Author: Helen Thomas

October 6, 2014

The Conference Board Employment Trends Index (ETI) increased in September.  The index now stands at 121.68, up from 121.32 (an upward revision) in August.  This represents a 6.1 percent gain in the ETI compared to a year ago.

“The Employment Trends Index increased for the ninth consecutive month, signaling solid job growth through year end,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “A combination of positive and negative forces has been driving the rapid decline in the unemployment rate in recent years.  Hiring is strong, but productivity growth is weak, and the participation rate continues to decline.  None show signs of reversing.”

September’s increase in the ETI was driven by positive contributions from six of its eight components.  In order from the largest positive contributor to the smallest, these were: Industrial Production, Real Manufacturing and Trade Sales, Initial Claims for Unemployment Insurance, Ratio of Involuntarily Part-time Workers, Number of Temporary Employees, and Job Openings.

The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area.  Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly.

The eight labor-market indicators aggregated into the Employment Trends Index include:

• Percentage of Respondents Who Say They Find “Jobs Hard to Get” (The Conference Board Consumer Confidence Survey)
• Initial Claims for Unemployment Insurance (U.S. Department of Labor)
• Percentage of Firms With Positions Not Able to Fill Right Now (National Federation of Independent Business Research Foundation)
• Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
• Ratio of Involuntarily Part-time to All Part-time Workers (BLS)
• Job Openings (BLS)
• Industrial Production (Federal Reserve Board)
• Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

Source: The Conference Board

October 3, 2014

The economy generated a gain of 248,000 jobs in September, faster than the averge monthly over the past year, and revisions to July and August were very positive.  The slower gain initially reported for August now appears to have been simply an aberration.  The continued rapid drop in the unemployment rate increases the odds that reaching the natural rate of unemployment and the first Fed rate hike will occur in the first half of 2015.  The one negative piece of information from this report is the ongoing weakness in wage growth.

Source: The Conference Board

October 3, 2014

According to the National Retail Federation’s calculations, retail industry employment increased by 35,500 jobs in September, with upward revisions for July and August.  Employment gains were seen in most retail categories with the exception of clothing and clothing accessories stores, which lost 3,000 jobs, and health and personal care stores, which lost 900 jobs.  NRF numbers do not include automobile dealerships or gasoline stations.

“As expected, today’s jobs report was positive news for the economy and the markets,” NRF Chief Economist Jack Kleinhenz said.  “September’s employment figure is roughly in line with its performance over the last six months and shows that the July and August data was just a temporary blip.”

“The employment figure should set the table for a healthy fourth quarter as we head into the all-important holiday shopping season,” Kleinhenz said.

“Economic data released in September, including the jobless benefits claims, supported stronger payroll growth and employment,” Kleinhenz said.  “The jobs report indicates no evidence of wage pressure and should allow the Federal Reserve to stay the course.”

The U.S. Bureau of Labor Statics Employment Situation Summary showed that total nonfarm payroll employment rose by 248,000 in September.  The unemployment rate fell slightly to 5.9 percent and the civilian labor participation rate remained relatively stable at 62.7 percent.

Source: National Retail Federation

October 2, 2014

Rite Aid reported $2 billion in sales for the four weeks ended September 27, representing a 4.5% increase over the comparable yer-ago period.

Same-store sales increased 5.1% over the prior-year period, including a 2.3% lift in front-end same-store sales and growth of 6.3% in pharmacy and comparable sales.  Pharmacy same-store  sales included an approximate 225 basis points negative impact from new generic introductions.  Prescription count at comparable stores increased 4.4% over the prior-year period.

Prescription sales accounted for 69.5% of drug store sales, and third party prescription sales represented 97.6% of pharmacy sales.

Year-to-date, same-store sales for the 30 week period ended September 27 increased 3.8% over the prior-year period.  Front-end same-store sales increased 0.8% while pharmacy same-store sales increased 5.2%.  Prescription count at comparable stores increased 3.2% over the prior-year period.

Total drug store sales for the 30 weeks ended September 27 increased 3.3% with sales of $14.9 billion.  Prescription sales represented 68.7% of total drug store sales.

Source: Retailing Today

October 1, 2014

• September posts a decline, following strong August gain.
• The STEM related categories continue to gain while other occupational groups show losses.

Online advertised vacancies declined 137,200 to 5,072,000 in September, according to The Conference Board Help Wanted OnLine (HWOL) Data Series released today.  The August Supply/Demand rate stands at 1.84 unemployed for each advertised vacancy with a total of 4.4 million more workers than the number of advertised vacancies.  The number of unemployed was 9.6 million in August.

“The September loss offsets most of August’s gain, resulting in only modest overall growth for 2014,” said Gad Levanon, Director of Macroeconomics and Labor Markets at The Conference Board.  “Following a strong second quarter, the third quarter has ended basically flat.”

In September, the STEM-related occupations showed strength in Computer and Math (9,600), Architecture and Engineering (3,400), and Healthcare Practitioners (12,200), while other categories showed losses, including Office and Administrative (-40,600), Sales (-32,500), and Transportation (-22,900).

Regional And State Highlights

• All 20 of the largest states posted declines in September.
• Among the 50 states, 45 experienced losses while 5 (Iowa, Utah, Maine, Alaska and Nebraska) gained.

Metro Area Highlights

• In September, among the 20 largest metro areas, 2 (San Jose and San Francisco) gained and 18 declined.
• Of the 52 metro areas for which Help Wanted OnLine provides monthly data, 8 gained advertisements, 43 lost, and 1 (Rochester) remained constant.

Occupational Highlights

• In September, of the 10 largest online job categories, 3 posted gains and 7 posted declines.

Source: The Conference Board

September 30, 2014

Walgreens posted fourth quarter sales of $19.1 billion, representing an increase of 6.2% compared to the year-ago period, while sales for the fiscal 2014 ended August 31 increased 5.8% to a record $76.4 billion.

Front-end comparable store sales increased 1.3% in the fourth quarter compared with last year’s fourth quarter.  Customer traffic in comparable stores decreased 2.2% and basket size increased 3.5%, while total sales in comparable stores increased 5.4%.  Walgreens Balance Rewards loyalty program reached 82 million active members at the end of this year’s fourth quarter.

Prescription sales, which accounted for 65.7% of sales in the quarter, increased 9.3% compared with last year’s quarter, while prescription sales in comparable stores increased 7.8%.  The company filled 211 million prescriptions in the quarter, an increase of 4.2% over last year’s fourth quarter.  Prescriptions filled in comparable stores increased 3.9% in the quarter.

In fiscal 2014, Walgreens filled a record 856 million prescriptions.  The company continued to see strong growth in prescriptions filled for Medicare Part D patients, which increased 9.2% in the fourth quarter compared with last year’s quarter.  Since the beginning of fiscal 2013, Walgreens Medicare Part D prescription market share has grown more than twice as fast as its overall retail prescription market share, the company stated.

“Our fourth quarter performance was in line with our expectation, recognizing we have much more to do.  We closed the fiscal year by exercising the option for the second step of our strategic transaction with Alliance Boots, completing the transition of our pharmaceutical distribution to AmerisourceBergen and driving continued improvement in our daily living business that resulted in our largest year-over-year quarterly and fiscal-year sales increases in three years,” stated Walgreens president and CEO Greg Wasson.  “While continuing to work through pharmacy margin pressure, we were able to achieve improved top-line pharmacy growth as our retail pharmacy market share for the fiscal year increased 30 basis points to 19%.  Finally, we maintained solid expense control in the fourth quarter and are moving forward with the implementation of our previously announced cost-reduction initiative to achieve $1 billion in savings by the end of fiscal 2017.”

Walgreens realized a net loss determined in accordance with generally accepted accounting principles for the fiscal 2014 fourth quarter of $239 million, compared with net earnings of $657 million in the same quarter a year ago.  Net loss per share for the quarter was 25 cents, compared with earnings of 69 cents per diluted share in the year-ago quarter.  This year’s quarter was negatively impacted by an $866 million, or 90 cents per diluted share, non-cash loss on the amendment and exercise during the quarter of the company’s Alliance Boots call option.

Adjusted fiscal 2014 fourth quarter net earnings were $714 million, a 1.7% increase.  Adjusted net earnings per diluted share for the quarter increased 1.4% to 74 cents, compared with 73 cents per diluted share in the year-ago quarter.  This year’s fourth quarter earnings adjustments had a net positive impact of $953 million or 99 cents per diluted share.

The combined synergies for Walgreens and its strategic partner, Alliance Boots, in fiscal 2014 were $491 million.  The joint synergy program is estimated to deliver fiscal 2015 combined synergies of approximately $650 million.  Alliance Boots contributed 6 cents per diluted share to Walgreens fourth quarter 2014 adjusted net earnings.  The company estimates that the accretion from Alliance Boots in the first quarter of fiscal 2015 will be an adjusted 10 to 11 cents per diluted share, including a 2-cent benefit related to Alliance Boots’ acquisition of its partner’s interest in a joint venture.  This estimate does not include amortization expense, the impact of AmerisourceBergen warrants or one-time transaction costs.

During fiscal 2014, the company generated operating cash flow of $3.9 billion and free cash flow of $2.8 billion.  Walgreens also increased its quarterly dividend rate declared in August by 7.1% to 33.75 cents per share, consistent with the company’s goal of returning cash to shareholders.  This marked the 39th consecutive year in which Walgreens increased its shareholder dividend.

GAAP total gross profit dollars increased $136 million, or 2.6%, compared with the year-ago fourth quarter, with gross profit margins decreasing 90 basis points versus the year-ago quarter to 28 as a percentage of sales.  Adjusted gross profit dollars increased $133 million, or 2.6%, compared with the year-ago fourth quarter.

Pharmacy gross profit dollars were negatively impacted by lower third-party reimbursement and generic drug price inflation, which were partially offset by an increase in the brand-to-generic drug conversions compared with the year-ago quarter.  Both pharmacy and front-end margins benefitted from purchasing synergies from the company’s joint venture with Alliance Boots.

The company opened or acquired 46 new drug stores in the fourth quarter compared with 33 in the year-ago quarter.  In fiscal 2014, Walgreens added a net gain of 21 new drug stores in addition to 70 net new drug stores through acquisitions.

At August 31, Walgreens operated 8,309 locations with a presence in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  The company has 8,207 drug stores nationwide, a net gain of 91 compared with a year ago.  Walgreens also operates infusion and respiratory services facilities, specialty pharmacies and mail service facilities, and manages more than 400 Healthcare Clinic and provider practice locations around the country.  Walgreens digital Business includes Walgreens.com, drugstore.com, Beauty.com, SkinStore.com and VisionDirect.com

Source: Retailing Today 

10/1/2014

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

Economic activity in the manufacturing sector expanded in September for the 16th consecutive month, and the overall economy grew for the 64th 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 September PMI registered 56.6 percent, a decrease of 2.4 percentage points from August’s reading of 59 percent, indicating continued expansion in manufacturing.  The New Orders Index registered 60 percent, a decrease of 6.7 percentage points from the 66.7 percent reading in August, indicating growth in new orders for the 16th consecutive month.  The Production Index registered 64.6 percent, 0.1 percentage point above the August reading of 64.5 percent.  The Employment Index grew for the 15th consecutive month, registering 54.6 percent, a decrease of 3.5 percentage points below the August reading of 58.1 percent.  Inventories of raw materials registered 51.5 percent, a decrease of 0.5 percentage point from the August reading of 52 percent, indicating growth in inventories for the second consecutive month.  Comments from the panel reflect a generally positive business outlook, while noting some labor shortages and continuing concern over geopolitical unrest.”

Manufacturing expanded in September as the PMI registered 56.6 percent, a decrease of 2.4 percentage points when compared to August’s reading of 59 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 September PMI indicates growth for the 64th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 16th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through September (55.2 percent) corresponds to a 4.0 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for September (56.6 percent) corresponds is annualized, it corresponds to a 4.4 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 15 are reporting growth in September.

Source: Institute for Supply Management 

September 30, 2014

The Conference Board Consumer Confidence Index, which had increased in August, declined in September.  The Index now stands at 86.0, down from 93.4 in August.  The Present Situation Index decreased to 89.4 from 93.9, while the Expectations Index dropped to 83.7 from 93.1 in August.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence retreated in September after four consecutive months of improvement.  A less positive assessment of the current job market, most likely due to the recent softening in growth, was the sole reason for the decline in consumers’ assessment of present-day conditions.  Looking ahead, consumers were less confident about the short-term outlook for the economy and labor market, and somewhat mixed regarding their future earnings potential.  All told, consumers expect economic growth to ease in the months ahead.”

Consumers assessed current conditions less favorably in September compared to a month ago.  Their view of business conditions was virtually unchanged: those saying conditions are “good” fell minutely, from 23.5 to 23.4 percent, while those claiming business conditions are “bad” held constant at 21.3 percent.  Consumers’ appraisal of the job market declined more appreciably, with the proportion stating jobs are “plentiful” falling from 17.6 percent to 15.1 percent.  Those claiming jobs are “hard to get” was barely changed, at 30.1 percent versus 30.0 percent in August.

Consumers’ optimism about the short-term outlook declined considerably in September.  The percentage of consumers expecting business conditions to improve over the next six months fell from 20.8 percent to 18.6 percent, while those expecting business conditions to worsen rose from 9.9 percent to 12.0 percent.  Consumers’ outlook for the labor market likewise took a downturn.  Those anticipating more jobs in the months ahead fell from 17.8 percent to 15.2 percent, while those anticipating fewer jobs rose from 15.2 percent to 17.8 percent.  The proportion of consumers expecting growth in their incomes rose in September to 16.8 percent, compared to 15.5 percent in August.  However, the proportion expecting a drop in income also rose – to 13.4 percent versus 11.6 percent a month ago.

Source: The Conference Board

September 29, 2014

For the U.S. as a whole, temperatures will trend similar to last year and below normal, but there will be a split in trends across the nation with warmer temperatures in the West and cooler temperatures in the more densely populated East.  The month will begin with warm weather across much of the nation and that will continue into the Columbus Day weekend in the East befor turning cooler.  The Northwest region will trend wetter than last year, but it still remains drier than normal, while the Southwest will be wetter than last year and normal.  Most of the East will trend drier than normal, but we’ll have to keep an eye out for any tropical disturbances, especially in Florida, although tropical activity overall will still be low.  Cooler temperature trends in the East will help to offset warmer trends in the western half of the nation.  Demand for fall apparel, furnace filters, and comfort foods should be stronger in the East compared to last year.

Source: Retailing Today, Weather Trends International

September 24, 2014

According to Deloitte’s annual retail holiday sales forecast, steadily improving economic fundamentals should moderately boost holiday sales in stores and online this year.

“Income, wage and job growth are positive indicators heading into the holiday season,” said Daniel Bachman, Deloitte’s senior U.S. economist.  “Debt levels remain at historical lows, and stock market gains coupled with increasing home prices have a wealth effect on consumers, which may encourage increased spending compared with prior years.  Although consumers are watching tensions unfold in the Middle East and Ukraine, the improvement in their economic situation should more than offset the foreign conflicts’ impact on consumer confidence and retail sales.  Despite recent events in energy-producing areas of the world, gas prices have held steady, which may also sustain consumers’ spending power.”

Deloitte’s retail and distribution practice expects total holiday sales to climb to between $981 and $986 billion, representing a 4 to 4.5% increase in November through January holiday sales (excluding motor vehicles and gasoline) over last season.  This growth rate is a moderate improvement over last year’s 2.8% gain.  Additionally, Deloitte forecasts a 13.5 to 14% increase in non-store sales in the online and mail order channels during the 2014 holiday season.

“While online sales continue to climb, digital customer interactions through both virtual and physical store channels present greater sales opportunities than online or mobile commerce alone,” said Alison Paul, vice chairman, Deloitte LLP and retail and distribution sector leader.  “Our research indicates that 84 percent of shoppers use digital tools before and during their trip to a store.  Additionally, those shoppers convert, or make a purchase, at a 40 percent higher rate than those who do not use such devices during their shopping journey.”

Deloitte forecasts that digital interactions will influence 50%, or $345 billion, of retail sales this holiday season.  This figure reflects the extent to which consumers’ use of desktop and laptop computers, tablets and smartphones influence brick-and-mortar store sales.

“Retailers should focus on the right functionality, rather than more functionality, when creating digital experiences this holiday season.  Rather than offer their full e-commerce site on a mobile device, for example, retailers may be more effective by helping consumers compare prices, scan through local assortments, and navigate the store.  Retailers that better understand how consumers make purchasing decisions, then deliver tools that support that process in a way that is consistent and complementary across online, mobile and store channels – may have the advantage this holiday season,” Paul said.

Source: Retailing Today