brombonz

Thoughts on the Retail Environment in January 2009

Correcting typo: two-year comp for BKE should be 36.6%, not 26.6%,


On Feb 09 09:40 AM brombonz wrote:

> You say, "Overall the results were fairy dismal with the exception
> of Wal-Mart (seekingalpha.com/symbo...), BJ's (seekingalpha.com/symbo...),
> Aeropostale (seekingalpha.com/symbo...) and Hot Topic (seekingalpha.com/symbo...)."
>
>
> Among apparel retailers (specialty chains and department stores)
> the median January comp was an 11% decline. Only four of 27 public
> companies reporting for the month had positive numbers. You named
> only two of them.
>
> In that context, would you consider specialty apparel retailers BKE's
> +14.7% January comp or APP's +2.0% "fairy [sic] dismal?
>
> Also, your spotlight on HOTT may be too bright. It may be more a
> rebound situation than a merchandising "hot topic" (see two-year
> comps cited below), and you also neglect to break out its two divisions:
> the negative 6.2% from its Torrid stores were a drag on the Hot Topic
> chain's positive 8.8%.
>
> On a two-year basis APP and BKE stand out, APP at +42.8% (+2.0% on
> top of +40.0%), BKE at +26.6% (its 14.7% following +19.1% for January
> 2008). ARO looks pretty good with a 16.2% two-year increase, but
> HOTT falls to +2.2% (+6.0% this year having to follow a 3.6% decline
> in January last year). HOTT's comp on a three-year or four-year basis
> would decline further, since January 2007 and January 2006 same store
> sales were also negative (-6.6% and -0.7% respectively). Whether
> the Hot Topic chain has gotten its "mojo" back remains to be seen.
>
>
>
>
>
>

Thoughts on the Retail Environment in January 2009

You say, "Overall the results were fairy dismal with the exception of Wal-Mart (WMT), BJ's (BJ), Aeropostale (ARO) and Hot Topic (HOTT)."

Among apparel retailers (specialty chains and department stores) the median January comp was an 11% decline. Only four of 27 public companies reporting for the month had positive numbers. You named only two of them.

In that context, would you consider specialty apparel retailers BKE's +14.7% January comp or APP's +2.0% "fairy [sic] dismal?

Also, your spotlight on HOTT may be too bright. It may be more a rebound situation than a merchandising "hot topic" (see two-year comps cited below), and you also neglect to break out its two divisions: the negative 6.2% from its Torrid stores were a drag on the Hot Topic chain's positive 8.8%.

On a two-year basis APP and BKE stand out, APP at +42.8% (+2.0% on top of +40.0%), BKE at +26.6% (its 14.7% following +19.1% for January 2008). ARO looks pretty good with a 16.2% two-year increase, but HOTT falls to +2.2% (+6.0% this year having to follow a 3.6% decline in January last year). HOTT's comp on a three-year or four-year basis would decline further, since January 2007 and January 2006 same store sales were also negative (-6.6% and -0.7% respectively). Whether the Hot Topic chain has gotten its "mojo" back remains to be seen.

Retailers on the Extinction List

It's also bilge that CACH is closing all stores. Here's a link to the company's IR web page, with links to press releases, a presentation to analysts only last week, financial info., etc.

The Few Retail Standouts

"There were only a few standouts in the reports this morning."

Hmmm. You're highly selective. Other "standouts" (assuming your standard is +4.0% or more) include APP +22.0%, BKE +14.5%, HOTT +8.3%, MWRK +6.0% and CTR +4.0%. In addition, on Thursday URBN reported its quarterly comp, +10.0%, with its Urban Retail division up 17.0% and the small Free People division up 4.0% (Anthropologie, at +2.0% was the drag on the corporate number).

APP has turned in a double digit comp every month since it made its first report in March (as well for the comparable month of the previous year), and for six consecutive quarters. BKE has turned in consecutive monthly double-digit comps since August 2007, preceded by similar results in March and June 2007. URBN, which reports quarterly, has had four consecutive double-digt quarters.

August Same-Store Sales Roundup

Isn't it about time that people in the financial media stop giving respect to the "estimates" guessing game? It's bad enough when applied to quarterly earnings, but becomes absolutely ridiculous applied to monthly sales reports.

Isn't it obvious that what matters is the change from the comparable period (or the monthly number as part of a pattern of monthly numbers for that company) or how the sales report in itself or as part of a pattern compares to that of peers, not even beginning to consider the relative impact of markdowns on the sales numbers and their implications for earnings, not what analysts estimate, with something like a 15% accuracy record.

It is mindboggling that reviews of analyst ratings (most based on predicted earnings changes) over the last several years have found
that the most rewarding buys are those earmarked "sell" by the analysts, the net best returns come from recommended "holds," and the worst from recommended "buys."

This same skill when applied to same store sales finds that the list above comes close enough to the reported comp to be considered accurate in predicting the number (whatever that number is worth in isolation) for by my reckoning six (JWN, TJX, LTD, BJ, FDO and FRED), or 15%, of the 40 companies for which estimates were made.

I've followed specialty retail, especially apparel, sporting goods and variety, closely for the last nine years, and since whenever this "estimating" disease took hold this kind of whistling-oin-the-wind inaccuracy has been the norm.

I just don't get it.

But this reference to variation from a "consensus" estimate is now a virtually standard reference in the lead of earnings or comp-sales related news stories throughout the financial media.

And it is meaningless in relation to a company's prospects.

To me it seems to be merely a fast shuffle creating more trading commissions and profits for brokers and trading firms.