nordstrom inc fell after cutting it's annual forecast.
bloomberg: punam goyal
there is a structural change in how consumers shop and for some reason everything flipped in march.
There is no new major fashion trend to bring in shoppers.
many young customers are opting to buy apparel online.
Khols, a low priced department store, slides more than 3.5%
Macys sales the worst since 2008. ceo terry lundgrum 'frandly we're scratching our heads' said cfo karen hokland.
1. middle class takes financial hit in most cities this century. nearly 4/5 of american metropolitan areas have seen
household incomes decline. growth only occured in 39 of 229 metro areas between 1999 and 2014.
2. nearly 1 in 6 workers became unemployed between 2007 and 2009. 14 million workers are still looking
or stuck in part time or temporary work.
3. wage growth after the recession is the lowest in 50 years according to goldman sacs.
4. Economic policy institute. For young high school graduates the unemployment rate is 17.8%. Add those
looking for full time work instead of part time and those who've become discouraged and given up
searching, the numbers more than 33%.
http://www.bloomberg.com/news/audio/2016-05-13/bloomberg-advantage-retail-sales-rise-department-stores-down
Craig R Johnson President Customer Growth Partners LLC
Sales went down 10 billion $ unadjusted from march to april 2016 compared to a 5 billion $ decline last year.
Department stores have been in trouble a long time, for example 10 years ago they had 10% of the market, now they have 1.8% of the
market.
Poonan Goyal: 10 years ago you went to department stores to socialise, now you socialise on your phone. It's a structural change.
Johnson: The problem that department stores have is what is called the 'tyranny of the installed base'.
http://www.bloomberg.com/news/articles/2016-05-12/nordstrom-plunges-after-retail-chain-cuts-its-earnings-forecast
Nordstrum reduced its earnings prediction from their previous forcast of 3.35% down to 2.5 to 2.7%. Macys gave a similarly bleak forcast.
“It’s a bloodbath,” said Poonam Goyal, a retail analyst at Bloomberg Intelligence. “There’s a structural change in how consumers shop, and for some reason everything flipped in March.”
The U.S. Commerce Department posted surprisingly strong retail sales figures for April on Friday, with purchases climbing the most since March 2015. But the benefits aren’t being distributed evenly. Auto dealers, grocery stores and online merchants had the biggest gains.
There’s no major fashion trend to bring in shoppers, and many younger customers are opting to buy apparel online instead. But also consumers are spending more of their money on technology or experiences, rather than clothing. That means they may wear an old outfit a bit longer than before and budget those funds toward something else.
In the old days, retailers would try to bounce back by freshening up their product line. But if it’s a structural change in how consumers shop, that’s not so easy.
“They’re spending in different places -- that’s what’s killing them,” Goyal said. “I don’t think it’s a product issue.”
The internet is allowing price comparisons which actually squeezes margins because everybody knows where they can get it cheaper.
Macys called out that the price transparency on the internet is hurting gross margins.
If you dovetail that with what nordstrom said "if we give them what they want, they will pay for it" however once it becomes commoditised to any degree they can buy it more cheaply on the internet, and they will.
http://www.bloomberg.com/news/articles/2016-05-04/aeropostale-files-for-bankruptcy-in-latest-mall-based-meltdown
Aeropostale is in Chapter 11 bankrupcy, closing over 150 stores. American Apparel, Sports Authority, and Quicksilver Inc (Roxy, DC shoes) have also experienced a recent melted down.
http://seekingalpha.com/article/3974192-macys-m-q1-2016-results-earnings-call-transcript?part=single
Okay. And just our last question, you were really helpful with your comments on what seemed like somewhat of an optimism on the way the customer and the economy is functioning. So how do you help us reconcile that versus what you're seeing and just how you're thinking about that bigger picture in terms of what seems like different trends fundamentally versus a certain health in the customer and the economy?
Karen M. Hoguet - Chief Financial Officer
We're frankly scratching our heads. We see the same economic data you all see and it would point to a customer that would be spending more. I think that gets to what he and she are spending it on. Savings rates are high, which tells you that either they're purposefully saving more or that there's some of that savings that can be used for discretionary spending if they get motivated to do so. Some of it is spending in different categories; health, restaurants, travel. I'm not sure, but I would say that we too are somewhat puzzled by the data that we're seeing on the consumer and the traffic we're seeing in the stores and on the site. So, I think, we could – or watch. Thank you very much.
g recorded. At this time I would like to turn the call over to your host, Karen Hoguet. Please go ahead.
Karen M. Hoguet - Chief Financial Officer
Good morning, and welcome to the Macy's, Inc. conference call. I'm Karen Hoguet, CFO of the company. Any transcription or other reproduction of the statements made in this call without our consent is prohibited. A replay of the call will be available on our website, www.macysinc.com, beginning approximately two hours after the call concludes. Please refer to the Investor Relations section of our website for discussion and reconciliations of any non-GAAP financial measures discussed this morning.
Keep in mind that all forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from the expectations and assumptions mentioned today due to a variety of factors that affect the company, including the risks specified in the company's most recent Form 10-K and other SEC filings.
Sales in the first quarter were $5.771 billion or 7.4% below last year due both to the stores that we've closed in 2015 and the decline in comp sales. While we had planned comp sales to be below last year in the first quarter, our 5.6% decline on an owned plus licensed basis was worse than expected. On a two-year basis, the comp sales were down 2.9% per year.
While the quarter started stronger, the business weakened considerably versus our expectations beginning in mid-March, and that trend continued through April. As Terry said in our press release, we are seeing weakness in consumer spending levels in apparel and related categories. The number of transactions declined 7% in the quarter, which is far worse than what was experienced last year. This is the proxy, as you know, for traffic.
AUR, average unit retail, was up slightly and units per transaction was up approximately 1%. Additionally, we continued to be negatively impacted by reduced spending by international tourists. Sales on international tourist credit cards were down 20% in the quarter on top of a 21% drop last year in the first quarter. This reduction in spending impacted our comp by a little less than a point versus last year. This was disappointing and had a disproportionately negative impact on our center core businesses given what these visitors buy.
Given that our stores are concentrated in major tourist markets, this is a big factor for us and we are no longer confident that it will improve anytime soon. While we are focusing on increasing our share of the domestic tourist business, we don't think we can offset all of the loss on the international side.
There were some businesses in the quarter that performed relatively well; fine jewelry, dresses, active, fragrances, coats, men's tailored clothing, housewares and furniture. However, the significant weakness in other parts of our assortments more than offset these good news stories. The softer businesses included handbags, fashion watches, women's shoes, kids, men's furnishings and luggage. Regionally, we continued to see weakness in our major tourist markets which as mentioned before are many of our largest markets.
http://www.wsj.com/articles/macys-pares-its-forecasts-1462969883
Macy’s Inc. set off fresh fears about the health of the U.S. retail sector, after the country’s largest department-store chain reported its worst quarterly sales since the recession.
The company’s poor results and downbeat comments Wednesday triggered a selloff across apparel makers, mall owners, luxury brands and rival chains. Macy’s shares had their biggest drop since 2008.
“We are not counting on the consumer to spend more,” Chief Executive Terry Lundgren said Wednesday. With saving rates high, wages growing and employment data steady, Macy’s executives were at a loss to explain why consumers weren’t spending in its stores. “We’re, frankly, scratching our heads,” said Chief Financial Officer Karen Hoguet.
Discount chains like T.J. Maxx and fast-fashion retailers such as H&M, which can offer jeans as cheap as $17 and polo shirts for $10, are grabbing foot traffic and hurting demand for the $50 jeans and $80 polo shirts that Macy’s sells.
“People are getting pickier,” said Liz Holland, chief executive of shopping center developer Abbell Associates, in a recent interview. She said sales at her malls increased in the first quarter, but noted that shopping centers were increasingly housing services such as hair salons and fitness centers instead of stores where people buy goods.
Nondiscretionary spending on health, insurance, education and housing has taken an extra 4% out of personal-consumption expenditures in 2015 compared with 2000, according to Craig Johnson, president of consulting firm Customer Growth Partners. That has reduced the discretionary spending available for traditional retailers by $500 billion—more than the combined annual U.S. sales of Wal-Mart Stores Inc. and Costco Wholesale Corp., Mr. Johnson said.
Mr. Lundgren, Macy’s CEO, said he expects these weak consumer-spending trends to continue and the retailer is changing its strategy to improve its results for the remainder of 2016.
In the first quarter, the number of transactions at the retailer—a proxy for foot traffic—fell 7%, which Ms. Hoguet said was “far worse” than last year, when they declined slightly. Average unit retail, a measure for what consumers are willing to spend, increased by a little. But sales on international tourist credit cards declined 20% in the period, following a 21% drop in the year-ago period.
http://www.census.gov/retail/marts/www/marts_current.pdf
http://www.newsmax.com/Finance/StreetTalk/retailers-shoppers-consumers-savings/2016/05/13/id/728659/
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12 Reasons Retailers Say Shoppers Aren`t Spending[/caption]
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SALES FOR RETAIL AND FOOD SERVICES APRIL 2016[/caption]
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Macy`s (M) Q1 2016 Results - Earnings Call[/caption]
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Aeropostale Files for Bankruptcy[/caption]
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Nordstrom Plunges on Lower Forecast[/caption]