Author: Helen Thomas

June 4, 2014

Ascena Retail Group president and CEO David Jaffe said sales in the third quarter were challenging, and despite comparable sales declines at Justice and Dressbarn, new store growth at Justice and Maurices, along with higher comparable sales at Lane Bryant, Maurices and Catherines bolstered the company’s overall results.

The company’s third quarter profit rose to $33.2 million, from $31.2 million in the year ago period.  Revenue inched up 0.3% to $1.145 billion, compared to $1.142 billion a year earlier.  Total same store sales rose 1%.

“Q3 sales were challenging, and that trend continued into the start of Q4,” said Jaffe.  “As a result, we are implementing promotional strategies and receipt flow adjustments to ensure our inventories are conservatively positioned for the fall season.”

Source: Retailing Today

June 3, 2014

Hudson’s Bay Company more than doubled sales in the first quarter driven primarily by its acquisition of Saks last year.

Retail sales were $1.9 billion, an increase of $971 million from $884 million for the prior year.  Consolidated same-store sales increased by 2.8%, with increases of 2.5% at DSG, 2.6% at Saks Fifth Avenue and 15.1% at Off 5th.  Digital commerce sales totaled $207 million, reflecting both the inclusion of Hudson’s Bay and Lord & Taylor (which together are referred to as “Department Store Group” or DSG) and Saks.

Sales growth at DSG was driven by menswear and beauty.  Sales growth at Saks Fifth Avenue was driven by menswear and accessories.  Sales growth at Off 5th was strong across all categories.

Two Off 5th stores opened in Palm Beach, Florida, and Milwaukee, Wisconsin, and two Saks Fifth Avenue locations closed in Orlando, Florida, and Stamford, Connecticut.

HBC also completed the sale and leaseback of its Queen Street flagship store and Simpson Tower office complex in Toronto for a purchase price of $650 million.

“Overall first quarter performance was in the range of our expectations,” said governor and CEO Richard Baker.  “We are encouraged by the business trends witnessed through the quarter, which bode well for the balance of this year.  Furthermore, we are pleased by the progress of our integration of Saks, which is on-track to achieve approximately $50 million in HBC synergies targeted for this year.  As a result, we ar reaffirming our outlook for fiscal 2014 as provided in April.”

Baker said that his confidence in HBC’s future is based upon its core sales growth strategies: driving digital sales across all its banners, growing Off 5th through a modified and more productive format as well as new stores in the U.S. and Canada, bringing Saks Fifth Avenue to Canada and driving outsized growth at the top doors of each of its banners.

Hudson’s Bay will also have a new financial chief step into that role June 9.  Paul Beesley most recently served in a number of executive roles with Empire Company Limited, a corporation with annual sales in excess of $19 billion and operations in retailing and related real estate, from 2000 to 2014, including as chief corporate development officer of it Sobeys unit and as CFO of Empire.  While at Empire, Beesley developed strategies resulting in the acquisitions of Canada Safeway and the remaining stake in Sobeys, led the creation of an Empire-related REIT and facilitated numerous financing transactions.

Source: Retailing Today

May 30, 2014

Exiting Canada may have taken a bite out of Big Lots’ profits in the first quarter, but the company still saw net and comparable store sales increase.

Net sales for the quarter increased 1.1% to $1.28 billion, compared to net sales from continuing U.S. operations of $1.26 billion for the same period last year.  Comparable-store sales for stores open at least 15 months increased 0.9% for the quarter.

Net loss from discontinued Canadian operations for the quarter totaled $25.2 million, or $0.44 per diluted share, compared to the company’s guidance of a net loss of $37 to $41 million, or $0.64 to $0.71 per diluted share.  The lower-than-expected loss resulted from incremental deferred tax benefits and favorable settlements on lease terminations associated with store and distribution center operating leases.

Looking ahead to the second quarter, the company estimates that income from continuing operations will be in the range of $0.24 to $0.30 per diluted share, compared to adjusted income from continuing U.S. operations of $0.37 per diluted share the second quarter last year.  This guidance is based on an estimated comparable-store sales increase of between 1% and 3%.

Big Lots operates 1,496 Big Lots stores in 48 states.

Source: Retailing Today 

June 5, 2014

Of the approximately 350 metro markets nationwide, 56 returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today.  This represents a net gain of nine metros year over year.

The index’s nationwide score of .88 held steady from the previous month.  This means that based on current permit, price and employment data, the nationwide average is running at 88 percent of normal economic and housing activity.  Meanwhile, 30 percent of metro areas saw their score rise this month and 83 percent have shown an improvement over the past year.

“Markets are gradually returning to normal levels of housing and economic activity,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “When we see more sustainable levels of job growth, this will unleash pent-up demand and bring more buyers into the marketplace.”

Baton Rouge, Louisiana, continues to top the list of major metros on the LMI, with a score of 1.4 – or 40 percent better than its last normal market level.  Other major metros at the top of the list include Honolulu; Oklahoma City; Austin, Texas and Houston.  Rounding out the top 10 are Los Angeles; San Jose, California; Harrisburg, Pennsylvania; Pittsburgh and Salt Lake City – all of whose LMI scores indicate that their market activity now equals or exceeds previous norms.

“Of the three components in the LMI, the one lagging is single-family housing permits, which is only 43 percent of the way back to normal while home prices are 26 percent above their last normal level and employment is at 95 percent of its previous norm,” said NAHB Chief Economist David Crowe.  “In the 22 metros where permits are at or above normal, the overall index indicates that these markets have fully recovered.”

“Well over one-third of all markets are operating at a level of at least 90 percent of previous norms, and this bodes well for a continuing housing recovery in the year ahead,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.

Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning their markets are now at double their strength prior to the recession.  Also at the top of the list of smaller metros are Bismarck, North Dakota; Casper, Wyoming; and Grand Forks, North Dakota, respectively.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity.  More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth.  For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison.  The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics.  An index value above one indicates that a market has advanced beyond its previous normal of economic activity.

Source: National Association of Home Builders

June 11, 2014

Last week:  The U.S. economy generated almost 200,000 new jobs in May, continuing a trend that is now more than a year old.  Indeed, consistently generating that many new jobs is slowly beginning to encourage some discouraged workers to start looking again.  As these developments continue, there will be less slack in the labor market and more instances of tightness in certain fields.  And that, in turn, would put upward pressure on wage growth.  How much and how soon will be big questions later in the second half of this year and into 2015.  Meanwhile, consumers, now a little more confident, will pick up the pace in spending.  And the economy, with a much better second quarter (after a weather-induced decline in the first quarter), will do even better this summer, as the third quarter begins.

Retail Sales, May (Bureau of the Census)

Vehicle sales (at a 16.5 million pace in May) reflect some continued catch up, as consumers continue to replace old vehicles for newer and more fuel efficient models.  Nonauto retail spending has been quite uneven – with a significant gain in March but a very slow April.  It would not be a surprise if May’s data is more similar to March than April.  Retailers, still stuck with piled up inventory, are hoping that continued good news on the labor front enables consumers to put into action some long delayed plans, which in turn will bring the inventory-to-sales ratio back down to something closer to normal.  In fact, they have yet to resort to discounting in order to stimulate more in-store or web traffic.  If sales disappoint again, that could well be the next step in late spring.

Producer Price Indexes, May (Bureau of Labor Statistics)

Energy prices remain relatively stable.  Food prices are stable now, but could start to move a little higher.  “Core prices (which exclude food and energy) remain very low, rising by no more than 0.2 percent per month.  The concern has been more about prices slowing.  But if the economy is starting to gain some momentum, it could result in a little price acceleration, not in May but perhaps later this summer.

Source: The Conference Board

June 11, 2014

Consumer spending in May increased 4.2%, with the retail sector enjoying new vigor.  The spending increase of 4.2% compared to 4.1% in April.

Retail spending growth of 1.7% marked a slight uptick compared to April’s growth of 1.3% as warmer weather across most regions, with the exception of the Northeast, supported retail foot traffic.  Although the 1.7% increase lagged the total spending figure, May marked the strongest growth in seven months, primarily driven by spending at building material and supply dealers (6.7% in May vs. 3.6% in April) and furniture and home furnishings merchants (1.4% in May vs. -0.7% in April).  Average ticket growth of 1.2% in May gained steam against April’s 0.5% growth, driven by higher year-over-year gas prices, higher food prices and an increase in some leisure-related categories.

A number of factors, including normalized weather, pent-up demand, falling unemployment and rising home prices supported consumers’ willingness to spend in May.  Credit card spending growth continued to be strong and led all other payment types.  The surge in spending growth at hotel and travel merchants, building material and home furnishing merchants, where credit is the primary payment tool, was a major driver supported by easing lending standards and payroll growth.

Other areas of growth included hotel spending growth of 9.3%, a 12 month high, compared to April’s 7%.  Gas station spending growth of 3.6% was higher compared to April’s growth of 3.3% and was another key supporting factor in overall growth as gas prices remained elevated versus last year.

Source: Retailing Today

June 9, 2014

The Conference Board Employment Trends Index (ETI) increased in May.  The index now stands at 118.58, up from 117.32 (a downward revision) in April.  This represents a 5.4 percent gain in the ETI compared to a year ago.

“The Employment Trends Index continues to signal solid job growth with an improvement in each of its eight components in the first five months of 2014,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “The need for employers to rapidly expand their payroll in light of strengthening economic activity is a major factor in the rapid decline in the unemployment rate.”

May’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: Industrial Production, Initial Claims for Unemployment Insurance, Real Manufacturing and Trade Sales, Ratio of Involuntarily Part-time Workers, Number of Temporary Employees, Job Openings, and Percentage of Respondents Who Say They Find “Jobs Hard to Get.”

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 3, 2014

Father’s Day is already the smallest of gift-giving holidays and this year Americans are expected to spend even less, according to the National Retail Federation’s (NRF) 2014 Father’s Day Spending Survey.

The survey found that the average person will spend $113.80 on neckties, tools, electronics and other special gifts for dad, slightly down from $119.84 last year.  Total spending for the holiday is expected to reach $12.5 billion.

“Knowing both cost and sentiment are important to their shoppers, retailers this Father’s Day will make sure to offer promotions on a variety of gift options, including home improvement items, tools and even apparel,” said NRF president and CEO Matthew Shay.  “As more people look for ‘experience gifts’ with tickets to baseball games or a day on the golf course, retailers will also make sure to promote their gift cards for families hoping to create the perfect gift package.”

While most people (64.1%) will simply say thank you to dad with a greeting card, four in 10 (41.6%) will treat dad to new apparel items such as neckties and sweaters, spending a total of $1.8 billion, while another 42.6% will celebrate with special outings such as dinner or a ticket to a sporting event, spending a total of $2.5 billion.  The survey also found that those celebrating Father’s Day will spend $1.6 billion on electronic gifts like smartphones and tablets, and $1.8 billion on gift cards, letting dad pick his own special gift.

Consumers will also spend on tools or appliances ($663 million), sporting goods or leisure items ($662 million), home improvement items ($645 million), personal care items ($641 million), books or CDs ($555 million) and automotive accessories ($520 million).

Dad’s loved ones will look for gifts at a variety of locations, including discount stores (28.1%), online (28.4%) and specialty stores (24.2%); 16.6% say they plan to support their communities and shop at a local or small business to find gift items for dad.  Most shoppers, however, will head to dad’s favorite department store (35.8%).

“As we saw with Valentine’s Day and Mother’s Day this year, consumers are keeping to a strict budget,” said Prosper Insights Director Pam Goodfellow.  “Whether they spend $10 or $100, millions of Americans will find creative, affordable ways to show dad how much they care.”

On-the-go shoppers will use their smartphones and tablets to research and purchase gifts for dad this year.  Nearly one-quarter of smartphone owners (23.4%) will research products and compare prices on gifts using their smartphone, and three in 10 tablet owners (30.6%) will do the same.  Nearly one in five (18.2%) will purchase products with their tablet for Father’s Day.

More than half of survey respondents plan to shop for their father or stepfather (52.3%) and 27.6% will look for ways to show their appreciation for their husband.

Source: Retailing Today, National Retail Federation 

June 3, 2014

Undeterred by bad weather and competitive pressures that took a toll on its first quarter performance, Dollar General is pressing ahead with plans for 700 new stores, recently opened its 12th distribution center and believes its full year profit forecast is attainable.

The company said sales during its 13 week quarter ended May 2 increased 6.8% to $4.52 billion, while same store sales increased 1.5%.  Although the comp figure was below the company’s expectations for an increase in the range of 2% to 3%, customer traffic and average transaction size still grew, according to the company.  Driving the gain were consumable category sales which were said to have significantly outpaced non-consumable categories.  Tobacco products, perishables and candy and snacks were top performers, according to the company.

“Dollar General’s first quarter same-store sales improvement of 1.5% was driven by growth in our consumables business and, overall, reflected the challenges of unfavorable winter weather, heightened competition and the current economic environment,” said Rick Dreiling, Dollar General’s chairman and CEO.  “Even as these factors weighed on our sales results, we saw trends improve as we moved through the quarter and we delivered (earnings per share) 72 cents, which was in line with our guidance.”

The company aided its EPS cause through aggressive share repurchase activity which made it possible to hit the low end of its targeted profit range of 72 cents to 74 cents.  Analysts had expected the company to report earnings per share of 73 cents.  Dollar General said it spent $800 million during the first quarter to repurchase 14.1 million shares, an amount that is roughly one third of the total 44.5 million shares repurchased for $2.3 billion since the program was authorized in December 2011.  The big reduction in shares helped boost earnings per share by two cents.  First quarter net income of $222 was essentially flat with the prior year profit of $220 million.

While Dollar General was able to hit its profit target, the lack of top line growth caused gross margin and expense leverage challenges.  Gross margins declined 57 basis points to 30% of sales which the company said was attributable to lower margin consumables comprising a larger portion of sales and higher markdowns related to promotional activity.  Meanwhile, expenses increased to 21.6% of sales from 21.3% of sales as moderate comp store growth caused the company to lose leverage while it also faced increased rent and utility costs.

Despite these challenges, Dollar General maintained its breakneck pace of growth during the quarter, opening 214 stores and a 930,000 sq. ft. distribution center in Bethel, Pennsylvania.  The company also confirmed its full year profit forecast and plans to open 700 new stores and remodel 500 others.  The company ended the first quarter with 11,338 stores throughout the U.S.

“We continue to grow both our customer traffic and average transaction amount as our merchandising initiatives reinforce our affordability and value messaging,” Drelling said.  “Sales trends began to improve in April and have continued to gain momentum.  We are pleased to see that our merchandising strategies are gaining traction with a strengthening of sales in both consumables and non-consumables in our second quarter to date.”

Dollar General, like many other retailers, is beginning 2014 in somewhat of a hole after reporting weaker than expected sales and profits aided by share-repurchase activity.  Going forward, the company is going to need a heightened level of spending among its cash-strapped core customers to achieve a full year profit target which was left intact.

Total sales this year are expected to rise between 8% and 9% with same store sales expected to grow between 3% and 4%, according to the company.  Full year profits are expected to range from $3.45 to $3.55 which is the same forecast the company shared when it reported fourth quarter results earlier this year.

Source: Retailing Today

June 5, 2014

Residential construction is a key engine behind growth in the United States.  According to McGraw Hill Construction’s Dodge Construction Market Forecast, single and multifamily housing projects account for about 45% of the value of all construction projects started in the United States in 2014.  With that market forecasted to grow rapidly in coming years, the green activity and drivers in the market are critical.  The SmartMarket Report of the single and multifamily builder and remodeler community released today contains this new intelligence.

The report, “Green Multifamily & Single Family Homes: Growth in a Recovering Market,” surveys builder and remodeler members of the National Association of Home Builders and reveals the evolution of green building for single family homes from boom to bust to recovery through comparisons with previous studies from 2006 to 2011, and includes new data on multifamily housing to provide a comprehensive review of the sector.

According to the latest study:

• 62% of firms building new single family homes report that they are doing more than 15% of their projects green.  By 2018, 84% of them expect this level of green activity.
• 54% of firms building new multifamily projects report that they are doing more than 15% of their projects green.  There is also growth expected – with 79% reporting the same level of activity anticipated by 2018.
• In the single family market, the most striking shift is in those firms dedicated to green building (doing more than 90% of their projects green).  That percentage is already at 19%, and by 2018, it is expected to double to 38%.

The study finds that builders and remodelers in both the single family and multifamily sectors report that the market is recognizing the value of green: 73% of single family builders (up from 61% since the last report) and 68% of multifamily builders say consumers will pay more for green homes.

“Greater consumer interest in green homes has contributed to the ongoing growth, leading us to anticipate that by 2016, the green single family housing market alone will represent approximately 26% to 33% of the market, translating to an $80 billion to $101 billion opportunity based on current forecasts.  The findings also suggest that lenders and appraisers may be starting to recognize the value of green homes, making it a factor that could help encourage the market to grow if there is more widespread awareness across the U.S.,” said Harvey Bernstein, vice president, Industry Insights and Alliances for McGraw Hill Construction.

The study also examines the triggers for green building activity.  “This new study demonstrates phenomenal growth in green building, with more builders engaging in sustainable building practices than ever before,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “While growth in green in the single family market is driven more by high utility incentives, as well as enhancing their competitive position and corporate image.  All are compelling reasons for the industry to engage with this continuously growing market.”

The SmartMarket Report also reveals a vigorous and growing renewables market in the residential sector.  65% of the respondents – both single family and multifamily – currently use renewables on at least some of their projects, and the percentage that incorporate them in all of their projects is expected to grow from 8% in 2013 to 20% by 2016.

“Green Multifamily & Single Family Homes: Growth in a Recovering Market” was produced by McGraw Hill Construction in partnership with the National Association of Home Builders, with the support of Waste Management and Menck Windows.

Source: National Association of Home Builders