Body Central's Staff May Need a Face-lift
As was to be expected, Body Central (NASDAQ: BODY) reported a soft first quarter yesterday with same store sales experiencing lower transaction sizes. Could this be at the hand of sales associates with lacking motivation? It appears that way, as conversion was down despite healthy traffic throughout the stores.
The outlook for BODY is not so hot at the moment. Guidance did not live up to the expectations set by analysts and investors, but the company may have had no choice when lowering projections for Q2. Customer service has clearly been deprioritized at the retailer, as shoppers continued to walk out of the stores empty handed, and of course - business can't be expected to be good with motionless inventory.
With service desperately seeking renovation and sales trends underperforming, Body Central may want to rethink the products it offers its customer base. According to Piper Jaffray, consumers are rebuilding their closets one literal step at a time, starting from their shoes up. Without satisfying this market as well, BODY is destined to continue experiencing wobbly quarters in the future.
"We are lowering our rating on BODY tied to our belief that the current apparel recovery cycle, while gaining momentum with dual-gender specialty retailers, could likely present a nearer-term headwind for Fast Fashion retailers. With newness in bottoms for the first time in several years, we believe the consumer is spending his/her incremental discretionary dollars on re-building the wardrobe, from the bottom up. As such, we believe nearer-term sales trends Fast Fashion (tops) could pause until the consumer is ready for the next phase of wardrobe replenishment," Piper Jaffray said in a research report this morning.
Tops, jewelry and dresses are not the focus of wardrobe revamps currently, or at least not for Body Central shoppers. Additional retail chains have seen great success as of late with fresh spring trends flying off the shelves - inclusive of anything from vibrant jeans to flowery tanks.
Not to be named as the only underdog, other mall-based retail brands have been as stressed as Body Central has been this quarter. bebe stores (NASDAQ: BEBE) also provided weaker guidance after Q3 proved to be unsuccessful for the company. However, this time it looks like it may not be the fault of halfhearted sales associates and management. In fact, the company couldn't get enough of their staff this quarter.
BEBE reported results slightly below estimates as higher-than-expected compensation took priority, according to Wedbush. A company that rewards its sales team for hard work seems almost unheard of in the retail industry, but bebe threw investor-caution to the wind and compensated strong efforts made by team members.
Things could be worse for the glitzy clothing distributor, as colored denim, dresses and tops are projected to begin selling at bebe stores with healthier product positions as the seasons change.
Although assurance may be reinstated for BEBE in coming quarters, it looks like BODY has a problematic bullet to bite. Re-evaluating customer service and sales trends may be just the thing to transform the retailer's dismal quarter into a turnaround all-star.
BODY is currently trading at $16.01, down -30.63% YoY, while BEBE is trading at $6.53, down -1.06% YoY.
Latest Ratings for BODY
|Jul 2013||SunTrust Robinson Humphrey||Initiates Coverage on||Neutral|
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