Companies in industry
The U.S. apparel market is the largest in the world, comprising about 28 percent of the global total and has a market value of about 331 billion U.S. dollars.
U.S. clothing stores are more profitable than they have been in years, even as sales growth has slowed, according to an analysis of private-company financial statements by Sageworks, a financial information company.
Net profit margin at privately held clothing stores (NAICS 4481), on average, was nearly 7% in 2013, or roughly double the margin of each of the previous two years, according to Sageworks’ industry analysis. Sales, meanwhile, grew about 5% in 2013, compared with nearly 7% and 9% growth in 2011 and 2012, respectively.
Net profit margins at publicly traded clothing retailers over the last several years, meanwhile, have been steady, at around 5%.
History of Retail
The Pre-Modern Period (pre-1945)
During this era, mom-and-pop stores and general stores operated throughout the country. The mom-and-pops were family-run businesses (grocery stores, hardware stores, etc.) that served the needs of townspeople. “General Stores” were common and offered a variety of items that consumers could buy in one place.
Retail Development 1945-1975
What was once strictly a made-to-order market for clothing changed to a ready-to-wear market. Flipping through a catalog, picking the color, size and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was standard practice. At the turn of the century some retailers would have a storefront where people could browse. Meanwhile, new pieces were being sewn or customized in the back rooms. In some parts of the world, the retail business is dominated by smaller family-run or regionally-targeted stores, but this market is increasingly being taken over by billion-dollar multinational conglomerates like Wal-Mart and Sears. The larger retailers have managed to set up huge supply/distribution chains, inventory management systems, financing pacts and wide scale marketing plans. The overall segments can be divided into two categories:
- Hard – These types of goods include appliances, electronics, furniture, sporting goods, etc. Sometimes referred to as “hardline retailers.”
- Soft – This category includes clothing, apparel, and other fabrics.
Each retailer tries to differentiate itself from the competition, but the strategy that the company uses to sell its products is the most important factor. Here are some different types of retailers:
- Department Stores – Very large stores offering a huge assortment of goods and services.
- Discounters – These also tend to offer a wide array of products and services, but they compete mainly on price.
- Demographic – These are retailers that aim at one particular segment. High-end retailers focusing on wealthy individuals would be a good example.
Each of these has its own distinct advantages, but it’s important to know how these advantages play out. For example, during tough economic times, the discount retailers tend to outperform the others. The opposite is true when the economy is thriving. The more successful retailers attempt to combine the characteristics of more than one type of retailer to differentiate themselves from the competition.
Specialty Chains include stores such as Crate & Barrel, the Body Shop, and Victoria’s Secret. These chains concentrate on one type of merchandise and offer it in a manner that makes it special. Some are very high-end (Louis Vuitton); others cater to the price-conscious masses (Old Navy). Many are so successful that department stores have started to emulate their buying, marketing, and merchandise-display strategies. Industry experts predict growth in this segment, particularly for home furnishings and home improvement, and it seems to attract many of the best and brightest in retail. There is plenty of room for these smaller stores to thrive, particularly in malls, but they are subject to sudden changes in consumer attitudes and can be affected more severely by these changes. For example, a specialty retailer of teen apparel or accessories may be the favorite of its targeted customers one season, and fall completely out of favor the next. They also face stiff competition from Category Killers, who sell the same type of goods, only in bigger stores with more items.
Technological Advances
Growth in Online Retailing
Online retailing is growing rapidly, from about $150 Billion in 2008 to an expected $210 Billion in 2012. While still only 6-7% of total retail sales, the amount of retail business being conducted on the Internet is rapidly growing every year as consumers’ trust in online shopping increases. Companies, especially Amazon.com, which helped pioneer retail e-commerce, are being followed by brick-and-mortar retailers which are rapidly expanding retail e-commerce into new markets as consumers recognize the advantages of online shopping with next-day or two-day delivery. Almost all large traditional retailers like Wal-Mart and Starbucks have also set up online stores so as not to miss out on the revenue opportunities that the Internet offers, although online is still, for some, a single-digit sales producer. We see continued growth in online retailing – fueled by a new computer-savvy generation with almost universal access to the Internet – although we expect it to occupy only a small percentage of the total retail market for quite some time. The success of e-tailers such as Amazon, eBay, and Blue Diamond can be attributed to strong business models.
Earnings Outlook increase Looking into earnings estimates within the Retail Apparel Industry in the current quarter, 16.67 % of companies, who provide earning guidance within Retail Apparel Industry have increased their earnings outlook for the current fiscal year. Too few to prevent overall down-ward revision of earnings estimates within the Retail Apparel Industry.
Earnings Guidance unchanged In the same quarter 16.67 % of companies, who provided earning outlook within Retail Apparel Industry, have reiterated their earnings per share outlook for the current fiscal year unchanged.
Earnings Estimates decrease Pessimism dominates within Retail Apparel Industry, as most of the businesses cut their earnings guidance, staggering 66.67 % have revised down earnings outlook. Overall earnings expectations for the Retail Apparel Industry were cut by -8.35 %, to the annual earnings expectation of -5.65 %.
Sales Forecast increase In the current quarter 33.33 % of companies, who have issued revenue expectation within Retail Apparel Industry, have expressed their optimism, by increasing revenue outlook for the current fiscal year.
Sales Expectations unchanged As even more corporations reiterate their sales projections, 66.67 % of businesses within Retail Apparel Industry, while corporate executives do not expect any change of economic environment.
Retail Apparel Industry yielded return on assets in 4 Q 2014 above Industry average at 16.35 %. ROA improved compare to previous quarter, due to net income growth. Within Retail sector, Retail Apparel Industry achieved highest return on assets. Total ranking remained unchanged compare to previous quarter at no. 2.
Revenue Growth Retail Apparel Industry‘s pace of Revenue growth in 4 Q 2014 decelerated to 2.91 % year on year, below Industry average. Sequentially Revenue grew by 18.53 %. Within Retail sector 6 other industries have achieved higher Revenue growth. Revenue growth total ranking has impoved so far to 37, from total ranking in previous quarter at 39.
| Retail Apparel Industry Profitability Ratios | 4 Q | 3 Q | 2 Q | 1 Q | 4 Q |
| 2014 | 2014 | 2014 | 2014 | 2013 | |
| Gross Margin | 35.22 % | 35.28 % | 35.04 % | 34.85 % | 34.93 % |
| Gross Margin (TTM) | 38.27 % | 35.03 % | 35.08 % | 35.23 % | 35.52 % |
| Gross Margin Ranking | # 46 | # 46 | # 46 | # 44 | # 43 |
| EBITDA Margin | 14.25 % | 14.82 % | 15.43 % | 14.48 % | 16.29 % |
| EBITDA Margin (TTM) | 16.11 % | 15.31 % | 15.15 % | 15.12 % | 15.32 % |
| EBITDA Margin Ranking | # 43 | # 45 | # 42 | # 43 | # 36 |
| Operating Margin | 11.02 % | 11.77 % | 12.37 % | 11.15 % | 13.69 % |
| Operating Margin (TTM) | 12.67 % | 12.32 % | 12.2 % | 12.17 % | 12.39 % |
| Operating Margin Ranking | # 44 | # 49 | # 45 | # 47 | # 39 |
| Pre-Tax Margin | 10.66 % | 11.07 % | 11.61 % | 10.42 % | 13.07 % |
| Pre-Tax Margin (TTM) | 12.25 % | 11.62 % | 11.51 % | 11.49 % | 11.73 % |
| Pre-Tax Margin Ranking | # 38 | # 44 | # 42 | # 44 | # 35 |
| Net Margin | 6.78 % | 7 % | 7.2 % | 6.42 % | 8.12 % |
| Net Margin (TTM) | 7.68 % | 7.24 % | 7.24 % | 7.22 % | 7.39 % |
| Net Margin Ranking | # 44 | # 48 | # 50 | # 48 | # 42 |
Urban Outfitters 