Hey, Macy's and Nordstrom: Costco is on your heels
When it comes to clothing, Americans want nice threads for little money. As the big-box wholesaler steps up its fashion lines, it could start outstripping the competition.
It's not that Americans don't want apparel. They just want to pay very little for it. That's one of the many things I learned from Craig Jelinek, the chief executive officer of Costco (COST), when I visited the company's Harlem store Thursday.
He said apparel has been the standout performer of late, and when you look around at his selection, you notice that Costco has taken the quality up a notch while really driving down the prices. For example, Costco is selling $1,000 Versace handbags for $500. The store just got in some killer Italian ties that look no different from the Ferragamos I wear, for 1/10 of what I pay for the name brand. The Kirkland signature dress shirts are so similar to what I buy at Saks (SKS) that you can't tell the difference, except they are 1/4 the price.
I have to believe that with 50 million members in the United States who are seeking to get their money's worth from their dues, Costco is taking a huge share from traditional retailers with these kinds of products. There's enough selection now -- much more than I have ever seen -- and enough famous brands, as well as the Kirkland private-label version, that I think Costco may actually be helping to reorder the apparel universe along with TJX (TJX) and Ross Stores (ROST).
Costco did confound me with its call that televisions are weaker. Could more people be going to Best Buy (BBY) this year now that it discounts so effectively? But Jelinek did say that tablet sales are very strong, so it isn't a revulsion to hardware.
I think it's a game changer that simply isn't getting talked about enough, considering the power and reach this membership wholesaler has in this country.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long COST and TJX.
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.....but Jim, maybe your next sentence should be:
"but because they don't have much disposable income anymore, they're wearing what they already have in their closets and drawers"
When the middle class is strong again, we will replace our worn out threads. I'd much rather buy quality apparel than fashion apparel that won't last.....and make it Made in USA.
I have an old coat, insulate jacket and had a sweatshirt hoodie...Probably both bought at Penneys or Sears...They are over 35-40 years old.
They are worn, ripped up from briars and barbed wire fences..
I got a couple of new hooded sweatshirts over last Christmas or so...Miss Lilly threw my old hood away or put it in cat shed..
The new hooded one lasted about 20 pulls on the zipper before it broke, no one fixes zippers..
I keep my old coat hid and warned her of consequences if it disappears.
They don't make decent clothes anymore unless you pay a fortune for them, then they are questionable at best..
everyone knows now most products we see are made in china, or vietnam or india or some other child slave labor country.
therefore we do not expect to pay crazy money for the same articles ~ handing cash to the latest overpaid CEO.
the stores opened their floodgates to cheap labor. now we want to see cheap retail prices as well.
VERY cheap retail prices.
we need SOMEthing for our sever reduction in american jobs.
They increase profit margins for a reason buddy, they don't care if you and I have to pay a nickel or dime more....Or get big packaging with less net ounces in it...
Lumber has gotten smaller, metal has gotten thinner...Or replaced by tough plastic, until you get in a wreck...
Even Twinkie wrappers are 20% bigger then they need to be; A one pound box with 13 ozs. inside?
There is no store in the world that can compete with that. To mention Macy's and Nordstroms in the same breath with Costco is stupid.
Neither can compete with a 15% margin
He is right on about the clothing. I can tell you as a clothing importer, the Kirkland brand is top notch.
For example , they import very fine quality worsted wool pants (super 120's yarn) from ITALY and retail it for $45.00. That pant would be $90- $150 in any men's store.
Calvin Klein V necks - great buy at $19 - $29 , I forgot how much nut either way great bargain.
Always buy all my electronics there as well. TV's , cameras etc. Great pricing , great return policies.
I have no dog in the fight pertaining to Costco...Only been in one, with friend.
Don't shop there and don't own the stock...Although it is an excellent Company in my opinion.
Yes the textile industry has died a slow death since the 70s and 80s, along with clothiers..
BUT it was not only about Unions..
A great penetration by foreign products by discount stores and others, brought most of demise on.
Unions contributed, but if you think workers should work for 1.50-2.00 bucks an hour back in the 80s then maybe you could say you were right.
Then we could have the "sweat shops " here instead of India, Pakistan. Mexico, S.America and most of Asia or Pacific Rim.
Plus the quality of cloth had to really go down, I believe cotton had a lot of subsidies back then also in the U.S.
It was an Industry that couldn't adjust, much like the auto manufacturing...
Problem with places like Costco wanting to get bigger in clothing or accessories along with driving prices down or wholesale prices...Is the Product has to "be made cheaper."
Lower thread counts in materials...
Less wool or cotton in apparel, more polyester or something similar.
Thinner leather or cheaper tanning..
Dyes that don't last or are not steadfast.
Cheaper made buttons and zippers, less thread or sewing holding them on.
When these big wholesalers got into more clothing, K-mart, WalMart, Target, etc..
The American textile industry pretty much disappeared.
And much of clothing was offshored.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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