NEW YORK — If consumers pull back on spending this January and retailers are forced to pull the trigger on steeper markdowns, the bottom-line impact may not be that bad.
Analysts say this is especially true for retailers such as J.C. Penney, which is using technology to better manage its inventories as well as its markdowns.
According to an analysis by WWD of department store retailers reporting results for the third quarter, the average gross margin rate was 78 basis points higher than the same period last year. Heftier gross margin rates heading into the critical holiday shopping season gives retailers more wiggle room when it comes to maintaining profits during planned promotions and markdowns.
In WWD's analysis, department store retailers serving the middle market posted the most robust year-over-year basis point changes in their gross margin rates. These included companies such as Bon-Ton Stores and J.C. Penney Co. Inc., which had gross margin gains of 365 and 110 basis points, respectively, while Gottschalks Inc. and Dillard's posted increases of 84 and 74 points, respectively. Analysts tend to applaud retailers when their gross margins rates rise 20 to 30 basis points.
Working with tighter year-over-year gross margin rates were the luxury players. Saks Inc. and Neiman Marcus had year-over-year gross margin gains of 1 and 2 basis points, respectively.
In a research note earlier this month, A.G. Edwards analyst Robert Buchanan pegged shares of J.C. Penney with a "buy" rating. The analyst praised the leadership of Mike Ullman, chief executive officer of the retailer, writing that Ullman and his team "continue to execute a common-sense strategy rooted in in-depth knowledge of the targeted moderate consumer."
Buchanan said Penney's is "catapulting the competition" by applying a "sound business process" and an "efficacious use of newly installed state-of-the-art merchandise-control software."
Jeffrey Klinefelter, equity analyst at Piper Jaffray, has an "outperform" rating on J.C. Penney. In a recent research note, the analyst is "forecasting a profitable holiday season at J.C. Penney."
"We believe J.C. Penney is positioned to benefit from continued margin improvement throughout the holiday season as the company has improved its inventory flows and its seasonal transitions. Tighter inventory control ... has resulted in lower clearance activity and gross margin expansion."Klinefelter added that Penney's gross margins have also "benefited from increased sales of private label product," which "have substantially higher merchandise margins and have outpaced the store average sales increase. These exclusive brands also help drive traffic and build customer loyalty."
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion
Eighty degree temperatures and outdoor installations at the annual Art Basel Miami Beach called for bright, elevated beachwear. See more street style pictures on WWD.com. #theyarewearing #ABMB (📷: @lifeinreverie)
Following September’s emotional tribute to her brother Gianni, Donatella Versace wanted to bring the spring show’s deep sense of intimacy to her @versace_official pre-fall collection. Donatella found inspiration in Versace Palazzo in Milan and from Gianni’s opulent apartment. Archival patterns and new motifs were splashed on silk shirtdresses and fitted jersey frocks. See the rest of the photos on WWD.com. #wwdfashion
Demna Gvasalia continues to shake up the Paris fashion calendar — and experiment with new runway timetables for his @vetements_official brand. WWD has learned that Vetements plans to stage its next coed show for the fall 2018 season on January 19 during Men’s Fashion Week in the French capital. Details about the timing and venue have not been confirmed — stay tuned on WWD.com to catch the latest. #wwdnews (📷: @giovanni_giannoni_photo)
@zacposen's go-to holiday gift? Cookies! "I'll usually bake cookies and send them as a gift," said the designer, who recently released his cookbook "Cooking With Zac: Recipes from Rustic to Refined." Get the recipe for his Brown Butter-Chocolate Chip Cookies via link in bio 🍪🍪🍪 #wwdeye #cookingwithzac
For @monsemaison’s pre-fall 2018 collection, Fernando Garcia and Laura Kim honed in on the brand’s many signatures — men’s wear, which was tweaked and feminized through deconstruction, proportion play and lots of bare shoulders. See the rest of the photos on WWD.com #wwdfashion (📷: George Chinese)
On Friday night, @yohjiyamamotoofficial received the Design for Asia Lifetime Achievement Award in Hong Kong. The 75-year-old designer has been celebrated for many years and is best known for his dark and avant-garde tailoring. “In my long career, in design, architecture, [I’ve been to] so many parties, this is the very first time that I have such a warm feeling, I really appreciate this,” Yamamoto said. #wwdfashion (📷: @dominiquemaitre)