Top 10 Takeaways from Day 2 of the Goldman Sachs 24th ... · Top 10 Takeaways from Day 2 of the...
Transcript of Top 10 Takeaways from Day 2 of the Goldman Sachs 24th ... · Top 10 Takeaways from Day 2 of the...
1
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Top 10 Takeaways from Day 2 of the Goldman Sachs 24th Annual Global Retailing Conference
TheFGRTteamattendedtheGoldmanSachs24thAnnualGlobalRetailingConferenceinNewYorkCitythisweek.Here,wehighlightourtoptakeawaysfromthesecondandfinaldayoftheconference.
1) Retailersarefocusingonprivatelabelstooffervalueanddifferentiation.
2) Wageheadwindswillcontinueandefficiencieswillhavetobefoundelsewhere.
3) Homeimprovementstoresareresilientinanageofretaildisruption.
4) Digitalshoppersareincreasinglychoosingtobuyonlineandpickupin-storewhentheyshop.
5) Retailersareincreasinglylookingatinternationalexpansionopportunities.China,EuropeandCanadaappeartobethegeographiesretailersaremostinterestedinwithregardtointernationalexpansion.
6) Thehomeandbeautycategoriesareoutperformingapparel.
7) SupplychainspeedIscrucialindrivinggrowth.
8) Storeclosuresstilloutpacestoreopeningsandrealestateownersfacerentpressure.
9) Smartretailersarepivotingandrebrandingtomeetopportunities.
10) Consumersareseekingoutproductsthataredifferentiatedandunique,andwhenproductsareindemand,priceisnotanissue.
TheFGRTteamattendedtheGoldmanSachs24thAnnualGlobalRetailingConferenceinNewYorkCitythisweek.Below,wehighlightourtop10takeawaysfromthesecondandfinaldayoftheconference.
2
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
1)RetailersAreFocusingonPrivateLabelstoOfferValueandDifferentiationRetailersdiscussedtheimportanceofincorporatingprivate-labelbrandsintotheproductmix.Presentersnotedthatprivate-labelcollectionsenableretailerstocapturehighermarginsandofferdifferentiatedproducts,whichcanultimatelydriveloyalty.
EdwardStack,CEOofDick’sSportingGoods,saidthatalthoughthecompany’ssecond-quartercompswererelativelyflat,private-labelcompswereupbymid-singledigits.Stacksaidthat,giventhecurrentpromotionalenvironment,exclusivescanhelpthecompanyalleviatesomeofthemarginpressurethatitisexperiencing.
UrbanOutfittersCFOFrankConfortidiscussedhowproductexclusivescontinuetodriveengagementandtoplinesalesforUrbanOutfitters.ThecompanyoffersexclusivitythroughcollaborationswithbrandssuchasChampionandAdidas,Confortisaid,notingthatprivate-labelbrandsaregrowingandrepresent“20-ishpercent”ofUrbanOutfitters’sales.
OntheRight:UrbanOutfittersCFOFrankConfortiSource:FGRT
TractorSupplyCFOKurtBartonnotedthesuccessofhisowncompany’sexclusivebrandsandsaidthatTractorSupplywillcontinuetointroducenewbrandsacrossproductlines.TractorSupplyrecentlylaunchedanewlineofexclusivedogfoodcalled4healthUntamed.
IntheMiddle:TractorSupplyCFOKurtBartonandCEOGregorySandfortSource:FGRT
3
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
2)WageHeadwindsWillContinueandEfficienciesWillHavetoBeFoundElsewhereSeveraloftheconferencepresentersdiscussedtheimpactofwageinflationontheirbusinesses.Tocombatrisingwages,retailersarefindingwaystodriveefficiencieselsewhereintheiroperations,thespeakerssaid,notingthattheyareundertakingvariousinitiativestocreateleverageintheirbusinessesandgrowthebottomline.
AccordingtoHomeDepotCEOCraigMenear,HomeDepotdrivesproductivitythroughsupplychaininitiatives.“We’vejustreallybegunworkingattheendof’16intothisyearonproductivityinthebackendofourstoresasitrelatestofreighthandling,”Menearsaid.ScottGoldenberg,CFOofTJXCompanies,saidrisingwageshadhadanegativeimpactonHomeGoodsmargins,whichnegativelyimpactedEPSgrowthby2%inthecompany’sfiscalsecondquarter.DrivingsalesinTJXCompanies’stronginternationalbusinesshashelpedpartiallyoffsetwageincreases,Goldenbergnoted.
3)HomeImprovementStoresAreResilientinanAgeofRetailDisruptionTheongoingUShousingrecoveryismakingthehomeimprovementspaceoneofthebestretailsegmentstobein.Themacroenvironmenthasbenefitedthissector:homevaluesarerising,existinghomesalesareincreasing,wagesarerisingandinterestratesareathistoricallows.
HomeDepothasbenefitedfromcontinueddemandforbuildingmaterialsfromcontractorsandfromdemandforappliancesonthepartofconsumers.Meanwhile,theconstructionofnewhomesamidtightsupplycontinuestofuelcontractordemandforbuildingmaterialssuchasplywoodandshingles,Menearsaid.Meanwhile,Lowe’shasexpandeditsnetworkofvendorsinordertoensureithastherightglobalmarketcoverageintherightmarkets,saidthecompany’sCEO,RobertNiblock.Lowe’shasalsoexperiencedstronggrowthinbig-tickettransactions,asrisinghomevalueshavemadeconsumersfeelbetteraboutinvestingintheirhomes.
OntheLeft:RobertNiblick,CEOofLowe’sOntheRight:CraigMenear,CEOofHomeDepotSource:FGRT
ExecutivesfromHomeDepotandLowe’sdiscussedtheimportanceoflocalizingproductofferingstomeetthemarket-specificneedsofcustomers.Executivesatbothcompaniesbelievethatthehousingrecoverystillhasquiteabitofroomlefttorun,butHomeDepotandLowe’smighthavealreadyproventhemselvestobesomewhat“Amazon-proof.”
4
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
4)OmnichannelCapabilities:Click-and-CollectIsHeretoStayConsumersareincreasinglychoosingthebuy-online,pick-up-in-storeoptionwhentheyshop.Manyretailersattheconferencenotedthatclick-and-collectstrategieshadbeensuccessfulpartsoftheiromnichannelinitiatives.Customersenjoytheconvenienceofbeingabletopickupanorderthesamedaythattheymakeapurchase.Theybenefitretailersbyenablingthemtosaveondirectshippingcostsandbyencouragingincrementalsalesinbrick-and-mortarlocations.
HomeDepot’se-commercebusinesshasgrownconsistentlyforalongperiodoftime,andmuchofthechannel’ssuccesscanbeattributedtothecompany’sbuy-online,pick-up-in-storeoffering.Morethan40%oforderspurchasedonHomeDepot.cominthesecondquarterwerepickedupbycustomersfromaHomeDepotstore.
TractorSupplyrolledoutitsbuy-online,pick-up-in-storeprograminMaythisyear,andtheofferingnowrepresents55%ofitsonlinebusiness,accordingtoCEOGregorySandfort.Carter’sCEOMichaelCaseydiscussedtheincrementalrevenuethatbuy-online,pick-up-in-storeservicehasdriventothecompany’soutletstores.AccordingtoCasey,about30%ofCarter’scustomerswhocomeintoastoremakeanadditionalpurchase,whichhasincreasedthecompany’saveragetransactionvalue.
5)RetailersAreIncreasinglyLookingatInternationalExpansionOpportunitiesTherewasmuchdiscussionofinternationalexpansionopportunitiesattheconference.China,EuropeandCanadaappeartobethegeographiesthatretailersaremostinterestedinforinternationalexpansion.Macy’sCEOJeffGennettecommentedontheinitialsuccessofthecompany’spartnershipwithAlibaba’sTmalle-commerceplatformandsaidthatMacy’splanstolaunchastand-alonewebsite,Macys.cn,inChina.UrbanOutfittersCFOFrankConfortiemphasizedthestellarperformanceofhiscompany’sstoresinVienna,Austria,andsaidthatthereissignificantopportunityinEuropeforallthreeofthecompany’sbrands.ExecutivesfromseveralcompaniesmentionedCanadaastheirfirstchoicetotestinternationalmarkets,givenitsproximityandculturalsimilaritytotheUS.EyewearstartupWarbyParkernowshipstoCanadaandhasopenedanofficeinToronto.AnexecutivefromthecompanysaidthattheteamconsidersenteringtheCanadianmarketasthelogicalfirststepwhentestinganinternationaloperation.
6)StoreClosuresStillOutpaceStoreOpeningsandRealEstateOwnersFaceRentPressureOnbalance,theretailindustryisseeingmorestoreclosuresthanstoreopenings.Recentclosureshavebeenconcentratedinthedepartmentstoreandspecialtyretailsectors,wherebusinesshasbeenchallenging.GapInc.planstocloseabout200specialtystores(includingGapandBananaRepublicstores)inthenextthreeyearsinanefforttorepositionitselftobeamorevalue-drivenretailer.UrbanOutfitters’managementteamsaidthatitiswillingtocloseprofitablestoresinanticipationofafasterchannelshiftasonlinepenetrationcontinuestoincrease.
Therewasalsodiscussionofretailrentstrendingdownasretailersreevaluatetheirstorebases.Realestateownershavebeenofferinglowerrentswhenretailersnegotiateforrenewals,andthedownwardrenttrendismorepronouncedatshoppingmallsandstripmalls,speakersnoted.
7)SupplyChainSpeedIsCrucialinDrivingGrowthOntheseconddayoftheconference,weheardmoreabouttheneedtoimprovesupplychainspeedinordertodrivetoplinegrowth.Thisrepresentsachangefromafewyears
5
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ago,whenretailersfocusedonoptimizingtheirsupplychainsbasedoncostattheexpenseofleadtime.UrbanOutfitters’Confortisharedhiscompany’sinitiativetodrasticallyincreasetheproportionofitemsitsourceswithashorterleadtime.Henotedthatthishadsignificantlyimprovedthecompany’sabilitytoofferon-trenditems,asitismucheasiertopredictatrendwhenspeedtomarketisfaster.ExecutivesfromTJXCompaniesandSignetJewelershighlightedsupplychainspeedasapriorityareafortheircompanies,too.ArepresentativefromPVHCorp.notedthatthecompanyisexpectingsomemarginenhancementsinthenext18monthsfromsupplychainimprovements.
GlobalsupplychainmanagerLi&Fungisactivelyworkingwithretailerstohelpthemimprovetheirsupplychainagility.Thecompanyistestingvirtualsamplingtechnologiesandplanstodigitizetheend-to-endretailsupplychainby2019.
8)SmartRetailersArePivotingandRebrandingtoMeetOpportunitiesDaniReiss,CEOofCanadaGoose,a60-year-oldluxuryouterwearcompany,saidthatthecompanylaunchedanewcapsuleknitwearcollectionjusttwoweeksago.HesaidthatalthoughCanadaGooseintendstomaintainitsstrengthasanouterwearcompany,itsawagrowingopportunityintheknitwearcategoryandthatcompanyresearchshowedconsumerswereopentoaCanadaGooseknitwearoffering.Reisssaidthatthecompanyhasreceivedgreatinitialfeedbackinstoresandthatitplanstogrowitsknitwearofferingovertime.
OntheRight:DaniReiss,CEOofCanadaGooseSource:FGRT
PhilipKrim,CEOandCofounderofCasper,saidthathiscompanyoriginallylaunchedasamattresscompany,butthatithasexpandedintotheentiresleepcategoryandnowoffersluxurysheets,duvetcoversandevenbedframes.Krimsaidthatthecompanyisstudyingmanyaspectsofsleep,andthatresearchhashelpedCasperofferthebestnewproducts.
6
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Lastly,DennisWeber,HeadofInvestorRelationsatHugoBoss,reportedthatthecompanyhasrebrandedtobetteralignwiththemarkettrendthatseesconsumersmovingfromformalweartocasualwear.HugoBosswashearingthat“thesuitisdead,”andWebernotedthat,althoughsuitsstillaccountfor20%ofthecompany’ssales,thecompanyrealizedthattoday’scustomerislookingforsmartercasualalternativestoweartotheoffice.Salesareupatbothofthecompany’srebrandedbrands;theyareup2%atBoss,drivenbyathleisure,andup6%atHugo,Webersaid.
OntheLeft:DennisWeber,HeadofInvestorRelationsatHugoBossSource:FGRT
9)HomeandBeautyCategoriesAreOutperformingApparelWeheardfromseveralretailersthatthehomeandbeautycategoriesareoutperformingapparel.Whileapparelspecialtyretailersarereportingcompsinthelowtomid-singledigits,homeandbeautyretailersareexperiencinghighercomps—andopeningstores.
MichaelHartshorn,CFOofRossStores,reportedthatthehomecategoryisanareaofstrengthforthecompanyandthatitaccountsfornearlyaquarterofRossStores’business.Theretailer’shomeitemsincludenontraditionalgoodssuchaspetandgardenitems,andthisareacontinuestoexpand,Hartshornsaid.Heexpectsthecategorytocontinuetogrow,andnotedthat25%isnotaceiling,inthecompany’sview.
Theapparelcategoryisgrowingmuchmoreslowlythanhome,asapparelislargerandmorefragmented.JohnRicciuti,PresidentofHomeGoods(whichisownedbyTJXCompanies),alsoreportedthatthehomecategoryisthriving.Ricciutisaidthatmorethan30%ofthecompany’sbusinessisinhomeandthatthecategoryresonateswithmillennialconsumers,whoareatthelifestagewheretheyarestartingtobuytheirownhomes.Hesaidthatreturnratesarealsolowerforthehomecategory,atapproximately16%–17%.HomeGoodsplanstoopen100storesthisyear,Ricciutisaid.
7
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Beautyisanothergrowthcategory.UltaBeautyreportedcomparablesalesof11.7%forthequarterendedJuly29.AccordingtoUltaCFOScottSettersten,thecompanycurrentlyhasabout1,010storesand“iscomfortablewith”opening100storesayear,withalong-termgoalof1,400–1,700storesintheUS.
AnexecutivefromDollarGeneralreportedthatthecompanycurrentlyholds1.2%ofthehealthandbeautymarketandthatitexpectstoincreasethatshareto3%overtime.Theexecutivenotedthatbeautydrivestraffic,sothecompanyisreducingthenumberof“fashionitems”itoffersandreplacingsomeofthemwithbeautyproducts.
10)ConsumersWantDifferentiatedProductsConsumersareseekingoutproductsthataredifferentiatedandunique,andwhenproductsareindemand,priceisnotanissue.CanadaGooseCEODaniReisssaidthatthecompanymanufacturesallofitsproductsonshore,andsellsthematthepricesatwhichtheyweremeanttobesold.Thecompanyis“functionfirst,”hesaid,anditsgoalistomakethebestproductineverycategoryinwhichithasanoffering.CanadaGooseouterwearretailsfornearly$1,000,andthecompanyreportsthatsomeofitsstylesaresoldoutregularly.Thecompanyiscurrentlyseeingdemandinbothitsonlineandofflinechannels,andplanstoopen15–20storesthrough2020.Itiscarefullyconsideringwheretolocatestores,dependingonconsumerretailtraffic,bothonlineandin-store.Reisssaidthatthecompany’sresearchhasshownthereisconsumerdemandforouterwearexceeding$1,000withadditionalfunctionalfeatures.
AnexecutivefromTJXCompaniesreportedthatitscustomerscomebackfrequentlybecausetheylikeitsproductdifferentiationandfearthattheywillmisssomething.Hesaidthatthebestcustomersknowthetruckschedules,andthattheyareexcitedandentertainedbytheideathattheremaybeonlyoneofaparticularitemavailable.Thatideakeepsthemcomingback,hesaid.Intermsofbranddifferentiation,hesaidthattherearemanythingsthatcanmakeaproductunique,includingproductqualityandcountryoforigin(asindicatedbya“MadeinItaly”or“MadeinGermany”label).Hesaidthatthecompanyhasthousandsofbuyerswhosourceallovertheworld,lookingforunique,differentiatedproducts.
8
September8,2017
DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comErinSchmidtResearchAssociateJingWangResearchAssociateStevenWinnickResearchAssociateHongKong:2ndFloor,HongKongSpinnersIndustrialBuildingPhase1&2800CheungShaWanRoad,KowloonHongKongTel:85223004406London:242–246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017
FungGlobalRetailTech.com