Author: Helen Thomas

After sinking 0.7% in January, the biggest drop in 6 years, the consumer price index rose 0.2% in February. This is attributed to a rise in gas costs and broad increases in other categories.

Outside of food and energy, the cost of rents, clothes, new and used cars and airfares all also increased 0.2% last month. Even with February’s uptick in prices, economists expect the strong dollar to keep inflation in check in coming months because it makes imported goods cheaper. The dollar has risen sharply in value in the past year compared with the euro and yen, in part because the U.S. economy is growing faster than those in Europe and Japan.

“It is too early to say inflation is turning higher,” said Jennifer Lee, an economist at BMO Capital Markets. The dollar’s strength “takes time to filter through to prices, and the recent increase will show up in coming months.”

The Fed has said in a statement that it might be appropriate for an interest rate increase after further improvement in the labor market, as long as inflation remains at its 2% target.

Source: Austin Statesman

The National Retail Federation released its 2015 Easter Spending Survey, gauging consumer behavior and shopping trends leading to the holiday. The report finds that the average person celebrating Easter will spend $140.62, over 2014’s $137.46 average spend. Total spending is expected to reach $16.4 billion.

“Easter will be the perfect segue into spring for both consumers and retailers who have longed for warmer weather for quite some time,” said NRF President and CEO Matthew Shay. “As one of the busiest times of year for several retail sectors and as shelves begin filling with both traditional spring and holiday merchandise, retailers are looking forward to welcoming shoppers with attractive promotions on home goods, garden equipment and traditional Easter items.”

The survey found that 45% of those celebrating will purchase clothing, spending more than $2.9 billion. They will also spend $2.4 billion on gifts, $1.1 billion on flowers, $998 million on decorations and $695 million on greeting cards.

58% plan to spend at discount stores, while 41% will shop at department stores. Additionally, 21.8% will shop at a specialty store and 18.8% will shop online.

Source: Retailing Today

The US dollar has increased 12% so far in 2015 against the euro and is up 27% from a year ago. This has prompted Wall Street analysts to make deep cuts to earnings forecasts of US multinational companies, and increasing the appeal of smaller, domestically focused companies.

As a result, investors are keeping a continued bias toward U.S.-based stocks that do less business abroad, such as shares of small companies that tend to be more domestically focused, and on companies outside the U.S. that stand to benefit from a weakening of their home currency as the dollar strengthens, particularly European manufacturers. Tiffany & Co. announced sales fell 1% in January but would have risen 3% if not for currency moves.

Wells Fargo looked at how 2015 consensus earnings estimates for retailers have evolved over the past two years alongside how their stocks performed. Among the 51 firms sampled, estimates fell for 42, or 82%, of them. Three companies—Shutterfly, Aeropostale and J.C. Penney—saw declines of more than 100%. Yet retailers’ stocks performed fairly well over the period. Shares only declined for 13 of the 51. On average, the share price among the sample actually increased 46%. In other words, valuation multiples expanded.

Companies that generate more than 50% of sales outside the U.S. are expected to post an earnings decline of 11.6% in the first quarter when results start rolling in next month. Companies that generate less than half of sales outside the U.S. are expected to post flat earnings for the quarter.

David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc., said that when the dollar has rallied in the past, consumer-discretionary and consumer-staples stocks have fared better than the broader market. These sectors have relatively low exposure to overseas markets.

Source: The Wall Street Journal

PwC administered a global survey to understand and compare consumer shopping behaviors and the use of different retail channels across 19 territories. Key findings:

US Consumers Shopping Online

• 39% of US consumers surveyed make online purchases monthly
• Top 3 reasons why US shoppers buy online instead of in store: lower prices/better deals than in stores (52%), ability to shop 24/7 (47%), and no need to travel to a physical store (40%)
• Top 3 reasons shoppers choose their favorite online retailers: “The prices are good”, “They usually have the items I want in stock”, and “I trust the brand”
•  US consumers do their research before buying online: books/music/movies/video games 75%, toys 62%, electronics/computers 73%
• The ability to return purchased items online sways consumers to purchase from certain retailers. Most important to shoppers were paid return labels provided with shipment (86%), online purchase returns available in-store (76%), can return purchase to a convenient location (61%)
•  Even with free shipping, consumers are willing to pay for same day (61%) and 1-2 day delivery (58%)

Source: PwC.com

American Express announced a new coalition loyalty program, called Plenti. Macy’s, Rite Aid, ExxonMobil and other major companies are joining American Express for this new  offering not previously available to U.S. shoppers.

Shoppers can earn points when they make purchases with participating retailers, and then those points are good for savings at all of those stores. A customer could purchase a cream and lipstick at Rite Aid and then redeem those points to get savings when buying a dress at Macy’s. They can get points paying a cell phone bill with AT&T and then get a discount at their ExxonMobil gas station.

Participating companies believe this will be more attractive to consumers because it is flexible. Although the Plenti program will be operated by American Express, shoppers can use any form of payment as they earn or redeem their points.

American Express is selecting only one participant in every industry; there will not be multiple department stores or gas stations. Retailers will not get access to one another’s consumer data. If a consumer purchases an item at Rite Aid, Macy’s will not know about that purchase. Each participating brand will have control over how consumers accumulate points in their stores.

“Consumers today are busy and smart. They know good value, and they want to be rewarded for the dollars they spend day-in and day-out at their favorite stores,” said Martine Reardon, chief marketing officer at Macy’s. “Plenti will offer customers everyday opportunity to earn and to redeem those points with much more choice.”

Resource: Washington Post

Industrial production, measuring the output of manufacturers, utilities and mines, rose .1% in February from January. Cold weather caused an increase in utility output, but factory and mining production declined, lowering capacity utilization two-tenths to 78.9%, instead of economist expectation of gains to 79.5%. Lower capacity utilization could prompt businesses to wait on investments.

Manufacturing, the bulk of all industrial output, declined for the third straight month, a development the Fed attributed largely to weak demand for long-lasting goods. “Manufacturing has started 2015 on a softer note than we had expected and if we do not see a pickup in the next few months we will have to consider notching down our 3% real GDP growth forecast for 2015,” John Ryding of RDQ Economics said in a note to clients. Economists said cold weather, while boosting utilities, may have crimped factories.

Resource: Wall St. Journal

Home Depot and Macy’s both posted solid earnings for the fourth quarter 2014. However, both retailers report that the situation with the West Coast ports will begin to really affect them now. This is after a report that a tentative deal was reached in the dispute that has affected retailers, manufacturers, farmers and merchants.

“The West Coast situation has been tough, with 12- to 16-day delays in getting our imports in,” Mark Holifield, Home Depot’s executive vice president for supply chain and product development, said on a call with analysts. “There’s still a fair amount of uncertainty what the new normal will be, once the ports get back to normal.”

Karen M. Hoguet, Macy’s chief financial officer, said that shipment delays were only just starting to hit inventory levels, and that its apparel and accessories departments were the most affected. About 12 percent of the department store chain’s first-quarter merchandise was delayed, Ms. Hoguet said, which may affect sales, gross margins and expenses in the first few months of the year.

Department stores, like Macy’s, were somewhat protected by allowances that enabled them to return some late products to their vendors. Discount retailers could benefit from getting merchandise the traditional retailers cancelled due to late delivery.

Source: The New York Times

Ulta Beauty announced fourth quarter growth in same store sales at a very high 11.1% and e-commerce growth of 55.2%. The 11.1% same store increase was after a prior year gain of 9.2%.

The company opened 100 new stores last year and are planning another 100 new stores for 2015. It is forecasting same store sales growth of 6% to 8% and e-commerce growth of 40%.

“Ulta Beauty wrapped up a very strong year of sales and profit growth with an excellent fourth quarter, which we are proud to celebrate as our first billion dollar sales quarter,” said Ulta CEO Mary Dillon. “Our best comparable sales increase of the year was driven by accelerating traffic growth, continued strength in prestige and mass color cosmetics, a successful holiday selling season, execution of more effective marketing and CRM strategies, a double-digit comp in our salon business, and a 55% comparable sales increase in our e-commerce business.”

Source: Retailing Today

Sales at Bon Ton grew 3% in the fourth quarter, attributing its success to top-producing sales in cold weather and active apparel and home.

The company continued its growth trend with double-digit sales growth in e-commerce, prompting them to announce expanded omnichannel strategies and opening an e-commerce fulfillment center.

“As we look ahead, we are excited for continued progress on our initiatives. We are looking forward to the opening of our new e-commerce fulfillment center, which we expect will facilitate significant expansion of our shipping capacity with improved operational efficiency and support the fastest growing area of our business,” stated Kathryn Bufano, President and CEO of Bon-Ton. “Investments such as this will continue paving the way for sustainable long-term profitable growth.”

Source: Retailing Today

Inclement weather and low wage gains slowed consumer retail spending in February, which is the third straight month of decline. February showed a .6% decline, after a .8% drop in January. Sales declined in nine of thirteen major categories, led by auto dealers and building supply merchants. The 2.3% drop in purchases at building-material stores was the biggest since May 2012.

“Consumers aren’t really spending as much of their savings from lower gasoline prices as expected,” Tom Simons, an economist at Jefferies LLC in New York, said before the report. “It’s the bad weather, consumers not spending the fuel savings as much as expected, and subdued wage growth.”

One standout in February was non-store retailers, which includes online retailers. Purchases showed at 2.2% increase in demand, the largest since March 2014.

Household consumption, which accounts for almost 70 percent of the economy, is projected by economists to expand this quarter. It grew at a 4.2 percent annualized rate in the final quarter of 2014, the most since the last three months of 2010, according to revised figures from the Commerce Department.

Source: Bloomberg Business