Retail Happenings of the Week

Millennials don't like brands. No news there. But this piece about the rise of no-name attire has some projections that furthers the "Amazon Effect" narrative ((and helps explain the seemingly ludicrous Kroger Inc. ($K) clothing line)). "This year Amazon will leapfrog T.J. Maxx owner TJX Cos. and Macy’s Inc. to become the second-biggest seller of apparel and footwear in the U.S., Wells Fargo estimates." And "In some categories—like the active wear that Americans increasingly wear all day, whether or not they hit the gym—private labels combined account for 20 percent of the market, according to researcher NPD." Short Lululemon ($LULU)? Addition reason (see above) to short TJ Maxx ($TJX)?

If this stresses you out, at least you can double down on discounted protein and work off the anxiety, given the look of GNC Holdings Inc. ($GNC). What does this all mean for the malls? Not a whole lot of good. Hence, mud. Though some beg to differ to the tune of $25b.

Some predictions for 2018. The most obvious of which is that there'll be more retail bankruptcies to come in 2018. Just (maybe?) not Charlotte Russe, which has seemingly pulled off a miracle and kept itself out of bankruptcy court with a consensual deal with its lenders in hand. Last note: while "treasure hunt" retailers may not be impervious to Amazon, Costco Wholesale Corporation ($COST) very well may be: it reported a 17% increase in earnings, a 42.1% increase in e-commerce sales and steady membership rates. The stock popped nicely going into week's end.

Sustained and Busted Retail Narratives

Michael Kors Holdings Limited ($KORS) reported HORRIBLE numbers this past week: an absolute trainwreck. Quickly here: revenue down 11.2%, same stores sales down 14.1%, wholesale net sales down 22.8%, and a quarterly net loss of $26.8mm, a ($203mm) swing from the same quarter last year. Feel free to pencil in 100-125 KORS stores into the chart below which, in a sign of the fast moving destruction of retail, is already outdated (Also, all of these closures are shining through in the retail job numbers). Express Inc. ($EXPR) also reported profit and revenue misses and saw its stock plummet. Meanwhile, L Brands ($LB) reported a 7% comp sales decrease and total sales down 5%; it closed 6 stores (but still has 3074!). By brand, Victoria's Secret -14%, Bath & Body Works +6%, and L Brands - 7%. The beauty narrative is sticky. As is the discount stores: Dollar General ($DG) reported solid numbers. And as is yoga, apparently, as Lululemon ($LULU) surprised to the upside though it, too, is closing some stores. All things housing related were supposed to be ringfenced from Amazon but, well, maybe not: Restoration Hardware ($RH) took a beating on earnings. It claims to be taking the heat now to protect itself from Amazon later. We'll see.

New York Commercial Real Estate is F*cked

Amidst all of the retail carnage, say hello to the one-week pop-up store lease (NYT firewall). Choice quote: "'[I]t must be really scary right now' for owners in SoHo...." Note that the article highlights that major firms do not track popups which screams of a data opportunity for the entrepreneurial set. Also, one-year rental deals are becoming all of the rage (here, Lululemon in NYC). 

Fast Forward: Short Sephora & Lululemon & Whoever Makes Sheets These Days

We're seeing more and more written about Glossier (women's beauty lifestyle brand) and Outdoor Voices (women's athletic gear) and word is that they may both be coming to a mall near you. Meanwhile, Caspar will now follow Harry's razors increased distribution strategy via partnership with Target (though not for mattresses...yet). We highlight this merely to get away from the male-centric (and false) emphasis on Warby Parker and Bonobos being the saviors for everything brick-and-mortar.