Author: Helen Thomas

October 9, 2014

Fred’s CEO Bruce A Efird is confident about the company’s initiatives to reposition the convenience-center model, expand marketing and implement new technology – all factors that he expects will help restore growth in the fourth quarter and next year.

Efird added that the initiatives are already producing positive results, despite customer traffic remaining a challenge in the company’s markets.

Total sales for September increased 3.3% to $183.6 million from $177.8 million in September 2013.  Comparable store sales for the month increased 0.2% on top of an increase of 2.8% in the same period last year.  General merchandise inventory has been significantly lowered, Efird said, and the company’s clearance programs to address unproductive inventory, once again, exceeded the sales plan for September.

Fred’s total sales for the year-to-date period increased 1.5% to $1.32 billion from $1.30 billion for the same period last year.  On a comparable store basis, year-to-date sales decreased 0.5% versus an increase of 0.8% for the year-earlier period.

“Our September comparable store sales continued the positive trend we have experienced in recent months in spite of the strong sales performance posted in the same month last year.  Our initiatives to emphasize our convenience-center model continue to gain traction throughout the business,” Efird added.  Additionally, our pharmacy department performed well with increases in both comparable scripts and sales.  We are very excited to have our new pharmacy prime vendor agreement in place, which will not only accelerate gross margin improvement in the pharmacy department, but will also support our pharmacy expansion initiatives.”

During the month, Fred’s closed five full service stores and one Xpress location.  Fred’s operates 701 discount general merchandise stores, including 21 franchised Fred’s stores, in the southeastern United States.

Source: Retailing Today

October 9, 2014

Family Dollar’s fourth quarter results were affected by decreased customer traffic, prompting chairman and CEO Howard R. Levine to point out that the company is still in the early stages of its turnaround plan.

Levine expects that the strategic actions taken in fiscal 2014 will position the company for better sales and earnings performance in fiscal 2015.  Although he anticipates that the first quarter will be the most challenging of fiscal 2015, Levine is optimistic that momentum will build through the rest of the year.  But he stopped short of giving specific details regarding financial guidance for 2015 in light of the company’s pending merger with Dollar Tree.

Total net sales for the quarter increased 4.5% to $2.61 billion from $2.5 billion in the prior-year quarter.  Comparable store sales increased 0.3% as a result of an increase in the average customer transaction value, partially offset by fewer customer transactions.  Sales in the fourth quarter of fiscal 2014 were strongest in the consumables and seasonal and electronics categories.

Gross profit for the quarter was $861.3 million or 32.9% of net sales.  During the quarter, the company implemented a series of restructuring initiatives, including the closing of 375 underperforming stores.  As a result, the company incurred $10.4 million in inventory write-downs in an effort to sell through merchandise at stores scheduled to close.

Net income in the quarter was $34.5 million compared with $102.2 million in the fourth quarter last year.  Adjusted to exclued the inventory write-downs, restructuring charges and merger fees in the quarter, and the favorable accounting adjustment in the quarter, net income for the quarter was $83.9 million, compared to adjusted net income of $99 million in the fourth quarter last year.

“Although our fourth quarter results continue to reflect the difficult competitive environment, as well as the financial challenges facing our customers, we are continuing to execute our previously announced restructuring initiatives to improve our performance,” added Levine.

Source: Retailing Today

October 9, 2014

Tight mortgage lending standards continue to affect sales for single-family builders across the nation, according to a survey released by the National Association of Home Builders (NAHB).  Well over half of the single-family builders surveyed indicated that lending standards were “tight” or “very tight,” while only 11 percent indicated that standards were “somewhat easy” and no builders described them as “very easy.”

“While housing has seen some positive growth throughout the year, there is no denying that tight credit conditions are hindering a full, healthy housing recovery,” said NAHB Chief Economist David Crowe.  “These persistently tight mortgage credit standards continue to limit the number of creditworthy borrowers, particularly younger families and first-time home buyers, from entering the housing market.”

The survey also asked builders if they had lost any sales over the last six months due to buyers not qualifying for a mortgage.  Eighty-three percent answered “yes,” and of these, the average share of sales lost was 9.7 percent.  NAHB estimates that this 9.7 percent translates to 18,700 new-home sales lost because buyers were unable to qualify for mortgages.

“NAHB advocates for prudent lending standards, but we’ve seen banks and regulators swing the pendulum too far and create an environment where lending standards are too restrictive,” said Kevin Kelly, NAHB chairman and a home builder and developer from Wilmington, Delaware.  “We want a return to reasonable lending standards where qualified borrowers are able to obtain a mortgage and create the American dream for themselves.”

NAHB has supported many housing finance reform policies that would help reverse tight lending conditions, including:

• Improved credit scoring models
• A reduction of guarantee fees – known as g-fees
• Passage of the Housing Finance Reform and Taxpayer Protection Act of 2014 (Johnson-Crapo)
• FHA and FHFA to continue and expand their efforts to reduce lender concern over mortgage insurance denials and forced loan buybacks

A tight lending market for potential home buyers is just one of the headwinds impacting the housing recovery today.  Builders also report that rising costs for building materials and shortages of finished lots and labor are problems they are facing.

Source: National Association of Home Builders

October 7, 2014

Shop.org today released its 2014 online holiday sales forecast, expecting sales in November and December to grow between 8-11 percent over last holiday season to as much as $105 billion.

Shop.org forecasts sales based on government data including consumer credit, disposable personal income, and previous monthly retail sales releases.  Holiday non-store sales in 2013 grew 8.6 percent.

Source: National Retail Federation

October 7, 2014

According to NRF, retailers are expected to hire between 725,000-800,000 seasonal workers this holiday season, potentially more than they actually hired during the 2013 holiday season (768,000).  Seasonal employment in 2013 increased 14 percent over the previous holiday season.

“These holiday positions offer hundreds of thousands of people the opportunity to turn their seasonal position into a long-term career opportunity in retail,” said Shay.

Source: National Retail Federation

October 8, 2014

The Conference and PwC Measure of CEO Confidence declined again in the third quarter of 2014.  The Measure now reads 59, down from 62 last quarter (a reading of more than 50 points reflects more positive than negative responses).

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “While CEOs say economic conditions have improved from the start of the year, their expectations for growth in the short-term have softened.  Overall, CEOs remain optimistic about growth prospects in the U.S. and India, but sentiment for Europe has declined considerably.  Expectations for China and Japan have moderated, and CEOs remained negative about Brazil’s near-term prospects.  Less than a quarter of chief executives report increasing their companies’ capital spending plans since January, while less than 20 percent have scaled back spending.”

CEOs’ assessment of current economic conditions, however, was more positive.  Now, approximately 52 percent claim conditions are better compared to six months ago, up from 46 percent in the second quarter of 2014.  Conversely, business leaders’ appraisal of conditions in their own industries declined, with just 41 percent saying conditions in their own industries have improved, compared with 48 percent last quarter.

CEOs’ expectations regarding the short-term outlook were less optimistic.  Slightly more than 44 percent of business leaders anticipate economic conditions will improve over the next six months, down from 53 percent last quarter.  However, nearly 51 percent expect conditions to remain the same.  Expectations for their own industries are also more subdued, with 34 percent anticipating an improvement, down from 46 percent in the second quarter.  About 51 percent expect no change in conditions.

Global Outlook

CEOs are more positive in their assessment of current economic conditions in the United States and India, but remain negative regarding conditions in Brazil, China, Europe and Japan.  More notable, business leaders’ assessment of conditions in Europe and Japan went from positive (a reading of 50 and over) to negative, while India increased into positive territory.

Looking ahead, short-term expectations for Europe, China and Japan declined but remain slightly positive, while expectations for Brazil edged up but remain negative.  Overall, CEOs are most positive about the outlook for both the United States and India.

More CEOs Increasing Capital Spending Plans

Nearly 21 percent of chief executives report increasing their companies’ capital spending plans since January of this year, while 17 percent have scaled back spending, based on a supplementary question.  In 2012, when we last asked this question, only 9 percent of respondents had incrased their capital spending plans and 32 percent had made cuts.  An increase in sales volume was one of the most common reasons given for increasing capital investment plans.  A decline in sales volume also played a key role in scaling back spending plans.

Source: The Conference Board

October 8, 2014

Costco reported a rise in sales and same-store sales for the fourth quarter.

Net sales for the quarter were $34.75 billion, an increase of 9% from $31.77 billion in fiscal 2013.  Same-store sales for the total company increased 6%, while U.S. same-store sales also rose 6%.

Net income for the quarter was $697 million, or $1.58 per diluted share, compared with $617 million, or $1.40 per diluted share, in the year-ago period.

Fiscal year 2014 sales totaled $110.21 billion, an increase of 7%.  Same-store sales increased 4% for the company and 5% in the United States.

Net income for the fiscal year was $2.06 billion, or $4.65 per diluted share, compared with $2.04 billion, or $4.63 per diluted share, in fiscal year 2013.  Net income last year was positively impacted by a $62 million tax benefit in connection with the portion of the special cash dividend paid in December 2012 to the company 401(k) plan participants.

Source: Retailing Today

October 3, 2014

How well many retailers perform this holiday season in store and online will be determined by the shopping preferences of a demographic group that doesn’t typically get a lot of love from marketers.

Marketers invest heavily in researching highly desirable segments, such as Millennials or the growing U.S. Hispanic population, to uncover actionable insights and develop sales strategies.  However, that isn’t the case with grandparents, which is a huge miss for brands and retailers clawing for every last share point.  There are approximately 70 million grandparents in the U.S. and they will spend an estimated $52 billion on their grandchildren this year, including $17 billion on gifts, according to the American Grandparents Association.

That’s a lot of spending power, but capturing those dollars requires a deeper understanding of grandparents’ behavior relative to parents and other shoppers.  The biggest area of difference between older and younger consumers: online shopping.  Online buying is still slow to catch on with the grandparents segment.  Seventy-one percent of grandparents say that the majority or all of their shopping (outside of grocery or pharmacy shopping) is done at a physical store – compare this to 61% of parents.

When comparing the grandparents segment from one year ago to that of today, we see slight shifts in spending from physical stores towards online.  Among the most recent grandparent respondents, 68% said they do most of their shopping at bricks-and-mortar locations vs. 73% one year ago, and those who say they split their spending equally with online shopping grew from 13% a year ago to 17% today.

This growth could be the result of a number of different factors, including a greater number of older adults recognizing the convenience benefits of online shopping, particularly if they have physical limitations that make it difficult to navigate large stores or malls, push through crowds, or visit numerous individual locations.  Because many of them are retired, they are also at home more often to accept package deliveries.  Also, younger grandparents who are still working full time may simply like the time-saving benefits afforded by online shopping as they seek to manage their busy schedules and empty-nester social lives.

Regardless of the grandparent’s age, the holiday season brings with it the opportunity to treat the grandkids to some nice gifts or other surprises.  When 5,069 grandparents were asked to characterize their gift-giving practices toward their grandchildren, most (54%) feel they are pretty well balanced in how much they purchase.  The “spoilers” who say they enjoy giving the youngsters lots of gifts and/or money account for 16%, and 23% are the “selective gifters” who say their practice is to buy a few high-quality items.  A small percentage (nearly 8%) instead focus on doing other things for their grandchildren that don’t involve giving gifts or money, perhaps due to being more cash-strapped and/or on fixed incomes.  We had thought the data would show a higher percentage for “spoilers,” since the poll question was answered voluntarily and anonymously, but perhaps the definition of spoiling is viewed differently by grandparents vs. non-grandparents.

Regardless of how many gifts are purchased, grandparents are less likely to flock to large sales events like Black Friday.  While 15% of parents and 13% of the general population say they wait for Black Friday to start most of their shopping, only 8% of grandparents say this.

For the 2014 holiday shopping season, grandparents look very similar to the general population in plans for gift expenses: Only 12% say they will spend more on gifts this year, 39% will spend less, 35% will spend about the same, and 14% won’t spend any money on gifts.  Many older adults are on fixed incomes, so that certainly plays a role with this segment, as they are 55% more likely than the general population to say they will spend no money on holiday gifts this year.

Despite how much they will spend, there are key differences in where they will spend those gift dollars.  Grandparents indicate they are more likely to spend most of their holiday gift budget at larger discount stores like Walmart or Target (42% said this, compared to 34% for the general population and 39% for parents).  They are also more likely than parents to shop at small, locally-owned stores (16% vs. 9% of parents), but far less likely to spend big at specialty retail chains like The Gap or Best Buy – only 1% of them will spend most of their money here.

Due to the sizable spending power of this consumer group, retail marketers should take note of the grandparents segment.  It’s important to take away that grandparents differ from the general population of U.S. adult consumers in several key areas: they are more likely to stretch out their holiday shopping and avoid major sales events or days; spend most of their holiday shopping money at discount superstores; and are starting to show some uptick in online shopping.  Their incomes are a factor in their gift-giving decisions for grandchildren as well.

These types of insights can certainly be leveraged by retailers to formulate segment-based promotions, in-store and online services, and even specialized offerings that cater to the attributes seen more in these older family members.

Source: Retailing Today

October 2, 2014

Home Depot is extending its e-commerce capabilities westward with the opening of a dedicated online fulfillment center in California.

Located in Perris, California, the 858,953 sq. ft. facility will initially employ approximately 150 people, and eventually employ up to 300.  It is one of three new DFCs opening across the U.S. in addition to the company’s existing network.

The Locust Grove DFC opened outside of Atlanta, Georgia in February and the Ohio DFC is scheduled to open next year.

According to the company, the new DFCs will dramatically increase the number of orders it can ship the same day they are received, which significantly expands the number of orders they’ll be able to deliver within two days.

The three new DFCs are strategically positioned to deliver 90% of Home Depot’s customers’ parcel orders within two days using economical ground service.  For example, a customer will be able to place an order by 5 p.m. Monday and receive on Wednesday.

The company added that the new DFCs will also lower transportation costs and allow it to deliver online orders to consumers, contractors and its network of U.S. stores faster and uniformly.

Each center will have the capability to hold as many as 100,000 skus and stock a variety of goods including:

1. Products customers most frequently want delivered

2. Products where an extended assortment will be enabled through direct fulfillment (e.g. lighting and fans)

3. Products where a direct fulfillment strategy provides a better customer solution (e.g. flooring)

4. Seasonal products where a central fulfillment strategy allows the specialty retailer to offer a more compelling assortment (e.g. patio furniture)

The Home Depot has more than 90 North American distribution facilities, which ship products to more than 2,000 stores.

Source: Retailing Today

October 7, 2014

Holiday sales are projected to grow at their fastest level in years, rising 4.1% to nearly $617 billion after a 3.1% increase last year.

The bullish seasonal spending forecast follows an uneven sales performance at the beginning of the year and a 3.1% increase during the 2013 season.  Online holiday sales are expected to increase between 8% and 11% to as much as $105 billion.  Holiday sales on average have grown 2.9% over the past 10 years, including 2014’s estimates, and are expected to represent approximately 19.2% of the retail industry’s annual sales of $3.2 trillion.  This would marke the first time since 2011 that holiday sales would increase more than 4 percent.

“Retailers could see a welcome boost in holiday shopping, giving some companies the shot in the arm they need after a volatile first half of the year and an uneventful summer,” said NRF President and CEO Matthew Shay.  “While expectations for sales growth are upbeat, it goes without saying there still remains some uneasiness and anxiety among consumers when it comes to their purchase decisions.  The lagging economic recovery, though improving, is still top of mind for many Americans.”

“Recognizing the need to keep household budgets in line, we expect shoppers will be extremely price sensitive as they have been for quite some time.  Retailers will respond by differentiating themselves and touting price, value and exclusivity,” continued Shay.

While consumer confidence has been unstable much of the year, improvements over the past few months in key economic indicators will give way to increased spending power among holiday shoppers.  Retail sales, jobs and housing data all point to healthy gains.

“Though we have only seen consumer income and spending moderately – and erratically – accelerate this year, we believe there is still room for optimism this holiday season,” said NRF Chief Economist Jack Kleinhenz.  “In the grand scheme of things, consumers are in a much better place than they were this time last year, and the extra spending power could very well translate into solid holiday sales growth for retailers; however, shoppers will still be deliberate with their purchases, while hunting for hard-to-pass-up bargains.”

Sources: Retailing Today, National Retail Federation