Author: Helen Thomas

July 30, 2014

The U.S. Census Bureau of Economic Analysis today reported 4.0 percent annualized growth in real Gross Domestic Product for the second quarter of 2014.

Some of the past quarter’s growth performance reflects a catch-up from the dismal first quarter performance.  But this stellar growth figure also suggests that the economy has gained some momentum and could hold on to this new found dynamism through the second half of 2014.  We find further confirmation in The Conference Board Leading Economic Index for the U.S. as well as the continued strengthening of the Consumer Confidence Index, released yesterday.  Job growth has driven income growth.  And consumers have clearly been spending on some long-delayed purchasing plans.  As a result, business investment is beginning to pick up.  These gains in consumption and investment could be accompanied by better numbers on export trade in the second half of the year, provided the global economy doesn’t slow much further.  In short, the economic doldrums of late 2013 and early 2014 are likely to be in the rear view mirror.

Source: The Conference Board

July 29, 2014

The Conference Board Consumer Confidence Index, which had improved in June, increased in July.  The Index now stands at 90.9, up from 86.4 in June.  The Present Situation Index increased to 88.3 from 86.3, while the Expectations Index rose to 92.7 from 86.4 in June.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence increased for the third consecutive month and is now at its highest level since October 2007 (95.2).  Strong job growth helped boost consumers’ assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations.  Recent improvements in consumer confidence, in particular expectations, suggests the recent strengthening in growth is likely to continue into the second half of this year.”

Consumers’ assessment of current conditions improved in July.  Those claiming business conditions are “good” edged down to 22.7 percent from 23.4 percent, while those stating business conditions are “bad” was virtually unchanged at 22.7 percent.  Consumers’ appraisal of the job market was more favorable.  Those saying jobs are “plentiful” increased to 15.9 percent from 14.6 percent, while those claiming jobs are “hard to get” remained unchanged at 30.7 percent.

Consumers’ expectations were more optimistic in July.  The percentage of consumers expecting business conditions to improve over the next six months increased to 20.2 percent from 18.4 percent, while those expecting business conditions to worsen held steady at 11.5 percent.  Consumers were more positive about the outlook for the labor market.  Those anticipating more jobs in the months ahead increased to 19.1 percent from 16.3 percent, while those anticipating fewer jobs declined to 16.4 percent from 18.4 percent.  Slightly more consumers expect their incomes to grow, 17.3 percent in July versus 16.7 percent in June, while those expecting a drop in their incomes declined to 11.0 percent from 11.4 percent.

Source: The Conference Board

July 28, 2014

WTI expects August 2014 temperatures to trend similar to last year for the U.S. as a whole.  Much of the East will trend warmer than last year with the Southeast also trending warmer than normal.  Summer clearance promotions will see the biggest returns during the first three weeks of the retail month in the eastern half of the nation.  A sharp change to colder weather at the end of the month in the North will be more favorable for back-to-school and autumn categories.  Precipitation will be greater than last year across the Plains for the month overall.  Wetter trends in the final week of August will be an additional positive for autumn categories in the East.  Hurricane activity will continue to run below normal; however, should a storm develop and threaten the U.S. mainland, the Texas Gulf Coast will stand the highest risk of impact.

Source: Retailing Today, Weather Trends International

July 22, 2014

Lowe’s plans to build a customer support center in Indianapolis, a move that will create up to 1,000 new jobs by 2016.

The world’s second largest home improvement retailer plans to invest $20.5 million to purchase, renovate and equip a 140,000 sq. ft. office facility at Intech Park 12, 6620 Network Way, on the northwest side of Indianapolis.  The new customer support center will support stores and Internet sales, delivery services and repair services for Lowe’s customers across the United States.  The facility is expected to be operational in the first quarter of 2015 and will complement the company’s existing customer support centers located in Wilkesboro, North Carolina, and Albuquerque, New Mexico.

“Indiana provides national companies like Lowe’s with the perfect building blocks for success,” said Governor Mike Pence.  “We have taken all the parts required – a central location, low taxes and a skilled workforce – and assembled them perfectly here in Indiana.  Indiana is a state that works for business because we have built the business climate companies like Lowe’s need for growth and success.”

Lowe’s, which currently employs nearly 7,900 people in Indiana, plans to begin hiring for positions at the new customer support center immediately.  EmployIndy will offer assistance during the hiring process.  Available positions, beginning with the site director position, will be posted this week with additional positions to follow.  Applications are accepted online at Lowes.com/careers.

“We chose Indianapolis becaus of the talented and experienced workforce who we believe can provide outstanding service to our customers,” said Don Easterling, Lowe’s VP, contact center.  “Indianapolis adds a strategic Midwest location to our network of customer support centers located in North Carolina and New Mexico.  We appreciate the support of both state and local officials that helped make this a win-win project.”

The Indiana Economic Development Corporation offered Lowe’s Home Centers up to $5,500,000 in conditional tax credits and up to $100,000 in training grants based on the company’s job creation plans.  These tax credits are performance-based, meaning until Hoosiers are hired, the company is not eligible to claim incentives.  The City of Indianapolis will consider tax abatement and additional funding for the direct infrastructure associated with the facility at the request of Develop Indy, a business unit of the Indy Chamber.

“Internationally recognized companies, like Lowe’s, are choosing Indy as the place to expand because of our welcoming business climate, central location, and talent pool,” said Mayor Greg Ballard.  “Indy has seen tremendous business growth this year, and as the city’s unemployment rate continues to fall, we look forward to continuing this course.”

With national companies like Lowe’s picking the state for their new operations, Indiana’s workforce growth in June was the largest in the nation.  During the past year, Indiana has added more than 53,000 Hoosiers to its labor force.  The state’s unemployment rate has declined 1.7% over that period, which is the ninth largest decrease in the nation.

Source: Retailing Today  

July 24, 2014

The National Association of Home Builders (NAHB) Remodeling Market Index (RMI) rose three points to 56 in the second quarter of 2014, regaining the momentum built in 2013.  This is the fifth consecutive quarter for an RMI reading above 50.

An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.  The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

“With many home owners on better financial footing, home remodeling has become more popular,” said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, New Hampshire.  “The completion of postponed work has helped remodelers in all regions regain confidence in the remodeling market.”

The RMI’s future market conditions index rose to 56 from 52 in the previous quarter, under the strength of an increase in all four of its subcomponents: calls for bids, amount of work committed for the next three months, backlog of jobs and appointments for proposals.

The current market conditions component of the RMI increased three points to 56 this quarter.  Remodeling jobs valued at $25,000 or more rebounded to 54, the same level as the end of 2013.  Smaller remodeling jobs and maintenance and repair components performed well this quarter with readings of 56 and 58, respectively.

“The recent improvement in the job market has helped restore remodelers’ confidence after a dip in the first quarter that was probably in part weather-related.  As homeowners feel more secure about their economic situation, they become more willing to undertake remodeling projects – especially larger, discretionary projects,” said NAHB Chief Economist David Crowe.  “In addition, fewer new home builders are looking to remodeling as a way to supplement their revenue, and this has somewhat reduced competition for remodeling projects.”

Source: National Association of Home Builders 

July 28, 2014

Dollar Tree said it would acquire Family Dollar in a transformational cash and stock deal valued at $8.5 billion to create a company with more than 13,000 stores and annual sales of $18 billion.

The deal was unanimously approved by the boards of both companys and involves Dollar Tree paying Family Dollar shareholders $59.60 in cash and $14.90 in equivalent Dollar Tree shares.

“We will continue to operate under the Dollar Tree, Deals, and Dollar Tree Canada brands, and when this transaction is complete, we will operate under the Family Dollar brand as well,” said Dollar Tree CEO Bob Sasser.  “Throughout our history, we have strived continuously to evolve and improve our business.  This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression, and importantly, positions Dollar Tree for accelerated growth.  By offering both fixed-price and multi-price point formats and an even broader, more compelling merchandise assortment, we will be able to provide even greater value and choice to a wider array of customers.”

Sasser said the deal would extend the company’s reach to lower-income customers and strengthen and diversify its store footprint while also delivering significant synergies by leveraging best practices of the organizations.  Dollar Tree anticipates that the transaction will result in $300 million of annual run-rate synergies to be fully realized by the end of the third year after closing.

Plans call for Family Dollar CEO Howard Levine to remain with the combined company, reporting to Sasser, and serve as a member of the board.

“For more than 54 years, Family Dollar has provided value and convenience to customers.  Dollar Tree also has a rich history of providing great value to customers, and together, as one company, we can provide more customers with even greater value and convenience,” Levine said.

The deal is a culmination of a process that began last winter and included discussions of potential combinations with other partners, Levine said.  The comprehensive review process ultimately determined the combination with Dollar Tree was in the best interest of shareholders.

“This combination will enable Family Dollar to accelerate efforts to improve the business and will benefit our dedicated team members who will now be part of a larger, more diverse organization,” Levine said.  “I am excited about our future with Dollar Tree, and I look forward to working with the Dollar Tree team to complete the combination as quickly as possible to realize the compelling benefits for all our stakeholders.”

Source: Retailing Today

July 24, 2014

Supervalu posted $5.23 billion in net sales for the first quarter, a decrease of 0.1% from $5.24 billion last year; but president and CEO Sam Duncan expressed confidence in the company’s performance, saying it is off to a solid start across business segments.

“Our first quarter results reflect the investments we are making this year to position the company for future success and I am pleased with our operating performance,” said Duncan.

Save-A-Lot’s net sales for the quarter were $1.35 billion, a 6.5% increase frm $1.27 billion last year, driven by a network identical store sales increase of 5.6%.  Identical store sales for corporate stores within the Save-A-Lot network were up 7.2%.

The company’s Independent Business net sales for the quarter were $2.4 billion, a decrease of 2.6% from $2.46 billion last year, primarily due to lost accounts including lower sales to one New Albertson’s banner that completed the transition to self-distribution and lower military sales, partially offset by net new business.

Retail Food net sales for the quarter remained flat compared to last year’s $1.43 billion.  Identical store sales were up 0.6%.

On March 21, 2013, the company completed the sale of five retail grocery banners – Albertson’s Acme, Jewel-Osco, Shaw’s and Star Market.

Supervalu operates 3,320 stores, which include 1,805 independent stores serviced primarily by the company’s food distribution business, 1,325 Save-A-Lot stores, of which 931 are operated by licensee owners; and 190 traditional retail grocery stores.

Source: Retailing Today

July 25, 2014

Real gross domestic product (GDP) decreased at an annual rate of 2.9 percent in the first quarter of 2014 after increasing 2.6 percent in the fourth quarter of 2013.  Both private services and goods-producing industries contributed to the decrease, while the government sector increased slightly.  Durable-goods manufacturing; wholesale trade; and agriculture, forestry, fishing, and hunting were the leading contributors to the decrease in GDP.  Overall, 16 of 22 industry groups contributed to the 2.9 percent decrease in U.S. economic activity.

• Durable-goods manufacturing real value added – a measure of an industry’s contribution to GDP – decreased 8.4 percent after an increase of 3.5 percent in the fourth quarter of 2013.
• Wholesale trade decreased 8.7 percent after an increase of 6.9 percent in the fourth quarter.
• Agriculture, forestry, fishing, and hunting decreased 31 percent after a decrease of 7.0 percent in the fourth quarter.

The downturn in the first quarter of 2014 was widespread.  Overall, 19 out of 22 industry groups contributed to the 5.5 percentage points downturn in real GDP; the leading contributors to the downturn were wholesale trade; professional, scientific, and technical services; and durable-goods manufacturing.

Other highlights:

• Growth in real value added slowed for nondurable-goods manufacturing in the first quarter, however, the industry group contributed the largest positive offset to the decrease in real GDP in the first quarter.  Nondurable-goods manufacturing, which includes petroleum and coal product manufacturing, increased 15.1 percent in the first quarter of 2014, after an increase of 18.6 percent in the fourth quarter.
• Professional, scientific, and technical services turned down in the first quarter, decreasing 6.5 percent after increasing 5.9 percent in the fourth quarter.  Professional, scientific, and technical services includes industries such as legal services, engineering, and administrative management and management consulting services.
• Federal government turned up 3.2 percent in the first quarter – its first increase since the second quarter of 2011.

Source: Bureau of Economic Analysis

July 24, 2014

Sales of newly built, single-family homes fell 8.1 percent to a seasonally adjusted annual rate of 406,000 units in June, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Sales numbers for May were revised downward to 442,000.

“The numbers are a little disappointing, but May was unusually high and some pull back isn’t completely unexpected,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  “Our surveys show that builders are confident about the future and we are still seeing a gradual upward trajectory in housing demand.”

“With continued job creation and economic growth, we are cautiously optimistic about the home building industry in the second half of 2014,” said NAHB Chief Economist David Crowe.  “The increase in existing home sales also bodes well for builders, as it is a signal that trade-up buyers can move up to new construction.”

Regionally, new home sales were down across the board.  Sales fell 20 percent in the Northeast, 9.5 percent in the South, 8.2 percent in the Midwest and 1.9 percent in the West.

The inventory of new homes for sale held steady at 197,000 units in June.  This is a 5.8 month supply at the current sales pace.

Source:  National Association of Home Builders

July 24, 2014

Growth in home improvement activity is expected to peak during the second half of 2014 and then begin to ease heading into next year, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program of Harvard University.  Revised estimates from the U.S. Census Bureau show the home improvement market grew 5.6% in 2013.  For 2014, the LIRA projects annual gains in home improvement spending of 9.9% with annual growth slowing to 7.0% in the first quarter of 2015.

“With the economy improving slower than expected and home sales struggling to keep up with last year’s pace, the recent strong gains in remodeling spending will likely moderate later this year,” says Chris Herbert, Research Director at the Joint Center.  “Although this presents a challenge for the remodeling industry, the LIRA continues to project significant growth going into 2015.”

“Despite some headwinds, there continue to be promising signs for remodeling,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center.  “Remodeling contractor sentiment remains positive and house prices continue to rise in most areas of the country.”

Source: Joint Center For Housing Studies at Harvard University