Retail news as 4th quarter earnings came out quantifies the economic headwinds most retailers and manufacturers are going through as they slip into 2009. Here’s a recap:
Levi Strauss acknowledged on February 10 that despite a diversified portfolio of brands and designs, slower consumer spending has taken its toll. As John Anderson, CEO of Levi’s put it, “The outlook remains uncertain and we face stiff headwinds.” Levi’s Americas segment fell 10% to $1.06 billion from $1.18 billion due to less consumer spending but also problems with their new resource management system.
According to Robert Hanson, President of North America, the new management system forced Levi’s to stop making shipments for a week, which he said may have accounted for some retailers to delay payments and cancel orders. In addition, when Mervyn’s Goody’s, and Boscov all filed for bankruptcy, this hurt Levi’s since these retailers owed Levi’s an estimated $23 million. Levi’s however is planning to launch a skinny jean silhouette at Wal-Mart which could help things in the near future for the brand.
Along the same lines, many denim brands at the last trade shows including Bread & Butter, ASR, and Class were also talking about their concerns that although they had orders, they were worried about retailers paying in a timely manner. More than 3 brands at Agenda told us that they had extended payments for their top boutiques that were having a hard time with meeting the brand’s payment schedules.
Also, fresh news coming out about the premium denim market indicates that $400 jeans are a thing of the past. Since we mostly report on youth culture, we predicted this trend 2 years ago as more young people were paying decidedly less for denim, and opting for trendy options such as skinny styles, colored denim, and lower cost brands already.
VF, which owns many brands that target global youth culture such as 7 for All Mankind , John Varvatos, Nautica, Reef, Wrangler, Lee, and Vans, reported an overall 29.5% drop in their 4th quarter earnings from 2008 and are looking for a flat 2009. However “flat” is the new “up” in this economic climate and the one brand doing well is Vans. Now that VF have re-organized and launched a separate action sports division, this could mean greater benefits for some of the brands within this category.
Eric Wiseman, VF’s CEO said that while he didn’t “expect any improvement from the conditions we saw in the fourth quarter,” he also announced in their 4th quarter conference call February 10th, “We are still interested in acquisitions.” Wiseman said that action sports, outdoor, and contemporary were the segments they were most interested in. Of course this re-fueled the fire that VF not only was interested in buying DC, a Quiksilver brand, but possibly Quiksilver overall.
However the same rumors came from Nike. On the same day February 10th, Nike announced a re-structuring which would eliminate 4% or about 1,400 jobs. Kurt Salmon Associates, a retail consulting firm in Atlanta, predicted that acquisitions may accelerate for the brand, including Nike possibly buying Quiksilver. (Now wouldn’t that be ironic.)
Meanwhile, Wal-Mart, the world’s largest retailer and one of the few chains standing up quite well in this recession-depression, announced it was cutting 700-800 jobs or 5 to 5.7% at it’s hometown headquarters in Bentonville, Arkansas, and would be moving all buying operations to New York nearer to its designers. This came out right after the Senate passed the $787.2 billion stimulus package. It also coincides with news a week previous from Saks, Macy’s, and Target who had all cut jobs significantly. Target planned to cut 9% of its staff in St. Paul and Minneapolis.
Target closed on Tuesday February 10th down 4.4% while Wal-Mart was down 5.2%.