Author: Helen Thomas

April 7, 2014

Of the approximately 350 metro markets nationwide, 59 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 11 metros year over year.

The index’s nationwide score ticked up to .88 from a March reading of .87.  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, 28 percent of metro areas saw their score rise this month and 83 percent have shown an improvement over the past year.

“I think the big news here is that regions outside of the energy states continue to gain ground,” said NAHB Chief Economist David Crowe.  “It’s a promising sign to see areas like Los Angeles and San Jose joining the top ten largest MSAs showing a recovery.  We still expect 2014 to be a strong year for housing and to aid in the overall economic recovery.  The job market continues to mend and with that we will see a steady release of pent up demand of buyers.”

Baton Rouge, Louisiana continues to top the list of major metros on the LMI, with a score of 1.42 – or 42 percent better than its last normal market level.  Other major metros at the top of the list include Honolulu, Oklahoma City, Austin and Houston, Texas, as well as San Jose, California and Harrisburg, Pennsylvania – all of whose LMI scores indicate that their market activity now exceeds previous norms.

“Things are getting slowly better overall,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “And with the housing market now entering the spring buying season, the fact that the nation’s economy is headed in the right direction is a very promising sign.”

“Stronger employment numbers seemed to be the driving force this month – an important factor to the recovery of our economy,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.

Smaller metros showing recovery continue to be dominated by the middle of the country experiencing an energy boom.  Odessa and Midland, Texas, boast LMI scores of 2.0 or better, with their markets 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 level of economic activity.

Source: National Association of Home Builders

April 1, 2014

In a move to increase traffic and grow sales, Family Dollar said it added 400 products to its food offerings and reduced prices on 1,000 other items.

As part of the rollout, the operator of more than 8,100 stores enlisted the aid of television personality, author and chef Pat Neely.  Plans call for Neely to participate in several special events including a recipe contest in which the challenge is to prepare a meal for four for under $15.  The contest winner will receive a cooking experience with Neely at his home in Memphis.

“At Family Dollar, our focus is solely on our customer.  It’s important for us to constantly evaluate our assortment, making sure that we have the products and national brands that are relevant to her and her family, always at a great everyday value,” said Jason Reiser, Family Dollar’s chief merchandising officer.  “I am excited to add these new food items to our already robust assortment, and I am confident that our customers will be impressed by the expanded selection we have to offer.”

According to Neely, Family Dollar stores have everything shoppers need to make delicious dishes at everyday low prices whether the occasion is a quick weeknight meal, fun lunch or famly reunion.

“Pat brings a down-to-earth style and flair that resonates with Family Dollar and our customers,” Reiser said.  “We are excited to welcome Pat to the Family Dollar family.  He’s a great ambassador for us as we expand our food assortment.”

Source: Retailing Today

April 1, 2014

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

Economic activity in the manufacturing sector expanded in March for the 10th consecutive month, and the overall economy grew for the 58th 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 Manufacturing Business Survey Committee.

Manufacturing expanded in March as the PMI registered 53.7 percent, an increase of 0.5 percentage points when compared to February’s reading of 53.2 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 March PMI indicates growth for the 58th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 10th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (52.7 percent) corresponds to a 3.1 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for March (53.7 percent) is annualized, it corresponds to a 3.5 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 14 are reporting growth in March.

Source: Institute For Supply Management

March 27, 2014

During New Homes Month in April, the National Association of Home Builders is sharing with home buyers the most popular features in new single-family homes in 2014.  Builders from across the country were surveyed on what features they were most likely to include in a typical single-family home this year, revealing that convenience, livability and energy efficiency are top priorities.

“Newly constructed homes can suit the specific requirements of today’s home buyers,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “And now is a great time to consider buying a new home, as consumers can take advantage of competitive home prices and low interest rates to find the perfect new home for their families.”

Home builders are including features that are practical and functional for the daily lives of today’s home buyers.  The features that are most likely to be included in a typical single-family home this year are: a walk-in closet in the master bedroom, low-e windows, a laundry room, and a great room.

Energy efficiency is a key theme with Energy-Star rated appliances, programmable thermostats and Energy-Star rated windows at the top of the list.  These features help make the home more comfortable and can save the home owner significant money over the long term.  On a median per square-foot basis, home owners spent 78 cents per square foot per year on electricity, while owners of new homes spent 65 cents per square foot per year, according to data from the 2009 American Housing Survey.

Builders also list features such as granite countertops, a double sink and a central island as winning elements in new-home kitchens, and a linen closet and a private toilet in the bathroom.  Additional features likely to be incuded throughout the home include first-floor ceilings at least nine feet high, a front porch, outdoor lighting, and a patio.

Source: National Association of Home Builders

March 28, 2014

Weather Trends International expects April 2014 to trend the coldest in five years and drier than last year for the U.S. as a whole.  Warmer year-on-year temperature trends in the Central states will be sandwiched in between colder trends on the East and West coasts.  A more active severe weather season than last year in the South Central states can be expected, especially across parts of Texas and Oklahoma.  Storm cleanup supplies and plastic sheeting will see increased demand in harder hit areas.  There is the potential for a hard frost and freeze through late in the month in the Northeast, Great Lakes and Ohio Valley, which could damage tender vegetation in garden centers.  Following another cold March, the start of the season for many spring categories will fall into the retail April month in the East, except for the Deep South where spring has already sprung.  Although the weeks before Easter on the East Coast will trend colder than last year, most of the colder trends will fall on the weekdays while the weekends look more favorable helping to drive holiday apparel and footwear demand.  Drier trends in Florida and the Midwest will be beneficial for store traffic and outdoor categories, but wetter weather in the Southwest and South Central states will inhibit traffic at times.

Source: Retailing Today, Weather Trends International

March 27, 2014

Favorable tax credits and a 53rd week in fiscal 2012 affected Fred’s net income results for the fourth quarter.  Severe weather also contributed some to the company’s net sales decline, as did higher-than-normal utility bills and rising generic drug costs.

The company reported a substantial 34.5% decrease in its net income during the quarter of fiscal 2013, to $5.56 million from $8.49 million in the same quarter a year earlier.  Net sales declined 7.2% to $495 million from $533.4 million, and same store sales grew 0.1%.

“Our comapny’s performance in the fourth quarter reflected all the difficulties that have been cited throughout the retail sector recently as we dealt with the unusually harsh weather of the past several months and a significant 24% increase in the cost of generic drugs, which reduced gross margin by 100 basis points in our pharmacy department,” said CEO Bruce A. Efird.  “Operationally, we achieved earnings of $0.17 per share for the quarter.”

During the full fiscal year, Fred’s net income fell 12% to $26 million from $29.6 million and net sales dropped 0.8% to $1.94 million from $1.95 million.

Looking ahead, total sales for first quarter 2014 are expected to be flat to up 2%.  Same-store sales for the first quarter are expected to be flat to down 2% reflecting poor weather conditions and weather-related store closings that have affected Lawn & Garden and other seasonal merchandise.

Source: Retailing Today

A recent Federal Reserve report shows that household finances have regained substantial ground since the Great Recession, driven largely by the run-up in home values and surge in stocks.  These positive forces have contributed to the highest level of wealth in our history – the net worth of U.S. households and nonprofits reached $80.7 trillion by the end of 2013.

The effect of wealth on consumption is an issue of longstanding interest to economists, which has sparked interesting research and debate.  As wealth accumulates, consumers increase confidence, and with it, consumer spending and the use of credit.  Based on this reasoning, economists are anticipating further growth and gains this year. 

However, not all wealth is created equal, and its impact on consumption and spending varies.  Housing prices have a larger role in consumer spending compared with financial wealth like stocks and bonds.  Here’s how.

Housing Prices

As home prices rise, households regain equity (they owe less on their mortgage than the value of their home).  As a result, they may find it easier to sell, refinance or borrow.  Overall, equity as a share of real estate has reached 51.7%, the highest point since the recession.

The key to increased spending, though, is how individuals turn rising home values into cash.  How much depends on how easily individuals can borrow and the desire by banks to lend.  For every dollar increase in housing values, research has estimated that consumption increases between 6 and 9 cents.

Stocks and Bonds

Stocks and bonds amount to 35 percent of net worth, and are at the highest level in 15 years.  Compared with housing wealth, financial wealth is readily accessible and much easier to convert into cash.  With this ease, you might think its impact on spending would be larger than housing.  However, research has found just the opposite.  For every dollar change in financial wealth, consumer spending tends to only increase by 2 to 4 cents.

The reduced impact of financial wealth is largely due to the fact that it is not shared as broadly as housing wealth.  There are many more Americans with homes than financial investments.  However, some analysts believe that the wealth and consumption relationship may not stem from the direct effect of financial wealth on spending, but rather from a signaling channel.  That is, as stock prices rise and fall, household optimism about the economy may cause households to revise their expectations about their future wages and consumption.

Optimistic Expectations

In the coming months, higher home and equity values (the wealth effect) combined with the use of consumer credit, should add to the pace of consumer spending.  While take-home pay remains the primary source of consumer spending, access to credit also plays a large role into economic activity.

Even though consumers have taken advantage of extremely low interest rates to purchase big ticket items, that doesn’t mean households are returning to pre-Great Recession spending habits.  It appears that there is more responsible borrowing on the part of consumers.  Credit card use has been extremely tepid as consumers remain hesitant to return to 2007-2008 behavior.  If consumers remain hesitant, their improved finances may not lead to big gains in spending.

I remain optimistic about consumer spending this year thanks to better employment prospects, a strengthening balance sheet and an expected uptick in after-tax income that makes it easier to finance debt dependent purchases.

This optimism is tempered with the reality that rising interest rates could otherwise thwart consumer attitudes toward spending and borrowing.  If interest rates begin to rise, it would make it more expensive for households to access and utilize credit and limit the increase in home prices.  Alternatively, if interest rates remain steady as we expect, consumers should gain more confidence as the employment situation improves, spurring additional spending and economic activity throughout 2014.

Source: National Retail Federation

March 25, 2014

Despite expected headwinds from slower generic drug introductions, comparisons with last year’s flu season and severe weather, Walgreens saw solid top-line growth in the second quarter ended February 28, driven by record quarterly sales and record second quarter prescriptions filled.

The company also continued to gain prescription market share while maintaining a firm hold on its costs. 

Walgreens posted a sales increase of 5.1% to $19.6 billion for the quarter.  First half sales were up 5.5% to $37.9 billion.

Prescription sales, which accounted for 62.2% of sales in the quarter, increased 7%, while prescription sales in comparable stores increased 5.8%.  The company filled 214 million prescriptions in the quarter, an increase of 2.8% over last year’s second quarter.  Prescriptions filled in comparable stores increased 2.2% in the quarter.  As of February 28, Walgreens increased its retail prescription market share 20 basis points from a year ago to 19% as reported by IMS Health on a 30-day adjusted basis.

Walgreens also saw strong growth in prescriptions filled for Medicare Part D patients, which increased 16% in the second quarter compared with last year’s quarter, while the company’s Part D market share increased 80 basis points in February compared with the same month a year ago.  “Our Medicare Part D program is accelerating our momentum in pharmacy,” Greg Wasson, president and CEO Walgreens, told analysts.  “As we move forward we are well positioned with senior customers as a preferred provider in four of the top national plans,” he said.

And Walgreens has been recognized by patients and payers for tightly integrating its health and wellness services with its retail clinic offerings, Wasson said.  Patients appreciate the convenience of services and payers view Walgreens as an emerging alternative healthcare model and part of the patient care delivery team, he said.  “To help meet this growing demand, we have a goal to add nearly 100 new Healthcare Clinic locations in calendar 2014 on top of our 400 current retail clinics.”

In addition, Walgreens has grown its 90-day at retail business substantially.  The 90-day at retail prescriptions were up 15%, Wasson said.  “For perspective, our 90-day at retail alone is as large as one-third of the total mail market industry,” Wasson said.

The total number of all CDC-recommended immunizations and vaccines administered by Walgreens reached 8.6 million in the first half of the fiscal year, an 11% increase over the previous year.

Front-end comparable store sales increased 2% in the second quarter, customer traffic in comparable stores decreased 1.4% and basket size increased 3.4%, while total sales in comparable stores increased 4.3%.

“We head into the second half of the year with nearly 80 million active members in our Balance Rewards loyalty program and with expectations that the generic drug headwind that affected the first half will ease and turn around by the end of the year,” Wasson added.  “With 80 million active members – we now have the largest loyalty program in the industry,” he told analysts.

The company is leveraging insights from its Balance Rewards loyalty program to provide customers with more value and simplified promotions.  Balance Rewards reached a milestone in February with more than 100 million enrollees and nearly 80 million active members at the end of this year’s second quarter.

Walgreens is also leveraging its omnichannel reach across all sales channels, Wasson said.  “Today, 9 million customers touch the Walgreens brand every day – at our stores, over the web or through mobile channels – making Walgreens a true omnichannel provider.”

“In addition, our joint synergy program with Alliance Boots is expected to exceed its second-year estimate, and we are bringing critical elements of the Well Experience to additional stores,” Wasson noted.  Wasson noted there are now 628 Well Experience stores across the nation.

The combined synergies for Walgreens and its strategic partner, Alliance Boots, in the first half of fiscal 2014 were approximately $236 million.  The joint synergy program is now estimated to deliver second-year combined synergies of $375-$425 million, an increase from the previous second-year estimate of $350-$400 million.

Walgreens also announced Tuesday that as part of its efforts to optimize the company’s asset base, it plans to close 76 drug stores during the second half of fiscal 2014.  Including these store closures, Walgreens still expects a net increase in its store count in fiscal 2014 of approximately 55-75 locations.  “While we seize the opportunity for store growth as the population ages and consumers look to community pharmacy for their health care needs, we also continue to focus on optimizing our assets and organization to position Walgreens for our future as a global company,” Wasson said.

The store closures represent less than 1% of Walgreens’ store base, Wasson added.

In the fiscal 2014 second quarter, the company opened or acquired 28 new drug stores compared with 29 in the year-ago quarter.

At February 28, Walgreens operated 8,681 locations in all 50 states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands.  The company has 8,210 drug stores nationwide, 138 more than a year ago.  Walgreens also operates worksite health and wellness centers, infusion and respiratory services, specialty pharmacies and mail service facilities.  Its Take Care Health Systems subsidiary manages more than 700 in-store convenient care clinics and worksite health and wellness centers.

Source: Retailing Today 

March 25, 2014

Sales of newly built, single family homes fell 3.3 percent to a seasonally adjusted annual rate of 440,000 units in February, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“There is no doubt that the persistently bad weather took a toll on sales in February,” said Kevin Kelly, chairman of the National Association of Home Builders and a home bulder from Wilmington, Delaware.  “However, builders continued to increase their inventory of for-sale homes, indicating they still anticipate a relatively strong spring buying season.”

“We still expect 2014 will be a strong year for housing,” said NAHB Chief Economist David Crowe.  “The first two-month average of 2014 is exactly in line with where 2013 left off.  If not for the unusual weather, we would easily be ahead of last year’s pace.  We also continue to see household formations and pent-up demand sales forward.”

Regionally, new home sales activity fell 32.4 percent in the weather-battered Northeast, 1.5 percent in the South and 15.9 percent in the West.  The Midwest posted a gain of 36.7 percent, stemming from an unusually low January figure.

The inventory of new homes rose to 189,000 units in February, a 5.2 month supply at the current sales price.

Source: National Association of Home Builders

March 25, 2014

The Conference Board Consumer Confidence Index, which had decreased in February, improved in March.  The Index now stands at 82.3, up from 78.3 in February.  The Present Situation Index edged down to 80.4 from 81.0, while the Expectations Index increased to 83.5 from 76.5.

“Consumer confidence improved in March, as expectations for the short-term outlook bounced back from February’s decline,” said Lynn Franco, Director of Economic indicators at The Conference Board.  “While consumers were moderately more upbeat about future job prospects and the overall economy, they were less optimistic about income growth.  The Present Situation index, which had been on an upward trend for the past four months, was relatively unchanged in March.  Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months ahead.”

Consumers’ assessment of current conditions was little changed in March.  Those claiming business conditions are “good” increased to 22.9 percent from 21.2 percent; however, those claiming business conditions are “bad” also rose, to 23.2 percent from 22.0 percent.  Consumers’ appraisal of the labor market was relatively unchanged.  Those claiming jobs are “plentiful” decreased marginally to 13.1 percent from 13.4 percent, while those saying jobs are “hard to get” increased slightly to 33.0 percent from 32.4 percent.

Consumers’ expectations, which fell last month, rebounded in March.  The percentage of consumers expecting business conditions to improve over the next six months increased to 18.1 percent from 17.3 percent, while those anticipating business conditions to worsen declined to 10.2 percent from 13.6 percent.  Consumers’ outlook for the labor market was also moderately more optimistic.  Those expecting more jobs in the months ahead edged up to 13.9 percent from 13.7 percent, while those expecting fewer jobs fell to 18.0 percent from 20.9 percent.  The proportion of consumers expecting their incomes to grow declined to 14.9 from 15.8 percent, but those anticipating a decline in their incomes also decreased to 12.1 percent from 13.4 percent.

Source: The Conference Board