Amazon Private Label vs Brick & Mortar Private Label

Everyone is well aware of Amazon's private label but brands within electronics. Not everyone is aware of their offerings within apparel and fashion. If 1010data's findings are showing initial traction. Note the Pinzon (home/bedding), Lark & Ro (women's apparel) and Buttoned Down (men's dress shirts) in the chart below. 

Whilst the growth numbers are impressive for the aforementioned apparel brands, keep the scale in mind. Building scale with an etail/.com only offering takes a significant amount of time. Secondly, Amazon's offering of other brands and 3rd party seller brands is so vast that sales are dispersed across an incredibly long tail. Contrast that scale with the scale of Target's private label kids brand Cat and Jack. You can argue the offering of Cat and Jack is much broader than Amazon's apparel brands, but one can't be amazed at the concentration of sales in brick & mortar stores. Cat and Jack did $2 billion in sales in its' first year thru July. 


Department Store & Off Price Retail Earnings Commentary: Macys, Kohls, TJ Maxx, Nordstrom

Another quarter has passed with Q2 earnings providing a preview on where retailers believe the important and critical quarters of Q3 and Q4 will end up. Based on the reports thus far, the exaggerations of the death of retail have subsided but there are obvious pockets of strength and weakness. 

JC Penney

  • Posted the 4th consecutive quarter of negative same store sales growth of -1.3%
  • Margin improved from last year's quarter
  • Focus on additional rollouts in big ticket areas like appliances and home continue along with expanded Sephora store in concepts
  • Bottom line: JC Penney will continue to close stores and limp along as malls continue to weaken and their digital offering remains average


  • Posted the 6th consecutive quarter of negative same store sales growth of -0.4%
  • Margin declined slightly from last year's quarter
  • Kohls still remains as one of the few large scale department stores that has publicly stated no plans of store closures
  • Bottom line: While the same store sales decline was marginal, I remain skeptical that all of the pain is behind them


  • Same store sales came in down 3.6%, the 10th consecutive quarter of negative growth
  • Margin declined slightly from last year's quarter
  • Full year guidance was confirmed
  • Bottom line: Pain will continue with further store closings and pressure on the existing stores, Backstage and Blue Mercury aren't enough to reverse the course.

Nordstrom & Nordstrom Rack

  • Same store sales came in positive for both groups with Nordstrom at 1.4% and 3.1% for Nordstrom Rack
  • Strong online results in and offset the store results of down 4.4% for Nordstrom and Rack down 1.0%
  • Margin was lower than last year as the company was a bit more promotional to offset the store weakness
  • Guidance was essentially unchanged with same store sales to remain flat
  • Bottom line: Nordstrom remains the best of breed department store with an adequate mix of full price and off-price


  • Posted another strong quarter with 4.0% same store sales growth
  • Guidance for Q3 is 1.0-2.0% growth versus a 7.0% increase in Q3 of 2016
  • Bottom line: Ross continues to do well and should continue to gain share with their flagship Ross banner and dd's Discount stores despite a non-existent ecommerce offering


  • The TJ Maxx & Marshalls duo posted a 2.0% same store sales growth; up from 0.0% last quarter
  • The overall same store sales increase was 3.0% driven by the HomeGoods increase of 7.0%
  • Guidance was raised for the full year
  • Bottom line: TJX continues to see growth in their existing store base and is aggressively opening new stores. Once the store growth slows, look for TJX to truly get into ecommerce and further focus on international growth.

Q1 Earnings Commentary: Department Stores

Q1 Earnings Commentary: Off Price

Disney Still Loves Netflix

With this one statement about Netflix, Disney's revered CEO Bob Iger set the world ablaze on the debate as to whether Netflix can survive without Disney:

With this strategic shift, we’ll end our distribution agreement with Netflix for subscription streaming of new releases beginning with the 2019 calendar-year theatrical slate. These announcements marked the beginning of what will be an entirely new growth strategy for the company, one that takes advantage of the opportunities the changing media and technology industries provide us to leverage the strength of our great brands.

This was a strategic move that in no way ends the Disney Netflix relationship:

  1. Bob is setting the stage for the next round of negotiations. Bob realizes Disney content is worth more than the current Netflix deal. 
  2. Bob realizes that HBO, Showtime and many others are interested in Disney content.
  3. Bob realizes he has a captive audience in the Disney ecosystem requiring Disney to provide their own streaming service.

Bottom line: Disney is not ending their relationship with Netflix. Disney is resetting their relationship and will ultimately provide the content to the highest bidder or group of consumers paying the most. Netflix has become a necessary evil with deep pockets that Disney will forcefully play with for decades to come.


Your Social Rating is Your Worth

More scores that rate your trustworthiness are coming to China’s internet—which is great for a quick discount, but concerning for civil liberties.

Tech giant Tencent is gradually testing and and expanding its “social credit” system that will give users a numeric rating based on their spending habits and social connections, two years after rival Alibaba launched its own social credit system. A source familiar with the matter this week confirmed that Tencent expanded its pool of “beta test” users for Tencent Credit, the name of its social credit system. The beta test users were given access to the service on QQ, a Chinese chat app.

According to media reports (link in Chinese), users must input their real names and Chinese ID numbers to reveal their scores, which ranges between 300 and 850. The company breaks down that score into five sub-categories: social connections, consumption behavior, security, wealth, and compliance.

Incredible. This has to be right out of the Black Mirror episode using social media as the ranking system by which the main character bases her worth. Which of the majors (Google, Facebook, Apple) will try some version of this first? 


Globally Made vs. USA Made

American Apparel's new owner Gildan (Canada based) recently relaunched the American Apparel website. As part of the relaunch, the new owner is providing customers the option to make a choice for globally made vs. American made items for their "Made in USA" capsule. This is a departure from the American Apparel of old that boasted 100% of the product was made in the USA (typically Los Angeles). For the new "Made in USA" capsule, the difference in price ranges from 16-26% lower for the globally made versions. American Apparel notes that the quality is identical and both versions are sweatshop free.

This is the first time I've seen a blunt choice given to the consumer and I'd bet that most consumers will likely choose the global version. What say ye?

Digital Ad Kool-Aid

In the fourth quarter, the reduction in marketing that occurred was almost all in the digital space. And what it reflected was a choice to cut spending from a digital standpoint where it was ineffective: where either we were serving bots as opposed to human beings, or where the placement of ads was not facilitating the equity of our brands.

So P&G cut over $100 million out of its digital advertising spend in the fourth quarter, and this is what happened, according to Moeller: “We didn’t see a reduction in the growth rate.” And he added, “What that tells me is that that spending that we cut was largely ineffective.

Stories of brands cutting their digital ad spend are still few and far between. Facebook and Google have nothing to worry about as they both recently posted record sales and earnings. A majority of advertisers are still drinking the Digital Ad Kool-Aid.

Amazon Earnings: More of the Same

Amazon released earnings last night. Despite a beat on revenue, earnings came in well below expectations and the market is trading the stock down 2-3% pre-market. I have updated the various slides and note 3 main themes:

  1. Revenue growth accelerated from recent quarters for product sales; AWS growth was lower but still above 40%
  2. Services now responsible for 35% of net sales as Amazon seeks to improve margins and hold less inventory
  3. Earnings were much lower given the investments in North America and international markets like India

The last few quarters showed profits that exceeded Wall Street's expectations and made the general public finally see that Amazon does truly make a profit. That comfort level brought a stock performance gain of almost 40% year to date. This quarter brought a much lower margin and profit that may bring back some of those fears. With that said, the business looks strong and continues to provide us with more of the same: revenue growth, move to services and investing in growth. Nothing to worry about here.

Sears & Amazon

Amazon is staking a claim in the appliance market in a big way in a partnership with Sears Holdings.

The embattled retailer announced it will sell its prized Kenmore-branded appliances on Amazon. The deal opens the way for the broadest distribution to date of Kenmore products outside of Sears stores and its websites. Distribution will be nationwide, and Sears Home Services and Innovel Solutions units will provide delivery, installation, and other services.

So why did Sears wait so long? Did Sears consider Amazon an enemy all this time? Other retailers such as Children's Place have put the enemy thoughts aside and figured out how realize the value of Amazon for extending their channel offering and growing sales. As marketplaces grow and legacy brick and mortar retailers struggle, brands will seek to leverage Amazon's devout customer base and breadth of ways to sell. Sears is an example with Amazon and Abercrombie is now example with Alibaba's Tmall. It will just take more time for other brands to come around.

As an added feature, Sears will sync its full line of Kenmore Smart appliances with Amazon’s Alexa. The integration means that customers will able to control the appliances with a voice command.

Kudos to Sears for seeing the potential of the Alexa line.

Image by: Steve Lovelace


3 Prime Day Facts

Tons of coverage on Prime Day but thought I'd take a few minutes to highlight the true facts of the 3rd year of Prime Day:

1. Sales Did Not Exceed Black Friday or Cyber Monday, Sales Did Exceed Amazon's Black Friday and Cyber Monday Sales - Estimated sales of $1 billion pales in comparison to Black Friday and Cyber Monday for all of retail. 

Total Sales - Amazon's Prime Day vs All Retailers ($ Billions)

2. Prime Day Is Profitable - All of the deals except for Amazon product are paid for and marketed by brands and sellers. The 25% discount you see on a product is a markdown or discount paid for by the brand. Amazon is paying for the discounts on products like the Echo but all other products are 100% paid for by the brand or seller. 

3. Prime Day is Part of the Fly Wheel - The $1 billion in sales is about 2.5x an average day but estimated to be 3-4x an average day in July. Therefore, it isn't a major driver for Amazon So why do it? Build excitement, sell more Prime memberships and offer one more benefit to the Prime ecosystem. Imagine Prime Day (or soon to become Prime week) in Whole Foods. Doorbusters in July?

One last thing...Amazon followed the lead of Alibaba's Singles Day, 11.11. The sheer scale of Singles Day compared to Prime Day, Black Friday and Cyber Monday is astounding:

Total Sales - Amazon's Prime Day vs All Retailers vs Singles Day ($ Billions)

Nike's Ambitious $50 Billion Goal for 2020

Nike dominated news headlines the past few weeks with announcements of a massive layoffs, selling direct to Amazon and capping off Thursday with an earnings release. All of the headlines led to a volatile week of trading for the stock from a low of $50 to a high of $59.71. Despite the optimism, Nike still seems to be struggling. 

Upon closer inspection of the earnings, there was one major positive with emerging markets growing 21% (18% with foreign exchange) vs. the previous year of -7% (12% with foreign exchange), but that is where the good news stopped:

  1. Nike's largest market North America posted flat sales growth.
  2. Nike's 2nd (Western Europe) and 3rd (China) largest markets both posted significantly lower growth rates when compared to the previous year.
  3. Nike's gross margin in the quarter declined 180 basis points and for the year declined from 46.2% to 44.6% due to higher product costs and unfavorable exchange. 

NPD's latest data on Nike's battle with Adidas shows tough times are still ahead for the mainline brand and Nike's iconic Jordan brand. You can't help but admire Adidas posting currency neutral growth of 31% in North America and 30% in China. Whilst Adidas is clearly the smaller rival with higher growth rates on a lower base, the market share gains are clearly being had by Adidas.

Will the announcement of selling direct to Amazon, laying off 1.2% of global employees and reducing SKUs lead to a turnaround? Questionable. Nike is already a top 3 brand in apparel/footwear on Amazon given the plethora of 3rd party sellers on the marketplace. Selling directly to Amazon will shift sales from those 3rd party wholesalers to Nike at a higher margin but will take a considerable amount of time. Layoffs provide meaningful cost savings in the margin department but SKU reductions will likely lead to leaving sales on the table. 

Each of these turnaround tenants lack the growth needed to meet Nike's public announcement goal of $50 billion in annual sales by 2020. Keep in mind it took Nike 13 years from 2002 to 2015 to gain $20 billion, how will the company ever increase another $20 billion in 5 years time (2015 to 2020). Until Nike shows a significant improvement in growth of key markets such as China and Emerging Markets, $50 billion is a number that seems a bit optimistic.



What I Learned From Jack Ma of Alibaba

Alibaba recently hosted an event in Detroit called Gateway 17 which invited 3,000 small and medium size businesses across apparel, consumer goods, hard goods and food. Speakers included Martha Stewart, Charlie Rose, Dan Gilbert and Alibaba's founder Jack Ma himself. Given Jack's commitment to President Trump to provide the US with 1 million jobs, the event was also heavily attended and covered by the media. 

The overarching theme of the event was to convince US small and medium size businesses of the size and need of the Chinese market as the middle class grows and China shifts from a manufacturing economy to a consuming economy. Jack Ma was featured in a Charlie Rose interview on stage on the evening of day 1 and provided day 2's keynote. This was my first time seeing Jack Ma live and a few themes stuck with me:

  1. China, China, China - Alibaba has tried to setup shop in the US, launched platforms like 11 Main in the US but recognizes these initiatives as mistakes. Jack realizes that using the US for product as opposed to selling product in the US is Alibaba's best route. Jack notes that the US drove the global economy for the last 30 years but China will likely drive the next 30. 
  2. Alibaba Is Like No Other - Jack believes Alibaba and Amazon aren't competitors. Alibaba empowers small businesses to sell on the internet. Amazon is ecommerce retailer. You can argue that point but Jack says, "Alibaba is not a company. Alibaba is an economy. By 2036, we hope to be the 5th largest economy in the world." With ambitions like that, Alibaba stands alone.
  3. Greater Purpose - Jack mentioned 100 days of flying in 2017. Is Jack running Alibaba day to day? No. Jack believes it is his civic duty to spread the word of Alibaba but even more so China. What helps China likely helps Alibaba. 

The scale of Alibaba and China is something the world has never seen. As economies like China and India become consumer economies, the opportunities for ANY market are endless. The internet makes each of those customer's accessible if done the right way.

Disclosure: At time of publishing, I was long Alibaba stock.


The "Add to Cart" War

Astute piece by Buzzfeed on the war happening behind the scenes of Amazon to keep prices ultra-competitive within the Amazon walls:

Behind the scenes on what may appear to be a simple product page on Amazon, a bustle of sellers are all scrambling to win your business. They're fighting over a small yellow box that is emerging as one of the most important battlegrounds in online shopping.

To the average user who lands on a product page it's all pretty straightforward. To the left are photos of the item — a cell phone charger, let's say. To the right, there's the "Add to Cart" button. Pretty simple, right?

But dozens of sellers may all be offering that same charger, and only one is chosen by Amazon's systems to get the sale when you hit Add to Cart. The others are relegated further down the page, and the vast majority of Amazon users never bother to look at them.

At any point in time, products can have 5-10 sellers competing to sell the exact same product. Although Amazon doesn't explicitly explain which seller earns the "buy box," it is known to be a combination of price and seller reviews. If a seller does not have the buy box, their product is still available for sale but highly unlikely to take place. Therefore, owning the buy box on the main product page is crucial to success for any 3rd party seller. 

What about when you are competing with Amazon themselves? How do you expect to beat Amazon on their own site when they have the most reputable account? Almost impossible. Amazon's pricing will continue to match or decrease price until a seller stops.

Note: I will be discussing this and other Amazon related topics at GrowCommerce on July 20 in NYC. 


Mobile Store That Comes to You

What do you get when you cross an autonomous bus with a brick & mortar store? 

Moby Mart is a mobile store on wheels. It’s about the size of a small bus, and the idea is that eventually it will use artificial intelligence and computer vision to navigate city streets. (The current prototype is controlled by humans.) It carries some basics, like fresh food, as well as things like sneakers and magazines. Like Amazon Go, the retail company’s recently announced autonomous store concept, there are no lines, no cashiers, and no cash. You just scan the items you’re taking, and the Moby Mart app automatically handles the transaction for you.

Why Amazon is Buying Whole Foods

About an hour ago, Amazon announced they will be buying Whole Foods for $42 a share, a 27% premium to the closing price on Thursday. Whole Foods is the 70th largest grocery chain in the world based on 2016 revenues and has over 430 locations. So why would Amazon go through an acquisition that is close to 14 times larger than any of their previous acquisitions?

  1. Access to your grocery wallet - Sales of food and beverages is the #4 category consumers spend money on aside from housing, health and other services. Whilst that number has gone down over the years, consumers still spend 8% of their wallet on food and beverages.
  2. Buy on, pick up in store - Amazon has dabbled in buying online picking up in lockers and just started Amazon Fresh pick-up but never had a physical presence allowing for customers to come to Amazon locations for pick-up and avoid their highest cost driver: shipping costs.
  3. Physical flexibility - Amazon is a big believer in empowering sellers through their marketplace. With the additional brick & mortar space, I wouldn't be surprised to see Amazon lease or consign unit space to sellers looking to sell product both online and in-store. Sellers can use that shelf space for marketing a product to the Amazon customer beyond just the site and apps. 

Now, whilst this is game changing news, we must keep the size of the grocery market in perspective. Amazon currently owns about 0.9% of the total grocery market. Whole Foods currently owns 1.7% of the total grocery market. While this is a significant increase in market share for Amazon, it still pales in comparison to the top two. Walmart has 17.3% and Kroger has 8.9%. Amazon's combined market share will be 2.6%. 

Whilst we fantasize about a checkout free store visit, Whole Foods private label brands available on Amazon and buy on, pick-up at Whole Foods, we must remember that deals of this size take time. Deals of this visibility sometimes see other bidders. Deals of this size take a lot of work operationally. We won't see approval until the back half of this year and likely won't see any change in operations until at least next year. 

A Retail Headline That Hit Home: Hudson's Bay

With the revolving negative headlines surrounding retail each day, I had become desensitized. Until Thursday's BREAKING tweet from @BoF Business of Fashion: 

Hudson's Bay is a retail juggernaut owning Lord & Taylor, The Bay, Home Outfitters, Saks, Saks Off Fifth, Gilt and Kaufhof in Europe. My first role with the company took place in 2009 to 2011. At the time, I was a consultant working for Accenture when I was first introduced to Lord & Taylor as a client. Our mandate was to provide the brains behind the ideas for merging Lord & Taylor with Hudson's Bay. After the Hudson's Bay acquisition took place, we were focused on using our larger scale to drive cost efficiencies and savings from vendors through larger, more optimistic contracts. Eventually we would provide support to Hudson Bay's Zellers team to ready the stores for handover to the short lived Target Canada and determine the best way to position Canada's leading department store, The Bay.

At some point in 2012 after I had left for several months, I was approached by HBC Senior Leadership to leave the consulting lifestyle and officially join the front lines of the industry I was so passionate about. Over the course of the next two years, I provided strategy support to the President, fought vigorously for digital initiatives and even MC'd the company's annual leadership summit. Up through 2014, it was a fantastic four years that serves as the foundation for my retail knowledge and relationships I use each and every day. Working as both a consultant and leader within a company with goals of becoming the world's largest department store operator was a blessing.

Unfortunately that goal brought about Thursday's news. Did retail really change that quickly? No. Internal meeting topics back to 2013 included ideas and strategy questions that the media talks about today. Should we downsize as productivity declines? Should our stores shrink in size? Should we fulfill our internet orders from our top stores or our lower performing stores? Should we kill our print catalog and shift that money to digital ads? Should we open more stores to fuel sales growth? Will global brands like Zara and H&M continue to steal share? Is off price the new model?

In actuality, retail is quite healthy and continues to grow at a modest 2-3% each year. Retail spend isn't without it's issues as healthcare and housing expenses have grown but the customer expectations and shopping habits have changed. Pockets of healthy growth are clear in fast fashion, brands opening their own stores, off price stalwarts like TJX and the shift to online spending. 

So why do retailers continue to pick the option that is in the best interest of the short term? Growth drives the world. Without growth, investors become displeased and the stock trades down. Without growth, employee morale suffers and focus is lost. Investing in digital, closing stores and shrinking stores kills growth in the short term. This is why Nordstrom is interested in going private. Wouldn't it be great to not have investors from the outside questioning your investments into the business?

Legacy retail must be reminded that business is always tough and the next 5-10 years will be even tougher. Stores will continue to shrink, stores will continue to close, new entrants will continue to come knocking and shoppers will continue to shift online where less profit is made. The golden years of retail are long gone and disintermediation is here for the foreseeable future. Those legacy retailers making the difficult decisions to groom themselves for a smaller, more dynamic and leaner retail industry are the ones that will survive


Unconventional Retail At Restoration Hardware

Restoration Hardware dropped a bomb on last week's earnings call that led to a 25% drop in share price. Were the results bad? Yes. Was the guidance poor? Yes. But even more alarming were some of the statements in the press release:

We understand that many of the strategies we are pursuing - opening the largest specialty retail experiences in our industry while most are shrinking the size of their retail footprint and closing stores; expanding our Source Book mailings while many are eliminating catalogs; moving from a promotional to a membership model, while others are increasing promotions, positioning their brands around price versus product; and refusing to follow the herd in self-promotion on social media platforms, instead allowing our brand to be defined by the taste, style, design and quality of the products and experiences we are creating - are all in direct conflict with conventional wisdom and the strategies being pursued by many in our industry.

We believe when you step back and consider we are - one, building a brand with no peer; two, creating a customer experience that cannot be replicated online; and three, have total control of our content from concept to customer - you realize what we are building is extremely rare in contrast to today's retail landscape. Yet, our most valuable asset is not what we've done, but rather who we've become. We've become a team of people who don't know what can't be done. A team that is driven by our values and beliefs. A team that is willing to march into hell, as we did last year, for a heavenly cause. A team that has a bold vision for the future, and an organization that is demonstrating it can bring that vision to life.

Carpe Diem,


Gary Friedman
Chairman and Chief Executive Officer


New Age Brand: Canada Goose

Canada Goose, the Canadian manufacturer of winter wear announced their first earnings since going public earlier this year. The stock popped 15% on the earnings as investors appreciated the higher margins and improved guidance. So how is this Canadian brand successful as we witness historic bankruptcies and hear that retail is dead?

1. Transition away from wholesale to direct to consumer

Canada Goose is a high end brand that typically sells into higher end department and independent stores. As department stores struggle, Canada Goose has focused on their sales direct to the customer through their own website and new store openings. Canada Goose also recognizes the foreign website traffic and launches country specific offerings like those launched in Fall 2016 in UK and France. If Canada Goose was reliant on their wholesale business, revenues (in Canadian dollars) dropped 48% in the quarter. Instead, the direct to consumer business offset that drop helping overall revenues to increase 22%. Direct to consumer (stores and now exceeds wholesale and was up 174% in the quarter to $36.5 million.

2. Opening of brick & mortar

Wait, huh? Brands are actually opening stores right now? The first store was Toronto, the birth place of Canada Goose. Next up was NYC in Soho with London and Chicago coming in Fall 2017. Focus for new stores is on cornerstone global cities that provide brand awareness without boundaries. Most brands keep a domestic focus in early years but Canada Goose realizes the potential of the brand internationally. 

3. Authentic branding

Brand screams Canada, speaks to relentless cold punishment products are tested with and is manufactured in the high cost region of Canada. Can you get anymore credible branding?

So why all the excitement for the brand? I personally believe Canada Goose embodies the structure and mindset of new age apparel brands. New apparel brands start either with a small wholesale business or etail operation, eventually dip their toes into their own brick & mortar and fall in love with direct to consumer margins as their wholesale business limps along. This is not new but brands like Bonobos who are facing similar situations aren't public. With Canada Goose being public, we have front row seats to how brands play successfully in the new age of retail. 

Disclosure: At the time of the time of publishing, I did not own Canada Goose stock but am a minority investor in Bonobos. 

Off Price Store Earnings Commentary: Nordstrom Rack, Ross, TJ Maxx

See also: Department Store Earnings: JC Penney, Kohl's, Macy's, Nordstrom

Off Price has been among the shining stars in retail for several quarters and the only shining star within the Apparel retailers for the past couple of quarters. All of that shining was questioned with the first wave of results from Nordstrom Rack, Ross and TJ Maxx. Each of the Off Price Retailers posted the lowest quarterly comp rate in years. Reasons for the drop included weather, merchandise mix and the shift to online. Is the point of Off Price store saturation? Is this the point at which the offline "treasure hunt" of Off Price is no longer preferred over the online "treasure hunt?"

Nordstrom Rack & Nordstrom

  • Nordstrom Rack is still positive but came in light posting a 2.3% comp. Last time the business posted a comp below 3% was Q3 2015. Online business was only up 19% vs previous year quarterly growth of 42%.
  • Full line store comp was down 6.4% with the total comp (includes online) down 2.8%.
  • 100% of stores are still cash flow positive despite the continued weakness in same store sales.
  • Management maintained guidance and maintains full year comps of flat.


  • Total comp was up 3%, lowest increase since Q1 2016 which grew 2%. 
  • Plan to open 90 stores this year. 
  • Home continues to be strong point.
  • Management maintained guidance and sees 2nd quarter comps of 1-2% growth. 

TJ Maxx (Marmaxx)

  • The headline comp was up 1% but the underlying Marmaxx group comp was flat. This compares to an average comp that increased 4.5% over the last 6 quarters. In fact, all of the TJ Maxx businesses (Marmaxx, HomeGoods, TJX Canada, International) all posted slowing comp growth rates.
  • Announced new brand HomeSense with first store opening end of Summer and carrying home furnishings completely different from HomeGoods but at a similar price point. The strategy is similar to their dual Apparel retail model with Marshalls and TJ Maxx.
  • Plan to open 250 stores this year and inventories were 7% lighter than last year but last year inventories were quite heavy.
  • Management lowered guidance but still believes a 1-2% comp increase will be realized for the full year. 

Department Store Earnings Commentary: JC Penney, Kohl's, Macy's, Nordstrom

See also: Off Price Store Earnings Commentary: Nordstrom Rack, Ross, TJ Maxx

Department Stores continue to struggle with consumer spend shifts. Each Department Store is using one of or all of the following strategies: 1) lower the number of stores; 2) shrink the size of go-forward stores; 3) invest in internet fulfillment; 4) brands vs. exclusive private labels as a differentiator. Here are some of the tidbits from last week's calls along with the results from the last 7 quarters comp sale results:

JC Penney

  • Comp was down 3.5%, the worst drop in several years. 
  • Big ticket items that were driving previous quarter comp sales are making incremental growth difficult.
  • 75% of online orders touch a store.
  • Management still believes the total year comps will be down 1% to up 1%.


  • Comp was down 2.7%, the fifth consecutive quarter with a negative comp and second highest negative comp (Q1 2016 of -3.9%).
  • 90% of stores are freestanding or in strip malls providing Kohl's more flexibility for fulfillment of online orders than mall based retailers
  • Strong investments in logistics with a 5th internet distribution center opening
  • Strong national brands are the merchandise focus.
  • Management still believes the total year comps will be flat to down 2%.


  • Overall comp of owned and licensed was down 4.6% and on an owned basis down 5.2%. This is the second worst comp in last 7 quarters (Q1 2016 of -5.6%). 
  • Bluemercury continues to be a strong point for Macy's posting double-digit comp growth.
  • Believe that the 100 store closures is enough but open to offload real estate where value outweighs the business.
  • Exclusive private label brands are the merchandise focus.
  • Management still believes the total year comps will be down only 2-3%.

Nordstrom Rack & Nordstrom

  • Nordstrom Rack is still positive but came in light posting a 2.3% comp. Last time the business posted a comp below 3% was Q3 2015. Online business was only up 19% vs previous year quarterly growth of 42%.
  • Full line store comp was down 6.4% with the total comp (includes online) down 2.8%.
  • 100% of stores are still cash flow positive despite the continued weakness in same store sales.

Privacy Is Overrated

Over the years, I have been part of many debates on panels and in living rooms on customer privacy. My stance has always been, "consumers don't care about privacy if the exchange benefits them." one study conducted across 372 cities and towns in Germany, we involved the collaboration of 3,544 retailers, stores, and merchants. Firms uploaded coupons onto a mobile app, and by enabling their GPS feature and sharing their real-time location information, consumers were able to receive these deals. Consumer engagement rate of these location-based coupons exceeded that of other, more traditional mobile ads by a magnitude of three to 10 times.
To find out whether consumers would be willing to give up their physical location in exchange for benefits, my co-authors and I conducted a set of elaborate studies at one of the largest shopping malls in China. The mall contains over 300 stores spanning 1.3 million square feet and attracts more than 100,000 visitors per day. At the entrance of the mall, customers were offered the option of accessing free wifi service in exchange for allowing the mall to monitor their shopping trajectories and send them personalized coupons and ads as they went about their shopping. My initial expectation was that a very small number of customers would opt in to this kind of explicit data-sharing relationship with the mall. But as it turned out, more than 75% of customers opted in, basically saying, “Take my data and give me an offer I can’t refuse.”

Is a model where consumers pay for privacy on the horizon?

As these opt-ins become more and more common—and harder and harder to avoid—I believe a model will soon emerge in which people will pay a premium for data privacy. Put another way, people are beginning to demand a fair exchange for their data and want to negotiate the terms with brands to mutual advantage.

For example, last year when AT&T deployed its high-speed fiber internet service to compete with Google Fiber, it had an interesting pricing model in Kansas that captured this concept of a “privacy premium.” The service was priced at $70 a month to match the price of Google Fiber—but if subscribers chose to opt out of AT&T’s “Internet Preferences” program, which recorded users’ browsing and search history, they would have to shell out an extra $29 a month. 

Only a matter of time.