ECOMMERCE

Amazon’s back-to-school sales start strong

BY Deena M. Amato-McCoy

Based on the momentum of early back-to-school shoppers, Amazon is on pace to hit a record 80% sales growth for the season.

The online giant's school supplies sales have grown by 35% year-over-year in the first two weeks of the back-to-school shopping season, according to One Click Retail. Early back-to-school shopping only accounted for 9% of sales in 2016.

Last year, Amazon’s back-to-school sales hit a record 20% growth over the entire season. This year, the online giant has a total growth potential of over 80% for back-to-school 2017.

According to One Click Retail’s “Office Product” report, Amazon's sales of office products grew by 25% to reach over $2 billion in 2016, while remaining brick and mortar U.S. sales grew by only 1%. Accounting for more than 20% of total U.S. sales of office products, Amazon's double-digit growth continues into back-to-school 2017.

Sales of laptops and accessories have already earned more than $25 million. Tablet sales have nearly doubled (98% growth) and youth apparel is up by 61% over the same two weeks in 2016. Laptop accessories are up by 45%; laptops by 8% and calculators by 6%.

The online giant’s apparel sales also grew by 25% in 2016 to a value of $3.4 billion. Shoes grew more rapidly, with growth of 35% — bringing the company’s shoe sales to $1.6 billion for 2016, according to reports from One Click Retail.

Both the apparel and shoes product groups see a predictable annual shift in shopping habits during back-to-school, with parents turning to Amazon to purchase shoes and clothing for their school-aged children.

"While this early indication doesn't necessarily predict the more sales-heavy remainder of 'Back-to-School' season, it does show early velocity,” said Spencer Millerberg, One Click Retail CEO. “It paints a picture that more parents are multi-tasking on Amazon during 'back-to-school night' for those supplies vs. stopping by the store on the way home."

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FINANCE

Ralph Lauren tops Street even amid sales decline

BY Marianne Wilson

Ralph Lauren Corp. posted better-than-expected results for its first quarter as it kept tight control on its inventory and promotions. But despite the company's efforts at reinvention, sales dropped 13.2%.

Ralph Lauren earned $59.5 million, or 72 cents per share, for the quarter ended July 1, compared to a loss of $22.3 million, or 27 cents per share in the year-ago period, which included a restructuring-related inventory charges of $54 million. Restructuring charges for the current period were $700,000. Excluding items, the company earned $1.11 per share, topping analysts estimates.

Revenue dropped 13.2% to $1.35 billion, which came in just above estimates. Same-store sales fell 7%. The sales drop was partially impacted by the company's decision to reduce shipments, reduce promotions and eliminate brands. Ralph Lauren said it lowered its inventory levels by 31% from a year earlier.

"While we are addressing challenges in our business, we have significant opportunity ahead and we’re moving forward with urgency,” said Patrice Louvet, who took the reins as CEO in July. “Ralph and I are focused on actively evolving the brand expression and consumer experience so we can ultimately renew growth and get back to leading."

Analyst Neil Saunders, managing director of GlobalData, said that with its new CEO in place, this is a "fresh start" for Ralph Lauren. To succeed, he said, the company needs to both win back old customers and secure new ones — especially younger consumers who do not feel connected with the brand.

"We are under no illusions that this process will be hard and painful," Saunders said. "We also believe that because of its many false starts, while Ralph Lauren has been running the race of reinvention for quite some time, it is now effectively back at the starting line as it embarks on its latest quest to win back its lost glory." (For more of Saunders' comments, click here.)

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FINANCE

Commentary: ‘Fresh start’ for Ralph Lauren

Ralph Lauren starts its new fiscal year in much the same way as it ended the last one: with sales lines splashed with red ink to indicate the severe declines across most divisions of the company. Some of this would be excusable if the iconic brand were at the start of a journey of reinvention, but this comes after multiple attempts to get the firm back on track – most of which have proved to be fruitless.

Nevertheless, with Patrice Louvet now in place as CEO and President, this is a fresh start of sorts for Ralph Lauren. Propriety demands that M. Louvet is given some space and time to bring about change; however, he will be under no illusion that such change must come quickly if it is to satisfy investors who are increasingly nervous about the trajectory of the business. We believe the tenure of M. Louvet has a much greater chance of success than that of his predecessor, if only because he is much more likely to work effectively with Ralph Lauren who still exerts significant control over the brand that bears his name.

There are already some initial signs of the direction of travel that the group will take under its new management team. Promotions have been cut back; inventory has been slimmed down; costs have been trimmed; and, distribution is being rationalized. Of these, we see the inventory and distribution decisions as the most critical elements.

On the distribution side, Ralph Lauren will come out of around 20-25% of department stores in the United States by the end of this fiscal year. As much as this will harm wholesale revenues in the short term, we believe the move will ultimately allow Ralph Lauren to improve brand clarity. As we have noted before, it simply isn't credible for a high-end brand to simultaneously showcase itself in a glitzy store on Madison Avenue while at the same time hawking a random assortment of sweaters thrown in a ragtag way on a table in Macy's.

The inventory and SKU count reduction are equally important. As the company has evolved and grown, it has spawned an enormous number of sub-brands, capsule collections, and labels. In theory, these are supposed to cater to different constituents of the market. In practice, there is no real delineation between many of the elements, and the result is a confused mass of product that is vaguely referred to as 'Ralph Lauren.' Trimming back here is necessary if the brand is to have any chance of cutting through in a very crowded and competitive marketplace.

The scale of the task ahead should not be underestimated. To succeed, Ralph Lauren needs to both win back old customers and secure new ones – especially new, younger consumers who do not feel connected with the brand. Fortunately for Ralph Lauren, our data show that the brand is not actively disliked and is, indeed, held in some affection. However, many lapsed, and non-consumers just do not see it as relevant and meaningful to them. Creating these customer connections is the real key to driving sustainable growth.

We are under no illusions that this process will be hard and painful. We also believe that because of its many false starts, while Ralph Lauren has been running the race of reinvention for quite some time, it is now effectively back at the starting line as it embarks on its latest quest to win back its lost glory.

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