Urban Outfitters already have 25 percent of all of their sales coming online

October 4, 2013 Leave a comment

JPMorgan Chase’s Brian Tunick on Retail’s Recovery via Value Pricing

By Joshua Brustein October 03, 2013

What do shoppers want? Experts discuss the forces reordering the retail industry.

Is the retail industry over the recession? 
I have 25 companies in my universe in specialty retail. The sales as a group are the highest they’ve ever been, the sales per square foot are the highest they’ve ever been, and the profit margins are the highest they’ve ever been. Value is probably the overarching theme. Look at T.J. Maxx (TJX), Marshalls, and, to a little degree, Burlington Coat(BURL). The pace of the growth in off-price has been almost double the pace of regular apparel spending. And on top of that, there’s not a weekend where an average specialty retailer in the mall is not offering some kind of 30 to 40 percent off deal. It certainly feels like the consumer is not shopping unless there’s some kind of deal attached to it. And it’s very hard to pull back when the consumer gets used to buying things on sale. The good news is margins, overall, are pretty good. But it’s more of a function of benefiting from lower cotton costs, more efficiencies as companies close stores to focus on their better stores and returns, and using e-com as a vehicle to also help profitability.Who’s doing tech well?

Urban Outfitters (URBN) is probably the poster child. They already have 25 percent of all of their sales coming online. And between their Urban Outfitters brand and their Anthropologie brand, they clearly have a tech-savvy customer. They’ve done everything from exclusive Web product, to new categories, to different loyalty programs, that have helped drive this customer. Now it helps when you start off with a catalog business. You have a customer that already has been trained to not visit your stores. The laggards in e-com have been off-price. T.J. Maxx really just launched its own website a couple of weeks ago. Ross Stores (ROST) has no e-commerce capabilities. And Burlington does less than 1 percent of sales online. So far off-price has not been willing to stick their necks out for online. The concern that’s out there, in general, is: What’s going to happen to the business models for companies that have stores? You’re certainly looking at a minimum of 20 percent of your sales to come online in the next five years. You wonder if they need to have so much real estate.

Where do you like to shop? 
J.Crew, Suitsupply, Steven Alan, Paragon Sports, and H&M (HMB:SS) are favorite places to shop. Online I like Asos and Frank & Oak.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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