This Week in Retail #36
Hey Friends,
Last week we celebrated our 1 year anniversary and I wanted to thank everyone who continues to support this publication. Writing this publication brings me a ton of joy and I love getting to see your feedback and thoughts on a weekly basis.
Value retail is still seeing it’s moment in the sun but some are faring better than others…. Ross announced the opening of 24 new stores in June and July, with 21 under its namesake banner and three DD’s Discount stores across 17 states. According to Richard Lietz, the expansion includes markets in Michigan, Minnesota, New York, Colorado, Pennsylvania, and Texas. Ross now operates 1,795 Ross stores and 353 DD’s Discounts, totaling 2,148 stores. The company aims to expand to over 3,600 locations, planning to open about 90 stores this year. Off-price competitor TJX also plans significant expansion, adding numerous new T.J. Maxx, Marshalls, HomeGoods, and Sierra stores, and currently operates over 4,900 stores globally.
Although not all value retail is created equally…..Five Below CEO Joel Anderson has resigned and left the board to pursue other interests after nearly a decade in the role. Chief Operating Officer Kenneth Bull, a 20-year company veteran, has been named interim CEO, with co-founder and former CEO Thomas Vellios as interim executive chairman. Five Below lowered its Q2 sales guidance to $820 million to $826 million, down from $830 million to $850 million, with comparable sales expected to fall 6% to 7%. Preliminary Q2 results showed a 9.5% increase in total sales over the previous year, despite a 5% drop in comparable sales.
Despite continued interest in elite brands, recent luxury earnings reveal a cautious spending environment, even among high-income earners. LVMH reported a 14% drop in net profits for the first half of the year, with second-quarter organic revenue growth at 1%, missing expectations. Sales for the first half totaled €41.7 billion (~$45.3 billion), reflecting 2% organic growth but a 1% year-over-year decrease due to currency effects. LVMH CFO Jean-Jacques Guiony noted the challenging times but emphasized the enduring appeal of brands like Louis Vuitton, which has benefited from new collections and high-profile campaigns. In contrast, LVMH's wine and spirits segment saw a 9% decline in organic revenue. The luxury sector's slow growth is partly due to economic and geopolitical uncertainties, particularly in the U.S., where inflation and high interest rates have made shoppers more price-sensitive.
Walmart Released their First Annual State of Adaptive Retail Report which focuses on a new era of personalized shopping. Some highlights are below:
The retail landscape has dramatically transformed over the past decade, leading to the emergence of Adaptive Retail. This evolved form of retail focuses on delivering shopping experiences tailored precisely to customer needs and preferences. Adaptive Retail goes beyond integrating online and offline shopping by adapting experiences based on the deeper context behind purchases.
Key Points:
Personalized Shopping Experiences:
Retail is now defined by profoundly personal shopping experiences where the customer controls how, where, and when they shop.
Retailers must understand the "Why" behind purchases to predict needs and reduce decision-making for customers.
Anticipating Shopper Needs:
Retail success hinges on the ability to anticipate and meet evolving customer expectations by offering personalized suggestions and delivering at the right moment.
Survey Insights:
A survey by Morning Consult of over 2,200 U.S. shoppers highlighted four key trends indicating that retailers must proactively predict individual needs, offer personalized experiences, and provide immediate accessibility.
Adaptability and custom "do it for me" experiences are now essential for retail success.
S&P Global Ratings downgraded Walgreens Boots Alliance from 'BBB-' to 'BB', moving it into speculative-grade territory. Analysts Diya Iyer and Hanna Zhang cited lower-than-expected annual guidance, strategic changes, limited cash flow, and large upcoming maturities as key risks. Walgreens is facing challenges in its retail and pharmacy operations, with U.S. margins impacted by reimbursement pressure, declining sales volume, and higher shrink. They expect Walgreens' adjusted EBITDA margin to drop over 100 basis points to below 5% this fiscal year, down from 6% last year, despite some mitigation from cost cuts.
Google has decided to retain third-party cookies in its Chrome browser, despite years of planning to phase them out. In a blog post by Anthony Chavez, VP of Privacy Sandbox, the company announced a new direction for Privacy Sandbox, allowing Chrome users to customize their browsing experience and choose to use cookies. This decision was influenced by feedback from advertisers and regulators seeking alternative privacy protection method. The latest announcement from Google, retaining third-party cookies in Chrome, relieved e-commerce brands and marketers who had faced uncertainty for years. Since January 2020, Google had postponed multiple deadlines for eliminating these cookies, aiming for a more private web experience. Eliminating third-party cookies would have hindered brands' ability to track user behavior and deliver targeted advertising. In preparation, brands have been gathering more first-party customer data, a practice they plan to continue even with the retention of third-party cookies.
Southwest Airlines is introducing assigned seating, including premium options for an extra fee, to attract new customers and improve profitability. This marks a significant shift from its long-standing open seating policy, driven by research indicating a preference for assigned seats. Additionally, the airline will start operating red-eye flights. These changes come as Southwest and American Airlines reported nearly halved profits for the second quarter, despite achieving record quarterly revenue. American Airlines also reduced its annual outlook.
After a 15-year hiatus, Limited Too has relaunched in Kohl’s stores nationwide and on the retailer’s website. The initial collection includes athleisure, sportswear, plaid skirts, and dresses, with plans to expand into swimwear. Limited Too collaborated with its original designers to maintain the brand's original spirit and creativity.
Conn’s HomePlus, a 134-year-old furniture and electronics retailer with locations primarily in the southern United States, has filed for bankruptcy and is closing nearly half of its 170 stores. The Texas-based company, which filed for Chapter 11 bankruptcy protection on Tuesday, has been struggling with slumping sales amid a broader slowdown in discretionary spending among consumers. Conn’s has assets and liabilities worth at least $1 billion each, according to the filing. lorida is the most affected state with 18 stores soon shutting down, followed by Texas with 9 locations. Other states where stores are closing include Arizona, Colorado, North Carolina and Virginia.
In some cryptocurrency news, maybe not necessarily retail related but…..Ferrari has expanded its crypto payment solution to Europe following its U.S. launch in October. Ferrari’s European dealer network will be able to accept crypto payments for its cars from the end of July. Ferrari partnered with BitPay as its cryptocurrency payment processor for the U.S. launch, accepting payments in bitcoin, ether and the USDC stablecoin, with crypto payments to dealers immediately converted into fiat currency to “protect them from price swings.”