A post-earnings check from Wells Fargo Securities found most retailers reported positive back-to-school traffic in August, despite the worsening supply chain dynamics.
Wells Fargo retail analyst Ike Boruchow also noted the “trickier setup” for the second half of 2021, as companies within his retail coverage universe face potential near term lost sales from tightening supply, rising inflationary pressures and the ongoing uncertainties surrounding the course of the Covid-19 pandemic.
But his deeper dive into the firms he’s tracking also sheds light on consumer perception, and how the fashion and retail brands stack up in “Boruchow’s Buyside Barometer.”
The analyst said his retail team of analysts tracked U.S. website data for 65 retail brands to determine customer engagement within broader categories and specific brands. While traffic growth remains healthy when compared to a two-year stacked basis—2021 versus pre-pandemic 2019 levels—there’s been some downward pressure when compared with year-ago figures. Most of that is likely due to the outsized growth of e-commerce during the pandemic and the subsequent return of consumers back into stores as the economy began opening up.
“Names where we are seeing the most positive web traffic trends include: Levi’s and Ralph Lauren, who are both outperforming the Apparel/Accessories sub-category,” Boruchow said in a report on Tuesday.
In the case of Levi Strauss & Co., web traffic was up 37 percent in July and August, despite tough year-over-year comparisons for the same year-ago period when traffic was up 57 percent. “Notably, web traffic is up nearly 65 percent over 2019 levels over the last 12 weeks,” the analyst said.
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For Ralph Lauren Corp., traffic increased on average 32 percent during the last 12 weeks, and has continued to outperform the Apparel/Accessories subcategory, which is down 5 percent over the same time frame.
“Importantly, despite Ralph Lauren significantly reducing the number of days of promotions on its site vs. 2019—promotions are typically a large traffic driver—web traffic is up roughly 95 percent over the comparable 12 weeks in 2019,” the analyst said.
In other movement within the Apparel/Accessories subcategory, Urban Outfitters saw a steep drop-off in traffic to its website over the last eight weeks, falling an average of 15 percent even with “relatively benign compares” of up 1 percent over the same year-ago period. And for the Calvin Klein brand, web traffic continues to underperform its larger Apparel/Accessories subcategory. Over the last eight weeks, web traffic is down 20 percent on average versus down 5 percent for the subcategory. But in fairness, the brand also faced touch comparisons from last year when it saw surging demand for basics, intimates and more casual apparel due to Covid lockdowns that kept people at home, Boruchow noted.
Another finding was that Bath & Body Works, the legacy business of L Brands, and Lululemon Athletica are ranked number 1 and 2, respectively, as the ‘most loved” retailer/brand within Boruchow’s coverage universe. Unfortunately for The RealReal, it remained at the bottom of the list of 36 companies.
In general, August saw fewer promotion for the ninth consecutive month, a boon to full-price selling, in part due to lean inventory levels. At department stores, the distribution channel remained clean, suggesting a healthy wholesale channel.
His top picks for the fashion retail space continue to be Capri Holdings Ltd., Gap Inc., Tapestry Inc., Hanesbrand Inc. and Victoria’s Secret & Co.
Victoria’s Secret last month completed its separation from its L Brands sibling Bath & Body Works. In more recent quarters, the brand underwent a rebranding that saw an exiting of its sexualized marketing long after it had fallen out of favor and the dropping of its Victoria’s Secret fashion show. The rebranding now includes a group of brand ambassadors that relies not on sex appeal but on women who are powerful in their own right as trailblazing activists.
On Aug. 18, the company posted its first quarterly report as a publicly-listed stand-alone firm. For the second quarter ended July 31, the company reported net income of $151.1 million, or $1.71 a diluted share, against a net loss of $199.5 million, or $2.26, a year ago. Net sales rose 51 percent to $1.61 billion from $1.07 billion. Shares of Victoria’s Secret, which trade on the New York Stock Exchange, have been in the trading range of $68 a share. Boruchow has a price target of $100 a share, and an “overweight” rating.