Author: Chad Symens

January 9, 2015

The economy generated 252,000 new jobs in December, and the gains for November and October were revised up.  These strong gains are likely to continue to boost consumer spending in 2015.  The continued drop in the unemployment rate, to 5.6 percent in December, puts us within striking distance of the natural rate of 5.5 percent.  All the more reason to expect that the Fed will start raising rates in the first half of 2015.  In such an environment we should expect to see acceleration in wage growth, but there is no evidence of that, yet, in the establishment survey.

Source: The Conference Board

Macy’s reported a 2.7% year over year increase in sales for November and December. This was in line with their projected 2-3% sales increase prediction.  “We feel very good about our performance in the November/December period as we reversed trend from a soft third quarter and set the stage for continued progress going forward,” Terry J. Lundgren, Macy’s chairman and CEO, said.

That continued progress includes the announcement of major changes at Macy’s for 2015. These changes include a restructuring of merchandising and marketing functions at both Macy’s and Bloomingdale’s, focusing on the company’s omnichannel approach as well as a series of adjustments to its field and store operations to increase productivity and efficiency that include closing 14 of its 790 stores and some related layoffs. Macy’s also announced opening two new locations and reconfirmed plans for seven others.

The company will change its merchandising-related functions in local districts to improve the ability to localize assortments by size, color, fabric weight, style, fit, category and brand. Among the changes, the company is eliminating positions known as “district planners” and reinvesting in new regional teams devoted to specific themes of merchandise localization. Plans call for these teams to intensify Macy’s warm-weather strategies, as well as address topics such as meeting the needs of more traditional customers who live in northern climate zones, and better understand and support the diverse needs of multicultural customers. Macy’s contends its field team will continue to represent a significant competitive advantage in reacting quickly to changes in customer demand.

Macy’s will expand its existing fulfillment center network in Arizona, California, Connecticut, Tennessee and West Virginia with a new 1.3 million square foot fulfillment center opening this year in Tulsa.

“Going forward, Macy’s and Bloomingdale’s will be better able to move more quickly and nimbly to select merchandise, assort inventories and serve total customer demand, no matter how, when or where the customer shops,” Lundgren said. “Some redundant activity also can be avoided to accelerate speed to market, partner more effectively with vendor resources and ensure the merchandising organizations are more responsive to the marketplace in making and implementing decisions.”

Source: Retailing Today

Holiday online sales in 2014 exceeded an already optimistic forecast. Total desktop online sales for November through December grew 15% to $53.3 billion, $2 billion of that total coming from Cyber Monday, making 2014 the 5^th consecutive year this day had the highest amount of spending.

The day after Cyber Monday came in second with $1.7 billion. Over the entire season, 15 days exceeded $1 billion in online desktop spending. In 2013 only 10 days exceeded $1 billion during the same period.

“Despite a shortened holiday calendar between Thanksgiving and Christmas and erroneous reports of flagging holiday sales, the American consumer proved resilient and flexed their spending muscle online this year, “ quoted comScore chairman emeritus Gian Fulgoni. “In the end, we saw growth rates in the mid-double digits as the online channel continued to gain meaningful share from brick-and-mortar.”

Source: Retailing Today

January 5, 2015

Rite Aid Corp. says sales at stores open at least a year grew 5.3% in December, boosted again by strengthening pharmacy sales.

Same-store sales at the Camp Hill, Pennsylvania-based retailer grew 5.3% to $2.2 billion, beating analyst consensus of 4.5% and reflecting a 1.7% increase in front-end same-store sales and a 7.3% increase in pharmacy same-store sales.

“The front-end comp of 1.7% outpaced consensus of 1.2% and represents the strongest two-year trend since last January,” noted Ed Kelly, Credit Suisse research analyst.  “Flu-related OTC helped and Wellness remodels are likely a tailwind impact could ramp over time as a higher proportion of the store base is remodeled.  The pharmacy comp beat as wellk, as sales rose 7.3% vs. consensus of 6.3%, although generic impact markedly decelerated sequentially due to the lapping of Cymbalta.”

Prescription count at comparable stores increased 5.1% over the prior year period.  Prescription sales accounted for 64.8% of drug store sales, and third party prescription sales represented 97.6% of pharmacy sales.

Same-store sales for the 43 week period ended December 27, 2014 increased 4.3% over the prior-year period.  Front-end same-store sales increased 1% while pharmacy same-store sales increased 5.9%.  Prescription count at comparable stores increased 3.6% over the prior-year period.

Total drug store sales for the 43 week period increased 3.9% with sales of $21.8 billion.  Prescription sales represented 68.6% of total drug store sales, and third party prescription sales represented 97.5% of pharmacy sales.

Source: Retailing Today 

January 2, 2015

Economic activity in the manufacturing sector expanded in December for the 19th consecutive month, and the overall economy grew for the 67th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued by Bradley J. Holcomb, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.  “The December PMI registered 55.5 percent, a decrease of 3.2 percentage points from November’s reading of 58.7 percent.  The New Orders Index registered 57.3 percent, a decrease of 8.7 percentage points from the reading of 66 percent in November.  The Production Index registered 58.8 percent, 5.6 percentage points below the November reading of 64.4 percent.  The Employment Index registered 56.8 percent, an increase of 1.9 percentage points from the November reading of 51.5 percent.  The Prices Index registered 38.5 percent, down 6 percentage points from the November reading of 44.5 percent, indicating lower raw materials prices in December relative to November.  Comments mention the negative impact on imported materials shipment due to the West Coast dock slowdown.”

Manufacturing expanded in December as the PMI registered 55.5 percent, a decrease of 3.2 percentage points when compared to November’s reading of 58.7 percent, indicating growth in manufacturing for the 19th consecutive month.  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 December PMI indicates growth for the 67th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 19th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through December (55.8 percent) corresponds to a 4.2 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for December (55.5 percent) is annualized, it corresponds to a 4.1 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 11 are reporting growth in December.

Source: Institute for Supply Management

Although analysts had projected retail growth in December to average 2.7%, J.C. Penney reports that sales rose 3.7% for the last 9 weeks leading up to the end of December. That compares to 3.1% growth for the same time period last year.

Last year at this time, Penney did not disclose sales results, which drove the stock down and raised investors’ concerns about the company’s turnaround efforts after failed changes in sales strategy. This included removing discounts and popular house brands.

“Our highest priority over the last year has been to restore profitable sales growth at J.C. Penney,” Chief Executive Myron E. Ullman said. “This holiday season was instrumental in that effort.”

The National Retail Federation (NRF) projects this holiday season to boast the strongest sales growth since 2011. J.C. Penney is the first large retailer to report holiday season sales.

December 23, 2014

Sales of newly built, single-family homes dropped 1.6 percent in November to a seasonally adjusted annual rate of 438,000 units, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“Though home sales have edged slightly lower, builders are reporting confidence in the market and are increasing their inventory in anticipation of future business,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“Sales have held in a relatively stable range during the past four months,” said NAHB Chief Economist David Crowe.  “As the labor market and broader economy continue to strengthen, we can expect the housing sector to gain momentum heading into next year.”

The inventory of new homes for sale rose to 213,000 in November, which is a 5.8 month supply at the current sales pace.

Regionally, new home sales rose 14.8 percent in the West.  Sales dropped 12 percent in the Northeast, 6.3 percent in the Midwest and 6.4 percent in the South.

Source: National Association of Home Builders

December 30, 2014

The Conference Board Consumer Confidence Index, which had declined in November, improved in December.  The Index now stands at 92.6, up from 91.0 in November.  The Present Situation Index rose to 98.6 from 93.7, while the Expectations Index decreased to 88.5 from 89.3 in November.

Says Lynn Franco, Director of Economic Indicators at The Conference Board, “Consumer confidence rebounded modestly in December, propelled by a considerably more favorable assessment of current economic and labor market conditions.  As a result, the Present Situation Index is now at its highest level since February 2008.  Consumers were moderately less optimistic about the short-term outlook in December, but even so, they are more confident at year-end than they were at the beginning of the year.”

Consumers’ appraisal of current conditions was considerably more favorable in December.  Those saying business conditions are “good” was unchanged at 24.8 percent, while those claiming business conditions are “bad” decreased from 21.8 percent to 19.6 percent.  Consumers were also more positive in their assessment of the job market, with the proportion stating jobs are “plentiful” increasing from 16.2 percent to 17.1 percent, and those claiming jobs are “hard to get” decreasing from 28.7 percent to 27.7 percent.

Consumers’ optimism about the short-term outlook eased moderately in December.  The percentage of consumers expecting business conditions to improve over the next six months edged down from 18.3 percent to 18.0 percent, but those expecting business conditions to worsen declined slightly from 10.4 percent to 10.1 percent.  Consumers’ outlook for the labor market was marginally less optimistic.  Those anticipating fewer jobs rose from 16.1 percent to 16.9 percent.  The proportion of consumers expecting growth in their incomes declined moderately from 16.9 percent to 16.4 percent; however the proportion expecting a decrease also declined, from 11.0 percent to 10.0 percent.

Source: The Conference Board

December 18, 2014

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.6 percent in November to 105.5, following a 0.6 percent increase in October, and a 0.8 percent increase in September.

“The increase in the LEI signals continued moderate growth through the winter season,” said Ken Goldstein, Economist at The Conference Board.  “The biggest challenge has been, and remains, more income growth.  However, with labor market conditions tightening, we are seeing the first signs of wage growth starting to pick up.”

“Widespread and persistent gains in the LEI point to strong underlying conditions in the U.S. economic expansion,” said Ataman Ozyildrim, Economist at The Conference Board.  “The current situation, measured by the coincident economic index, has been improving steadily, with employment and industrial production making the largest contributions in November.”

The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.4 percent in November to 110.7, following a 0.2 percent increase in October, and a 0.3 percent increase in September.

The Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.3 percent in November to 125.4, following no change in October, and a 0.1 percent increase in September.

Source: The Conference Board

December 16, 2014

Following an upwardly revised rate last month, housing starts in November slipped 1.6 percent to a seasonally adjusted annual rate of 1.028 million units, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Three-month moving averages for total and single-family production were at their highest levels since the Great Recession.

“These numbers are in line with our latest surveys, which show that single-family builders are confident that the market is gradually recovering,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

“Over the course of the year, the number of houses under construction has been on an upward trajectory, signaling that housing is moving forward,” said NAHB Chief Economist David Crowe.  “With strong demand, affordable home prices and favorable interest rates, we should see housing production continue to grow into 2015.”

Single-family housing starts were down 5.4 percent to a seasonally adjusted annual rate of 677,000 units in November, while multifamily production rose 6.7 percent to 351,000 units.

Regionally in November, combined housing production increased in the Northeast, Midwest and West, with respective gains of 8.7 percent, 14.4 percent and 28.1 percent.  Total production dropped in the South by 19.5 percent.

Issuance of building permits registered a 5.2 percent loss to a seasonally adjusted annual rate of 1.035 million units in November.  Multifamily permits dropped 11 percent to 396,000 units while single-family permits slipped 1.2 percent to 639,000.

Regionally, the Northeast posted an overall permit gain of 27.4 percent.  The Midwest, South and West registered respective losses of 7.3 percent, 10 percent and 5.6 percent.

Source: National Association of Home Builders