Author: Helen Thomas

July 1, 2014

Economic activity in the manufacturing sector expanded in June for the 13th consecutive month, and the overall economy grew for the 61st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.  “The June PMI registered 55.3 percent, a decrease of 0.1 percentage point from May’s reading of 55.4 percent, indicating expansion in manufacturing for the 13th consecutive month.  The New Orders Index registered 58.9 percent, an increase of 2 percentage points form the 56.9 percent reading in May, indicating growth in new orders for the 13th consecutive month.  The Production Index registered 60 percent, 1 percentage point below the May reading of 61 percent.  Employment grew for the 12th consecutive month, registering 52.8 percent, the same level of growth as reported in May.  Inventories of raw materials remained at 53 percent, the same reading as reported in both May and April.  The price of raw materials grew at a slower rate in June, registering 58 percent, down 2 percentage points from May.”

Manufacturing expanded in June as the PMI registered 55.3 percent, a slight decrease of 0.1 percentage point when compared to May’s reading of 55.4 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 June PMI indicates growth for the 61st consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 13th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (54.0 percent) corresponds to a 3.6 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for June (55.3 percent) is annualized, it corresponds to a 4.0 percent increase in real GDP annually.”

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

Source: Institute For Supply Management

July 10, 2014

Labor markets improved overall across the advanced economies, according to unemployment rates and employment growth data compiled and standardized by The Conference Board International Labor Comparisons (ILC) program for May 2014.

Unemployment rates in May fell in four of the nine countries compared, and were unchanged in the remaining five.  Sweden saw the greatest improvement, with joblessness falling 0.3 points to 7.7 percent.  Unemployment fell 0.2 points in the Netherlands (to 7.0 percent) and 0.1 points each in Japan (to 3.1 percent) and Germany (to 5.1 percent).

“In May, despite a continued high unemployment rate for the European Union as a whole, employment picked up in several European economies, including France, Italy, and the Netherlands,” said Elizabeth Crofoot, Senior Economist with the International Labor Comparisons program at The Conference Board.  “Yet Germany’s slight dip in employment, the first in over two years, underscores the continued fragility of Europe’s labor market recovery going forward.”

Employment in May increased in all economies compared except Germany and Australia.  Japan and Sweden saw the largest increases, rising 0.5 points to 99.6 and 105.5, respectively.  Despite an improvement of 0.3 points, Italy continues to have the lowest employment index (96.9), while Australia retains the highest (112.6) despite May’s 0.1-point decline.  With a gain of 0.1 points to 99.9, the U.S. inched even closer to reaching the employment index level of 2007 (=100) for the first time since the recession.

Source: The Conference Board

July 10, 2014

Retail sales generally improved in June, helped by good weather and big discounts as retailers look to clear inventory for the back-to-school season.

Costco Wholesale Corp. reported a 6% increase in June same-store sales, helped by higher fuel prices.  Its results topped Wall Street estimates.

Excluding the impact of foreign exchange rates and gasoline prices, Costco’s same-store sales increased 6% for the five-week period ended July 6.  The metric rose 5% in the United States and 7% overseas.

Net sales rose 10% to $10.89 billion.

While the retailers that still report same-store sales were in line or slightly better than had been expected, there were exceptions.  L Brands reported a 2% increase in June same-store sales, below estimates for a 3.1% increase.  Growth was led by a 3% increase in sales for the company’s Victoria’s Secret brand.

In other June results:

• Zumiez reported a 3.1% rise in same-store sales.  Net sales for June rose 11.1% to $65.3 million, from $58.8 million in the year-ago period.
• Stein Mart’s same-store sales increased 2.6%.  Total revenue for the five weeks ended July 5 rose 4% to $113.2 million.
• The Buckle posted a 0.7% increase in same-store sales.  Net sales for the period increased 2.8% to $84.8 million, from $82.5 million last year.
• Fred’s same-store sales fell 0.6%.  Total sales for the month increased 2% to $191.2 million, from $187.3 million last year.

Source: Retailing Today

July 3, 2014

The labor market remains surprisingly and resiliently strong as evidenced by the gain of 288,000 new jobs created in June.  This is not just catch up after a bad winter.  It also reflects some gathering strength in the economy.  More consumer demand could drive more investment in capital (to give workers the tools to get the job done) and more investment in human capital.  One big question is whether there will be enough upside to continue to drive up wage gains.  Business, faced with a lack of pricing power and weak productivity growth, are in a difficult bind.  Separately, sustained and possibly rising job growth could result in a pickup in the participation rate as more discouraged workers restart a job search.  While that could hold back upward pressures on wages and salaries, it is still a marker for how much potential improvement there is in economic conditions and prospects.

Source: The Conference Board

July 3, 2014

June was a good month for two of the nation’s largest drugstore operators.  Walgreens reported sales of $6.3 billion for the month, an increase of 8.9% as compared to the same month in fiscal 2013, while Rite Aid realized a 3.9% same-store sales increase for the four weeks ended June 28.

Total front-end sales at Walgreens increased 1.6% in June compared with the same month in fiscal 2013, while comparable store front-end sales increased 1.3%.  Customer traffic in comparable stores decreased 2% while basket size increased 3.3%.

Prescriptions filled at comparable stores increased by 7.3% in June and increased 4.7% on a calendar day-shift adjusted basis.  June 2014 had one additional Monday and one fewer Saturday compared with June 2013.  These calendar shifts positively impacted prescriptions filled at comparable stores by 260 basis points.

June pharmacy sales increased by 13.4%.  Comparable store pharmacy sales increased 11.3% and increased by a calendar day-shift adjusted 6.7%.  Calendar day-shift adjusted comparable store pharmacy sales were negatively impacted by 140 basis points due to generic drug introductions in the last 12 months.  Pharmacy sales accounted for 65.2% of total sales for the month.

Sales in comparable stores increased by 7.5% in June.  Calendar day shifts positively impacted total comparable sales by 170 basis points.  Generic drug introductions in the last 12 months negatively impacted total comparable sales by 90 basis points.

Calendar 2014 year-to-date sales for the first six months were $38.1 billion, an increase of 5.9%.  Fiscal 2014 year-to-date sales for the first 10 months were $63.7 billion, an increase of 6%.

Walgreens opened 15 stores during June, including three relocations and closed 13.  Nearly all of the June store closings were part of the company’s previously announced efforts to optimize its asset base by closing a total of 76 drug stores.

Meanwhile, Rite Aid saw June front-end same-store sales increase 0.9%.  Pharmacy same-store sales, which included an approximate 169 basis points negative impact from new generic introductions, increased 5.4%.  Prescription count at comparable stores increased 3.5% over the prior-year period.

Total drug store sales for the four-week period increased 3.5% to $2 billion.  Prescription sales accounted for 68.4% of drug store sales, and third party prescription sales represented 97.5% of pharmacy sales.

Same-store sales for the 17-week period ended June 28 increased 3.3% over the prior-year period.  Front-end same store sales increased 0.2% while pharmacy same store sales increased 4.6%.  Prescripion count at comparable stores increased 2.6% over the prior-year period. 

Total drug store sales for the 17 weeks ended June 28, 2014 increased 2.8% with sales of $8.4 billion.  Prescription sales represented 68.4% of total drug store sales and third party prescription sales represented 97.4% of pharmacy sales.

Source: Retailing Today 

July 7, 2014

Nearly 2,000 Home Depot stores in the U.S. began offering a wide range of connected home devices that run the Wink platform on July 7.

The Wink platform unites close to 60 devices, creating the broadest set of connected home products in one ecosystem, with fifteen leading manufacturers of home products ranging from light bulbs and locks to window shades, irrigation systems and water heaters, according to Wink and Home Depot.

“When looking for new products and services, we believe it is critical The Home Depot provide our customers the connected home options and convenience they desire – one that is easy, affordable and gives them the choice in products they need,” said Jeff Epstein, vp of home automation merchandising at Home Depot.  “With Wink, we’ve found a partner that supports the industry leading brands we already carry on our shelves and online.”

Wink vp Brett Worthington said Home Depot’s nearly 2,000 U.S. stores offer customers the broadest network of connected products.  “Together we are offering the simplest way to connect to products in the home from trusted brands like Leviton, Honeywell, Rheem, Lutron and Schlage.”  There are close to 60 Wink-enabled products covering a variety of products from garage door openers and dimmers to ovens and air conditioners.  Manufacturer partners include Bali, Chamberlain, Dropcam, GE, Honeywell, Kidde, Kwikset, Leviton, Lutron, Philips, Quirky, Rachio, Rheem, Schlage and TCP.

All Wink-enabled products are operated through the free Wink app.  The Wink app lets consumers personalize their experience to what works best for their home.  For example, a consumer can operate just one light bulb or all of the light bulbs in a particular room, or they can group the light bulbs with other products in a particular area of their home.  According to Wink, its app makes consumers’ lives easier by letting them adjust the thermostat or turn lights off after leaving the house, or control energy savings by shutting off the air conditioner when leaving and turning it back on right before getting home.

Source: Retailing Today 

July 7, 2014

The Conference Board Employment Trends Index (ETI) increased in June.  The index now stands at 119.62, up from 119.03 (an upward revision) in May.  This represents a 6.3 percent gain in the ETI compared to a year ago.

“The rapid increase in the Employment Trends Index in recent months suggests that strong job growth is likely to continue through the summer,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “While the strong labor market signals an improvement in economic growth, the key factor is that the average productivity of workers will need to rise as well.”

June’s increase in the ETI was driven by positive contributions from seven of its eight components.  In order from the largest positive contributor to the smallest, these were:  Percentage of Firms With Positions Not Able to Fill Right Now, Real Manufacturing and Trade Sales, Industrial Production, Number of Temporary Employees, Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Job Openings, and Ratio of Involuntarily Part-time to All Part-time Workers.

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

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

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

Source: The Conference Board

June 26, 2014

With winter’s polar vortex a distant memory, summer’s warm temperatures have consumers celebrating in front of the grill.

According to NRF’s Independence Day Survey, more than 153 million consumers – nearly two-thirds of those celebrating – are set to observe the Fourth of July holiday with a cookout, barbeque or picnic, spending an estimated $6.2 billion ($68.16 per household) on burgers, snacks and other food items for the occasion.  This is the first year NRF asked celebrants about their spending plans on food items.

While the majority will spend the day around a picnic table, many will also attend a fireworks display or community celebration (105 million) or a parade (27 million).  Plans for each of those activities declined from last year, but an increasing number of celebrants are taking advantage of the three-day holiday weekend: 13.7 percent (32 million) plan to take a vacation, the highest in the survey’s history.  This figure rises to nearly one in five among Millennials.

Although gas prices continue to creep upward, holiday travelers seem relatively undaunted.  More than 70 percent indicate their spending for the Fourth of July will not be impacted by prices at the pump, up from nearly 65 percent a year ago.

Source: National Retail Federation

June 27, 2014

WTI expects July 2014 to trend similar to last year for the U.S. as a whole.  The East will trend near normal or cooler than normal, while warmer than normal temperatures will be confined to the West.  Overall, the peak of the summer is shaping up to be very similar to 2013 but with a few major timing differences.  Unlike 2013, the hotter weather in 2014 will be back-end loaded in the month just as back-to-school shopping begins, which is a negative for early fall apparel, but favorable for clearing out summer inventory.  A cooler Fourth of July week in the Northeast and West will drag on sun care and beverage sales, but a spell of warmer weather later in the month will help to recover some earlier holiday losses.  Tropical activity will continue to be subdued, especially during the first half of the month, but there may be a slight pick up later in July with the highest risk areas being south Florida and Texas.

Source: Retailing Today, Weather Trends International

Walgreens reported a 16% year-over-year jump in third quarter profit, but was forced to withdraw its previously issued fiscal 2016 guidance because it missed Wall Street estimates.

The company’s net earnings for the quarter were $722 million compared to $624 million in the prior-year period.  Net sales increased 6% to $19.4 billion from $18.3 billion, while same-store sales increased 4.8%.

Lower taxes also boosted the company’s profits, but pressure on pharmacy gross profit margins and a 0.7% decrease in same-store traffic kept them from hitting Wall Street’s expectations.

Despite withdrawing its guidance for fiscal 2016, Walgreens confirmed that it plans to move forward with its purchase of U.K. drugstore retailer Alliance Boots, which it currently holds a 45% stake in, by the end of 2015.  The company will issue an update on the acquisition as well as its revised guidance in July or August.

“We continued to see improving top-line growth in the third quarter driven by increased daily living sales and strong increases in both prescriptions filled and our pharmacy market share,” said Walgreens president and CEO Greg Wasson.  “At the same time, we are experiencing increased pressure on pharmacy gross profit margins.  We maintained solid expense control in the third quarter to offset some of this pressure while understanding that there is more to be done.  We will be accelerating our optimization efforts, including taking additional steps to lower expenses companywide.  In addition, our joint venture with Alliance Boots continues to generate significant benefits.”

Source: Retailing Today