Author: Helen Thomas

April 15, 2014

Builder confidence in the market for newly built, single-family homes rose one point to 47 in April from a downwardly revised March reading of 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.

“Builder confidence has been in a holding pattern the past three months,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “Looking ahead, as the spring home buying season gets into full swing and demand increases, builders are expecting sales prospects to improve in the months ahead.”

“Job growth is proceeding at a solid pace, mortgage interest rates remain historically low and home prices are affordable,” said NAHB Chief Economist David Crowe.  “While these factors point to a gradual improvement in housing demand, headwinds that are holding up a more robust recovery include ongoing tight credit conditions for home buyers and the fact that builders in many markets are facing a limited availability of lots and labor.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”  The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”  Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions in April held steady at 51 while the component gauging traffic of prospective buyers was also unchanged at 32.  The component measuring expectations for future sales rose four points to 57.

The HMI three month moving average was down in all four regions.  The West fell nine points to 51 and the Midwest posted a four point decline to 49 while the Northeast and South each dropped two points to 33 and 47, respectively.

Source: National Association of Home Builders

April 16, 2014

Led by a 6 percent rise in single-family starts, nationwide housing production rose 2.8 percent above an upwardly revised February rate of 920,000 to a seasonally adjusted annual rate of 946,000 units in March, according to newly released figures from HUD and the U.S. Census Bureau.

“We see improving signs of new-home construction as we move into the spring buying season,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  “The strongest recovery is in the Northeast and Midwest, where builders were hampered by severe winter weather earlier this year.”

“Today’s report is in line with our forecast of a gradual strenghtening in the housing sector in 2014,” said NAHB Chief Economist David Crowe.  “However, several uncertainties including tight credit conditions for home buyers and erratic job growth are making builders cautious about getting ahead of demand.”

Single-family housing starts rose 6 percent to a seasonally adjusted annual rate of 635,000 units in March, while multifamily starts fell 6.1 percent to 292,000 units.

Regionally in March, combined single and multi-family housing production rose strongly in the Northeast and Midwest with gains of 30.7 percent and 65.5 percent, respectively, but fell 9.1 percent and 4.5 percent in the South and West, respectively.

Overall permit issuance fell 2.4 percent to 990,000 units in March.  The Northeast and Midwest posted gains of 33.3 percent and 26 percent, respectively, while the West was unchanged and the South posted a 17.1 percent decline.

Source: National Association of Home Builders

April 14, 2014

Last week: During a quiet week with relatively little news, the drop in stock prices garnered headlines, even as corporate profit reporting gets underway.  There seems to be a little more retail activity in early spring, as the wet, cold winter fades into memory.  And forecasts continue to reflect optimism that the economy is picking up momentum.  Still, it is hard to shake the memory of prolonged weak growth.  And new reports about softness in the housing market (another dip in mortgage applications) do not help.  So, some cautious optimism seems to pervade, except on stock exchanges.

Retail Sales, March (Bureau of the Census)

Vehicle sales (at a 16.4 million pace in March) reflect some catch up from widespread inclement weather at the start of the year.  Nonauto retail spending will appear stronger than it really is for the same reason.  Going forward, the retail pace will be dictated by the pace of hiring and any pickup in wages.  Retailers, still stuck with piled up inventory, are hoping continued good news on the labor front allows consumers to put into action some long delayed plans.

Consumer Price Indexes, March (Bureau of Labor Statistics)

Globally, inflation is slowing.  Domestically, it is simply holding steady, albeit at a very slow pace.  “Core” prices (which exclude food and energy) have been rising by no more than 0.2 percent per month for more than a year.  There is little reason to expect anything different.  Energy prices are running below year-ago comparisons (not including natural gas and electricity, driven higher by the bad weather).  Food prices are relatively quiet, although meat prices could be driven lower as more steak hits the markets due to herd culling out west, another weather impact.  Prices will rise as demand exceeds supply.  “Core” prices, however, are unlikely to start rising much even if the economy turns a corner.  Medical-care inflation has slowed while the cost of housing remains steady.  Without much change in either of those two components, retail inflation will not change significantly.

Housing Starts and Building Permits, March (Bureau of the Census)

Home building has been running close to a million starts (annualized).  Demand has held up, even with mortgage rates moving a little higher.  And with foreclosure activity winding down, more demand must be met by increased construction.  Weather has delayed some home building, but it hasn’t stopped the industry from staffing up, in anticipation of putting up more units (single family or apartment).  The most likely path forward is continued slow improvement.  Alternatively, a faster pace is far more likely than a slowdown.

Industrial Production, March (Federal Reserve Board)

The ordering rate remains soft and the inventory overhang weighs on production schedules.  So even if retail buying is poised for a pickup, it remains too soon to expect industrial production to start posting anything close to robust gains.  That may develop later this spring.  For now, flat industrial production is more likely.

Source: The Conference Board

April 14, 2014

To help customers save water and grow its sales in the process, Home Depot will execute a massive customer education initiative later this month.

Home Depot regularly holds in store clinics to arm customers with knowledge to tackle home improvement projects, and its newest initiative applies that thought process to a less familiar merchandise classification.  On Saturday, April 26, every one of Home Depot’s 1,977 U.S. stores will host an hour and a half long “Water Conservation Workshop,” in which 10 home improvement projects will be covered.

The emphasis will be on those things that help customers save the most water such as converting to a dual-flush toilet, switching to EPA WaterSense labeled showerheads and faucets, and installing drip irrigation and rotary nozzle or dual spray sprinklers.  Home Depot estimates its customers saved 42.5 billion gallons of water through the purchase of WaterSense labeled products.

“At The Home Depot, we’re committed to helping our customers solve everyday home improvement challenges, and for many, water conservation is one of those challenges,” said Joe McFarland, president of the retailer’s western division where drought conditions have been extreme.  “We have the products and our associates have the know-how to help our customers identify water-saving solutions and implement them at home.  These workshops help us to share that knowledge with our communities and inspire residents to take action.”

In addition to hosting workshops, Home Depot said it adjusted its in-store environment for hundreds of stores in the West, creating unique signage and shifting inventory and displays to help make customers more aware of the various actions they can take to conserve water.

“Conserving water is one of the most important things we can do for our communities, for our environment, and for our economy,” said Nancy Stoner, EPA acting assistant administrator for water.  “WaterSense labeled products provide efficiency without sacrificing performance and their use will help communities throughout the country preserve their water resources.”

Source: Retailing Today

April 14, 2014

Warmer spring weather spurred continued consumer spending and activity this March.  According to the National Retail Federation, March retail sales, which exclude automobiles, gas stations and restaurants, increased 0.8% adjusted month-to-month and 1.6% unadjusted year-over-year.

“Consumers shed their winter coats last month for fresh, spring merchandise,” NRF president and CEO Matthew Shay said.  “Retail sales increased in most categories and sectors as consumers took to stores to purchase new spring attire and home furnishings in hopeful expectation of warmer weather.  Sales should continue to remain positive this spring with the approach of Easter and expected tax refunds.”

Earlier this month, NRF’s Easter Spending Survey reported that the average American consumer will spend $137.46 this Easter holiday on clothing, candy, gifts and more, with total spending reaching $15.9 billion.

March retail sales, released today by the U.S. Census Bureau, which include categories such as automobiles, gasoline stations, and restaurants, increased 1.1% seasonally adjusted month-to-month ($433.9 billion).  The Census also reported that retail sales increased 2.8% adjusted year-over-year.

“Improving economic conditions and consumer confidence should push consumers to return to spending habits this spring,” NRF chief economist Jack Kleinhenz said.  “Consumers released some pent-up demand in March after two consecutive months of harsh winter weather that not only hampered employment opportunities but also retail sales.  We remain optimistic that retail sales will continue their positive march this spring.”

Additional findings from NRF’s retail sales report include:

• Building material and garden equipment and supplies dealers stores’ sales increased 1.8% seasonally-adjusted month-to-month and 6.2% unadjusted year-over-year.
• Clothing and clothing accessories stores’ sales increased 1.0% seasonally-adjusted month-to-month yet decreased 2.3% unadjusted year-over-year.
• Electronics and appliance stores’ sales decreased 1.6% seasonally-adjusted month-to-month and 2% unadjusted year-over-year.
• Furniture and home furnishing stores’ sales increased 1% seasonally-adjusted month-to-month and 1% unadjusted year-over-year.
• General merchandise stores’ sales increased 1.9% seasonally-adjusted month-to-month yet decreased 0.2% unadjusted year-over-year.
• Health and personal care stores’ sales increased 0.3% seasonally-adjusted month-to-month and 4% unadjusted year-over-year.
• Nonstore retailers’ sales increased 1.7% seasonally-adjusted month-to-month and 8% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores’ sales increased 0.3% seasonally-adjusted month-to-month yet decreased 5.5% unadjusted year-over-year.

Source: Retailing Today

April 10, 2014

In the wake of acquiring Houston-based RediClinic, Rite Aid reported revenues of $6.6 billion for the fourth quarter ended March 1, resulting from a 2.2% lift primarily attributed to an increase in pharmacy same-store sales.

For the full year, Rite Aid reported $25.5 billion in revenues, up 0.5%.

For the quarter, the company reported net income of $55.4 million or $0.06 per diluted share, and adjusted EBITDA of $356.3 million, or 5.4% of revenues.  For the full year, Rite Aid reported net income of $249.4 million or $0.23 per diluted share, and adjusted EBITDA of $1.3 billion, or 5.2% of revenues.

“Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year adjusted EBITDA,” stated Rite Aid chairman and CEO John Standley.  “These accomplishments reflect the significant progress we’re making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well,” he said.  “Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company.”

Same-store sales for the quarter increased 2.1% over the prior year, consisting of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front-end sales.  Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores decreased 1.8% over the prior year period, with 1.3% of this decrease being driven by a decrease in flu-related prescriptions and flu shots.  Prescription sales accounted for 67.5% of total drug store sales, and third party prescription revenue was 97.1% of pharmacy sales.

In the fourth quarter, the company relocated two stores, remodeled 94 stores and expanded three stores, bringing the total number of wellness stores chainwide to 1,215.  The company also closed eight stores, resulting in a total store count of 4,587 at the end of the fourth quarter.

Comparable sales for the year increased 0.7% consisting of a 1.2% increase in pharmacy sales, partially offset by a 0.2% decrease in front-end sales.  Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores decreased 0.3% over the prior year period.  Prescription sales accounted for 67.9% of total drugstore sales, and third party prescription revenue was 97% of pharmacy sales.

For the year, the company relocated 11 stores, acquired one store, remodeled 405 stores, expanded four stores and closed 37 stores.

Rite Aid said it expects sales for fiscal 2015 to be between $26 billion and $26.5 billion with same-store sales expected to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.

The company’s outlook for fiscal 2015 is based on the anticipated benefits of its wellness remodels, customer loyalty program, new pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies.  The company’s outlook also considers planned wage and benefit increases, the introduction of new generics in the second half of fiscal 2015, generic drug price increases and a challenging reimbursement rate environment.

Capital expenditures are expected to be approximately $525 million.  This number does not include the purchases of Health Dialog or RediClinic, Rite Aid noted.

Source: Retailing Today

April 10, 2014

Family Dollar plans to close 370 underperforming stores, cut jobs and lower prices on 1,000 basic items following a disappointing second quarter, which was adversely affected by the extra week in last year’s quarter, severe weather, holiday promotions and a challenging consumer environment.

The company is also slowing its new store growth beginning in fiscal 2015 to bolster its return on investment.  It now anticipates opening 350 to 400 new stores as opposed to approximately 525 stores in 2014.

Net income in the quarter ended March 1 fell 35% to $90.9 million from $140.1 million in the year-ago period.  Net sales decreased 6.1% to $2.7 billion, from $2.9 billion.  Same-store sales declined 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.

“Our second quarter results did not meet our expectations,” said chairman and CEO Howard R. Levine.  “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer.  In addition, like many retailers, our second quarter results were significantly impacted by severe weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.”

The job cuts and store closures are expected to reduce annual operating costs by $40 million to $45 million beginning third quarter of fiscal 2014.

Looking ahead, the company expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures.

For the third quarter of fiscal 2014, Family Dollar expects that same-store sales will decline in the low single digit range and for the fourth quarter of fiscal 2014, the company expects that same-store sales will be flat to up slightly.  Family Dollar also expects a low single digit increase in net sales during the full fiscal year.

Source: Retailing Today

April 9, 2014

Average spending per person is forecast to decline this Easter, despite pent up demand from a long cold winter.  

According to new consumer research from the National Retail Federation, fewer people will celebrate Easter this year and average spending per person will decline to $137 from $145 last year.  Total spending is expected to reach roughly $15.9 billion.  A key reason for the decline is that the number of Americans who said they plan to celebrate Easter fell to 80.3% this year compared to 83% last year.

“The winter doldrums left consumers with a lot of pent up demand, and though many Americans may take a cautious approach to spending on Easter items this year, retailers are anticipating that warmer weather will easily put consumers in the mood to buy bright clothes, holiday decorations and more,” said NRF president and CEO Matthew Shay.  “As one of the biggest holidays of the year, retailers are looking forward to increased customer traffic in stores and online, and will roll out promotions on everything from garden supplies and patio sets to apparel and grocery items as they help their customer prepare for the holiday.”

Though fewer Americans will celebrate this year, families are still looking forward to their traditional Sunday meals.  Those who do plan to celebrate will spend the most on a grocery bill for a family dinner or Sunday brunch out; according to the survey, 85.7 percent of those celebrating will spend an average of $43.18 on a holiday meal, totaling $5 billion.

Since the holiday traditionally marks the ceremonial start to spring, 42.9 percent will purchase new spring attire, spending an average of $22.71; total spending on apparel is expected to reach $2.6 billion.  Additionally, nine in ten (89.3%) of those celebrating will stock up on Easter candy, spending a total of $2.2 billion.  Families will also spend on gifts ($2.4 billion), flowers ($1.1 billion) and decorations ($1.1 billion).

Another notable shift relates to the number of people who now indicate that smartphones and tablets will play a greater role in their Easter decision-making.  Roughly one-third of those who own tablets said they would use the device to research products and compare prices, with the behavior most pronounced in the 18-24 year old age bracket, where 44% plan to use their tablets.  A similar phenomenon was evident with smartphones, where 23.4% of overall respondents said they would use their devices to research products, while 37.1% of those 18-24 plan to do so.

Many will use their smartphones to check off their Easter shopping list.  Of those who own smartphones, nearly one in four (23.4%) will use their device to research products or compare prices.  Just 12.2 percent will make an actual purchase with their smartphone.  Nearly one in five (19.2%) tablet owners will make a purchase on their device, but most will simply research holiday gifts, apparel and other items (30.2%).

“Americans are eager to dip their toes in the fresh green grass this Easter and celebrate the day with friends and family,” said Prosper Insights and Analytics director Pam Goodfellow.  “Though they are planning to trim their budgets in terms of spending on food, clothes and gifts, most will look for personal and fun items that won’t break the bank in order to enjoy the day.”

 Sources: National Retail Fereration and Retailing Today

April 7, 2014

The Conference Board Employment Trends Index increased in March.  The index now stands at 117.52, up from 117.01 (an upward revision) in February.  This represents a 5.1 percent gain in the ETI compared to a year ago.

“The increase in the Employment Trends Index in the first quarter is signaling solid job growth in the coming months,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “With GDP forecasted to average 2.5 to 3.0 percent through the end of this year, there is little reason to expect employment growth to slow any time soon.”

March’s increase in the ETI was driven by positive contributions from four of its eight components.  In order from the largest positive contributor to the smallest, these were: Initial Claims for Unemployment Insurance, Industrial Production, Number of Temporary Employees, and Real Manufacturing and Trade Sales.

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 

April 4, 2014

The economy generated a gain of 192,000 jobs in March.  Undoubtedly, there was some catch up in hiring following the inclement weather this winter.  Still, the underlying hiring trend is encouraging, with more good news expected this spring and summer.  This confirms the signals from The Conference Board’s Consumer Confidence Index and Leading Economic Index for the U.S.  More jobs means more pay checks, lifting sentiment and resulting in more consumer buying.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  The key, as always, is sustained job gains in the service sector including health and education.  If these numbers continue, the much-anticipated strengthening of the economy may materialize sooner rather than later.

Source: The Conference Board