Retailers' Woes Mean Great Deals For Consumers on These 3 Products
Thanks to an abnormally warm fall across much of the country, consumers may be able to score big deals on winter apparel at the likes of Macy's (M) - Get Report , J.C. Penney (JCP) - Get Report and other retailers as they take profit-busting markdowns to clear merchandise that didn't sell in the third quarter.
"The weather has not helped, with the warm temperatures experienced across the country -- our sales of cold weather merchandise, such as coats, sweaters, boots, etc. were significantly below last year in the quarter," said Macy's CFO Karen Hoguet on a call with analysts Wednesday. Consumers delaying purchases of sweaters, coats and boots weighed heavily on the department store retailer's third quarter sales.
Macy's comparable store sales, which are sales from stores open longer than a year, fell by 3.6%. Inventory rose by 4.6% year over year as sales slid, which is often a lethal combination to a retailer's future profit margins as unsold items will have to be discounted. Weak third quarter sales, and a reduction in full year earnings guidance in part stemming from the company taking unplanned markdowns in cold weather goods this month, rocked Macy's stock on Wednesday to the tune of 14%.
"When we look at the U.S. department store channel, I think that's the place where we see a little bit of elevated inventory across the channel that is not just in our business, but broadly defined in many of the competitors," said Polo Ralph Lauren (RL) - Get Report global brands president Christopher Peterson a Nov. 5 call with analysts.
This has been the hottest first nine months of any year in modern record keeping, according to the National Oceanic Atmospheric Administration (NOAA). September was the hottest on record dating back to January 1880. NOAA points out that while 2014 was the warmest year on record, it could be surpassed by this year after all of the data is compiled.
And across retail, inventory levels have subsequently begun to pile up.
V.F. Corp. (VFC) - Get Report , which makes Timberland boots and North Face jackets, saw inventories spike 12% year over year in the third quarter with reported sales only rising 3%. At Decker's Outdoor (DECK) - Get Report , makers of Ugg boots, third quarter inventories surged 23% compared to the prior year, with sales rising a meager 5.4%. Decker's acknowledged that the warm weather caused sluggish sales of basic Ugg boots, which tend to be strong sellers during periods of cold temperatures. Nevertheless, the company remained optimistic that unsold cold weather boots would sell in the fourth quarter.
Even athletic wear purveyor Under Armour (UA) - Get Report , which tends to sell lighter weight fall and winter jackets, experienced an inventory build. Under Armour's inventory increased 36% year over year in the third quarter, while sales improved 28.4%. "We have really worked closely with our partners to create offerings that aren't just relying on big puffer jackets that are sitting in retail stores and if it doesn't snow aren't going to sell," said Under Armour CEO Kevin Plank, stressing to investors the company's product diversification relative to competitors.
TheStreet took a trip to one mall in Long Island, NY to see where some of the biggest deals are already starting to surface on merchandise not typically on sale so late into the year.
1. Jackets
If the weather was more typical over the last few months, winter coats likely wouldn't be on sale. This year, with warm weather dominating the U.S., everything from parkas to puffers to lightweight jackets are coming with some big discounts.
The men's coat section at J.C. Penney, pictured above, was deeply discounted in a range of 40% to 50%, and similar discounts were found in the women's coat department. At Macy's, jackets were being offered at about 40% off.
The good news for V.F. Corp. was that its expensive North Face parkas and puffers at Macy's were not on sale.
2. Winter accessories
Who needs a winter hat if it hasn't broken 40 degrees since last year? Other than jackets, some of the best deals were in winter accessories such as hats, gloves and scarves. At J.C. Penney, pictured above, discounts on hats and gloves throughout the store reached as high as 50%, while Macy's was offering discounts of 20% on most hats and scarves.
Online, Kohl's (KSS) - Get Report is also featuring discounts on cold weather accessories, ranging from 20% to 30% depending on the category.
3. Boots
Retailers are so far remaining hesitant to discount winter boots too heavily because they can be worn in mild temperatures. But the discounts are already starting to creep up on what is usually a pricey purchase.
At Macy's, pictured above, the entire women's boot department was 15%. J.C. Penney was a bit more aggressive with its boot discounts, with some touching 50% off, depending on the style.
Online, Target (TGT) - Get Report is offering many boot styles at a 20% to 30% discount.