Those who cannot drive are going online. Cruising to the mall, if it is 20 or 30 miles away, is no longer a cheap trip. With gas at $4 a gallon, some potential shoppers may not go to the mall at all.
Thank goodness for the internet. More and more people are getting online to buy the things they need. In an economy where many people feel poor, the average online shopper may not be spending big, but he is spending.
According to The New York Times, retailers "are experiencing double-digit sales growth at their shopping Web sites, creating a surprising bright spot during an otherwise gloomy time for sales in brick-and-mortar stores." The paper adds that Gap (NYSE: GPS) "had an 11 percent decline in same-store sales in the first quarter, but a 21 percent increase in online sales."
While the news is a silver lining, it probably does little to save the earnings of large retailers. Internet sales are still a relatively small portion of total revenue for companies that have to support the real estate and personnel costs at significant numbers of large stores. E-commerce traffic may lift numbers a bit, but they do not bring down the expense base that represents most of the problem for retail profitability.
Until the internet sales are 15% or 20% of total sales for a company like Gap, investors should not look at online revenue as a reason to buy retail stocks.
Douglas A. McIntyre is an editor at 247wallst.com.
This post is part of a series on celebrity spokespeople who ended up doing serious harm to the brands they were hired to promote, or vice versa. See our list of the 20 top spokesperson fiascos.
Now, I've never been a fan of Sex in the City, the hugely popular TV show where Parker starred as gossip columnist Carrie Bradshow. Even though I spent my late 20s as a single woman in New York City, I spent my 30s -- when the show was hot -- as a staid married woman, with a baby either in tow or on the way most of the time. In fact, the few times I watched the steamy show, I found it so embarrassing I had to turn it off.
However, Sarah Jessica Parker and I are just a year apart in age. So it still makes my blood boil to think that the Gap (they were lucky to have her!) replaced her with 17-year-old singer (Joss Stone), right after her 40th birthday in March, 2005.
But who got the last laugh? It certainly isn't The Gap, which has seen its stock price fall nearly 25% in the past three years to a current $15.90 a share.
San Francisco Fed Reserve Bank President Yellen to speak about the U.S. economic outlook at the University of California/San Diego with a Q&A session.
Aracruz Cellulose (NYSE: ARA) to report Q2 earnings; conference call at 11:00am.
Tuesday, July 8
Richmond Fed Reserve Bank President Lacker to speak about U.S. economic outlook to the National Economists Club in Washington with a Q&A session expected.
This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
San Francisco-based Gap Inc. (NYSE: GPS) has seen its fair share of hits or misses. The original Gap Stores was an overwhelming success in the 1980s and 1990s, but ran into the proverbial wall as the century was ending. The Gap missed the fashion changes and has re-tooled and re-engineered itself more than Joan Rivers! The concept has never been quite the same or attained its cache in the minds of discerning consumers. Other concepts within the Gap system have fared better, such as the Banana Republic, and Old Navy still remains popular in the deep discount segment.
Zara offers a fresh approach to fashion with a range of price points appealing to all levels of consumers. Zara is based in Spain and is part of the huge distribution company Inditex, which trades on the Spanish exchange. Zara is just beginning to make some serious inroads into the United States. With only 154 stores in the U.S., Zara has the room to five-fold its base within the next decade. The Zara concept has over 1,400 stores spread out over 50 countries, with plans to double that base. The U.S. is fertile ground for Zara as the international cache appeals to American consumers.
Zara is a vertically integrated concept. From designing men's, women's and children's fashions to manufacturing to distribution, Zara controls the entire process. The stores are all company-owned, to complete the vertical integration. Zara has captured the cache that the Gap Stores once had. Zara's appeal ranges from casual wear to business attire, while maintaining reasonable price points.
During summers and winters in the early 1990s, I used to work for Williams-Sonoma (NYSE: WSM). In many ways, it was a dream job. I was paid to talk about cooking, learn about cooking and demonstrate cooking tools. One day, however, it occurred to me that, as much as I loved adopting a slightly condescending air when selling high-priced kitchen items, there really was a problem with the products that I was hawking. That afternoon, I talked an older woman into buying a "Tuscan grape drainer" as a gift for her niece's wedding. As the woman left the store, I realized that I had just convinced her to shell out $49.95 for what was, essentially, an earthenware bowl with holes in it and a couple of grape decals stuck on top.
As much as I like cooking, I have to acknowledge that nobody really needs a berry spoon, an asparagus peeler, a corn shucker, or most of the numerous other items that Williams-Sonoma hawks to its customers. The store is, in its own way, comparable to Sharper Image, Wilson's, or any number of the other specialty niche retailers that are finding it so difficult to weather the recession. Recently, in an attempt to lure shoppers into its premium stores, the retailer reduced prices massively, cutting into its profit margin and producing a 42% drop in fiscal first quarter profits.
As some analysts have noted, part of William-Sonoma's problem is that it is supporting an expensive catalog division that isn't really pulling its own weight. Moreover, as shipping prices continue to increase, it is likely that the company will see its catalog sales continue to decline. However, this is only half the issue: while most stores are feeling the recession pinch, it is hitting specialty retailers particularly hard. As Linens N' Things, Sharper Image, Wilson's Leather, and other companies could certainly attest, it's not a good time to specialize. Or, to put it another way, in this economic climate, people are using colanders to drain their grapes.
And who's next on the block? Well, have you taken a peek at the Gap (NYSE: GPS) recently?
When Gap Stores (NYSE: GPS) installed Glenn Murphy as its chairman and CEO, he was hailed as a savvy retailer whose marketing know-how would compensate for his lack of fashion industry experience. In its press release announcing the hiring, Gap declared that:
During his more than 20 years of experience in retail, Mr. Murphy successfully reinvigorated retail brands in the areas of food, health and beauty, and books. Most recently, at Shoppers Drug Mart, he differentiated the brand with new products and better service, and grew the company's market capitalization from about CAD $3 billion to over CAD $10 billion following its public offering . . .
Nearly 11 months into his tenure, the reinvigoration hasn't exactly happened: June comparable store sales fell 14% which, even allowing for the tough retail environment, isn't too impressive. But Murphy has made progress on other fronts and, so far, his main accomplishment has been cost-cutting.
Today was indicative of another mixed day for equities, and other markets were mixed as well. We saw a sharp rise in bond yields due to a more hawkish fear from Wall Street about the FOMC rather than the wider than expected trade deficit reported this month. Oils closed down again on increased production today, although we still sit north of $130/barrel. Here are the unofficial closes of major US index levels:
There were also many biotech stocks today (ACHN, CRXL, MNKD, SQNM, CYTR, CYTX, INGN, ATHX, MITI, GTOP) which saw mystery moves to the downside on either not big news or as a follow-on trading move after news from the last few days.
American Superconductor Corp. (NASDAQ: AMSC) saw a sharp rise and shares were up almost 20% to $43.25 in the final minutes of trading today. The company secured a follow-on order today from China worth more than two-year's worth of revenues for the company.
Guess? Inc. (NYSE: GES) designs, markets, distributes and licenses a trendy, upscale collection of contemporary apparel, accessories and related consumer products. The company operates 391 retail stores in the United States and Canada and 607 retail stores outside of North America, of which 63 are directly owned. It also distributes products through department and specialty stores around the world. Competitors include Gap Inc. (NYSE GPS) and Abercrombie & Fitch (NYSE: ANF).
Guess? surprised investors last week, when it reported Q1 EPS of 51 cents and revenues of $489.2 million. Analysts had been looking for 46 cents and $451.6 million. The CEO noted that international expansion continued to yield strong results. Management also guided Q2 EPS to 47-49 cents (47 cent consensus), Q2 revenues to $455-$465 million ($456.27M consensus), FY09 EPS to $2.40-$2.48 ($2.44 consensus) and FY09 revenues to $2.03-$2.08 billion ($2.05B consensus). Brean Murray subsequently remarked that the firm's projections remained conservative on a number of levels. Wedbush Morgan reiterated its "buy" recommendation on the shares.
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically short-selling trader like me! But before I tell you the name of this stock that despite the obvious economic problems -- strong oil, weak housing and the dollar, mounting foreclosure, etc -- is sitting right near all-time highs, looking to break out, let's do a quick rundown of its competitors in the apparel retail space.
In a move designed to make it easier and more appealing for consumers to shop at its websites, Gap (NYSE: GPS) is consolidating operations to allow for the purchase of clothing from Gap, Banana Republic, Old Navy and Piperlime using one shopping cart, paying one shipping fee. The Wall Street Journalreports that "By integrating the sites, the San Francisco-based company hopes to encourage shoppers to purchase products from more than one of its brands. Gap says about a third of its online orders are placed by customers who shopped at more than one of its Web sites in the past year."
Since this seems like an obvious way to spur sales growth, you have to wonder what took so long. One concern may be that keeping the sites separate kept the brands more distinct in the eyes of the consumer. Will having pricey Banana Republic merchandise in the same shopping cart as the more budget-oriented Old Navy detract from the value of that brand? It's possible. It may be why a more successful retailer like Abercrombie & Fitch (NYSE: ANF) has chosen to keep Hollister and its namesake brand entirely separate.
But with recent cost cuts aimed at improving profitability, Gap's recently-anointed CEO Glenn Murphy appears focused on improving performance now rather than building brands. With its shares trading at about half of where they were a decade ago, shareholders are probably ready for that.
A bad day closed out a bad week as home sales drove off a cliff and concerns over oil prices pushed most airlines and General Motors Corporation (NYSE: GM) to 52-week lows. Even General Electric Company (NYSE: GE) dropped to a one-year level of its own.
Most stocks moved on bad news and rumor. Anheuser-Busch Companies, Inc. (NYSE: BUD) jumped 7% on news that it might be bought by InBev. Resales of U.S. houses and condos dropped 1% to a seasonally adjusted annualized rate of 4.89 million from 4.94 million in March.
The only company of any size which posted any good news was The Gap, Inc. (NYSE: GPS). The retailer posted net income of $249 compared to $178 last year. Since most of the improvement was from cost cuts, it does not signal any improvement in retail.
Maybe next week will be better. Or not.
Douglas A. McIntyre is an editor at 247wallst.com.
Military Couple are Millionaires in the Making If you're brave enough and willing, the Army can be a lucrative career. Just ask U.S. Army Captains Matthew and Kristen Shifrin. This military couple's plan is to save one paycheck and live off the other. That has them well on their way to meeting their financial goals. Millionaires in the Making Millionaires in the Making: The Shifrins «
Safeguard Your Home Before a Storm Strikes Disaster has stormed through homes from the Gulf of Mexico to the Atlantic Ocean, with 1,005 tornadoes reported so far this year and AccuWeather.com forecasts 12 named hurricanes this year. Take these steps now to protect your house and valuables -- plus, what to do after disaster hits. Safeguard Your Home Before a Storm Strikes - Kiplinger.com
Stock futures were lower Friday morning as one again crude prices resumed their seemingly endless move upward. The market may also be agitated about further data upcoming about the housing market.
On Thursday, U.S. stocks ended higher two days of heavy losses as finally crude-oil futures retreated, giving some relief to the markets. The Dow industrials finished 24 points higher, or 0.19%, the Nasdaq Composite rose 16 points, or 0.67%, and the S&P 500 added 3 points, or 0.26%.
Only one economic report is due out today. April existing-home sales will be released at 10 a.m. EDT, and economists expect it to decline yet again.
Oil prices rose Friday, as supply concerns once again took center stage especially with growing global demand. After tumbling around $4 overnight from a record above $135 a barrel, light, sweet crude for June delivery was up $1.29 to $132.10 a barrel.
With the long weekend just around the corner, trading might be lighter than usual today. U.S. markets will be closed Monday for Memorial Day.
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This post is part of 
During summers and winters in the early 1990s, I used to work for 
When 
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically 
In a move designed to make it easier and more appealing for consumers to shop at its websites, 
Stock futures were lower Friday morning as one again crude prices resumed their seemingly endless move upward. The market may also be agitated about further data upcoming about the housing market.
Comfort Zone Investing: Exploit volatility with constant dollar investing
Merck earnings preview: No miracles expected
Apple reports Monday -- buy AAPL before earnings?
