Connect with us

Latest News

We are in the middle of the great American department store shakeout



Rachel Green working at Bloomingdale’s.


“You’re going to Bloomingdale’s with Julie? That’s like cheating on Rachel in her house of worship,” Chandler Bing says to fellow “Friends” character Monica.

That two-decade old joke would not work today. The Rachel Green character, whether sporting mini-barrettes and spaghetti strap dresses or not, would more likely be shopping at home, on her computer, with a glass of wine.

Of the victims of the retail upheaval, department stores have been among the hardest hit. Annual sales at U.S. department stores fell 20% from 2017 to 2018, and sales are on pace to fall even further this year, according to the U.S. Census Bureau. Over the past few years, Bon-Ton and Gordmans liquidated and Sears went bankrupt.

The pressure isn’t abating. Barneys earlier this month filed for bankruptcy, while J.C. Penney is working with restructuring advisers to tackle its debt-load. Shares of Nordstrom are down more then 38% and Macy’s are down 35% so far this year. More than 1,000 department stores have shuttered over the past decade.

“We are in the middle of a department store shakeout,” said Michael Dart, a partner at A.T. Kearney and author of “Retail’s Seismic Shift.

If you haven’t been in a department store lately — and you aren’t alone in avoiding them — you might not have noticed they are slowly dying. And the looming question is who will survive.

To a degree, the pressure these stores are all facing is the same: as the retail industry has transformed over the past few decades, department stores’ greatest strength, size and scale, have become their greatest weakness. Department stores are the retailers with the biggest footprints, which limits the ability to react.

Today’s shoppers like their shopping personalized: shoes for the working urban woman, pants for the stay-at-home mom. Department stores, though, are mass oriented — they stock colors and fashion most likely to appeal to a broad set. Their vast footprints across the United States mean it’s difficult to tailor products regionally.

A man checks his phone as he walks past Macy’s flagship store in New York City.

Getty Images

Retailers have tried to adapt. Macy’s is adding a curated retail concept, Story, to 36 stores across the country, including at its Herald Square flagship. It’s also launched Market @ Macy’s, a pop-up shop within its stores, which features local designers.

But even that has challenges.

“Market was wherever [Macy’s] thought they would have the most overall foot traffic, but not the best area for each brand,” said Dee Murthy, CEO Menlo House, owner of shoe brand New Republic that took part in Market.

Brands strike back

In 1969, Bloomingdale’s took a bet on a new men’s line called Ralph Lauren. It was the first time it extended a brand an in-store boutique. The brand soon became an iconic part of American style, synonymous with laid-back luxury. Last year, Ralph Lauren CEO Patrice Louvet closed about a quarter of its U.S. department store distribution during its fiscal year.

Ralph Lauren is by no means alone. Brands from Michael Kors to Coach are weaning their dependence from department stores. There is a multitude of ways for a brand to control their own destiny to reach a variety of customers, from outlet stores to freestanding shops in malls, and of course, their own websites.

As department stores’ troubles have grown, brands’ urge to be independent has likewise fortified. Brands no longer trust that department stores won’t slash product prices. Brands worry about sloppy presentation, decaying customer service and empty floors as some malls have become desolated. That fear is particularly strong for lower price-point stores.

“The reality is, storytelling, merchandising and TLC, that doesn’t exist anymore,” said Murthy. “Brands don’t get that kind of power from the retailer.”

The exception, Murthy noted, may be retailers like Bergdorf Goodman or Nordstrom, which still have strong customer service and stores outside the mall.

Instead, brands are building out websites or keeping some of products for their own standalone stores. Lululemon, a brand that may have relied on a retailer like Bloomingdale’s decades ago, ended 2018 with 440 locations globally and has plans to grow further this year. Digital brands like Warby Parker have side-stepped department stores nearly entirely, making it a point of growing through building out their own stores.

An employee restocks clothes on display at the Lululemon Athletica sports apparel store on Regent Street in London.

Simon Dawson | Bloomberg | Getty Images

Staple department store brands like Pucci and Nanette Lepore also are allowing products to be sold at outlets and off-price retailers like T.J. Maxx, which offer shoppers cheaper products and a chance for discovery that a department store cannot. Macy’s, Nordstrom and others have tried to replicate the experience with their own off-price stores, Macy’s Backstage and Nordstrom Rack.

“I try not to go to department stores too much,” said Brianna Ryan, a 22-year-old Pilates instructor in New York City, noting the number of thrift stores in Manhattan.

She last went a major department store, Bloomingdales, about a month ago, in search of new workout clothes. She left after she found the prices too high.

“I found a pair of white leggings that looked exactly like Lululemon from T.J. Maxx,” Ryan explained.

The shakeout

As other department stores have fallen victim to these forces through bankruptcy or liquidations, like Sears and Bon-Ton, that business seems to have evaporated not shifted.

After Sears filed for bankruptcy last October and closed a number of its stores, investors expected J.C. Penney would benefit, thinking former Sears shoppers would head to Penney instead. That never materialized. Instead, Penney is hunkering down even further. It stopped selling appliances this past winter. It closed stores and has hired external advisors to look at options for restructuring its debt.

Employees assist customers at the checkout counter of a J.C. Penney store.

Michael Nagle | Bloomberg | Getty Images

In the absence of a quick fix, several retailers are seeking to shield themselves from the public spotlight. As a private company, a retailer can make tough changes, like closing stores or investing in technology, without the whipsaw reaction of the public market.

With private equity so recently burned by their retail binge in the 2000s, the companies with the best shot are those that already have significant inside ownership — and a pitch for why they will be the ones to survive. Two efforts are already underway.

A group of Nordstrom family members that own a significant stake in Nordstrom have been working on a proposal to increase their stake in the department store to more than half, people familiar with the situation tell CNBC.

The proposal comes more than a year after the company was forced to abort talks to taker retailer private. A special committee of the board rejected its offer of $50 a share. Shares of the retailer have in recent weeks slipped more than $20 below that offer. Proponents of the department store say it has stronger relations with brands than its peers, as well as a smaller footprint in better locations.

Nordstrom did not immediately respond to a request for comment.

Meantime, Richard Baker, executive chairman of Saks-owner Hudson’s Bay, is leading a bid of shareholders that collectively own 57% of the company to take the retailer private. Shares of the retailer, which also owns Lord & Taylor, had fallen nearly 50% in the year through June 10, before the consortium launched its offer.

The offer though, has already faced pushback from a special committee appointed to evaluate the deal, which has called it “inadequate.”

The offer of 9.45 Canadian dollars ($7.12) a share represented a 48% premium to Hudson’s Bay’s closing share price its last trading day before the offer was extended. Still, Hudson’s Bay CEO Helena Foulkes only last year pegged the value of the company’s real estate at $28 Canadian dollars per share. That’s roughly three-times the offer put forward by the the Baker-led consortium.

Still, retail has gotten harder in the past year, and Hudson’s Bay has hived off assets, including its European department store, Galeria Kaufhof.

A Barney’s store stands in lower Manhattan on August 06, 2019 in New York City. Barneys, one of America’s most exclusive clothing stores, has filed for bankruptcy.

Spencer Platt | Getty Images

In a letter released earlier this month, Baker and the other shareholders made their case to take the company private, saying the landscape for retailers “poses serious threats” to the value of its business and real estate.

“We believe that the business plan and value creation initiatives required to address these challenges will be better understood, accepted and executed by patient capital in a private company context,” they wrote.

The investor group pushed back on speculation that, as a private company, Hudson’s Bay would return the retailer to the real estate roots of Baker, a New York real estate investor, abandoning retail all-together. Hudson’s Bay sold its iconic Lord & Taylor Fifth Avenue store to WeWork earlier this year.

And now investors are asked to take their bets.

“There will be survivors, I think Nordstrom is one of them, but the jury is out on who will be the others,” said A.T. Kearney’s Dart.

Source link

Latest News

Stocks won’t bottom until panic gets more extreme: BofA




New charts from Bank of America-Merrill Lynch’s Stephen Suttmeier suggest two things must happen before the stock market bottoms: The S&P 500 needs to fall another 5% and panic needs to get more extreme.

His first chart shows the S&P 500‘s decline, and the key levels to watch.

“The correction is going to continue,” the firm’s chief equity technical strategist told CNBC’s “Futures Now ” on Thursday. “You take a measured move of this trading pattern — one leg down, one leg up. It’s gets you right down into that 2,750-2,740 range.”

Suttmeier estimates it’ll take weeks for stocks to find a floor, especially since the volatility is coming during the worst seasonal period of the year: August through October.

“We have plenty of resistance,” he said. “We continue to stall right around this 2,940 level on the S&P.”

Suttemeier’s second chart reflects fear in the market through the 25-day put/call ratio, which follows put volume relative to call volume. According to Suttmeier, panic isn’t widespread enough for stocks bottom.

“Once you get above one in the 25-day put/call ratio, you can see this S&P bottom. And, that happens probably sometime in September,” said Suttmeier. “We had fearful readings to start June. June was an up month, and we came into August very complacent.”

On Friday, the S&P 500 rallied 1.4% to close at 2,888.68 and is almost 5% away from its all-time high.

Source link

Continue Reading

Latest News

There are now 175 online mattress companies—and you can’t tell them apart




Samurai Messenger Service prepares to deliver a packaged mattress from the bed delivery company Casper in New York.

Yana Paskova | The Washington Post | Getty Images

Gone are the days of flopping onto mattress after mattress in a stuffy showroom floor.

Online mattress companies that ship to your front door say that finding the perfect bed might just take a few clicks. But experts warn that it’s important to look beneath the sheets. They say many mattresses being sold are actually very similar — despite how they’re marketed.

“The products that you’re buying — there are many similarities and only some minor differences,” said Seth Basham, an analyst at Wedbush Securities who covers the mattress industry. He said that the core of the mattresses at different companies often use the same foam. “The different layers — what goes on top of what, can differ. But the big difference is how they’re being sold and marketed.”

There are now around 175 bed-in-a-box companies in business, estimated Michael Magnuson, founder of mattress review site Their sales account for 12% of the $16.5 billion mattress industry, though only the top 10 companies make a significant dent, according to Basham. Among the major players are brands like Purple, Casper, Nectar, Leesa, and Tuft & Needle.

Mattress giants like Tempur Sealy and Serta Simmons should be nervous, said Peter Keith, an analyst at Piper Jaffray. Sales units on average at those companies have been down 5% over the past two years.

A survey by the International Sleep Products Association reported that 45% of mattresses purchased in last year were online, up from 35% for purchases in 2017.

Purple is the only public bed-in-a-box company, after it merged with a public investment shell company in 2018 at a valuation of $1.1 billion. Its stock has dropped 40% since the merger, and the company is currently valued at $355 million. Like many other bed-in-a-box companies, according to Basham, Purple has not yet seen a profit. In 2018, the company made $285 million in sales, and reported a net loss of $19.6 million.

Profit is hard to come by because the ease of forming an online mattress company makes the market competitive, according to Basham. “Barriers to entry are low, but barriers to profitability are high,” he said. “It doesn’t take that much to design a mattress, a marketing campaign, put up a website, and have one of these big companies like Carpenter do the fulfillment for you,” he said, referring to one of the key mattress manufacturing companies.

A rolled up Purple mattress on a doorstep.

Source: Purple Innovations

Manufacturing ease

The majority of bed-in-a-boxes outsource their manufacturing, according to Magnuson from “None of these guys, with a few rare exceptions, make their own mattresses,” he said. “They’re literally calling around to producers saying, ‘we need a finished product and here’s what we think it should look like.’ Sometimes, they don’t even know what they want it to look like.”

The companies that make their own mattresses include Brentwood Home, Brooklyn Bedding and Purple, Magnuson said. Many of the bigger bed-in-a-boxes do the research and development of the mattresses themselves, which differentiate how they feel. And companies like Tuft & Needle, Casper and Leesa have layers of foam with proprietary formulas, which means they’re not the same as others.

Most of the outsourcing is to just four major manufacturers, according to Dan Schecter, senior vice president of sales and marketing at Carpenter. He said his company makes mattresses for 40% of the mattress industry at 60 factories throughout the country. That includes including roughly 14 bed-in-a-box brands, along with all the traditional players like Tempur Sealy.

“The customer comes to us … they say they want a mattress that does these things against the body, and they would like to have these features and advantages as part of their marketing story. We then create the mattresses that dovetail with what their vision is,” he said.

Layla CEO Akrum Sheikh said companies that manufacture their own products are “at a disadvantage as they may find themselves being limited to the use of their own technologies and capabilities.”

“In order for Layla customers to truly benefit from the product, we believe in a business model that combines utilizing licensed technology and abilities from multiple manufactures combined with our own proprietary inventions bundled up into one superior product,” Sheikh said. “This model allows us to innovate and create without restrictions.”

Schecter said the mattresses produced by Carpenter do not have the same foam formulations, and that the company only agrees to design and manufacture mattresses that are backed by science.

Purple emphasizes the science behind its mattresses, especially its “Smart Comfort Grid” layer, which it says helps to relieve pressure on your body during sleep. Eight Sleep is another company that’s technology-oriented, and touts its mattresses’ dual temperature control and sleep tracking app.

Innovations like these are helping brands to differentiate themselves, according to Keith.

“For a while there were a lot of similarities, but you’re starting to see the bigger companies diversifying their offerings,” he said. For example, some brands are now selling luxury and cheaper versions, or hybrid models that include both foam and springs.

Marketing confusion

But all the different offerings might just overwhelm consumers, said David Srere, co-CEO of ad agency Siegel+Gale.

“It’s the amount of information. There’s just too much,” he said. “If you go online, not only do all of them look alike, but they’re all talking about their different products. If I tell you that my mattress is special because it’s infused with copper gel, does it mean anything to you?”

Layla, Sleep Science and Propel by Brooklyn Bedding all sell copper-infused mattresses. DreamCloud, Leesa, and Walmart-owned Allswell are just some of the brands offering hybrid mattresses.

Brentwood Home and Sleep Science were not immediately available for comment.

And the sameness between companies applies to their marketing and brand identities, too, according to Armin Vit, co-founder of graphic design firm UnderConsideration. He sees resemblances in the companies’ colors, fonts and advertising messages. “You can see a similar approach,” he said. “In my mind, Casper was the first, so I think they sort of set the tone. They did well, and others followed.”

Casper, which was founded in 2014, was among the first bed-in-a-box company to gain widespread recognition. Their logo, which is navy blue with a sans-serif font, has similarities with Leesa’s, launched in 2015, Nectar’s, which was founded in 2016, and Purple’s, also formed in 2016.

Vit said that the likeness of the logos and marketing might be intentional. “The goal is for something to look familiar,” he said, because there’s a chance consumers will mix up someone’s mattress recommendation with another company’s.

“It’s not ideal, it’s not the most creative or authentic thing to do, but it’s kind of like getting sales and getting customers with confusion in the marketplace.”

Each companies’ messaging isn’t much better. For example, Casper says its memory foam mattresses is for “those who want a ‘just right’ feel whether you sleep on your back, side or stomach,” while the Nectar’s mattress firmness is also “just right” and provides “optimal comfort and support — whether you sleep on your front, back, or side.”

Vit said, “There’s a certain comfort in doing what the successful company’s doing. Someone takes the lead and everyone else says, ‘Hey, that seems good, let’s go there.’ It’s not exciting, but it’s sort of smart.”

Source link

Continue Reading

Latest News

British Airways’ New York-London and other high revenue airline routes




British Airways airoplane Boeing B747-400 in the sky above clouds.

hady Khandan | ullstein bild | Getty Images

In case the suites and lobster at the front of the plane didn’t give it away, a new ranking shows how high-paying travelers rule the skies.

The routes that make the most money are those frequented by business travelers, where airlines have been scrambling to add high-end seats at both four- and sometimes five-digit prices.

British Airways’ nonstop flights between New York’s John F. Kennedy International Airport and London’s Heathrow Airport brought in nearly $1.2 billion in revenue in the 12 months ended in March 2019, far and away more than any other route in the world, according to data released this week by aviation statistics firm OAG.

Other high-revenue routes include the less than 90-minute hop on Qantas connection between Melbourne and Sydney, which made the largest Australian carrier $861 million over that period, and United Airlines service between San Francisco and Newark. That flight generated $689 million. Following that was American Airlines‘ Los Angeles-JFK route, which  brought in nearly $662 million.

In an industry with slim profit margins that scarcely leave the single digits, airlines pour resources into such high-revenue routes, adding new seating because they know they attract corporate accounts and other high spenders.

“Those airlines who have [those routes] will defend them at all costs,” said OAG executive vice president John Grant. “They’ll fight for those passengers and not cancel them.”

Airlines are also trying to get passengers to pay for premium seats, rather than give them away with free upgrades, and they’re getting much better at it.

Delta Air Lines last month said it is selling more than 60% of its first class seats, up from about 13% in 2011 — bad news for anyone expecting a free upgrade. The airline is also getting less than half of its revenue from the coach cabin, compared with about two-thirds six years ago, it said late last year.

JetBlue Airways plans to start service to London from New York and Boston in 2021, using its Mint class to court travelers away from entrenched rivals on the lucrative routes with cheaper premium-class lie-flat seats.

U.S. airlines have also taken a cue from their international competitors in adding a new class in between standard coach and business class known as premium economy, which for a higher fare gets travelers earlier boarding, a roomier seat, a larger entertainment screen and higher-end food, among other perks.

American Airlines earlier this month said it finished the installation of premium economy seats on its wide-body fleet. Prices vary but a premium economy seat can fetch almost three times more than a regular economy ticket. For example, a round trip between New York and London in early September on American was $704 while a premium economy ticket was $1,908.

Source link

Continue Reading


Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.