Author: Helen Thomas

Wall Street analysts are calling last week “Retail Wreck” due to numerous retailers’ news of poor sales, profits and future outlook on consumer spending. April retail sales came in higher than expected with a positive 1.3% gain, the highest gain in a year. Will strong sales in the first month of the second quarter help with a stock rebound for retailers?

Last week’s poor results were reported by many retailers, including Macy’s, Kohl’s and Nordstrom’s. Department stores are also responding to the strong online sales versus in-store that was reported, with online sales soaring 10.2% over last year. They are struggling with putting inventory in the right place to meet their increasingly complicated inventory and distribution demands.

Investors are waiting for home-improvement results this week from Home Depot, Lowe’s, Target and Wal-Mart to try to determine if the profit misses in the retail space is a problem just for department stores and apparel makers, or if it is a broader problem ahead for the consumer-driven US economy.

Sources: The Wall Street Journal, USA Today

There were stock declines all over the retail spectrum yesterday, as consumers spend less than expected and shift spending from traditional department stores and retailers to nontraditional online retailers. The SPDR S&P Retail ETF closed down 4.44%, the worst since August 18, 2011 and down 15% over the last 12 months.

Macy’s is getting the most news of the day, closing down 15.2%. This caused CEO Terry Lundgren to lower its full-year forecast. Quarterly earnings for Macy’s exceeded expectations, but revenue came in below estimates.

April retail sales will be announced on Friday morning, and analysts are waiting to see what stock impact these results will have.

Other retailers with dropped stock levels yesterday include Wal-Mart, Home Depot, Nike, Fossil, and Disney, who dropped 4.04%, its worst day since January 15.

Source: CNBC, Wall St Journal

JC Penny’s announced Monday that they will be doing a major expansion into home appliances. Starting in July, JC Penney’s will add an appliance showroom to almost 500 of its stores. The showrooms will feature kitchen and laundry appliances from Samsung, LG, GE Appliances, and Hotpoint, with over 100 appliances on display.

“Since launching major appliances in 22 stores last February, the response has been outstanding,” said Marvin R. Ellison, CEO, JC Penney’s. “The pilot confirmed that we should not limit our business to apparel and soft home in order to achieve significant revenue growth.”

The retailer also plans to allocate additional 25% of floor space to window coverings in about 500 stores, and pilot a new furniture line, Signature Design by Ashley, from Ashley Furniture, in 25 stores.

JC Penney’s is also testing an in-store flooring concept with Empire Today in stores in Tampa, Florida, and Washington, D.C., beginning this summer. “The current housing market presents a lucrative opportunity to diversify our Home assortment and strategically align with consumer spending patterns,” Ellison said.  “By combining our soft home and window coverings merchandise with the industry`s leading brands for appliances, furniture and flooring, JCPenney will become a destination for home design and redecorating, allowing us to weather-proof our business during seasonal periods of the year.”

Source: Chain Store Age

Target Corp is tightening its supply chain requirements for its vendors as part of a multi-billion dollar plan. The rules, effective May 30, include tighter deadlines for deliveries to warehouses, and fines for late deliveries and inaccuracies in product information.

Says Target’s COO, John Mulligan, vendors need to help keep shelves stocked, maximize sales and control costs. A letter was sent to suppliers. In the letter, Target stated the goal to keep products stocked to “lower missed sales for all of us.” Target US stores in 2015 held 8 to 9 billion items on store floors, in transit or in warehouses at any point in time.

The new rules will be phased on over the summer, with household, paper, and pet products needing to comply in June, health and beauty complying by July and apparel, home and electronics in August.

Source: Reuters.com

The government in Quebec announced a proposed modification to the province’s sign rules that would require businesses ibn Quebec to add French to their outdoor signage. They did agree to retailers not having to alter their registered trademark names or logos. These retailers would be required to add a French word, description or slogan to their outdoor signage. The French words are not required to be larger than the non-French trademark name.

The government is requesting public feedback on the new proposed regulations for the next 45 days. WalMart’s regional president, Xavier Piesvaux, said the regulation “gives our companies the flexibility to communicate in French while keeping the integrity of our brand”. In 2014 major retailers, such as WalMart, Costco, Best Buy, Gap, Old Navy, Guess and Toys ‘R’ Us won a court battle ruling that storefront signs with their trademark in English does not contravene the Charter of the French Language.

Source: CBC CA NEWS

In 2015, 84.2% of American celebrated Mother’s Day, spending an average of $173 per person, totaling spend of $21.2 billion. This was the highest spending per person, up from $163 in 2014. Will 2016 be a strong year for retail Mother’s Day sales? Expectations are that Mother’s Day spending will be similar to last year’s record-breaking totals. 7,000 consumers surveyed by the NRF (National Retail Federation) said they will spend the most on jewelry, followed by outings (lunch/dinner/brunch), flowers and gift cards.

Department and Specialty stores had the highest retail traffic in Mother’s Day sales last year, followed closely by online sales and discount stores:

Source: Fundivo, MarketWatch

J.C. Penney’s successful 10-year relationship with global beauty brand Sephora is expanding. Sephora currently has over 1,780 locations in 29 countries including 370 in North America and 546 in-store shops inside J.C. Penney stores. The department store retailer announced that it will open 60 additional Sephora shops in Penney stores by June 17^th. Among the new shops will be a 3000 s. ft. flagship shop located in the newly relocated Penney at Northridge Mall in Salinas, CA. It will feature a larger assortment of emerging brands, merchandise displays and expanded room for service.

When Sephora made its debut inside J.C. Penney in 2006, it was a new concept.

“J.C. Penney was one of the first department store retailers to forgo the traditional beauty counter and work with a global beauty brand to build a dynamic Sephora shop inside its stores,” Angela Swanner, senior VP for Sephora inside J.C. Penney. “Ten years and nearly 600 locations later, Sephora inside J.C. Penney has become a leading beauty destination that will continue to be a growth driver in 2016 and beyond.”

The Penney-Sephora partnership isn’t limited to physical stores. Sephora also has a significant online presence on Penney’s e-commerce site.

Source: Chain Store Age

Lowe’s Home Improvement is launching a new social campaign to make sure they’re reaching millennials as the tech-savvy generation begins to reach the age when they start settling down and buying homes. According to the Wall Street Journal, Lowes is turning to Snapchat and Facebook mobile video to help first-time home buyers discover home improvement tricks.

In the push to reach new potential customers who spend time on visual and video-driven social media platforms, Lowes is working with Omnicom advertising agency BBDO to create a new series of social videos. The Snapchat video series is called “In-A-Snap” and it allows consumers to follow along with home improvement projects and tap the screen to complete specific tasks. On Facebook, Lowes will be the first marketer to take advantage of a flip video application on Facebook’s mobile feed that allows viewers to change the orientation of the video. The “FlipSide” videos, which link back to Lowes.com, show simultaneously what can happen if a homeowner doesn’t tackle spring cleaning projects, versus what happens when a homeowner cleans the gutters, changes air filters or prunes overgrown shrubs.

Lowe’s Chief Marketing Officer, Marci Grebstein said, “The challenge as a marketer today is, how do you continue to engage consumers differently and within different social media platforms. We have been able to create informative and entertaining content based on how the platform works.”

Sourcse: The Wall Street Journal, Retailing Today

According to new research by Green Street Advisors, department stores need to close hundreds of locations to recapture the level of productivity they had a decade ago in 2006. The real-estate research firm estimates that approximately a fifth of all anchor space in U.S. malls, or roughly 800 stores, could be a part of the closures.

As retail business has shifted to discounters or online merchants like Amazon.com in recent years, many large retailers have closed locations. Sears recently said it would close 78 stores including 68 Kmarts this summer as part of a plan that was announced in February. But according to Green Street, Sear would need to close 300 or 43% of its stores to regain the sales per square foot that it had in 2006.

To return to 2006 productivity levels, Green Street estimates that JC Penney would need to close 320 stores (31%), Nordstrom Inc. would need to close 30 stores (25%) and Macy’s, which closed 40 stores last year, would need eliminate an additional 70 stores (9%).

Sales at U.S. department stores averaged $165 per square foot in 2015 which represents a 24% drop since 2006. But stores only reduced their physical footprint by a total of 7% over the same time period.

“Department stores used to be a great catchall for different brands, but today many of the brands have stores of their own, and shoppers can also find them online,” said DJ Busch, a senior Green Street analyst.

The stores have declined to comment on the Green Street Report, but have indicated that closing a large number of stores isn’t the right strategy to improve productivity in today’s dynamic retail market.

“There’s a misperception out there that when we close a store, that business transfers online,” Ed Record, Penney’s chief financial officer, told analysts in November. “When we close a store, particularly in a small market, we see our dot-com business go down.”

Macy’s has attempted to lure shoppers into their stores by adding Bluemercury beauty shops and Backstage discount stores to it’s department stores, and a spokesman for Nordstrom said that all of its stores are profitable, and closing stores “is not our normal practice.”

Source: The Wall Street Journal

Amid reports from the Commerce Department that housing starts in March were up 14.2% from last year, paint, drywall and other building suppliers are seeing an uptick in sales. Sherwin Williams reported on their investor call forecast-beating first quarter profits. They reported an 11% increase in sales revenue from its stores and a 44% improvement in profit.

USG Corp., manufacturers of drywall and ceiling tiles, reported the “best quarter we’ve had in almost a decade”. Sales increased 7% to $970 million.

Great weather is attributed to work on homes starting earlier in the year than usual. Illinois Tool Works Inc., supplier of screws, fasteners, nail guns and other items improved its operating margin to 21% from 17% last year. Says CEO Scott Santi, “We certainly exited the quarter in pretty good shape. We’re not seeing anything slow down.”

Building materials, garden equipment and supply dealers show estimated sales increases of 11.9% over Q1 2015. Analysts are predicting that Home Depot and Lowe’s may post stronger than expected sales for their quarters ending April 2016.

Source: Wall St Journal, Seeking Alpha