The vibe flowing out of September sales reports from retailers is largely positive with big names such as Costo and Limited Brands showing brisk sales, while teen seller Zumiez (ZUMZ) knocked it out of the park with 18.6% growth. Although back-to-school season numbers look to be beating expectations, the best gift for retail investors may be when Q3 reports roll in with companies showing improved margins as clearance sales were avoided and inventory controls clicked.
Citigroup analyst Deborah Weinswig advises retailers to keep a sharp focus on online initiatives despite the staggering growth numbers bandied about for mobile and social networking sales. Estimates from Forrester Research indicate online retail sales will surge to $327B by 2016 - a mark that is estimated to be 10X greater than what smartphone sales will generate. A roadmap for retailers: Adopt a clever omnichannel strategy that produces synergistic benefits to complement online and brick-and-mortar businesses instead of poaching sales with hyper-aggressive mobile promotions.
Young shoppers are the force behind the rapid growth of showrooming with their grasp on how to use mobile devices to find the best deals, according to research by AlixPartners. Naturally, Amazon (AMZN +2.2%) appears to be a beneficiary of the trend, but brick-and-mortar retailers could have a secret weapon. A retail brief published by Aimia suggests that the very same savvy young shoppers who make showrooming a force of habit are also the most loyal reward program participants. The end game: A loyalty program with soft benefits could steal Amazon's thunder.
Toys R Us Chairman Jerry Storch makes the case on Squawk Box that brick-and-mortar stores won't go away anytime soon, but will morph into mini-distribution centers. The line of thought follows a recent trend by retail players of using existing stores as fulfillment centers and showcasing more extensive pick up options to online buyers. The end game: Retail stores see a competitive advantage over Amazon if they can deliver products faster as they still dream about ultimately offering the holy grail of online shopping - same-day delivery.
Home Depot (HD) hires Mark Vadon to its board of directors, notable primarily because the exec is the co-founder of online retailer Blue Nile. The company has taken a few hits overs its online strategy, but now has a heavyweight to lean on for advice.
Home Depot (HD) plans to shut all seven of its big box outlets in China and cut 850 jobs, leading to a $160M charge in Q3. "China is a do-it-for-me market, not a do-it-yourself market, so we have to adjust," the company says, although the country's slowing economy is also not helping. Home Depot will now focus on online and specialty stores in China. (PR)
Execs with Home Depot (HD) presenting at the Goldman Sachs Global Retail Conference note that revenue correlates more closely to GDP in the U.S. than the ups and downs of the housing cycle. Looking to the future, they note that 75% of its business (think drywall) can't be sold online - but that it's exploring new channels for items (think power tools) that can be shipped. In response to a query on the use of capital, management says the firm will spend more money to build stores in Mexico than the U.S. or Canada. (webcast)
Today's round of strong sale reports from major retailers may give firms the confidence to hold back on more promotional activity heading into the holiday season, according to AlixPartners. One promising trend is that shoppers stepped out to buy bolder, more fashion-oriented lines - instead of just replenishing the basics. With the retail table now set for a strong Q3 as the back-to-school season roars to a powerful start, optimism starts to creep up that consumers might even keep the good vibes going right through the crucial holiday period.
Lowes (LOW +0.7%) and Home Depot (HD +0.7%) both move higher today, buoyed by better July Pending Home Sales numbers, as well as a potential sales boost stemming from the necessary home repairs hurricane Issac will bring.
Retail gifting and regifting: After digesting the Q2 report from Sears Holdings (SHLD), Credit Suisse says Eddie Lampert owes Ron Johnson a big thank you as Sears benefited nicely from turmoil at J.C. Penney (JCP). Along those lines, SW Retail Advisors notes Home Depot (HD) picked up significant market share from Sears in garden-related categories with the retailer losing foot traffic.
Execs with Home Depot (HD +2.5%) tip off on an earnings CC (webcast) that results could have been stronger for the quarter if not for the hot and dry weather that spurred many homeowners to give up on greening up their lawns. The overall tone from the company is optimistic, with a view that housing has turned a corner and more margin expansion is still in sight. (Previous: earnings)
More on Retail Sales: Helping to smooth rather large downward revisions, the Y/Y figure shows sales +4.1%, up from +3.5% last month. Ex-autos, +3.2% Y/Y, up from +2.6% last month. With Home Depot (HD) in focus this morning, a look at sales for Building Material Suppliers shows an 11.7% annualized rise in July.
Management at Home Depot (HD) catches praise up and down Wall Street after the home improvement giant beat estimates (I, II) and improves its outlook for profitability. ITG Investment Research analyst John Tomlinson says it was a quarter of "strong execution" as the company cut costs and rode improved store traffic to improved results. HD +1.3% premarket.