Back to top

Image: Bigstock

Children's Place & Other Retailers Catch Up With Online Trend

Read MoreHide Full Article

Players in Retail – Apparel and Shoes industry are leaving no stone unturned to improve top-line performance and expand customer base. These retailers remain committed to addressing the challenges related to the pandemic and position themselves for future success. In this respect, companies are directing resources toward digital platforms in order to better engage with customers, accelerating fleet optimization initiative, augmenting supply chain and concentrating on improving financial flexibility. The industry players are also focusing on superior product strategy to resonate well with customers and advancing omni-channel capabilities.

Digitization Key for Future Growth

The Children's Place, Inc. (PLCE - Free Report) has been making investments to upgrade its omni-channel capabilities as part of its digital transformation strategy. We note that three years ago management made an investment of $50 million to fast-track its digital endeavors. Notably, the company has one of the highest digital penetrations in the industry — accounting for 31% of revenues for fiscal 2019. The company informed that to help fulfill its surging online demand amid the pandemic, it enabled ship-from-store capabilities in roughly 85% of its U.S. stores, which more than doubled its daily shipping capacity.

We note that e-commerce sales rose 12.2% during first-quarter fiscal 2020, and represented approximately 53% of total net sales, as online sales accelerated following the closure of store effective Mar 18. Management at its earnings call on Jun 11 highlighted that second-quarter to date on-line demand has soared 300%, courtesy of upsurge in demand for essential children’s clothing. Children's Place notified that more and more customers are now shifting to online platform with 50% of its customers utilizing e-commerce or omni-channel, up from 37% last year.
 
With changing consumer shopping pattern, the company has been making every effort to lower dependency on brick-and-mortar platform and shift toward digitization. The company plans to close an additional 300 stores by the end of fiscal 2021. Of these, 200 closures are planned for this year and remaining for fiscal 2021. Since the announcement of fleet optimization initiative in 2013, the company has closed 275 stores. This Zacks Rank #3 (Hold) company is aiming mall-based, brick-and-mortar portfolio to represent less than 25% of revenues entering fiscal 2022. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Players Riding the Digital Wave

Owing to this ongoing biological catastrophe, consumers’ have primarily shifted to e-commerce for purchases. As a result, retailers have been quickly moving to leverage their online platforms, including websites and mobile apps, and omni-channel capabilities to serve customer demand better. In fact, the companies’ digital businesses have been playing a key role amid the lockdown. However it is obvious that this was not enough to make up for loss of revenues from brick-and-mortar. Going forward, industry participants will be playing dual in-store and online roles with evolving consumer shopping pattern.

Zumiez Inc. (ZUMZ - Free Report) is striving to expand e-commerce and omni-channel platforms to provide consumers with the facility of quick and easy access to its products and brands. In this regard, the company has significantly improved customers’ experience, by integrating its physical and digital networks. This enables customers to access inventories through all channels, alongside availing facilities like buy online, pick up in store and reserve online and pay in store. We believe that the company’s well-balanced store expansion and e-commerce strategies will help this Zacks Rank #2 (Buy) company to keep track of the evolving patterns and drive top-line growth. During the final eight weeks of first-quarter fiscal 2020, when nearly all of the stores were closed, the company registered online sales growth of 75.9%, driven by efforts to serve customers digitally. Notably, comparable sales, comprising stores reopened and e-commerce traffic, increased 79.6% in May. By channel, comparable store sales for locations opened in May rose 38.5%, while e-commerce comparable sales soared 181.6%.

The Gap, Inc. (GPS - Free Report) leveraged its omni-channel capabilities to cater to customers’ demand online, at a time when its stores were temporary closed. This Zacks Rank #3 company witnessed a 13% year-over-year increase in online sales in first-quarter fiscal 2020. Moreover, the company recorded online sales growth of 40% in April. Last month, the company registered more than 100% growth in online sales. Brand-wise, there was a significant acceleration in the digital business for Old Navy and Athleta brands, recording increases of 20% and 49%, respectively. Notably, the company witnessed 40% year-over-year increase in customers migrating from retail only to multi-channel during the first quarter. We also note that online as a percentage of sales have improved to 25% in fiscal 2019 from 20% in 2017.

American Eagle Outfitters, Inc. (AEO - Free Report) witnessed strong digital demand in first-quarter fiscal 2020, which partly cushioned the top line. This Zacks Rank #3 company reported a 33% increase in digital demand, as measured by ordered sales. Digital demand surged by 75% at Aerie and 15% at AE. Management at its earnings call on Jun 3 notified that on a quarter-to-date basis, digital demand has increased more than 100% for Aerie, while it is up about 50% for the AE brand. The company introduced curbside pickup with reopening of stores. The company is enhancing digital capabilities, strengthening inventory management and reassessing store fleet to position itself for a new future of retail industry.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?

Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2020 today >>