Fashion & Lifestyle from HETAIL


Smart ways to honor, or apologize.


Assiduously edited by TWIG & GRASS



Another Reason To Run...

Tuesday, December 30

From retail stocks.

The natural squabbles that arise in crisis are starting to play themselves out. However, this one is huge. Primarily because it deals with what has already happened, as well as the future.

A little known side of retail are the guarantees that vendors make with large stores for their profit margins. Retailers are more likely to buy more merchandise if they know vendors will cover the difference for the items that are sold under the agreed level of profitability, usually in the neighborhood of 40%.

This article (HERE) spells out the "war" playing itself out now between vendors and retailers, due to the tremendous, and early, markdowns taken this holiday season. The thing that makes this so critical is, this is the time of year retailers usually await checks making up the difference in the margins from vendors. This year the opposite is happening, with vendors negotiating to receive re-payment for the unprecedented discounting of their goods by several major retailers.

As Cotten Timberlake at Bloomberg reports:

If vendors succeed, they could recoup $1.2 billion from Macy’s, Penney, Kohl’s, Nordstrom, Dillard’s and Saks Inc. alone, based on analysts’ average estimated fourth-quarter sales of $24.2 billion for those six chains.   (emphasis is mine)

Which means, not only will retailers be hit by much smaller profit margins than anytime in the last 40-50 years, not only will there be no gross margin dollars flowing to them from vendors that usually guarantee those profit margins, but the retailers, after all this bad news is sorted out, will be making payments to these vendors, further reducing profits.

That may be the biggest story in retail so far to emerge from a season of big stories.

Keep an eye out.

Best of December Windows

Tiffany - North Michigan Avenue

Somehow, every month, Tiffany manages to pack more punch in their little 24" x 16" windows than most others get out of space 10-20 times in size.

Always different, always new and forward and always, ALWAYS brand worthy, meaning it meets the standard of "wow" Tiffany customers anticipate.

Take a look (click images for better detail):

Home Alone

From my inbox 12/30/08:

I cannot, for the life of me, ever remember a furniture store doing "additional" percentages off  on clearance. Usually it is a straight mark, with prices reflected on the ticket.

One thing that has always worked for the home market, is really working against it right now. That thing is long leads on delivery. When you ordered a sofa and it took 3 months to deliver that gave the furniture store plenty of time to resource and negotiate, thus ensuring maximum profitability. 

They are now faced with inventory showing up that was ordered in May, June, July, August and even early-September. This has caused a glut in inventory, leading to high storage fees and forced reductions on goods to get them out the door.

If you go 3 posts back on this blog you will see I predict very bad things for all things home, save the cookware category.

The main problem retailers are having now seems to be an enlightened consumer. Everyone knows prices are going to go down further. So those few people with money (and there are only a few) are sitting on their hands until after the new year to see where the pricing game goes.

It Begins!!!

Monday, December 29

From my 12/28/09 inbox:

There is no reason to panic, this is all expected...if you have been following the blog, that is.

Thinning Profits (and the Herd!)

Saturday, December 27

The following are photos from my monthly walk along Michigan Avenue, Rush and Oak Streets. This two mile stretch has every store, covering every niche, in the entirety of the retail marketplace. What I decided to do is document what I saw, where I saw it and, just to get 2009 on everyone's mind, share what I think the fate of the particular retailer holds in the near future.

Before we start, please understand this very important fact:

With VERY few exceptions, when a store sells something for 50% off, they are losing money on the item. Yes, I know all about margin builders and the like, but those are a very rare exception in the overall assortment.

The reason for the loss is simple, here is an example:

Store A buys a dress for $40
Store A decides to sell the dress for $100 (a 55-60 mark being about industry norm).
If they sell the $100 dress for 50% off at $50 it would seem they made $10 profit, right?


Store a had to pay for the trip to New York for it's buying teams.
Pay for the paper to write the order on.
Pay the salary of the buyer that makes such decisions.
Pay for advertising, in-store signing and and the like.
Pay for medical, dental, 401k and other retirement benefits for their employees.
Pay for the real estate costs, insurance, design and fixture costs for their stores.

There is more: loan repayments, legal fees and market research, but you get the idea.

Such costs cannot be covered from that $10 profit, unless you sell hundreds of millions of those dresses (which is what Walmart is so good at).

That being said, the signs you see below should read as something out of SAW IV, not Happyland.

While this will bode very well for the consumer, it, quite literally, means the end for more than a few of these stores.

As always, all images can be clicked to get a larger, more detailed view.

Let's get it started:

This is Aldo, the shoe store that competes against 9 West when their goods are full price and Payless once they put their goods on sale. They are over saturated and overly dependent on mall traffic to drive sales. When was the last time you heard a friend say, "Hey, let's go to Aldo." I thought not. I see this chain closing 50% of it's locations, and/or seeking bankruptcy protection by May 2009.

Brooks Brothers will be fine. When the economy goes sour, people dress better. Even during the Great Depression this was the case. People without jobs wore suit and tie, just to feel a part of society. Brooks Brothers is an iconic brand that more than a few people will discover a other options from overseas start to disappear. Don't look for expansion, just look for them to make it through the economic downturn in one piece, which is sort of an A- or B+.

Walt Disney stores. During the Great Depression this company was hit so hard it had to do something radical just to remain relevant. What they did was start doing live action films, s Snow White and the like were not really meaningful after the war. This time, Disney is better suited for the though economic climate ahead. The acquisition of Pixar Studios two years ago gives Disney a foothold on smart, cutting edge filmmaking that not only deals with tough issues and ideas, but seeks them out. That being said, they SHOULD close their stores, but won't. Tourism to the Disney family of theme parks will plummet, so giving your child a little piece of Disney, if even in the form of a Happy Meal, may become all the more important. We'll see, but Toys, as a category, took a bath this holiday.

Sak's Fifth Avenue is going away. If not altogether, much like the sign below, 75% of it will. Someone has to convince me why not. See, you can't, can you? Saks has long thought itself Neiman's and run itself like Enron. If someone peeped behind the curtain, OOPS! you got us. This holiday season should pretty much end what has been a 6-7 year flirtation with a $5 stock price. Credit is tightening, so look for investors to pull of their roots and  go elsewhere. Sak's is nice, but not necessary. This will be one of the biggest, in name, casualties of this economic downturn. Obama Stimulus, or not.

Neiman Marcus is really in a class by itself. The brand represents the pinnacle of the American retail marketplace. They will benefit more from Saks' demise than anyone beside, perhaps, Nordstrom. Without the presence of Sak's, Neimans should see better gross margins due to not having to price match/ compete in many of their markets, which will lead to more profitability. Neiman's would be one of my real winners for 2009, save for one mistake...and it ain't small.

Why they decided to open up so many of these CUSP boutiques is beyond me. They are aimed at just the market niche that is most impacted by, first the housing collapse and now, the Great Recession. The combination of $600 blue jeans, $1800 driving jackets and long-term mall leases does not make for a good recipe for the future we face. This ultimately will be a VERY costly drag on the company and expect them to exit the idea entirely by the beginning of 2010.

BCBG, the retailer that never really was, will go back to selling it's goods in stores exclusively. For the life of me I cannot think of a more gracious thing to say, other than the sooner the better. 50% reduction by the beginning of 2010, perhaps entirely. They still have a strong, desirable brand for young adults, though.

Juicy Couture, in short will be in big trouble. Rapid expansion, usually means rapid reduction. Juicy has a great brand, but they are waaaaay overextended as far as different balls in the air. Look for them to rapidly shift to licensing, if that is an available option. Store closings and a return to being a vendor, not a retailer.

Yves Saint Laurent will be fine. I just wanted to illustrate the point that EVERYONE is on sale.

Children's clothing boutiques will be one of the first to get wiped out. Over the last decade no category has had faster growth and prices within this category have not been tied to anything sane. $100 shirts, $125 jeans and $70 t-shirts have become the norm from NEW DESIGNERS, not even luxury brands.

All things related to children will see growth, as people will think of their kids before themselves, but most Childrens boutiques will take a back seat to the Target's and Kohls's of the world. This has actually already started, evidence being the bath toy's took this December.

Home related stores are already in deep trouble (see Home Depot), though few really know by how much. To get a grasp of the outlook for this segment of retailing you need only one fact: January is the second most important month of the year for furniture-makers. So many home stores will go under within the first half of this year, survival will come down to how long you can hold on? If you can make it to July, and less than 50% will, you may have a chance at getting through the year flat. Habit will drive people to stores in the first quarter of the year, but I cannot think of a segment of retail so heavily dependent on credit, save automobiles. This obviously is a recipe for disaster.


Those in the know understand why I included this photo, as a "sale" sign at this company is virtually unheard of. The early part of this economic downturn will benefit "stay-at-home" stores which related to: cooking at home instead of going out, watching dvd's at home as opposed to going to movies and buying liquor for home gathering as opposed to going out to bars and clubs.

What happens after the summer within these categories is anyones guess at the moment. If things start to rebound (which I don't see) they will maintain their balance. Though should there be no clear vision of an end to the downturn, look for them to be hit hard by September, complete with lots of closings and bankruptcies.

Not enough stores at MaxMara to have mass closings, but they will feel the realities of the economy, hardcore. Light inventory and staff cuts are in their very near future.

When you sell everything in your store for $20, as H&M does, you cannot survive by selling everything for $10. Margins are too thin at this company to help pay for what has been a very rapid expansion. Look for LOTS of store closings for this European company, same goes for Forever 21 and Charlotte Russe. Bankruptcy is not out of the question for any of them.

Let's be real. Borders is in big trouble. Not liquidation trouble, but trouble nonetheless. Immediate store closings after the new year, staff reductions at other locations and possibly bankruptcy protection for reorganization purposes. The good news for them is they have been putting out fires for 6-8 months at the company, so they are a bit further along in their planning than other retailers.

Ralph Lauren is on SALE!!!!! Run, don't walk!!! Their strong department store business will carry them for the next few years, one of the few companies with such a luxury.

Banana Republic (Gap and Old Navy) are in some very big trouble. Over-saturation in every market, irrelevant fashion assortments and long-range turnaround plans aimed at fashion, not efficiency mean bad news. Look for lots of closings, lots and lots of corporate lay-offs and a possible split of the company, which might be best. Banana, however, will be hit the hardest. It participates in the niche with the most competition, 20-40 year-old new professionals. Zara is going to dominate this market once it gets set with it's expansion, Express has more money and focus (though they are already suffering) and their clientele is already starting to dip into the XXI's and Junior departments at larger retailers in search of discounted merchandise.

Bye-Bye Talbot's! I don't see how they will emerge from this in one piece. Immediate store closings, immediate mass lay-offs and perhaps even liquidation.

As I stated earlier, Limited Brands (Express, Limited, Express Men) is going to take a significant hit. They have too many stores to begin with, but the fact they control the entire process (from design, textiles, maufacture and shipping) of everything in their stores may save them in the long run. Wexler is smart and visionary, so we will see if he was able to make the necessary adjustments to his machine before September, if not....ouch!

Very hard to write these words, but Crate & Barrel may not make it. I am a Chicagoan, so I grew up alongside this company. Going to the first store with my mother when I was small boy. That aside, the company has become less relevant with each passing year due to more copycats, with lower prices. In the movie It's A Wonderful Life, Clarence the angel tells George Bailey, "every time a bell rings, an angel gets its' wings." Well in the non-celluliod world, every time an Ikea opens a Crate & Barrel loses it's wings, or appeal.

I am pulling for you C&B, I just don't see how you emerge from this unscathed.

Ann Taylor closing are a given. Too many stores, reduction in clientele (less job holders means less clothes needed), loads of competition at every conceivable price-point and bloated inventory levels all point to bad times ahead. Look for quick moves to bankruptcy protection and, ultimately, a BIG downsizing by the middle of next year.

These types of stores (H20 and Bath and Body) are basically gone. They can only operate profitably when selling goods at full price, which is no longer an option. So take this test, will you spend the $15 you have on a new shirt, sweater, groceries or six ounces of green-apple bubble bath. Thought so!

The question for retailers like Levi's becomes, will their customer base continue to buy jeans from their boutiques at $90-$145, or start buying the lesser-weight versions from Kohls for $19.99-$40.00? I think the latter is more probable, so that is not good news for the store side of Levi's.

Ditto for Kenneth Cole. This is value-brand that has never been priced at value. So as a retailer, good-bye! As a vendor, you have a bright future.

Ditto Emporio Armani. The good thing for this company is there are not many of their stores to close, but close they will.

Stores that are not on Michigan Ave. that face major problems:

Sears - Kohls is kicking their butt and will continue to do so. Tightening credit means far less major appliance sales, less home-building means fewer tool sales. How can they withstand a double-hit like that in their two main areas of strength?

Macy's - Contraction is inevitable. Look for closings of 75-200 stores rather quickly. Bankruptcy is not out of the question, as they have massive debt payments due in the first half of 2009. Swollen inventories and lease obligations spell bad news.

All Jewelers - Contraction in this market will be unrelenting. A bad 4th quarter (-35%) will only make the thinning less merciful. Look for the elimination of 25-50% of all mall-based jewelers by June.

Mail Dominance

Friday, December 26

I thought I might share a few images from my inbox this morning. I expect this to be the norm going forward, not the exception.

I think everyone should sign up for e-mail alerts from their favorite retailers. Reason being, many of my favorites do not advertise in traditional (newspapers, magazines, televisions) manners to keep their costs down. Also, they are able to react quickly to market conditions. For example, Saks Off 5th regularly sent out alerts on deals that lasted for only a few hours throughout the entire Holiday Season. I took several people to the store and watched their jaws fall through the floor at the prices on everything from Prada to Zegna to Gucci.

If you are going to be a shopper, be an informed shopper.

Numbers Start To Trickle...

Retailers will not be forced to share Holiday numbers until the 7th of January, or so. However, the analyst's numbers have already started breaking, and all I can say is WOW!!!!!!!!

Must read article from the Wall Street Journal HERE.

This came in very late last night on Christmas Day, so I knew the news would be bad. The numbers actually play out in line with what I have been telling you for the last 7 weeks, retail got mugged this season.

The strange thing to come out of this report is how far off the actuals are from everyone's estimates. After Black Friday we were told, in spite of the photojournalistic evidence provided by yours truly, that "sales were up", and "things might not be as bad as expected."

Now that we are dealing with the staticity of facts, everyone is stating the obvious, this was one of the worst shopping seasons since the compilation of retail figures began.

The only thing scarier than these numbers is what lies ahead.

Merry Christmas, To All

Thursday, December 25

Crystal Meth(od)

Wednesday, December 24

Each year, on Christmas Eve and Christmas Day, an annual ritual plays out. 

While bells toll, adults gather around the fire and children's imagination run wild with thoughts of what might be under the tree.....

The 24th and 25th are notorious dumping grounds for massively important news stories, because everyone knows we do not read the paper on these days. We are focused on our families.

This year not only am I going to make a prediction of 5 major stories dropping, I am going to post them right here as the news rolls in.

So take a peek into my crystal ball, what is that you see ever so faintly....

Update #1 (1:13 am 12/24) Walmart Ends Tears of Fighting Workers Lawsuits, Settles for $640 Million. Read story HERE

Update #2 (1:39 am 12/24) Retailers Want Bailout Too. Proposing three separate 10 day tax-free shopping days next year, in March, July and October. Read more HERE

Update #3 (5:15 pm 12/24) Jobless Claims Reach Highest Levels in 26 Years (586,000 new claims last week). WOW, now that's what I call Christmas Spirit. Read more HERE.

Update #4 (5:21 pm 12/24) Stores to ramp up closings and job cuts in 2009. Many have announced intent without including specifics. Read more HERE.

Update #5 (6:22 pm 12/24) I purposely waited until 6 pm Eastern Standard Time because I knew this info was coming. The info is always withheld until the stores close on the East Coast.

Here it is.

People are not out shopping...and HAVE NOT BEEN THIS SEASON!

Read more HERE and also HERE

So there is my $5 foot-long. A holiday gift from me to you. 

Let's stay on top of the reporting between now and next Thursday (NYE), this is when the best of the best economic info of the year will drop.

Merry Christmas to you and yours. I know if you have been reading you are in good shape going into 2009.

Topical Depression

Sunday, December 21

"Man is the only animal that blushes. Or needs to."

-Mark Twain (Following the Equator)

While studying the Great Depression over the last 16 months in anticipation of the collapse of our financial markets, I have, for the first time, been exposed to hundreds of photographs from the late-1920's and early-1930's.

In seeing just how abject basic life was for most people during the Great Depression, I got to thinking of how glad I am that America, as a country, has more weapons to ensure that the tide will not sink that low again. Government services are better run and more prepared for such things. People have more connectivity with one another, so if there is need in one part of the country, the word can get out to the proper authorities to assist in providing the goods and services needed to remedy the situation. And so on...

So we can all rest assured that even though it will be tough, there is no chance it will reach the depths of despondency visited upon the public in the early 20th Century, right?

This is more than likely the most famous picture of the Great Depression. A mother with her two children. She stares slightly away from the camera sending the conflicting messages of both strength/fortitude, as well as almost resigned helplessness. Her children look away from the camera while leaning on one of the two things they have learned to rely on in their young lives, their mother. The other being hunger.

Here a doctor attends to two children during Hurricane Katrina recovery efforts. The lady feigns a faint smile, but the children's comfort in her arms tell the true story. Naked, comfortable and asleep while in the arms of a perfect stranger. Only living through chaos of the highest order would allow children to settle in so comfortably in such circumstances. The adult must be considering the fate of the children, even as she ponders the next order of business in her effort to assist those in need. 

So there we have it, the beginning of a quick reminder that anything is possible. 

The following images will compare images culled from The Great Depression and juxtapose them with those of Hurricane Katrina. The similarities are eerie, but perhaps it can lead to a better handling of our civic situation, should things turn (and I pray they do not) for the worse for our country.

I will cease with the melodramatic commentary going forward, limiting myself to more simple observations.

Both situations produced unimaginable housing conditions:

We cannot allow this to happen a third time to our neighbors.

Families found they had to travel with all their worldly possessions in the search for a new start.

The constant migration lead to children being exposed to conditions, which ultimately proved deleterious to their health and well-being.

People stood in long lines, hoping for basic provisions for their families. Be it a bread line, or a line for potable water.

The signs from the citizenry called out for basic human dignity, NOT hand-outs.

Each and every time I think about how much more equipped we are as a country to handle Depression-like circumstances, I think of the massive failure in the last massive crisis we had to deal with on American soil.

Signs were everywhere before the disaster, giving us ample time to avert disaster.

This Doppler image from Katrina: 

This (and every other) HEADLINE from 1929 (gave a heads up 6 months before starvation became widespread).
Are we ignoring our canary?

I, for one, hope not.


2009 ·clean needles by TNB