Let’s be honest. Management teams are always putting their best foot forward. Press releases and conference calls are filled with Truthiness.

Each week, we’ll challenge “managerial spin” and offer some news and commentary about the retail industry. You are encouraged to provide any feedback to info@RetailGeeks.com.

Click to Open PDF (more…)

Reminder: We like to look at the Commerce Department data on a comp basis (year-over-year change). Hey, it’s government data, so caveat emptor.

This month’s report delayed due to ICR Conference attendance. See Full Report Here

Big picture, our favorite measure of “what’s happening at the mall” (excludes Motor Vehicles, Gasoline, and Building Materials) suggests a +5.0% year-over-year sales improvement in December 2011 versus LY. This represents a deceleration versus the +5.3% growth in November 2011.

The most compelling category specific storylines in December 2011 were:

December 2011 represented the 26th consecutive month of positive year-over-year growth for our favorite mall measuring stick. But, the 2-year growth rate greatly decelerated versus a month ago.

Electronics & Appliance Stores reported only flat year-over-year growth in December 2011 versus LY. This disappointing growth rate followed a +3.9% improvement in November 2011 versus LY.

Furniture & Home Furnishing Stores again reported impressive year-over-year growth in December 2011 (+5.6% in December 2011 follows +4.5% in November 2011). That said, the category remains the worst performing category versus calendar 2007 (-14.6% in December 2011 versus December 2007).

Over the same 4-year time frame, other struggling categories such as Motor Vehicles & Parts Dealers are down -3.5% and Electronics & Appliance Stores are down -12.4%.

Sure, Food Service & Drinking Places likely benefitted from favorable weather in December 2011. But, the category’s +8.4% growth versus LY in the month was impressive.

Non-Store Retailers saw its year-over-year growth rate slow to +10.6% in December 2011 versus +14.1% in November 2011.

Food Inflation at Home May Have Peaked, USDA’s Glauber Says Click to Open PDF
Farmers are expected to reap a record corn crop in 2012. After an almost +6% rise (“food at home”) in 2011, many are expecting a more “normal” gain of +3% to +4% in 2012.
Posted: Wednesday, January 04, 2012
Source: Bloomberg

For Malls, Occupancy Firms Up Click to Open PDF
The third quarter of 2011 marked an 11-year high for mall vacancy rates (9.4% in malls in the Top 80 U.S. markets). This number edged lower in Q4 2011 to 9.2%. But, that was the fourth quarter. Many more retailers are exiting stores as we enter 2012. Our bet is that the rate begins to creep higher again in Q1 2012.
Posted: Monday, January 09, 2012
Source: WSJ

Nordstrom Lowers Price of Rewards Click to Open PDF
How will this impact GPM%. One of many concerns for investors in JWN at the moment.
Posted: Tuesday, January 09, 2012
Source: WSJ

David Yurman Taps Glen Senk as CEO Click to Open PDF
One of the more surprising executive moves in years.
Posted: Thursday, January 12, 2012
Source: WSJ

Sears Seeks to Calm Nerves Click to Open PDF
Perception is much more important than reality for a struggling retailer. SHLD management needs to fully understand this or the company will flirt with Chapter 11.
Posted: Friday, January 13, 2012
Source: WSJ

Yesterday, Urban Outfitters (URBN – $29.41) CEO Glen Senk announced his departure. But, his recent strategic decisions left us scratching our head and his departure was long overdue. click here for a recent research note

In our view, Mr. Senk’s tenure will be marked by the ridiculous statements he made to the institutional investor community. For example, a few years ago, he suggested that URBN would eventually deliver 25% to 30% EBIT margins. That was never going to happen, good economy or bad.

Also, who could forget the following:

At the ICR Conference in January 2011, Mr. Senk suggested that the Anthropoligie catalog in March 2011 was “one of the top 5 best” that he had seen at the chain.

At the ICR Conference in January 2011, Mr. Senk suggested that the company was planning for a “higher merchandise margin” in FY 2011 than LY. Also, Mr. Senk suggested that the sourcing environment was “easier” on URBN than others because URBN is not “boxed into low prices and cotton.” In addition, URBN has “never been in low-cost factories.”

On the Q2 2011 conference call in August 2011, Mr. Senk was “anticipating gradual improvements” in the company’s comparable sales and financial improvements “over the balance of the year and into Spring 2012.”

On the Q2 2011 conference call in August 2011, Mr. Senk boldly suggested that “I did just look at the Spring finalization and I have to say, and Eric is probably going to kick me, but I think it is some of the best product I have seen at Anthropologie in a long time.”

We know what happened to each of these bold statements above and they did not reflect well on Mr. Senk’s ability to provide a peek into the company’s financial future.

Those are just a few examples. But, we believe that Mr. Senk’s exit was largely a function of the following.

In August 2011, Mr. Senk made the following statements on the company’s Q2 2011 conference call:

“We have begun to enhance our merchant organization by splitting the creative and operational functions, thereby unencumbering creativity.”

“I think the organization has absolutely embraced the concept of taking risk.”

The ‘splitting’ of creative and operational functions and the embracing of merchandising ‘risk’ had the potential to be an absolute disaster and it appears that is exactly how it played out. URBN had a long history of operational discipline and the above strategic shift likely exacerbated the company’s recent merchandise margin woes.

Many times, Mr. Senk reminded investors that merchants were eternal optimists. That’s true. But, it’s imperative that a retailer has a strong merchandise planning and allocation (MP&A) team to provide the guardrails to ensure operational discipline.

Mr. Senk’s desperate Hail Mary (splitting creative/operational functions) is likely to reason for his sudden departure today. But, investors in URBN should be saying good riddance.

Let’s be honest. Management teams are always putting their best foot forward. Press releases and conference calls are filled with Truthiness.

Each week, we’ll challenge “managerial spin” and offer some news and commentary about the retail industry. You are encouraged to provide any feedback to info@RetailGeeks.com.

Click to Open PDF (more…)