Posts Tagged ‘Nordstrom’

2011 Retail Analysts in Review – Part 3: Liz Dunn, FBR Capital Markets

by Quantum Retail • December 7th, 2011 • Write a comment »

Liz Dunn, analyst at FBR Capital Markets began her 2011 retail predictions expecting the upside of the year to be significant. She believed stocks could stall and even trade off, but that a lot of 2011 would depend on employment rate increases – when jobs came back, spending would come back. Dunn also stated that retailers should be cautious of cutting back too much on inventories and of the rising price of commodities.

2011 through the eyes of four different retailers

Dunn evaluated 2011 outlooks for four retailers – some struggling and some succeeding:

American Eagle: Caught in the middle of competition while struggling to differentiate

Analysts were critical of American Eagle as the four weeks ended January 29, 2011 and reported total sales decreased by nine percent. Some say a change in management was needed to prove they’re a prime player and not a “broken brand”.

Dunn admitted that turning around AE wouldn’t be easy as retailers all around faced a handful of economic headwinds in 2011 from rising transportation costs, gas prices and commodity prices, unemployment and difficult same-store sales comparisons. The only way for retailers to pick up their game would be to differentiate from the pack. Consumer’s shopping behaviors and patterns constantly change; whether it’s difficult to get people through the doors or if it’s just that customers are not finding the right product, there are ways around it.

As American Eagle continues to face strong competition, their total sales have not been too detrimental. Total sales for the second quarter increased by 4 percent to $676 million compared to $652 million last year. There were no major management changes to attribute for that increase, but a new focus on key item businesses and improved merchandising more than likely played a large part. However, AE recently announced current CEO Jim O’Donnell would be retiring late January 2012 and a replacement has already been selected.

In addition, AE also launched new campaigns and initiatives to give them a competitive advantage. With the rising prices of cotton and the retailer’s love for denim, AE partnered with Cotton Incorporated on “COTTON FROM BLUE TO GREEN®” denim recycling program. The retailer also began engaging heavily in social media with a social photo contest in which nearly 800,000 customers and employees uploaded photos of them wearing AE apparel. The contest, called AE BestShot, was a chance for American Eagle to show just how passionate people are about the brand.

To learn more about how to differentiate as a retailer check out our free whitepapers and reports»

J.C. Penney: Moving forward by shifting with shopper habits

Dunn believed we would see J.C. Penney moving away from their past, including their catalog business, to focus on their future. The retailer planned on closing stores, call centers, and outlets and cutting jobs related to these facilities in order to gain traction for their future. Dunn predicted we would see a lot more of these moves from J.C. Penney as they transitioned their appeal to consumers shifting habits.

The most important thing a retailer should do in this type of situation is to respond to what core customer’s want and need. It takes a proper mix of strategies and technology to keep up with today’s market.

It appears as if J.C. Penney is making moves to differentiate from their past. The company hired a new CEO, former SVP of retail operations at Apple, and began the leap into e-commerce and m-commerce. J.C. Penney has been looking to mirror the ease and convenience of their stores and catalog online at jcp.com and with a new mobile commerce site. They continued to leverage their digital infrastructure and introduced guided navigation and mobile coupons.

The retailer also started to better understand their core customer as well as shoppers changing habits. By closing a string of stores and outlets, they have made themselves available to acquire new brands and compelling assortments necessary to maintain relevance to their consumers. Recent store closings were also executed to aid in increased sales productivity and to manage costs and expenses more tightly. In time, J.C. Penney hopes to be the one-stop-shop for all of their customer’s needs.

Lululemon: Might see stalling growth as competitors beef up their activewear

After having virtually invented the yogawear category in Canada, the company was facing a fresh challenge in the United States as other retailers have looked to cash in on the activewear trend. Dunn stated lululemon’s biggest risk for 2011 was valuation and although the retailer has tapped earnings estimates for at least eight straight quarters, analysts believed they needed to do more than simply beat forecasts; they needed to announce a blockbuster quarter to keep investors contended.

Many retailers, despite their main focus, have sought after a piece of the activewear pie, so to speak, with reporters citing this trend as “lululemon envy”. Retailers, like Gap and Nordstrom, have started to mimic lululemon’s strategy. Gap’s Athleta stores sell yogawear for similar prices and offer free yoga classes – an innovation started by lululemon. Nordstrom went a step further by hiring lululemon alum to create and introduce their new yoga line Zella. Even companies that already dominate in athletic wear are taking it to the next level. The North Face recently announced that they will premiere new running and yoga collections in spring 2012 and Nike now sells capris and crops in a yoga-studio format.

Needless to say, lululemon has started a revolution. It’s not just their product that enables them to have increased revenue of 39 percent in the second quarter of 2011, but it’s the format of their stores, their deep experience and passion of the sports they practice; it’s the complimentary yoga classes and local “ambassadors” that give them a cult-like following and have made them a household name.

Chico’s and Soma: Outlets are an area of growth

Dunn asked Kent A. Kleeberger, EVP, CFO and treasurer of Chico’s, to discuss outlets and outlet strategy and how it would impact the company’s gross margins in 2011.

Kleeberger commented that their outlet strategy was a big driver for the Chico’s brand. Chico’s has continued to experience increased sales with their made for outlet (MFO) products, expanding into additional categories. The retailer planned to grow their MFO product in 2011. Their sister company, White House|Black Market has been doing some novel things in the outlet sector as well, and Soma brands has been mixing in some full-price product with clearance goods. Overall, Kleeberger was looking forward to growth in the sector as well as increased MFO product across all brands in 2011 and beyond.

Chico’s focused their infrastructure investments on opening new stores, primarily for the Chico’s brand and new Soma stores. They began to explore new merchandise opportunities and brand extensions; however, the Chico’s brand spent the majority of 2011 growing the number of WH|BM and Soma boutiques as opposed to outlet stores. Additionally, they increased penetration of the MFO product with the Chico’s brand, but much of their clearance was carried out through their direct-to-customer channel.

The 2011-year saw some stores struggle, but the majority of retailers’ maintained sales and some even achieved record quarters. Despite costly commodities, low unemployment rates and increased competition, retailers found creative, new ways to succeed in the challenging market from taking advantage of brand and product strategies to increasing e-commerce initiatives. Nonetheless, the most important thing a retailer can do is respond to core customer’s changing wants and needs. Next generation technologies need to be implemented to ensure the right product is in the right place at the right time allowing consumers to find what they want when they want it.

Read Dunn’s full report here»

For more information about adapting to the new pace of retail with Quantum Retail’s inventory platform Q visit»

Please note that the information provided above is sourced from public releases and reports and does not include any undisclosed information from or about the retailers named.

Stay posted for next week’s review from Meredith Adler, Barclays Capital

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2011 Retail Analysts in Review – Part 2: Marie Driscoll, Standard & Poor’s

by Quantum Retail • November 30th, 2011 • Write a comment »

Marie Driscoll, head of consumer discretionary retail at S&P Equity Research, admitted that while various aspects of the labor market have continued to stay extremely poor, the 2011-year could be slightly positive for retail sales. Driscoll, along with other S&P analysts, presented a rundown of 10 trends for retailers in 2011 keeping in mind the current employment situation. Here’s a recap of the trends and whether or not these trends were on track.

1. International growth: Retailers such as Abercrombie & Fitch, Polo Ralph Lauren and Tiffany planned to increasingly focus on international growth with many retailers closing domestic stores to take advantage of emerging markets.

Driscoll and S&P were spot on with this prediction. Abercrombie & Fitch and Tiffany both sought international expansion in emerging markets this year. Tiffany’s international sales were even set to exceed sales of its U.S. stores. The retailer now operates 31 stores in Europe. More so, Gap is an even better example to demonstrate this trend. The retailer recently planned to close approximately 200 domestic stores in the U.S. to focus on global growth and expects China to become a billion-dollar business in three to four years.

Retailers are more aggressive than ever about global supply chain expansion as they don’t want to rely solely on U.S. revenue stream. Expanding stores to new markets means retailers need a supply chain that responds to customer needs and that is efficient at distributing product on a global scale; an international presence means understanding more than IT, it’s about everything retail.

Get more resources on how to adapt to the challenges of today’s retail market here»

2. E-commerce growth: As the recession continues, consumers have begun to favor value and convenience more and more. With that said, Driscoll predicted an online growth of 10% in 2011. For retailers, the web has been the perfect place to test trends and assess customer interest. For those already involved with e-commerce initiatives, Driscoll stated it’s important that online sales don’t take away from store sales and inventory.

Quantum has devised a solution that enables retailers to easily manage and integrate e-commerce inventory, warehouse or vendor availability, and distribution alongside physical store locations.

To read more about Quantum’s solution, Q, visit»

What Driscoll and S&P have proposed here is very accurate in a sense that e-commerce has become a major trend and now accounts for a large percentage of sales for retailers. Most retailers have even begun to offer free shipping with no restrictions for the large percentage of consumers that prefer to shop online and, as a result of increased demand, retailers are also offering hard-to-beat deals exclusively for online shoppers. Online retailers have gone a step further and created a Black Friday counterpart: Cyber Monday. Cyber Monday is the one-day of the year in which retailers and e-commerce sites offer deals similar to those of Black Friday.

3. M-commerce growth: Becoming more common, increased price comparisons and retailer enabled Wi-Fi hot spots in stores have given rise to m-commerce. S&P speculated that 50% of consumers would have smartphones by the end of 2011 and that sales associates would also be empowered by this greater access to information.

Tablets and handheld devices are becoming staples for tech-smart retailers allowing associates to search online warehouses, other stores in a chain, and other retailers for specific products and prices. In turn, allowing consumers to make purchases right then and there. Google Wallet is making an appearance in retail store locations as well. OfficeMax added the new service to checkout terminals to make it easier for customers to pay, redeem coupons and utilize its loyalty program all through the use of their smartphones. Mobile services that enhance the shopping experience will soon become a necessity, not an option.

4. Social media growth: Driscoll determined that companies would more than likely rely on social media as an effective way for retailers to manage image and brand.

Retailers and companies are definitely capitalizing on all the possibilities that social media offers as its proven that consumers who connect with a brand via social media have a deeper emotional commitment to the brand or company and therefore, spend more money. According to a report by Bain & Company, those people that engage with brands through social media spend between 20% and 40% more on the products offered by the brands they follow compared with other customers.

5. Green/organic growth: S&P analysts expected consumers to increasingly seek out organic or green products in 2011.

This trend was not as predominant as anticipated. Companies are “going green” more often these days, but as far as green products are concerned, consumers are confused by what exactly ‘green’ means and are trying to request better clarification.

New research from Ryan Partnership Chicago and Mambo Sprouts Marketing determined that consumers would spend more money on sustainable products if they knew which products were “truly green”. The survey also concluded that more than half of shoppers prefer that sustainability information such as packaging and labels be displayed within the store.

6. Meeting individual consumer demand: It’s been important for retailers to personalize service, catering to individual consumer demands by providing greater service and marketing. But, the fact of the matter is that every store and consumer behaves differently.

More retailers are developing new sites and apps that allow consumers to input information about themselves for more tailored product searches. However, retailers such as Nordstrom don’t consider this a trend – it’s a best business practice for them in which each department within a store caters to a specific lifestyle. Moreover, Nordstrom offers free personal shoppers to help each customer find exactly what he or she looking for. For Nordstrom, it’s always been about the individual consumer.

7. Increasing the divide between high-end and value merchants: The success of high-end luxury stores benefiting from the wealthy and low-end retailers being aided by value-seeking consumers will continue throughout 2011.

This has been a very true trend for quite some time now especially as, despite the recession, the wealthy have continued to shop high-end stores and value driven consumers are taking a step back. Retailers that cater to consumers on the tightest budgets stand to lose the most.

8. Increasing the thrill factor: Consumers will seek out new and exciting experiences. S&P predicted stores that are able to thrill, surprise, delight and engage would probably win in this category.

 It is not just the thrill factor that consumers are enticed by; it’s the ambiance of a store or the interactivity of a web site. Department stores, particularly, need to better enhance the shopping experience such as with the use of lavish displays, celebrity appearances or live music to attract more foot traffic.

9. Increasing consumer personalization: Brands are testing the waters of mass collaboration, providing the consumer with the opportunity for community input in product designs.

S&P analysts might be on to something with this prediction. Although it has not proven to be a major theme for retailers in 2011, this may be something to look forward to and something for retailers to consider in the future.

10. Increased coupon use to lead to decreased margin: More and more consumers have started searching for coupons as a means of creating value for their purchases.

Extreme couponing has become one of the most popular trends of 2011 especially in the grocery and household goods sectors. Consumers who engage in couponing are becoming less loyal to retailers, stores and brands, and are focusing on where the money-saving coupons take them. Shoppers are also seeking deals in different forms such as cash-back rewards, in-store contests and gift-card giveaways.

Retailers face the fear that all the effort and money put into coupons and deals is going to be thrown away to one-time buyers with no return. And with increased costs, heavy promotions and constant coupon use, margins have started to suffer.

Retailers have become considerably aggressive over the past year pursuing new opportunities to drive sales. Driscoll and her fellow analysts at S&P declared 10 ways in which retailers would improve sales in 2011 and while some of the trends were more prevailing than others, it’s best for retailers to keep an eye out for those that will become major game changers in the coming years.

To read Driscoll’s full report visit»

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Please note that the information provided above is sourced from public releases and reports and does not include any undisclosed information from or about the retailers named.

Stay posted for next week’s review with insight from Liz Dunn, FBR Capital Markets

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2010: Retail Innovation – Kohl’s, Nordstrom, Home Depot lead innovation

by Dave Landreth • March 9th, 2010 • Write a comment »

2010 Retail Outlook Review Series – Part 1

This series will outline retail trends, innovation and best practices for retailers in 2010. Look for Part 2 next week.

As 2010 gets underway, retailers are prepared for sales to trickle back. 2009 forced retailers to make some necessary changes. The general pattern for the year was slashing inventories, getting back to the basics and battling for the lowest prices. The following are results and projections from the National Retail Federation for 2009 and 2010.

2009 – a hard hit for retail

2009 was an extremely difficult year for retailers. Industry retail sales (excluding autos, gasoline and restaurants) declined by 3.3% in the first quarter, 3.4% in the second and 3.8% in the third quarter compared to the previous year. Fourth quarter sales rose a slight 0.3%. Despite overall sales slump, lower inventories enhanced retailers’ profit margins. The National Retail Federation forecast that holiday sales (November and December combined) would be down 1.0%, but instead, preliminary results showed a gain of 1.1%.

2010 – projected sales to increase by 2.5%

In 2010, the retail environment will remain difficult, but the improved economy and easy comparisons will result in positive sales gains. NRF forecasts that retail sales will increase by 2.5% vs. the 2.5% decline in 2009.

Interestingly, some retailers were able to thrive in 2009 and take advantage of a very difficult time in retail by having the ability to proactively understand in real time what was happening to their business. These thought leading retailers adjusted their business strategies to meet the local needs of their shoppers and better leverage their inventory investments.

This year, these same retailers have the best possible understanding of what to expect during the spring and fall shopping surges and are formulating their plans to leverage this knowledge to grow their business. It’s about bending to the customer and giving them what they want at prices they are willing to pay.

Technology helps retailers adjust to the “New Normal”

While retail has stabilized somewhat, all indications predict that customer buying habits have forever shifted. Consumers are still clipping coupons and getting into the habit of buying products, fashions, and food that has the most value and is long-lasting. With these new consumer patterns, forecasts of past shopper behavior are no longer relevant. In a recent interview with Barron’s, Deborah Weinswig, Citigroup Investment Research’s retailing analyst said “retailer’s must adjust to the New Normal, conspicuous consumption is definitely out.” Weinswig, who focuses on major retailers such as Wal-Mart Stores, Home Depot and Target, states that “technology stories are key,” when she considers investing in retailers.

“Retailers who are investing in optimizing their environment to localize their decisions about the customer are the only real winners,” states Weinswig. One of these retailers Deborah is enamored with is Kohl’s. She states that they have “completely pulled away from the pack.” She continues, “Kohl’s has done such a great job in terms of delivering value to the customer at the right price that Target has lost share to them on apparel and home goods.” Kohl’s remains progressive and has continued to grow through the recession, while most retailers saw a negative trend in their comps.

Why is technology so important?

Weinswig states, it is “because retailers have been so late to the game. That’s the underlying story at Saks. They have invested a lot in technology. So has J.C. Penney, which has spent a lot of time on cycle-time reduction. And there’s Home Depot, which is upgrading its technology. That’s the common thread in terms of the retailers we have Buys on. Consistent with this theme, Nordstrom did a major technology implementation in 2004 and now they have some of the best inventory turns in my coverage universe.”

One area where retailers have really seen results through the recession is by utilizing intelligent inventory planning and management technology that can help retailers decrease excess inventory to align demand with store need. To do that, retailers need to look for solutions that can give them real-time visibility to their chain, their product performance and customer buying habits at each store.

When they have this kind of visibility and can utilize this intelligence in their merchandise planning, forecasting, ordering, allocation and replenishment processes, they can manage each store effectively, rather than aggregating and averaging their data. When you combine automation that turns store data into profitability monitoring and strategic merchandise management, this creates instant ROI for retailers.

Get back in the game

Are you ready this year to know exactly what your customers are asking for at every location and to have the ability to react as their wants change? If you are looking for a solution that can drive momentum for your business this year, check out the solutions offered by Quantum Retail. Our customers see valuable results in 8 to 12 weeks, and our implementation approach gives your team access to the system from the beginning, so you can manage changes to your processes with ease. Quantum Retail continues to help all of its clients drive positive business value more rapidly than anything seen in retail.

For more information, visit: http://quantumretail.com/solutions

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