Needham & Company on Retail Apparel: Hanging Out at the Mall: It’s Beginning to Look a Lot Like Christmas
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Needham & Company on Retail Apparel: Hanging Out at the Mall: It’s Beginning to Look a Lot Like Christmas by Christine Chen
Chen said, "Traffic and conversion across the mall accelerated and parking become more difficult as consumers begin to think about Holiday gifts. According to Planalytics, the warmest 2nd weekend of December in 5 years did drive incremental traffic to malls, but negatively impacted demand for winter product, such as sweaters, coats, and boots, which continued to see heavy markdown activity across the mall. Mall traffic accelerated this weekend in the West as cooler temperatures drove demand for seasonal items. Warm weather on the East Coast helped traffic trends, but likely hurt demand for seasonal product. The mall remained highly promotional overall with the impact of frequent promotions at several retailers losing the call to urgency. In our universe, traffic and conversion winners were Anthropologie, American Eagle, Guess?, Hollister, and Zumiez."
American Eagle (NYSE: AEO): Inventories continue to be heavy, resulting in 40% off sweaters on Friday & becoming 40% off all tops on Saturday, which drove incremental traffic and conversion. aerie also went to 40% off everything on Saturday (excluding undies).
Abercrombie & Fitch (NYSE: ANF): $25 GC with $50 purchase in-store only (redeem 12/16 to 1/28) on top of 50% off select category discounts drove traffic and conversion at Hollister stores which saw an increase in traffic and conversion. A&F stores remain busy, driven by select promotions of 50% off select categories. Shelves seem to have been restocked in preparation for Super Saturday weekend, though inventories still remain lean.
Aeropostale (NYSE: ARO): ARO went to 60% off everything and seems to be moving through inventory, with fashion selling out and basics remaining though traffic remains lighter than LY.
Guess? (NYSE: GES): GES continues to refine their promotional strategy to better drive return traffic and increase average transaction value. Over the weekend, GES ran 25% off a $100+ purchase at Guess? stores (Friday to Sunday) and online (which started Thursday) vs. 20% off entire purchase and 50% off clearance from Tues through Sunday LY. Guess? by Marciano, the higher-end concept, did not run a customer appreciation event vs, 20% off entire purchase and 50% off clearance from Tuesday through Sunday LY, though will run 25% off $200 + purchase this upcoming weekend. Select styles were 30% to 40% off, but combined with regular clearance was significantly lower than the level of clearance LY. By staggering the promotions of Guess? and Guess by Marciano and not running them the same weekend, we think GES is able to maximize the spend from the customer base, as there is overlap due to a combined loyalty program. As a result, the customer likely spends more overall, since psychologically its easier to spend more in aggregate in 2 trips rather than one.
Urban Outfitters (Nasdaq: URBN): Anthropologie drove traffic and conversion both in-store and online with its 2 day 50% off full price
sweaters and outerwear on Friday and Saturday. Clearly, the brand has a loyal following as by 8 AM ET, several styles were already sold out (including everything in our cart) as many customers loaded shopping
carts in anticipation on Thursday and began placing orders at midnight. On Sunday, what little was left of the full price sweaters and outerwear went back to full price, but additional 30% off clearance started which also
resulted in several items selling out online early Sunday morning. While the markdowns will impact margins as previously indicated, we think they have been very effective at moving inventory in order to end the quarter
clean. In addition, the increased traffic and conversion to stores and online resulted in a positive QTD SSS and total company SSS of +MSD% QTD (including DTC).
Zumiez (Nasdaq: ZUMZ): The arrival of colder weather drove traffic and conversion, despite limited promotions in the store overall. We did notice incremental promotions on snow outerwear and snowboard packages, but continue to believe that ZUMZ continues to see pricing power due to a unique product assortment.
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Chen said, "Traffic and conversion across the mall accelerated and parking become more difficult as consumers begin to think about Holiday gifts. According to Planalytics, the warmest 2nd weekend of December in 5 years did drive incremental traffic to malls, but negatively impacted demand for winter product, such as sweaters, coats, and boots, which continued to see heavy markdown activity across the mall. Mall traffic accelerated this weekend in the West as cooler temperatures drove demand for seasonal items. Warm weather on the East Coast helped traffic trends, but likely hurt demand for seasonal product. The mall remained highly promotional overall with the impact of frequent promotions at several retailers losing the call to urgency. In our universe, traffic and conversion winners were Anthropologie, American Eagle, Guess?, Hollister, and Zumiez."
American Eagle (NYSE: AEO): Inventories continue to be heavy, resulting in 40% off sweaters on Friday & becoming 40% off all tops on Saturday, which drove incremental traffic and conversion. aerie also went to 40% off everything on Saturday (excluding undies).
Abercrombie & Fitch (NYSE: ANF): $25 GC with $50 purchase in-store only (redeem 12/16 to 1/28) on top of 50% off select category discounts drove traffic and conversion at Hollister stores which saw an increase in traffic and conversion. A&F stores remain busy, driven by select promotions of 50% off select categories. Shelves seem to have been restocked in preparation for Super Saturday weekend, though inventories still remain lean.
Aeropostale (NYSE: ARO): ARO went to 60% off everything and seems to be moving through inventory, with fashion selling out and basics remaining though traffic remains lighter than LY.
Guess? (NYSE: GES): GES continues to refine their promotional strategy to better drive return traffic and increase average transaction value. Over the weekend, GES ran 25% off a $100+ purchase at Guess? stores (Friday to Sunday) and online (which started Thursday) vs. 20% off entire purchase and 50% off clearance from Tues through Sunday LY. Guess? by Marciano, the higher-end concept, did not run a customer appreciation event vs, 20% off entire purchase and 50% off clearance from Tuesday through Sunday LY, though will run 25% off $200 + purchase this upcoming weekend. Select styles were 30% to 40% off, but combined with regular clearance was significantly lower than the level of clearance LY. By staggering the promotions of Guess? and Guess by Marciano and not running them the same weekend, we think GES is able to maximize the spend from the customer base, as there is overlap due to a combined loyalty program. As a result, the customer likely spends more overall, since psychologically its easier to spend more in aggregate in 2 trips rather than one.
Urban Outfitters (Nasdaq: URBN): Anthropologie drove traffic and conversion both in-store and online with its 2 day 50% off full price
sweaters and outerwear on Friday and Saturday. Clearly, the brand has a loyal following as by 8 AM ET, several styles were already sold out (including everything in our cart) as many customers loaded shopping
carts in anticipation on Thursday and began placing orders at midnight. On Sunday, what little was left of the full price sweaters and outerwear went back to full price, but additional 30% off clearance started which also
resulted in several items selling out online early Sunday morning. While the markdowns will impact margins as previously indicated, we think they have been very effective at moving inventory in order to end the quarter
clean. In addition, the increased traffic and conversion to stores and online resulted in a positive QTD SSS and total company SSS of +MSD% QTD (including DTC).
Zumiez (Nasdaq: ZUMZ): The arrival of colder weather drove traffic and conversion, despite limited promotions in the store overall. We did notice incremental promotions on snow outerwear and snowboard packages, but continue to believe that ZUMZ continues to see pricing power due to a unique product assortment.
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