Author: Helen Thomas

September 24, 2014

Sales of newly built, single-family homes increased 18 percent in August to a seasonally adjusted annual rate of 504,400 units in August, the highest level in six years, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“This jump in sales activity is in line with our latest surveys, which indicate builders are seeing increased traffic and more serious buyers in the market for single-family homes,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“This robust level of new home sales activity is a good sign that the housing recovery is moving towards higher ground,” said NAHB Chief Economist David Crowe.  “Historically low mortgage rates, attractive home prices and firming job and economic growth should keep the housing market moving forward in 2014.”

Regionally, new home sales rose 50 percent in the West, 29.2 percent in the Northeast and 7.8 percent in the South.  Sales were unchanged in the Midwest.

The inventory of new homes for sale edged up to 203,000 in August, which is a slim 4.8 month supply at the current sales pace.

Source: National Association of Home Builders

September 24, 2014

More costumes than ever will be flying off the shelves as Americans gear up to celebrate the spookiest holiday of the year, according to NRF’s Halloween Consumer Spending Survey.  More than two-thirds (67.4%) of celebrants will buy Halloween costumes for the holiday, the most in the survey’s 11 year history.  The average person will spend $77.52 this Halloween, compared to $75.03 last year.  Total spending on Halloween this year will reach $7.4 billion.

“As one of the fastest-growing consumer holidays, Halloween has retailers of all shapes and sizes preparing their stores and websites for the busy fall shopping season,” said NRF President and CEO Matthew Shay.  “There’s no question that the variety of adult, child and even pet costumes now available has driven the demand and popularity of Halloween among consumers of all ages.  And, with the holiday falling on a Friday this year, we fully expect there will be a record number of consumers taking to the streets, visiting haunted houses and throwing unforgettable celebrations.”

Party-goers will splurge on spooky and fun garb to wear this year as $2.8 billion will be spent on costumes overall.  Specifically, celebrants will shell out $1.1 billion on children’s costumes, and $1.4 billion on adult costumes.  It is clear Fido and Fluffy will not be forgotten:  Americans will spend $350 million on costumes for their furry friends.

Candy and greeting cards alike will be popular items this season, as consumers will spend $2.2 billion on candy this year and 35.9 percent of people will be sending Halloween greeting cards.  With Americans planning to spend $2 billion on decorations for the frightful holiday, life-size ghosts, pumpkins and festive decor will be aplenty on lawns and doorsteps throughout the country.

Consumers will celebrate the holiday in many different ways, but topping the list of planned activities is handing out candy (71.1%), while others will decorate their homes and yards (46.7%), and dress in costume (45.8%).  One-third of Americans will throw or attend a party (33.4%), which is up from last year (30.9%).

Much like last year, consumers will hit the stores and the Internet early to get the first pick of costumes and candy.  According to the survey, nearly one-third of celebrants (32.1%) say they will start their Halloween shopping before the first of October.  And, while 43.3 percent of celebrants kick off their shopping in the first two weeks of October, one-quarter (24.6%) will wait until the last minute and shop the last two weeks of October.

While the bulk of Americans will look for costume inspiration online (34.2%) or in a retail store or costume shop (33%), Pinterest is a growing source of inspiration this year.  The survey found 11.4 percent of Americans will turn to Pinterest for costume ideas, up from 9.3 percent last year.  Young adults will drive the most Pinterest traffic:  21.2 percent of 18-24 year olds will turn to the popular site for ideas, as will 21.0 percent of 25-34 year olds.

“Social media is a great tool for consumers to find inspiration for all of their Halloween activities, including finding tips for decorating their homes and yards, looking for personal and even family costume ideas, and even finding the best deals from retailers,” said Analyst Pam Goodfellow.  “As the popularity of Halloween continues to grow to unseen levels, there is no doubt that Americans this year will find ways to get in the spirit, looking for affordable, fun ways to celebrate with their families.”

For some consumers, the U.S. economy is still top-of-mind.  According to the survey, 18.8 percent say the state of the U.S. economy will impact their Halloween spending plans.  Specifically, nearly two in five (19.7%) of those impacted will utilize their creative skills and make their own costumes rather than buying a new one this Halloween.

Source: National Retail Federation

September 23, 2014

Following fourth quarter results that missed Wall Street expectations, Ascena Retail is looking ahead to fiscal 2015, which CEO David Jaffe said will see the continuation of a critical, multi-year investment to build the company’s omnichannel platform.

The company reported net earnings of $15.7 million, compared with $29.8 million in the year-ago period.

Revenues for the quarter were $1.18 billion, compared with $1.20 billion in the prior year.  The company attributed the decrease challenging tween market comditions at Justice and inventory-related issues at Lane Bryant.  Results were partially offset by positive comp growth at Maurices and Catherines and new strong growth at Maurices.  Total same-store sales decreased by 2%.

“Despite mixed results across our portfolio and continuing soft traffic patterns, fourth quarter EPS was in line with our expectations.  We have yet to see sustained evidence of market improvement, and as a result, are maintaining focus on inventory levels and expense management, developing an integrated ecommerce platform for our customers, and driving efficiency improvements throgh our strategic investments.  Our final brand is in the process of moving into our retail distribution center in Ohio, and we remain on track to have all our brands operating out of our new ecommerce fulfillment center by spring of calendar 2015.  We continue to create a business model that will drive sustainable long term value for shareholders.”

Source: Retailing Today

September 19, 2012

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.2 percent in August to 103.8, following a 1.1 percent increase in July, and a 0.7 percent increase in June.

“The LEI continued to rise in August, although at a slower rate than in July,” said Ataman Ozyildirim, Economist at The Conference Board.  “The LEI’s six-month growth trend has been held back slightly by lackluster contributions from housing permits and new orders for nondefense capital orders.  Despite concerns about investment picking up, the economy should continue expanding at a moderate pace for the remainder of the year.”

“The leading indicators point to an economy that is continuing to gain traction, but most likely won’t repeat its stellar second quarter performance in the second half,” said Ken Goldstein, Economist at The Conference Board.  “Meanwhile, the CEI, a measure of current economic activity, continued to expand through August, amid improving personal income, employment and retail sales.  However, industrial production registered a slight decrease for the first time in seven months.”

The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.2 percent in August to 109.7, following a 0.1 percent increase in July, and a 0.3 percent increase in June.

The Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.3 percent in August to 125.1, following a 0.3 percent increase in July, and a 0.4 percent increase in June.

Source: The Conference Board

September 19, 2014

Investors don’t seem to care that Home Depot’s data breach is being characterized as the largest ever in the retail sector with shares of the company hitting a new high on Friday.

Home Depot shares touched a 52-week high of $93.75 on Friday, a day after the company disclosed details about an extensive data breach which went undetected for months and compromised the information of 56 million customers.

The company confirmed that the malware used in its recent breach has been eliminated from its U.S. and Canadian networks and provided new details about the completion of a major payment security project designed to increase data security.  The project provides enhanced encryption of payment data at the point of sale in the company’s U.S. stores, offering significant new protection for customers, the company said.  Roll-out of enhanced encryption to Canadian stores will be complete by early 2015.  Canadian stores are already enabled with EMV or “Chip and PIN” technology.

Despite the expense of the IT investigation and remediation efforts, the strength of Home Depot’s business during the period when hackers were stealing customers’ data enabled it to increase its full year profit forecast by two cents to $4.54.  While the updated guidance includes various expenses already incurred, it does not reflect potentially substantial accruals for future losses the company said are probably but cannot be quantified at this time.

Source: Retailing Today

September 19, 2014

The merger between Albertsons and Safeway is expected to close in a few months and when it does the combined company already has a new senior leadership and field operations structure in place.

The companies late Friday announced key leadership positions it said drew on strong talent within both organizations to build an innovative, customer-focused and growth-driven company.

“We are confident in this team’s ability to build a great company that’s positioned to win over the long term by earning the loyalty of grocery shoppers in every market we serve and delivering superior operational and financial results,” said Safeway president and CEO Robert Edwards.

Edwards will serve as CEO of the combined company once the deal closes and current Albertsons CEO Bob Miller will become executive chairman.  The combined company will operate nearly 2,400 stores under banners such as Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, ACME, Albertsons, Jewel-Osco, Lucky, Shaws, Star Market, Super Saver, Amigos, Market Street and United Supermarkets.

“We know the best way to grow our business is to have the highest quality fresh departments, lower prices, clean, well-stocked stores and the best customer service in the market,” Miller said.  “Our teams will focus on delivering what customers want locally, and we will give our store teams more flexibility to make decisions that are right for their neighborhoods.  The division teams will have the responsibility to have the right assortment for their markets.”

Shareholders of both companies approved the merger on July 25 and the deal is now under review by the Federal Trade Commission but is expected to close during the fourth quarter.  The new company will be comprised of three regions and 14 retail divisions that will be supported by corporate offices in Boise, ID, Pleasanton, CA, and Phoenix, AZ.

Source: Retailing Today

September 18, 2014

Led by a steep 31.7 percent decline in multifamily production, nationwide housing starts fell 14.4 percent to a seasonally adjusted annual rate of 956,000 units in August, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Single-family housing starts dropped 2.4 percent to a seasonally adjusted annual rate of 643,000 units.

“The August drop in multifamily starts is not too surprising, given how volatile the numbers have been the last 18 months,” said David Crowe, chief economist of the National Association of Home Builders (NAHB).  “And while single-family starts registered a slight decline, low mortgage rates, affordable home prices and pent up demand will keep single-family production moving forward in 2014.”

“Our members are telling us that traffic to new model home sites and sales expectations are on the rise,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “Despite the monthly blip, single-family starts are still 8 percent above last year’s level.”

Combined housing starts fell in all regions of the country.  The Northeast, Midwest, South and West posted respective drops of 12.9 percent, 10.3 percent, 10.9 percent and 24.7 percent.

Issuance of building permits registered a 5.6 percent loss to a seasonally adjusted annual rate of 998,000 units in August.  Multifamily permits fell 12.7 percent to 372,000 units while single-family permits decreased 0.8 percent to 626,000 units.

Regionally, the Northeast, Midwest, South and West registered overall permit losses of 11.6 percent, 12.4 percent, 0.6 percent and 8.3 percent, respectively.

Source: National Association of Home Builders

September 18, 2014

Solid same store sales growth at Rite Aid caused second quarter profits to surge but looming pressure on pharmacy margins prompted the company to reduce its full year outlook.

Rite Aid reported revenues of $6.5 billion for its second quarter ended August 30, representing a 3.9% lift credited to rising pharmacy same-store sales.  Rite Aid revised its year-end guidance, however, based on anticipated lower pharmacy margins going forward.

“In the second quarter, our team of dedicated Rite Aid associates worked together to execute our strategy and deliver results that reflect growth in net income and adjusted EBITDA and significant increases in same-store sales and prescription count,” stated Rite Aid chairman and CEO John Standley.  “Heading forward, while we believe that our key initiatives will continue to drive top-line growth, we are revising our guidance based on lower than anticipated pharmacy margin in the second half of fiscal 2015.  As we navigate these headwinds, we will remain focused on growing our business, generating continued operational efficiencies and positioning our associates to deliver a consistently outstanding experience for our customers.”

Same-store sales for the quarter increased 4.1% over the prior year, consisting of a 1.1% increase in front-end sales and a 5.6% increase in pharmacy sales.  Pharmacy sales included an approximate 199 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores increased 3.7% over the prior year period.

Prescription sales accounted for 68.8% of total drug store sales, and third-party prescription revenue was 97.5% of pharmacy sales.

Net income was $127.8 million or $0.13 per diluted share compared to last year’s second quarter net income of $32.8 million or $0.03 per diluted share.  The improvement in net income resulted primarily from an increase in adjusted EBITDA, a lower LIFO charge due to pharmacy inventory reductions and a $62.2 million loss on debt retirement in the prior year, partially offset by higher income tax expense.

Adjusted EBITDA was $364.2 million or 5.6% for the second quarter compared to $341.6 million or 5.4% of revenues for the like period last year.  Adjusted EBITDA improved due to an increase in front-end and pharmacy gross profit, partially offset by an increase in selling, general and administrative expenses related to the company’s higher level of sales.

The improved pharmacy gross profit was driven by the increase in pharmacy revenues and the impact on inventory valuation related to the company’s transition to its new drug purchasing and delivery arrangement with McKeeson, partially offset by lower reimbursement rates.  The net effect on inventory valuation resulting from the transition to the outsourced McKesson arrangement is not expected to be material to fiscal 2015 results, but did increase gross profit, adjusted EBITDA and pre-tax income by approximately $40 million in the second quarter.

In the second quarter, the company relocated 5 stores, remodeled 117 stores and expanded 1 store, bringing the total number of wellness stores chainwide to 1,433.  The company also opened 1 store and closed 10 stores, resulting in a total store count of 4,572 at the end of the second quarter.

Based upon current estimates for reimbursement rates and anticipated lower profitability from new generics and generic drugs that recently lost exclusivity, the company is expecting decreases in pharmacy margin in the second half of fiscal 2015 as compared to its prior estimates and therefore is lowering its guidance for adjusted EBITDA, net income and net income per diluted share.  Adjusted EBITDA is expected to be between $1.2 billion and $1.275 billion.  Net income is expected to be between $223 million and $333 million and income per diluted share between $0.22 and $0.33.  The company is also narrowing guidance for sales and same-store sales.  Sales are expected to be between $26 billion and $26.3 billion and same-store sales to range from an increase of 3% to an increase of 4% over Fiscal 2014.  Capital expenditures are expected to be approximately $525 million.

Source: Retailing Today

September 17, 2014

Builder confidence in the market for newly built, single-family homes rose for a fourth consecutive month in September to a level of 59 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.  This latest four-point gain brings the index to its highest reading since November of 2005.

“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time home buyers,” said NAHB Chief Economist David Crowe.  “Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor.”

Derived 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 posted gains in September.  The indices gauging current sales conditions and traffic of prospective buyers each rose five points to 63 and 47, respectively.  The index gauging expectations for future sales increased two points to 67.

Builder confidence also rose across every region of the country in September.  Looking at the three-month moving average for each region, the Midwest registered a five-point gain to 59, the South posted a four-point increase to 56, the Northeast recorded a three-point gain to 41 and the West posted a two-point increase to 58.

Source: National Association of Home Builders

September 16, 2014

• Millennials will spend over $2 trillion on home purchases and rent in the next five years.
• Millennials’ housing aspirations are not so different than previous generations.
• Most plan to purchase homes and live in suburbs, and nearly all already have cars.

Millennials will play a critical role in shaping housing demand over the next five years, concludes a new report by The Demand Institute (TDI).  They will spend $1.6 trillion on home purchases and $600 billion on rent, more on a per-person basis than any other generation in the next five years.  Millennials will make up one in every four dollars spent on housing over this period.

According to the report, there will be 8.3 million new millennial households formed between now and the end of 2018 as these young adults increasingly venture out on their own.  While most of these new households will rent, many existing millennial households will purchase homes.  The vast majority plan to buy a home in the future.

Released today by The Demand Institute, a non-advocacy, non-profit think tank jointly operated by The Conference Board and Nielsen, the report Millennials and Their Homes: Still Seeking the American Dream finds that, in contrast to the common refrain about Millennials, these young adults have similar aspirations and intentions as previous generations when it comes to housing.  The vast majority plan to own homes, and nearly all already have cars.  Most planning to move intend to have their next home in the suburbs, not the city.

Millennials and Their Homes: Still Seeking the American Dream, examines the demand for housing among the youngest adults, who will drive a significant portion of this market over the next five years.  This analysis is supplemented with proprietary economic and consumer research.  The report is the result of an 18-month research program that includes in-depth interviews with 10,000 U.S. consumers, including more than 1,000 Millennials, along with analysis of 2,200 cities and towns in America and projections of the national and regional U.S. housing markets.  The findings offer insight into the forthcoming housing choice of adults aged 18-29 to help business and policy leaders identify opportunities to better meet the needs and aspirations of America’s newest household heads.

“A fundamental question abou Millennials is whether their coming of age in the Great Recession has shaped their goals and aspirations to be different from those of previous generations,” said Louise Keely, President of The Demand Institute and Senior Vice President at Nielsen.  “We found that, while this generation has many unique characteristics when it comes to their housing choices, they share many of the same intentions as young adults in previous decades.  As Millennials’ economic situations strengthen, their demand will be important drivers of the housing market.”

“One important difference between Millennials and young adults in previous decades is the unique financial challenges of home ownership today, resulting from graduating into a weak job market with growing student loan debt,” said Jeremy Burbank, Vice President at The Demand Institute and Nielsen.  “Many Millennials are open to alternative approaches to housing finance, including single-family rentals and rent/own hybrid contracts such as lease-to-own.”

Source: The Conference Board