Ottawa Citizen

U.S. re­tail­ers far­ing well

Prof­its up de­spite Hur­ri­cane Sandy and fis­cal cliff fears,

- CHRIS BUR­RITT, COT­TEN TIM­BER­LAKE AND LAU­REN COLE­MAN-LOCHNER

Washington and Hur­ri­cane Sandy weren’t able to ruin ev­ery­thing for re­tail­ers this year.

While one es­ti­mate put hol­i­day sales gains at only 0.7 per cent, re­tail­ers from Macy’s Inc. to Aber­crom­bie & Fitch Co. con­trolled in­ven­to­ries head­ing into the hol­i­days, en­abling them to limit dis­counts.

An­a­lysts es­ti­mate earn­ings per share for con­sumer-dis­cre­tionary re­tail­ers in the Stan­dard & Poor’s 500 In­dex will in­crease about 13 per cent in the fourth quar­ter, ac­cord­ing to data com­piled by Bloomberg as of Dec. 21. A year ear­lier, profit slipped 3.4 per cent on a share-weighted ba­sis.

“The re­tail­ers coming out of the hol­i­day sea­son on top have done an ex­cel­lent job with their in­ven­to­ries,” Me­gan Dona­dio, a New York­based re­tail strate­gist for con­sult­ing firm Kurt Salmon, said. “They’ve planned pro­mo­tions care­fully to en­sure prof­itabil­ity.”

Re­tail­ers are in­creas­ingly us­ing so­phis­ti­cated an­a­lyt­ics in plan­ning pro­mo­tions, de­cid­ing how much to or­der based on pre­vi­ous sales and in­dus­try­wide de­mand, Dona­dio said. Most chains se­cured hol­i­day goods months be­fore Sandy hit in Oc­to­ber, re­duc­ing the harm from power fail­ures and trans­porta­tion in­ter­rup­tions in the North­east.

Con­sumers also have been re­silient. While Repub­li­cans and Democrats have been un­able to agree on a plan to avoid fed­eral spend­ing cuts and tax in­creases of $600 bil­lion that would come into ef­fect in Jan­uary with­out ac­tion by Congress, the Bloomberg Con­sumer Com­fort In­dex was lit­tle changed at mi­nus 32.1 in the pe­riod ended Dec. 23, near a four-year high.

Ewing Con­cep­cion, a 21-year-old stu­dent at Mer­ri­mack Col­lege in North An­dover, Mass., said he spent more this hol­i­day sea­son while snag­ging fewer deals.

“I paid full price for a lot of stuff this year,” Con­cep­cion said while shop­ping Wed­nes­day at the Mall at Rock­ing­ham Park in Salem, N.H.

Re­tail­ers have got bet­ter at man­ag­ing their in­ven­to­ries in re­cent years, keep­ing them from hav­ing to re­sort to steep dis­counts to pre­vent mer­chan­dise from pil­ing up. The im­prove­ment will show up in a com­pany’s gross mar­gin, or the por­tion of sales left af­ter sub­tract­ing the cost of goods.

Re­tail­ers pro­jected to have wider gross mar­gins this sea­son in­clude Ralph Lau­ren Corp., whose gross mar­gin may ex­pand to 59.2 per cent of sales in the quar­ter end­ing Dec. 31 from 57.1 per cent in the same pe­riod a year ago, ac­cord­ing to the av­er­age of five an­a­lysts’ es­ti­mates com­piled by Bloomberg.

The New York-based ap­parel maker pur­sued a “very crisp and very di­rect” ap­proach in sell­ing hol­i­day items in de­part­ment stores, Jack­wyn Ne­merov, an ex­ec­u­tive vi­cepres­i­dent at Ralph Lau­ren, told an­a­lysts on a con­fer­ence call in Novem­ber.

Coach Inc.’s gross mar­gin will widen by more than 0.2 per­cent­age points to 72.4 per cent in the three months ended Dec. 31, an­a­lysts es­ti­mate. The mar­gin at Macy’s, the sec­ond-largest U.S. de­part­ment-chain, may be lit­tle changed at 40.9 per cent.

Fall­ing costs, in­clud­ing a 16 per cent de­cline in cot­ton prices this year, are help­ing ap­parel sellers. VF Corp., which sells Wran­gler jeans at re­tail­ers from Wal-Mart Stores Inc. to Gan­der Moun­tain Co., ex­pects to post its high­est-ever quar­terly gross mar­gin in the fourth quar­ter, Chief fi­nan­cial of­fi­cer Bob Shearer told an­a­lysts in Oc­to­ber.

“The in­dus­try is bet­ter po­si­tioned this year with the eas­ing of ap­parel cost pres­sures,” Michael Niemira, chief econ­o­mist for the In­ter­na­tional Coun­cil of Shop­ping Cen­ters, said. “That should help their mar­gins. To that ex­tent, it’s a bet­ter en­vi­ron­ment for the re­tailer.”

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 ?? CHRIS CARL­SON/THE AS­SO­CI­ATED PRESS ?? Hol­i­day shop­pers in the U.S. found goods dis­counted less as re­tail­ers em­ployed strate­gies to en­sure prof­itabil­ity.
CHRIS CARL­SON/THE AS­SO­CI­ATED PRESS Hol­i­day shop­pers in the U.S. found goods dis­counted less as re­tail­ers em­ployed strate­gies to en­sure prof­itabil­ity.

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