Author Archives: hithaprabhakar

The State of the Union: WWMW (what will Michelle wear)?

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(photo credit: Vogue)

In addition to jobs, the economy, homeland security and housing set to be on the agenda for this evening’s “The State of the Union” address, there is another topic everyone is buzzing about; and it doesn’t have to do with policy.

Instead, it has to do with Michelle Obama’s sartorial choices which to some people, are just as important as the message the President plans on delivering tonight. In her most recent controversial appearance the first lady appeared clad in a red Alexander McQueen gown at a state dinner thrown for the People’s Republic of China president, Hu Jintao- a seemingly good choice until critics accused her of being a communist sympathizer (wearing the color red when greeting the General Secretary of the Communist Party of China is apparently a no-no) as well as being un- American for not wearing an domestically based designer (looking at you Oscar de la Renta).

Tonight’s choice is anyone’s guess. I am pretty vocal about how I do not think our first lady is a style star, but to keep the nuetrality and patriotism I would love to see her come full circle and wear a purple (a non- partisan color) Jason Wu or Michael Kors (because they represent America much more than Oscar de la Renta) sheath.

P.S., now might be a good time to plug my friend’s book, “Power Dressing: First Ladies, Women Politicians and Fashion” available for pre- order on Amazon. I LOVE books like these- it takes an atypical/intellectual/political look at fashion and Robb got Pamela Golbin, curator in chief at the Musee de la Mode et du Textile of the Louvre in Paris to write the forward. SO great!

Is luxury back? Coach beats estimates with 2Q earnings

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(A luxury obsessed consumer. Picture courtesy of Racked.com)

Coach reported better than expected profits today. Net income rose to $303.4 million, or $1 a share up from $241 million or 75 cents in 2Q of last year. Sales rose 19% to $1.26 billion and the company expects sales and profit to increase at least 10% through 2011. In addition, Coach plans to repurchase close to $1.5 billion of shares by June 30th, 2013.

With those kind of numbers it’s hard not to seriously wonder if the luxury retailers are finally back. Or is it?

Mike Tucci president of Coach’s North American retail division credits three main reasons for strong sales during the holiday season: product performance, digital strategy and progress on the new mens intiative. Tucci specifically notes Coach.com is the fastest growing full price channel in North America and experienced double digit growth during the holiday season. “We will continue to use digital capability as a touch point for the customers,” he said on the earnings call. So what are some of the pitfalls for Coach? For one, gross margin estimates missed the street’s expectations coming in at 72.4% compared to 73.2% due mostly in part by an increase in sales at their lower priced outlet stores. Second, Coach’s market share in Japan continues to contract. But, with expanding market share in China (Frankfort referred to China as “our fastest growing business.”) and a potential move of production to lower labor cost countries such as India, Coach may still see some bright days ahead in 2011.

Coach wasn’t the only luxury retailer to report stellar earnings supported by significant growth in China. Burberry reported a 36 percent increase in sales reflecting the deal to take over 50 stores from the retailer’s Chinese franchise partner. Likewise, the new “digitally enhanced” flagship store in Beijing drove significant traffic. “There is an underlying growth in the Chinese luxury sector anyway, but the main driver has been making sure our stores are properly stocked,” said Stacey Cartwright, chief financial officer. “Previously, lean levels of inventory meant a lot of sales were walking out the door.”

Luxury conglomerate Richemont reported a 7 percent increase in sales (omitting currency fluctuations) to $2.29 billion beating analysts estimates. The Asia-Pacific region accounted for 31 percent of Richemont’s sales during the quarter.

It’s difficult to ignore numbers like that especially when Consumer Confidence Index rose 7.3 points to 60.6. Feeling better about the economy mixed with a little “frugal fatigue” may be the exact combination luxury retailers need in order to have a full recovery. With that said, there is a Chloe handbag AND a pair Christian Louboutin heels that I’ve been eyeing for months now. 18 months to be exact.

The REIT stuff: Dillard’s to get into the real estate biz

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On the heels of reporting promising numbers for 3Q 2010 (net income was $14.4 million at 22 cents a share up from last year’s $8 million at 11 cents a share) Dillard’s ($DDS) announced today they will be moving into the real estate business.

Now, before you start thinking that makes no sense whatsoever, real estate investment trusts (REITs) come with tax benefits that do not exisist in other corporate structures. In a Security and Exchange Comission filing the company explained that forming a REIT might enhance its ability to access debt or preferred stock, which will enhance liquidity, indicating that Dillard’s may be a) going to start expanding into new stores or b) re-vamping the already existing stores.

The retailer has hit numerous stumbling blocks in the past and was pretty much written off by Wall Street until 2007 where they launched a massive clean up effort. Management (mostly comprised of members of the Dillard family) started cutting underperforming stores, took a disciplined approach to inventory management, and started stocking the stores with better merchandise. Instead of trying to compete with retailers such as Kohl’s ($KSS) Dillard’s started to position itself as somewhere between a Macys ($M) and a Nordstrom ($JWN).

“Going into the REIT business is a genius move,” says Jeffrey Roseman executive vice president of Newmark Knight Frank a New York commercial real estate broker. “It’s like the age old notion that McDonalds isn’t in the burger business, it’s in the real estate business. This is just another way the retailer is able to increase income on their balance sheets apart from the sale of apparel.”

According to thier annual report, Dillard’s owns 241 of the 309 stores, roughly 78% of their doors.

Why the “Man-cession” is over.

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No, I’m not talking about (from what I hear) the lack of dating options for the
single ladies here in NYC, sillies. I’m talking about how men are getting back out there and shopping! According to an October survey conducted by BIGresearch, men plan to spend about 3 percent more than they did in 2009; women plan to spend about 1 percent less. On Black Friday of 2010, men spent on average $100 more than women- about $417 during the weekend (source: NRF). Why the surge in spend? Well, men are overall more optimistic about the economy. They feel overall that their finances will improve, while women are a bit more pessimistic. Two years ago (right when the recession began) both men and women were equally pessimistic.
What’s exciting is seeing retailers respond to the surge in male shoppers. $JCP and $SKS reorganized their menswear sections trying to appeal to the male 25-45 demographic. $SKS generates 14% of its sales from the mens department and $COH is also getting on the band wagon– they opened two stand alone mens stores stocked with $198 messenger bags and $798 jackets. And PS, those items are pretty much sold out. Above is my segment on CNBC’s “Power Lunch” talking about the return of the male…

Speaking of $JCG…

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In the wake of their Saturday deadline, J.Crew recieved no additional takeover bids during their “go shop” period a provision that is frequently included in leverage buyout deals (the deadline for other potential companies to throw in their hats was on the 15th). Well today, the retailer announced they would be extending the deadline to February 15th for other/rival bids and to settle a shareholder lawsuit. As it stands, TPG Capital and Leonard Green have been the only ones to come to the table so far with a $3 billion offer. There was some talk about $SHLD and $URBN possibly throwing their hats in (it was reported by DealBook both retailers had signed confidential agreements to study J.Crew’s books during the solicitation period) but it was unclear whether they were seriously considering counteroffers.

J.Crew vs. Jack Spade: Which is more “new dad” gift worthy?

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My best friend just had a baby. And while I’ve been busy purchasing cute clothes for him and fun mommy items for her, I sort of forgot about her amazing (and also a dear friend of mine) husband who is putting in double duty as diaper changer, baby feeder and nerve calmer. I know! I’m the WORST.

So you can imagine how psyched I was when the Jack Spade Spring 2011 look book crossed my path/in box today. For me, Jack Spade has always been the go to stop for all things hip-male/ perfect gift source for a new dad who fits the former description. With that said, I was compelled to check out www.jcrew.com since I’ve had $JCG on the mind for the past four weeks. Hate to say it, but I think $JCG is encroaching on Jack Spade’s market share of snazzy man bags and tailored over coats. Check it:

This Waxwear-Pocket Brief looks like can double as a work and baby bag. It’s on the high budget side ($365) but what a great design, no?

My friend’s husband does want a coat. This Herringbone Field Coat at $525 seems appropriate for a southern California winter.

I think new dads are in need of new shirts as much as moms. While I don’t think my friend’s husband will be wearing the Chambray Triple Stitch while burping the little one, at $225 it may be work shirt worthy.

Meanwhile, I am convinced part of the reason why $JCG is killing it on the earnings side is because of the mens business and thier “In Good Company” designer collaborations. For example, the Barbour Sylkoil Bedale Jacket ($379 shown at the top of this post) is almost as awesome, if not more than the Jack Spade Field coat.

And check out the Belstaff Colonial shoulder bag 554. To me t
his seems a little more functional as a baby bag for dads than the Waxwear Pocket Brief.

Instead of the present being a surprise I might cave and have him pick something out of the options listed. Can’t believe how far Jcrew has come from the roll sweaters of 1990.

CNBC’s “Power Lunch”: $TGT’s move to Canada

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YAY. Nothing makes me more happy than reporting on good news and $TGT’s announcement that the retailer is officially moving into Canada is exciting.  $TGT agreed to pay Zellers Inc. C$1.825B in two equal payments of C$912.5M to acquire the leasehold interests in up to 220 sites currently operated by Zellers Inc. Target expects to open 100 to 150 stores throughout Canada in 2013 and 2014. What’s more $TGT also announced it intends to sell their credit card recievables portfolio which totaled $6.7 billion as of October 30th, 2010. The move is likely to finance CAPEX for the new stores in Canada which is said to exceed $1 billion.

My take:

While expansion is always a good sign of a retailer doing well, we can’t ignore their online business which wavered/lost market share to $AMZN during the holidays. With shopping becoming more mobile/online, how the retailer handles this will be key.  Grocery business is also taking a hit with rising commodity and food prices, but having a variety category mix like $TGT is doing with the one-stop-shop is a good model for them.

Gold for sale: $$$ good, “hoodwinking” bad.

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One of my favorite jewelers and good friend Tina Tang (former equities trader at Goldman Sachs) came up with an easy, step-by-step guide to selling your gold if you are not a commodities trader (hint* it does not include sending it away in a package to some sketchy place called “We Buy Gold”). With gold sales hitting record highs (trading at 1358. 28 the last time I checked) and unemployment rates still topping out at 9.4%, selling gold may seem like a viable option, BUT before you clear out your or a loved one’s  jewelry case (kidding about the loved one- hello, that’s stealing!) PLEASE do your reseach and read all of the fine print. This is gold we are talking about, people.

How to sell your gold jewelry and not get hoodwinked.
by Tina Tang
 

First, before going to sell your gold for cash, you must remember that it is a business.  The gold buyers are not doing a charity. They are trying to make a living. Thus, you cannot expect to get the price in which gold spot is trading on the international market.
At the same time, you also do not want to be taken advantage of. Here are a few of my suggestions:

1. Know where the gold spot market is.  Also know that 14kt gold is 58% pure gold, 18kt is 75% pure gold.  Gold spot is the pure gold trading amount. KITCO.com is a good source for pricing.

2. Know how much your jewelry weighs in pennyweight (DWT).  The gold buyers will be quoting you on  gold weight.  You just need a cheap scale or can ask a local jeweler to weigh your gold for you.

3. If you know weight and gold carat, you can plug numbers into this calculator:  http://www.dendritics.com/scales/metal-calc.asp

4.  You are now armed with facts, with this pick 3 gold buyers to get quotes.  3 quotes allows you to see what is fair and who has the best price.
The last time I sold some gold I took home $2000!

You can always contact us for advice at any time.  Our customer service:  orders@tinatang.com

Retail hangover?

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(Drawing by Seth Herzog)

The retail industry was bracing itself for the inevitable and it looks like it happened. No, sillys, Terry Lundgren is not stepping down as chairman and chief executive of Macys (M)– it seems as though the consumer is experiencing a little bit of a “retail hangover.”

While same store sales seemed to beat everyone’s expectations for November, December’s numbers came with a thud. In the teen retailer space American Eagle Outfitters (AEO) and Aeropostale (ARO)  reported significant declines of 11 percent and 5 percent. With rumors both retailers may be getting snapped up by private equity in a buy out situation, these numbers only fuel the speculation fire. Meanwhile, Abercrombie and Fitch (ANF) killed it by reporting a 15 percent comp increase due mostly in part to a disciplined inventory management. Joining the promo band wagon by getting rid of last year’s full- price sales strategy didn’t hurt the company either. This move allowed Abercrombie to slowly take away market share from its direct competitors. Gap (GPS) also reported an 8 percent decline in comp sales. By the looks of the overly promoted merchandise in both Gap and Old Navy stores the day after Christmas (stay tuned I am going to a post about my mall vists post festivus/holiday) and the days following, no wonder no one was in there purchasing! It looked like a clothing bomb went off in the stores and not in a good way; too many cheap sweaters, jeans and active wear spelled disaster for this retailer. Ew.

On the other hand, luxury retailers saw an incredible rebound compared to this time two years ago. Saks Inc. (SKS) and Nordstrom (JWN) reported a gain in same store sales of 11.8 percent and 8.4 percent. Although Tiffany & Co. (TIF) just got downgraded by Jeffries from a “buy” to a “hold” on Thursday, store traffic as well as sales seemed to flourish during the holidays.

“I think the luxury customer came out and actually shopped for pleasure, not replenishment,” said Deb Weinswing in an interview with Womens Wear Daily. “There is a ‘V-shaped’ recovery in luxury, and at the moderate retailers, it’s more like a bathtub shaped curve. We’re heading in the right direction.”

I could not agree with Deb more.

Hitha’s picks: Luxury

Ralph Lauren (RL): While a lot of luxury retailers (and retailers in general) are talking about their strategy in Asia, Ralph Lauren is actually executing it. The company has strong wholesale sales across all categories as well as strong online and store comps, net income rose 15.6% total revenues up by 11.5%

Tiffany & Co. (TIF): Yes, many analysts are getting behind Jeffries in their downgrade move on this stock but I’m not so sure I want to go there yet. The company is dillgent about providing inventory mixes across all price points, the stock up more than 51% year-to-date and same store sales jumped 7% for 3Q and management raised guidance. What’s more Europe and Asia look like strong growth areas for the retailer. 

Bluenile.com (NILE): Join the club if you were one of the many who asked for a watch or a piece of jewelry for the holidays and got it. The watch and jewelry category posted 15% increase for November/December. Coupled with 12% increase in e-commerce spending in the US for first 40 days of holiday (Comscore) Bluenile.com is in a good position going into 2011. According to the chief executive of the company,  Traffic to the website increased 1000% first two weeks of November. But don’t think Bluenile.com is placing all of its bets on world wide web–this online retailer is  leveraging social media and smart phone Apps to reach customers.

Do you think the luxury consumer will experience the same “hangover” in 2011?

I’m back… (back in the NY groove).

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Hi everyone.

Suffice it to say I’ve taken a long break from this blog.  But for good reason– my first book is coming out in August of 2011(published by FT Press) and I finally turned in the first draft. It was a long and arduous process that took me to far away lands and experiences I only thought existed in the movies, but I did it.  And when I mean “I”  what I really mean is “we” since I had a killer research assistant, a great office assistant and an incredible editor. My team = beyond awesome.

Even with all of the help, writing a book and trying to blog at the same time wasn’t going to happen.  But now that the first draft is behind me, I am ready to focus on all things retail and the business of fashion. Excited? I am! As always, I welcome your questions and comments on basically everything. Just no questions on the weather. My guess is as good as yours…