Major U.S. department stores, such as Macy's and Nordstrom, are experiencing delays in the repayment of store credit cards, posing a risk to their revenues as consumers reduce discretionary spending before the crucial holiday shopping season. Macy's revealed on Tuesday that increasing instances of late payments led to a decline in credit card revenues, which amounted to $120 million in the second quarter, marking a decrease of $84 million compared to the previous quarter. Although Nordstrom witnessed a 10% growth in credit card revenues during the first half of this year, company executives stated on Tuesday that delinquencies have now surpassed pre-pandemic levels and may "result in higher credit losses in the second half of 2023 and continue into 2024."

According to credit reporting consultant John Ulzheimer, U.S. department stores have traditionally offered store credit cards as a means to boost sales and increase revenue. However, these cards tend to carry more risk compared to conventional credit cards, as they typically have higher interest rates and lower credit limits. Ulzheimer explains that store credit cards, such as Macy's credit card, have an annual percentage rate of 31.99%, significantly higher than the national average of 22.39% as reported by WalletHub in August. Due to these elevated interest rates and more lenient credit score requirements, it becomes more probable for higher-risk consumers to apply for store credit cards.

According to Juan M. Sánchez, an economist and vice president at FRED, the decreasing payment rates could indicate a weakening in consumer spending. Delinquency rates are particularly elevated among young consumers in their 20s and 30s, as well as individuals residing in economically distressed areas. Consequently, department stores are now anticipating increased levels of bad debt and write-offs for the year, reflecting the ongoing pressure on spending in the United States.

Photo: us.fashionnetwork.com

Puma's Black History Month campaign supports emerging designers

Puma, the renowned global sportswear brand, has initiated a campaign in support of Black History Month 2023 (October 1-31). This campaign aims to empower emerging talents in the design industry. The main focus of the campaign will revolve around Puma's iconic streetwear model, the Puma Suede. The brand is inviting up-and-coming designers to showcase their creativity by crafting outfits that complement this footwear. The ultimate reward for the winner will be an exclusive one-on-one mentoring session with June Ambrose, a renowned costume designer and creative director for women's basketball.

In addition, the selected winner will receive a design equipment package along with a cash fund of £2,000 to provide support throughout their design journey. Participants will be given specific guidelines, requiring them to submit three to five complete looks, with each look comprising three garments. Alongside the visual submissions, they will also be required to provide a written submission of 250 words, explaining the inspiration behind their designs. A panel of experts will review the submissions and shortlist three designers. Each of these shortlisted designers will be awarded £1,000 to bring their envisioned creations to life.
Among the three shortlisted designers, a final winner will be chosen and rewarded with an extra £1,000, a valuable piece of design equipment, and the exclusive mentoring opportunity with June Ambrose. Participants are encouraged to submit their designs and written submissions to pumabhm@mslgroup.com by the deadline of 8 September.

Photo: www.puma-catchup.com

Key shoe supplier in Taiwan foreshadowed Nike's decline

The enthusiasm for fitness activities among individuals has significantly diminished. This decline in demand for sports gear has resulted in Nike Inc., a leading sportswear company, experiencing a record-breaking streak of consecutive stock losses. One notable indication of this weakened demand comes from Pou Chen Corp., a crucial supplier based in Taiwan.

Nike's shares have seen a continuous decline for ten consecutive days, marking the longest downward trend since the company went public 43 years ago. While China's economic struggles, including ongoing challenges in domestic consumption, may seem like an easy explanation, it doesn't fully account for the situation. Notably, Greater China represents just 14% of Nike's overall sales, and revenue from this region had already been declining since reaching its peak in the fiscal year ending in May 2021.

North America accounts for 42% of Nike's business, and approximately two-thirds of its global sales are derived from footwear. In the fourth quarter, which concluded on May 31, revenue in the footwear division increased by 7%. Although this growth rate is slower compared to the double-digit figures achieved in the two preceding periods, it still indicates positive growth. However, Nike has faced challenges in the past during difficult economic situations. For instance, in fiscal year 2020, revenue declined by 4.8% due to the impact of Covid-19, which resulted in reduced gym attendance and limited access to running tracks. Additionally, during the global financial crisis in 2010, Nike experienced a mild contraction.

While the United States may not currently be experiencing a recession, households have nearly exhausted the surplus savings accumulated during the pandemic. As a result, they may be grappling with a combination of apprehension and monotony. Recent data from the US Department of Commerce revealed that July's retail sales increased by 2.5% compared to the previous year. However, the category encompassing sporting goods witnessed a decline of 0.5%, marking its second consecutive monthly decrease.

Pou Chen, located in Taichung, Taiwan, has caught the attention of astute investors. As the largest contract manufacturer of branded sports shoes globally, the company boasts prestigious clients such as Nike and Adidas AG. In the previous year, Pou Chen shipped an impressive 273 million pairs of shoes, with an average price of $20.73 per pair. While the exact details of Pou Chen's relationships with its clients, including the specific extent of their partnerships, remain undisclosed, filings from the Taiwanese company indicate that its largest client contributed approximately 25% of its sales, totaling $2.1 billion, in the previous year. 

Pou Chen tends to fly under the radar and is often overlooked by foreign investors, as evidenced by the limited coverage from only four sell-side analysts. However, being listed in Taiwan has its advantages since companies are required to provide monthly sales reports. The latest report, released on August 10, paints a gloomy picture for Pou Chen.

In July, revenue experienced a sharp decline of 17%, indicating a worrisome trend. The company is currently projected to face a year-on-year contraction of 7.7%. The situation is even bleaker for the footwear unit, which witnessed a substantial 20% drop in revenue. This decline adds to the unit's cumulative slide of 13% for the year. Such a significant and sudden reduction in business from a key supplier serves as a clear signal that clients like Nike and Adidas are cutting back on orders, reflecting a lack of optimism for any imminent recovery in the near future.

Photo: www.nike.com