Canadian Apparel Insights
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CANADIAN APPAREL INSIGHTS TrendexNA.com DECEMBER 2018 Marketing Intelligence for the Canadian Apparel Industry The Year Ahead For Canadian Apparel Retailing: More Unknowns Than Knowns FEATURED ARTICLE While the final chapter of the 2018 Canadian apparel market has yet to be written, this publication The Year Ahead has now begun to focus on 2019. The process has been somewhat unnerving, as there seems to be more unknowns than knowns. Even more disconcerting is the fact that it’s not obvious if the un- UPDATES ON knowns will eventually play out to the betterment or detriment of the Canadian apparel industry. The Children’s Place implications of the unknowns for the apparel industry vary from minimal to significant. FGL Sports The 2019 apparel unknowns include: HBC—DSG Will retail apparel sales during 2018 exceed the 1.4% increase in 2017 sales. Through the first lululemon half of 2018, apparel sales increased 1.9%. For the year Trendex is forecasting that apparel Marks sales could increase in the range of 2.1%-2.5%. Moores Will athleisure sales continue to drive the growth of the Canadian apparel markets? Athleisure’s Reitmans (Canada) growth over the past three years has exceeded almost all other apparel segments. Its growth has been driven by increases in athleisure brands and retailers, along with a change in lifestyle. Roots Will the “supply” of luxury apparel retailers finally exceed the demand for luxury apparel in Cana- Zumiez Canada da? It’s not just that the number of luxury retail doors are increasing, its also that their stores are getting bigger, and establishing a presence in Canada’s better malls. OTHER Will Canada’s A malls continue to prosper in light of e-commerce’s growth? In response, Canadi- Leger Ontario Study an mall developers have continued to invest in upgrading/expanding their A malls. The result is Canadian 2017 that less than 20 malls in Canada have continued to prosper in the face of e-commerce’s growth. Luxury Purse Market La Senza Will the growth rate of apparel e-commerce accelerate or slow? Canadian apparel e-commerce sales during 2017increased 13.8% after increasing by 16.6% in 2016. Will the increasing wide Lids Canada spread adoption by apparel retailers of Buy Online, Pick Up In Store, serve to accelerate the growth of apparel e-commerce? NEXT MONTH Will the growth in the number of off-price retailer doors slow as signs of cannibalization begin to Q3 2018 Apparel Retail emerge? While the number of Canadian off-price apparel doors increased by 38 during the first Sales Summary nine months of 2018, the majority of the increase occurred in a few metro areas. 2017 Household Apparel Expenditures Canada Off-Price Retail Doors End of Third Quarter 2018 2017 2016 Winners 271 265 255 Marshalls 88 72 57 Nordstrom Rack 6 — — Off-Fifth 18 8 — TOTAL 383 345 312 - article continued on page 6 Copyright 2019 Trendex North America This newsletter is proprietary to Trendex North America and may not be reproduced or disseminated outside a subscribing company without express written consent of Trendex North America. Subscribe at: http://www.trendexna.com/order-form-canadian-apparel-insights CANADIAN APPAREL INSIGHTS NOVEMBERTrendexNA.com 2018 DECEMBER 2018 Marks Reports Strong Q3 2018 FGL – Private Label Drives After reporting an acceptable 2.4% increase in its total sales Sales Increase during the first half of 2018, Marks reported a strong 6.4% FGL had an ok, but not outstanding Q3 2018, as its total sales increase during its Q3 2018. During the quarter, the sales increased1.6%, while its comparable store sales in- retailer, which operated 386 stores, reported a 6.1% increase creased 2.2%. The discrepancy between the two sales in its comp sales. Sales per square foot increased 2.0%. measures was partially attributable to the net closing of six CTC attributed Mark’s outstanding performance to sales stores. increases in men’s apparel, along with casual and industrial The retailer’s sales gains were attributed to a strong back-to footwear. Sales also benefited from additional promotions -school selling season, along with favorable seasonal and cooler Septem- Marks weather in western Canada. Outerwear, clothing accesso- ber weather in Quarter Ending Sept 29, 2018 ries, along with athletic apparel were the top performing Western Canada. Q3 Q1-Q3 merchandise categories. Additionally, Marks recorded strong Total Sales +6.4% +3.8% For some time one of FGL’s initiatives has been to increase sales gains in Que- Comp Sales +6.1% +3.5% the penetration of its owned brands. To its credit, FGL re- ported that part of its sales gain was driven by three of them: bec, which reflected Sales per sq. ft. +2.0% N.A. customers positive Woods, Ripzone, and Helly Hanson. response to its re- FGL The relatively small sales increase FGL reported for Q3 branding initiatives. Quarter Ending Sept 29, 2018 2018 could be attributed to either an industry wide slowdown Given Mark’s sales Q3 Q1-Q3 in the growth of sporting goods, or increased competition. momentum, 2018 The next issue of this publication will explore in greater de- Total Sales +1.6% +0.6% could turn out to be tail both of these hypothesis. more than accepta- Comp Sales +2.2% +1.8% ble for the retailer. Sales per sq. ft. +0.2% N.A. Moore’s: Disappointing Q3 2018 CTC’s Initial Report On Helly Hansen’s Sales Moore’s, the Canadian division of Tailored Brands reported that it’s total sales in its third quarter ending November 3, Canadian Tire, which purchased Helly Hansen in May 2018 2018 decreased by a currency adjusted 4.7%, while its com- for C$985 million in addition to assuming approximately parable sales increased 2.4%. The decrease in the retailers C$50 million of operating debt, reported that the brand/ total sales came on top of a 6.3% increase during the first retailer sales in the quarter ending September 29, 2018 to- half of 2018. Moore’s parent company attributed Moore’s Q3 taled C$181.7 million, Sales in Canada accounted for 13.9% 2018 total sales decrease to “an increase in transactions of sales, while 86.1% were in 40+ countries around the partially offset by a decrease in units per transaction, while world. Undoubtedly, a significant portion of Helly Hansen’s average unit prices were flat.” Canadian sales were accounted for by Marks and FGL. For all of 2018 Tailored Brands is forecasting that compara- Q3 2018 ble sales in Moore’s 126 stores will increase by a low-single C$ Millions digit. Moores Total Canadian Canada % of Quarter Ending Nov. 3, 2018 Sales (1) Sales (1) Total Sales Q3 Q1-Q3 Helly Hansen $182 $25 13.9% Total Sales -4.7% +0.4% Columbia $1,034 $62 6.0% Comp Store Sales +1.2% N.A. lululemon $971 $179 18.4% (1) Converted at C$1.30 to US$1.00 2 CANADIAN APPAREL INSIGHTS NOVEMBERTrendexNA.com 2018 DECEMBER 2018 Reitmans (Canada) Reports lululemon: Stays The Course Mixed Results (Q3 2018) lululemon results for its Q3 2018, based on just about every metric were outstanding. For the quarter ending October 28, The results for Reitmans (Canada) Q3 2018 contained both 2018 the retailer reported that its total sales, with 38 more good news as it related to the company’s profitability, but stores operating, increased by 22%. lululemon’s gross profit disappointing news when it came to the retailer’s sales. increased 26%, as its gross margin was 54.4%, an increase First the good news, Reitmans (Canada’s) profitability in- of 240 basis points. The retailer ended the quarter with 426 creased as its net earnings for the quarter were C$8.9 mil- stores. Sales in its Canadian division increased 9.5% to lion as compared to a net loss of C$16.8 million a year earli- US$138 million, while sales in both Asia and Europe in- er. However, it should be noted that in addition to improved creased by more than 50%. Outerwear sales gained traction results from operating activities, the company had taken a with a 150% comp for men’s and a 40% comp for women’s outerwear. C$26.3 million goodwill impairment charge in Q3 2017. As such, the increase in its Q3 2018 net earnings was relatively lululemon’s e-commerce sales during Q3 2018 increased by minor. 44% and accounted for 25.3% of sales. E-commerce sales in China increased by 76%, with a two year increase of over Reitmans continued to close stores during Q3 2018, as at 200%. Contributing to the growth in China was lululemon’s the end of the quarter it operated 624 doors, 28 less than a partnership with Tmall, which resulted in a 150% increase in year earlier. Eleven of the stores closed were Reitmans its sales during Q3 2018. lululemon’s investment over the stores, ten were Addition Elle and four were Pennington past year in data analytics and website development result- stores. A year earlier (Q3 2017) Reitmans operated 652 ing in faster checkout, contributed during Q3 2018 to a 41% stores, 42 less than in Q3 2016. increase in customer acquisition, along with a 19% increase The 0.2% increase in in its email list. Reitmans (Canada) Ltd. Reitmans same Quarter Ending 2018 Currently in Edmonton the retailer is testing its first loyalty stores/ e-commerce program with an annual fee of C$129. In addition to several Q3 Q1-Q3 sales could indicate benefits, members also receive either a pant or pair of shorts Total Revenue -1.1% -0.6% that either Reitmans designed exclusively for the program.