One Step Forward, Two Steps Back
An article that recently caught my eye adds more evidence to my growing suspicion (and I know I am far from alone in this) that the near-term to mid-term retail outlook might not be quite as positive as we may have thought just a few months ago. The piece, “Gap Stands out Among Retailers in Tough Quarter,” in Women’s Wear Daily highlighted the sobering second-quarter numbers from a long list of big retail brands. As the title implies, Gap, Inc. enjoyed a strong second quarter — second-quarter net earnings rose 25% to $303 million and sales jumped up 8% compared to the same period in 2012 — but the bigger story isn’t so much about GAP stepping up, as it is about everyone else taking a step back.
The list of second-quarter casualties is extensive. Macy’s, Target, Abercrombie & Fitch, Aéropostale, Wal-Mart and Sears have all recently either reported weak earnings or have revised their projected Fall numbers down. At a time when the economy has been in a modest but consistent recovery, this is alarming and certainly unwelcome news. We’ve seen signs for concern, but I think it’s safe to say that the extent of the poor retail numbers took most analysts and observers by surprise.
The question, of course, is what does it all mean? Is it a blip on the radar or the beginning of something more profound? One possibility is that the economic recovery has been overhyped, and the robust numbers earlier in the year were more a reflection of pent-up demand than a sign of a larger economic trend. In the immediate future, retailers and retail real estate professionals must consider the impact of the former on back-to-school shopping and the just-around-the-corner holiday season.
What makes the weak second-quarter retail numbers and anemic third-quarter projections particularly counterintuitive is that many/most of the big-picture economic indicators have shown improvement throughout the year. If that’s the case, however, why don’t consumers really seem to be spending? I think this gets at a larger problem, which is that when we talk about economic trends, the metrics we use to measure the ups and downs apply disproportionately to large companies and the wealthiest consumers. The result is that recoveries tend to be focused at the high end of the income scale, and that’s really a fairly small group of people. If the middle class isn’t spending money, that’s going to have a huge impact on retail sales. I think it’s worth asking the question of whether or not this “recovery” might be the new normal.
If we are we using metrics and assumptions from 10-20 years ago to analyze today’s recovery, maybe it’s time to consider the possibility that many of the things that we think are important — a stock market that recently reached record all-time highs, a rapidly recovering housing sector — might be less relevant when it comes to the retail economy. I suspect employment is a much bigger deal in that regard: not just the top-line number, either, but thinking about how many people have dropped out of the workforce, settled for part-time or lower-paying work, or otherwise seen their professional circumstances adversely impacted.
The one fly in the ointment of this “evolving retail economy” theory is that, if this was simply the case, you’d expect to see discounters and value-oriented retailers doing better. But, despite these circumstances, even big value names like Target and Wal-Mart are delivering fairly uninspiring numbers. One interesting data point that might be related to that discrepancy is that off-price apparel chains like Stein Mart, TJ Maxx and Marshall’s have been quite strong lately (all were second-quarter standouts). It’s possible that more consumers are looking for quality but digging deeper to hold out for great values and bigger discounts.
Whatever happens going forward, it seems to me that an across-the-board 2013 rebound is very much in doubt for retailers. Previous predictions had been as high as double-digit growth for back-to-school shopping, but in light of the latest information, I’ll be quite surprised if those figures even manage to top 3%. What is even more concerning is what this might mean for holiday shopping. If the trend continues, we might be looking at flat or very modest growth, which would definitely be a disappointment in the midst of what was supposed to look and feel much more like a true recovery.
What do you think? Is this kind of inconsistent and underwhelming recovery the “new normal”? If so, what are the ramifications, and how are retailers going to have to do to adapt and evolve? Leave a comment below or send your thoughts to [email protected] and join the conversation.
Click here for past columns by Jeff Green.
Albertson’s to buy United Family
BOISE, IDAHO – Albertson’s Supermarkets plans to purchase grocery store and c-store operator the United Family. The transaction’s terms have not been released.
Albertson’s currently operates more than 600 stores in 16 states. United currently operates 50 traditional, specialty and Hispanic grocery stores under its United Supermarkets, Market Street and Amigos banners, and seven convenience stores and 26 fuel centers under its United Express banner, all in Texas. United also operates two divisions, R.C. Taylor Distributing and Praters, and one wholly owned subsidiary, Llano Logistics, which operates the company’s two distribution centers in Lubbock and Roanoke, Texas.
“During the past 97 years, the United family and leadership team have done a tremendous job in establishing and perpetuating a remarkable culture of service and commitment to fresh, quality foods throughout their stores,” said Bob Miller, CEO of Albertson’s LLC. “Their commitment to community is unparalleled. Our team feels there is an exceptional opportunity to invest in and grow their brands.”
Upon completion of the transaction, United will operate as a separate business unit under Albertson’s LLC’s corporate structure. Robert Taylor, United’s CEO, will continue to lead the company as president of the United subsidiary, reporting directly to Bob Miller, CEO of Albertson’s LLC. The transaction is expected to be complete by the end of October, subject to customary government approvals.
A Golden Week at Westfield San Francisco Centre
Westfield San Francisco Centre has embraced the National Day Golden Week holiday that runs from Oct. 1- Oct. 7 every year — in China.
During Golden Week, more than 120 million residents of the People’s Republic of China travel to visit family and friends in the People’s Republic and overseas. Large numbers visit San Francisco, home of the largest Chinatown outside of Asia.
National Day Golden Week may seem an awkward name for a holiday. The awkwardness no doubt stems from the difficulties inherent in translating Chinese into English. In fact, the Chinese have used the term National Day for more than 1,700 years to denote the birth or ascension of an emperor.
Today, it is the name of the official three-day holiday commemorating the founding of the People’s Republic of China. Weekends and perhaps a little finagling have stretched the three-day holiday to seven days of a National Day Golden Week ever since 1950.
To welcome this year’s National Day Golden Week visitors, Westfield San Francisco Centre will offer a host of special services, retail offerings and an exclusive menu at M.Y. China.
Services and amenities for all international travelers
When arriving at the Centre, out-of-town guests may stop by Westfield Guest Services and ask about the services and amenities provided to visitors.
Visitors from China will find a store directory in both English and Mandarin. The Mandarin directory notes the retailers that accept China UnionPay, the preferred method of payment in the People’s Republic and Taiwan. Guests may also use China UnionPay at Westfield Guest Services.
The Centre also offers LanguageLine, an on-demand three-way video interpretation service in over 200 languages including Mandarin, Cantonese and regional dialects. LanguageLine is available at Westfield Guest Services.
VIP Passport to Savings program
International visitors may also participate in the VIP Passport to Savings program, which entitles travelers to thousands of dollars in savings, special offers and services provided by dozens of participating shops and restaurants. The Centre supplies area hotels, visitor centers, tour operators and travel agents with vouchers.
M.Y China specialty menu
Centre restaurant M.Y. China offers authentic Chinese cuisine by celebrity chef and James Beard Award Winner Martin Yan.
Under Chef Yan’s direction, M.Y. China will prepare a special menu throughout Golden Week. Priced at $150 for two, the menu features five courses and new dishes prepared with rare ingredients. How about some crocodile and abalone?
Don’t decide yet. You might also choose Moose and Mixed Vegetables and turtle Soup.
If visitors crave another specialty cuisine, the Centre provides a variety of restaurant options from Pan Asian dishes to pizza and steak. The Food Emporium serves fresh fare from more than 15 gourmet eateries.
The Centre is home for Bloomingdale’s west coast flagship store and provides translated in-store signage and language assistance from over 20 Mandarin and Cantonese speaking employees. The store’s visitor center has special offers and multilingual directories. Bloomingdale’s also accepts all forms of China UnionPay.
All of this combines at Westfield San Francisco Centre from October 1 through October in celebration of National Day Golden Week.