Watching the Retail Detectives
By Tom Ryan
Well before retailers officially report their holiday sales results,
Wall Street analysts and other retail observers regularly scour stores for
telltale clues on whether sell-throughs are going as planned.
To a large degree,
markdowns levels are being gauged. Wall Street Strategies’ Brian Sozzi tells CNBC that
he analyzes whether promotions were in line with where management of the retailer
is guiding him while also eyeing any "abnormalities" in
markdown levels. For example, an excessively high markdown rate — upwards
of 70 percent — serves as an omen that a profit warning may be forthcoming.
Markdown rates of around 40 percent were seen as more likely to be part of
a planned markdown strategy. Finding less-than-professional looking markdown
signage was also a sign of excessive promotions, according to an article in
Speaking to the Journal, Richard Jaffe, at Stifel Nicolaus, said
he looks at which items don’t go on sale for an indication of what categories
are doing well. Christine Chen, at Needham & Co., looks for items on clearance
racks that have remained in stores well past their season as a sign of a fashion
Empty shelves late in the season were also generally seen as a sign of
not only healthy sales but also that inventory levels weren’t over-planned.
according to the Journal article, "can be fickle, changing
by the day and even by the hour," but is also an obvious sign of healthy
shopping. Mr. Sozzi checks parking lot levels on key days like Black Friday
for evidence of shopping vigor. Particularly busy checkout lines inside individual
stores were also seen as signs of a strong season for a store.
sales floors, such as those found by the Journal at
Victoria’s Secret, were generally seen as a good sign. In theory, sales associates
were deemed too busy checking out customers to properly service the floor.
But much depends on the retailer. For instance, John Morris, at BMO Capital
Markets, saw sloppy tables at the Gap chain as a sign that Gap Inc’s moves
to cut staffing in a cost-cutting effort was having a detrimental impact on
"It’s 2 p.m.," he told the Journal. "Someone should be
putting this table together."
Discussion Questions: Do you have any of your own favorite telltale signs
when walking retail stores that say its performance is running
above or below plan? What are some lesser-known indications? How do you recommend
industry-watchers "shop" a
store for retail knowledge?
- What Retailing Insiders Found at the Mall – The Wall Street
Mall Crawl With Retail Analyst Brian Sozzi – CNBC
shopping with the expert – The Miami Herald