Mothercare makes child's play of recession
18th November 2009 18:27

Baby and children's goods retailer Mothercare Plc seems to be making child’s play of the recession, with first-half like-for-like sales up 4.1% and its 17th consecutive quarter of UK sales growth.

Earlier this year, the retailer put its success down to the fact “people keep spending on their babies long after they stop spending on themselves.”

But it has also been helped by new products – including the re-launched M2B maternity range and the 'Baby K' clothing lined designed with celebrity mum Myleene Klass – strong online sales and giant strides in international markets, which have all combined to make it the go-to destination for everything related to pregnancy and early childhood.

And it’s now shaking up its stores too, with plans unveiled today for 31 new parenting centres across the UK – Mothercare's largest and most profitable UK store format – over the next three years.

Crucially, one of the reasons the retailer is able to embark on this ambitious roll-out is the dire state of the UK property market, which means it has been able to negotiate advantageous lease terms and enter key catchments where it would previously have struggled to make a profit.

And landlords should also brace themselves for some more hard bargaining after the retailer warned it would close or relocate more than 90 of its least profitable high street stores where the lease expires within the next three years – unless it can renegotiate rentals.

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What’s in a name?
12th November 2009 18:00

Just as it appeared to be turning the corner at the end of a dismal year of tumbling sales and profits, quirky shoe maker Crocs now seems to have another battle on its hands.

With cruel timing, it emerged in a recent filing that German car maker Porsche is suing it for alleged infringement of the ‘Cayman’ trademark – which not only appears on one of its sports cars but is also the name of Crocs’ best-known style of clogs.

Crocs says it plans to “vigorously defend” itself against the claims – but with sales and profits only just starting to recover from a $185m loss last year this is likely to be an unwelcome and expensive diversion as it tries to steer a turnaround of its business.

Bloggers have been quick to dismiss Porsche’s action as petty, pointing out that there’s not much chance of confusing Crocs’ $30 Cayman sandal with the $51,000 Porsche Cayman.

One even had the temerity to write: “The most ridiculous thing about this suit is that Crocs is a far superior product than the Porsche Cayman. I've worn Crocs and driven a Cayman; the Crocs are way more comfortable.”

And where will Porsche draw the line? Maybe it’d like to take on the Cayman Islands too?

But there’s also a sense of déjà vu here as well. In the same Form 10-Q filing Crocs lists no less than 12 lawsuits it has filed accusing firms of patent and trade infringement. As they say, what goes around comes around.

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Retailers' results a mixed bag
9th November 2009 13:22

US retailers posted a mixed bag of results last week, despite October same-store sales putting in their best monthly performance for more than a year.

Sales were in part bolstered by easy comparisons with the year-ago period when consumer spending went into freefall. But it's also clear from the figures that shoppers are continuing to trade down to lower-priced brands and retailers as worries about job losses, debts and the economy continue to persist.

Other factors lifting October's results include cold weather sales of seasonal merchandise such as winter coats and knitwear, and strong promotions and deep discounts.

Attention is now switching to the looming holiday shopping season – the most important event in the sales calendar – which kicks off in just a few weeks.

At apparel group Liz Claiborne, third quarter loss hit US$91m, 32% up on last year, as sales continued to fall. Third quarter comps were ahead of the company's own guidance, but the declines still make pretty grim reading: Juicy Couture down 13%, Lucky Brand down 16%, Kate Spade down 3%, Mexx down 13%, Liz Claiborne down 13%.

However, CEO Bill McComb scents some sign of recovery in a fourth quarter even though it is, by his own admission, likely to result in another double-digit sales decline.

US fashion company Polo Ralph Lauren, meanwhile, saw its second quarter profit rise 10%, and reported gains in market share after “disciplined operational management” helped offset a 4% drop in sales. The firm said it will continue to invest in high growth international markets, including a double-pronged effort to control brand operations in Japan and South East Asia and expand into surrounding markets.

Marks & Spencer is also eyeing more stores in China despite the teething problems it faced after launching a first outlet in Shanghai last year. Chief executive Sir Stuart Rose said the retailer's broad appeal helped the company towards a 1.7% growth in first-half general merchandise sales. But he said the firm remains cautious in its outlook for Christmas and the year ahead despite posting a slight gain in first-half profit and increasing its market share in clothing.

Uncertainties over the European Commission’s plans to extend anti-dumping duties on imports of leather shoes from China and Vietnam continue to worry retailers, importers and manufacturers. The EC has been accused of ignoring industry concerns about the decision after it sent Member States its final conclusions into the investigation the day after feedback was filed. And China's shoe manufacturers told just-style they are bracing for a further hit to exports.

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Tipping between recession and recovery
2nd November 2009 14:53

Pinpointing that crucial tipping-point between recession and recovery is at best a fine art, and at worst a mug's game. But three sets of results posted last week suggest there is definitely a glimmer of hope on the horizon – or at least that aggressive moves to cut costs and inventories are finally paying off.

At branded apparel giant VF Corporation, CEO Eric Wiseman said: “The worst effects of the recession may be behind us,” after third quarter profit fell 6.8% to US$217.9m on a 5% drop in sales.

However, despite strong growth in Asia and rising sales in its sportswear and contemporary divisions, some caginess remains. “We do not believe that the global economy is out of the woods just yet,” Wiseman added, perhaps in reference to sliding revenues in Europe and in its jeanswear and imagewear units.

Timberland, too, surprised the market with a 23% jump in third quarter profit, helped by strong sales in North America and in its footwear business – but says there is still a lot of work to do before the brand reaches its full potential.

While profit rose to $37.8m, sales remained flat at $421.8m as strong growth in the European boots business and SmartWool brand were offset by declines in casual footwear and Timberland apparel. The company also told investors it hopes its Earthkeepers range of recyclable shoes can help it climb towards consistent and sustainable top-line growth.

And at Hanesbrands the good news continued after the apparel maker posted a 153% surge in third quarter profit to US$41.1m, driven by lower expenses and cost reduction initiatives. The company, whose brands include Playtex, Champion, Wonderbra and Hanes, also said it is ramping up production capacity after securing extra shelf space at retailers like Target, Walmart and Macy's that should add 5% sales growth in 2010.

One of the sectors hardest hit by the global recession, though, is luxury retail, as shoppers defer new purchases, spend less, or simply trade down to cheaper alternatives. And Italian fashion house Versace Group has become the latest victim of the slowdown in spending on luxury items after deciding to cut 350 jobs – around a quarter of its worldwide workforce – in a bid to return to profit.

However, amid signs from some of the large luxury powerhouses that the market is starting to stabilise, retailers are being warned the post-recession luxury market will be far different from the one that came before.

But despite retailers and brand owners working at a frantic pace to produce and sell more and more garments at ever-cheaper prices, this business model seems at odds with steps being taken by many of these firms to build sustainability into their supply chains. However, the keys to narrowing this divide are increasingly held by designers.

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Honduras continues to hurt
29th October 2009 19:14

Four months after the political upheaval that saw the Honduran president forced into exile, the country seems no nearer to finding an end to the dispute.

Talks between ousted Honduran President Manuel Zelaya and the country’s new interim government are making little progress, and until a settlement is reached the political crisis looks set to continue to affect trade across Central America.

The situation isn’t helped by the mixed messages being broadcast about the country’s apparel industry. While Honduran suppliers continue to say that there has been no impact whatsoever on business, trade groups representing US textile firms, retailers and importers are painting a very different picture.

In a letter to Secretary Hillary Clinton they say the situation is causing permanent damage to what once was the most economically vibrant textile and apparel trade platform in the CAFTA region.

US  imports of apparel from Honduras are down 39% in September they warn, credit is at a record low, and there are “increased plant closures, job losses and the crippling of a once booming trade sector.”

It’s hard to tell whether these changes are due to buyer concerns with political stability, or more simply a symptom of disappearing raw material facilities, regional uncompetitiveness, or China’s growing ability to provide fast response in smaller quantities.

But what is true is that while uncertainties regarding the political situation in Honduras are still hanging in the air, buyers will always be cautious about doing business there.

Yes, having a balanced supply chain is a fundamental rule of sourcing, and most firms are constantly assessing their production, but until the US clarifies its stance on the situation in Honduras, the impact on the region as a whole will continue to reverberate for a long time to come.

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