Author: Helen Thomas

March 6, 2014

Albertsons plans to acquire Safeway for $32 a share in a deal valued at roughly $9 billion that will create a supermarket chain with roughly 2,400 locations to rival market leader Kroger.

The deal announced late Thursday ended longrunning speculation regarding the potential acquisition of Safeway.

“This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country,” said Albertson’s CEO Bob Miller.  “It also brings together two great organizations with talented management teams.  Safeway CEO Robert Edwards and his team have done an outstanding job in positioning Safeway’s core business for success, by investing in its stores and creating innovative strategic marketing programs that contribute to shareholder value.  Working together will enable us to create cost savings that translate into price reductions for our customers.  Together, we will be able to respond to local needs more quickly and deliver outstanding products at the lowest possible price, more efficiently than ever before.”

Source: Retailing Today

March 10, 2014

For meteorologists, scientists, weathermen and millions of others, this winter has been absolutely dreadful.  And, although spring is on the horizon, much of the country is still covered in snow.  In fact, the nation’s 21st winter storm just wrapped up this past weekend.

When it comes to the impact weather has on businesses, most industries, including retail, manufacturing, construction and auto, recognize the ebb and flow of weather as a significant part of their plans.  For retailers, weather forecasting models can impact everything from merchandising decisions to shipping and receiving, and even sales and staffing.

Looking back on the past few months, it’s evident the 2013-2014 winter season has been a serious thorn in the side for the nation’s largest industries.  In the Federal Reserve’s recently released “Beige Book,” a summary of commentary on current economic conditions, “weather” was mentioned 119 separate times to describe November and December alone.

Just how severe was this winter?

• Ohio had used almost a million tons of salt for its roadways as of late February, compared with 630,000 tons used on average each winter
• Erie, Pennsylvania became America’s snowiest city with a population over 100,000, recording a whopping 123.9 inches of snow
• According to the National Oceanic and Atmospheric Administration, December and January averaged over the contiguous 48 states were the third-coldest months in the last 30 years
• As of January 31, there were 1,073 different snowfall records set across the country at various times
• The meteorological winter, beginning December 1 and ending March 1, marked Chicago’s coldest winter in 30 years

As for the latest results from retail, industry sales in January fell 0.4 percent from December 2013, according to the Department of Commerce, led by a drop in auto sales and in categories like clothing, furniture stores and restaurants, sectors largely depending on foot traffic.  Seasonal hiring in February showed retailers took a more cautious approach to staffing their stores during the brutally cold month.

But for some retailers it hasn’t been bad news:

• Ace Hardware has reported it is having its best winter in more than a decade thanks to increased sales of snowblowers and shovels
• Maine-based retailer L.L. Bean has sold out of its famous waterproof boots
• Sales for company Delivery.com are up 30 percent compared with last year as more people looked for ways to get their laundry, dry cleaning and grocery shopping done without leaving home
• Carmex, maker of their namesake cult-favorite lip balm, says its sales are up 9 percent over the past eight to ten weeks
• Pawz Dog Boots, which makes fun, colorful booties for dogs that protect them from salt and snow, says sales have more than doubled

Looking ahead, it’s too soon to say if NRF’s outlook for 2014 needs to be adjusted based on recent sales reports; the impact from the severe weather could have just been a blip on the radar, so to speak.  When the ground finally thaws and consumers can start enjoying spring-like weather, we will re-evaluate consumer spending.  Until then, we can only hope that winter is done having its fun with us.

Source: National Retail Federation

March 11, 2014

Following disappointing fourth-quarter sales, the Bon-Ton Stores president and CEO Brendan L. Hoffman has notified the company’s board of directors that he will not renew his employment agreement with the company when it expires February 7, 2015.  Hoffman also plans to resign as a director of the company.

“I am extremely proud of the Bon-Ton team and what we have accomplished since I joined in 2012.  I truly enjoyed working for the company these past two years.  However, I have made the difficult decision to end my tenure with the company for strictly personal reasons.  I remain committed to continuing to execute the strategic initiatives we put forward as the company searches for a new chief executive officer,” said Hoffman.

The board of directors will undertake a national search to find a CEO to succeed Hoffman.

Comparable-store sales for the fourth quarter decreased 7.3%.  The company reported net income for the quarter of $61.3 million, or $3.04 per diluted share, compared with net income of $74.4 million, or $3.71 per diluted share, for the prior-year quarter.

Hoffman was optimistic and said that despite the disappointing results the company is making progress on several strategic initiatives that he believes will drive improved performance.  Multiple snowstorms and the polar vortex during the December and January periods resulted in a sharp decline in traffic and ultimately hurt comparable-store sales in the quarter.

“In spite of these top line pressures, we were able to achieve a gross margin rate slightly better than prior year and reduce expenses,” Hoffman said.  “In addition, we effectively managed our inventory such that we ended the year with inventory levels approximately 5% below that of the prior year, including a significant reduction in carryover merchandise, leaving us well positioned for the spring season.”

Hoffman was equally optimistic about the company’s burgeoning e-commerce business.

“We are excited about our new e-commerce fulfillment center, which will permit significant expansion of our shipping capacity with improved operational efficiency.  We will continue strengthening our foundation to deliver profitable sales growth in the coming years,” he added.

Looking ahead, the company expects comparable store sales to increase in a range of 1% to 3%.

Source: Retailing Today

March 11, 2014

Smaller format stores are all the rage these days.  Dollar General, which already operates nearly 12,000 stores, plans to open 700 more  this year.  Walmart recently announced plans to accelerate growth of its smaller format stores by opening between 270 and 300 small stores, more than double the 120 to 150 store range it projected last fall.  Even Target has gotten in on the action with plans to open its first Target Express store near downtown Minneapolis this summer.

Source: Retailing Today

March 10, 2014

Today, the National Association of Home Builders (NAHB) released the results of a new study, What Home Buyers Really Want: Ethnic Preferences.  The latest release from NAHB’s publishing arm, BuilderBooks is a further analysis of the 2013 study, What Home Buyers Really Want, which presented preferences of all home buyers combined.  This new study compares and contrasts how housing preferences are affected by the racial or ethnic background of a home buyer, after controlling for factors such as age and income.

“The new data reveals some interesting findings about home buying preferences broken down by race and ethnicity,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “It contains invaluable information for builders by providing a window into the preferences of potential home buyers, and allowing them to tailor things to better meet the needs of their customers.”

The survey data confirmed that there are some significant differences across the various ethnic groupd of buyers such as:

• Minority home buyers are typically younger than White non-Hispanic buyers.  The median African-American buyer is 39, the Hispanic buyer is 37, and the Asian buyer is about 36, while the median White buyer is 43 years old.
• Fifty percent or more of buyers in all racial/ethnic groups are married couples: 80 percent of White buyers, 50 percent of African-Americans, 74 percent of Hispanics, and 79 percent of Asians.  Most also have children living at home.
• Asian home buyers have the highest median household income of all four groups, $72,797, compared with $67,747 for Whites, $50,221 for Hispanics, and $43,774 for African-Americans.  Asians also expect to pay the most for their home: $283,469, compared with $205,775 among Whites, $181,444 among Hispanics, and $176,397 among African-Americans.

 Source: National Association of Home Builders

March 7, 2014

Severe weather that persisted during the year’s shortest month affected Gap’s February sales results.

The company reported net sales for the four-week period ended March 1 of $929 million, compared with net sales of $966 million for the four-week period ended March 2, 2013.  Comparable-store sales for the month declined 7%, versus last year’s 3% increase.

“While February was clearly a difficult month, we remain focused on executing our global priorities,” said chairman and CEO Glenn Murphy.

Comparable sales by global brand for the month were as follows:

• Gap: down 10% versus last year’s 2% increase
• Banana Republic: down 7% versus last year’s 5% decrease
• Old Navy: down 6% versus last year’s 6% increase

The company said that more than 450 stores had to close during February due to weather.

In line with its strategic priorities, the company is preparing to open its first Gap store in Taiwan.  The brand expects to end fiscal year 2014 with more than 100 Gap stores across the Greater China region.

Gap will report March sales April 10.

Source: Retailing Today

March 7, 2014

The Bon-Ton Stores is investing in its growing e-commerce business.  The company has signed a lease with Duke Realty Corp for a 743,000 sq. ft., automated, direct-to-consumer fulfillment center in West Jefferson, Ohio.

The company expects the facility to be fully operational and ship its first orders in spring of 2015.

The new facility will consolidate the e-commerce fulfillment that is currently being performed at Bon-Ton’s four distribution centers.  When fully operational, the fulfillment center will employ approximately 139 new Ohio associates, with additional seasonal jobs expected to be created during the peak holiday shopping season.

“In response to the rapid growth in our e-commerce business, we are taking this step to ensure extraordinary service to our customers,” said president and CEO Brendan Hoffman.  “This new fulfillment center will permit significant expansion of our shipping capacity with improved operational efficiency.”

The consolidation will impact associates involved in the direct-to-consumer fulfillment at the company’s four distribution centers.  Affected associates will be offered the opportunity to interview for available positions at the new West Jefferson facility or receive career transition benefits, including severance, according to established practices and state employment service support.  Bon-Ton does not expect that the combined severance and other expenses associated with the consolidation, which it expects to incur during the next 16 months, will be material.

Source: Retailing Today

March 7, 2014

National Retail Federation president and CEO Matthew Shay and chief economist Jack Kleinhenz issued a response to the organization’s February jobs report.

“While there are signs of modest momentum in the economy, now is not the time to play partisan politics with the recovery by forcing federal mandates on retailers and small business owners like an increase in the minimum wage,” Shay said.  “Such policy decisions could hamper economic growth and actually drive up the unemployment rate.”

NRF calculated retail employment down 6,700 in February, yet up 205,500 year-over-year.  The biggest job losses were seen in electronics and appliance stores, and sporting goods, hobby, book and music stores.  December and January retail employment figures were also revised downward.

“Retailers continued to rearrange and maximize their payrolls and inventories following the holiday shopping season,” added Kleinhenz.  “This decline should be temporary in nature and viewed as a speed bump.  We really need to lift the snow screen to adequately measure the economy and jobs situation.”

Kleinhenz went on to express optimism for continued ecoomic and employment gains this year and says the NRF is encouraged by growth in construction jobs and building material employment last month, which suggests a forthcoming improvement in residential and nonresidential spending along with household and business confidence.

Shay and Kleinhenz also added that the Bureau of Labor Statistics Employment Situation Summary showed that February total nonfarm payroll employment rose by 175,000 with the unemployment rate at 6.7% and the labor force participation rate at 63%.

Source: Retailing Today

March 3, 2014

Ascena Retail Group, the operator of Lane Bryant, Justice and Dress Barn stores, cited increased spending on growth initiatives and a challenging sales climate for a second quarter profit decline and its second full year earnings guidance reduction in two months.

Sales for the company’s second quarter ended January 26 increased 2% to $1.3 billion, while consolidated same-store sales were essentially flat.  A 3% comp decline at physical stores was offset by 28% e-commerce growth to achieve the overall flat comp increase.  Net income fell to $31.9 million, or 19 cents a share, from $47 million, or 29 cents a share last year.

The decrease was due primarily to profit declines at Justice stores and increased operating expenses from growth-related investments in new stores, merchandising and design resources and e-commerce capabilities, according to the company.

“Second quarter net income was slightly above our revised expectations, despite softer than expected sales in January driven primarily by challenging weather that continued to negatively impact sales into early March,” said Ascena president and CEO David Jaffe.  “However, in warmer regions sales have been in line with expectations.  We are implementing promotional strategies and receipt flow adjustments to bring inventory balances back to targeted levels.”

Jaffe remained optimistic about the company outlook, citing very good progress on long range strategic priorities related to synergy initiatives and recently completed construction of a new national retail distribution center and a new e-commerce fulfillment center that becomes operational in the spring.

Ascena’s profits were expected to be under pressure following a January 13 announcement regarding holiday sales during November and December.  At the time, Jaffe noted that “a challenging holiday selling season resulted in increased promotional activity.  We successfully cleared excess inventory and have taken the necessary markdowns in the second quarter to transition cleanly into the spring season.”

As a result, the company shaved as much as 20 cents of its full year profit forecast, reducing the range of earnings possibilities to $1.10 to $1.15 from earlier guidance of $1.25 to $1.30 for its fiscal year ending in July.  However, late Monday, the company further reduced its full year estimate to a range of $1 to $1.05.

The soft holiday sales and expense pressure followed a respectable showing in the company’s first quarter ended October 26 in which each of its formats posted positive same store sales growth.

Source: Retailing Today

March 6, 2014

Walmart didn’t mention competitive issues as a source of sales weakness during its fourth quarter, but reports this week from Kroger and Costco indicate they were at least a contributing factor.

This was especially true in the case of Costco.  Recall that Sam’s reported a same store sales decline of 0.1% during the fourth quarter ended January 31, after a 1.8% gain the prior year.  Operating income fell 15.3% to $425 million.  At the time, Sam’s president and CEO Rosalind Brewer said the underlying health of the Sam’s Club business was sound and that restructering efforts, including the elimination of 2,300 positions from club operations were allowing Sam’s to be more agile and focused on growth opportunities.

“The stragegies we have in place will deliver value for our members, helping to grow the business and drive strong financial performance in fiscal year 2015,” Brewer said.

Sam’s expects its same store sales for the first quarter ending May 2 to be relatively flat following a 0.2% gain last year.

Conversely, Costco grew its U.S. same store sales, excluding fuel by 5% during its second quarter ended February 16.  Sam’s fourth quarter and Costco’s second quarter don’t totally match up, but both companies’ reporting periods included the holiday season.  It was evident from Costco’s results and comments from CFO Richard Galanti that Costco went hard after price at the expense of profitability during the shortened and weather impacted holiday season.

For example, despite the 5% domestic comp increase, Costco’s net income declined to $463 million, or $1.05 a share, compared to $547 million, or $1.24 a share, during the second quarter the prior year.  Comparisons to the prior year were made more difficult because the period included a 14 cent a share one time tax benefit related to a portion of a special cash dividend the company paid in December 2012 to 401k plan participants.

“Even with that distinction, however, the year-over-year comparison was unfavorable,” Galanti said.

Contributing to profit pressures at Costco were weaker sales and gross margin results in certain non-foods merchandise categories, particularly during the four-week holiday selling season, weaker gross margins in the fresh foods business and lower reported international profits resulting from the significant weakening of foreign exchange rates, according to Galanti.

“The first four-week period of the quarter represented the majority of earnings underperformance in the quarter,” Galanti said.  Costco’s second quarter began on November 25, 2013 and encompassed the Thanksgiving weekend which fell late last year and compressed the holiday season.

While Costco was outcomping Sam’s, Kroger was doing the same to Walmart and made no mention of bad weather or food stamp reductions in its earnings release.  Kroger reported a 4.3% increase in identical store sales, excluding fuel, and said it expects first quarter comps to rise between 2.5% and 3.5% against a backdrop of minimal inflation.

Walmart reported a 0.4% decline in same store sales at U.S. stores following a 0.3% increase last year.  Looking forward, Walmart’s forecast for first quarter same store sales is flat compared to a prior year decline of 1.4%.

Source: Retailing Today