Retailer Plans to Go Public. Wait…Now?…A Retailer?…Really?

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Roots, a Canadian retailer, has filed a prospectus for a public offering.  Here’s the link to their web site.  As usual, the initial prospectus is missing a lot of key numbers, but I’ll do the best I can.

Roots has been around since 1973, so they must be doing something right.  “As of July 29, 2017, our integrated omni-channel footprint included 116 corporate retail stores in Canada, 4 corporate retail stores in the United States, 109 partner-operated stores in Taiwan, 27 partner-operated stores in China and a global e-commerce platform that shipped to 54 countries during our most recently completed fiscal year.”  They had 2,200 full time employees.

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More Ideas About the Future of Retail

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A reader sent me this article discussing how retail seems likely to evolve.  Why don’t you go and read it before I offer my comments?

The author (Doug Stephens) and I are, in general, in violent agreement about the direction and speed of retail change.  We further agree that if you, as a retailer are paralyzed by uncertainty and aren’t at least trying to keep up and figure out how to change, you’re in trouble.

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Some New (or Not) Retails Ideas

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In my travels, I’ve come across a few articles describing some new retail ideas.  I don’t know which might turn out to be “right” or “wrong,” but it seems incumbent on us to be aware and consider whether any of the ideas might apply to our businesses.  I guess this is my way to help you whack yourselves on the side of your heads.

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The Details We Don’t See; Zumiez’s July 29 Quarter

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During the quarter, Zumiez increased its sales and reduced its loss compared to the same quarter last year.  It continued to follow its strategy and its balance sheet remains solid- perhaps a bit stronger than a year ago.

I’ve generally been a supporter of Zumiez’s strategy.  It’s not that they necessarily know any better than any other retailer how things are going to shake out as retail consolidation winds its way through the industry, or that they are certain how, exactly, brick and mortar and online are going to evolve and influence each other.  But they’ve made a couple of bets (that we’ve been talking about for some quarters bordering on years now) that are complementary to their long-term strengths and strategies and that offer them the data and flexibility to respond when, inevitably, things don’t turn out exactly as they expect.

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Not Too Bad, But Not Too Good. And Generally Uninformative. Globe’s Annual Results

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Globe is no more immune to economic conditions than any other company.  But what I’ve always liked about them is they seem to be in touch with reality and have a positive attitude about it.  They haven’t always been right (me neither) but they’re not slow to realize when something should change and in making it happen.  Their results for the year ended June 30, 2017 demonstrate that.

As usual, we don’t get very much useful information in their statutory report, and nothing by brand, but I’ll give you what I’ve got.

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More of the Same; Billabong’s Results for the Year

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Here’s what I said six months ago about Billabong:

“Six months ago [talking about a year ago], reporting on Billabong’s results for the whole year, I said this was a challenging turnaround, Billabong was doing things right, they were starting to see results, but the market was tough, and implementing their plan was taking longer and costing more (perhaps because it’s taking longer) than they’d initially expected.  That’s all still true…”

And it’s still, still true as we review the results for the year ended June 30, 2017.  I thought the delay was especially highlighted in Billabong’s July 28 “Omni Update” press release where they noted they’d “…terminated the agreement with the Omni-channel solution provider…” and taken a write down of AU $11.7 million as a result.  Billabong continues to try and change the engine oil while driving the car.  Tough task- but it’s what they have to do.

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As the Trade Show Proposition Changes, Would You Want to Own More of Them? Emerald Expositions’ Quarterly Results

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As you probably know, Emerald Expositions (EE) is the owner and manager of Surf Expo, Outdoor Retailer, and now what was formerly SIA’s Snow Show.  Overall, they operate over 50 shows as well as other events.  They’ve grown by acquisition, and expect to continue to do so.  Their shows are in many industries and include the International Drone Conference and Exposition (kind of cool!), the National Pavement Expo (who knew there was one?), American Craft Retailers’ Expo, and the Digital Dealer Conference and Expo (no idea what they do there).  These, along with the Snow Show, are among their most recent acquisitions.

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Why is Back to School Shopping Slow?

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SGB Media published an article last week called, “What’s Causing the Delays in Back-To-School Buying?”  Here’s the link to the article.  If you read the article (you should- SGB does a pretty good job), you’ll find a discussion of the factors said to be causing the delays- the usual suspects.

I’d like to offer a different point of view.  The factors they refer to are symptoms.  The overall reason it’s occurring is the condition of the economy- specifically wages.

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To Have or Not to Have Stores; That is the Question. Deckers’ June 30 Quarter

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The 10-Q reads this way:

“…in light of the recent and continuing changes in the retail environment, we also believe it is prudent to further reduce our global brick and mortar footprint. We expect to continue to reduce our footprint through a combination of store closures and the conversion of owned stores to partner retail stores, and, accordingly, we anticipate generating future cost savings. We are currently targeting a worldwide retail store count of approximately 125 owned stores by the end of fiscal year 2020.”

At June 30, Deckers had 96 concept stores and 63 outlet stores for a total of 159.  These are “predominantly” UGG stores.  Getting down to 125 stores will be a reduction of 21.4%.  Some of the decline will be due to converting owned to partner stores.  Partner stores “…are branded stores that are wholly-owned and operated by third parties. Upon conversion or opening of new partner retail stores, each of these stores become wholly-owned and operated by third parties.”

One can’t help but ask why, if Deckers doesn’t want to own these stores because of “changes in the retail environment,” the potential partners will.  Perhaps that suggests these will mostly be store closures.

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Advantage Big Guys with Solid Processes and Cash Flow: VF’s Quarter

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Before I dive too deep into the financial weeds, let’s look at VF’s overall strategy as explained by CEO Steve Rendle and Chief Financial Officer Scott Roe in their conference call discussing the results for the quarter ended June 30, 2017.

Strategy Stuff

Steve: “…while we expect the retail landscape to remain uncertain, we will invest against our largest growth opportunities to create momentum rather than wait for it.”

They have the cash flow and balance sheet to do this.

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