American Eagle Q4 falls 89% on lower sales, charges
Pittsburgh — American Eagle Outfitters Inc.’s fourth-quarter profit plunged 89% on lower sales and one-time charges related to employee severance costs, the discontinuation of a product line and other items. The company also forecast first-quarter results that were below analysts’ estimates.
The teen apparel retailer posted net income of $10.5 million for the quarter ended Feb.1, down from $94.8 million in the year-ago period.
Sales were $1 billion in the quarter, down from $1.1 billion last year. Same-store sales fell 7%.
For the full year, American Eagle’s net income declined to $83 million from $232.1 million. Annual revenue fell 5% to $3.31 billion, from $3.48 billion.
"The company’s results in 2013 were highly disappointing," said interim CEO Jay Schottenstein. "While tough macro conditions have persisted in our retail sector, our merchandise and overall customer experience fell short of expectations. We’re taking steps to bring greater focus and excitement to our product offering and better engage our core customers."
In January, American Eagle CEO Robert Hanson left the company, on the heels of a disappointing holiday season. Schottenstein assumed the post on an interim basis.
IRI unveils new age CPG solutions
The phrase “game-changing” is arguably the most overused in business, but a strategic alliance that IRI president and CEO Andrew Appel announced this week actually fits the bill.
During introductory remarks at IRI’s annual summit, Appel shared with the more than 1,000 attendees gathered in Orland details of a huge data sharing partnership between IRI, comScore and Rentrak.
“Far and away, this is the biggest innovation IRI has done in the past 15 years,” Appel said.
The combination of the three firms’ unique data assets means brand marketers and retailers will have access to unified view of shopper behavior and media consumption in a way that did not previously exist. That’s because IRI brings its strength in capturing sales data and shoppers insights found in its “Liquid Data” platform with comScore’s market leading online behavior assets and Rentrak’s cross-platform media consumption data.
“This combination will allow brand marketers to finally get a handle on how all elements of the marketing mix are driving sales,” Appel said. The strategic alliance between the three firms creates what Appel called, “the richest data set in the world to improve the efficiency and effectiveness of how we run our businesses.”
While the agreement with comScore and Rentrak was the most significant announcement Appel made, he did allude to an additional strategic partnership to be announced in the coming year on the activation side of the business as opposed to the measurement side.
All the announcements were part of a comprehensive review of upgrades and enhancements to the tools IRI makes available to CPG companies and retailers. Accordingly, the theme of the three day event which kicked on Monday was, “Winning the Race to Growth.” It was a natural follow-up to the prior year’s theme of “Growth Delivered,” which propelled IRI to a record year, according to Appel.
“Last year it was about ‘Growth Delivered,’ but this year it is about accelerating the pace of that growth,” Appel said.
Key developments Appel outlined to help clients achieve success on an “immensely complex path to purchase,” involve the availability of real time data around the clock on mobile devices. IRI is also launching its own app store, which will contain micro tools for specific functions such as market growth opportunity finder called IRI Pivot. Other apps will be focused on a product launch success predictor and a customizable alert platform.
Another key area of development involves IRI’s Retail Trade Desk. Appel said it will transform the way merchants make decisions and empower unprecedented engagement with suppliers. Trade desk features supplier collaboration tools, decision-tracking features and automated action recommendation features that can be accepted or rejected.
A different kind of dollar store
Smaller format stores are all the rage these days. Dollar General, which already operates nearly 12,000 stores, plans to open 700 more units this year. Walmart recently announced plans to accelerate growth of its smaller format stores by opening between 270 and 300 small stores, more than double the 120 to 150 store range it projected last fall. Even Target has gotten in on the action with plans to open its first Target Express store near downtown Minneapolis this summer.
With some of the nation’s largest retailers relying on accelerated growth of smaller stores to drive growth, one company with a differentiated concept and a downright glacial pace of expansion is called UTBW, an acronym for “Used To Be Woolworth’s.”
Stores operate under the banner of Five & Dime General Store and the closest location to Northwest Arkansas is in Brandon, Mo., adjacent to a Bass Pro Shops.
The Santa Fe, N.M.-based company only has nine stores in an unusual mix of locations such as San Antonio, Kansas City, Charleston, San Diego, Monterrey, Calif., and Savanah, Ga. The company has been deliberating over opening a tenth location in St. Augustine, Fla., for more than a year. Earl Potter, a Stanford trained lawyer turned retail entrepreneur serves as chairman and Mike Collins, a veteran retailer who spent 25 years at Woolworths, is CEO.
The Five & Dime stores and the company itself are throwbacks to an era when retail was a simpler business. The company employs an old school intuitive approach to merchandising and supply chain matters to generate enviable levels of productivity.
“We are not high tech in the sense that we rely on advanced algorithms about where to put our stores or what to put in our stores,” Potter said. “We have no centralized distribution or anything like that, but we have some very experienced people who are old school merchants and very sensitive to what is selling and what isn’t.”
Relying on intuition for purchasing and replenishment decisions is easier to do when stores range in size from 2,500-sq.-ft. to 4,000-sq.-ft. and experienced operators are in place. The company also relies on McKesson to help with health and beauty categories.
“We carry a lot of item that are found in a traditional convenience store, but we will also have some softgoods, hardware, snack food items, toys for kids and items that are locally relevant,” Potter said.
The combination has been effective. Sales last year exceeded $13 million and Potter said sales per square foot range from $400 to $1,000 depending on the location and maturity of the store. And unlike other value oriented retailers who rely on low margin food and consumable to generate traffic, most of the items in the Five & Dime stores carry higher margins.
For the model to work Potter said stores need to be in locations with high levels of foot traffic.
“Our stores are not typically a destination, but the areas in which we are located are destinations,” Potter said.
As a result, the company is very methodical in its site selection to ensure every location generates strong sales and achieves profitability.
“We’re very conservative when it comes to expansion and I’m not sure how many locations will work for our concept. We don’t claim to have something that can be stamped out,” Potter said. “Our model depends on having a closely knit management team.”