Online sales boost H&M, Ascena’s struggles continue, Nike tries to realign and Boohoo.com is all smiles.
In a Nutshell: H&M Group said an omnichannel approach that includes continued integration and development of its online and physical stores drove sales gains in the third quarter, but store traffic woes remain a concern and dragged down the bottom line.
The company said it continues to improve its online store and is adding more and faster delivery options, while at the same time further broadening the range of products online. The physical store is increasingly being integrated with the online store for a more convenient shopping experience.
H&M said it will be closing around 90 stores during the year, resulting in a net addition of about 385 new stores. In the year to date, it has opened four new markets for H&M stores in Kazakhstan, Colombia, Iceland and Vietnam, with Georgia set to open later this year. With those additions, H&M will be present in 69 markets. This year, the retailer will also open eight new H&M online markets, and next year the company plans to continue online expansion into further countries, including India.
Sales: H&M Group’s sales for the third quarter ended Aug. 31 increased 5 percent to 59.38 billion Swedish krona ($7.3 billion). H&M said continued rapid and profitable growth of the group’s online sales, which in some established markets already account for 25 percent to 30 percent of total revenue, helped drive the gains.
Earnings: Profit for the period fell 20 percent to 3.84 billion Swedish krona ($470 million) from 4.82 billion Swedish krona ($590 million) in the year-ago period. The company blamed steep markdowns on fall apparel for the profit drop. Gross profit margin dropped to 51.4% in the quarter from 54 percent a year earlier.
CEO’s Take: Karl-Johan Persson, chief executive officer, said, “The competitive landscape is being redrawn, new players are coming in and customers’ behavior and expectations are changing, with an ever greater share of sales taking place online. This shift is clearly reflected in our online sales, which continue to develop very well. However, our growing online sales did not fully compensate for reduced footfall to stores in several of our established markets, which has resulted in our total sales development not reaching our targets so far this year. This is, of course, something that we are not satisfied with and which, among other things, resulted in that we entered the third quarter with inventory levels that were too high.”
[Read more about H&M’s product development: H&M Foundation Develops New Method for Recycling Textile Blends]
Ascena retail group
In a Nutshell: Ascena Retail Group Inc., which operates such chains as Ann Taylor, Loft, Lou & Grey, Lane Bryant, Catherines, Maurices, Dress Barn and Justice, struggled in the fourth quarter with sales and earnings declines, as its new leadership team settles in.
Last month, Gary Muto was named chief executive officer and president of Ascena Brands, and Brian Lynch was promoted to chief operating officer and president of Ascena Retail Group. The company said this was an important part of its efforts to reinvigorate top-line growth, enhance a culture of performance and accountability, drive efficiencies and cost savings, and create sustainable shareholder value.
Sales: Ascena Retail Group reported net sales for the fourth quarter ended of July 29 fell 8.5% to $1.66 billion compared to sales of $1.81 billion in the year-ago period. The decrease in sales reflected the impact of a 4 percent comparable sales decline caused primarily by mid-single digit declines in average selling price and store traffic, offset in part by double-digit transaction growth in the direct channel.
Earnings: The company reported a net loss of $16 million in the fourth quarter compared to net income of $14 million in the year-ago period. Gross margin decreased to $951 million, or 57.4% of sales, in the quarter compared to $1.04 billion, or 57.5% of sales, in the year-ago period. The company noted that the gross margin rate was essentially flat as product cost savings at its Premium Fashion segment (Ann Taylor, LOFT and Lou & Grey,) tight inventory management at its Plus Fashion segment (Lane Bryant and Catherines), improved economics related to its Value Fashion segment’s (Maurices and Dress Barn) new credit card program, and freight-related synergies were offset by lower average selling prices in the Value Fashion and Kids Fashion (Justice) segments.
CEO’s Take: David Jaffe, CEO, said: “Our fourth quarter adjusted earnings per share of 5 cents came in well above our guidance range, reflecting a modest easing of store traffic headwinds. To be clear, conditions remain challenging–the store traffic was down mid-single digits for the quarter and we are planning for this trend to continue for the foreseeable future. While comp sales performance was several points better than our guide, we were not pleased with the results, and we will not be satisfied until we deliver positive, sustained enterprise-level comp sales.”
“I am encouraged by the major, decisive actions our team has taken across all aspects of our business,” Jaffe added. “As part of our transformation efforts, we are investing in leading edge planning and marketing capabilities to support top-line growth and improved margin, and we remain on track to deliver cost savings of $250 million to $300 million. Transformation-related expense efficiencies delivered to-date have provided a meaningful offset to the negative top-line environment and we will continue to look to identify additional sources of cost savings as we aggressively transform Ascena into an agile competitor, one that can deliver sustainable growth in an environment that we expect to remain intensely competitive.”
In a Nutshell: As Nike continued to implement a new company alignment announced in June, created as a result of the Consumer Direct Offense that simplified Nike Brand’s geography structure from six geographies to four, the sneaker and activewear giant reported that sustained revenue growth in international geographies and Nike Direct globally was offset by an expected decline in North America wholesale revenue.
Sales: Sales for the three months ended Aug. 31 rose slightly to $9.07 billion from $9.06 billion in the year-ago period. Revenue for the Nike brand increased 2 percent to $8.6 billion, with growth in Greater China, the Middle East and the Asia-Pacific and Latin America regions. Revenues from the Converse brand dropped 16 percent to $483 million, driven by declines in North America.
Earnings: The company’s net income fell 24 percent to $950 million from $1.25 billion, as lower selling and administrative expense was offset by a gross margin decline, a higher effective tax rate and growth in other expense.
CEO’s Take: Mark Parker, chairman, president and CEO, said, “This quarter, we captured near-term opportunities through our new Consumer Direct Offense. Looking ahead to the rest of fiscal 2018, we will ignite Nike’s next horizon of global growth through the strength of our brand, the power of our innovative products and the most personal, digitally-connected experiences in our industry.”
On a conference call with analysts, Parker added: “We are going deeper, we are connecting more personally to help each individual make the right choice for them. That’s incredibly powerful for a brand that motivates people to do more. To make that vision a reality at scale, we are taking some bold steps. We are breaking old models and we are fully realigning our teams to be more personal by adding resources to our fastest-growing cities, editing our lines to create more choice on top-selling products, investing in better data and analytics to sense market shifts faster, activating new product creation teams focused only on speed-to-market, and we are leading with mobile.”
In a Nutshell: As sales and earnings surged in the first half ended Aug. 31, online fashion retail group Boohoo.com, with brands that include Boohoo, BoohooMan, PrettyLittleThing and Nasty Gal said it has made significant investments in an improved web site platform, added new apps, upgraded IT systems, expanded warehouse space and added new office space.
Sales: The company said group revenue for the half year increased 106 percent in the first half ended to 262.9 million pounds ($353.2 million) from 127.3 million pounds ($184.46) a year earlier, with growth across all territories and brands.
Earnings: Earnings before interest, taxes, depreciation and amortization increased 68 percent to 27.8 million pounds ($37.35) in the quarter from 16.5 million pounds ($22.17) in the prior half year, with planned investments in the customer proposition and marketing in rapidly growing sectors of the group leading to an adjusted EBITDA margin of 10.6% compared to 13 percent a year earlier.
CEO’s Take: Mahmud Kamani and Carol Kane, joint CEOs, said: “We are pleased to report excellent progress for the group in the first half of the year across all our brands. boohoo’s revenue has continued to grow across all geographies, with international growth being strongest as we continue to increase our market share overseas, and the newly acquired PrettyLittleThing brand has exceeded our growth expectations.”
“PrettyLittleThing is fast gaining recognition amongst our target consumers as a highly desirable fashion brand in the U.K., and its international growth is very encouraging, confirming its considerable potential,” they continued. “BoohooMan has also performed very well, with high growth rates in the U.K. and overseas. Nasty Gal was rebuilt by us from virtually a zero base after acquisition in March this year and it is growing well month-on-month. The integration of the two new brands has been successful, adding diversity to our business whilst enabling us to draw upon our strengths in marketing, sourcing, operations and customer service to deliver profitable results and greatly increasing the group’s potential.”
Sustainability remains at the core of Target’s corporate ethos and the retailer is making a major move to combat climate change.Read more
NAFTA could end up being a bilateral trade agreement that doesn’t include the United States at all.Read more
Driven by the Trump administration’s hard line stance on global trade, the U.S. is set to lose its position and credibility on the world commercial stage.Read more
The Bangladesh High Court issued a stay this week on implementation of the Bangladesh Accord for Building and Fire Safety 2018.Read more
Alpargatas Argentina is investing $5.6 million reintroduce its footwear brand Havaianas, plus is social media causing Nike shares to drop?Read more
Behind every distressed retailer are suppliers, vendors, creditors and landlords who must determine how best to proceed—as partners or combatants.Read more
3-D printing is often viewed as an opportunity for companies, but the emergence of this technology could be curtains for cross-border trade.Read more