• 50% off already reduced product provides more evidence that there is still plenty of unwanted fall product in their assortment. We also noticed in multiple locations some spring product, at the very least current wear now product, that has been marked down. Regarding fall markdowns, the inventory seems to be quite heavy in the sweater classification.
• New spring assortments look very strong with respect to color and product assortment. Concerned about the price points as we compare the more basic items with the fashion pieces. We have noticed a greater amount of novelty, but with current pricing in the range of $99-$109 in novelty sweaters we feel it is too high in relation to their competitors. This issue becomes more magnified as we understand that Coldwater is looking to improve traffic trends which have been severely deteriorating in recent months. A perfect example of the disconnect in pricing takes place with their novelty tape yarn sweaters as well as their basic fine gauge sweaters, both of which are priced at $69. The price of these items compared to the fashion pieces does not seem to be appropriate…read more

We will be reviewing Dress Barn (ASNA), Anthropologie (URBN), Ann Taylor & Loft (ANN), Coldwater Creek (CWTR) and Chico’s (CHS) just to name a few. Stay Tuned!

Business was driven by gift card redemptions and stores were focused on clearance sales to make room for spring lines and enter the new year with clean inventories. Though warmer weather helped foot traffic, sales of cold-weather gear were once again held back as last month was the 3rd-warmest January in 50 years.

Total net sales for the 22 chains we track (JC Penney no longer reports monthly sale) increased 4.0% from a year ago to $26.893 billion in January, while same-store sales rose 2.9% on top of a 5.4% gain last year – this was the 29th straight monthly gain after 12 consecutive months of declines.

However, it was a month of winners and losers as only 12 of 22 chains reported comp gains for the month compared to 19 last January, with 59% of chains beating analyst estimates. Total fiscal year (February-January) sales increased 6.7% to $391.2 billion and comparable store sales rose 4.8% following a 3.8% increase in 2010.

Standouts during the month included pretty much the same names we have seen out-perform all year, with Costco (+8%), off-price stores TJX (+8%) & Ross Stores (+5%), The Buckle (+7.4%), Limited Brands(+9%), Saks (+10.5%) and Zumiez (+10.8%) all once again out-pacing estimates.

Because January and February are such light-volume months and chains are focused on clearing inventory and rolling out Spring lines, we will be much more focused on margins and outlooks for the first quarter. Though much warmer than average weather forced many department stores and apparel chains to slash priced 70-80% on winter gear, tight inventory management helped many to raise estimates even in the face of continued weak sales.

Ross Stores, TJX, Kohl’s (+0.6%), Macy’s (2.4%) and even The Gap (-4%) all raised 4th quarter earning guidance.

Laggards in January included all the usual suspects with notable weakness at Wet Seal (-13.0%), Stein Mart (-3.9%), Cato (-6%) and Bon-Ton (-3.5%).

Other chains which struggled to get shoppers to pay full price were Abercrombie & Fitch and Ann Taylor (-3.5%). Though these chains don’t report monthly sales anymore, they both said holiday results were underwhelming and lowered earnings guidance.

click on company below for detailed monthly performance data

Every consumer confidence index we follow has shown dramatic improvement over the last 6 months as Americans are finally starting to see improvement in the labor market and the overall economy. However, as commentary from this morning’s Bloomberg Consumer Comfort Index release shows, significant doubts remain about the sustainability of these gains.

“Rising incomes and aggressive discounting by retailers likely created a better buying climate and bolstered consumer confidence to close out January,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “That being said, the increase in the cost of gasoline and the most tenuous of gains in the labor market does place the improvement in confidence in jeopardy.”

Following a relative splurge over the holiday season, consumers will most likely pull back over the next few months as they look to rebuild their savings amid earnings gains. Based on government reports, retail sales showed spending lost momentum each month in the fourth quarter and with consumer spending rising 2.2% in 2011 after advancing 2% in 2010, it marked the weakest two-year performance of any expansion since World War II.

February will be an event-driven month with the Super Bowl, Valentine’s Day and President’s Day driving most business while chains will continue the roll-out of spring wares.

• Shoppers Increasingly Reaching For Store Brands…and it’s Not All About Price (WSJ)
• A New Retail Chief at Apple. Another Model for Retailers to Emulate (Forbes)
• Study Shows Shopper Behavior in Supermarket Center Store (Supermarket News)
• Consumer Confidence Posts Unexpected Decline in January on Weak Job Market (Conference-Board)
• Why mobile payments still haven’t revolutionized retail (VentureBeat)
• Record Number Of Americans To Celebrate Super Bowl This Year With Plans To Spend $11 Billion (NRF)
• Barnes & Noble’s Nook as the Bookstore’s Last Stand (NY Times)
• Retail Revolution: We Ain’t Seen Nothing Yet (HBR Blogs)
• Study Shows Direct Correlation Between CPG Brand Website Usage and In-Store Purchase Behavior (Accenture)
• Raising Prices Without Scaring Off Shoppers (MediaPost)
• Infographic: Top Retail Sites Still Way Too Slow (PC Mag)
• Warm winter adds to retailers’ post-holiday blues (Yahoo! Finance)
• JC Penney CEO Lays Out Framework to Remake Retailer (Businessweek)
• Mall Shoppers Focusing on Clearance Sales: buying winter clothes and delaying spring purchases (Barrons)
• Report Shows Shoppers Continued to Show Strong Interest in Coupons in 2011 (Inmar)
• RadioShack Shares Plunge on Earnings Miss and Weak Outlook (Reuters)
• Mobile phones becoming go-to shopping tools in stores (ZDNet)
• Consumer Spending Stalled in December Amid Higher Savings (Bloomberg)
• Talbot’s Reconsiders Private Equity Lifeline as Struggles Continue (NY Times)
• In major technology shift, new survey finds real-time retailing is key to success (Boston Retail Partners)

Reported holiday sales have for the most part been better than expected (see here for the scorecard with results from 55 chains), but that spending was driven by a consumer that is again taking on more debt and saving less, while personal incomes have barely kept up with inflation.

Consumer borrowing surged in November posting the largest monthly gain in a decade, with credit card debt increasing by the most since March 2008. In addition, the savings rate dipped to 3.5% in November, which was the lowest since 2007. While confidence has improved with recent economic readings and stock prices, expect consumers to retrench in the first quarter following the holiday splurge.

While most headlines note the strength of top-line results, dig a little deeper and you will find underlying weakness. We have seen more profit warnings than any time since the recession from the likes of Target, JC Penney and Kohl’s on the low-end. Even apparel chains that saw robust gains over last year such as American Eagle Outfitters (sales +15%, comps +12%) and American Apparel (sales +15%, comps +12%) are expected to report a significantly smaller profit than projected just a few weeks ago.

Due to the extremely competitive environment, free shipping offers, and deep discounting and promotional activity focused around Black Friday weekend and the week leading up to Christmas, these sales gains came at the expense of margins.

Perhaps most worrying of all is the significant sequential slowdown in sales and lowered guidance from Tiffany yesterday. Luxury chains have enjoyed an extraordinary rebound following the recession and seemed immune to cautious consumers, economic uncertainty and the European debt woes. Michael J. Kowalski, chairman & CEO, said “sales weakened markedly in the United States and Europe during the holiday season, reflecting restrained spending by consumers for fine jewelry,”

There were some chains that truly enjoyed a fruitful holiday: some strong performers included Macy’s, Zumiez, TJX & Ross Stores, Ulta Salon, lululemon athletica, Francesca’s, DSW & Genesco and Ascena Retail Group. These names offered the best product and were best able to balance the price/value relationship, allowing them to gain market share and expand margins.


Wednesday’s Top Retail & Consumer Reads:

• An Interview With New Costco President & CEO Craig Jelinek (Motley Fool)
• Dollar Stores Have Room For Continued Growth in the U.S. (Bloomberg)
• Mobile Shopping Doubles Over December 2011 Holiday (IBM Smarter Commerce)
• More Health Clinics Popping Up Inside Retailers & Grocers (NY Times)
• DSW Lifts 2011 Earnings Outlook, To Accelerate Store Openings (Nasdaq)
• Retail seasonal hiring near pre-recession levels (CNBC)
• Advanced Use of Mobile for Retail Remains on the Horizon (eMarketer)
• What’s Behind Target’s Recent Split With Advertising Agency? (AdAge)
• Many Retailers’ online ordering, shipping and returns processes fall short (Kurt Salmon)
• Action-sports brand Volcom aspires to raise the fashion bar for juniors swim (ApparelNews)
• Evidence mounts consumers are shopping competitors inside stores (Internet Retailer)
• U.S. Retailers Need to Up Their Game on Multichannel Efforts (Gartner)
• Though holiday sales gains were impressive, ‘Groupon Effect’ clipped American Apparel profit (NY Post)
• Comprehensive Analysis of 25 U.S. High Yield Retail Sector Issuers (Fitch Ratings)
• The Container Store CEO talks Conscious Capitalism (Retail’s Big Blog)
• U.S. Mobile Email Audience Grows by 28% in the Past Year (comScore)
• India Lets Foreign Retailers Open Wholly Owned Stores After Rule Reversal (Bloomberg)