Author: Helen Thomas

August 5, 2014

Just a few days after naming a new CEO, Target issued a preliminary update on its second quarter expenses related, in part, to the December 2013 data breach.

The company’s financial results are expected to include gross expenses of $148 million, partially offset by a $38 million insurance receivable, related to the breach.  These expenses include an increase to the accrual for estimated probable losses for what the company believes to be the vast majority of actual and potential breach-related claims, including claims by payment card networks.

“Since the data breach last December, we have been focused on providing clarity on the company’s estimated financial exposure to breach-related claims,” said John Mulligan, interim president and CEO, CFO.  “With the benefit of additional information, we believe that today is an appropriate time to provide greater clarity on this topic.”

The environment in the U.S. and Canada continues to be challenging for Target.  Mulligan added that results aren’t yet where they need to be, but was optimistic about the company’s progress, particularly in its efforts to drive U.S. traffic and sales, improve its Canadian operations and advance its digital transformation.

“With last week’s announcement that the board has chosen Brian Cornell as Target’s next chairman and CEO, we are excited to welcome Brian to the team and committed to working together to accelerate Target’s transformation and become a leading omnichannel retailer,” Mulligan said.

The company now anticipates its second quarter 2014 adjusted earnings per share will be within a range around $0.78 compared with prior guidance of $0.85 to $1.00 per share, reflecting flat comparable sales in its U.S. segment, with lower-than-expected EBITDA margin driven by promotional markdowns, as guests continue to spend cautiously and focus on value in the current environment; as well as softer-than-expected sales in its Canadian segment, combined with the impact of continued investments to clear excess inventory.

The company will provide complete second quarter results August 20.

Source: Retailing Today

August 1, 2014

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

Economic activity in the manufacturing sector expanded in July for the 14th consecutive month, and the overall economy grew for the 62nd 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, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.  “The July PMI registered 57.1 percent, an increase of 1.8 percentage points from June’s reading of 55.3 percent, indicating expansion in manufacturing for the 14th consecutive month.  The New Orders Index registered 63.4 percent, an increase of 4.5 percentage points from the 58.9 percent reading in June, indicating growth in new orders for the 14th consecutive month.  The Production Index registered 61.2 percent, 1.2 percentage points above the June reading of 60 percent.  Employment grew for the 13th consecutive month, registering 58.2 percent, an increase of 5.4 percentage points over the June reading of 52.8 percent.  Inventories of raw materials registered 48.5 percent, a decrease of 4.5 percentage points from the June reading of 53 percent, contracting after five months of consecutive growth.  Comments from the panels are generally positive, while some indicate concern over global geopolitical situations.”

Manufacturing expanded in July as the PMI registered 57.1 percent, an increase of 1.8 percentage points when compared to June’s reading of 55.3 percent.  July’s PMI reading of 57.1 is the highest reading since April 2011 when the PMI registered 58.9 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 July PMI indicates growth for the 62nd consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 14th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through July (54.4 percent) corresponds to a 3.7 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for July (57.1 percent) is annualized, it corresponds to a 4.6 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 17 are reporting growth in July.

Source:  Institute for Supply Management

July 30, 2014

• Following a strong June increase of 155,900, July showed a small loss
• States were mixed with about half showing small gains

Online advertised vacancies showed a small drop of 15,500 to 5,044,600 in July, according to The Conference Board Help Wanted OnLine Data Services.  The June Supply/Demand rate stands at 1.9 unemployed for each advertised vacancy with a total of 4.4 million more unemployed workers than the number of advertised vacancies.  The number of unemployed was 9.5 million in June.

“Labor demand continues to be at historically high levels with employer demand running at about 5 million ads each month,” said Dr. Gad Levanon, Director of Macroeconomics and Labor Markets at The Conference Board.  “While the average monthly increases have become more modest since early 2013, the overall trend has helped lower unemployment levels and reduced the U.S. Supply/Demand rate from a peak of 5.2 in June 2009 to 1.9 in June 2014.”

In July, professional occupations showed a small gain in Computer and Math (13,400) and Community and Social Services (3,500) but a drop in Healthcare (-8,300).  The Services/Production occupations showed losses with Office and Administration (-15,700) and Installation and Repair (-9,600).

Regional And State Highlights

• Fifteen of the 20 largest states posted losses in July
• Among the 50 states, 27 experienced gains while 23 declined

July Changes For States

In July, online labor demand was up in 27 states and down in 23 states.  The West and South experienced modest gains while the Northeast and Midwest posted declines.

The West experienced a modest gain of 1,800, with an increase of 1,900 in Arizona to 95,100.  Colorado grew 300, California dropped 1,800 to 546,900, and Washington fell 1,100 to 127,600.  Among the smaller states in the West, Utah gained 2,200, led by an increase in Sales and Related Occupations and Food Preparation and Serving-Related Occupations.  New Mexico rose 700, Hawaii increased by 200, Idaho dropped 1,800, and Oregon fell 600 to 68,200.

The South grew by 1,700 in July.  Out of the larger states in the region, North Carolina rose 1,300 to 128,600.  Florida and Georiga both fell by 2,500 while Texas dropped 1,400.  Maryland and Virginia both decreased by 1,000.  Among the smaller states, South Carolina was up 3,600 to 64,600.  This was the South’s largest gain, led by an increase in Education, Training, and Library Occupations and Management Occupations.  Kentucky rose 1,200.  Alabama and West Virginia increased by 1,000 and 900 respectively, while Mississippi fell by 600.

The Northeast fell 11,700, reflecting a loss of 7,100 in New Jersey.  Massachusetts dropped 3,700 to 149,400, and New York decreased by 3,400 to 303,400.  Pennsylvania rose 4,700 to 218,300.  This was the largest gain in any state and was led by an increase in Sales and Related Occupations and Installation, Maintenance, and Repair Occupations.  In the smaller states, Maine gained 800, Vermont rose 500, and New Hampshire increased by 300.  Connecticut and Rhode Island both decreased by 100.

The Midwest dropped 2,300 in July.  The largest drop occurred in Michigan (-6,500).  Illinois fell 2,100 to 201,400.  Ohio and Wisconsin fell by 1,000 and 900 respectively.  Minnesota rose 4,400 to 123,700.  This was the largest gain in the Midwest region.  Minnesota’s gain is partially due to the rise in Healthcare Practitioners and Technical Occupations and Office and Administrative Support Occupations.  Missouri fell 200.  Among the smaller states in the region, Kansas had an increase of 2,900 to 46,500, Iowa increased by 900, Indiana gained 600, and North Dakota and South Dakota inched up with gains of 400 and 100 respectively.

Metro Area Highlights

• In July, among the 20 largest metro areas, 4 (San Francisco, Minneapolis, San Jose, and Cleveland) gained and 16 declined
• Of the 52 metro areas for which Help Wanted OnLine provides monthly data, 28 lost advertisements, 21 gained, and 3 (Tucson, Louisville, and Kansas City) remained constant

Occupational Highlights

• In July, 7 of the 10 largest online job categories posted losses

Source: The Conference Board 

August 4, 2014

Each $1,000 increase in the cost of a new median-priced home price forces 206,000 prospective buyers out of the marketplace, according to a new study by the National Association of Home Builders (NAHB).

The number of households affected varies across states and metro areas and largely depends on their population, income distribution and new home prices.

Among the states, the number of households who would no longer be eligible to qualify for a mortgage based on a $1,000 increase to a median-priced home ranges from a low of 313 in Wyoming to a high of 18,250 in Texas.

“This study highlights the real effects that building regulations have on housing affordability,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “Local, state and federal government officials need to know that higher regulatory costs have real consequences for working American families.  Oftentimes, these government regulations end up pushing the price of housing beyond the means of many teachers, police officers, firefighters and other middle class workers.”

Based on national mortgage underwriting standards and incorporating the latest income distribution data from the American Community Survey and the U.S. Department of Housing and Urban Development, the report contains detailed results for more than 300 metro areas.

The analysis found that every $833 increase in fees paid during the construction process – such as the price of a construction permit or an impact fee – adds an additional $1,000 to the final price of the home.

Measured by local metro areas, the number of households who would be priced out of the market based on a $1,000 increase range from a low of 19 in Napa, California to a high of 5,742 in the New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania area.

Looking at affordable metro areas, where roughly 50 percent or more of households can afford new homes, the priced out effects are typically large and can often disqualify thousands of new home buyers, as in the case of Houston-Sugar Land-Baytown, Texas (4,234); Atlanta-Sandy Springs-Marietta, Georgia (4,135); and Las Vegas-Paradise, Nevada MSA (2,044).

Source: National Association of Home Builders

August 4, 2014

The Conference Board Employment Trends Index (ETI) increased in July.  The index now stands at 120.31, up from 119.92 (an upward revision) in June.  This represents a 6.6 percent gain in the ETI compared to a year ago.

“The six-month growth rate in the Employment Trends Index is the strongest in over two years, suggesting solid job growth is likely to continue in the coming months,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “The pickup in economic activity in recent months will likely increase the need and willingness of employers to accelerate hiring.”

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

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

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

• 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

August 1, 2014

The National Retail Federation calculated retail industry (excluding autos and gasoline) employment increased by 27,000 jobs in July.  NRF calculated that retail gained 232,000 jobs year-over-year.  The healthy and steady increase in retail employment was due to improved economic and seasonal factors in the second quarter and should provide for stronger growth in the second half of the year.

“Pickup in retail employment in July and the upward revisions to June and May are very encouraging,” NRF Chief Economist Jack Kleinhenz said.  “The increase was due in part to seasonal hiring as well as improved business and consumer conditions.  No one can guarantee smooth sailing ahead even though overall retail payrolls are encouraging.  Choppy growth will continue.”

“Recent data increasingly show that the economy is on better footing, reflecting improved consumer and business confidence.  Although the unemployment rate edged up, more seekers entered the labor force.  The nation’s retailers are adding jobs at a healthy pace.”

The U.S. Bureau of Labor Statistics Employment Situation Summary showed that total nonfarm payroll emplyment rose by 209,000 in July, slightly below industry expectations.  The unemployment rate ticked up to 6.2 percent and the civilian labor participation rate increased to 62.9 percent.

Source: National Retail Federation 

August 1, 2014

The economy generated a gain of 209,000 jobs in July, very close to the average of more than 200,000 per month over the past year.  This means that the trend in employment growth, which supported stellar second quarter GDP growth and strong consumer and business confidence, is holding up for now.  The unemployment rate has remained almost unchanged at 6.2 percent, still well above the natural rate of unemployment, which is about 5.5 percent.  This implies that the pace of job creation can continue for a few more months beyond the summer.  However, participation isn’t increasing rapidly, with baby boomers retiring en masse.  Moreover, labor productivity, which has been low for a long time, may become a more important source of growth.  These forces could also begin to create more upward pressure on wages later this year.

Source: The Conference Board

August 1, 2014

At first glance the list of the nation’s fastest growing retailers appears to be more of a hodgepodge of industry sectors than evidence of a single, defined trend.  From grocery conglomerates and discount specialty stores to home furnishing and athletic wear companies, the top players on STORES’ Hot 100 Retailers List run the gamut.  The list, published annually in the August issue of STORES Magazine, consists of retail companies that reported the greatest increase in domestic sales between 2012 and 2013.  All public and private companies with more than $300 million in sales were eligible for the list.

“The eclectic quality of the list is an upbeat indicator for retail,” said STORES Media Editor Susan Reda.  “While Albertson’s grew mainly by acquisition, Wayfair’s ascent is 12 years in the making as this online specialist benefits from renewed consumer interest in sprucing up their homes.

“It’s becoming a familiar story in our industry – growth stems from new products, innovative thinking and one-of-a-kind customer experiences,” Reda said.

Idaho-based grocery Albertsons claims the top spot on the 2014 list, with sales growth of 432.7 percent between 2012 and 2013.  Albertson’s growth – to 2013 sales of $19.5 billion – has primarily come from mergers and acquisitions.

Home furnishings companies Wayfair and Conn’s made their marks this year, landing at No. 2 and No. 4, respectively.  Boston-based Wayfair saw its sales increase 52.5 percent between 2012 and 2013, while Texas-based Conn’s sales grew 39.2 percent during that time frame.  A revitalized housing market has helped the home furnishings sector in recent years as consumers are once again investing in their homes.

Specialty retail company Ascena Retail Group secured the No. 3 spot this year.  Suffem, New York-based Ascena operates more than 3,800 stores throughout the United States and Canada, including the Justice and Dress Barn brands, and recently reported annualized revenues of more than $4.5 billion.  Sales for Ascena Retail Group grew 49.1 percent between 2012 and 2013.

Michael Kors Holdings has had tremendous staying power the past few years in terms of continued company growth, making the top 10 each of the past three years, including No. 6 this year.  The New York-based company’s U.S. sales increased 36 percent between 2012 and 2013.

No. 7 Under Armour continues to take the athletic world by storm, landing in the top 10 for the first time on sales growth of 34.8 percent.  The Baltimore-based company reported U.S. sales of $672 million in 2013.

Michigan-based grocer SpartanNash (5), Five Below (9) and Amazon.com (10) also placed in the top 10.

“Hot retailers do things better than their competitors, and they’ve clearly carved out a proposition for the consumer,” said Kantar Retail Chief Knowledge Officer Bryan Gildenberg.  “Part of that success is being at the right place at the right time with the right products, and the other part of it is being smart enough to know the differences in those factors between themselves and their competitors; in a slow growth market like 2013, share gains equal growth.”

Hot 100 List names nine companies who have “sustained sizzle”

Talk about staying power: Nine retailers are being recognized for having made the Hot 100 each year since its inception in 2006.  The sustained sizzlers, listed in order of total sales growth (and with 2014 rank):

• Amazon.com – 852% (10)
• Ascena Retail Group – 366% (3)
• O’Reilly Automotive – 225% (53)
• Urban Outfitters – 196% (39)
• J. Crew – 158% (38)
• Tractor Supply Co. – 150% (34)
• Dick’s Sporting Goods – 137% (69)
• Dollar Tree – 126% (87)
• Ross Stores – 97% (86)

The Hot 100 Retailers list is the definitive annual ranking of the fastest growing retail chains in the United States.  Rankings are determined by increases in year-over-year domestic sales between 2012 and 2013.

Source: National Retail Federation

July 31, 2014

In June 2014, annual inflation as measured by the Harmonized Index of Consumer Prices (HICP) declined in the U.S. and Japan, but was mixed across Euro Area countries compared.

Although inflation remained steady in the Euro Area as a whole, price growth slowed in Belgium (from 0.8 to 0.7 percent), France (from 0.8 to 0.6 percent), Italy (from 0.4 to 0.2 percent) and Spain (from 0.2 to 0.0 percent), while it accelerated in Germany (from 0.6 to 1.0 percent), Austria (from 1.5 to 1.7 percent) and the Netherlands (from 0.1 to 0.3 percent).  Outside the Eurozone, Sweden (0.5 percent), the United Kingdom (1.9 percent), Norway (1.8 percent) and Denmark (0.4 percent) also experienced rising prices.  Switzerland experienced the largest decline in inflation (from 0.2 to -0.1 percent), returning to deflationary territory after two months of positive price growth.

“In June, inflation in the Euro Area as a whole held steady at its lowest level (0.5 percent) since the Great Recession,” said Elizabeth Crofoot, Senior Economist with the International Labor Comparisons program at The Conference Board.  “But the broad range of inflation rates among membetr states – from negative or zero to nearly two percent – highlights the difficulty in setting a common monetary policy that will have a common impact on prices.  However in Japan, the slight dip in inflation (from 4.5 to 4.4 percent), the first since January, suggests that the combined impact of recent monetary expansion and an increased sales tax may be easing.”

June inflation remains below 1 percent in all Euro Area countries compared, except Austria (1.7 percent) and Germany (1.0 percent).  Inflation is also above 1 percent in Japan (4.4 percent), the U.S. (1.9 percent) and Norway (1.8 percent).  June inflation was lower than price growth a year ago in all countries compared except Japan, the U.S., and Sweden.

Source: The Conference Board

July 31, 2014

Retail and consumer products veteran Brian Cornell was named chairman and CEO at Target to fill two of the three roles previously held by the company’s former top executive Gregg Steinhafel.

Cornell will assume his new responsibilities at Target on August 12 after most recently serving as CEO of PepsiCo Americas Foods for two years.  He brings a well-rounded background in retail and CPG to Target.  Prior to PepsiCo, Cornell served as president and CEO of Walmart’s Sam’s Club division for roughly three years.  He came to Sam’s Club after serving as CEO of Michaels Stores and also held the role of chief marketing officer at Safeway.  Earlier in his career, Cornell held general management positions at PepsiCo North America Foodservice.

In a brief statement announcing his appointment, Target said Cornell’s top priorities would be to accelerate the company’s performance and advance its omnichannel evolution.

“As we seek to aggressively move Target forward and establish the company as a top omnichannel retailer, we focused on identifying an extraordinary leader who could bring vision, focus and a wealth of experience to Target’s transformation,” said Roxanne S. Austin, the interim non-executive chair of the Target board who led the search for Steinhafel’s replacement.  Steinhafel, who also held the title of president, stepped down in early May and his responsibilities were filled on an interim basis by CFO John Mulligan.

“The board is confident that Brian’s diverse and broad experience in retail and consumer products as well as his passion for leading high performing teams will propel Target forward.”

Cornell said he was honored and humbled to join Target as the first CEO hired from outside the company.

“I am committed to empowering this talented team to realize its full potential, lead change and strengthen the love guests have for this brand,” Cornell said.  “As we create the Target of tomorrow, I will focus on our current business performance in both the U.S. and Canada and on how we accelerate our omnichannel transformation.”

In exchange for his services, Cornell will receive a lucrative compensation package that includes an annual salary of $1.3 million, a 2014 pro-rated cash incentive equal to 150% of his base sales and stock-based awards with a potential payout of $3.75 million.  In addition, in 2015 Cornell will receive stock-based awards with a potential value of $9 million.  Target is also on the hook to compensate Cornell for incentive awards and grants he forfeits by leaving PepsiCo.  Target said it would provide Cornell with a make-whole equity grant and a make-whole pro-rata annual bonus valued at more than $19 million, minus whatever portion of that amount Cornell is able to retain from his former employer.  Target said it was unable to determine that amount at the time details of his compensation were disclosed in a filing with the Securities and Exchange Commission.

Source: Retailing Today