Author: Helen Thomas

February 6, 2014

The weather posed a significant challenge for Fred’s in January.  According to CEO Bruce A Efird, Mother Nature not only disrupted consumer shopping patterns, but also resulted in more than 120 store closings during the final week of the month.

“Prior to the last week of January, sales were running in the mid-range of our forecast, with reconfiguration departments leading the way,” Efird explained.

Fred’s total sales for January were $134.8 million compared with $173 million for the five-week year-earlier period.

Adjusting to make January sales results comparable with those of the prior year, the company eliminated the first week of the month.  On this adjusted basis, total sales in January decreased 1.1%.  Comparable-store sales for the month decreased 1.8% versus flat comparable store sales in the year-earlier period.

“In the final week of the month, comparable store sales dropped into the negative double digits, culminating in a weather effect on comparable store sales for all of January that is estimated at more than 300 basis points,” added Efird.

Efird noted that lower-than-anticipated sales in the last week of January will reduce earnings for the final quarter by approximately $0.03 per share.  Fred’s now expects to report fourth quarter earnings per diluted share in the range of $0.13 to $0.16 cents versus earnings of $0.15 per diluted share for the comparable 13-week period last year.

“With January closing out the fourth quarter, we had success in several areas, most notable in our reconfiguration departments that include pharmacy, pet, auto and hardware, which will carry forward in 2014.  We are also in the process of revamping our fourth quarter marketing, promotion and pricing strategies to respond to changing consumer buying habits, along with the increasing popularity of internet shopping.  We are confident that our strategies to build a strong presence in specialty pharmacy and clinical services, together with accelerating pharmacy acquisitions and new pricing, promotion and marketing programs, will lead to continued success in 2014.”

During January, Fred’s opened one new store and two Xpress pharmacies.  For the year, Fred’s added a net total of 25 locations, consisting of 11 new stores and 14 new Xpress pharmacies, which was offset by the closing of 25 store locations and eight Xpress pharmacies.  The company also opened 26 new pharmacies in 2013 and closed 17, for a net addition of nine pharmacies during the year.

Fred’s operates 704 discount general merchandise stores, including 21 Fred’s stores, in the southeastern United States.

Source: Retailing Today

February 6, 2014

Retail industry sales (which exclude automobile, gas stations, and restaurants) will increase 4.1% in 2014, up from the preliminary 3.7% growth seen in 2013, according to the National Retail Federation.  The association’s 2014 economic forecast calls for online sales to grow between 9% and 12%.

A number of factors contributed to NRF’s 2014 economic forecast, including:

• Economic Growth is expected to be above its long-term historical average.  Early estimates for growth in the economy as measured by real GDP could fall between 2.6% and 3%, a noticable improvement from the estimated 1.9% rate for 2013, and the fastest pace in the past three years.
• The labor market is expected to continue its modest recovery averaging approximately 185,000 jobs per month, helping decrease unemployment to near 6.5% or lower by the end of 2014.
• Inflation as measured by the CPI is predicted to inch higher to as much as 1.7% in 2014.
• The housing sector is expected to continue to improve in 2014, and stronger household and business confidence should spur more consumer spending overall.

“The economy remains susceptible to buffets as we are already witnessing in the new year, thanks to harsh winter weather, domestic and global financial issues,” said NRF chief economist Jack Kleinhenz.  “While we are careful not to ignore the challenges, we are optimistic and hopeful that future disruptions will be limited, allowing employment and business investment to grow all the while giving retailers and their customers the confidence in the economy they need.”

Source: Retailing Today

February 6, 2014

Kohl’s January sales were significantly lower than planned as a result of lower traffic and low levels of clearance merchandise.  Comparable-store sales decreased 2%.  Combined November and December same-store sales increased 0.8%.

Unanticipated expenses in servicing its e-commerce business led to higher-than-expected costs for the quarter.  As a result of these expenses, the company is lowering its fourth quarter diluted earnings per share estimates from $1.59 to $1.74 to approximately $1.53.  Fiscal 2013 diluted earnings per share are now expected to be approximately $4.03, compared to previous guidance of $4.08 to $4.23.

The company will release its detailed report on the fourth quarter February 27.  Kohl’s operates 1,158 stores in 49 states.

Source: Retailing Today

February 4, 2014

On the heels of a healthy yet modest holiday shopping season, cautious consumers aren’t quite ready to splurge on Valentine’s Day this year, continuing to keep their budgets in check.

According to the National Retail Federation’s 2014 Valentine’s Day spending survey conducted by Prosper Insights and Analytics, 54% of Americans will celebrate with their loved ones this year, compared to 60% in 2013.  The average person plans to spend $133 on candy, cards, gifts, dinner and more, up slightly from $130.97 last year.  Total spending is expected to reach $17.3 billion.

Valentine’s Day will continue to be a popular gift-giving event, even when consumers are frugal with their budgets.  This is the one day of the year when millions find a way to show their loved ones they care,” said NRF president and CEO Matthew Shay.  “Consumers can expect Cupid’s holiday to resemble the promotional holiday season we saw just a few months ago, as retailers recognize that their customers are still looking for the biggest bang for their buck.”

Gift-givers will find the perfect gift for their loved ones that fits their budget, whether it’s candy, flowers, jewelry, clothing, an evening out or simply a greeting card.  Nearly half (48.7%) will buy candy, a third (37.3%) will give flowers and more than half (51.2%) will send greeting cards.  Nineteen percent will treat their significant other to something sparkly – jewelry spending will total $3.9 billion, and 37% will celebrate with an evening out, spending an estimated total of $3.5 billion.  Others will give more practical gifts like clothing (15.8%) or gift cards (14%) so their loved ones can have that item they’ve been eyeing in the store.

Men will spend $108.38 on gifts for their significant others – twice as much as women who will spend $49.41 on their special someone.  But Valentine’s Day isn’t just for couples; people will show their appreciation for family members (59.4%), friends (21.7%), teachers (20.4%) and colleagues (12.1%).  And like every holiday, Americans won’t forget about their pets with 19.4% buying gifts for their furry friends, spending an average of $5.51.

“While fewer are planning to celebrate Valentine’s Day this year, millions of shoppers will still make room in their discretionary budgets to send cards and gifts to loved ones or enjoy a special evening out,” says Prosper Insights and Analytics Director Pam Goodfellow.  “Consumers can expect promotions on everything from flowers to date night dinner packages in the coming days, leaving plenty of ideas for those looking to spoil their Valentines.”

Cautious consumers do their research when it comes to shopping, and many will purchase gifts online.  The survey found that 26.1% plan to shop online this Valentine’s Day, flat with last year’s 26.3%.  Many will turn to their tablets or smartphones before making their final gift decisions; 24% will research products or compare prices on their smartphones and 32.25 will do so on their tablets.

The NRF’s Valentine’s Day spending survey was designed to gauge consumer behavior and shopping trends related to Valentine’s Day.  The survey was conducted for NRF by Prosper Insights & Analytics.  The poll of 6,417 consumers was conducted from January 2-13, 2014 and has a margin of error of plus or minus 1.2 percentage points.

Source: Retailing Today

February 4, 2014

J.C. Penney scored its first positive quarterly sales result since 2011, reporting a same store sales increase of 2% in the fourth quarter, which included the holiday season.

“While 2013 brought a lot of change and challenges to J.C. Penney, the steady improvements in our business show that the company’s turnaround is on track.  In spite of the significant headwinds facing all retailers this season, including unprecedented harsh weather conditions in many parts of the country, we delivered on our promise to generate positive comparable store sales growth in the fourth quarter,” said CEO Myron E. Ullman.

Same-store sales increased 3.1% in the nine weeks through November and December.  The increase was fueled by solid performances in beauty (Sephora), activewear, sweaters, outerwear, dresses, boots, men’s clothing, luggage and housewares.

“As we look ahead to 2014, our associates are encouraged by the company’s results and we remain steadfast in our focus to build on these achievements and return to profitable growth,” Ullman added.

The company said it closed its 2013 fiscal year with total available liquidity in excess of $2 billion.

Source: Retailing Today

February 5, 2014

Strong demand for apartments will increase over the next several years, said panelists during a press conference at the National Association of Home Builders (NAHB) International Builders’ Show (IBS) in Las Vegas.  And while multifamily construction continues to be strong, NAHB does expect the speed to decrease as sustainable levles are reached in 2015 or 2016.

“The multifamily market has rebounded significantly from its trough in 2009 at 82,000 multifamily housing starts to 340,000 in 2013,” said NAHB Chief Economist David Crowe.  “NAHB is forecasting 363,000 multifamily housing starts in 2015, which is above the previous longer term average of 340,000 as more young adults prefer renting.”

The strong performance in multifamily comes from three sources, explained Crowe.  “First, during the collapse, production of multifamily housing had significantly decreased, so part of the resurgence in 2011 was just catching up with a more normal flow.  Second, the strong demand for apartments is being fed by a rising demographic of echo boomers that will continue to grow in size as we absorb people born after 1980.  Third, young adults who might have otherwise chosen homeownership, and some older adults as well, are hampered by a variety of issues, such as unusually tight underwriting standards for mortgages, lower credit scores because of the slow employment market and lower entry salaries.  As a result, the share of households that rent rather than own has increased steadily since 2004 and will likely continue until jobs are more secure, mortgages more accessible and careers more stable.”

Many markets have regained their footing and are producing at least as many multifamily units as they did during the relatively stable period between 1996 and 2006.  “The multifamily market has come a long way since the collapse,” said panelist Guy K. Hays, president of Legacy Partners Residential Inc. in Foster City, California.  “Overall, supply and demand are in balance and in most markets there is a need for the continued production of new units.”

While both panelists are optimistic about the future of the multifamily housing market, there are still challenges that face the industry such as the availability of labor and rising cost of some building materials.  But demand for apartments is strong enough for developers to proceed in most markets, the panelists noted.

Source: National Association of Home Builders

January 31, 2014

Bad weather and a reduction in food stamps led to weaker-than-expected sales at Walmart and Sam’s Club, which combined with greater-than-expected international expense, prompted an uncharacteristic pre-announcement from the company that fourth quarter profits would be worse than expected.

Walmart said its earnings per share adjusted to exclude several non-recurring and greater-than-expected expenses related to international operations would be below the low end of a previously provided forecast of $1.60 to $1.70 and full year earnings per share would be below earlier guidance in the range of $5.11 to $5.21.

The earnings miss for the quarterly period ended January 31 was attributed to a number of factors.  In the U.S., same-store sales at Walmart stores ad Sam’s Club are both expected to be slightly negative, according to Walmart CFO Charles Holley, compared to earlier guidance which called for comps at Walmart to be roughly flat and comps at Sam’s in the range of flat to 2%.

“Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14-week period for Walmart U.S.,” Holley said.  “First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect November 1 is greater than we expected.  And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter.  Sam’s Club was also impacted by the weather throughout the quarter.”

The pre-announcement by Walmart is unfamiliar territory for a company accustomed to meeting or exceeding its forecasts.  It also marks an inauspicious beginning to a new leadership era at the world’s largest retailer.  Walmart International president and CEO Doug McMillon assumes the role of president and CEO of Walmart Stores on February 1 when current president and CEO Mike Duke steps down.

Walmart is scheduled to report fourth-quarter results on February 20.

 Source: Retailing Today

January 31, 2014

When it comes to meeting consumer expectations, the stakes for retailers have never been higher.  Digital age consumers are more discerning, have high expectations for the quality of product information and use technology in a variety of ways to make educated purchasing decisions.  They use search engines to get more information about a product or brand.  They comparison-shop online.  They visit manufacturers’ websites.  They read online endorsements, reviews and recommendations.  Given this reality, retailers need to focus on their omnichannel strategy and strengthen their capabilities to deliver the desired product into the hands of customers wherever they are, or risk losing sales.

Research conducted by Ipsos OTX and Google after the 2012 holiday shopping season found that 51% of consumers researched online then visited stores to make a purchase.  Forty-four percent researched online befor buying online, 32% researched both online and in person before buying online and 17% researched in person and then bought online.

These findings illustrate the need for industry to get ahead of consumers to serve them well and create lifelong loyalty.  Many companies have started to successfully embrace omnichannel retailing, in which the walls between brick-and-mortar stores and online shopping have been broken down.  Using omnichannel strategies, retailers essentially deliver a seamless fulfillment experience for customers who require a fast and easy shopping experience, and expect the retailer to anticipate their needs and preferences.

Some retailers are excelling when it comes to omnichannel.  One of the secrets to their success is recognizing that the interdependency between consumer-facing operations and supply chain practices is crucial for aiming high and achieving omnichannel fulfillment goals.  An efficient omnichannel operation includes placing an emphasis on unique product identification and accurate attributes, as well as customer preferences, purchase history and paths to buying decisions and purchasing.  Simply put, omnichannel fulfillment is about knowing what a retailer has, knowing that it’s available and following through on promises to the consumer.

There are many benefits to this approach.  Consider the following example, published in a research paper in MIT’s Sloan Management Review this summer:

 Tasmia Kashem, a resident of Burbank, California, went to the Beverly Center mall in Los Angeles to shop for shoes.  After browsing at Nine West, a fashion retail chain store, Kashen didn’t see anything she liked.  As she was leaving the store, an associate offered to show her additional collections on an iPad.  Upon scanning through the online offerings and reading reviews, Kashem decided to preorder a new style that was arriving at the store the following week.  In this example, the retailer’s omnichannel approach turned a “walk out” into a sale.  In the process, they also probably gained a repeat customer.

For omnichannel retailing to work in this way, retailers need to be aligned with their suppliers, distribution centers, logistics providers and stores.  What makes omnichannel retailing possible is unique product identification and a standards-based approach to business processes across the supply chain – from warehouse operations, to inventory management, to consumer-facing applications.  Standardized product information, including extended attributes, is exchanged not only with trading partners, but also with the consumers whose buying behavior is heavily influenced by digital information.  Armed with complete and accurate product information, retailers can prepare their systems for product sales on a repeatable basis no matter where it comes from.

Better data means better inventory management – an essential piece of an omnichannel strategy.  Macy’s is one leading retailer embracing this concept.  After a recent investment in its fulfillment operations this year, two-thirds of Macy’s stores are equipped to effieiently ship online orders as well as orders from other stores, trimming inventory and getting items to customers faster than ever.

However, not all systems operate this way.  The use of varying product identification standards and proprietary systems by different companies has created inconsistencies from trading partner to trading partner.  These inconsistencies result in flawed, incorrect and out-of-date product information that frequently leads to negative user experiences.  Global research conducted by GS1 revealed that 74% of consumers surveyed consider it important that product information is trustworthy.  Thirty-eight percent would not purchase the product if they did not trust the product information displayed about it on their smartphone, and 35% would never use an app that contained untrustworthy information again.

In addition to accuracy and consistency, better consumer data also promotes better targeting and greater knowledge of consumer needs.  Retailers can take advantage of more detailed product and consumer information to provide purchase recommendations in much the same way as online retailers or other online shopping organizations that use previous purchase information and customer preferences.

Today’s smart, connected consumer can be a boon for retailers seeking better targeting and deeper relationships.  Standardized data and reliable product information helps businesses communicate with their partners efficiently to the ultimate benefit of both the industry and the consumer.  Forward-thinking retailers should consider adapting to the savvy shopper and embrace universal product standards – or risk being left behind.

 Source: Retailing Today

February 3, 2014

Homeowners Doled Out $130 Billion Last Year For Renovations

Americans are spending lavishly again to upgrade their homes, indicating they remain confident about the long-term prospects for the recovery despite recent signs of weakness.

Homeowners spent $130 billion on remodeling projects last year, according to data released Monday by the U.S. Census Bureau.  That was up 3.1% from 2012 and was the largest amount of home-remodeling spending since 2007, the year that the housing downturn began.  Permits for remodeling jobs in the U.S. rose 5.1% last year from 2012, the largest increase since 2010 when the figures began their rebound from a 10-year low, according to permit-tracking company BuildFax.

Rising spending on remodeling is in contrast to recent signs of slowing in new-home construction activity, indicating that a growing number of consumers have decided that upgrading their home might be a better investment than buying a new one.  Other factors at play include the limited inventory of existing homes and rising home values, which have made it easier for homeowners to finance their remodeling projects by borrowing against their equity.

Home-equity lending, which sank to its lowest level of the past 10 years in 2010, jumped 18% last year to $123.4 billion, according to estimates by Moody’s Analytics.  That increased lending stems mostly from rising home values, which created more equity for many homeowners and lifted some who previously owed more than their home was worth, into positive territory.  According to real estate data firm CoreLogic, two-thirds of all U.S. homeowners had at least 20% equity in their homes as of last year’s third quarter, up from 53.2% two years earlier.

“If home prices are going up and people have more equity in their home, things like remodeling and refurbishment will do well, because it’s effectively the way of playing the reinvestment game,” said Joseph LaBorgna, chief U.S. economist for Deutsche Bank AG.

The increased remodeling activity comes as thousands of contractors and tradesmen are expected to convene in Las Vegas this week at two trade shows geared to the remodeling and home-building industry, the International Builder Show and the Kitchen and Bath Industry Show.  The combined attendance is expected to exceed 80,000, the highest since 2008.

“From 2010 to 2013 is the difference between night and day,” said Gary Drake, chief executive of Drake General Contractor Inc., a Los Angeles remodeling company that says it posted a 30% increase in revenue last year to $4 million.  “The phone is ringing more.  Old clients are calling me.  Architects are offering me work.  I’m actually turning down work now.”

The increase in remodeling projects has revved up sales for a variety of home-improvement companies, from retailers such as Lowe’s to paint company Sherwin-Williams, and local contractors who install everything from granite countertops to carpeting.

Michael Grosswendt, a builder and renovator of high-end homes in the Los Angeles area, said revenue and staff at his company, All Coast Construction, were nearly halved during the downturn to as low as $10 million and 25 workers.  As the market recovered in 2013, Mr. Grosswendt’s revenue climbed to $15 million.  These days he’s turning down work while keeping his staff at 25 and spending more time on fewer projects.

Suppliers are cashing in, too.  Masco Corporation, owner of brands including KraftMaid cabinets, Behr paints and Delta fauctes, posted $2.2 billion in sales in the third quarter, up 12% from a year earlier partly on strong sales of windows and cabinets.  Residential remodeling projects typically account for roughly three-quarters of Masco’s sales.

Mohawk Industries, a global manufacturer of tile, carpet and flooring, saw U.S. sales of its product lines decline by 30% to 40% during the downturn.  In 2013, Mohawk posted quarterly gains, such as a 12% increase in sales of ceramic tile in the U.S. and a 3% boost in carpet sales, due at least in part to more remodeling.

“Those year-over-year gains for our products for remodeling are the first we have seen in the past six years,” said Frank Boykin, Mohawk’s chief financial officer.  “This is an indication of the potential pent-up demand in the remodel market.”

Source: The Wall Street Journal

January 28, 2014

Ross Stores has promoted Michael Hartshorn to CFO, retaining his SVP title, effective February 2.  Hartshorn will be responsible for the accounting, treasury, financial planning, tax, risk management and investor relations functions.  As CFO, he will continue to report to John Call, group SVP finance and legal, and corporate secretary.

“Michael is a very talented executive with 24 years of broad-based financial experience.  He joined our company 14 years ago and has held various management positions in our finance, IT and supply chain organizations, most recently as SVP and deputy CFO,” said vice chairman and CEO Michael Balmuth.  “His strong management skills, financial expertise and in-depth knowledge of our business will be valuable assets in his new role.  Michael will continue to work closely with John Call, who has been our CFO for the past 16 years and who will continue in his senior leadership role, overseeing our finance and legal functions.  Our company will continue to benefit from the proven leadership and financial expertise of these two exceptional executives.”

Hartshorn has been SVP and deputy CFO of Ross Stores since January 2012.  Prior to this, he was group VP, finance and treasurer from March 2011 to January 2012 and VP, finance and treasurer from April 2006 to March 2011.  From 2002 to 2006, he served in various management roles in the Ross IT and supply chain organizations, focusing on network strategy and operating initiatives.  He initially joined the company in 2000 as director and assistant controller.

Hartshorn began his career at the public accounting firm of Cooprs & Lybrand where he spent three years in their audit practice, followed by seven years in various financial roles at the May Department Stores Company.  He has a bachelor of science in accountancy from the University of Missouri.

Source: Retailing Today