Search results matching tag 'retail'

'Tis the season to layaway

Kim Peterson — Mon, 19 Oct 2009 16:53:00 GMT

Layaway, gone from most stores for years, is back this season as stores get creative in wringing every dollar they can from shoppers.

Toys R Us announced Monday it will launch a layaway program for its more expensive items. Chief executive Gerald Storch said customers were requesting the service.

Toy sales don't suffer as much as other retail categories in recessions. That's because, when your daughter looks at you with big eyes and says how much she would love the Fur Real Friends Lulu My Cuddlin Kiddy Cat, well, it's hard to say no.

And now, Toys R Us and other stores are making it that much harder to say no. Kmart and Sears are even offering online layaway programs. You must make a down payment of 15% or $10, whichever is greater, and pay a $5 fee, according to The Los Angeles Times.

The new interest in layaway -- from both shoppers and stores -- comes as forecasters expect retail sales to drop this holiday for the second year in a row. The expected 1% decline won't be as bad as last year's 3.4% fall, according to Bloomberg, but retailers are preparing for some bleak numbers.

Stores are also rolling out sales and promotions -- and we'll hear a lot about layaway in the next few weeks.

The rebirth of the American consumer

Anthony Mirhaydari — Tue, 13 Oct 2009 18:17:00 GMT

Don't look now, but a nation of shoppers is about to be reborn. Thanks to rising stock prices, stabilizing home values, increased savings, improved confidence in the economy, and reduced debt, there is building evidence that the quintessentially American capacity for consumption is returning. The key has been a recovery in net worth and more manageable debt burdens.

According to Deutsche Bank economists, from a low in the first quarter, households are already halfway down the road to rebuilding net worth to the 20-year average of 533% of income. Also, thanks to ultra-low interest rates, debt service ratios are quickly returning to more normal levels even as total debt levels remain elevated. This helps spending since people focus on monthly payments, not the total balance outstanding.

It's worth noting that the stock market is already pricing in a more optimistic outlook in this area. Retailers and other consumer discretionary stocks have been on fire: Specialty outlet Lululemon (LULU) is up some 470% from its March low while big-toy manufacturer Polaris (PII) is up more than 200%. The Consumer Discretionary SPDR (XLY), meanwhile, has returned to levels last seen in the summer of 2008.

The big question is how consumers will respond now that their financial situation is somewhat improved.

With 70% of the U.S. economy dependent on the consumer, much depends on the savings rate -- which current stands at about 4%. Deutsche Bank built a savings model that factors in things like net worth, credit card interest rates, consumer sentiment, and the unemployment rate. They predict the savings rate to increase to 6% over the next several years.

So what are the implications? Bank of America - Merill Lynch economists believe that such a moderate rise in the savings rate could complete the healing of household balance sheet. And the drag on the economy would be relatively modest, with consumption growth falling by 0.25% to 0.75%.

Under this scenario, debt levels would remain elevated as new savings are used to buy high-yielding assets to boost wealth instead of paying down debt. You've gotta love this solution. Better to own more than owe less. Especially since the vast majority of consumer debt is tied to real estate and early repayment of mortgage debt isn't as popular as taking a flyer on a hot stock idea.

If this is true, than the biggest beneficiaries of the return of the consumer could be asset managers like SEI Investments (SEIC) and Blackrock (BLK) instead of luxury retailers like Coach (COH) and Tiffany (TIF).

Disclosure: The author does not own or control a position in any of the funds or companies mentioned.

Anthony Mirhaydari is a researcher for the Strategic Advantage investment newsletter. He can be contacted at anthony.mirhaydari@live.com. Feel free to comment below.

Related reading:

Federal Reserve restarts the money pump

Why stocks look oversold

Is there hope for the labor market?

Surprise under the Christmas tree?

Jim Van Meerten — Wed, 07 Oct 2009 15:57:00 GMT

There are a lot of articles predicting gloom and doom for the Christmas retail season. On one hand we hear the economy is recovering, and on the other hand we hear that we're not out of the woods yet.

I decided to take a very unscientific poll to find out for myself. I'd rather be approximately right than precisely inaccurate, so I called a few friends and asked how they were preparing for Christmas. I got some surprising answers.

Several people told me that they remembered growing up in hard times but everyone's parents had a Christmas Club account. They couldn't find a Christmas Club to join but decided to open a savings account or a money market account and they've been stashing some money away until they see the seasonal sales.

I also heard a term I hadn't heard in years: layaway. I remember how we bought my first big boy bike at Western Auto on a layaway plan. Every week we'd go in and I'd check to see if it was still there in the store and we'd put down another $2 till it was paid off. Stores are again pushing the layaway plans and people are responding.

I followed up with a question: When will you decide how much to spend and what will trigger your decision? Again I was surprised by some rational answers.

Most people said they had been holding back for two reasons. First, they were uncertain about layoffs and secondly, they always used the year-end bonus to pay off the Christmas bills. Most felt that by Christmas they would know if their companies would survive and if they still had a job. Most also said that although year-end bonuses were confidential the rumor mill would know by Thanksgiving if they were going to get one and approximately how much.

Ok, very unscientific but I still think, valid information. People are preparing with savings and layaways ahead of time and most feel even though they haven't been spending recently because of uncertainty that they'd have the answers about their future by year end.

How are you and your friends and family preparing for Christmas? I'd like to see if you have similar responses and please let us know. I think there will be a lot of unexpected surprises under the tree this year.

Jim Van Meerten is an investor and shares his opinions on financial matters on Financial Tides and Top Stocks. Please comment below or email to FinancialTides@gmail.com.

Related reading:

Another bad retail holiday

Retailers in for unhappy holidays

Another bad retail holiday

Douglas McIntyre — Tue, 06 Oct 2009 10:57:00 GMT

Retail sales dropped 3% or more during the 2008 holiday period. Same-store sales at a number of large chains were down much more than that. The trend was so bad that thousands of store locations closed early in 2009 and tens of thousand of workers lost their jobs.

The 2010 holiday sales season may be nearly as bad as last year’s. The National Retail Federation expects a hard winter.

The NRF reports that it expects holiday retail industry sales to decline 1% this year to $437.6 billion. The number falls significantly below the ten-year average of 3.39% holiday season growth.

The news may be bad for the entire industry, but it will be particularly troubling for retail chains that have already had difficult years. Abercrombie & Fitch (ANF), American Apparel (APP), Saks (SKS) and Zumiez (ZUMZ) are among the companies that need strong holidays to make up for extremely poor sales in the first three quarters of 2009.

The holiday season may be important to a number of retailers, but it is more important to the economy in general. Consumer spending still represents 70% of gross domestic product by most estimates. The rise in unemployment and tight credit will likely keep retail activity down beyond the end of this year. That will cause more layoffs in the industry and in turn push increased national joblessness.

Economists have to recalibrate their growth projections for the fourth quarter of this year and the first quarter of 2010. A jobless recovery is one thing. A “sales less” recovery is another.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

Related stories:

Top 500 companies

Wall St. pay cut

New solar shingles

Top kids’ gifts include toy hamster

Karen Datko — Thu, 24 Sep 2009 23:11:00 GMT

Toys R Us released its list of prospective hot toys for the holidays, and guess what: Most retail for less than $100.

The toy getting the most media attention is the Zhu Zhu Pets Hamster, which retails for a very attractive $9.99. "With more than 40 different sound effects and artificial intelligence, these pets will dart around the house, play in hamster tubes, run on wheels and more," Toys R Us said. This sounds fun.

Among those on the higher end, The Associated Press reports, are "Mattel's Mindflex, about $90, which measures brain activity through a helmet and uses it to move a ball through an obstacle course." Great. We'll bring that one out whenever anyone questions our brain power.

The list is based on consumer reaction in small markets and Toys R Us analysis, and the toys on it will be heavily promoted this season. In other words, these are the ones your kids will be bugging you about.

Other lower-cost picks on the Toys R Us "Fabulous15," as described by AP, include:

Nerf N-Strike Raider Rapid Fire CS-35 from Hasbro. A customizable dart gun. $34.99.
Little Mommy Baby Ah-Choo from Fisher-Price. A doll that sneezes and speaks. $34.99.
ChixOs Pink Design-A-Luxury Loft from Spin Master. A customizable doll and playhouse set. $29.99.
Color Me a Song from Crayola Beginnings. A kit that plays music while tots color. $24.99.
Bakugan Battle Brawlers New Vestroia Maxus Helios 7 in 1 toy by Spin Master. A version of the popular card and morphing marble game that combines seven different marbles into one fighter. $39.99.

For your shopping convenience, Toys R Us is opening 80 "pop-up" stores in malls for the holiday season and "express" stores in Babies R Us locations.

However, the company rightly expects that people will be watching their spending. One analyst the AP quotes expects holiday toy sales to be flat or slightly down this year.

Related reading:

Toy battle on Aisle 5

No ‘must-have' toy hurts sales for toymakers

Rite Aid in need of a Band-Aid

InvestorPlace — Thu, 24 Sep 2009 18:20:00 GMT

This post is by InvestorPlace's Jim Woods.

The nation’s third-largest drugstore chain is in need of a little first aid. Rite Aid (RAD) came out with a narrower second-quarter loss before the opening bell, but unfortunately the company also cut its full-year forecast due to what it generically described as a difficult retail environment.

The news caused RAD shares to bleed heavily in early Thursday trade, so it’s a good thing the company can draw on an ample supply of Band-Aids from aisle 5.

Bing: What analysts say about Ride Aid

If you look at the actual numbers for their most-recent quarter ended Aug. 29, we see a net loss of $116 million, or 14 cents a share, compared to a net loss of $222 million, or 27 cents a share, in the year-ago period. And while the bottom line numbers were in-line with the consensus Wall Street forecast, the company’s sales declined to $6.32 billion from $6.50 billion over the same period.

Rite Aid did manage to increase the number of prescriptions it filled, but according to a company press release, pharmacy results were negatively impacted by additional pressure on pharmacy margins. “A more discount-driven customer buying more items on sale continued to have a negative impact on front-end results,” the press release read. Here we have another example of the new Frugal Nation zeitgeist in action.

But as stated previously, the real deep cut to the shares (down over 10% early Thursday) was the company’s slashed forecast for fiscal 2010. Rite Aid’s new projections are for a loss of 48 cents to 74 cents a share. Back in June, the company said it expected a loss of 33 cents to 59 cents a share in fiscal 2010. Wall Street expectations called for a full-year loss of just 40 cents a share.

The twist of fate here for Rite Aid investors is that the stock has had a remarkable run off its $0.20 share price in February to a new 52-week high of $2.35 last week. As my colleague Douglas McIntyre pointed out in his great piece, Rite Aid -- Miracle on Main Street, Rite Aid is a classic example of how low expectations pay off for investors who like to bottom fish.

Unfortunately, when you bottom fish, the big gainers have a tendency to fight their way off the hook with any modicum of bad news. Certainly, today’s lowered forecast for 2010 was more than enough bad news for Rite Aid shares to get away from bottom fishers.

Although I am a fan of Rite Aid stores and their pharmacy operations, from an investment perspective, I think if you own Rite Aid shares here, and if you have a profit, now would be a great time to lock in those gains.

If you are contemplating a move into the stock after today’s pullback, I recommend waiting to see where the short-term trading bottom is found before committing any new money to RAD.

At the time of this writing, Jim Woods did not own shares of RAD.

Related Articles:

Rite Aid -- Miracle on Main Street

Score Big with 10 Touchdown Trades

10 Sectors That Could Use a Bailout

The Gap's revival is in its jeans

James Dlugosch — Wed, 16 Sep 2009 21:24:00 GMT

The economy is improving, but does that mean people will again go out and blow a few hundred dollars on designer jeans? I don't know about you, but I certainly will not.

Instead, I’m falling back onto old standby: The Gap (GPS).

Do you remember when Gap was cool? I do. I shopped at the GAP from the mid-1980s until the end of the 1990s. But I stopped shopping at The Gap at the turn of the millennium.

Bing: More on Retail Stocks

The timing was no coincidence; a lot of people did the same.. More choices, more niche brands and premium jeans retailers sprung up like weeds as the bull market wore on. The Gap got lost in the crowd, and its business suffered.

So did its stock. GPS was a lackluster share during the last bull market, then collapsed during the bear market last year. The move lower was a complete overreaction, as investors sold stocks and asked questions later. From March of 2003 until 2008, GPS traded flat at $20 per share. GPS lost half its value to $10 per share during the 2008 bear market.

But the selling failed to appreciate how well positioned The Gap would be during a debilitating recession. A weak consumer market favors The Gap, with its mainstream prices.

Perhaps that explains why GPS shares are up more than 100% since bottoming in March. They are also up significantly more than the market as a whole, year to date.

Ironically, however, the soft economy hasn't hindered the sales of some premium jeans brands. Premium jean-seller True Religion (TRLG) is also on a run of late. True Religion, with jeans that go from the $200 range on up, has benefited from expectations of a return to status jean buying after the recession ends.

Over time, I'd expect something more like the trading pattern of another premium apparel company, Buckle (BKE). Shares of Buckle bottomed last November, but rallied steadily through May. But since then, shares have sputtered, as investors question the strength of the next business cycle. Shares of Buckle trade for approximately $10 less than the high reached in May; jeans are in the $100 range.

To me, the likely scenario is that after a brush with disaster, the economy is likely to sputter forward over the next few years. Accompanying this unimpressive growth will be stubborn unemployment.

Consumers will still be strained and budgets will remain tight. In that market, premium brands will have a tough go of it. For The Gap, where jeans go for $50-$70 before the inevitable mall sales, the opposite will be true.

Its stable and relatively conservative brands may lack sizzle during the boom times, but its offerings are perfect for the economic environment now and in the future. Shares are relatively cheap as well, despite the 2009 gains.

Analysts expect The Gap to make $1.35 per share this year. At $21 per share, the company is valued at 15 times 2009 earnings. I expect early stage economic growth to push earnings 20% higher in 2010.

If so, there are more gains to be had in The Gap, while premium brands will remain under pressure I would buy GPS and avoid TRLG and BKE.

At the time of publication, James Dlugosch did not own shares of Gap, True Religion or Buckle.

Related Articles:

6 ways to revitalize Blockbuster

Minyanville — Wed, 16 Sep 2009 20:16:00 GMT

This article is written by Minyanville's Mike Schuster

Years of mismanagement, increased competition, and ill-conceived promotions have caught up to Blockbuster (BBI). On Tuesday, the company announced plans to close 810 to 960 underperforming locations -- an amount that doubles the previous aim of 410 to 450 stores -- in an effort to stave off the increasing likelihood of Chapter 11.

In addition the shuttered locations, the company said it may revamp 250 to 300 existing stores into used DVD outlets, bringing the total percentage of closed or altered Blockbuster locations to 24% to 29%.

The last few years have been rough for the once-great king of rental video. Netflix (NFLX) has ushered people away from the brick-and-mortar shops to the ease of online rental membership. And Redbox (CSTR) kiosks have been the popular choice for those who need a DVD title for a paltry $1/night fee. Shares have fallen an astounding 95% since its all-time high of $30 in May 2002 and dipped to $0.22 -- its lowest point -- in March of this year. In keeping its ongoing annual losses in check, Blockbuster has curbed its marketing and in-store stock this year, according to the Los Angeles Times. And the chain estimates that each closed store will save $30 million in avoided losses.

But Michael Pachter -- an analyst at Wedbush Morgan Securities -- told the Times that for every closed location, there's an opportunity for Redbox to install a kiosk out front.

As business steadily transfers to Netflix and Redbox, Blockbuster is in dire need of some guidance. As a former employee of the company -- Floor Representative from March '97 to January '98 -- I feel qualified to provide some sound advice for a positive business makeover.

1. With Netflix's "Watch Instantly" feature, Blockbuster's immediate-viewing appeal is severely undercut. Equip each store with an array of TVs, shag carpeting, and beanbag chairs for a quick, cozy, and convenient viewing experience.

2. Some customers prefer Redbox kiosks for their faceless interaction. Train the staff to ignore customer questions, avoid eye contact during transactions, and vacate the premises when asked for a recommendation.

3. Blockbuster locations have been widely criticized for only carrying generic, mainstream titles. Find the Lithuanian equivalent to Confessions of a Shopaholic and promote the title as a Blockbuster exclusive.

4. A Staff Pick generally doesn't carry much weight if the employee is a 17-year-old neophyte. Enroll each employee in film school, bankroll their first three features, and book at least one Village Voice interview before they give an opinion on cinema.

5. Online piracy has curtailed the public's interest in paying for films. Guilt-trip potential pirates by uploading Blockbuster's entire library to BitTorrent sites with the message: "If you enjoyed this movie, please donate $19.99 to your local Blockbuster location."

6. Bring back VHS for a kitschy retro vibe.

No positions in stocks mentioned

Related Articles

What's Buffett buying?

Our Marionette Economy

How to bullet-proof your portfolio for deflation

Celebrity clothing lines disappear

Kim Peterson — Wed, 16 Sep 2009 16:02:00 GMT

In this economy, it's tough to sell pricey clothes to a penny-pinching public. Even if you're Justin Timberlake or Jennifer Lopez.

The recession is taking a toll on celebrity clothing lines, The Wall Street Journal reports. Sales of products with celebrities' names on them dropped to $2.9 billion last year from $3.5 billion in 2006.

Do you really need to pay an extra $50 for something just because a celebrity's name is on it? These days, more people are saying no.

Jennifer Lopez' Sweetface line is gone, the Journal reports. Lauren Conrad of reality-television fame had to put her upscale clothing line "on hold." Singer Mandy Moore and Nicky Hilton (sister of Paris) are also out of the business.

"Every D-level celebrity who thought they could make a quick buck by designing a handbag or whatever is going to disappear," Vogue editor-in-chief Anna Wintour told the Journal. "And I think that's a good thing."

One celebrity that seems to be staying in the business is singer Gwen Stefani, whose L.A.M.B. line continues to sell at Saks Fifth Avenue.

Image credit: Lion Hirth, GNU Free Documentation License

Related reading:

Economy on the mend? Check your closet

Trouble for Abercrombie & Fitch

The shrinking of American retail

JC Penney fights for survival

Why Best Buy could be a bargain

Minyanville — Tue, 15 Sep 2009 17:30:00 GMT

This article is written by Minyanville's Kristen Graham

As one of the few freestanding electronic retailers left standing, I’ve found myself warming up to Best Buy (BBY) lately. See, Best Buy is a retail winner. This morning, the company released second-quarter results have further piqued my interest in the company.

The retailer missed earnings estimates as profits fell 22%. But total revenue rose 12%, boosted by the 170 new European stores it opened over the last year. And domestic sales increased 2% -- a solid figure in my mind as positive sales growth is pretty rare in the retail space these days.

More importantly though, inventory fell 6.1%, positioning the company to enter the holiday season with a lean balance sheet. And market share soared 2% as its formerly crippled rival Circuit City is no longer in operation and current competitors just don’t offer as impressive of a selection of merchandise.

Despite increased traffic flow, the average ticket fell. This comes as no surprise as consumers simply don’t have the funds to make larger purchases right now. The key point here, though, is that consumers are still going to Best Buy for their electronic needs. Sure -- they may not be making purchases as large as they once would have, but they're still going or switching to the big-box retailer when they need electronic goods.

This is important because it indicates that the Best Buy brand is still going strong. And why wouldn’t it be? It’s nearest retail outlets pale in comparison. Radio Shack (RSH) supplies a limited selection of what sometimes seems like archaic gadgets. And consider yourself lucky if you can even navigate your way to the electronics section of a Sears (SHLD) -- its stores are disorganized and cluttered.

In reality, the only competitor of Best Buy that puts up a real fight is Amazon (AMZN). The competition between the two for this year’s holiday shopping season will undoubtedly be fierce as they duke it out for shoppers' limited holiday budgets. But there's something to be said for personal face-to-face service, and that’s precisely Best Buy’s competitive advantage.

So far, the company has done well at avoiding massive promotions; the gross margin was stable in comparison to last year. And management has successfully implemented expense control. I anticipate Best Buy gaining further market share during the holidays with Circuit City completely out of the picture. At less than 17 times earnings, I think Best Buy is a company to keep your eye on as we move closer to the most critical two months of the year for retailers.

No positions in stocks mentioned

Related Articles

All eyes on Best Buy

Best Buy May Not Be the Best

Retailers in for Unhappy Holidays