Author: Helen Thomas

May 27, 2014

The Conference Board Consumer Confidence Index, which had decreased in April, improved moderately in May.  The Index now stands at 83.0, up from 81.7 in April.  The Present Situation Index increased to 80.4 from 78.5, while the Expectations Index edged up to 84.8 from 83.9 in April.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence improved slightly in May, as consumers assessed current conditions, in particular the labor market, more favorably.  Expectations regarding the short-term outlook for the economy, jobs, and personal finances were also more upbeat.  In fact, the percentage of consumers expecting their incomes to grow over the next six months is the highest since December 2007 (20.2 percent).  Thus, despite last month’s decline, consumers’ confidence appears to be growing.”

Consumers’ assessment of present-day conditions improved in May.  Those stating business conditions are “good” decreased to 21.1 percent from 22.2 percent, while those stating business conditions are “bad” declined to 24.1 percent from 24.8 percent.  Consumers’ assessment of the labor market was more favorable.  Those claiming jobs are “plentiful” rose to 14.1 percent from 13.0 percent, while those claiming jobs are “hard to get” decreased slightly to 32.3 precent from 32.8 percent.

Consumers’ expectations increased slightly in May.  The percentage of consumers expecting business conditions to improve over the next six months edged up to 17.5 percent from 17.2 percent, while those expecting business conditions to worsen decreased marginally to 10.2 percent from 10.5 percent.

Consumers were more positive about the outlook for the labor market.  Those anticipating more jobs in the months ahead increased to 15.4 percent from 14.7 percent, while those anticipating fewer jobs edged up to 18.3 percent from 18.0 percent.  The proportion of consumers expecting their incomes to grow increased to 18.3 percent from 16.8 percent, but those expecting a drop in their incomes also increased, to 14.5 percent from 12.9 percent.

Source: The Conference Board 

May 23, 2014

Sales of newly built, single-family homes rose 6.4 percent to a seasonally adjusted annual rate of 433,000 units in April, according to newly released data from HUD and the U.S. Census Bureau.  The gain builds on an upward revision of sales numbers reported for the previous month.

“Builders are gradually increasing sales but tight credit conditions, particularly for first-time home buyers, are impeding a more robust recovery,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“In a positive development, builders are adding inventory in anticipation of a further release of pent-up demand,” said NAHB Chief Economist David Crowe.  “We are only about half-way back to what could be considered a normal market, but relatively low mortgage rates and affordable home prices are other factors that should help keep starts and sales on a slow upward trajectory in the months ahead.”

On a regional basis, new home sales rose 47.4 percent in the Midwest and 3.1 percent in the South and held steady in the West.  The Northeast posted a 26.7 percent decline.

The inventory of new homes for sale increased to 192,000 units in April.  This is a 5.3 month supply at the current sales pace.

Source: National Association of Home Builders

May 22, 2014

Sears plans to close at least 80 stores this year after widening its loss in the first quarter of fiscal 2014.

Although same-store sales increased 0.2% for the quarter, the company’s net loss climbed to $402 million from $279 million in the prior-year quarter.  Revenues declined 7% to $7.9 billion, from $8.5 billion in the prior-year quarter.

Sears attributed its continued decline in revenue to the closure of Kmart and Sears full-line stores, as well as the divestiture of its Lands’ End business.  But according to a Reuters report, analysts pointed to the effect of promotional transactions on gross margin, with one analyst going so far as suggesting that the company’s new business model – namely Shop Your Way – may be doing more harm than good since the company offered deep discounts on “already promoted, low-margin items.”

“Sears is undergoing a significant transformation, and we fundamentally are changing the way we do business,” said chairman and CEO Edward L. Lampert.  “Our performance in the first quarter highlights the challenges we are facing as well as the progress we are making in this transformation.  We are moving away from a company that was heavily based on selling products solely through a store-based network to a member-centric business model focused on providing benefits to our members anytime and anyplace.  We are seeing progress in our transformation to a member-centric, integrated retailer, as we continue to invest heavily in driving our Shop Your Way program.”

Source: Retailing Today

May 22, 2014

Increases in traffic and average ticket resulted in record first quarter sales growth at Dollar Tree.

Consolidated net sales for the quarter were a record $2 billion, a 7.2% increase compared to $1.87 billion reported for last year’s first quarter.  Consolidated comparable store sales increased 2% on a constant currency basis.  Adjusted for the impact of Canadian currency fluctuations, the comparable-store sales increase was 1.9%.

Earnings per diluted share for the first quarter were $0.67, a 13.6% increase compared to earnings per diluted share of $0.59 reported for last year’s quarter.

Discretionary business grew slightly faster than consumables and leading categories for the quarter included candy, check-out products, stationery and seasonal merchandise for Valentine’s Day and Easter.

“Our stores are currently filled with a balanced mix of consumable products and exciting variety merchandise for Summer Fun.  Inventory is clean and fresh and our associates are focused on providing a great shopping experience for every customer, at every store, every day,” said CEO Bob Sasser.

The company continues to expand.  During the first quarter, Dollar Tree opened 94 stores, closed six stores and expanded or relocated 28 stores.  Retail selling square footage increased 6.8% compared to a year ago, to 44.0 million sq. ft.

Looking ahead, the company estimates sales for the second quarter to be in the range of $1.97 billion to $2.02 billion, based on low-single digit positive comparable-store sales.  Diluted earnings per share are estimated to be in the range of $0.58 to $0.64.

Full year sales are now estimated to be in the range of $8.37 billion to $8.54 billion.  This estimate is likewise based on a range of low-single digit positive comparable-store sales.  Fiscal year 2014 diluted earnings per share are expected to be $2.94 to $3.12.  These estimates assume no impact from potential additional share repurchase activity in 2014.

Dollar Tree operated 5,080 stores in 48 states and five Canadian Provinces as of May 3.

Source: Retailing Today

May 21, 2014

Despite the massive data breach that hurt Target’s fourth quarter, people are not staying away from the retailer.  According to a Reuter’s report, the company saw a dramatic improvement in traffic in the first quarter compared to its late fourth quarter trends.

The company’s first quarter financial performance in its U.S. and Canadian segments was in line with expectations, and according to interim president and CEO John Mulligan, reflects not only its continued recovery from the data breach but also early signs of improvement in its Canadian operations.

“While we are pleased with this momentum, we need to move more quickly,” said a cautiously optimistic Mulligan, who is also the company’s CFO and is temporarily filling in as chief executive while the company seeks a replacement for the ousted Gregg Steinhafel.  “As a result, we have made changes to our management team and are investing additional resources to drive U.S. traffic and sales, improve our Canadian operations and advance our ongoing digital transformation.  We have updated our 2014 earnings expectations to reflect the impact of these investments and believe that they position Target for accelerated profitable growth as a leading omnichannel retailer.”

U.S. sales for the quarter increased 0.2% to $16.7 billion last year, reflecting the contribution from new stores partially offset by a 0.3% decrease in comparable sales.  First quarter gross margin rate was 29.5% compared with 30.7% in 2013, driven primarily by additional promotional markdowns this year.

The company’s Canadian segment generated sales of $393 million, compared with $86 million in first quarter 2013 when Target opened its first 24 Canadian stores.  The first quarter 2014 gross margin rate of 18.7% reflects the continued impact of efforts to clear excess inventory, including long lead-time receipts.  This compares to first quarter 2013 gross margin rate of 38.4%, which benefitted from a lack of clearance markdowns due to the short time stores had been open.

Heading Canadian operations now is company veteran Mark Schindele.  He replaces Tony Fisher, whom the company terminated this week.

Target incurred $18 million of net expense in first quarter 2014 thanks to the data breach – during which an intruder gained unauthorized access to its network and stole payment card and other customer information – reflecting $26 million of total expenses partially offset by the recognition of an $8 million insurance receivable.

The expense does not include any accrual for the potential claims by the payment card networks for counterfeit fraud losses, the company said, adding that the amount accrued to date for probable losses on potential payment card network claims consists solely of operating expense reimbursement obligations.  Target also added that at this time, it is unable to reasonably estimate a range of possible losses on the payment card networks’ potential claims in excess of the amount accrued.

Source: Retailing Today 

May 21, 2014

Bad weather for retail dampened sales at Lowe’s, but earnings surged well into the double digits for the first quarter, the company announced Wednesday morning.

Lowe’s sales increased 2.4% in the first quarter, rising to $13.4 billion.  Comparable-store sales increased 0.9%.

The Mooresville, North Carolina-based retail giant reported a net earnings surge of 15.6% to $624 million for the quarter ended May 2.

Lowe’s quarterly earnings report followed by one day the report from Home Depot, which outperformed Lowe’s in terms of sales.  Lowe’s showed the higher percentage gain in net earnings – 15.6%, compared with Depot’s 12.5%.

Both retail giants pointed to the challenges of operating through a season hampered by a late start to spring.

“We executed well during the quarter, despite an unexpectedly prolonged winter in many areas of the country,” commented Robert A. Niblock, Lowe’s chairman, president and CEO.  “While poor weather dampened traffic and negatively impacted performance of exterior categories, results for indoor categories were solid.  We effectively aligned inventory, staffing and marketing resources by climatic zone to best serve customers’ needs.”

As of May 2, 2014, Lowe’s operated 1,836 home improvement and hardware stores in the United States, Canada and Mexico, representing 200.7 million sq. ft. of retail selling space.

For the full fiscal year, Lowe’s said total sales are expected to increase approximately 5%, while comp-store sales are expected to increase about 4%.

Early second-quarter performance suggests Lowe’s is on the right path, Niblock said.

“Performance has improved in May, which – together with our strengthening execution – gives us the confidence to reaffirm our sales and operating profit outlook for the year,” he said.

In other news, Lowe’s has a new SVP in Michael Tummillo, who is taking over the Building and Maintenance division as SVP and general merchandising manager.  He replaces Michael McDermott, who will now serve as CMO and direct supervisor to Tummillo.

“Mike has a deep understanding of the business and the challenges our professional and DIY customers face every day,” said McDermott.  “During his time at Lowe’s, Mike has demonstrated the kind of strategic thinking and leadership across functions which will position him for success as he takes on responsibility for the broader building and maintenance merchandising team.  I have great confidence that Mike will deliver our strategic goals in this important segment of the business.”

Tummillo was most recently serving as merchandising VP, rough plumbing and electrical.  He joined Lowe’s in 2004 as VP credit services, soon after acquiring additional responsibilities in credit, project and event sales.  His resume also includes stints at GE card services and GE financial assurance.

Source: Retailing Today

May 22, 2104

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.4 percent in April to 101.4, following a 1.0 percent increase in March, and a 0.5 percent increase in February.

“The LEI rose for the third consecutive month, driven largely by improving housing and financial market conditions,” said Ataman Ozyildrim, Economist at The Conference Board.  “This latest report suggests the economy will continue to expand, and may even pick up steam through the second half of the year.”

“Despite a brutal winter which brought the economy to a halt, the overall trend in the leading economic index has remained positive,” said Ken Goldstein, Economist at The Conference Board.  “If consumers continue to spend, and businesses pick up the pace of investment, the industrial core of the economy will benefit and GDP growth could move closer towards the 3 percent range.”

The Conference Board Coincident Economic Index for the U.S. increased 0.1 percent in April to 108.5, following a 0.3 percent increase in March, and a 0.3 percent increase in February.

The Conference Board Lagging Economic Index for the U.S. increased 0.2 percent in April to 123.3, following a 0.7 percent increase in March and a 0.2 percent increase in February.

Source: The Conference Board

May 20, 2014

Store closures and weak demand for traditional office supplies and computers hurt Staples in the first quarter of fiscal 2014.

The company attributed a 44% drop in net earnings during the quarter to lower sales caused by store closures and a rise in the value of the dollar.  But according to reports, the office products company and second largest internet retailer in the United States is facing stiff competition from big box retailers such as Walmart and e-commerce giants such as Amazon.

Net earnings were $96 million for the quarter.  Net saes dropped 3% to $5.65 billion from $5.81 billion.

For the second quarter, the company anticipates further decreases in sales, which caused shares to drop 10%.

“We’re making progress meeting the changing needs of our customers as we reinvent Staples,” said chairman and CEO Ron Sargent.  “Despite a slow start to the first quarter, our results were in line with our expectations and we expect to build mementum throughout 2014.”

Source: Retailing Today

May 13, 2014

Slightly lower median home prices along with steady mortgage rates contributed to higher housing affordability in the first quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.

In all, 65.5 percent of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $63,900.  This is slightly higher from the 64.7 percent of homes sold that were affordable to median-income earners in the fourth quarter.

Meanwhile, the national median home price dipped from $205,000 in the fourth quarter to $195,000 in the first quarter while average mortgage interest rates were virtually unchanged, moving from 4.54 percent to 4.57 percent in the same period.

“Housing affordability remains strong and this is an encouraging sign as the spring home building season moves into high gear,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“As home prices and mortgage interest rates are unlikely to go down, the first quarter HOI is another indicator that this is an opportune time to buy,” said NAHB Chief Economist David Crowe.

Syracuse, New York was the nation’s most affordable major housing market, as 93.7 percent of all new and existing homes sold in this year’s first quarter were affordable to families earning the area’s median income of $67,700.  Meanwhile, Cumberland, Maryland-West Virginia claimed the title of most affordable smaller market, with 96.3 percent of homes sold in the first 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 first quarter included Buffalo-Niagara Falls, New York; Youngstown-Warren-Boardman, Ohio-Pennsylvania; Harrisburg-Carlisle, Pennsylvania; and Dayton, Ohio; in descending order.

Smaller markets joining Cumberland at the top of the affordability chart included Springfield, Ohio; Kokomo, Indiana; Mansfield, Ohio; and Lima, Ohio.

For a sixth consecutive quarter, San Francisco-San Mateo-Redwood City, California held the lowest spot among major markets on the affordability chart.  There, just 13.3 percent of homes sold in the first quarter were affordable to families earning the area’s median income of $100,400.

Other major metros at the bottom of the affordability chart included Santa Ana-Anaheim-Irvine, California; Los Angeles-Long Beach-Glendale, California; New York-White Plains-Wayne, New York-New Jersey; and San Jose-Sunnyvale-Santa Clara, California; in descending order.

All of the five least affordable small housing markets were in California.  At the very bottom of the affordability chart was Santa Cruz-Watsonville, where 21.1 percent of all new and existing homes sold were affordable to families earning the area’s median income of $77,900.  Other small markets at the lowest end of the affordability scale included Napa, Salinas, San Luis Obispo-Paso Robles, and Santa-Petaluma, respectively.

Source: National Association of Home Builders 

May 20, 2014

Despite getting a slow start to the year, The Home Depot rallied in the first quarter thanks to solid results in non-weather-impacted markets.

The home improvement retailer reported first quarter sales of $19.7 billion, up 2.9% from last year’s first quarter.  Comparable store sales were up 2.6%.  Comp-store sales for U.S. stores were positive 3.3%.

The company also reported double-digit growth in net earnings – up 12.5% to $1.38 billion.

“The first quarter was impacted by a slow start to the spring selling season,” said Frank Blake, chairman and CEO.  “But we had solid results in non-weather-impacted markets and expect our sales for the year to grow in line with guidance we previously provided.”

That guidance calls for 2014 sales to increase about 4.8% from the previous year.

At the end of the first quarter, Home Depot operated a total of 2,263 stores.

Source: Retailing Today