A Quarterly Update

Our latest Quarterly Report takes a look back at Q3 2018 and analyzes that quarter’s growth and the future quarter’s projected growth through a lens of Digital Strength to identify the companies and industries on the right track and those at risk.

Between Q3 2017 and Q3 2018 companies in the Consumer Discretionary sector experienced an average DSI score increase of 4.2% with a 3% revenue growth. But within the sector is where we saw even more interesting movement. The Consumer Durables and Apparel group, which includes companies ranging from Garmin to Steve Madden, substantially over indexed in both metrics with a 10.8% YoY DSI increase and 7% revenue growth.

This growth isn’t necessarily the biggest shock, disposable income in the U.S. had the biggest gain in 2018 since 2015, but it does provide some insight into how an industry like apparel is connecting more authentically with their customers while delivering the convenience digital natives are expecting from brands. Stores incorporating augmented reality in dressing rooms and a introducing a “mobile-first” focus aren’t revolutionary in the digital space, but they are laying a groundwork that encourages brands to explore ways to genuinely serve up digital experiences and experiment a bit to see what gains traction.

Stand out companies in Q3 included Ralph Lauren and Kohl’s, with DSI scores of 93 and 90, respectively.  How did they end up so high on the list?

RALPH LAUREN CORPORATION: A new CEO, a 50th anniversary and robust e-commerce numbers are just a few of the reasons Ralph Lauren experienced significant revenue growth in 2018. Even though retail is slowing down, North American digital sales posted a 9% comp increase1 which is one of the factors contributing to the 35 point jump in DSI score since 2017, moving Ralph Lauren into the top 10% of the DSI for the past two quarters. They invested heavily in marketing last year, spending 30% more than last2 and they have been dipping their upscale toe into wearable technology, planning a launch of self-heating jackets that can be controlled through an app3.

KOHL’S CORP: Kohl’s made a substantial jump in 2018 DSI scores, moving from 53 in Q1 to 90 in Q3, surpassing the retailing category average of 71 by almost 20 points. As a retailer who relies on a combination of foot traffic and ecommerce, Kohl’s has launched partnerships to ultimately become more relevant and “stickier” with customers and, as such, has experienced some success. Early in 2018, select Kohl’s stores started accepting Amazon returns, an initiative that’s paying off by delivering an increase of traffic at the pilot stores of over 8%4. Separate from Amazon, Kohl’s is partnering with PopSugar to draw in more Millennials and has been investing an aggressive omni-channel strategy to motivate brand sharing and conversations, making shopping more personal and convenient.

As we dive into 2019, we expect more brands to start following suit and, if they don’t, we’re not sure how much longer they’ll be around.  We’ll continue to follow this momentum throughout the year – stay tuned to see where the industry goes next!

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