Roulston Consumer Chair on Key Retail Trends

Craig Johnson, the chair of our Consumer group, has shared his perspective on the current trends in the retail space:

Flight to value resuming; post-post frugal fatigue: WMT, TGT both up only modestly, as F&C predominate, and as discretionary still lags. Winners: Dollar stores, TJX, ROST, ARO, F-21; COST/BJ’s; but now with first reappearance of barbell growth in 2 years.

Dollar stores emerging as C-stores without the gas pumps, rapidly expanding SF, units

High heat driving AC/Fan sales for WMT/TGT, COST, LOW/HD, BBY/HGG; best in several years, but not a make/break.

Unless Exclusive/Unique/New, Full price merch left on racks (ex URBN/Anthro, JCG-F, TIF).

Winners focus on Value, Speed, Productivity, Newness: VSPN

Needs/Wants/Desires: Necessities vs. Discretionary: e.g. COST Food/Cons’ YOY 61% to 65%; WMT 49% to 53%; BJ’s 68% to 71%. Discretionary categories were recovering most strongly, off of pent-up demand, but now taking a breather.

Women’s Wear rebounding from 2-3 year drought: TLB (going younger, ANN esp Loft, CWTR all up from deep ditch, but far below sales highs; JCG, CHS, Anthro/URBN, all much better, better comps with smaller fleets.

Deflation still strong in sectors: CE (Notebooks, Netbooks, GPS)—but FPT new generation of LED, 3D and IPTV Net-Connectivity will bring TV AUR’s up; Apparel deflation easing/reversing by 1-2% 1Q2011, with hikes tempered by sourcing into Bangladesh, Cambodia, VNam; and Food has bottomed, with dairy up and beef/corn going up; some product inflation

Private Label substitution, higher quality, but lower prices and thus Av. Tkt down.

More frequent trips continuing, with small AT’s

Home sector in major turnaround, 1Q best Q since 4Q2006, but 2Q softening again. WMS, BBBY, TJX/HomeGoods, and Home depts of broadlines strong (TGT, KSS, M, even WMT). HIP bottomed in Jan/Feb, all much stronger in March/April/May, best Spring since 3+ years, and still accelerating. Key has been the great outdoors: nursery, lawn & garden, and OPE

WSM strongest in several years, esp PB, PB/T-K sides. W Elm still work in progress, being tweaked by Mgt.

BTS shoppers delaying purchases till later in season; more looking vs. buying July MTD; waiting closer to need, and for sale prices/next mark