Weekly Top 5 – Five Articles Worth Reading

Retail Geeks — Fri, 03 Feb 2012 19:07:21 +0000

Each week, we provide a PDF of 5 articles of interest to investors focus on the retail/consumer space. Enjoy.

Starbucks Enters India With Tata’s Help Click to Open PDF
A missed opportunity for BBY to replace current CEO Brian Dunn.
Posted: Tuesday, January 31, 2012
Source: WSJ

Store Brands Step Up Their Game, and Prices Click to Open PDF
Apparently, a CFO’s loose lips at a management access dinner got him fired for a possible Regulation FD violation.
Posted: Wednesday, February 01, 2012
Source: WWD

Retailers Posted Solid January Sales Click here for the full report and various ‘stack’ presentations.

Big picture, comp sales in January 2012 should have been stronger. Why?

In January 2011, retailers unanimously suggested comp sales were negatively impacted by inclement weather (see comments below). Retailers should have received a nice lift in January 2012 due to the relative lack of store closures, etc. A retailer would prefer a warm winter (this year) versus a material number of store closures (last year).

It was a different story in February 2011. Sales in February 2011 rebounded as winter weather ‘normalized’ versus the prior month.

So, if retailers were unable to report stronger top-line results in January 2012 with a favorable weather comparison, what happens in February 2012 when the sector laps a good weather month?

Today, no one mentioned last year’s inclement weather. Let’s review some of the disclosures from retailers reporting monthly sales:

BIG
“We believe the last three weeks of January were impacted negatively by weather conditions in many of our major regions and markets.”

Ex-BJ

“Severe snow storms affecting the Northeast and Mid-Atlantic regions had a negative impact on merchandise comparable club sales of approximately 2.5%.”

COST
“For the reporting month, winter weather conditions had a negative impact in many regions with the US and Canada. We estimate that adverse weather conditions negatively impacted our reported January comp sales results by approximately 1.0% to 1.5%.”

FRED
“Poor weather and the inability of our customers to get early tax refunds in January were critical factors contributing to the sales shortfall.”

JCP
“Geographically, the Company’s best performing regions were the Southwest and Northwest, compared to the Northeast and Southeast regions where winter storms affected sales and traffic trends throughout the month of January.”

KSS
“The Northeast region being most affected by snowstorms during the month.”

M
“While sales in January were restrained by the series of snowstorms that caused widespread store closings along the East Coast and in the Southeast U.S….”

TJX
“We achieved these increases despite some of the worst winter storms in many years in the Northeast and Midwest, where we have a heavy concentration of stores.”

A couple retailers suggested that delayed tax refunds negatively impacted sales in January 2012 (e.g. CATO, CTRN).

The problem is that, in January 2011, many more retailers complained about delayed tax refund anticipation loans versus the prior year (e.g. BIG, BONT, CTRN, and FRED). Therefore, it’s difficult to believe that delayed tax refunds negatively impacted sales (relative to LY) as much as CATO and CTRN are suggesting.

In January 2012, retailers generally reported comp sales results that were -100 Bps to -300 Bps below December 2011 (see attached table).

Therefore, keep an eye on retailers that reported comp sales in January 2012 that were greater than -300 Bps below December 2011 (CATO, DDS, JWN, M, ROST, SMRT, and WTSLA).

Five retailers that report monthly sales numbers have negative 2-year ‘stacks’ in January 2012. These are: GPS (-1.0%), BONT (-3.2%), SMRT (-5.1%), WTSLA (-6.8%), and CATO (-10.0%). See attached table.

4-year comp sales ‘stacks’ range from +30.0% at LTD to -25.2% at WTSLA. See attached table.

Furniture continues to be mentioned as a relatively strong category, continuing the trend that has been reported over the past few months. Clearly, the category has been the worst performer over the past 5 years and the resurgence may have more to do with “replenishment” than anything else. But, an encouraging trend nonetheless.

COST suggests that weaker foreign currencies negatively impacted total company comp sales by -75 Bps in January 2012. This compares to -50 Bps in December 2011, -50 Bps in November 2011, and -25 Bps in October 2011.

Keep an eye on retailers with FX exposure.

COST suggests that Food/Sundry inflation was +LSD to +MSD in January 2012 versus +MSD in December 2011, +LSD to +MSD in November 2011, and +LSD in October 2011. Interestingly, Food/Sundry inflation at COST in January 2011 was disclosed as “a little over” +100 Bps.

In addition, COST disclosed that its Fresh Foods inflation was +LSD to +MSD in January 2012 versus +MSD in December 2011. In January 2011, Fresh Foods category inflation was disclosed as +LSD. When will runaway food inflation end?

While the lowered EPS guidance revision for Q4 2011 at ANF did not surprise us, the company is likely being too optimistic re: FY 2012 ($3.50 to $3.75 guidance range). We’re well below $3.00 for next year.

ANN management AGAIN proves that it cannot forecast its GPM%. The company has ‘missed’ its quarterly GPM% guidance in 4 of the past 5 fiscal quarters.

Last month, JWN management suggested that The Rack’s relatively poor performance versus LY was a function of a GroupOn event in the prior year. What was this month’s excuse? We’re continuing to forecast an EPS ‘miss’ versus consensus expectations in Q4 2011.

Looking Ahead by Looking Back… What happened in February 2011?

Overall, comp sales in February 2011 were strong following a weather impacted January 2011.

While a few retailers attempted to suggest that weather negatively impacted sales in February, a a couple of retailers mentioned that weather trends became much more favorable in the latter half of the month.

In February 2011, the strongest category performance was in food (inflation), men’s apparel, jewelry, and shoes. Weak categories included electronics.

In February 2011, week #4 was generally considered to be the strongest fiscal week from a comp sales perspective. Week #1 was generally held to be the weakest fiscal week in February 2011.

In February 2011, the Northeast and Mid-Atlantic were generally held to be the strongest comp sales regions. The Midwest was generally held to be the weakest comp sales region in February 2011.

Facebook Fan Stats – January 2012

Retail Geeks — Wed, 01 Feb 2012 19:09:07 +0000

WAG Delivers Impresses Fan Growth – KSS, TLB, URBN, ex-JCG Ignore Social Media

Social media is fast becoming the most effective approach to boost brand awareness, understand the customer, get feedback, as well as direct traffic to a company’s web site and/or stores.

We like to track the Facebook activities and monthly fan base growth for the retailers and brands that we follow (and many others). Click to Open PDF
The conventional wisdom is that the only reason products are sourced from overseas is cost. This article suggests that it’s much more than cost alone. It’s the flexibility and access to mid-level labor that manufacturers overseas enjoy that we are unable at present to replicate here.
Posted: Saturday, January 21, 2012
Source: New York Times

Talbots Shares Soar as Buyers Circle Firm Click to Open PDF
Nice overview of e-commerce and the dramatic rise of late of m-commerce.
Posted: Wednesday, January 25, 2012
Source: WWD

J.C. Penney Chief Thinks Different Click to Open PDF
Historically, JCP management had a dismal track record when guiding go-forward EPS. Today, with the many strategic undertakings that will transform the store over the next few years, incoming CEO Ron Johnson professes that FY 2012 EPS will be much greater than today’s consensus expectations. Good luck with that.
Posted: Friday, January 27, 2012
Source: WSJ