Author: Chad Symens

It seems that sporting goods retailers are in a slump. Last week The Sports Authority filed for bankruptcy and said it will close nearly a third of it’s 450 stores over the next three months. It ha not yet been disclosed which stores will close. Bankruptcy has been looming since January when the retailer disclosed that it had missed a $20 million debt payment.

Earlier this week, Performance Sports Group Ltd., one of the biggest makers of baseball bats and other sporting equipment slashed their 2016 fiscal year forecast. The company expects to report revenues of approximately $125 million, or 9% lower compared to the same quarter last year. Shares of Performance Sports fell 65% to about $4.00 in trading on Tuesday.

“The second half of fiscal 2016 has been impacted by adverse market conditions and related customer credit issues,” said Kevin Davis, CEO, Performance Sports Group. “The baseball/softball market is experiencing an unexpected significant downturn in retail sales, including in our important bat category. This weakening of consumer demand, coupled with the chapter 11 filing by one of the largest U.S. national sporting goods retailers, is reducing our sales for baseball and softball products.”

Also this week, Dick’s Sporting Goods Inc. reported weak holiday results, with both fourth quarter and full-year same-store sales declining. Despite the decline in profits, Dick’s announced ambitious store expansion plans in 2016 and points to the success of their e-commerce business. The company ended the year with e-commerce penetration at a record 15.7% of sales, compared to 14.4% in the fourth quarter of 2015.

“This is certainly a unique time in the industry. The competitive landscape is evolving, which is creating pressure for some and opportunities for others,” said Dick’s CEO Edward Stack.

Amazon.com opened its first brick-and-mortar store in Seattle in November, and announced plans to open another store in San Diego. Macy’s announced it is shutting down almost 40 stores this year. Kohl’s plans to follow suit and close 18 stores, stating its online sales increased 30% in the fourth quarter, causing their reevaluation of its store footprint. Similar announcements of closing stores were also made by Sears, JC Penney and The Gap, as 8% of total US retail sales are now online.

Companies that began their retail lives online, such as Athleta, Fabletics and Birchbox are now adding brick-and-mortar stores. They are moving into prime real estate that was once reserved for top-performing retail stores, such as Birchbox opening its first store in Manhattan.

Is this the new evolution of retail, blending the two worlds? Experts say the trend will continue to grow. The impact will be different in each retail category, such as electronics versus clothing. “For most products, consumers actually prefer to shop in store because they want to see and touch what they’re buying,” said Dave Parro, vice president of the retail technology practice at Walker Sands, a PR marketing firm. “But they also shop online regularly because of the convenience and range of products available.”

The winners of the switcheroo? The consumer. Those who are omni-shoppers know which retail channel and retailer is best to fit their needs.

Source: Philly.com, WSJ

The NRF (National Retail Federation) commented on the Labor Department’s report that retail employment (excluding gasoline stations, automobiles and restaurants) was up 51,100 jobs in February. Compared with February 2015, retail jobs were up by 247,300. Apparel stores saw a significant gain of 11,100 jobs. The NRF noted that weather played a big part of the increase.

“Weather has a serious impact on the retail industry, and when cold winter weather finally made its appearance shoppers headed to stores and brought shopping patterns to a good level,” said National Retail Federation chief economist Jack Kleinhenz said. “This solid report shows that the consumer is confident and continuing to shop.”

Source: Retailing Today

According to data from Chain Store Guide’s Consumer Spending Report, the month of March is likely to see a slowdown in consumer spending. While current economic reports are varied, the unpredictable stock market and upcoming elections have likely created unease among consumers.

When polled on the state of the U.S. economy, nearly 30% of those asked would rate the economy as “Poor” compared to only about 25% the previous month.  The data did, however, reveal some positive trends as well.  Notably, 80% of consumers polled reported personal finances as either “excellent”, “good” or “fair”. And, all three of CSG’s indexes – US Spending Monitor, Restaurant Spending Monitor and Retail Spending Index – are close to their 12-month averages.

Source: Chain Store Guide

Last Thursday, J.C. Penney announced impressive increases in same-store sales and earnings, as well as a new marketing campaign called Penney Days.

For the fourth quarter ending on January 30th, the retailer announced that same store sales grew 4.1% . “We are very pleased with our performance for the fourth quarter and full year. Our focus on private brands, omni-channel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment,” said Marvin R. Ellison, CEO. “We are also pleased that we delivered strong fourth quarter results while effectively managing our inventory, which finished the year up 2.6 %. I would like to thank our over 100,000 associates who embrace our strategy and come to work each day focused on driving sales and providing excellent customer service.”

They also announced a new promotional event called Penney Days. At different times throughout the year they will make limited number of some of their highest rated private brand items available for one cent. The new campaign will give J.C. Penney the opportunity to showcase the company’s assortment of private brands and it will give customers the opportunity to try them for just a penny.  J.C. Penney will promote Penney Days through television spots, weekly sales circulars and digital marketing. They will also launch a social media campaign reminding users of the power of a penny and will promote the hashtag “#SoWorthIt” with all elements of the campaign.

The Wall Street Journal recently reported that while apartment construction has been a bright spot in the recovery of the nation’s housing market over the last six years, economists say the tide might be turning away from apartments and toward single-family homes.

For the past six years, the construction of apartments and condos has grown at a faster rate than that of single-family homes. Last year U.S. builders began construction on 396,000 units in buildings with two units or more, the most in a year since 1988.  In contrast, single family home construction has remained below the historical 20-year average of about 1.05 million homes. Last year builders started just 714,600 homes.

But 2016 could be the year the trends reverse. Both the National Association of Home Builders and housing-research firm Metrostudy are forecasting significant growth in single family home starts this year. Their predictions of 19% growth and 14.6% growth respectively outpace their single-digit growth predictions for multi-family construction.

Six years of rapidly rising rents across the U.S. have driven prices to a point that is out of reach for many, far outpacing income growth. Chief economist at Metrostudy, Brad Hunter pointed out that “after six years of strong performance, the apartment market is poised for a breather. We’ve reached a point where we can’t continue to grow that sector.”

The NAHB made a similar prediction last year when they forecasted 26% growth for single-family construction and only 2% for multi-family. The two sectors grew at similar rates with single-family seeing 10.3% growth compared to 11.6% for multi-family in 2015.

Consumer spending grew in January, showing an improvement in retail sales and home purchases. On Friday, the Commerce Department reported personal spending rose 0.5% in January from the prior month. Americans’ pretax earnings from salaries and investments increased at about the same pace. US consumer confidence dropped slightly in January but recovered slightly in February, a sign of slower but steady economic growth.

Reports Friday also revealed that gross domestic product advanced at 1%, higher than the estimate of 0.7%. Inflation still runs below the Federal Reserve’s 2% inflation target.

Improvement in overall economic growth for the quarter ending January 30 was mainly due to the fact that companies pulled back on inventory less than originally expected. Economists have cautioned that first quarter growth may be slow as companies take longer to work through their well-replenished stock.

Source: The Wall St. Journal

For the period ending January 30, 2016, Macy’s total sales declined 5.2% to $8.87 billion. Same-store sales fell 4.3%, slightly less than the 4.7% decrease analysts were expecting. Macy’s did announce it had another year of double-digit growth in its online business, attributed to high increases in mobile traffic and conversions.  In looking back on the year, chairman and CEO, Terry J. Lundgren, pointed out many expansion initiatives. “We expanded our online capacity with a new state-of-the-art fulfillment center in Tulsa, Oklahoma,” he said. “We announced licensed department arrangements with companies including LensCrafters, Men’s Wearhouse and Best Buy to add new categories to the Macy’s store assortment. We completed the acquisition of Bluemercury, which added capabilities to our signature beauty business. We developed and launched Macy’s Backstage, which will be piloted as an in-store concept this spring. And we began initial testing of online selling in China in a new joint venture with a Hong Kong-based partner.” Macy’s has $400 million of planned cost savings and will have more conservative inventory planning in 2016 to improve its operating margins. It does expect to see a 1% comp-stores decline in 2016.

Source: Chain Store Age

Dillard’s announced a 35.6% drop in fourth quarter profit. For the period ending January 30, revenue was $2.07 billion for the fourth quarter, down from $2.1 billion a year ago. Same store sales declined 2%. In 2015, Dillard’s opened three new stores in Murray, UT, Slidell, LA and Cincinnati, OH. They also closed two clearance stores. The Southern retailer also announced the upcoming closure of their Aiken, SC location in Q1 of this year. As of now, Dillard’s operated 273 stores and 24 clearance centers over 29 states.

“The fourth quarter was difficult. As sales came in less than planned, we worked hard to control our inventory during an unusually competitive environment,” said Dillard’s CEO William T. Dillard II. “Sales were particularly weak on the Southern border and in the energy producing regions. Higher markdowns affected gross margin, but we did the right thing as we move on to 2016.”

Source: Retailing Today