger than mainline too. Whatever you do, don't be tempted to lower your standards.
Bottom line: If you want to own these stocks do your research. Watch monthly retail sales. Walk the stores and watch trends. Talk to people about what they're doing for the holidays this year. Or just keep following me here, on CNBC and on Twitter and see what I'm seeing. Be careful out there.
Yes, last year things were so dire, folks were so scared, that the sales were totally abysmal. It almost seemed Apocalyptic. And we have absolutely come back from that brink. But this time last year unemployment was only 6.8%, most folks had credit cards that hadn't had limits reduced, retailers had way too much inventory that they sold to us at 60% off, and we were still in the mindset that retail therapy worked.
But this year, we don't have the same level of inventories so there won't be the same sales. Oh sure, expect retailers to have promotions. Just don't expect that there will be the smell of fear when you walk in the stores. Retailers know you expect a discount, and they've procured items at costs that will allow them to put them "On Sale" while they still make decent margins. And if you buy it when it isn't "On Sale", they'll make even more.
The major retailers are saying November is starting weak. Smaller retailers are saying November is starting weak. JC Penney, Kohl's and Walmart have all started Black Friday discounting earlly. If I was managing a retailer, I wouldn't be enthusiastic about what's happening out there.
Caveat - one semi bright spot came from the CEO of American Express this morning when he said on CNBC that his cardholders spent 3% more in October. Maybe it will continue to holiday... maybe it won't. Most major outlets are expecting a fall in sales.
The trick right now is to find the best operators in retail and cling to them if you feel you must own a retailer. Discounters will do better than mainline departmetn stores. Higher end stores seem to be stronger than mainline too. Whatever you do, don't be tempted to lower your standards.
Bottom line: If you want to own these stocks do your research. Watch monthly retail sales. Walk the stores and watch trends. Talk to people about what they're doing for the holidays this year. Or just keep following me here, on CNBC and on Twitter and see what I'm seeing. Be careful out there.
Thursday, April 16, 2009
Gotta go through it
So the American consumer bought way too much stuff with money that wasn't really theirs in the malls that have appeared everywhere across our landscape. And now the bill is due, consumers aren't spending, and those malls dotting the landscape aren't looking so pretty any more.
How ironic that General Growth Properties who bought way too many malls with money that wasn't really theirs is now having problems of the Chapter 11 variety. You have to give them credit (perhaps a bad word choice in light of the circumstances), but they had done everything possible to work out something with their bondholders to get through this without having to file.
So what happens now? Well, this isn't liquidation, it's just restructuring. General Growth will continue to operate their more than 200 malls... until they can sell some of them off. It's considered likely that Simon Properties will be able to pick up some of the properties at literally fire sale prices.
I'm fairly certain that more than a couple of the nation's malls need to go dark. In fact I talked about that for an hour in October with NPR. Here in the Seattle metropolitan area we have eight malls for 3.2 million people. Sounds like a lot of potential shoppers, but the malls are just too close together. We could easily cull three or more of those from the herd and improve the local gene pool.
So now it gets interesting. It's now not just the retailers but the property owners that are having issues. And the consumer isn't at a point they should be spending like drunken sailors again. Call me funny, but I'm not seeing how the current stimulus plans fix this. It's like that song we used to sing at camp where a refrain went something like: "can't go under it, can't go around it, gotta go through it."
How ironic that General Growth Properties who bought way too many malls with money that wasn't really theirs is now having problems of the Chapter 11 variety. You have to give them credit (perhaps a bad word choice in light of the circumstances), but they had done everything possible to work out something with their bondholders to get through this without having to file.
So what happens now? Well, this isn't liquidation, it's just restructuring. General Growth will continue to operate their more than 200 malls... until they can sell some of them off. It's considered likely that Simon Properties will be able to pick up some of the properties at literally fire sale prices.
I'm fairly certain that more than a couple of the nation's malls need to go dark. In fact I talked about that for an hour in October with NPR. Here in the Seattle metropolitan area we have eight malls for 3.2 million people. Sounds like a lot of potential shoppers, but the malls are just too close together. We could easily cull three or more of those from the herd and improve the local gene pool.
So now it gets interesting. It's now not just the retailers but the property owners that are having issues. And the consumer isn't at a point they should be spending like drunken sailors again. Call me funny, but I'm not seeing how the current stimulus plans fix this. It's like that song we used to sing at camp where a refrain went something like: "can't go under it, can't go around it, gotta go through it."
Friday, March 20, 2009
A squeeze around the middle
Sometimes a squeeze around the middle is a nice thing. I personally like it when my husband or kids come up and give me a hug. But when the squeeze is put on me in a business sense, not so much.
One of my loyal readers asked in the comments of another post how credit terms had changed for some of the retailers recently. Interesting question, and one that I have spent some time working on recently. In the interest of full disclosure, I'm discussing this from an outside perspective. I've not worked in the credit area of a supplier or in the buying organization for a retailer... but I know people who have and/or do.
Under normal times retailers (we're talking big retailers here, not the mom & pops) order goods from a supplier. The supplier produces the goods and when they ship they bill. Terms differ, but are usually net 30, net 45, something like that. The retailers usually negotiate additional other terms they want such as markdown allowances, etc.
From what I'm hearing on multiple fronts, the retailers are getting more than a little bit bolder on the terms that they're demanding. They're not only asking for higher allowances, but they're also extending out their payments. In fact, numerous retailers are actually highlighting their accounts payable as a percentage of inventories on their earnings calls. Additionally, for goods shipped from overseas historically the retailer was said to have possession of the goods when they shipped, so the time on the ocean counted in the payment terms. That just got changed by a number of large retailers recently.
Suppliers have a few ways to fight back. Some retailers are obviously cash strapped, and that's taken into account by the credit managers at the suppliers when orders are placed. I'm hearing that credit terms are especially strict these days. Credit managers are pouring through financials, trying to make sure that they're not taking on too much risk. As one friend put it, "Just because you're a big company doesn't mean you can't go bankrupt on me." I know of one particularly fiesty credit manager who refused to sell to a certain large retailer because they were asking for ridiculous terms. The line "you have to sell to us because we're _______" doesn't hold much weight right now. Also, JP Morgan (and others, I'm sure) have developed some financial hedging products to allow suppliers to protect themselves against the potential bankruptcy of retailers with whom they do business.
Cheery, no?
One of my loyal readers asked in the comments of another post how credit terms had changed for some of the retailers recently. Interesting question, and one that I have spent some time working on recently. In the interest of full disclosure, I'm discussing this from an outside perspective. I've not worked in the credit area of a supplier or in the buying organization for a retailer... but I know people who have and/or do.
Under normal times retailers (we're talking big retailers here, not the mom & pops) order goods from a supplier. The supplier produces the goods and when they ship they bill. Terms differ, but are usually net 30, net 45, something like that. The retailers usually negotiate additional other terms they want such as markdown allowances, etc.
From what I'm hearing on multiple fronts, the retailers are getting more than a little bit bolder on the terms that they're demanding. They're not only asking for higher allowances, but they're also extending out their payments. In fact, numerous retailers are actually highlighting their accounts payable as a percentage of inventories on their earnings calls. Additionally, for goods shipped from overseas historically the retailer was said to have possession of the goods when they shipped, so the time on the ocean counted in the payment terms. That just got changed by a number of large retailers recently.
Suppliers have a few ways to fight back. Some retailers are obviously cash strapped, and that's taken into account by the credit managers at the suppliers when orders are placed. I'm hearing that credit terms are especially strict these days. Credit managers are pouring through financials, trying to make sure that they're not taking on too much risk. As one friend put it, "Just because you're a big company doesn't mean you can't go bankrupt on me." I know of one particularly fiesty credit manager who refused to sell to a certain large retailer because they were asking for ridiculous terms. The line "you have to sell to us because we're _______" doesn't hold much weight right now. Also, JP Morgan (and others, I'm sure) have developed some financial hedging products to allow suppliers to protect themselves against the potential bankruptcy of retailers with whom they do business.
Cheery, no?
Subscribe to:
Posts (Atom)
Posts
