Author: Helen Thomas

May 1, 2014

Rite Aid posted $2 billion for the four weeks ended April 26, representing a lift of 4.9%.  Same-store sales increased 5% over the prior-year period.

April front-end same-store sales increased 4.7%, with 4.6% of the increase attributable to a shift in the timing of Easter, which fell on April 20 this year, compared with March 31 last year.  Pharmacy same-store sales, which included an approximate 138 basis points negative impact from new generic introductions, increased 5.2%.  Prescription count at comparable stores increased 2.3% over the prior-year period.

Prescription sales accounted for 67.9% of drug store sales, and third-party prescription sales represented 97.4% of pharmacy sales.

Same-store sales for the eight-week period ended April 26, 2014 increased 2.9% over the prior-year period.  Front-end same-store sales decreased 0.2% while pharmacy same-store sales increased 4.3%.  Prescription count at comparable stores increased 1.7% over the prior-year period.

Total drug store sales for the eight weeks ended April 26, 2014 increased 2.6% with sales of $3.9 billion.  Prescription sales represented 68.7% of total drugstore sales, and third party prescription sales represented 97.4% of pharmacy sales.

Source: Retailing Today

May 1, 2014

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

Economic activity in the manufacturing sector expanded in April for the 11th consecutive month, and the overall economy grew for the 59th 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.

Manufacturing expanded in April as the PMI registered 54.9 percent, an increase of 1.2 percentage points when compared to March’s reading of 53.7 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 April PMI indicates growth for the 59th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 11th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (53.3 percent) corresponds to a 3.3 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for April (54.9 percent) is annualized, it corresponds to a 3.9 percent increase in real GDP annually.”

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

Source: Institute For Supply Management

May 1, 2014

American workers have endured six years of depleted wealth, stagnant wages, and general insecurity.  But their fortunes are about to change, according to a surprising new study from The Conference Board.  ‘From a Buyer’s Market to a Seller’s Market’ predicts unemployment in the United States – currently 6.7 percent and falling rapidly – will reach its “natural rate” of 5.5 percent by late 2015.  The decline will continue well past this benchmark; over the next 15 to 20 years, U.S. unemployment may even dip below 3.8 percent, the lowest rate recorded since the 1960s.

“While our conclusions may seem unlikely today, they rest on a simple fact: nearly all baby boomers will be out of the job market by 2030,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board and a co-author of the report.  “As woriking-age population expansion slows to a crawl, even modest job growth should steadily tighten the labor supply and force wages higher.  In the short run, this will be good news for workers.  But it could also become a major handicap on U.S. growth and competitiveness, which we must prepare for now.”

Among the report’s other key findings:

• Most of the millions who left the active job market during the Great Recession are unlikely to return.  Many are retired or disabled, while “skill erosion” has made others uncompetitive in the eyes of employers.  Thus the official unemployment rate is a broadly accurate measure of slack in the labor market, not misleadingly low as many commentators argue.
• Since 2009, unemployment decline has outpaced previous recoveries even as GDP growth lags behind.  Meanwhile, wage growth, voluntary quit rate, and employers’ difficulty in filling positions are all trending up, suggesting the transition to labor shortages is underway.
• As baby-boomer retirement mounts, wage pressure will form a growing constraint on corporate profits and, ultimately, economic growth.  Seeking to increase productivity and reduce costs, companies may raise prices and move operations to cheaper areas.
• Impacts will vary widely across industries.  Those in which older workers are concentrated – and which attract few skilled immigrants – will be at highest risk of labor shortages.  These include law enforcement, plant operations, and rail and water transport.  Conversely, relatively high numbers of young and foreign entrants should mitigate the effects on high-growth and technology fields.
• Immigration and productivity are open factors in general – a surge above trend growth for either could offset much of the demographic pressure currently projected.

Source: The Conference Board

April 29, 2014

Lowe’s and Porch.com have expanded their strategic partnership to the more than 1,700 Lowe’s home improvement stores across the U.S.

Every Lowe’s store in the country now features Porch as the in-store resource to help homeowners find the right home improvement professionals for nearly any project outside of Lowe’s current installation services.  In addition, home improvement service professionals can sign up for a free Porch profile to help increase the exposure of their business to homeowners in need of their specific services.

“While we have already been able to help our customers with projects like installing flooring or remodeling a kitchen, our partnership with Porch means we can now guide customers to find help for nearly any home improvement service, from routine maintenance to dream projects,” said Jay Rabello, VP new business development and corporate innovation at Lowe’s.  “Homeowners trust Lowe’s products and project expertise, and now that relationship can extend to the search for home improvement pros by providing a highly personal, localized experience through Porch.”

Porch was first introduced at Lowe’s stores in the Carolinas and the Seattle area in January.  If a Lowe’s customer needs a professional for a service Lowe’s does not currently offer, such as handyman, painting or landscaping services, employees can access the Porch network of pros on their mobile devices and in-store terminals to identify local providers.

“From day one, Porch has been on a mission to make home improvement simple, easy, and delightful,” said Matt Ehrlichman, CEO of Porch.  “We launched our product just over six months ago and thanks to the enthusiastic feedback and support of our customers, Porch is becoming a true center of gravity for home improvement professionals and homeowners, enabling them to connect and work together like never before.  Our team is excited to continue our collaboration with Lowe’s to improve every facet of the home improvement experience.”

The partnership with Porch is the latest in a series of technology initiatives Lowe’s has introduced to enhance the in-store support employees can offer customers, including equipping employees with iPhones to help customers access information, view how-to videos or locate product in the store efficiently.

Source: Retailing Today 

April 30, 2014

The U.S. Bureau of Economic Analysis today reported 0.1 percent annualized growth in real Gross Domestic Product for the first quarter of 2014.

Economic growth in the first quarter was disappointing, beyond the anticipated slowdown related to the brutal winter weather conditions affecting major parts of the nation.  Based on these preliminary estimates, inclement weather had an even more negative impact than analysts had calculated.  Despite positive growth effects from continued consumer spending, these were offset by a strong decline in investments in residential and non-residential structures, and a sharp decline in exports.  However, there is little reason to expect a continued sub-par performance.  The strength in consumer spending in the first quarter is expected to continue into the second quarter.  In going forward, we receive similar positive signals from The Conference Board Leading Economic Index.  If the economy can deliver as much as 3 percent growth in the second quarter, and open more than 200,000 new jobs per month, it will help set the stage for a strong third-quarter performance.  In short, after a very disappointing first quarter, the economy, freed from headwinds such as a weak housing market or budget squabbles, and buoyed by catch up, low inflation and low interest rates, could finally realize its potential underlying dynamism.  That’s a more positive outlook than any time during the past five-year-post-recession period since 2009.

Source: The Conference Board

April 29, 2014

The Conference Board Consumer Confidence Index, which had increased in March, declined slightly in April.  The Index now stands at 82.3, down from 83.9 in March.  The Present Situation Index decreased to 78.3 from 82.5, while the Expectations Index was virtually unchanged at 84.9 versus 84.8 in March.

“Consumer confidence declined slightly in April, as consumers assessed current business and labor market conditions less favorably than in March,” said Lynn Franco, Director of Economic Indicators at The Conference Board.  “However, their expectations regarding the short-term outlook for the economy and labor market held steady.  Thus, while sentiment regarding current conditions may have slipped a bit, consumers do not foresee the economy, or the labor market, losing the momentum that has been building up over the past several months.”

Consumers’ appraisal of current conditions pulled back moderately in April.  Those claiming business conditions are “good” edged down to 21.8 percent from 22.6 percent, while those claiming business conditions are “bad” rose to 24.4 percent from 23.5 percent.  Consumers’ assessment of the labor market was also slightly more negative.  Those stating jobs are “plentiful” declined to 12.9 percent from 13.8 percent, while those saying jobs are “hard to get” increased to 32.5 percent from 31.4 percent.

Consumers’ expectations held steady in April.  The percentage of consumers expecting business conditions to improve over the next six months was unchanged at 17.4 percent, while those anticipating business conditions to worsen increased marginally to 10.3 percent from 10.1 percent.  Consumers were slightly more optimistic about the outlook for the labor market.  Those expecting more jobs in the months ahead increased to 15.0 from 14.1 percent, while those expecting fewer jobs edged up to 17.9 percent from 17.5 percent.  The proportion of consumers anticipating their incomes to grow increased to 17.1 percent from 15.3 percent, but those expecting a drop in their incomes also increased, to 12.9 percent from 11.5 percent.

Source: The Conference Board

April 25, 2014

Probably.  Starting in 2007, U.S. consumers began to build up savings, and pay off more old debt than the amount of new credit card, mortgage, or other household debt they incurred.  Of course, this had the impact of delaying the replacement of old vehicles or household appliances and furniture.  The bottom line, then, was a prolonged period of very slow growth in consumer spending.

Almost seven years later, household balance sheets are in much better shape.  Not so the stock of household goods.  If consumers are now more confident they will be able to pay off debt, sales of furniture and appliances could accelerate as early as this spring.  And this boost in consumer spending might even be enough to send overall GDP above 3 percent (annualized) and send job growth above 200,000 per month.

Is deleveraging over?  The ratio of household debt to income peaked at 129 percent in 2007.  By the fourth quarter of 2013, it was down to 104 percent – more the result of lower mortgage debt than any other factor.  Statisticians at the Federal Reserve in New York tried to calculate an equilibrium ratio of debt to income (based on factors like the ratio of mortgage debt outstanding to home price, mortgage rates, other collateral, income and income expectations, and so on).

Not only was the debt-to-income ratio down by the end of last year, but the actual ratio was closer to the calculated ratio configured by these Federal Reserve statistics.  In other words, excessive household debt was lower, reaching a more manageable level (given the current state of borrowing costs, mortgage and otherwise).  Therefore, if job growth maintains its current pace, and interest rates do not rise much, there could be a spurt in shopping this spring.

Does that mean saving rates will go down?  If job and wage growth accelerate, consumer spending might go through a spurt without any drop in the saving rate.  Like all economic forecasts, there are a lot of ifs, but the outlook looks more favorable than it has since the end of the Great Recession.

Source: The Conference Board

April 25, 2014

Last week: The Conference Board Leading Economic Index pointed to some faster growth in the U.S. economy this spring and summer.  Two important ingredients, beyond recovery from a bad winter, are improving sentiment and a pickup in demand, signaled by improving orders.  This past week, data on orders for durable goods suggested the ordering rate is gaining traction.  This coming week will provide a fresh read on the state of consumer sentiment.  One big question: Do consumers perceive the same economic gravity shown in the ordering and indicator data?

The Conference Board Consumer Confidence Index

The economic data point to an improving economic environment.  Are consumers buying it?  Confidence did gain a little in February and again in March.  Did this continue in April?

Gross Domestic Product – 1Q 2014 (Bureau of Economic Analysis)

This first read on the economy in the first quarter will show the impact of sharp and widespread inclement weather – reducing job growth and limiting consumer shopping.  If the rise in GDP comes in close to 1.5 percent (annualized), that number will be well below the underlying rate of growth in the economy, and set the stage for a second quarter report that will overstate it, as shopping and home building catch up.

Personal Income and Outlays, March (Bureau of Economic Analysis)

Income growth has generally been in a range of about 0.2 to 0.3 percent.  Spending was slower in February, due to sustained bad weather.  There is a chance that spending in March rose faster, as shoppers were able to get to the stores.  April, in turn, will show even more of that.  The bigger issue is whether job growth and a rise in wages will be enough to move income growth above the 0.2 to 0.3 range.

Employment Situation, April (Bureau of Labor Statistics)

The economy opened up a little more than 180,000 new jobs in March.  The figure for April could be just over 200,000, reflecting an economy that is gaining strength and catching up from this past winter.  That much job growth is likely to feed household sentiment and boost shopping.  The big question is whether all this will be enough to generate more capital investment in equipment.  In other words, business clearly is investing in more workers, but do they have enough equipment for the staff to get the job done?  Money for investment is not the issue.  Indeed, neither is sentiment as surveys of attitudes of business executives through the first quarter reflect an uptick in optimism.

An uptick in consumer spending and business investment is a recipe for continued job growth of more than 200,000 per month for at least the next few months.  In other words, the economic cycle could start spinning a little faster, just as The Conference Board Leading Economic Index has been signaling.  Look for more construction jobs, service sector jobs, perhaps even some manufacturing jobs.

Regionally, hiring has been the weakest in the service-dominated big population centers in the Northeast and Midwest.  If the labor market is turning more robust, it is likely that service-sector employment in those states is about to pick up.

April 25, 2014

Weather Trends International expects May to trend the coldest in three years and drier than last year.  On the West Coast, it will be cooler than last year, but still above normal, while the South trends warmer than last year and normal.  There is a good chance that a large portion of the North will trend cooler than last year and normal.  There will be a band of severe weather potential extending from the lower Mississippi Valley northeast to eastern Ohio which will set the stage for increased demand for clean-up categories.  The nation’s mid-section should see a warmer start to the month, while much colder year-on-year trends consume the Pacific Northwest and New England.  Favorable weather in the run-up to Mother’s Day weekend will be a positive for apparel and gift categories.  Cooler trends after Mother’s Day will be a challenge for many retailers to maintain sales momentum.  Memorial Day is setting up to be much stronger across the Northeast and Northwest as conditions trend much warmer and drier than last year, which should benefit products like charcoal, sun care, beverages and outdoor leisure items.

Source: Retailing Today, Weather Trends International

April 24, 2014

Against the backdrop of unusually severe winter weather, the Remodeling Market Index (RMI) declined to 53 in the first quarter of 2014, according to the National Association of Home Builders (NAHB).  This reading is down from the historically high level of 57 in the two most recent quarters, but remains above the key break-even point of 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.

“Remodelers remain confident in the continued growth of the home improvement market,” said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, New Hampshire.  “As we head into spring, the gradual rise in home equity levels will continue to help clients better afford to remodel their homes.”

Smaller renovation jobs continue to show strength.  The home maintenance and repair component of the RMI increased two points to 59 in the first quarter, a historically high reading.  Overall, the current market conditions of the RMI declined three points to 53 this quarter.

While the RMI’s future market conditions index fell from 58 in the previous quarter to 52, all of the four major components of the RMI’s future market conditions index remained at or above 50 in the first quarter of 2014.  Calls for bids was 52, the amount of work committed for the next three months was 50, the backlog of remodeling jobs was 55 and appointments for proposals was 52.

“An uncommonly harsh winter and continued labor shortage created a drag on many parts of the housing market, including remodeling, in the first months of 2014,” said NAHB Chief Economist David Crowe.  “The two components of the RMI that declined the most in the first quarter, calls for bids and appointments for proposals, are the ones most likely to respond to weather conditions.  Going forward, we expect gradual, but steady growth in the market for remodeling as there is still some pent-up demand from the housing downturn waiting to be released.”

Source: National Association of Home Builders