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    Clothing retailers have flexibility in pricing, and Wall Street rewards it

    Shoppers will visit Macy’s flagship store in New York on May 20, 2021.

    Eduardo Munos | Reuters

    This week’s major retail revenue round is a big industry gap between retailers trying to keep customer prices low amid rising inflation and retailers who can pass costs on to shoppers this holiday season. Revealed.

    Big box chain the goal When Walmart It was Punished by investors After providing a third-quarter earnings report, despite results that exceeded analysts’ expectations. Both employ strategies that primarily involve absorbing some of the increased costs of shipping, labor and materials, rather than raising the price of stickers. Both businesses cited the need to maintain a reputation for value.

    “That is our purpose” Wal-Mart CEO Doug McMillon said in an interview With CNBC “Squawk on the Street” “We save people money and help them lead a better life. They are the words that came out of [Walmart founder] Sam Walton’s mouth. He liked to fight inflation. We do so too. “

    Wal-Mart’s share price fell 2.6% on Tuesday. resulting in..Target price fell 4.7% on Wednesday that day report.. Wal-Mart’s share price is currently declining slightly year by year, but Target’s share price remains up by about 43%.

    But if you’re in the business of selling lots of apparel, that’s a different story.Share of department store operating company Macy’s When Coles, TJ Maxx owner TJX And lingerie retailers Victoria’s Secret Both companies rebelled as they pitched pricing power to Wall Street and reported that inventories were low.

    Macy’s stock surged 21% on Thursday, reaching a three-year high of $ 37.95 at some point. Coles’ share has risen by more than 10% and Victoria’s Secret’s share has risen by nearly 15%. TJX’s share price reached a 52-week high of $ 76.94 on Wednesday.

    “Everyone was concerned about the supply chain and inflation,” said Simeon Siegel, an analyst at BMO Capital Markets. “But that’s literally the same as tight inventory and rising prices.”

    “Each of these stock pops represents a readjustment from inflationary concerns to excitement about low discounts,” says Siegel.

    Macy’s says it’s give and take

    All retailers are navigating an environment where all costs are rising, from fuel to labor.inflation Recorded the highest price in 30 years in October.. The consumer price index, which includes product combinations ranging from gasoline and healthcare to groceries and rent, rose 6.2% year-on-year, the highest since December 1990.

    A few Categories are significantly higher than other categoriesHowever. For example, food prices in October rose 0.9%, with meat, chicken, fish and eggs together rising 1.7%. Apparel prices were flat.

    Macy’s, primarily an apparel destination, has been testing over the past three months to see which categories of products consumers are price-sensitive to and where shoppers are willing to pay a few more dollars. Said that.

    “We obviously have experienced these inflation cycles, so we have a lot of experience with them,” Macy’s CEO Jeff Gennette said in an interview. “And in fashion, you can sometimes tell that and get higher tickets and higher sale prices.”

    However, in some cases, Macy’s faces a “price cap” on products such as basic T-shirts and denim jeans, Jennet said. “In some cases, we run retail stores, take higher costs, and take shorter margins,” he said.

    Another weapon Macy’s has in its arsenal is a lean inventory, Genette said. This means you don’t have to discount unsold surpluses. Macy’s inventories for the three months ended October 30 increased by more than 19% year-on-year, but decreased by more than 15% on a two-year basis.

    At the beginning of the week, Target and Wal-Mart’s bloated inventory was a danger signal for investors. In part, these companies were willing to make sure they had enough stock on the shelves for the holidays. This can be rewarded if shoppers rush to the store hoping to shop in the coming weeks. Wal-Mart said inventories were up 11.5% ahead of the holiday season. Target inventory increased by nearly 20% year-over-year, or $ 2 billion.

    “Retailers don’t want to scare consumers,” said Naveen Jaggi, president of retail advisory services at commercial real estate firm JLL. “They don’t want to deprive them of the motivation to buy a product, so they are willing to control costs and undertake selling prices,” he said.

    But if people don’t show up, or if they show up in Target and Walmart looking for something out of stock, their bloated inventory can be marked down in January.

    In particular, Gennett said that when Macy’s adopts price cuts, it offers discounts at the local level rather than the local level. So the same shirt in one Macy’s store in Los Angeles may be cheaper than another in five miles away, he said.

    Coles sees shoppers paying attention to premium brands

    Kohl’s CEO Michelle Gass said customers are gradually moving towards luxury as retailers change their product lineup.She quoted Nike When PVH-Owned Tommy Hilfiger as two examples of Coles’ premium brands to get higher prices.

    “We still have those great promotions, but the small number of them makes it easier, especially for new customers,” Gus said in an interview. “Currently, we have sophisticated tools for elasticity.”

    Like Macy’s, Coles is strengthening its inventory grasp, down 25% over the last two years of the third quarter.

    Jeffreys analyst Stephanie Wisink said Cole’s profit margins have improved thanks to current inventory and stagnant demand, allowing the company to sell more products at regular prices. Said that.

    Victoria’s Secret also sells more bras and underwear at higher prices, thereby increasing sales. Revenues in the third quarter increased 7% from $ 1.35 billion in the previous year to $ 1.4 billion. Its inventory has decreased by 4% compared to last year and 16% compared to 2019.

    TJX CEO Ernie Herrman told analysts on Wednesday that there was no consumer backlash against rising prices in the off-price chain.

    “I thought there were some items that would run into problems here and there, but they weren’t,” he said.

    TJX same-store sales for the quarter ended October 30 were up 14% year-over-year, while net sales were up 24% to $ 12.5 billion. Its inventory has increased slightly to $ 6.6 billion, compared to $ 6.3 billion two years ago.

    -CNBC Melissa Repco Contributed to this report.

    Clothing retailers have flexibility in pricing, and Wall Street rewards it

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    The post Clothing retailers have flexibility in pricing, and Wall Street rewards it appeared first on Eminetra.

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