Market trends

Reopening Responses Reflect Cautious Optimism

AlphaSense

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June 12, 2020


Open sign.
Open sign.

After months of lockdown orders, all 50 states and many countries have begun the reopening process. Alongside the lifted travel restrictions, local governments are issuing guidelines for businesses to start opening their offices and stores to employees and customers. So what trends are companies seeing as global economies begin to reopen? We’ve compiled commentary highlights from the past week of conferences below.

Takeaways:

  • PVH Corp said that they’re experiencing strong conversion and higher units per transaction in stores and lower overall traffic trends
  • Guess shared that they have gained momentum and same-store sales in Asia for Q2 and are running at 75% of last year’s sales productivity.
  • Genesco stated that reopened store sales have been running at less than half of last year’s level.
  • Oxford Industries mentioned that they don’t expect to close down many stores, but they will take this opportunity to reassess some locations.
  • Dollarama sees caution in consumers, with people coming in less frequently but buying more at one time.

AlphaSense can track emerging trends in real-time by industry, watchlist, and across the market. We expect this to be an exciting theme to follow as countries plan to reopen. Start your free trial of AlphaSense now, or log in to your account.

Q2 2020 FuelCell Energy Inc Earnings Call – 6/12

We have remained in contact with global team members, suppliers, and customers to share information and minimize interruptions to our business plan as much as possible. Now that efforts are underway to reopen society under a controlled method, we are planning to begin reopening our Torrington, Connecticut manufacturing facility on June 22. While the shutdown of our manufacturing facility was in effect, we continued the construction of our 7.4-megawatt project at the Navy Submarine Brace in Groton, Connecticut. In addition, we commenced construction at the San Bernadino Biofuel project.

We will utilize a staggered approach to reopen our offices. We will comply with all rules and regulations, including continued use of social distancing protocols and work from home. We have secured the necessary PPE for all team members, and we have modified workspaces to promote social distancing. Of course, we will continue monitoring the situation and adjusting our operations as necessary.

Q1 2020 PVH Corp Earnings Call – 6/12

Starting with Asia and China, they have provided us with the best learnings for the recovery phase in our other regions. Currently, all of our stores in China are open. Since China started to reopen, there have been significant week-over-week improvements. For example, our reopened stores are now approximately flat to last year, and our digital business is up triple digits for both Calvin and Tommy. We’re experiencing powerful conversion and higher units per transaction in stores and lower overall traffic trends. To drive transactions during the store closures, we offered virtual client telling and engaged with shoppers through WeChat. In addition, we live-streamed our brands to connect with consumers, which led to significant sales growth versus a typical day.

Then Europe follows closely after Asia, where we have seen significant week-over-week improvements. Currently, about 85% of our stores are open, and trends are very encouraging. We’re planning for the U.K. market to reopen early next week. As we reopen stores, we have experienced strong conversion and favorable full-price trends with more minor promotions than planned. In addition, we have faced lower overall traffic trends that have improved more in smaller cities versus big cities as consumers are shopping closer to home. We have applied a data-driven approach to be able to offer targeted promotions to increase sellouts while also keeping margins relatively stable.

Overall, we believe that Europe’s recovery will be about one calendar quarter behind the trends we see in China. For wholesale, our total order books that were up mid-teens pre-COVID are now down low to mid-teens for each of our brands as we work with our partners to consolidate product sites to match demand better and end the year clean on inventory as possible.

And lastly, in North America, stores here were the latest to reopen, and we will be at 85% reopen by next week. We are pleased to see how the consumers are coming back. In our stores, small doors are performing very well. Our domestic consumers are over-indexing, and it will be critical to target that domestic consumer for the remainder of the year as international consumers are traveling much as, and we don’t expect this trend to improve this year materially.

Preliminary Q1 2021 Hooker Furniture Corp Earnings Call – 6/12

Answer – Paul B. Toms: Right. The Northeast and maybe the upper Midwest, even the northwest, maybe slower reopening and parts of the south or the west. But it’s tough to — I mean, we can look at our traditional customers and know where the sales are. But when you get into e-com, catalogs, and plugs, it’s harder to precisely see where the furniture ends up in this region. So — but I think you could probably be safe to say, indeed, on the Hooker Branded as well as the domestic upholstery segment that we are more concentrated in the southern parts of the country, the south, I’d say, we’re in Texas, Oklahoma, the Sunbelt than we are in the Northeast. But we have an outstanding presence in the Northeast. I think for some of the other distribution channels and probably through Home Meridian than we do through the two segments.

Q2 2020 Currency Exchange International Corp Earnings Call – 6/12

Answer – Randolph W. Pinna: Well, unfortunately, yes, it’s on hold. As you know, the border is closed. So, unfortunately, most of their stores are also the Buffalo store; there are 2 or 3 that are reopening as we speak. But they did Phase 2, and Phase 3 was paused, not because of any problem with our relationship; it’s just that they’ve been hit, I think, even harder than us because their customers are all foreigners. And then the fact that they’re on the borders and the border is closed, they are impacted. And so the CEO and their senior management team had paused, but we were just talking to them last week, and it looks as if Phase 3 will come before Phase 2, which is the Mexican border, and then Phase 2 is the other locations they have, and that is less — that’s not a priority. The Mexican border is still open, likely to start happening this summer.

Q1 2020 Party City Holdco Inc Earnings Call – 6/12

For our outlook, given the uncertainty around the duration and trajectory of the COVID-19 related disruption, please note that we’re not providing a different perspective for 2020 today. However, we thought it would be helpful to give some data points for the quarter to date. As Brad mentioned, we reopen stores through a phased and measured approach with increased sanitation protocols. Our reopenings have been heavily concentrated in the last weeks of May, and we’re encouraged by the initial reopening results we’ve seen.

On average, sales at reopened stores, including buy online and pick up in-store, are at approximately 80% of corresponding prior year volumes. Our e-commerce business, including BOPIS, generated record performance for the duration of our store closures and continues to deliver strong performance in this early phase of reopening. Given the loss of store operating days for April and most of May, overall retail comparable sales trends through June 7 are down approximately 70%, with third-party wholesale sales declining directionally consistent with this number.

Q1 2021 Christopher & Banks Corp Earnings Call – 6/12

Where do we stand today? We have opened 90% of our store base through a phased reopening plan based on state and local guidelines and adherence to health and safety measures. We began with a minimal number of stores at the end of April and accelerated openings throughout May. We are pleased to see sales volumes building to our expectations. As I mentioned earlier, our eCommerce business has accelerated. We have not experienced a slowdown in growth since we opened our stores, and we believe it will continue to grow at a high rate due to our continued enhancements in omnichannel capabilities.

Q1 2020 Dave & Buster’s Entertainment Inc Earnings Call – 6/12

We are first reopening our stores. Our store reopening process starts with carefully evaluating state and local restrictions related to guest capacity and hours of operations. And based on a scaled-down operating model, a store must have the initial potential to generate a variable profit between 10% to 20% of its 2019 revenues. We set hours of operation for each store based on pre-COVID high-volume days and dayparts in tandem with state-mandated limitations. And for those open stores as of this week, we are currently operating at an average of 60 hours a week or roughly 65% of our pre-COVID average weekly operating hours. More importaThosenerated about 90% of our pre-COVID revenue. So we are deliberately focusing operations in our most productive times.

Q1 2020 Lululemon Athletica Inc Earnings Call – 6/11

Answer – Meghan Frank: Great. Thanks, John. It’s Meghan. We have approximately 60% of our stores open at this point globally. 100% in Australia and New Zealand, 95% in Asia, 60% in Europe, and 50% in North America. We expect to open almost 100% of our stores by June. If we think about the productivity we see within those stores, as Calvin mentioned, in the ignition variability. It’s still in the initial weeks very early, but we’re seeing that in the range of 75% to over 100% of last year’s productivity. And at the same time, we’ve seen our e-commerce business accelerate in the early weeks of the quarter. As I shared, we expect total revenue to improve in Q2 to a high single-digit decline. And we expect the e-compete quarter to grow at approximately 125%. So moderating throughout the quarter as stores ramp and reopen.

Fleetcor Technologies Inc at RBC Financial Technology Conference (Virtual) – 6/11

So as you saw in the disclosure back in May for our April volumes, that part of the business was down 20% to 25%. So 75%, 80% of those customers continue to travel because those are genuine blue-genuine guys. Staying in hotel rooms is part of their job. They cannot work from home. So it held up well. Tarting to tick up little by little as states start to reopen and folks start to get back on the road, but that may take a little bit longer just as projects are paused and as those customers wait a little bit to see what demand was going to look like going forward.

Q1 2020 Childrens Place Inc Earnings Call – 6/11

Answer – Michael Scarpa: We expect that we’ll probably be restoring the range of closures by the end of the second quarter. So half of them will take place in the ensuing 1.5 months. So we expect that a good portion of them will open and liquidate, and then we’ll close depending on the inventories before if there are ship-from-store activities. You had another question?

Planet Fitness Inc at William Blair Growth Stock Conference – 6/11

Answer – Christopher J. Rondeau: Yes. We have the national ad fund, the 2% because we weren’t billing members, there wasn’t any wasn’t annoying in. And until we have the majority — vast majority y of the stores open in all the 50 states, you won’t see any big national promos. So we’ll see open stores, and all the states start opening up. So my guess, by the end of summer, hopefully, or the beginning of September. So you maybe see a big natural push there. Now on a local level, out of these 38 states that we’re open in, 11 or 12 states were open 100% of available stores. So in those big DMAs, where we have all the stores open, you’ll be available to see the 7% local spend begin to work probably in the next couple of weeks here and begin to build members and at least collect their 7%. And they do the marketing co-ops, which we’ve talked about, where we take a DMA like Atlanta, which might have 40 stores, and they all contribute to the local marketing co-op and do extensive marketing, marketing pushes that way. So outside of national promotions, and that’s not — it’s a widespread way. But you’ll begin to see that probably a couple of weeks. But if you look in that area, you would almost assume that isn’t national because they’ll buy syndicated ABC. They’ll be on cable networks. I mean, it’s a big spend. So I mean, 7% is most of it, right? So you’ll see — again to see that here shortly, but we haven’t done anything yet, which is even more encouraging because the joins have been coming in ahead of last year.

Q1 2020 Oxford Industries Inc Earnings Call – 6/11

I think that we probably, over time, are going to see fewer people fewer stores. But when they get there, they’re going they will admitted to buying. They’re going to have done their research in advance. They’re going to be looking for the expertise in the service of our excellent staff excellent stores. And it may end up physically changing the way we want about those stores and their size. But I don’t know that we’ve drawn any hard conclusions about that. And then, in terms of store count, one of the things that I think was a strength going into this shutdown is that we were not overstored. We didn’t have a lot of stores that marginal stores his situation has p on things, I don’t expect to close down a lot of stores as a result of this, I can’t say that there won’t be a small handful, but that won’t reopen, but I don’t think we’ll close down a lot of stores in the short term.

Q2 2020 Transcontinental Inc Earnings Call – 6/10

Answer – François Olivier: No, no, no. They are the reopening of the economy. Some of the industrial products are raw materials that are, let’s say, part of the construction industry. So as the construction industry reopens and pre open start to rebuild houses and buildings, this business will in. So it’s like opening — the economy reopening. That 20% is what we call industrial ban use. It’s on industrial products. So as plants and the construction business are open, this business is going to will this business has not stopped. But obviously, a lot of the industry we’re servicing has blowdown or operates at a reduced rate. So obviously, Packaging is at a reduced rate, but we don’t have a lot of customers that have — that are not in operation right now, but they are working through inventory. A lot of our customers at custom running were concerned with a list. Slistss big order to us to be secure and a lot of our customer now with the reopening of their industry, are working through this inventory and are going to start to reorder soon. So it’s clearly linked economy reopening, and the less the economy will reopen, the more this business will stay challenged or like below last year, and the more the economy will reopen, the more it will go back to normal.

Q1 2021 Dollarama Inc Earnings Call – 6/10

Answer – Neil Rossy: Well, we’ve just reopened, as we mentioned, some of the mall stores. During Q1, we — the last time we spoke in Q4, at that time, we announced 55 closures. That went up during the quarter to 104-ish. And now is back down to 32. So one, you’ve got some positive traffic kicking around in for those stores that are reopening. But I mean, it’s a slow pickup, where we’re just beginning to see that. But I think people are still — what we see is still cautious. In other words, people are not coming as often but buying more at a time. So I think those are the — what we’re seeing right now.

Starbucks Corp at Stifel Cross Sector Insight Conference (Virtual) – 6/10

Answer – Patrick J. Grismer: We could not be more pleased with how the business in China has been recovering. Of course, the first step of that was rapidly reopening stores as market conditions and government guidelines would allow and pivoting quickly to accommodate customers’ new expectations around physical distancing. So the team moved quickly to accommodate customers how they wanted to be met, and that included dialing up our focus on Mobile Order & Pay and the mobile order for delivery. So as we mentioned in our 8-K, we saw nice improvement compared to pre-COVID-19 levels that appear to be reasonably sticky in terms of the extent to which consumers are pivoting to more of a Mobile Order & Pay or mobile order for the delivery experience. So we’re pleased with how the team has shifted in that regard.

Six Flags Entertainment Corp at William Blair Growth Stock Conference – 6/10

Answer – Leonard A. Russ: Sure. So as many people have read, most state and local authorities are limiting capacities at most businesses when they first reopened to about 25%. So we’ve kind of built that into our opening plans that we would open at those reduced capacities as we initially open our parks. And that 25% is based on kind of a design day capacity. So what is kind of a peak demand that you would see for a park for a good fun environment for our guests, as well as looking at what is a safe social distancing capacity, looking at each person needing 36 square feet to ensure that they’re kind of in that 6-foot parameter, kind of limiting factor that we’ve all been listening to and hearing about since the pandemic began? We’ll be able to increase our capacities as we learn more gradually. We’re opening our parks really with a dress rehearsal kind of mentality, where we’re opening it less than that 25 % capacity to ensure that we get the learnings under our belt and we can make adjustments before we kind of increase to the 25% and eventually 50% more from a capacity standpoint.

Target Corp Annual Shareholders Meeting – 6/10

Now I’ll turn to our shareholder question about the impact to our stores from recent events. Over the last couple of weeks, we’ve had to temporarily close hundreds of stores and reduce hours and others due to our continued focus on team member safety. I am thrilled to say that all of our store team members have remained safe during this period of unrest.

Beyond those temporary closures, which are mainly behind us, we have seven stores that sustained significant property damage. Four of those stores are expected to reopen by the end of this month. The other three will remain closed until we can repair the damage. The most significant damage occurred in our Lake Street store in Minneapolis, which we will rebuild and reopen as soon as possible, which is hopefully by the end of this year.

And as I mentioned in my remarks, we’ve taken other steps to provide the needed food and supplies to the neighborhood in the meantime. But I want to make sure it’s obvious. We’re committed to rebuilding and reopening all of these stores as soon as possible. 

Q1 2021 Guess Inc Earnings Call – 6/10

As we began to reopen these locations in April, we experienced a significant drop in customer traffic but a meaningful improvement in conversion rates, resulting in a materially lower sales productivity than last year. But since then, we have gained momentum, and same-store sales in Asia for Q2 are running at 75% of the previous year’s sales productivity, a significant improvement. By mid-March, we decided to close most of our stores in both regions temporarily regarding North America and Europe. We have reopened over 400 stores in Europe and over 180 stores in the U.S. and Canada, with operations resuming from mid-April to June. As we experienced in China, we have seen slow customer traffic in these stores, partially offset by improved conversion rates. I’m thrilled to report that most reopened stores are performing better than we anticipated resulting in a quarter-to-date sales productivity of roughly 75% in the U.S. and Canada and 70% in Europe compared to last year’s levels. As you would expect, stores that depend on local customer demand have performed better than those that rely on tourism as nobody is traveling now.

Q1 2020 Red Robin Gourmet Burgers Inc Earnings Call – 6/10

We have also implemented new social distancing measures by rearranging our dining rooms and posting signage, and marking tables that cannot be used. With these measures in place, we are confident that we’re delivering the high-quality food and great experience that Red Robin is known for safely. In addition, we’re opening restaurants at a maximum of 50% capacity, which, in some cases, are more stringent than what restaurants are being mandated to do by state or local jurisdictions. Concurrently, we are completing our work around how to open dining rooms at 75% capacity with social distancing intact so that we could open at this increased capacity with appropriate health and safety protocols.

Importantly, as of the week ended June 7, restaurants with open dining rooms generated comp sales of 26.7% compared to comp sales generated at restaurants only offering off-premise of down 56.0%, a positive difference of 29.3 percentage points.

Wyndham Destinations Inc at Stifel Cross Sector Insight Conference (Virtual) – 6/10

Number one is that if you’re going to a beach, you’re very likely to take your reservation or book and go on your vacation. So our arrivals have been pretty much as we’ve expected. And Central Florida, Orlando, we’ve had more no-shows or lower arrivals than anticipated. I don’t think that should — well, it was a little bit of a surprise to us, but with Disney not reopening until July, the theme parks not reopening until really the first, second week of June, the amenities are going to attract people to Orlando. So probably trend-wise, you saw a little lower than expected there but an expectation in the other locations.

Q1 2020 AMC Entertainment Holdings Inc Earnings Call – 6/9

We have about 50-or-so theaters that we own in the United States, where we don’t even — where there are no theater leases. If any of those theaters are unprofitable, they may not reopen. I’m expecting that we will open up 97%, 98% of our U.S. theaters in July. Still, I wouldn’t be surprised if a couple of percentage points — maybe 96%, of a couple of percentage points of the theaters we choose not to reopen because their profitability is marginal. Over time, meaning looking ahead, not just the next 90, 180 days but looking into ’21 and ’22 and ’23, we’re going to have to take a stern look, especially as theaters come up for normal lease expiration. And we’re going to go through an exhaustive analysis of every single theater and make the determination whether that theater stays in our fleet or it leaves our fleet, or it only stays in our fleet if we can renegotiate terms with a landlord such that rents are more affordable going forward on a, let’s say 5-year contractual extension. I don’t see anything that will decrease the theater count that would have us fall below being the most prominent theater operator in the United States. I don’t think we’ll be at 635 theaters either because we will take a stern look at profitability, and we want to run those theaters that are contributing to overhead and shedding those theaters that are not.

Nordstrom Inc at Cowen Virtual Department Store Summit – 6/9

Answer – Erik B. Nordstrom: Sure. Right now, we have about 40% of our store fleet open. That includes full-line stores and Rack stores. This is a big week for us. We open 118 stores this week. That will get us to about 75% of our stores. So it’s — and in general, that 40% was more focused on smaller markets than our most significant markets.

So I would be cautious in making too much out of small sampling, but I would tell you that our results are ahead of expectations. Our Rack results are a bit stronger than our full-line store results. And we are seeing improvement sequentially over the weeks that we see things improve.

Macy’s Inc at Cowen Virtual Department Store Summit – 6/9

Answer – Jeffrey Gennette: Yes. They’re — so as we’ve reported, Oliver, we — when you look at — we expected stores to be down between 80% and 85%, which is really how we modeled it based on how other countries had opened up. And as you hear from all retail in America, it’s opened up much better than that. So we opened up — our average is down about 50% as we opened, and it’s pretty broad-based when you look at it.

The first tranche of stores that we opened was May 4, and they opened around that number. Then, we opened another tranche on May 11. And, this week, you’re going to see us open with about 400 and — a little over 400 stores will be fully opened. And each tranche that we’re opening up is opening up a little better. And each week that they’re open, they’re getting a little better. So I would tell you that we’re pretty pleased with that.

And as we also reported, to your question, the digital business, which has been quite strong, we’re up 80% in May — or we’re up 80% in May. The trend modulates slightly as those stores have been open for about two weeks. You start to see a slope in that rate. So we don’t expect that 80% to hold as all stores available in the back half of the year, but we expect it to continue strong.

Kohls Corp at Cowen Virtual Department Store Summit – 6/9

Answer – Jill Timm: Sure. From a margin perspective, I would say Q1 is our low point. As we reconciled, we took some inventory actions that had a significant impact on our gross margin. That helped us feel very clean with how we address the inventory, especially with the establishment, for the first time, of a lower cost-to-market reserve. The two pieces, I think, that you’ll see persisting, Oliver, is, one, the cost of shipping. As Michelle mentioned, our digital business continued to outperform by almost 90% in May. So we know that that will be high penetration. So we’ll see those headwinds continue. And then, as we just talked about, we expect the promotional activity to be heightened, and we will participate in that, which will also weigh in on the margin, but you will see it improve from Q1.

Q1 2021 Genesco Inc Earnings Call – 6/9

Reopen store sales have been running at less than half of last year’s level. And while J&M, historically, enjoys a more extensive penetration of e-commerce sales, the gains during the quarantine have not been as pronounced as we’ve seen in our teen and used businesses. As was the case before the pandemic, casual footwear and apparel continued to drive J&M sales, as working from home and sheltering in place has temporarily reduced the need for the dressier product.

Concerning Schuh, it’s too early for a read since only a few stores have been open for a few days. The U.K. has been slower to open than the U.S. and is opening with a more significant number of restrictions. June 15 is an important date when England allows stores to reopen, and we expect to have over 2/3 of our fleet up and running then. With best-in-class e-commerce capabilities, Schuh has been the most successful of our businesses, capturing some of the lost store sales over the past two plus months, albeit through heavy promotional activity to match the U.K. competition. Like Journeys, women’s and kids sales have been most brisk.

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