“The prevailing sentiment across retailing is that the customer has less interest in shopping in stores, whether it be traditional department stores or other luxury specialty stores.” That’s what Neiman Marcus CEO Karen Katz said yesterday after delivering yet another quarterly drop in same-store sales and profits.
That’s a sentiment many would echo at the moment. While anecdotal evidence suggests some product is selling (shoes seem to have taken over from bags at the hot property) the fact is,retail is having a tough time at the moment. And whether it’s a slightly-out-of-touch value player like BHS going under in the UK, or a teen chain or luxury retailer like Neiman Marcus struggling in America, fashion retail is at the sharp end of that.
Yet some are doing just fine thank you. Look at Ted Baker yesterday. With its surging sales and continuing new store openings, it’s in a really sweet spot. Then today, Inditex presented yet another upbeat report to prove that when you get it right, you really do reap the rewards.
Yes, it was a case of same old, same old at Zara owner Inditex as Q1 sales rose 13% (or 17% currency-neutral) to €4.9bn, net profit rose 6% to €554m, and comp sales rose in all regions. And to add insult to injury for anyone not doing so well, Inditex said the group generated nearly 12,000 new jobs, opened more new stores to bring its total to 7,085, and struck an extended agreement with IndustriALL Global Union to boost responsible supply chain management… oh, and Q2 sales are going great with a 15% currency-neutral rise so far.
All of which makes it even more depressing to read those latest Neiman Marcus results where online shopping, the upcoming presidential election, fewer tourists, stock market volatility and cool weather were once again blamed for a lacklustre quarter.
How lacklustre? Comp sales fell 5% and total sales fell 4.2% to $1.17bn. That may sound like a huge figure but it’s margins that count and profit plunged from $19.8m a year ago to $3.8m as the gross margin fell by 1.70 percentage points on the back of markdowns.
So was there any good news? Well shoes (for both women and men) were strong, as was beauty. And handbags were “less challenging” than previously, although that statement doesn’t go quite so far as to say that they were good.
Neiman Marcus is particularly vulnerable to oil industry woes as its Texan focus means oil execs feeling a little less wealthy will cut back on their spending. It also suffers when fewer Brazilians visit Florida, when Russians travel less and when general problems in the stock market mean wealthy customers’ share portfolios generate less income than usual.
It all made Neiman the latest in a stream of American department store operators (Macy’s, Nordstrom, Hudson’s Bay/Saks) to report weaker-than-expected performance.
Neiman is trying to put things right though, and said it’s working with its suppliers to cut stock levels by cancelling orders, returning excess stock and negotiating extra markdown allowances. Those suppliers must be so pleased!
The fact is that at present, fashion retail seems to be divided into two groups – the haves and the have-nots. They divide up not by price level, trend level, number of stores or anything like that. But by the ‘haves’ currently having a great (or at least good) time of it. And the ‘have-nots’? Well, they’re really not having so much fun.
For the former think Gucci, Primark, Ted Baker, Inditex, John Lewis, Amazon. And for the latter… unfortunately the list is too long to go into here but I definitely think Neiman Marcus qualifies.