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Ugg teams with NFL star for omnichannel campaign

BY Dan Berthiaume

New York – Vertical specialty apparel retailer Ugg for Men is launching a global omnichannel advertising campaign in partnership with NFL quarterback Tom Brady. The campaign, “This is Ugg,” launches Sept. 2 and features a series of three 60-second video spots that will air on YouTube and TV.

The campaign will also feature a concurrent print component. Los Angeles-based M&C Saatchi served as creative agency.

“For the new Ugg for Men campaign, we started with this premise: small moments can carry as much weight as the big moments,” said Nancy Mamann, VP of marketing for Ugg Australia. “We conceptualized the spots to capture authentic moments that relate to men across the world. For Tom Brady in particular, we explored his life off the field, along with more personal settings, to show some of the moments that he considers meaningful.”

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Toys ‘R’ Us’ international business rebounds

BY CSA STAFF

For the second consecutive quarter, Toys “R” Us has delivered positive comparable store net sales results in its U.S. and international segments.

After several years of market weakness, the company’s international business as whole has begun to rebound, driven primarily by net sales increases in Japan and the U.K. Business in China and Southeast Asia remains strong, as the company continues its expansion in that region.

Total net sales for the second quarter ended Aug. 2 increased by 2.7%, driven by comparable store net sales growth of 1.5% domestically and 2.5% internationally.

“We are pleased with the improvement in our Adjusted EBITDA for the quarter as we continue to take the prudent and necessary steps to strengthen the foundation of our business,” said Antonio Urcelay, chairman of the board and CEO. “During the second quarter, we completed the inventory clearance effort in our U.S. stores which began at the start of the fiscal year. While this resulted in a decline in margin rate in the interim, we believe it has significantly improved the overall health of our inventory and has us well-positioned for the influx of hot new products as we approach the holiday selling season. The actions we have taken during the first half of the year in implementing our TRU Transformation strategy, including strengthening our in-stock position, optimizing our inventory, implementing a clearer pricing strategy and simplifying promotions, should result in a much-improved shopping experience for our customers in the important months ahead.”

The company’s domestic comparable store net sales increase of 1.5% was primarily driven by increases in the core toy, learning and entertainment (which includes electronics, video game hardware and software) categories. International comparable store net sales were up 2.5% primarily due to increases in the core toy, learning and seasonal categories.

The company narrowed its operating loss, which was $42 million for the quarter, compared to an operating loss of $46 million in the prior year. Domestic segment operating earnings were $25 million lower primarily due to the inventory clearance efforts, while the international segment operating performance improved by $14 million primarily due to higher gross margin dollars, partially offset by an increase in SG&A.

Toys “R” Us operates 877 Toys “R” Us and Babies “R” Us stores in the United States and Puerto Rico. It also operates more than 710 international stores and more than 190 licensed stores in 35 foreign countries and jurisdictions.

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Conn’s marks 12th consecutive same-store sales increase

BY CSA STAFF

The strategy at Conn’s to grow sales of its most profitable product lines have proved successful for the specialty retailer, which marked its 12th consecutive quarter of increasing same-store sales. But overall results were unsatisfactory, because provisions for credit losses were higher than expected, resulting in portfolio performance deterioration.

“Over the last five months we have successfully opened an additional 14 stores, in 11 markets. We are reaching customers that were underserved before, giving low-income consumers the opportunity to purchase quality, durable, branded products for their homes at affordable monthly payments,” said chairman and CEO Theodore M. Wright.

The company reported an increase of 30.4% to $353 million in consolidated revenues for the quarter. Same-store sales increased 11.7%, on top of an 18.4% increase a year ago. Retail gross margin increased 250 basis points to 40.8%. Furniture and mattress sales increased 60.6% and accounted for 30.8% of total product sales.

Credit segment operating income declined $7.7 million to an operating loss of $0.2 million. Provision for bad debts on an annualized basis was 13.9% of the average outstanding portfolio balance in the current quarter and 11.1% on an annualized basis for the first six months of fiscal 2015. The company, therefore, updated its guidance for full fiscal 2015 to a range of $2.80 to $3 adjusted earnings per diluted share — this updated range primarily reflects the impact of higher expected provision for bad debts and the issuance of $250 million in 7.25% senior unsecured notes in July 2014.

“Despite tighter underwriting, lower early-stage delinquency and improved collections staffing and execution, delinquency unexpectedly deteriorated across all credit quality levels, customer groups, product categories, geographic regions and years of origination. Tighter underwriting and better collections execution did not offset deterioration in our customer’s ability to resolve delinquency,” said Wright about the company’s credit losses. “Delinquency rates improved through May and increased modestly in June, consistent with typical seasonal trends. However, over 60-day delinquency rates unexpectedly deteriorated a combined 90 basis points in July and August. We now expect future 60-plus day delinquency to increase to levels above our historical highs in the third and fourth quarter of fiscal 2015. Early stage delinquency remains lower than historical averages through August.”

In response to higher delinquency, the company is reducing the level of no-interest programs and raising the interest rates in some markets to increase portfolio yield.

“As it has been for half a century, our combined retail and credit business model proved its strength and resiliency. Retail profitability cushioned the impact of credit performance volatility inherent in subprime consumer credit. Had we not pushed ahead to expand our retail sales, we would not have mitigated negative credit trends by strongly growing retail profits,” added Wright. “We remain confident in the business model.”

The company opened eight Conn’s HomePlus stores in seven new markets in the quarter.

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