Author: Helen Thomas

November 14, 2014

October’s retail sales report helps strengthen the National Retail Federation’s holiday expectations for sales growth of 4.1 percent, and offers an optimistic look ahead for the busiest consumer spending time of the year.  According to NRF, October retail sales, excluding autos, gas and restaurants, grew a healthy 0.7 percent month-to-month seasonally adjusted over September, and 44 percent unadjusted year-over-year.  NRF also finds the three-month moving average for year-over-year growth is a steady 3.9 percent.

“Consumers regained the energy to spend again in October, removing some of the concerns surrounding the slower consumer spending results seen as of late,” said NRF Chief Economist Jack Kleinhenz.  “Much of the spending power stems from lower gas prices, accelerated job growth, wages and salary gains, and the recent rise in stock prices.  We expect that the next two months will bring forth confident holiday shoppers who have the ability and desire to spend on gifts and more.”

The Commerce Department found overall October retail sales increased 0.3 percent seasonally adjusted over September and 4.1 percent unadjusted year-over-year.

“Consumers have once again proven resilient to the pressures they are still facing from a slow-moving economic recovery, receiving a helping hand from lower costs at the pump and gains in the labor market,” said NRF President and CEO Matthew Shay.  “Moving forward, retailers will continue to find ways to entice holiday shoppers with great bargains while also focusing on other value-added promotions.  It is clear that Americans have the spending power, they just need to see continued improvement in the economy before they return to shopping habits from pre-recession.”

All business lines, excluding electronics, showed gains on a month-to-month basis.

• Clothing and clothing accessories sales increased 0.5 percent seasonally adjusted over September and a healthy 1.3 percent unadjusted from 2013.
• Non-store sales increased a robust 1.9 percent seasonally adjusted month-to-month, and 8.7 percent unadjusted year-over-year.
• Sporting goods sales increased a solid 1.2 percent seasonally adjusted month-to-month, and 3.6 percent unadjusted over 2013.
• Sales at electronics companies decreased 1.6 percent seasonally adjusted from the previous month, possibly as a result of fall-off from the Apple iPhone roll-out in September, but increased 2.8 percent year-over-year.
• Furniture and home furnishing sales increased 0.2 percent seasonally adjusted from September, and 2 percent unadjusted year-over-year.

Source: National Retail Federation

November 18, 2014

Builder confidence in the market for newly built single-family homes rose four points to a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Growing confidence among consumers is what’s fueling this optimism among builders,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “Members in many areas of the country continue to see increasing buyer traffic and signed contracts.”

“Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,” said NAHB Chief Economist David Crowe.  “After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.”

Dervied from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” fair” or “poor.”  The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”  Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components increased in November.  The index gauging current sales conditions rose five points to 62, while the index measuring expectations for future sales moved up two points to 66 and the index gauging traffic of prospective buyers increased four points to 45.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose three points to 44, the South posted a four-point gain to 62, and the West edged up one point to 58.  The Midwest registered a two-point loss to 57.

Source: National Association of Home Builders

November 13, 2014

The growth in gift card popularity is irrefutable, and this holiday season spending on tiny plastic or digital gift cards will top all previous records.  According to NRF’s Gift Card Spending Survey, the average person buying gift cards will spend $172.74, up from $163 last year.  Total spending is expected to reach $31.74 billion.  In an October NRF survey, 62 percent of shoppers said they would like to receive a gift card, making gift cards the most requested gift item eight years in a row.

“No longer impersonal or only about convenience, gift cards have become the perfect, practical gift item for millions of holiday shoppers,” said NRF President and CEO Matthew Shay.  “And, as the most requested gift item for eight years in a row, we’re sure there will be plenty of happy individuals this holiday season who can look forward to treating themselves to something shiny and new come January when retailers start to offer promotions on fresh new merchandise.”

According to the survey, shoppers will spend an average of $47.87, up from $45.16 last year.  Total spending on gift cards has increased 83 percent since NRF began tracking consumers’ intentions to buy gift cards as holiday gifts in 2003.

Gift cards are a go-to gift for consumers of all ages; the survey found adults 65+ will spend the most on gift cards at an average of $204.59.  Young adults between 18-24 years old will spend the least at an average of $113.75.  Additionally, men plan to spend significantly more than women on gift cards ($180.81 vs. $165.09 respectively).

“These days, shoppers simply love the idea of gifting someone they care about with a little ‘free money’ in the form of a gift card.  Consumers young and old want to find the best way possible to create a happy holiday experience for their loved ones, and gift cards are a great option every time.”

There are a plethora of options for shoppers when it comes to what type of card to get, and it is clear department stores, restaurants and coffee shops are among the most popular choice for gift givers.  According to the survey 37.7 percent of gift card buyers will give their loved ones a gift card from a department store, and 34 percent will give their friends and family the gift of a meal at a restaurant.  One in five (20.6%) will pick up coffee shop gift cards, 18.1 percent will give the gift of entertainment, such as a movie theatre gift card, and 18.9 percent will give gift cards to electronics stores.

Source: National Retail Federation

November 19, 2014

Lowe’s said its third quarter same store sales spiked 5.1% a day after Home Depot reported an even stronger increase.

Total company sales increased 5.6% to $13.7 billion driven by increased productivity of existing stores as evidenced by a 5.1% comp increase.  Home Depot said its third quarter same store sales increased 5.8%.  Lowe’s profits increased 17.3% to $585 million while earnings per share increased 25.5% to 59 cents and were aided by $900 million in share repurchase activity.

“We are pleased with our performance, and continue to be cautiously optimistic about the home improvement landscape,” said Lowe’s chairman, president and CEO Robert Niblock.

Looking ahead, the company said it expects full year sales to increase 4.5% and same store sales to increase 3.5% to 4%.  The company plans to open six home improvement stores and four hardware stores this year.  Lowe’s currently operates 1,836 home improvement and hardware stores.

Source: Retailing Today

November 13, 2014

Firming home prices in markets across the country contributed to a slight dip in nationwide housing affordability in the third quarter of 2014, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.

In all, 61.8 percent of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income of $63,900.  This is down from the 62.6 percent of homes sold that were affordable to median income earners in the second quarter.

The national median home price increased from $214,000 in the second quarter to $221,000 in the third quarter.  Meanwhile, average mortgage interest rates decreased from 4.44 percent to 4.35 percent in the same period.

“Low mortgage rates, strong job growth and affordable home prices make this a good time to buy a home,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards,” said NAHB Chief Economist David Crowe.  “Rising employment and incomes, interest rates that remain near historically low levels, and pent-up demand should contribute to positive momentum heading into next year.”

Youngstown-Warren-Boardman, Ohio-Pennsylvania claimed the title of the nation’s most affordable major housing market, as 89.1 percent of all new and existing homes sold in this year’s third quarter were affordable to families earning the area’s median income of $52,700.  Meanwhile, Cumberland, Maryland-West Virginia and Kokomo, Indiana each tied as the most affordable smaller market, with 94.8 percent of homes sold in the third quarter being affordable to those earning the median income of $54,100 in Cumberland and $56,900 in Kokomo.  Other major U.S. housing markets at the top of the affordability chart in the third quarter included Syracuse, New York; Indianapolis-Carmel, Indiana; Harrisburg-Carlisle, Pennsylvania; and Dayton, Ohio; in descending order.

Meanwhile, smaller markets joining Cumberland and Kokomo at the top of the affordability chart included Davenport-Moline-Rock Island, Iowa-Illinois; Mansfield, Ohio; and Springfield, Ohio; in descending order.  For an eighth consecutive quarter, San Francisco-San Mateo-Redwood City, California was the nation’s least affordable major housing market.  There, just 11.4 percent of homes sold in the third quarter were affordable to families earning the area’s median income of $100,400.

Other major metros at the bottom of the affordability chart were Los Angeles-Long Beach-Glendale, California; Santa Ana-Anaheim-Irvine, California; San Jose-Sunnyvale-Santa Clara, California; and New York-White Plains-Wayne, New York-New Jersey; in descending order.

All five least affordable small housing markets were in California.  At the very bottom was Napa, where 10.2 percent of all new and existing homes sold were affordable to families earning the area’s median income of $70,300.  Other small markets included Santa Cruz-Watsonville, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles; in descending order.

Source: National Association of Home Builders

November 3, 2014

New Orders, Employment and Production Growing; Inventories Growing; Supplier Deliveries Slowing

Economic activity in the manufacturing sector expanded in October for the 17th consecutive month, and the overall economy grew for the 65th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business. 

The report was issued today by Bradley J.  Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.  “The October PMI registered 59 percent, an increase of 2.4 percentage points from September’s reading of 56.6 percent, indicating continued expansion in manufacturing.  The New Orders Index registered 65.8 percent, an increase of 5.8 percentage points from the 60 percent reading in September, indicating growth in new orders for the 17th consecutive month.  The Production Index registered 64.8 percent, 0.2 percentage point above the September reading of 64.6 percent.  The Employment Index grew for the 16th consecutive month, registering 55.5 percent, an increase of 0.9 percentage point above the September reading of 54.6 percent.  Inventories of raw materials registered 52.5 percent, an increase of 1 percentage point from the September reading of 51.5 percent, indicating growth in inventories for the third consecutive month.  Comments from the panel generally cite positive business conditions, with growth in demand and production volumes.”

Manufacturing expanded in October as the PMI registered 59 percent, an increase of 2.4 percentage points when compared to September’s reading of 56.6 percent.  This is the same reading as reported in August 2014, which is the highest reading for the index since March of 2011 when it registered 59.1 percent.  A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 43.2 percent, over a period of time, generally indicates an expansion of the overall economy.  Therefore, the October PMI indicates growth for the 65th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 17th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (55.6 percent) corresponds to a 4.1 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for October (59 percent) is annualized, it corresponds to a 5.2 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 16 are reporting growth in October.

Source: Institute for Supply Management

November 13, 2014

J.C. Penney is in the final phase of its turnaround and the company’s stores are customers’ preferred destination for great style, quality and value, according to company CEO Mike Ullman.

Those comments came after J.C. Penney said its third quarter same store sales were flat and it forecast a fourth quarter comp increase of 2% to 4%.  Total sales in the quarter ended November 1 declined slightly to $2.76 billion from $2.78 billion.

The company reported an operating loss of $54 million, but that was a massive improvement from the prior year when the company reported a staggering operating loss of $401 million.  Other positives from the quarter were gross margins which expanded to 36.6% of sales, compared to 29.5% in the same quarter last year, thanks to strength in the home and fine jewelry categories.  The company also reduced expenses and reduced inventories by 10.4%.

“This quarter shows the progress we are making in the final phase of J.C. Penney’s turnaround.  We continued to significantly improve the profitability of our business with gross margin expansion of 710 basis points, a $342 million improvement in EBITDA and bottom-line financial results that exceeded even our own expectations,” Ullman said.  “Like most retailers, following a strong start to the back-to-school season, sales did slow in September and October as unseasonably warm weather hindered the sale of fall goods.”

Ullman’s observation on the third quarter was that during what he called “appointment shopping periods” such as back to school and holidays, J.C. Penney is the customers’ preferred destination for discovering great style, quality and value.

“This year, we are confident customers will once again choose J.C. Penney for meaningful holiday gifts that fit their family budget.  We are well positioned to complete this holiday season and I would like to thank our associates for their hard work, warrior spirit and commitment to delivering an exceptional customer experience every day,” Ullman said.

Source: Retailing Today

November 13, 2014

Kohl’s is heading into the holidays with a loss of momentum after third quarter same store sales declined 1.8% and the company missed analysts’ earnings estimate by four cents.

The third quarter comp decrease of 1.8% was on top of a prior year decline of 1.6%.  Total sales at the operator of 1,163 stores declined slightly to $4.37 billion from $4.44 billion.  Net income declined to $142 million, or 70 cents a share, from $177 million, or 81 cents a share.

The 1,163 stores Kohl’s operated at the end of the quarter was five more units than the company had in operation at the end of the third quarter the prior year.

Source: Retailing Today

November 13, 2014

A third quarter same store sales decline of 1% at Dillard’s wasn’t enough to dissuade CEO William Dillard, II from declaring the company is very well positioned for the holidays.

Total merchandise sales also declined 1% to $1.42 billion while net incomes increased to $55.2 million, or $1.30 a share, compared to $50.9 million, or $1.13 a share.  The third qurater earnings per share benefited from a one time gain of $3.8 million, or nine cents a share, related to the sale of a store location.

“Returning cash to shareholders was a high priority during the quarter, and we completed the remaining $224 million of share repurchase authorization,” Dillard said.  “Although comparable sales declined 1%, we were pleased with a 69 basis point merchandise gross margin improvement, with our inventory control and with our strong operating cash flow.  We believe we are positioned very well for the holiday season, and we look forward to providing premium Dillard’s service to our customers.”

The company said its sales trends were strongest in juniors’ and children’s apparel followed by men’s apparel and accessories.  Sales were weakest in the home and furniture category.  Sales trends were strongest in the central region, followed by the eastern and western regions, respectively.

Source: Retailing Today

November 13, 2014

Walmart’s same store sales turned positive during the third quarter, ending a two year drought, prompting the company to forecast a U.S. comp increase of as much as 1% during the fourth quarter.

Third quarter same store sales at U.S. stores increased 0.5% and were aided by inflation and the impact of a 5.5% comp increase at the company’s Neighborhood Market locations.  Fourth quarter comps at U.S. stores are forecast to be flat or up 1%.  One percent may not sound like much, but if realized or possibly exceeded the additional sales volume would be substantial considering the U.S. stores division generated third quarter sales of $70 million, a 3.4% increase from the prior year.

Total company sales increased 2.8% to $118.1 billion, including a negative impact of nearly $400 million related to currency exchange fluctuations.  Profits declined 0.7% to $3.7 billion, but earnings per share increased by a penny from the prior year to $1.15, squarely in the middle of the company’s guidance range of $1.10 to $1.15 and three cents better than analysts forecast.  Walmart’s earning per share calculations benefited from the repurchase of 1.1 million shares during the quarter.

Despite the slight advance in earnings, Walmart Stores, Inc., president and CEO Doug McMillon called the profit performance “solid.”  He singled out as positives the U.S. stores comp increase, a 21% increase in e-commerce sales and profitablility of the Sam’s Club and Walmart International businesses.

“We’re investing in key areas of our business, including wages in our U.S. stores and in e-commerce and mobile capabilities.  We continue to see opportunities to improve our business,” McMillon said.  “Being the price leader is an ongoing priority for us and a commitment to customers.  As with every year, that is even more important during the holiday season.  We have some things in our favor this fourth quarter, including lower fuel prices in the U.S. and other key markets, and we’re set to deliver for customers during this time.”

Same store sales at Sam’s Club, excluding fuel, increased 0.4% and total sales, excluding fuel, increased 2.3% to $12.7 million.  Despite the modest top line growth, operating profits increased 12% to $493 million, the strongest improvement of Walmart’s three divisions.

Walmart International sales increased 1.7% to $33.7 billion, but on a constant currency basis increased 2.9% to $34.1 billion.  Operating profits increased 3.7% to $1.43 billion.  Operating profits at U.S. stores declined 1.2% to $4.9 billion.

Looking forward, Walmart forecast fourth quarter earnings between $1.46 and $1.56 and full year earnings per share to range from $4.92 and $5.02, lower than the company’s earlier guidance of $4.90 to $5.15.

“Our earnings per share guidance assumes several important factors, including the economic conditions in several of our largest markets, and a highly promotional holiday season,” said Walmart CFO Charles Holley.  “As a reminder, our full year EPS guidance includes the four factors we discussed last quarter, which were higher U.S. health-care costs, incremental investments in e-commerce, ongoing investments in Sam’s Club, and our effective tax rate.”

Source: Retailing Today