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Nordstrom loyalty, online plans cost more than expected

Nordstrom Inc on Thursday said it expected an even bigger impact on this year’s gross margin from its efforts to win more customers through its loyalty program and anticipates spending more on its growing e-commerce business.The high-end retailer, which also operates the Nordstrom Rack chain of lower-priced outlet stores, now expects its gross profit margins to fall by at least 0.4 percentage point, compared to a previous floor of 0.35 points, as it spends money on its Fashion Rewards program, an essential tool for winning over shoppers and gathering data on their spending habits.It also now expects to spend at least $340 million in the fiscal year ending in January on expenses that include investments in its online business, up from a minimum of $325 million. Online sales rose 38 percent last quarter.

“They need to make sure the online experience is at the same level as the in-store experience,” said Morningstar analyst Paul Swinand.

Shares were down $2.15 at $53.25 in after-hours trading, following a 3.2 percent drop in regular trading before the results were released.

The investments prevented Nordstrom from raising the top end of its fiscal-year profit forecast. The company now expects to earn $3.45 to $3.50 per share, compared with a previous range of $3.40 to $3.50 per share and analysts’ forecasts of a $3.49 per share profit, according to Thomson Reuters I/B/E/S.

Nordstrom now expects same-store sales to rise 6.5 percent to 7 percent this year, versus an earlier forecast of a 6 percent to 7 percent increase.

Nordstrom’s net income for the quarter ended on Oct. 27 rose 15 percent to $146 million, or 71 cents per share, from $127 million, or 59 cents per share, a year earlier. That was 1 cent below analyst expectations.

As previously reported, revenue rose 13.8 percent to $2.71 billion, while same-store sales were up 10.7 percent.


H&M maintains lead in organic cotton use for 2011

The Textile Exchange has been advocating the use of greener raw materials for ten years. The non-governmental organization monitors the evolution of the annual use of organic cotton in the world and promotes those textile companies that use this resource. The Textile Exchange just published its ranking for 2011 with H&M taking first place for the second year in a row.
H&M leads the Top 10 in the Textile Exchange's sustainability report (photo: H&M)
H&M leads the Top 10 in the Textile Exchange’s sustainability report (photo: H&M)
The Swedish group has been using organic cotton since 2004 and says its goal is 100% production with environmental cotton by 2020. “Cotton is the raw material we use the most. We plan to further increase our use of organic cotton in the future, beside making strong investments in ‘Better Cotton’ and gradually increasing our use of recycled cotton,” said Henrik Lampa, product sustainability manager at H&M.Behind the Swedes, the top positions went to the same three companies — C&A, Nike and Inditex. On the other hand, Adidas completely disappeared from the rankings, after having placed number five for the first time in 2010. Puma made its debut on the list, garnering seventh place after American brands Anvil and PrAna. Also among the top ten were American retail chains Williams-Sonoma and Target and the German group Otto.


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Online marketplace eBay courts China shoppers

SAN FRANCISCO – Leading Internet marketplace eBay on Monday took aim at China with the launch of a website aimed at enticing fashion-conscious shoppers there with “the very best” of its offerings.The California-based firm teamed with Chinese luxury online retailer Xiu.com to launch a localized eBay Style website at ebay.xiu.com.”Our long-term vision is to connect Chinese consumers to global products and brands that they want and love in a seamless and safe way,” eBay said in a release.

“By partnering with Xiu.com we are able to surface our best inventory to Chinese consumers, while providing a simple and easy shopping experience.”

Offerings will include thousands of brands of clothing, handbags, beauty products and more, with Xiu handling sales, deliveries and customer service, according to the companies.

“We believe that in the future Chinese consumers will use eBay as a passport to global fashion styles, especially for leading women’s brands and accessories, and menswear,” said eBay vice president Melanie Tan.

Sales to shoppers in China navigating eBay in English have increased 40 percent in the past year, according to Tan. Xiu will tailor the new website to local language and culture, the companies said.

“Our mission is to bring the best of the world to China, so eBay, with its global access, is an ideal partner for us,” said Xiu.com chief executive George Ji.

“We also hope to introduce a new, more inspiring buying experience to Chinese consumers.”

International sales buoy Asics

 

For its second quarter, April 1 to September 30, 2012, Japanese sportswear company Asics reported net sales of 1.2 billion euros (126.6 billion yen), a 2.2% increase. The results were largely driven by international sales, which increased 3.1% to 807 million euros, while domestic sales remained stable at 0.4% or 418 million euros.

Chaussure Asics
Chaussure Asics

However, exchange rates continued to penalize Asics as they did in the first half of the year. While the company saw its sales grow by more than 8.4% in Europe before exchange rates, sales on the Old Continent showed a drop of -2.5% when converted to local currency — 300 million euros compared to 308 million euros for the same period last year. Europe is the Japanese company’s third largest market after Japan and the Americas, and maintained the highest operating income of 35 million euros.

For the fiscal year ending March 31, 2013, Asics expects sales to increase 4.5% to 2.5 billion euros, and operating income to rise 1.9% or 194 million euros.
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HONG KONG – Luxury brands banking on a China rebound to boost sales may be in for an unpleasant surprise: weak demand in the world’s second largest luxury market may last longer than the economic slowdown as Beijing cracks down on conspicuous consumption.

"Luxury products are highly expensive and civil servants, whose salaries are about 5,000 yuan ($790.6) a month, cannot afford them"
“Luxury products are highly expensive and civil servants, whose salaries are about 5,000 yuan ($790.6) a month, cannot afford them”

China is sensitive to anything that raises suspicions of corruption, especially after the scandal involving Bo Xilai and his emerald-wearing wife Gu Kailai marred this year’s once-a-decade leadership transition.

The government imposed a “frugal working style” rule on its civil servants, which goes into effect on October 1, barring them from spending public money on lavish banquets or fancy cars, and from accepting expensive gifts. Gift giving is considered a sign of respect in Chinese culture, and has been a reliable source of demand for the world’s top luxury brands.

A string of high-profile incidents, including a high-speed Ferrari crash reportedly involving the son of a senior public official and a local government official photographed flaunting luxury watches beyond the reach of his salary, have enraged many Chinese who have taken to the blogosphere to vent their anger.

Chinese police inspectors are now studying up on how to recognise luxury brands to help them expose corruption, according to local media.

“Luxury products are highly expensive and civil servants, whose salaries are about 5,000 yuan ($790.6) a month, cannot afford them,” China Daily reported on Friday. “So officials who possess luxury products should give convincing explanations on how they got them.”

Luxury brands were already struggling with a slowing economy and a bit of flashy fashion fatigue as Chinese shoppers shun flamboyance in favour of understated displays of wealth.

Beijing’s crackdown suggests that even if economic growth starts to recover later this year, as many economists predict, luxury demand may lag.

“There is definitely a general moving away from the bling and the gold taps. This is a permanent shift,” said Rupert Hoogewerf, chairman of the Hurun Report, a Shanghai-based luxury publishing house which compiles China’s Rich List.

Hoogewerf said while many Chinese consumers are pulling back on spending because of a weakening economy, there is also a heightened sensitivity surrounding luxury purchases.

PRADA’S TURN?

British fashion house Burberry Group Plc’s warning on September 11 that its sales growth in China was far slower than expected spooked luxury investors and raised concerns that the entire sector was in danger of stumbling.

Its Italian rival, Hong Kong-listed Prada SpA, releases half-year earnings later on Monday and investors are looking to the company to provide a clearer picture of the state of Chinese demand.

Analysts have mostly remained upbeat on Prada’s outlook, eyeing strong market share gains and good brand perception, but its shares are down 7.5 percent since Burberry’s warning.

There are some signs that Beijing’s “frugal” campaign, announced in July, is already hurting luxury demand.

In Hong Kong, a popular luxury shopping destination for mainland Chinese, July sales rose just 3.8 percent from a year earlier, slowing from June’s 11 percent year-on-year growth. August figures are scheduled for release on October 4.

Gift giving is a cultural norm in China, seen as a way of showing respect. It is not unusual for civil servants to receive expensive bottles of alcohol, jewellery or lavish meals from business leaders in the community.

Since Beijing’s crackdown was announced, demand for typical gift-giving products such as watches and wine has faded.

Jebsen, a distributor for premium brands in China and one of the largest Porsche dealership groups in the world, said its Porsche sales have remained healthy, up 28 percent in August from a year earlier.

But its Hong Kong Bordeaux wine sales are down 25 percent in value and 6 percent in volume. Hong Kong has been a favourite entry point to China for high-end Grand Cru wines.

To be sure, China still has plenty of people willing and able to splash out on fancy goods, and Hong Kong and the gambling enclave of Macau remain shopping paradises.

At U.S. billionaire Steve Wynn’s casino in Macau, which houses high-end brands such as Louis Vuitton, Piaget and Dior, retail business is still solid with sales well up over the same period a year ago, said a Wynn spokesperson.

Outlet shopping villages are also becoming popular for Chinese consumers who benefit from hefty tax savings.

Desiree Bollier, chief executive of Value Retail, which has nine outlet villages in Europe, said Chinese customers are increasingly opting for the smaller niche European brands offering unique products they cannot find at home.

“Demand is not diminishing but evolving – the spectrum is becoming broader and more sophisticated,” she said.

(Reporting by Farah Master; Editing by Emily Kaiser and Jean Yoon)

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Milan launches new womenswear trade show

The debate launched this summer on the reorganization of Milan womenswear fairs seems to have yielded a first concrete result. Friday, September 21, a collaboration between two groups was announced. The one side involves the Florence organizer Pitti Immagine with its three events – Touch!, NeoZone and Cloudnine – held in Milan since 2006 in the Via Tortona fashion district, featuring 170 collections. The other partner is Fiera Milano and its MI Milano, the company’s women ready-to-wear fair for some 150 brands that it hosts on its fair grounds.

Two of the city’s three main organizers of fashion events that usually take place during the women’s Fashion Week have thus decided to join forces in rolling out a single and unique event next February for women’s apparel and accessories in the medium and high-end range. White, the research and trends trade show that takes place during fashion weeks, is not part of the project.

The historical "Palazzo delle Scintille," the venue for the new fair
The historical “Palazzo delle Scintille,” the venue for the new fair

The city is backing the initiative, which will be held at the “Palazzo delle Scintille,” a historic fair facility of nearly 10,000 square meters located on Milan’s former exhibition and convention grounds and currently a total construction site. This vast area, previously the site of Milan trade shows, is now slated to be transformed into a new residential area. The historically symbolic “Palazzo delle Scintille” is the only building that will be preserved in the area, but it must first be completely renovated. This is the same building that the city of Milan wanted to transform into a “large multipurpose center of fashion” until just recently.

A tender for the renovation work is to be announced soon, but no details have been revealed on the financing of the restructuring or the name of this new event and its organization. The Italian chamber of fashion, which was not involved in the effort, is expressing some skepticism. “The real problem with these shows are their dates, which would benefit by being moved up to coincide with men’s fashion week. But the question has not even been addressed,” complained Mario Boselli, the President of the Camera della Moda.

A week ago, the Pitti Immagine managing director Raffaello Napoleone worried about the supremacy of Paris over Milan. He called upon the Italian system to consider a new formula, suggesting a possible grouping between the various actors. He said he did not want to make any hasty decisions and was “ready to make choices that everyone agreed upon.” The sudden announcement of the alliance with Fiera Milano in the middle of Fashion Week seems to contradict his words. Moreover, Pitti Immagine does not seem more concerned about moving up its Milan trade shows, which risk overlapping Pitti W, the women’s pre-collections event organized by Pitti in Florence during Pitti Uomo.
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Prada reassures against “hysteria” over luxury slowdown

HONG KONG/MILAN – Italian fashion house Prada SpA dismissed talk of a sharp slowdown in spending on luxury goods, posting a 59.5 percent jump in net profit and saying its sales in the past two months were on track with expectations.
By Dominique Muret Prada reassures against "hysteria" over luxury slowdown HONG KONG/MILAN - Italian fashion house Prada SpA dismissed talk of a sharp slowdown in spending on luxury goods, posting a 59.5 percent jump in net profit and saying its sales in the past two months were on track with expectations.

“I think we must stay calm and be less hysterical. I don’t see such a dramatic market,” said Patrizio Bertelli, chief executive of the maker of minimalist dresses which competes with the likes of Louis Vuitton and PPR SA’s Gucci.

His comments on an analyst conference call come after Britain’s Burberry Group Plc said on Sept. 11 its sales growth in China was far slower than expected, spooking luxury investors and raising concerns that the entire sector was in danger of stumbling.

China’s luxury market, on which global luxury powerhouses have become increasingly dependant, has been hit by weaker demand than expected due to slowing growth and a crackdown by Beijing on conspicuous consumption.

But Milan-based Prada, also popular for its coloured Miu Miu dresses and leather handbags, said it expected “good double-digit growth” in 2012 at shops open more than a year.

“Today, looking at numbers in August and September, we are convinced that we will meet the targets indicated in our budget,” Bertelli said without giving details.

Asked about Burberry, Bertelli declined to comment on its competitor, but said Prada benefited from a “flexible” offer which was responsive to conditions in its different markets.

DIFFERENT NEEDS

“We think that considering all markets at the same level is wrong. We must accept markets’ diversity and adapt to different needs and traditions,” the CEO said, adding Prada was reducing inventories to keep costs under control.

Bertelli said he expected Prada’s earnings before interest, tax, depreciation and amortisation (EBITDA) to improve this year. He said he would raise prices only to adjust for currency trends.

The group’s net profit for the six months through July reached 286.4 million euros ($372 million) compared with a forecast of 290.3 million from six analysts polled by Thomson Reuters.

First-half EBITDA rose 49 percent to 469.4 million euros, or 30 percent of consolidated net revenue. The company’s own brand and Miu Miu have been the main drivers of growth, posting revenue up 40.4 percent and 23.7 percent respectively.

The Asia Pacific market delivered the highest growth rate, accounting for more than a third of Prada’s total net revenue. Greater China sales rose 50.2 percent to 334.6 million euros.

Analysts said Prada’s leather goods sales tend to be more resilient than apparel during an economic downturn and expect the company to outpace its competitors due to its strong positioning in handbags and its smaller store network.

Prada said it would continue to focus on expanding its own retail network, which it sees as essential to long term growth, even if market conditions remain challenging.

Prada, which reported revenue of 1.55 billion euros for the first half of the year on Aug. 6, has opened 28 new stores while closing two, taking the total number of directly-operated stores to 414 at the end of July.

Listed in Hong Kong, Prada’s shares have gained 71 percent so far this year, substantially outperforming the benchmark Hang Seng Index which is up 12 percent. The company’s earnings were released after the Hong Kong market close.

Top Italian brands take to the catwalks in Milan

Italy’s top luxury brands including Fendi, Prada and Versace take to the catwalks for Milan fashion week from Wednesday to show off hotly-awaited spring-summer 2013 collections to global fashionistas.

Elena miro catwalk in Milan - Photo: AFP
Elena miro catwalk in Milan – Photo: AFP

Gucci is set to kick off the fashion extravaganza, which will see 68 Italian and international brands strutting down runways in a week of shows, boutique openings, cocktail presentations and parties.

British designer John Richmond, famed for his rock-inspired creations, also stars on Wednesday, followed on Thursday by Prada and Emporio Armani.

Etro, known for its trademark bright colours and bold patterns, will take to the catwalk on Friday, along with Moschino and two Versace shows — followed by a rock-and-roll party with live band to show off Versace’s Versus collection.

Saturday opens with German designer Tomas Maier, who will unveil his latest creations for Bottega Veneta, followed by Fendi and Jil Sander’s hotly-awaited collection — the first since she rejoined as creative director in February.

On Sunday, it will be the turn of Marni, Dolce & Gabbana and Giorgio Armani, after which the Armani house will host a glitzy inauguration party for a new exhibition to showcase the Italian designer’s most memorable creations.

Fashion week winds up with DSquared2, Roberto Cavalli and Gianfranco Ferre on Monday, with Tuesday dedicated to up-and-coming new designers.

Beneath the frantic pre-show preparations taking place in the city’s palaces, parks and historic monuments — including the imposing 14th century Sforzesco Castle — there is an air of apprehension over the sector’s health.

Last week the fashion industry forecast a 5.6-percent drop in revenue for 2012 to 60.2 billion euros ($79 billion), down from an earlier 5.2-percent estimate — and luxury brands in the recession-hit country are being squeezed.

While many fashion houses are now focusing their efforts on expansion abroad — particularly in economic powerhouses such as China and Brazil — there are still bids to attract wealthy visitors to Italy’s commercial capital.

Fashion week this season will be marked by a string of boutique openings — from Just Cavalli — opening on the exclusive Corso Matteotti with a party on Friday — to British lingerie brand Agent Provocateur.

And in a declared bid to boost Made in Italy, Nicole Minetti, a television starlet-turned-politician on trial for procuring prostitutes for former Italian prime minister Silvio Berlusconi, will model lingerie on the catwalk for Parah according to media reports.MILAN, Sept 19, 2012 (AFP)

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