October 23, 2015
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October 23, 2015 October 23, 2015 l This week, FBIC participated in a panel discussion at DEBORAH WEINSWIG the Sourcing Journal Summit in New York, attended Executive Director – Head of Global Retail & Technology Fung Business Intelligence Centre by more than 250 senior-level attendees and [email protected] representatives from more than 100 companies US: 646.839.7017 HK: 852.6119.1779 l Fashion retailer Primark will open near Philadelphia CN: 86.186.1420.3016 on Nov. 25, after making its recent US debut in Boston. The store will carry its own brand of men’s, women’s and children’s clothing and accessories l Nordstrom plans to expand its 180-store off-price Nordstrom Rack chain to 300 stores by 2020, having figured out the elusive millennial generation l Walmart plans to increase spending on e-commerce capabilities to $900M this year and $1.1B next year, up from the $700M last year, targeted at fulfillment centers, its mobile app and online grocery shopping DEBORAH WEINSWIG, EXECUTIVE DIRECTOR –HEAD OF GLOBAL RETAIL & TECHNOLOGY 1 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2015 The Fung Group. All rights reserved. October 23, 2015 FROM THE DESK OF DEBORAH WEINSWIG Last week, we attended and participated in a panel discussion at the Sourcing Journal Summit 2015, which was held in Midtown Manhattan. Sourcing Journal positions itselF as the premiere trade publication for apparel and textile executives Focused on sourcing and manuFacturing, and it has more than 55,000 readers. The event was advertised as having more than 250 senior-level attendees, more than 15 thought-provoking speakers and representatives from more than 100 companies. Discussion and panel topics included key trends in sourcing, the latest in trade, optimizing the supply chain, the Future oF reshoring and nearshoring, and using technology to improve eFFiciency. Our panel discussion Focused on how technology has changed the development process over the past few years, trends in preproduction technology and how these technologies are changing retail. Despite an abundance oF soFtware solutions available For managing manuFacturing processes, many manuFacturers are Frustrated by the Fact that they are still emailing around large, detailed spreadsheets that must be pored over every Monday morning. Another source oF Frustration is design changes that arrive after manufacturing has already begun. If a certain style or color is selling out, lead times can be are too long For manufacturers to be able to react to the spike in demand. Turning to omnichannel, we were asked how technology is helping retailers cater to the constantly connected consumer, which companies are winning and what they are doing right. Although the perception is that omnichannel is omnipresent, studies show that this is not yet the case. According to a recent study conducted by ERP software provider SAP, 17% of retailers have become omnichannel providers, while 50% are still planning or undergoing their transFormation. That indicates that most retailers still have far to go before they can offer “buy anywhere, collect anywhere” service to customers. Regarding success stories, we like the recent upgrade oF the Starbucks smartphone app. It enables customers to order and pay on their phones, thereby skipping the line, which can be long in New York City during the morning rush. Starbucks has worked hard to enable customers to customize their drinks, and the app helps with order accuracy as well. It also increases revenues, as customers who use it are less likely to abandon a long line and go elsewhere For their coFFee. A fascinating and illuminating presentation was given by John Thorbeck, Chairman of Chainge Capital, which oFFers consulting services for companies to adopt Lead Time Optimization. He has published several articles on the “Zara Gap,” with several publications in collaboration with ProFessor Warren Hausman oF StanFord University. Dr. Hausman’s work borrowed the concept oF postponement From the electronics-manuFacturing industry. The idea is that companies that have the supply-chain flexibility to postpone manufacturing as long as possible can achieve increases in proFitability and receive a higher market value for their stock. The Zara Gap represents the signiFicant valuation disparity between Zara’s stock and those of other retailers when plotted in a graph comparing the market-capitalization-to-revenue ratio versus a ratio of operating income to inventory. According to the a Sourcing Journal article, the key elements oF postponement are: postponing Finished good commitments to reduce lead times and Finished good inventories; staging capacities and hedging materials to exploit improving forecasts during the selling season; optimizing total profit to incorporate the Financial impact of markdowns, stockouts and unwanted inventory instead of Focusing on cost minimization alone; and integrating demand For Fresh, more Frequent new product with rapid replenishment. We look Forward to even more ideas and technologies From other industries being borrowed and adopted to enhance and advance the retail industry! DEBORAH WEINSWIG, EXECUTIVE DIRECTOR –HEAD OF GLOBAL RETAIL & TECHNOLOGY 2 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2015 The Fung Group. All rights reserved. October 23, 2015 FBIC HAPPENINGS & WEINSWIG’S WATCH ING • Last week, we attended and participated in a panel discussion at the Sourcing Journal Summit 2015, which was held in Midtown Manhattan. STAT OF THE WEEK • FBIC Global Retail & Technology estimates US holiday retail sales will rise by 3-4% year over to $626-633 billion this year. • Expected colder, drier weather this December will provide a 3-4% boost to US retail sales ahead of Christmas 2015. • For more, see our report, US Holiday 2015 Forecast. Source: FBIC Global Retail & Technology CHART OF THE WEEK UK Retail Sales Growth Figure 1. UK Year-over-Year Retail Sales Growth (ex Fuel) 5 4.1 4 3.4 3.3 4 2.8 3 2.4 2.3 3 % 1.9 2 2 0.9 1 1 0.2 0 Jan Feb Mar Apr May Jun Jul Aug Sep Source: OfFice For National Statistics • UK retail sales growth jumped to 3.4% in September 2015, new data shows. • A return to positive growth For Food retailers contributed, as grocery stores saw an upliFt in trade due to the Rugby World Cup. • NonFood stores saw a strong month, with sales up 4.1% year over year, with clothing specialists’ sales up 5.8% • Internet retail sales were up 14.9% year over year in September. DEBORAH WEINSWIG, EXECUTIVE DIRECTOR –HEAD OF GLOBAL RETAIL & TECHNOLOGY 3 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2015 The Fung Group. All rights reserved. October 23, 2015 US RETAIL EARNINGS Revenues ($ Mil.) Change YoY Gross Margin (%) Change Net Income ($ Mil.) Change Store Fleet EOP Company Period 2015 2014 (%) 2015 2014 (BP) 2015 2014 (%) 2015 2014 Tractor Supply 3Q ended Oct.21 1,476 1,360 8.5 34.7 34.1 60 0.9 0.8 11.0 1,465 1,361 3Q Ended Sept.30 Alphabet 18,675 16,523 13.0 25.2 22.5 267 3,979 2,739 45.3 NA NA 3Q Ended Sept.30 Amazon 25,358 20,579 23.2 1.6 (2.6) 424 79 (437) (118.1) NA NA 3Q Ended Sept.30 eBay 2,099 2,150 (2.4) NA NA NA 529 579 91.4 NA NA 3Q Ended Sept.30 Under Armour 1,204 938 28.4 48.8 49.6 (86) 101 89 13.5 173 122 Source: Company reports US RETAIL HEADLINES Primark to launch in the Philadelphia market (October 19) Philadelphia Inquirer • Irish-based fashion retailer Primark will open in the King of Prussia Mall (in the old Sears space) near Philadelphia on November 25, shortly after making its US debut in Boston earlier this year. The department store will focus on customer service, with plans for 93 fitting rooms – triple the usual number for a shop this size—58 cash registers—double the usual complement, and will hire 220 full-time workers and 270 part time. • The store will carry its own brand of men’s, women’s and children’s clothing and accessories, sourced by a Dublin-based global buying team to designers and factories worldwide, which the company says drives down costs. Nordstrom Rack stores woo next-gen luxury shoppers (October 15) Business Insider • Nordstrom plans to expand its 180-store off-price Nordstrom Rack chain to 300 stores by 2020, according to Women’s Wear daily. Unlike many other retailers, Nordstrom has figured out the elusive millennial generation. “The outlet business gives Nordstrom exposure to young customers who are seeking a deal and otherwise wouldn’t be shopping there,” explained Robin Lewis of the Robin Report. • According to Lewis, the wide variety of brands offered by Nordstrom minimizes the risk of the outlet business diluting the brand’s image. Nordstrom believes younger customers will migrate to its expensive full-line stores as they grow older. Amazon to icnrease holiday hiring by 25% (October 20) WSJ • Amazon announced plans to hire 100,000 seasonal warehouse employees in the U.S. this year, 25% more than last year, to speed up holiday deliveries. By comparison, Wal-Mart is expected to hire 60,000 workers this year, Target hopes to hired 70,000 seasonal workers and Macy’s plans for 85,000. • Holiday hiring by U.S. retailers is projected to be flat this year, in part due to changing shopping habits and job growth in the sector this year, according to global outplacement firm Challenger Gray & Christmas. Coty aquires content agency Beamly as it prepares for P&G Deal (October 19) Cosmetic Design • Coty confirmed the acquisition of London and New York-based digital marketing business Beamly.