TIME Retail

Here’s Why Barbie Is Having a Pretty Rough Month

The Biggest Barbie Collection Auctioned At Christies
Chris Jackson—Getty Images

World’s largest toy maker posts 61% drop in second-quarter profit as demand also falls for Fisher-Price and Hot Wheels brands

fortunelogo-blue
This post is in partnership with Fortune, which offers the latest business and finance news. Read the article below originally published atFortune.com.

Mattel’s iconic Barbie doll joined the popular social-network site LinkedIn this year and even appeared in a Sports Illustrated campaign, but both marketing ploys weren’t enough to drive sales in the latest quarter.

The world’s largest toy maker posted a sharp 61% drop in second-quarter profit as Barbie posted another sales decline and demand also fell for the well-established Fisher-Price and Hot Wheels brands. Results badly missed Wall Street’s expectations for the quarter, hurt by sales weakness across almost all categories.

But the sales woes for Barbie, which have plagued Mattel MAT -0.71% the past few years, are especially problematic. Barbie’s global sales slumped 15% in the latest quarter.

Worldwide sales of Mattel’s preschool Fisher-Price brands slid 17%, while Hot Wheels sales dropped 2%. The pricier American Girl doll segment was the lone bright spot, with sales rising 6%.

For the rest of the story, go to Fortune.com.

TIME Retail

Amazon Charges a Penny After France Bans Free Shipping

Booksellers On The Banks Of The Seine Opposite The Ile De La Cite In Paris, France In February, 2006 -
Booksellers on the banks of the Seine opposite the Ile de la Cite in Paris, France in February, 2006. Elise Hardy—Gamma-Rapho / Getty Images

'Okay, we'll charge one cent'

Amazon thumbed its nose at a French ban on free shipping of book orders, agreeing to raise the shipping price to exactly $0.01 Euros, or a single penny.

France24 reports that Amazon’s move comes one month after the ban sailed through France’s National Assembly. Lawmakers argued that the nation’s roughly 3,500 bookstores needed protection from online competitors, whom they accused of “dumping” books on the market at a loss.

“We are unfortunately no longer allowed to offer free deliveries for book orders,” Amazon explained in an FAQ to shoppers, who might reasonably wonder why the company would bother to charge one cent. “We have therefore fixed delivery costs at one centime per order containing books and dispatched by Amazon to systematically guarantee the lowest price for your book orders.”

The free shipping ban was passed as an amendment to a 1981 law that also attempted to curb competition between booksellers by capping discounts on new books at 5%.

[France24]

TIME fashion

J. Crew Introduces a Size Smaller Than XXS

J. Crew Shopping Bag
A women holds a J. Crew shopping bag. Bloomberg—Bloomberg/Getty Images

It's for those with a 23 inch waist

You know how it is when you’re in a dressing room and even the smallest size available is still too baggy? What, that’s never happened to you? Well, just in case you know someone who is too small for a XXS or ’00,’ J. Crew has introduced a new ’000′ size for women with a 30.5″ bust and a mere 23″ waist. What does someone with a waist that small look like? Probably a little like Keira Knightly who is famous for her waspy middle. Or burlesque star Dita von Teese who says she’s been wearing a corset for decades to keep her 22-inch waist as she ages.

However, the retailer has received some criticism for introducing the triple zero or ‘XXXS’ size. “J.Crew’s vanity sizing has reached a whole new level of crazy,” wrote the fashion blog Racked. “What’s next, negative numbers?” But is a triple zero really that much smaller than a regular ’0′? After all, a ’00′ or a ’0′ can range from a 22′ to a 25′ inch waist depending on the brand. And the fashion industry has long been accused of vanity sizing, a downwards trend in size numbers in recent decades despite the average woman becoming heavier over the same time period. According to the 2003 SizeUSA study, the average woman is about 5’4″ and 150 pounds, which is 20 pounds heavier than 40 years ago.

“According to standard size measurements, that average 155 pound woman should be wearing a size 16, but thanks to vanity-sizing, she’s probably buying a size 10 or 12,” Jim Lovejoy, the industry director for the SizeUSA survey, told Newsweek. “Most companies aren’t using the standard ASTM [American Society for Testing and Materials] sizes any more. Sizes have been creeping up a half inch at a time so that women can fit into smaller sizes and feel good about it.”

But J. Crew insists that the new ’000′ size has nothing to do with vanity. “We are simply addressing the demand coming from Asia for smaller sizes than what we had carried,” a J. Crew spokesperson told Today. “Our sizes typically run big and the Asia market tends to run small.” And it’s true that all that vanity sizing has left the truly small out in the cold and not just in Asia. Nicole Miller introduced a size 0 (25½-inch waist) about 15 years ago because the company had a strong presence in California there was lots of demand from their Asian customers for something smaller.

In the meantime, we’ve all gotten used to the idea of a size zero—and thanks to vanity sizing more of us can fit into one. Even the double zero doesn’t look as strange as it used to. So who knows, maybe sizes will keep creeping into the negative side of the number line and we’ll all be some kind of zero.

TIME Retail

IKEA Is Going to Raise Minimum Wages in All its U.S. Stores

Contractors work on construction of a new IKEA store in Miami, May 20, 2014.
Contractors work on construction of a new IKEA store in Miami, May 20, 2014. Christina Mendenhall—Bloomberg/Getty Images

IKEA will use MIT's Living Wage Calculator to calculate minimum earnings for staff, leading to an average 17% hike

IKEA, the world’s largest furniture retailer, plans to raise the minimum wage in all of its U.S. stores by using MIT’s Living Wage Calculator, which estimates the base pay needed to survive in a particular city – a move that could set a new standard expected for major retailers.

Huffington Post quotes Rob Olson, the chief financial officer of IKEA U.S., as saying that the average store minimum wage will increase by 17% to $10.76 per hour on Jan. 1. Employees at each of the 38 stores will have a different base salary depending on the cost of living in the city they’re in, ranging from $9-$13 per hour. Olson notes that the average minimum wage at U.S. stores will be $3.51 higher than the current federal minimum wage, which is $7.25 per hour. “It’s all centered around the Ikea vision, which is to create a better everyday life for the many people,” Olson told the Huffington Post.

The move is only the most recent illustration of divided stances on minimum wage reform. The heated national debate has been marked by protests waged by McDonald’s workers demanding higher pay. Meanwhile, Seattle voted to raise its minimum wage to $15 an hour in May — the highest minimum wage in the country. The International Franchise Association opposed the decision, calling it “unfair and discriminatory minimum wage plan,” according to the Washington Post. Barack Obama has been a proponent of higher minimum wages, reflected in a decision to hike the minimum wage for federal contractors up to $10.10—a move that he suggested should be adopted throughout the country.

Although other companies such as Gap Inc., have vowed to raise the base pay for stores nationwide, IKEA is the first major retailer to use a living wage calculator when setting salaries. Olson says that the new base pay salary is meant to be a selling point to recruit more talented employees, according to the Washington Post. While IKEA’s new minimum wage hike could sharpen the company’s image, it’s perhaps a greater sign to other companies of an impending trend in the workplace.

TIME Retail

Barnes & Noble Splitting E-Reader Into Separate Business

The nation's last big player in the brick-and-mortar book business is splitting off its digital side

Barnes & Noble is splitting its digital Nook enterprise off from its physical bookstore business, abandoning what analysts once saw as the company’s best chance of surviving competition from the likes of Amazon, which sells books, digital e-readers and a plethora of other goods and services.

The spinoff of the company’s Nook business will be complete by the end of the first quarter of the next calendar year, Barnes & Noble said in a statement.

Barnes & Noble’s Nook business was a latecomer, introduced in 2009 two years after Amazon introduced its first Kindle reader. Barnes & Noble’s brick-and-mortar bookstore businesses is still profitable; its retail segment saw a 0.8% increase in revenue to $955.6 million for the quarter.

But the Nook has dragged on the company’s revenue as the device posted a 22% decline in revenue to $87 million in the last quarter. The company as a whole posted a loss of $36.7 million in the same quarter.

The two new companies are called Barnes & Noble Retail and Nook Media.

“We believe we are now in a better position to begin in earnest those steps necessary to accomplish a separation of Nook Media and Barnes & Noble Retail,” said CEO Michael Huseby in a statement. “We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately.”

Borders bookstore applied for bankruptcy in 2011 and later folded into Barnes & Noble, leaving only one remaining massive physical bookstore chain left in the United States.

The Barnes & Noble split is an indication that the bookstore’s foray into digitization hasn’t succeeded after William Lynch, the prime proponent of the Nook, resigned as CEO last year.

Barnes & Noble’s stock was up more than 5% to $21.70 around noon eastern time on the day the news was announced.

TIME Retail

Whole Foods Must Pay $800,000 for Overcharging Customers

A customer carries shopping bags outside of a Whole Foods in El Segundo, Calif., Nov. 5, 2013.
A customer carries shopping bags outside of a Whole Foods in El Segundo, Calif., Nov. 5, 2013. Bloomberg/Getty Images

The grocery chain was finagling prices across its California locations, according to the Los Angeles Attorney's office

A year-long investigation into Whole Foods Markets for overcharging customers in California has uncovered widespread pricing violations, officials said Tuesday, and will result in an $800,000 settlement for the grocery chain.

Inspectors found that Whole Foods was charging more than the advertised price for a variety of food items, according to the Los Angeles City Attorney Mike Feuer.

Locations often employed tactics like adding the weight of containers when charging for food at the salad bar and hot bar, or including less than the weight advertised for items sold by the pound.

“We’re taking action to assure consumers get what they pay for,” Feuer said in a statement. “No consumer should ever be overcharged by their local market.”

Whole Foods agreed to appoint two officials to oversee pricing accuracy throughout California and assign one employee in each store to oversee how much it is charging customers.

The chain’s $800,000 penalty will be divided out into $630,000 in civil penalties, $100,000 to a statewide consumer protection trust fund, and $68,394 in investigative costs, Feuer said.

Whole Foods said in a statement that its pricing was accurate 98 percent of the time, Reuters reports. “We will continue to refine and implement additional processes to minimize such errors going forward,” it said.

 

MONEY Pick from a Pro

A Middle Class Retailer that’s Actually Thriving

TJ Maxx store
TJ Maxx is now bigger and more valuable than even Target. Tim Boyle—Bloomberg via Getty Images

While discounters such as Target are feeling squeezed, TJX Companies, which runs T.J. Maxx, Marshalls and HomeGoods, is finding success with its own version of cheap chic.

The Pro: John Crowley, co-manager of the Eaton Vance Focused Value Opportunities fund (Ticker: EAFVX).

The Fund: Eaton Vance Focused Value Opportunities EATON VANCE GROWTH FOCUSED VALUE OPPORTUNITIES EAFVX 1.0989% is a concentrated portfolio that only invests in around 30 value-oriented blue chip stocks. The fund has beaten around two-thirds of its peers over the past one and three years, according to Morningstar.

The Pick: TJX Companies

The Case: TJX, the retailer behind bargain behemoths such as T.J. Maxx, Marshalls and HomeGoods, is a different type of discounter. The company not only gets brand-name apparel and home decor directly from manufacturers (in some cases buying cancelled orders and overruns), it also buys from wholesalers and other retailers looking to move excess inventory at discounted prices. The combination of high-end brands—think Diane Von Furstenberg tops and Helmut Lang sweaters—coupled with bargain-basement prices makes the company appealing in both favorable and unfavorable economic conditions.

That’s certainly been the case in recent years, as revenue growth at TJX has far exceeded that of other big retailers in recent years, including Target TARGET CORP. TGT -0.0084% , Walmart WAL-MART STORES INC. WMT -0.3973% , and Macy’s MACYS INC M 0.3527% .

TJX Revenue (Annual YoY Growth) Chart

TJX Revenue (Annual YoY Growth) data by YCharts

Strategy:

Crowley says the company owes its success in large part to its smart, sturdy business model, selling heavily discounted brand name apparel and home decor. The off-price retail model is hardly new. Its roots date back to the old Filene’s Basement, and you can see traces of it in online retailers such as Overstock.com OVERSTOCK COM OSTK -0.1403% . What is rare is TJX’s ability to pull it off on such a grand scale. The company has more than 3,200 stores globally, versus fewer than 2,000 for Target.

Plus it’s no easy feat to generate returns on par with TJX, says Crowley. For instance, Crowley points out that TJX’s return on equity—which is a popular gauge of measuring a business’s profitability and efficiency—is over 50%. That compares favorably to the 16% average ROE for companies in the S&P 500.

It also compares favorably to other retailers:

TJX Return on Equity (Annual) Chart

TJX Return on Equity (Annual) data by YCharts

Speed:

One possible downside to the way TJX sources its merchandise is that clothes sometimes come in limited quantities, colors or sizes. Yet the company has managed to turn this into an advantage. Limited inventory means merchandise moves through TJX stores rather quickly. In many cases racks of clothes are even put on wheels.

The chart below shows just how much faster inventory churns at TJX than at Macy’s, Kohl’s, and J.C. Penny’s.

TJX Inventory Turnover (Annual) Chart

TJX Inventory Turnover (Annual) data by YCharts

“The merchandise turns over so quickly that it keeps the traffic and sales moving,” says Crowley. It also creates a “kind of a treasure hunt mentality,” he adds. Indeed, bargain-hunters know they’re likely to find something new with every visit — and if they don’t move fast to purchase, they could miss a deal.

Online, T.J. Maxx replicates the same feeling of urgency and treasure hunting for customers. Items almost out of stock are labeled with a bold red “almost gone” sticker. And for high-end designer items, shoppers can click a “reveal designer” button that adds a touch of drama to the moment where you uncover that that $499 leather purse is Gucci, or those $629 platforms are Jimmy Choo.

Scale:

TJX has enormous reach, buying from 16,000-plus manufacturers in more than 75 countries. Its closest true competitor, Ross Stores ROSS STORES INC. ROST -0.086% , is five times smaller.

Scale is important, especially for future earnings growth. TJX has more than 3,200 stores in the U.S., Canada and Europe. Of those, only about 370 are in Europe, where Crowley sees particularly strong growth potential. “They will continue to grow as their value proposition resonates loudly and more clearly over there,” says Crowley.

And as TJX gains traction overseas, its business model could work in more varied international markets like Latin America and Asia, says Crowley.

True, TJX stock reflects that potential, as the stock’s price/earnings ratio is around 18.5, versus 17 for Ross.

The company’s earnings, though, are growing faster than many of its rivals, as are its dividends. Crowley notes that TJX has boosted its dividends by an average of 22% annually for the past five years.

TIME Retail

RadioShack Is Now a Penny Stock

Radio Shack Stock Drop
Traders work on the floor of the New York Stock Exchange near the post that handles Radio Shack, June 20, 2014. Richard Drew—AP

Shares dip below a dollar for the first time

RadioShack faced the prospect of being removed from the New York Stock Exchange on Friday when its stocked dipped below $1 a share for the first time ever.

The milestone follows a long decline for the one-time electronics retail giant. The company has struggled to adapt to consumers shopping for electronics products outside traditional stores. That evolving market killed off Circuit City in 2009. Other retailers that met a similar fate include Tweeter Home Entertainment and CompUSA.

RadioShack’s stock peaked at more than $75 in the late 1990s. Some of the most dramatic losses have come in recent years. The company lost $400 million in 2013, and, earlier this year, it announced the closing of up to 1,100 stores.

RadioShack’s shares closed at $0.92 on Friday.

 

TIME U.S.

This Is How Much Money Americans Are Spending Every Second

Spoiler alert: it's a whole lot

Americans love to spend. We know this. But just how much are they spending every second of every day, and on what exactly? The folks over at Retale, a location-based app that aggregates weekly retail circulars, created a real-time graphic to visualize the answers to these questions. Watch the numbers tick swiftly upward, as more and more money is spent on everything from coffee to firearms to pet food to lottery tickets to doughnuts.

Via retale.com

References are listed below the graphic. Of course, keep in mind that these numbers are ultimately an estimate. And if the graphic looks familiar, that’s because it was inspired by the popular Internet in Real-Time chart.

MONEY stocks

Four Theories on What Jeff Bezos and Amazon Are Really Up To

+ READ ARTICLE

The big question was never what Amazon.com AMAZON.COM INC. AMZN 0.467% would unveil on Wednesday. Most observers knew it was the company’s first smartphone, called the Fire Phone — the first smartphone on the market with a 3D display.

No, the real question is: What is CEO Jeff Bezos’ endgame?

Why does this online retailer, which has recently branched out into tablet computers and flying delivery drones, want to inch its way into the crowded smartphone space that Apple APPLE INC. AAPL 0.3045% and Samsung, two bigger companies with much deeper pockets, already dominate?

Theories abound, but here are the contenders:

Theory #1: Bezos wants to be king of all media — and advertising.

Most observers regard Amazon as either a retailer or an up-and-coming player in tech, thanks to its Kindle tablets and cloud computing service. But people forget the company’s roots are really in media — Amazon started out as a book seller with Bezos working out of a rented garage.

Big recent moves reinforce the notion that the company wants to dominate this space. Last week, Amazon launched a streaming music service that will compete with the likes of Spotify and Beats Music, which Apple just acquired.

The service will be offered free to Amazon Prime subscribers who pay $99 a year to get unlimited two-day shipping from the retailer. Those Prime members already get access to Amazon’s streaming video service that competes directly with Netflix NETFLIX INC. NFLX -4.4916% . (Like Netflix, Amazon has also begun to produce its own original content, like the show Alpha House, starring John Goodman).

Just as Kindles are starting to perk up Amazon’s overall media sales — on a quarterly basis, sales of video, books and other content are now growing 21%, up from 15% in 2012 — a smartphone would surely help boost streaming music.

Of course, you might be asking: Isn’t the media industry maturing? So why would Amazon want to double down on this business?

Well, it’s not just the content that Amazon desires — it’s the ability to sell online advertising against that content and on Amazon-controlled devices, which now includes a smartphone.

Jay Greene of The Seattle Times writes that while Google GOOGLE INC. GOOG 1.4403% and Facebook FACEBOOK INC. FB -0.317% get all the attention for their potential to attract online advertisers, the data that Amazon has on “its 237 million active customer accounts…puts Google to shame.” He’s right. While Google and Facebook can tell advertisers what its customers like, Amazon can tell them what they actually buy…and when…and how frequently…and to a certain extent why.

By some estimates, Amazon will pull in close to $1 billion in online ads this year, which would put it well ahead of online advertising darlings such as Twitter TWITTER INC. TWTR 0.1445% and LinkedIn LINKEDIN CORP. LNKD 1.4139% .

Theory #2: Bezos wants to be king of tech.

So what if Amazon started life as a retailer? If anything, Bezos knows how to adapt.

And he knows that the profit margins for technology companies far exceed those for retailers.

^XIT Chart

^XIT data by YCharts

Amazon stumbled into being a tech company in a variety of ways. For instance, the servers and computing capacity needed to power Amazon.com’s retail operations early on gave birth to Amazon Web Services. That’s the company’s cloud computing business, which recently won a major contract from the CIA, beating out rival IBM, the mother of all tech services firms.

Meanwhile, the Kindle was developed as a vehicle to boost online book sales. And the company, which is constantly looking for ways to speed up delivery, recently purchased Kiva Systems, which makes robots that help automate and speed up the packing process at warehouses. Janney Montgomery Scott analyst Shawne Milne notes that Bezos wants “to significantly ramp the implementation of Kiva’s robots within Amazon’s fulfillment centers from 1,000 currently to 10,000 by the end of the year.” Milne says this technology could eventually end up saving the company anywhere from $450 million to $900 million a year in costs.

Okay, Amazon will have the cloud and warehouse robot markets cornered. How will this help the company compete in the saturated smartphone space?

It should be noted that critics raised similar concerns about tablets, yet the Kindle has been able to carve out roughly 7% to 8% share in this difficult space, which in turn has boosted Amazon’s digital media sales. Not only that, analysts believe that the larger Amazon eco-system that the Kindle has promoted now accounts for up to $8 billion in revenue for the company.

Besides, Amazon does not need to be the top dog in smartphones for this move to pay off. For instance, if the company were able to seize just 1% of that portion of the smartphone market that uses Google’s Android platform, that could lead to $1 billion to $1.5 billion in annual revenues, according to Janney Montgomery Scott. If Amazon managed to grab a mere 3% of the Android market, it could add nearly $5 billion in sales at a time when Wall Street is starting to question Amazon’s potential growth rate.

Theory #3: Bezos wants to be king of all distribution.

Amazon isn’t a retailer as much as it is a transactor.

For instance, Amazon created a platform and marketplace that allows the company to process transactions for tens of thousands of small businesses. Rather than viewing these mom-and-pop shops as competitors, Amazon offers its services to them in exchange for a cut of each purchase. So anytime a retail transaction is made online, there’s now an even better chance that Amazon will profit from it. Edward Jones analyst Josh Olson describes the company’s global distribution network as a “real moat” that gives the company a competitive edge.

The same principle works for cloud computing, where Amazon is happy to distribute server capacity to competitors such as Netflix in exchange for a fee. Therefore, whether its rival grows or shrinks, Amazon wins.

The strategy also applies to the new online payment service that Amazon launched this month, which will compete with eBay’s Paypal. And the same goes for AmazonSupply, a B2B site that Amazon is quietly building to get a cut of the $7 trillion market for supplying businesses.

And ditto for smartphones, which are devices that will allow Amazon to process millions of new transactions — be it for digital content or general merchandise.

Theory #4: Bezos is trying to buy time.

Think of it as a big shell game. While Bezos is on stage trying to dazzle you with a 3D smartphone, or with a new streaming music business, he wants investors not to focus on where the ball actually is.

And right now, the metaphoric ball is Amazon’s nearly non-existent profit margin. For instance, take a look at Amazon’s profit margin versus that of rival Apple:

AMZN Profit Margin (Quarterly) Chart

AMZN Profit Margin (Quarterly) data by YCharts

For years, Wall Street was content to bid the stock higher — despite the fact that the company barely turns a profit — as long as revenues soared. The belief was that near-term profits weren’t the point with a company like Amazon, which has been dutifully spending money to build out the necessary infrastructure to make Bezos’ long-term plans work.

AMZN Profit Margin (Annual) Chart

AMZN Profit Margin (Annual) data by YCharts

Last year, though, the company earned just $274 million off of revenues of nearly $75 billion. Investors have started losing patience, as seen by the performance of Amazon shares.

AMZN Chart

AMZN data by YCharts

Earlier this year, Colin Gillis, an analyst with the brokerage BGC Partners, even raised the question: “Is Amazon losing its status as a growth stock?”

For Bezos, then, this flashy foray into smartphones may be a way to distract investors from the realization that it may take years for Amazon to convert its revenues into real profits.

Amazon shares trade at a price/earnings ratio of nearly 500, based on the past 12 months of actual profits. While Wall Street may tolerate that in a fast-growing tech company, they won’t in a barely profitable retailer.

So, smartly, Bezos is choosing to play the tech card — at least until the retail profits materialize.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser