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H&M profit misses, but ramps up store openings and will debut new brand

BY Katherine Boccaccio

Stockholm, Sweden — Swedish fast-fashion retailer Hennes & Mauritz AB reported Thursday that net income for the quarter ended Aug. 31 edged up less than 1% to $550 million, missing analysts’ expectations of $618 million in profit. Sales rose 10% in local currency, but gross margins shrank and the retailer said it would delay the start of online operations in the U.S. until next summer to allow it more time to adapt to the market.

However, CEO Karl-Johan Persson said that H&M will ramp up store expansion, opening about 300 new stores this fiscal year compared with its previous estimate of 275. Its growth focus is on the U.S. and Asia.

H&M also said it plans to launch a new retail brand for women, & Other Stories, in spring 2013. The price points are expected to be slightly higher than those at H&M’s namesake stores,

“& Other Stories is about bringing everything she can wear into one place, focusing on the whole look," the company said in a statement. "We believe shoes, bags, jewelry, lingerie and beauty are key for styling and just as important as clothing."

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Here come the holiday sales forecasts

BY CSA STAFF

Deloitte is out with its holiday sales forecast (up 3.5%-4%) and soon other prognosticators will weigh in with their seasonal outlooks.

For now, Deloitte is a lone voice in late September projecting holiday sales will increase between 3.5% and 4%, noting that the economy’s health and the presidential election are taking center stage with consumers this fall. Despite the distractions a modest increase is expected, but the gain will be below last year’s growth rate of 5.9%.

"Economic headwinds nagging consumers this fall include stubbornly high gasoline prices that continue to creep up and soft housing and job markets," said Carl Steidtmann, Deloitte’s chief economist. "While consumers turned out in the summer to give retailers solid gains for a few months, that pace may be difficult to sustain through the end of the year. Consumers and businesses alike may pause in advance of the election; however, retailers may benefit from a post-election consumer spending boost."

Deloitte’s retail and distribution practice expects total holiday sales to climb to between $920 and $925 billion, representing a 3.5% to 4% increase in November through January holiday sales when compared to last year. Additionally, Deloitte forecasts a 15% to 17% percent increase in non-store sales, which is primarily attributable to ecommerce. Nearly three-quarters of non-store sales result from the online channel with additional sales coming from catalogs and interactive TV.@

"Non-store sales continue to outpace overall growth, but increasingly influence consumers’ experience with the retail store, from trip planning, to in-store product research, and post-purchase reviews and sharing," said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader.@"This holiday season, retailers’ most lucrative customers may be the ones they engage across physical and virtual storefronts."

Paul noted that consumers might also consolidate or reduce trips to the store in response to higher gas prices. Conversely, she added, consumers are expected to keep a sharp eye on promotions and pricing, making retailers’ digital connections with consumers before and during each shopping trip even more critical this year.

"This year, we anticipate retailers will come to the starting gate with true omni-channel pricing strategies, as opposed to disparate or reactionary strategies of the past," said Paul.@"Consumers should see more price transparency across mobile, online and store channels, and retailers will use these same channels to gain insights into their core customers’ behavior.@Retailers that interpret and respond to real-time information about shoppers can hit the right notes on pricing and promotions that drive traffic without eroding margins."

Deloitte forecasts that mobile-influenced retail store sales will account for 5.1 percent, or $36 billion, in retail store sales this year as consumers increase store-related smartphone activity such as product research, price comparison or mobile application use.@ @

"Retailers that welcome the smartphone shopper in their stores with mobile applications and wi-fi access, rather than fear the showrooming effect, can be better positioned to accelerate their in-store sales this holiday season," said Paul.

The firm’s recent research shows shoppers armed with smartphones are 14% more likely to make a purchase in the store than those who do not use a smartphone as part of their in-store journey.

"The mobile channel is a powerful customer engagement tool, enabling retailers to capture a shopper’s attention at the point-of-purchase, while gleaning valuable information about shopper behavior regardless of the shopper’s location," Paul said.

 

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PepsiCo’s Dew brand commits to New Orleans

BY CSA STAFF

PepsiCo’s Mountain Dew executives and recording artist Lil Wayne this week opened a new skate park in New Orleans made possible by funding from the beverage brand.

The skate park is located in the city’s Ninth Ward, a region that gained infamy following devastating flooding after Hurricane Katrina in 2005. The skate park is a key component of a social media, brand building initiative known as DEWeezy that was announced in March of this year and offers Dew fans an opportunity to create a television commercial featuring Lil Wayne.

"We’re very excited to be a part of the rejuvenation of the Ninth Ward community," said Brett O’Brien, Mountain Dew’s VP of Marketing. "This is a great way for local residents to connect, challenge themselves and ultimately enjoy their surroundings even more – while celebrating skate culture."

The skate park is intended to serve as a New Orleans destination for action sports lifestyle enthusiasts and was designed and built by California Skateparks and landscape architect Tim Duggan of Brad Pitt’s Make It Right Foundation. The eco-friendly skatepark was designed to mirror the landscape of the Lower Ninth Ward. The main floor of the indoor park represents a portion of the street grid around The Village, with a line down the center representing Caffin Avenue. Connecting bank and quarter pipe end pieces at either end of the park represent the Mississippi River and the Bayou Bienvenue.

The park’s solar power array was designed and built by Make It Right Solar, and pervious concrete was installed to prevent flooding. Well-known New Orleans artist, Lionel Milton, was commissioned to paint a mural inside the park.

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