J.Crew (NYSE: JCG) is capitalizing on the trend of online shopping with a new concept of an online outlet store that will launch in September. The bid from retail stock J.Crew is meant to attract bargain shoppers in an economy characterized by weak consumer spending.
Online sales have zero overhead and big margins — especially when retailers up shipping costs. And because clothing retailers typically locate their outlet stores in vacation destinations and other out-of-the-way locations, a brick and mortar storefront just didn�t make sense for J.Crew as many Americans are staying close to home and travelling less.
Among retail stocks, JCG has stumbled dramatically with a -30% decline so far in 2010 and a -9% drop over the last 12 months.� But things could be turning around. J.Crew�s profit almost doubled in the quarter ending July 31, hitting $34.9 million, from $18.6 million a year earlier. If the company continues its momentum with online sales, it could end the year on a serious high note. And all signs from similar online trends are pointing to success in that area.
U.S. online retail sales are estimated to total $173 billion in 2010, according to Forrester Research, the National Retail Federation�s digital division. And major retailers are seeing growth in this market. With back-to-school shoppers on the move right now, more will be heading online to look for values and savings.
Gap (NYSE: GPS) online sales have risen +15% in the most recent quarter, hitting $258 million. The clothing company also recently noted that it has expanded its online business to 55 countries through international shipping, making its Old Navy brand of clothes available for the first time to customers outside North America. It�s now launching websites in Canada and the U.K.
And other stores are seeing the value in online. In September, Europe�s largest clothing retailer, Inditex, is taking its flagship Zara brand online in Spain, Germany, France, Italy, Portugal and Britain � expanding to the United States, Japan and South Korea in 2011. Also next month clothing giant H+M will be following suit.
Online sales for Crocs, Inc. (NASDAQ: CROX) are on the rise, too. Crocs, Inc. this time last quarter saw a +24% increase in sales to $22 million online. Its retail outlets saw a 20% increase from last year to $66 million. Nordstrom (NYSE: JWN) has seen its online business boom, as the company�s direct division, which includes its website and catalog, took in $144 million for the first quarter, a 38 percent increase from a year ago. That�s a 7.2% (and clear growing) share of total sales. Direct sales jumped 34 percent in the second quarter from a year ago, which is nearly triple the growth rate for overall sales.
Of course, not all are seeing online success. Online sales at American Eagle (NYSE: AEO) have risen steadily since 2007, though this quarter dropped -9%. The company had in the past attributed online sales increases in its total sales, which for this second quarter increased 1% to $662 million, compared to $658 million for the same quarter last year.
Make no mistake about it, though. Online sales are here to stay � and growing even in a poor economy. J.Crew�s new online outlet model may become a staple of other retailers if it takes off.
As of this writing, Burke Speaker did not own a position in any of the stocks named here.
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