Author: Helen Thomas

March 18, 2014

Walmart this week opened its first small format convenience store branded as Walmart To Go in its hometown of Bentonville.

The concept offers a familiar blend of convenience store products, prepared foods and gasoline and is not to be confused with Walmart’s other small format concept known as Walmart Express.  The Express format measures about 15,000 sq. ft. and also appeals to convenience minded shoppers with gas, a pharmacy and fresh food offerings.  The Walmart To Go store bears the same name as a home delivery grocery service the company launched three years ago in San Francisco and expanded to Denver last year.

The Walmart To Go store is located at the heavily trafficked intersection of South Walton Boulevard and S.W. 14th Street, less than a half mile south of Walmart’s headquarters.  The intersection is well suited to a convenience store format with easy ingress and egress.  However, as retail tests go, Walmart won’t get a true read on the viability of the concept until it is exposed to competition in a market where the shopper base is not distorted by those who work for or sell products to Walmart.  The proximity to the retailer’s headquarter ensures that a large percentage of those visiting the store will have some type of Walmart affiliation.  Also of note is the fact that the most meaningful competition for Walmart To Go will come from other Walmart formats.  A Walmart supercenter with a gas station is located adjacent to Walmart’s headquarters and a 45,000 sq. ft. Neighborhood Market store, which is also designed to satisfy shoppers’ convenience needs, opened last year and is less than a mile from the new Walmart To Go.

Source: Retailing Today

March 14, 2014

Sears Hometown and Outlet Stores said Fourth-quarter same-store sales declined 3.4% as two of the company’s best known brands had disappointing results. 

Sales in the fourth quarter declined 4.5% to $602.4 million due to the combination of a 3.4% same-store sales decline and an extra week in the fourth quarter the prior year, which added sales of $36.5 million.  The same-store sales decline was made up of a 4% decline at the Hometown division and a 1.5% decline at the Outlet division.

The comp decline was primarily driven by lower consumer electronics sales following a planned exit from the category in most Hometown stores, lower sales in the tool category in both segments, lower apparel sales in Outlet stores and lower major appliance sales in Hometown.  The decreases were partially offset by higher lawn and garden sales in Hometown and higher major appliance and furniture sales in Outlet.  If consumer electronics are excluded from the comp calculations, the total decline was only 1.1% overall, consisting of a 1% decrease at Hometown stores and a 1.3% decrease at Outlet stores.

“Fourth quarter results were disappointing, especially in the Hometown and Hardware segment where holiday sales and margins of our important Kenmore appliances and Craftsman tools significantly underperformed management’s expectations,” said president and CEO Bruce Johnson.  “In the Outlet segment, increased holiday promotional spending did not drive the expected sales increases.  Total company January sales were negatively impacted by the unusually severe winter weather in many of our trade areas.” 

That said, Johnson noted that the company made significant progress on four key strategic fronts during the quarter that leave it favorably positioned for 2014.  For starters, Johnson said 30 new stores were opened during the past fiscal year with half of those coming in January.  “Total sales from these 30 new stores during the first quarter of 2014 to date have met our expectations, with particularly strong sales from the new Outlet Stores, which accounted for 13 of the 30,” Johnson said. 

The company also continued its transition to a model whereby stores are operated primarily by independent dealers and franchises.  After 19 conversions in the fourth quarter, 1,115 of the company’s 1,260 stores are now operated by dealers and franchisees.  Johnson also said the company achieved double-digit year-on-year growth in both online and multichannel sales, particularly at Searsoutlet.com, where sales for the quarter grew nearly 80% from the prior year to approximately $11 million.

Finally, new Outlet sourcing initiatives began to shift inventory positions in furniture, apparel and out-of-box appliances, to products Johnson said he is confident will deliver higher overall merchandise margins than in the fourth quarter of 2013.

Source: Retailing Today

My team has the opportunity to spend a significant amount of time in various retailer portals downloading store lists, POS data and other files as part of the work we do for our customers.   We routinely encounter errors with the portals and in particular during peak times like early morning.   When prospective customers ask me why they should purchase a service like Accelerated Analytics instead of just using HomeDepotLink or RetailLink or Partners Online I often let them know one reason is because those portals tend to unavailable for significant portions of the day.   

Looks like today is going to be one of those days….

March 13, 2014

Consumer spending on retail sales rose a healthy 0.3 percent in February, despite widespread inclement weather.  This good result essentially offsets the declines registered in January.  The core retail sales measure that excludes autos, building materials and gasoline also advanced a solid 0.3 percent supporting consumer spending in Q1.  Online store sales rose a robust 1.2 percent, as shoppers turned to the internet given the inclement weather in the month.  Although there is some lingering uncertainty about the strength of the labor market going forward – delivering more jobs and perhaps higher wages.  There could be a further bounce this spring as some shoppers finally get out as warmer weather arrives.  Still, the direction of the consumer market for the remainder of the year is more dependent on the strength of the labor market.  The upscale market is and will continue to do fine.  For the mid to lower-scale retail market, better weather could mean a little better sales record but sales are likely still to be constrained on the upside by sluggish wage gains.

Source: The Conference Board

March 18, 2014

Nationwide housing starts were virtually unchanged in February, inching down 0.2 percent to a seasonally adjusted annual rate of 907,000 units, according to newly released data from the U.S. Department of Housing and Urban Development and U.S. Census Bureau.

“Continuing the January trend and in line with our recent surveys, builders are in a holding pattern.  Poor weather is keeping many from getting into the field and they continue to face challenges related to a shortage of lots and labor,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“While housing construction is in a recent lull due to unusual weather conditions, we expect to see an improvement as the winter weather pattern subsides and builders prepare for the spring selling season,” said NAHB Chief Economist David Crowe.  “Competitive mortgage rates, affordable home prices and an improving economy all point to a continuing, gradual strengthening of housing activity through the rest of the year.  Moreover, building permits, which are less dependent on weather and are a harbinger of future building activity, rose above 1 million units in February.”

Single-family housing construction rose 0.3 percent in February to a seasonally adjusted annual rate of 583,000 units while multifamily starts edged 2.5 percent lower to a 312,000-unit pace.

Regionally, combined housing starts activity was mixed in the month, posting gains of 34.5 percent in the Midwest and 7.3 percent in the South and declines of 37.5 percent in the Northeast and 5.5 percent in the West.

Issuance of new building permits rose 7.7 percent to a seasonally adjusted annual rate of 1.02 million units in February.  Single-family permits edged down 1.8 percent to 588,000 units and multifamily permits rose 27.6 percent to 407,000 units.  Regionally, overall permits rose 6.3 percent in the Northeast, 9.9 percent in the South and 17.9 percent in the West but declined 11.8 percent in the Midwest.

Source: National Association of Home Builders

March 7, 2014

The economy generated a gain of 175,000 jobs in February.  Whether that is enough to dissipate uncertainty about where the economy is headed this year remains the big question.  Even though the number of workers unable to report to work due to inclement weather increased strongly, and average weekly hours declined, the number of construction jobs continued to increase at a moderate rate.  Going forward we see things improving as many of the underlying fundamentals of the economy have continued to improve.  The Conference Board Leading Economic Index and the latest reading from the survey of purchasing managers point to strengthening conditions over the next few months.  Catch up from weather-delayed plans could push job gains over 200,000 per month.  And more jobs mean more paychecks, lifting consumer confidence and sending consumers out shopping once the weather improves.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  In sum, we look for a spring thaw to warm up the economic readings, including most notable employment and housing indicators.

Source: The Conference Board

March 17, 2014

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

“The March HMI mirrors last month’s sentiment, as builders continued to be affected by poor weather and difficulties in finding lots and labor,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“A number of factors are raising builder concerns over meeting demand for the spring buying season,” said NAHB Chief Economist David Crowe.  “These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale.”

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 for 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 index’s components were mixed in March.  The component gauging current sales conditions rose one point to 52 and the component measuring buyer traffic increased two points to 33.  The component gauging sales expectations in the next six months fell one point to 53.

The three-month moving averages for regional HMI scores all fell in March.  The Northeast dropped three points to 35, the Midwest fell three points to 53, the South posted a four-point decline to 49 and the West registered a two-point drop to 61.

Source: National Association of Home Builders

March 10, 2014

The Conference Board Employment Trends Index (ETI) increased in February.  The Index now stands at 116.39, up from 115.99 (a downward revision) in January.  This represents a 4.4 percent gain in the ETI compared to a year ago.

“February’s job report and the ongoing improvement in the Employment Trends Index should provide some relief for those concerned about weakness in the U.S. economy and labor market,” said Gad Levanon, Director of Macoreconomic Research at The Conference Board.  “The majority of the ETI’s components have been steadily rising in recent months, suggesting solid job growth will continue in the coming months.”

February’s increase in the ETI was driven by positive contributions from six of its eight components.  In order from the largest positive contributor to the smallest, these were:  Number of Temporary Employees, Job Openings, Real Manufacturing and Trade Sales, Industrial Production, Consumer Confidence Survey Percentage of Respondents Who Say They Find Jobs “Hard to Get,” and Ratio of Involuntarily Part-time to All Part-time Workers.

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 Job Openings (BLS)
• Job Openings (BLS)
• Industrial Production (Federal Reserve Board)
• Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

Source: The Conference Board

March 13, 2014

Many retailers have pointed to a persistent and severe winter for weak holiday and fourth-quarter sales.  But according to the National Retail Federation (NRF), retail sales rebounded in February.

The NRF said that February retail sales, excluding automobiles, gas stations and restaurants, increased 0.2% adjusted month-to-month and 2.3% year-over-year.

“Today’s positive retail sales report indicates that the economy is primed for growth,” said president and CEO Matthew Shay.  “Retailers and consumers endured the harsh winter and they’re hoping both the natural and man-made obstacles to growth will leave with the snow.”

Shay went on to say that retailers are facing “serious” headwinds placed on them by policymakers in Washington who are pushing for new overtime mandates and a higher minimum wage.  According to Shay, for the economy to fully recover, the administration and Congress neet to “quit politicking and focus on growth and job creation.”

“Despite a long and cold winter, consumers continued to persevere and spend in February,” added chief economist Jack Kleinhenz.  “This month’s retail sales data is encouraging and above expectations.  However neither the jobs nor retail data reflect the fundamental health of the economy.  While the weather continues to play tricks on economic forecasts and figures, we expect much-needed clarity come spring as consumers release pent-up demand.”

Additional NRF findings from the February retail sales report include the following:

• Building material and garden equipment and supplies dealers stores sales increased 0.3% seasonally-adjusted month-to-month and 3.2% year-over year.
• Clothing and clothing accessories stores sales increased 0.4% seasonally-adjusted month-to-month and 2.4% unadjusted year-over-year.
• Electronics and appliance stores sales decreased 0.2% seasonally-adjusted month-to-month and 2.3% unadjusted year-over-year.
• Furniture and home furnishing stores sales increased 0.4% seasonally-adjusted month-to-month and remained unchanged unadjusted year-over-year.
• General merchandise stores sales decreased 0.3% seasonally-adjusted month-to-month and 0.9% unadjusted year-over-year.
• Health and personal care stores sales increased 1.2% seasonally-adjusted month-to-month and 5.6% unadjusted year-over-year.
• Nonstore retailers sales increased 1.2% seasonally-adjusted month-to-month and 6.8% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores sales increased 2.5% seasonally-adjusted month-to-month yet decreased 5.3% year-over-year.

Source: Retailing Today

March 13, 2014

An unrelenting Dollar General continues to push forward with plans to open 700 stores this year despite reporting weak financial results and a 1.3% same-store sales increase for the fourth quarter.

Sales during Dollar General’s fourth quarter ended December 31, increased 6.8% to nearly $4.5 billion and were driven mainly by the addition of new locations as same-store sales increased just 1.3%.  The comp increase was due to growth in customer traffic and average transaction amount with tobacco and perishables singled out as key contributors, according to the company.  However, growth in those categories negatively affected the company’s gross margins as did an increase in the shrink rate, which caused gross margins to decline to 31.9% from 32.5%.  Expenses were essentially flat with the prior year at 20% of sales.

Profits in the fourth quarter increased 1.6% to $322 million or $1.01 a share, compared to a profit of $317 million, or 97 cents a share, in the fourth quarter the prior year.

“Sales in the fourth quarter were impacted by severe winter weather, including many days with significant store closures, an aggressive competitive retail landscape and our customers’ uncertainty about spending in the current economic environment,” Dollar General chairman and CEO Rick Dreiling said.  “In spite of these headwinds, both customer traffic and average ticket increased in our same-stores in the fourth quarter.  In addition, we controlled our expenses well and successfully managed the business to deliver a gross margin rate that was better than we anticipated.  Although some of the severe weather impact has continued into the first quarter, we are pleased with our sales performance on days when weather is more normalized.”

The impact of weather can be seen in Dollar General’s expectation for a first quarter same-store sales increase in the range of 2% to 3%, compared to a 2.6% comp increase in the first quarter of 2013.  For the full year, the company expects sales to increase in the range of 8% to 9% and same store sales to rise between 3% and 4%, which implies an acceleration of comp growth later in the year.  Earnings per share are expected to range from $3.45 a share to $3.55.

The key contributor to those results will be the company’s breakneck pace of expansion which calls for 700 new stores as part of a $450 million to $500 million capital expenditure program.  The new store construction program, the most ambitious in the retail industry, follows a record year of square footage expansion in 2013.

“Among our other many accomplishments for the year, we successfully opened 650 new stores, ending the year with 11,132 stores serving customers in 40 states,” Dreiling said.  “Dollar General is a strong and growing business with high return store growth opportunities that we intend to capture.  While we remain cautious on the current operating environment and the many challenges our customer is facing in 2014, we have a business model that generates significant cash flow, putting us in a position to invest in these growth opportunities, while continuing to return cash to shareholders through share repurchases.”

Dollar General will come close to surpassing $20 billion in annual sales this year if its same-store sales and expansion goals are realized.  Last year, the company’s sales increased 9.2% to $17.5 billion from $16 billion and full-year same-store sales increased 3.3%.  As in the fourth quarter, those results were driven by an increase in customer traffic and average transaction size and strength in categories such as tobacco, perishables, candy and snacks.

Source: Retailing Today