FROM THE DESK OF DEBORAH WEINSWIG

Three Positive Signs for a Post-Crisis Recovery in US Retail This week, we note three trends that are cause for optimism as US retail further reopens for business. 1. Impressive Sales Productivity in Reopened Stores With major names in US apparel having reopened stores, several have been reporting solid sales performances. In recent weeks:

• Abercrombie & Fitch noted that sales at its reopened US stores were around 80% of last year’s levels.
• American Eagle Outfitters reported that sales productivity was at 95% at its reopened stores.
• At Burlington Stores, sales were ahead of last year’s levels at its reopened stores.
• Gap Inc. reported that reopened stores in North America generated sales at nearly 70% of their performance a year ago, on average across its banners (Gap, Athleta, Banana Republic and Old Navy), with Old Navy outperforming this average.
• Although Kohl’s initially reported sales productivity of 50–60% in the first week stores reopened, CEO Michelle Gass stated this week that the chain’s reopened stores were seeing sales productivity of around 75%.

Reporting lower numbers, Urban Outfitters noted on May 19 that sales productivity was at 50% of last year’s levels. This week, Macy’s reported that sales in its reopened stores were at 50% of usual productivity, although management expectations were 10–15%. While the pattern seems to be one of department stores underperforming, we think the overall numbers cited here give some cause for hope in the shape and scale of recovery post lockdown. 2. The Home-Improvement Sector Saw Growth through Lockdown The performance of the home-improvement sector during lockdown further injects some optimism into the outlook for discretionary retail in the US. Bucking the downturn, retail sales in the sector increased by a strong 8.1% year over year in March, according to the US Census Bureau. In April, this softened to 1.2%; home-improvement stores were allowed to remain open as essential retailers, but this was in the context of a universal lockdown and at a time of near-universal declines across nonfood sectors. We estimate that the sector returned to much more solid growth in May (not yet reported by the Census Bureau). As a result, we estimate the home-improvement retail sector will be the top-performing store-based nonfood sector in 2020. Supporting this are recent figures cited by market-leading retailers. Reporting first-quarter earnings, Home Depot noted that during the last three weeks of April and continuing into the first two weeks of the second quarter, it had seen a “significant acceleration” in demand, to double-digit comparable sales growth. Similarly, Lowe’s management noted that as of May 20, its month-to-date US comparable sales had been at or above the “strong trends” seen in April—and were in the double digits. Tractor Supply is guiding for very substantial 20–25% comparable sales growth in the second quarter, a major acceleration from the 4.3% comp reported for the first quarter (which closed at the end of April). 3. Incremental Upward Trends in Our Weekly Survey We have seen what may be green shoots in our weekly surveys of US consumers. In our May 27 survey, we saw an eight-percentage-point decline in the proportion of all respondents expecting to avoid some kind of public place or travel after lockdowns. While we see this increase very slightly in our June 3 survey, the change was within the margin of error. The latest figure shows that the proportion of consumers expecting to avoid any location or travel (68.3%) is still much lower compared to in the week of May 13 (73.6%) and May 20 (75.6%). More specific to retail, 45% of consumers in our June 3 survey stated that they expect to avoid shopping centers/malls after lockdowns, and this is the lowest proportion of respondents since we started asking the question. Meanwhile, we have seen slight but steady week-over-week declines in the proportion expecting to avoid shops in general. Further Indicators of a Recovery We have seen evidence of a better-than-expected return to retail from third-party measurement firms, too. This week, retail-technology firm Aptos noted rapid recoveries at open and partially open stores that use its technology: Data presented by the company suggest sales in those reopened stores were down just 10% in the week ended May 24. This is another indication that retail overall is seeing a decent recovery. However, data also suggest that the bifurcation in retail performance is continuing, with department stores appearing to underperform other nonfood sectors.

US RETAIL AND TECH HEADLINES

Five Below Sales Down; Losses Double (June 9) Company press release

• Discount retailer Five Below posted a 44.9% year-over-year decrease in net sales in the first quarter ended May 2, 2020, as the company was forced to temporarily close all of its stores due to the coronavirus pandemic. The company registered a net loss of $50.6 million compared to its net income of $25.7 million in the previous year.
• Five Below increased its line of credit from $50 million to $225 million and ended the quarter with $139 million in cash, cash equivalents and investments. The company also repurchased 137,023 shares at a cost of approximately $12.7 million in the first quarter of fiscal year 2020.

Tiffany & Co. Revenue Declines 45% (June 9) Company press release

• Jewelry retailer Tiffany & Co. posted a 45% year-over-year decline in net sales to $556 million and a 44% drop in comparable sales for the first quarter ended April 30, 2020, due to the impact of coronavirus-related store closures. E-commerce sales were up 23% globally, with the US and the UK up 14% and 15%, respectively.
• The company reported a net loss of $65 million for the period compared to its net income of $125 million in the prior year. Tiffany & Co. ended the quarter with $1.1 billion cash, cash equivalents and short-term investments.

Klarna To Launch New Rewards Program (June 9) TechCrunch.com

• Swedish fintech firm Klarna plans to launch a rewards program called Vibe, becoming the first “buy now, pay later” service provider to offer a rewards program. The no-fee program will be launched initially in the US in June before being rolled out in other markets—starting with Australia, Germany, Sweden and the UK in the coming months.
• Vibe subscribers can earn reward points for every $1 spent via the Klarna app or for purchases made at Klarna partner retail stores. Users can then redeem the earned points for gift cards at Foot Locker, Sephora, Starbucks and Uber.

Casey’s Profits Climb as Cost of Goods Reduce (June 8) Company press release

• Casey’s General Stores reported a 16.8% year-over-year decline in revenues for the fourth quarter of 2020. Despite this, the company registered a net income of $62.1 million year over year compared with $25.2 million to the previous year.
• Casey’s witnessed an increase in operating expenses by 6.2% and a decline of 25.4% in cost of goods sold during the reported quarter. Due to the continued uncertainty of the Covid-19 crisis, the company has not provided guidance for the fiscal year ending April 30, 2021.

Stitch Fix Sales Decline Due to Order Backlogs amid the Pandemic (June 8) Company press release

• Online personal-styling service Stitch Fix reported a 9% year-over-year decline in revenues to $371.7 million for the third quarter ended May 2, 2020, as the coronavirus delayed orders and forced the company to close some warehouses. The company posted a net loss of $33.9 million, compared with earnings of $7 million a year ago.
• Earlier this month, Stich Fix stated that it would be laying off 18% of its workforce in California between now and the end of September and, in exchange, plans to employ 2,000 stylists in affordable US locations. The company ended the quarter with $328.5 million cash, cash equivalents and highly rated securities.

EUROPE RETAIL AND TECH HEADLINES

UK Retail Sales Drop in May Due to Lockdowns (June 9) BRC.org.uk

• UK retail sales fell 5.9% year over year in May, according to the BRC-KPMG Retail Sales Monitor, an improvement on April’s 19.1% decline, after some lockdown restrictions eased and more shoppers went online. Comparable sales increased 7.9% year over year in May, excluding temporarily closed stores and including online sales.
• The BRC splits food and nonfood retail sales on a rolling three-month basis. In the three months ended May, total food sales increased 5.6% and total nonfood sales were down 21.8%. Online nonfood sales showed record growth of 60.2% in May, significantly above the average annual growth rate of 12.9%.

Morrisons Releases E-Commerce Site for Clothing Label Nutmeg (June 9) RetailGazette.co.uk

• Supermarket chain Morrisons has launched a new website for its clothing label Nutmeg.
• Orders will be shipped within 14 working days for a £2.97 ($3.80) fee, and returns can be made either online or in store within 30 days. Morrisons also plans to roll out a £3.97 ($5.10) next-day delivery option, as well as a click-and-collect service from all Morrisons stores.

Tom Tailor Secures €100 Million Additional Loan (June 9) RetailDetail.Eu

• German apparel retailer Tom Tailor has received an additional €100 million ($114 million) revolving credit facility, secured with a guarantee provided by the federal government and the states of Hamburg and North Rhine-Westphalia. The secured financing runs until the end of September 2024.
• The company stated that the consortium of banks has also agreed to extend all existing credit lines with an adjusted volume of €355 million ($403 million) until September 30, 2024. In addition, the company’s majority shareholder Fosun International has extended the term of an existing loan of €28.5 million ($32 million) for Tom Tailor until the end of 2024.

Sosandar Revenues Grow; Signs New Deal with John Lewis and Next (June 9) Company press release

• Online fashion retailer Sosandar reported a 62% increase in revenue from April 1 to May 31, compared to the same period a year ago, noting strong performance at the start of its financial year that coincided with lockdowns due to the coronavirus. Order numbers rose 44% and new customer acquisition increased 15%, as the demand for online purchases increased amid the lockdown.
• Sosandar has signed a new deal with department-store chain John Lewis and apparel retailer Next. Under the partnership, customers will be able to purchase Sosandar’s products on John Lewis and Next websites from fall this year.

Iceland Returns to Family Ownership (June 8) Company press release

• Malcolm Walker, Founder of supermarket chain Iceland, and CEO Tarsem Dhaliwal have taken full ownership of the retailer after buying out the remaining 63.1% stake from South African conglomerate Brait. The sale consideration to be paid by Walker and Dhaliwal to Brait is £115 million ($147 million) in cash payable in three instalments.
• The first tranche of £60 million ($77 million) was paid on June 8, 2020, and the remaining instalments of £26.9 million ($34 million) and £28.1 million ($36 million) are due to be paid in July 2021 and 2022 respectively.

ASIA RETAIL AND TECH HEADLINES

Flipkart Unveils Voice Assistant (June 9) Company press release

• E-commerce firm Flipkart has introduced an AI (artificial intelligence)-powered voice assistant feature to its platform. The new feature currently supports Flipkart’s grocery store Supermart and will be extended to other verticals shortly.
• The voice assistant enables customers to search for products, understand product information and place orders via the Flipkart app using voice commands, mimicking the interaction shoppers are likely to have with staff if they shopped in physical stores. The company stated that the feature will be available in multiple languages, starting with Hindi and English.

Folli Follie Exits Hong Kong (June 9) SCMP.com

• Greek luxury jeweler and watch retailer Folli Follie has exited the Hong Kong market, shutting all 12 stores and releasing 60 of its employees in the territory. Parent company FF Group has appointed Deloitte Advisory as liquidators and is seeking buyers for the operations in Australia, China and Japan.
• Folli Follie underwent a debt restructuring of €300 million ($338 million) and avoided bankruptcy in February, before the coronavirus pandemic broke. The company also announced that its other brand, Links of London, will close on June 8.

Paytm Extends “Postpaid” Lending Services (June 8) IndiaTvNews.com

• Indian fintech company Paytm has expanded its “Postpaid” credit lending services to local convenience stores, shopping and bill payments facilities available on its app and online payments on select apps. The company has introduced three variants of Postpaid—Lite, Delite and Elite—which will be offered based on a partner non-banking financial company’s assessment.
• The service aims to eliminate the need to withdraw cash for meeting monthly household expenses, as users will be able to buy groceries and essentials on credit. Paytm offers a passbook to analyze users’ monthly spends to plan everyday expenses. Users have until the 7th of each month repay their bills.

Lotte Takes Ownership of Concessions at Changi Airport (June 10) InsideRetail.Asia

• South Korean duty-free retailer Lotte has taken ownership of the liquor and tobacco concessions at Singapore’s Changi Airport from Hong Kong-based travel retailer DFS Group. Lotte was awarded the concession last year in a tender process for around 86,110 square feet of retail space at the airport for six years, ending June 8, 2026.
• The new Lotte outlets will offer over 3,000 choices of wines and spirits, including exclusive limited-edition whiskies and cognacs. Lotte will start the construction of the new stores once the coronavirus restrictions are eased and will trade via the online platform iShopChangi.com for now.

Yishou Closes $40 Million Series C Round (June 8) KR-Asia.com

• Chinese e-commerce platform Yishou has collected $40 million funding from investors in a Series C round. The funding was led by venture capital firm CMC Capital and joined by investment bank China Renaissance. The company intends to use the new finances to further digitalize the company’s supply chain and grow its customer base.
• Apparel suppliers can connect with vendors on customer-to-customer e-commerce platforms such as Taobao, brick-and-mortar stores and even street vendors via the Yishou app to later resell on their channels. Yishou had received ¥55 million ($7.8 million) funding in a Series B round held in March 2019.