Blog: Leonie BarrieLittle sign of a July retail uptick

Leonie Barrie | 10 August 2009

There was little sign of any uptick in retail spending in July, as retailers released yet another disappointing month of same-store sales results. However, while consumers continue to keep a tight hold on their purse strings, some industry observers are optimistic that a turnaround may be just around the corner.

Among those offering a glimmer of hope with rising same-store sales were off-price retailers TJX and Ross Stores, department store group Kohl’s, and fashion retailer Chico’s. And Gap Inc, Macy’s and JC Penney shrugged off falling revenues to lift their earnings estimates.

But results were still hampered by leaner inventories as retailers clear out merchandise, the shift of many back-to-school sales tax holidays into August, tough comparisons with the year-ago period, and unfavourable weather.

All eyes are now focused on the key back-to-school selling period – but the evidence so far suggests shoppers will continue to focus on discounted items and make fewer purchases.

There are more immediate concerns for US apparel giants Gap and Levi Strauss, who have both launched urgent investigations in Lesotho after a supplier in the African country was exposed for chemical dumping and pollution by a UK newspaper.
The Nien Hsing-owned factory, which produces jeans for the companies, was found to be dumping hazardous materials in landfill sites and illegally polluting river water. Images also showed children sifting through harmful materials at a rubbish tip, where Gap and Levi’s labels are scattered along the ground.

Meanwhile, Crocs has hit back at the notion that its colourful plastic shoes are a fad, and says it sees a return to profit in 2010 – despite swinging to a second quarter loss of $30.3m as sales tumbled 11.3%. The company said the results were better than expected, and the market seemed to agree, with shares rising on the back of the firm’s rising retail and internet sales, strong demand in Asia, lower inventories and the fact a $17.3m credit facility has been paid off.

There were mixed fortunes at rival sports firms Adidas and Reebok though. Widespread revenue declines sent second quarter profits at Adidas crashing by 93%, but the company is scenting an improvement in the second half of the fiscal year. While at Puma, lower operating costs and higher sales were unable to offset reduced margins, pushing net earnings down by 15.6% - prompting a gloomy outlook for the second half of the year.

Also on the sportswear front, there was good news for rugby-focused sportswear brand Canterbury of New Zealand, which has been sold to UK retailer JD Sports in a GBP6.5m (US$11m) deal. The acquisition safeguards the future of Canterbury's business in Australia and New Zealand, as well as the presence of the brand across the UK and Europe.


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