Consumers were more willing in recent months to treat themselves to things they did not need, like baubles and little black dresses. But only if those indulgences could be had for recession-friendly prices.
That was underscored on Wednesday when two of the nation’s best-known clothing and accessories purveyors, Saks and the TJX Companies, reported their quarterly earnings.
Saks, the upscale department store, posted a loss of $4.6 million, or 3 cents a share, for the three months ended Jan. 30, compared with a loss of $99.7 million, or 72 cents a share, a year earlier. Sales at stores open at least a year, a measure of retail health, declined 4.8 percent compared with the period a year ago.
Were it not for several one-time costs that hurt the results, Saks would have had earnings of 6 cents a share.
The luxury retailer narrowed its losses by cutting costs, lowering its inventory and striving to appeal to frugal-minded customers. In 2010 it will offer more entry-level prices on designer brands, as well as more exclusive and private label merchandise. Today about 10 percent of the chain’s merchandise is exclusive; the plan is to increase that to about 20 percent.
“The consumer’s mind-set has changed,” Stephen I. Sadove, the chief executive of Saks, said in an interview, “how they’re defining value has changed.”
For instance, dresses that can be worn to work and then out on the town are selling well at Saks because consumers are aiming to get more bang for their buck.
Mr. Sadove described the luxury sector as much more stable and predictable than last year. “The consumer’s starting to be a bit more comfortable,” he said.
Still, during a conference call on Wednesday he noted that “we have yet to see a meaningful rebound in consumer demand.”
Discount chains have been performing far better than upscale stores throughout the economic downturn, and on Wednesday, TJX, which owns chains including TJ Maxx and Marshalls, posted a profit of $395 million, or 94 cents a share, for the period ended Jan 30, compared with $251 million, or 58 cents a share, last year. Sales rose 10 percent, to $5.9 billion. Sales at stores open at least a year climbed 12 percent.
“In 2009, one of the worst economic periods that the U.S., Canada, and Europe have seen, TJX generated superior earnings growth,” Carol Meyrowitz, the chief executive of TJX, said in a news release. “Sales growth was driven by a large increase in transactions as we attracted new customers from all income levels with our compelling values.”
TJX has thrived in recent months as consumers thumbed through its racks for brand names at low prices. While the luxury sector has not been as lucky, there were signs of improvement.
Saks said in its most recent reporting period that it experienced relative strength in its women’s designer sportswear, handbags, shoes and jewelry categories, as well as its OFF 5th outlet business. Also, its Internet business thrived, posting a 23 percent sales increase.
Another positive sign for retailers is that consumers bought more items at full price. Mr. Sadove said shoppers began to realize that inventories were so low that waiting for an item to go on sale might mean being left empty-handed. Saks plans to continue weaning shoppers off discounts with tactics like excluding some products from certain promotions.
Retailers are sensitive, though, to what their customers want. “It’s one thing to have higher prices,” said Ronald L. Frasch, president and chief merchandising officer of Saks, “but if you don’t sell them it doesn’t mean anything.”
Some good news also came from Saks’s New York City flagship, which outperformed the rest of the chain’s store base after being hit hard last year by the recession. Mr. Sadove, who described the economic recovery as more of an L-shape than a V-shape, said the tenor of the city felt better. He said he had noticed a pickup in tourism, more confidence from people with jobs on Wall Street and increased activity at the city’s restaurants.
“I think New York City is coming back a bit,” Mr. Sadove said, adding that it has “still got a long way to go.”
The same is true of the luxury sector. But on Wednesday Wall Street was satisfied enough to send shares of Saks up 2 cents, to $7.10 a share. Shares of TJX, which is based in Framingham, Mass., rose $1.33, or 3 percent, to $40.51 a share.
COMMENTARY: TJ Maxx and Marshall's have found their niche in the marketplace and have truly benefited from the recession as discounting has become commonplace among fashion retailers. $5.9 billion in revenues is nothing to sneeze at.
Courtesy of an article dated February 24, 2010 appearing in The New York Times Business
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