q2 2015 review & bts webcast with planalytics aug. 11 2015

WEBCAST 2015 Back-To-School Outlook

© 2015 Planalytics, Inc. All Rights Reserved. Proprietary and Confidential.

2015 BTS/BTC Calendar

September 2014

Labor Day: September 1

Public Schools Open: September 4

Rosh Hashana: September 24-26

September 2015

Labor Day: September 7

Public Schools Open: September 9

Rosh Hashana: September 13-15

Su Mo Tu We Th Fr Sa

1 2 3 4 5 6

7 8 9 10 11 12 13

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29 30

Su Mo Tu We Th Fr Sa

1 2 3 4 5

6 7 8 9 10 11 12

13 14 15 16 17 18 19

20 21 22 23 24 25 26

27 28 29 30

•  Summer ends 1 week later in 2015


Overview – Too Much Stuff and No Excitement

•  Consumer purchase mentality—What do we need now? A Just in Time Shopper

-  Macy’s reacts to this shopping behavior by rolling out same-day delivery to additional stores

•  Look for traditional shopping seasons to continue to blur

-  Black Friday style sales in July

•  Harder for retailers to post sales and earnings gains.

-  Continued IT investments—Mobile, Click & Collect, Personalization, Omnichannel—all mandatory to maintain share

-  Most categories hovering in deflationary territory

3


Overview – Makes Retail a Promotional Bonanza

•  Meanwhile the consumer wins

•  BTS needs:

-  Shoes and shorts

-  Texts and backpacks

4


Current Retail Business Environment

1.  BTS Outlook

2.  Year-Over-Year Results

3.  Off-Price Retailing Beating Counterparts

4.  Gas Did Not Stay Below $2 per Gallon

5.  June US Retail Sales Mixed, Showing Slow Recovery

6.  Continued Record Low Jobless Claims

7.  Consumer Spending Varies by Category

8.  Promotional Page

9.  2Q Earnings Scorecard

10.  BTS 2015 Fashion Trends


1. BTS Outlooks

•  National Retail Federation(NRF) combined Back-to-School/ Back-to-College (BTS/BTC) spending to drop 9.3% in 2015 to $67.95 billion

-  Electronics, the largest category, is expected to decrease16.8%

-  Dorm furnishing is projected to rise 18.4% to $6.05 billion.

•  The average family with children in

-  Grades K-12 plans to spend $630.36, a 5.8% decline

-  College plans to spend $899, a 1.9% decrease

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1. BTS Outlooks (Cont’d)

•  eMarketer sees retail sales growth of 4.6% in the prime BTS selling season

-  14.4% gain in ecommerce sales to $56.35 billion in BTS

•  Brand Keys 21st Survey has BTS spending flat at $650 per household with k-12 age children

•  FBIC Global Retail & Technology see BTS sales growth in tandem with the recent June sales report, 0.1% or flat year-over-year

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2. Year-Over-Year BTS/BTC

8

BTS 2014 2015E

YoY% Change

Total ($B) 26.54 24.87 -‐6.3%

Total per household (USD) $669 $630 -‐5.8%

Selected Categories per household 2014 2015E

YoY% Change

Shoes 124 118 -‐5.5%

Clothing 231 218 -‐5.8%

School Supplies 102 98 -‐3.4%

Electronics 212 197 -‐7.1%

BTC 2014 2015E YoY% Change

Total ($B) 48.40 43.09 -‐11.0%

Total per household (USD) $916 $899 -‐1.9%

Selected Categories per household 2014 2015E

YoY% Change

Shoes 78 73 -‐6.2%

Clothing 139 137 -‐1.3%

School Supplies 75 67 -‐10.8%

Electronics 244 207 -‐15.0%

2014 2015E YoY % Change

Total BTS/BTC ($B) 74.94 67.95 -9.3


3. Off-Price Retailing Beating Counterparts

9

0.6 0

-‐13.8

6 7.9

18.7

-‐20

-‐15

-‐10

-‐5

0

5

10

15

20

25

Macy's Kohls Sears TJX Big Lots Burlington

FY13 Sales %

FY14 Sales %

FY15 Sales %

YoY% change in Sales: Off-Price Retailers Vs. Specialty Retailers

•  In January 2015, off-price retailers TJX Companies and Ross Stores reported a 6% and 7.9% in net sales, while Macy’s and Kohl’s registered sales growth of 0.6% and 0%.

•  Efficient inventory management/turnover and low-cost structure allow for higher margins

•  Outperforming high-end retailers because consumers are still cautious with their discretionary income: 20 to 60% discounts on branded goods.

•  Macy’s opened discount store to compete: Macy’s Backstage

%


4. Gas Did Not Stay Below $2 per Gallon

•  The gradual decline in oil prices is likely to continue in the second half of 2015, and gas should average $2.49 per gallon

Through July 18, 2015 Regular grade average Source: US Energy Information Administration

2.6

1.0

2.0

3.0

4.0

May

-14

Jun-

14

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Weekly US Regular Conventional Retail Gasoline Prices: USD per Gallon $


5. June US Retail Sales Mixed, Showing Slow Recovery •  Total US monthly retail sales, excluding motor vehicles and restaurants,

were mixed. The (YoY) change was 0.1%

•  Retail sales were softer than expected in June, following a strong performance in May

•  The NRF lowers 2015 forecasted growth to 3.5% from 4.1%, reflecting weak 1H

Through June 30, 2015 Source: Bureau of Economic Analysis

US Monthly Retail Sales Ex-Auto YoY%

0.1

(10)

(5)

0

5

10

03 04 05 06 07 08 09 10 11 12 13 14 15


6. Continued Record Low Jobless Claims •  Unemployment rate declined to 5.3% from 5.5% in May

•  Nonfarm payrolls increased 223,000 in June

•  Applications for jobless benefits reported a seasonally adjusted 267,000, in the week ending July 25

•  US has added an average of 208,000 jobs each month

•  All good news and NOT showing up in retail sales

Through June 30, 2015 Source: Bureau of Labor StaAsAcs Seasonally Adjusted

US Unemployment Rate %

5.3

4

5

6

7

8

9

10

11

04 05 06 07 08 09 10 11 12 13 14 15


-0.4

-0.2

0.2

0.7

0.1

1

-1.3

-1.6

-1.5

3

7.7

1.3

1.2

6.6

-0.4

-1.4

4.1

1.9

Non-store Retailers

Restaurants & Bars

Health & Personal Care

General Merchandise

Sporting Goods, Books & Music

Electronics & Appliances

Building Materials & Garden eq. Suppliers

Furniture & Home Goods

Clothing & Accessories

YoY% MoM%

7. Consumer Spending Varies by Category

Through June 30, 2015 Source: Bureau of Economic Analysis

US Monthly Retail Sales by Category YoY%


8. BTS/BTC Promotions

•  All retailers are participating in promotional activities across platforms

-  In-store

-  On-line

-  Social media

-  Mobile


9. 2Q Earnings Scorecard

•  354 companies reported 2Q through 7/31; the blended earnings decline is 1.3%. The last time the index reported a YoY earnings decline was 3Q 2012 (-1.0%).

•  Positive earnings surprises below historic average but Consumer Discretionary sector are reporting the largest upside vs. estimates (+8.8%)

-  Amazon (0.19 vs. -0.15),

-  Carnival ($0.25 vs. $0.16),

-  Netflix ($0.06 vs. $0.04),

-  Under Armour ($0.07 vs. $0.05)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

S&P Earnings

Consumer Disc.

Earnings

S&P Revenue

Consumer Disc

Revenue

0.27 0.29 0.48 0.46

0.73 0.71 0.52 0.54

Above

Below

Q2 2015 Earnings/Revenues

Source: FactSet Research Systems 2015


10. BTS 2015 Fashion Trends

•  All about denim

•  Leggings rule!

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Upcoming Events

•  Fashion Footwear Association of New York Shoe Show: New York, Aug. 4-6

•  Magic: Las Vegas, Aug. 17-19

•  NACDS Total Store Expo: Denver, CO, Aug. 22-25

•  ICSC Florida Conference: Orlando, FL. Aug. 30-Sept.1

•  World Retail Congress: Rome, Italy. Sept. 8-10

•  Goldman Sachs 22nd Annual Global Retail Conference: New York, Sept. 9-10

•  The Retail Conference 2015: London, UK. Sept. 16

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THANK YOU!