Author: Helen Thomas

August 20, 2014

Recognizing that a number of the best deals of the summer are still to come, some families have only scratched the surface of their back-to-school shopping lists as of mid-August.  According to NRF’s latest Back-to-School/College Surveys, the average family with children in grades K-12 completed just half (49.9%) of their shopping by that time, down slightly from last year (52.1%).

“As the shopping season draws to a close, budget-conscious parents are likely hoping that end-of-summer sales and promotions will be just what they need to wrap up their school lists,” said NRF President and CEO Matthew Shay.  “Much of the delay this summer could also stem from families holding out for a sales tax holiday in their state, as well as from influential teenagers who want to first see what their friends are buying before they ask mom and dad to commit to their fall needs.”

According to the survey, as of August 12, fewer families had stepped out to take advantage of retailers’ special school savings opportunities; specifically, one-quarter (23.6%) had not started shopping yet, up from 20.9 percent last year.  However, there were some who were eager to get started as they looked to spread out their spending: 15.7% say they have completed their lists, which is about the same amount as last year.

College families on the other hand, got a good jump on retailers’ sales and promotions this summer: 23.4 percent say they are completely finished with their lists, up from 20 percent last year.  Additionally, slightly fewer families this year say they haven’t started shopping (26.2% vs. 28.8% last year).

Hoping to trim the costs where they can, some back-to-school shoppers made it a point to look for coupons and sales while scouring for new footwear, supplies, electronic items and apparel.  And, according to the most recent survey, 15.2 percent of back-to-school shoppers said 100 percent of their purchases were influenced by coupons, sales and promotions, the highest percent since 2011; 14.8 percent of college students and their families say 76-99 percent of their shopping was influenced by coupons, also the highest for that range in the survey’s history.

In July, NRF found eight in 10 (81.1%) families with children in grades K-12 said the state of the economy would impact their school spending in some way; seven out of 10 (77.2%) college students and their families agreed.

In the survey, when asked what payment method back-to-school families used most often to purchas school necessities, 44.9 percent say they have or will use their debit cards more than cash (24.9%) and credit cards (27.9%).  College students and their families have or will use debit cards (43.4%), followed by credit cards (33.7%) and cash (18.9%).

To wrap up their lists, most back-to-school shoppers will shop at discount (54%), department (47.7%) and clothing stores (35%), and online (24.8%).  One-third (33.7%) will visit an office supply store and 10 percent will shop local and support small business.

Back-to-college shoppers will finish their shopping at discount (47.4%), department (40.3%) and clothing stores (26.8%).  The most in the survey’s history – 37.4 percent will wrap up their lists online.

School Requirements for Supplies, Electronic Purchases

To gauge the level of influence a school may have on both back-to-school and college shoppers’ intentions to buy supplies and/or electronics, NRF asked parents this year about specific course/school requirements.

According to the survey, nearly one in five parents (18.2%) say that 100 percent of their back-to-college electronics purchases were influenced by course/school requirements.

For back-to-school families, whose lists often include supplies needed for the classroom, 21 percent of parents say that 100 percent of the supplies they buy are influenced by classroom and school requirements.  When it comes to electronics, 16.4 percent said that every electronic item they buy is influenced by classroom lists and school requirements.

“As schools look to parents more and more to help fund classroom needs, parents are looking for as many ways as they can to cut costs, and that could very well be why we’re seeing more people seek out coupons and sales this summer.  Low prices at the end of the season will definitely drive more college and school families to shop last minute, especially for those with specific items they need in order to start the school year.”

Source: National Retail Federation

August 14, 2014

Nordstrom’s second quarter earnings were in line with its expectations.  The results come two weeks after the company said it was acquiring Trunk Club, a men’s personalized clothing service, for $350 million.

Profit for the quarter remained flat compared to last year’s second quarter at $183 million.  Net sales for the quarter were $3.3 billion, a 6.2% increase from $3.1 billion in the prior-year quarter.  Comparable sales increased 3.3%.

Nordstrom Rack net sales increased $114 million, or 18%, compared with the same period in fiscal 2013, reflecting incremental volume from existing stores and the impact of 25 store openings since the second quarter of fiscal 2013.  Nordstrom Rack comparable sales increased 4%.

The Nordstrom Rewards loyalty program continues to contribute to overall results, with members shopping more frequently and spending more on average than non-members.  The company opened nearly 370,000 new accounts in the second quarter, an increase of 18% compared with the same period last year.  With 4.1 million active members, sales from members in the second quarter increased 11% in the second quarter and represented 44% of sales, from 42% for the same period last year.

Nordstrom entered into an agreement to acquire Trunk Club July 31.  Founded in 2009, Trunk Club delivers a stylist service that combines the convenience of online with a high-touch, personalized shopping experience.  Trunk Club is a high-growth company and expects to achieve operational profitability and more than double its annual sales to more than $100 million.  The company believes this acquisition represents a natural extension of its core business, aligns with its strategic priorities around a relevant customer experience and accelerates entry into this fast-growing market.

Trunk Club will operate as an independent, wholly owned subsidiary and will be managed by its current leadership.  The transaction is expected to close in the third quarter, subject to closing conditions including customary regulatory and shareholder approvals.

Nordstrom plans to open three full-line stores (The Woodlands, Texas; Calgary, Canada and Jacksonville, Florida) later this year.  To date in fiscal 2014, the company opened 11 Nordstrom Rack stores and plans to open 16 additional stores during the remainder of the year.  In the second quarter of 2014, the company opened a Nordstrom Rack store in Manhasset, New York.

Source: Retailing Today

August 19, 2014

A 6.4% second quarter same store sales increase at U.S. stores enabled Home Depot to handily exceed analysts’ profit estimates and prompted the company to increase its full year outlook.

The nation’s largest home improvement retailer said its sales for the quarter ended August 3 increased 5.7% to $23.8 billion and net income grew 14.2% to $2.1 billion from slightly less than $1.8 billion the prior year.  Earnings per share increased 22.6% to $1.52, seven cents better than analysts forecast, from $1.24 the prior year.  Home Depot’s profit performance was aided during the quarter by aggressive share repurchase activity which reduced the number of outstanding shares by 6.2%.  The company spent $3.5 billion during the first six months of the year buying its own shares.

“In the second quarter, our spring seasonal business rebounded, and we saw strong performance in the core of the store and across all of our geographies,” said Frank Blake, Home Depot’s chairman and CEO.

The company’s overall same store sales growth, including locations in Canada and Mexico was 5.8%.  The growth was driven by a 4.2% increase in the number of transactions and a 1.8% increase in average transaction size which was $58.43 in the second quarter of 2014 compared to $57.39 in the second quarter the prior year.

Based on the strong second quarter performance, Home Depot confirmed its forecast for 2014 sales growth of 4.8% and increased its earnings per share target to $4.52.  The company also said it planned to spend another $3.5 billion during the back half of the year buying its own shares.

Source: Retailing Today

August 18, 2014

Builder confidence in the market for newly built, single-family homes rose two points to 55 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today.  This third consecutive monthly gain brings the index to its highest level since January.

“As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished 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 August.  The indices gauging current sales conditions and expectations for future sales each rose two points to 58 and 65 respectively.  The index gauging traffic of prospective buyers increased three points to 42.

“Each of the three components of the HMI registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring,” said NAHB Chief Economist David Crowe.  “Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand.”

Every region saw a gain in its three-month moving average HMI score in August.  The Midwest posted a seven-point increase to 55 and the West registered a four-point gain to 56.  The Northeast posted a two-point gain to 38 and the South was up one point to 52.

Source: National Association of Home Builders 

August 18, 2014

Dollar General bid $78.50 for Family Dollar this morning in a $9.7 billion deal that exceeds the $74.50 a share Dollar Tree offered for Family Dollar on July 28.

The deal would create a small format powerhouse with nearly 20,000 stores in 46 states and sales of more than $28 billion.

“For Family Dollar shareholders, our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium and immediate liquidity for their shares,” said Rick Dreiling, Dollar General’s chairman and CEO.  “We look forward to expeditiously entering into constructive discussions with Family Dollar in order to sign a definitive merger agreement that provides enhanced value to Family Dollar shareholders and enables Dollar General to realize the benefits of this combination.”

The $78.50 per share Dollar General offers represents a 29.4% premium over the $60.66 closing price of Family Dollar shares the day before Dollar Tree made its offer.  The deal Dollar Tree offered Family Dollar is valued at about $8.5 billion and involves Family Dollar shareholders receiving $59.60 in cash and $14.90 in equivalent Dollar Tree shares.  The offer has already been unanimously approved by the boards of both companies.

To get the deal done, Dollar General said it had done significant economic and antitrust analysis and was prepared to commit to divesting as many as 700 stores.  The company also committed to paying the $305 million termination fee Family Dollar will owe Dollar Tree if the previously announced deal falls through.  In addition, Dollar General CEO Dreiling said he would remain in his current role to oversee integration of the companies after previously indicating he would retire in 2015.

Dollar General and Family Dollar operate complementary business – similar size stores with similar product assortments – which is expected to result in operational synergies and annual savings of between $550 and $600 million three years after the proposed merger is complete, according to Dollar General.

“Dollar General has developed extensive integration plans across work streams.  The expected synergies would be derived from sales growth driven by an improved merchandise offering and store presentation, purchasing and sourcing efficiencies, distribution and transportation optimization and administrative savings,” according to the company.

Source: Retailing Today 

Health Costs, Weak Store Traffic Hinder Wal-Mart

August, 14, 2014

The world’s largest retailer is having a hard time returning to growth and doesn’t expect sales to improve in the U.S. for much of the rest of the year.

Wal-Mart Stores Inc. (WMT -0.66%) cut its earnings guidance for the year after it posted its seventh straight quarterly decline in U.S. store traffic and said growth in online sales would slow.  It cited sluggish consumer spending and higher costs associated with building new smaller-format stores, increased health-care expenses, and greater investments in its e-commerce operations.

Sales excluding newly opened or closed stores in the U.S. were flat.  That was a mild improvement after five straight quarters of declines, but nevertheless underscored the challenges facing a division that made up 60% of the retail giant’s $476 billion in revenue last year yet hasn’t seen positive comparable-store sales since 2012.

“We wanted to see stronger comps in Wal-Mart U.S. and Sam’s Club,” Chief Executive Doug McMillon said.  “Stronger sales in the U.S. businesses would’ve also helped our profit performance.”

A rough streak of results from retailers is raising concerns about the health of the consumer as the economy chugs through the second half of the year.  The bad news came not just from Wal-Mart, but also from Macy’s Inc. (M -0.67%), Michael Kors Holdings Ltd. (KORS -0.41%) and Kate Spade & Co. (KATE +0.29%), companies that until recently had weathered the weak demand and heavy discounting that have plagued the industry.  The Commerce Department said Wednesday that spending at U.S. retailers was flat in July.

For the three months ended July 31, Wal-Mart posted a profit of $4.09 billion, up a hair from $4.07 billion a year earlier.  Revenue rose 2.8% to $120.1 billion.

Wal-Mart investors had low expectations going into Thursday’s report.  The departure of U.S. chief Bill Simon earlier this month had stoked concerns that efforts to improve store merchandise and operations hadn’t managed to materially boost sales.  Meanwhile, Wal-Mart’s core low-income customers continue to struggle with depressed wages and cuts in government benefits.

“Our customers are still under pressure,” Chief Financial Officer Charles Holley said.  “They are concerned with their cost of living and employment.

Shoppers like Jessica Manzanares, 28 years old, continue to pinch pennies.  “All the prices are going up on gas, food, school supplies,” said the mother of three as she compared notebook prices at a Wal-Mart store in Denver.  “Notebooks used to be 97 cents, now the ones my boys want are $2.47.”

This year Ms. Manzanares is comparing school-supply prices between the dollar store chain where she is an assistant manager and a nearby Wal-Mart.  “It’s a little bit cheaper here, and a penny here and there adds up.”

One expected headwind came from health care, where costs are rising quickly as more employees sign up for coverage.  The company said it now expects to shell out an additional $500 million in health-care expenses related to increased employee enrollment and higher costs, up from the $330 million in increases it originally expected.

“Health-care costs increased approximately $180 million versus last year and were well above our initial estimates,” said Wal-Mart U.S. CEO Greg Foran, who stepped into the role this week following the departure of Mr. Simon.

The company said it now expects full-year earnings of $4.90 to $5.15 a share, down from its previous range of $5.10 to $5.45 a share.  U.S. comparable-store sales in the three months ending October 31 should be relatively flat, the company said.

Mr. Foran, who has never worked in the U.S., joined Wal-Mart in 2011 after being passed over for the top job at Woolworths Ltd. (WOW.AU +0.06%) in Australia.  He served as president of Wal-Mart China, where he presided over the company’s expansion as it tangled with compliance issues and government regulation, and was appointed head of Wal-Mart Asia in April.

Wal-Mart said it continued to spend on compliance costs, including $43 million on costs related to a continuing investigation into alleged violations of the U.S. antibribery law and changes to its global compliance program.  It also added more labor hours for employees in the front end of the store, as well as overnight stockers and bakery workers, bumping up salaries and wages by $200 million from the year before.

Wal-Mart now expects to spend an additional 5 cents to 7 cents a share on e-commerce, including building a new distribution center this year in Indiana.  It previously said it expected to spend an additional 2 cents to 4 cents a share.

The company also cut its online sales growth projections for the year to “mid-20s” from 30%.  Its online sales, as well as its smaller-format grocery stores, have been among the few positive sales drivers for the company.  During the quarter ended July 31, global online sales grew by 24% and contributed 0.3 percentage point to Wal-Mart’s U.S. sales, excluding newly opened or closed stores.  Wal-Mart brought in $10 billion in online sales last year.

“We grew faster than the market, but we didn’t grow as fast as we wanted to,” said Neil Ashe, who leads global e-commerce at Wal-Mart.

Source: The Wall Street Journal 

August 13, 2014

Facing slight headwinds from economic pressures and mounting concerns over global unrest, consumers in July cut back on discretionary spending, reflecting a trend that shows many are juggling their spending between goods and services.

NRF retail sales in July, which exclude autos, restaurants and gas, were largely unchanged over June, increasing 0.1 percent; year-over-year unadjusted sales increased 4 percent.  The Commerce Department said on Wednesday, July retail sales, which had increased 0.2 percent in June, were flat over the previous month and up 3.7 percent unadjusted year-over-year.  Much of the unexpected weakness came from a lack of spending in key areas such as furniture, home furnishings and electronics stores.

June and July’s combined year-over-year growth averages approximately 4 percent, which NRF’s Chief Economist Jack Kleinhenz believes is still on track to meet expectations of annual sales growth of at least 3.9 percent for the remainder of 2014.

“Overall, I still believe the economy and the consumer are headed in the right direction as consumer fundamentals such as positive income, employment and confidence remain relatively sturdy,” said Kleinhenz.  “Retailers right now are witnessing a choppy pattern of spending, choosing between large ticket items and other discretionary purchases, with services they may need.  Families today are still displaying behavior tht shows they continue to struggle with purchase decisions, based on needs versus wants.  It is also evident some consumers are cautious about leveraging up credit to support purchases.”

Sales in July were up against a strong showing in July 2013, making comparisons slightly more difficult.  Specifically, electronics stores sales decreased 0.1 percent over June and increased 1.3 percent year-over-year; sales at apparel and accessory stores increased a solid 0.4 percent over June and 2.7 percent year-over-year.  Health and personal care stores’ sales increased 0.4 percent seasonally adjusted over last month and a healthy 7.2 percent year-over-year.

Source: Retailing Today

August 14, 2014

Kohl’s exceeded analysts’ profit expectations in the second quarter, but it wasn’t due to top line strength and now the company has a lot riding on the back-to-school season.

The company’s sales for the second quarter ended August 2 declined to $4.242 billion from $4.289 billion and same-store sales fell 1.3% after a slight prior year comp increase of 0.9%.  Meanwhile, net income increased slightly to $232 million from $231 million, while earnings per share advanced 8.6% to $1.13 from $1.04, five cents better than analysts’ forecasts.  The earnings beat was driven by expense control and increased share repurchase activity, which reduced the number of outstanding shares.

Undeterred by the sales decline and weak underlying profit performance, Kohl’s chairman, president and CEO Kevin Mansell focused on improvements late in the quarter and the company’s positioning for back-to-school.

“We are pleased with the improvement we saw in sales as the quarter progressed,” Mansell said.  “The improvement was the most dramatic in the month of July where we achieved a positive comp.  As they consistently do, our teams did a great job of managing expenses throughout the quarter.  We enter the back-to-school season with fresh, new inventory and encouraging momentum.”

Kohl’s increased its store count by five units during the quarter to end the period with 1,160 stores in 49 states.  Four new Kohl’s stores are expected to open this fall.

Source: Retailing Today

August 14, 2014

Nationwide housing affordability dipped in the second quarter of 2014 as several markets saw a firming of home prices, according to the National Association of Home Builders/Wells Fargo Housing Opportunity (HOI), released today.

In all, 62.6 percent of new and existing homes sold between the beginning of April and the end of June were affordable to families earning the U.S. median income of $63,900.  This is down from the 65.5 percent of homes sold that were affordable to median-income earners in the first quarter.

The national median home price increased from $195,000 in the first quarter to $214,000 in the second quarter.  Meanwhile, average mortgage interest rates decreased from 4.57 to 4.44 percent in the same period.

“With interest rates near historically low levels and strengthening job growth, now continues to be a great opportunity to buy a home,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“The second quarter HOI reflects the slow but steady march toward the historic levels of price appreciation and interest rates that result in affordability levels we experienced before the mid-2000s boom,” said NAHB Chief Economist David Crowe.  “While we are seeing a slight decrease in affordability, it is still fairly high by historical standards.”

Youngstown-Warren-Boardman, Ohio-Pennsylvania claimed the title of the nation’s most affordable major housing market, as 90.4 percent of all new and existing homes sold in this year’s second quarter were affordable to families earning the area’s median income of $52,700.  Meanwhile, Cumberland, Maryland-West Virginia was the most affordable smaller market, with 97.2 percent of homes sold in the second quarter being affordable to those earning the median income of $54,100.

Other major U.S. housing markets at the top of the affordability chart in the second quarter included Indianapolis-Carmel, Indiana; Syracuse, New York; Harrisburg-Carlisle, Pennsylvania; and Scranton-Wilkes-Barre, Pennsylvania; in descending order.

Meanwhile, smaller markets joining Cumberland at the top of the affordability chart included Kokomo, Indiana; Davenport-Moline-Rock Island, Iowa-Illinois; Battle Creek, Michigan; and Lima, Ohio; in descending order.

For a seventh consecutive quarter, San Francisco-San Mateo-Redwood City, California was the nation’s least affordable major housing market.  There, just 11.1 percent of homes sold in the second quarter were affordable to families earning the area’s median income of $100,400.

Other major metros at the bottom of the affordabililty chart were Santa Ana-Anaheim-Irvine, California; Los Angeles-Long Beach-Glendale, 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 Santa Cruz-Watsonville, where 16.6 percent of all new and existing homes sold were affordable to families earning the area’s median income of $77,900.  Other small markets included Napa, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles; in descending order.

Source: National Association of Home Builders 

August 11, 2014

Import volume at major U.S. container ports is expected to hit an all-time record in August as retailers concerned about the lack of a West Coast longshoremen’s contract rush to bring holiday season merchandise into the country, according to the monthly Global Port Tracker report released today by the National Retail Federation.

“The negotiations appear to be going well but each week that goes by makes the situation more critical as the holiday season approaches,” NRF VP for supply chain and customs policy Jonathan Gold said.  “Retailers are making sure they are stocked up so shoppers won’t be affected regardless of what happens at the ports.”

Import volume at U.S. ports covered by the Global Port Tracker report is expected to total 1.54 million containers this month.  That’s the highest monthly volume since NRF began tracking import volume in 2000, topping a previous record of 1.53 million set in July and unusually high numbers seen this spring as retailers began importing merchandise early in anticipation of this summer’s contract talks.

The contract between the Pacific Maritime Association and the International Longshore and Warehouse Union expired on July 1.  Dockworkers remain on the job as both sides continue to negotiate a new agreement.  Both sides have reported that talks have been “productive,” and NRF has urged both labor and management to avoid any disruptions that could affect the flow of back-to-school or holiday merchandise.

U.S. ports followed by the report handled 1.48 million 20 ft. equivalent units in June, the latest month for which after-the-fact numbers are available.  That was down 0.38% from May but up 9.1% from June 2013.  One TEU is one 20 foot cargo container or its equivalent.

July was estimated at 1.53 million TEU, up 5.8% from the same month last year, and August is forecast at 1.54 million TEU, up 3.6% from last year.  September is forecast at 1.48 million TEU, up 2.8% from last year; October also at 1.48 million TEU, up 3.3%; November at 1.37 million TEU, up 2%; and December at 1.34 million TEU, up 2.1%.

Those numbers would bring 2014 to a total of 17.1 million TEU, an increase of 5.2% over 2013’s 16.2 million.  Imports in 2012 totaled 15.8 million.  The first half of 2014 totaled 8.3 million TEU, up 6.9% over last year.

The import numbers come as NRF is forecasting 3.6% sales growth in 2014.  Cargo volume does not correlate directly with sales but is a barometer of retailer’s expectations.

The increases in volume reflect both improvements in the economy and retailers importing merchandise early because of the contract negotiations.

U.S. GDP has increased in 11 out of the last 12 quarters, confirming that we are in a sustained period of expansion.  A significant portion of the strong upswing in imports has been due to the labor negotiations, with importers moving up shipments just in case.

Global Port Tracker covers the U.S. ports of Los Angeles/Long Beach, Oakland, Seattle and Tacoma on the West Coast; New York/New Jersey, Hampton Roads, Charleston, Savannah, Port Everglades and Miami on the East Coast, and Houston on the Gulf Coast.

Source: Retailing Today