Author: Chad Symens

December 17, 2014

Anemic growth in worker compensation since the start of the decade has substantially strengthened the cost advantages of U.S. manufacturing against other mature economies, according to data on 34 countries released today by the International Labor Comparisons (ILC) progrm of The Conference Board.  In 2013 (the last year for which data is available), hourly compensation costs for American manufacturers averaged $36.34, up just $1.59 from 2010.  This represents slower growth than even the crisis years of 2007-2010, over which hourly costs grew $2.71.

“Despite a rapidly shrinking unemployment rate, U.S. manufacturing saw exceptionally low worker costs growth in recent years, especially compared to European countries with often weaker recoveries but more rigid labor markets,” said Elizabeth Crofoot, Senior Economist with the ILC program.  “Our dollar-denominated data reveal a broad spectrum among advanced economies: At one end, countries where labor costs are relatively low and still declining – notably Japan and Greece.  At the other end, countries – led by Switzerland, Sweden, Australia, Norway, and Germany – where already high pay and benefits continue to rise at relatively rapid rates.”

“Looking ahead, the dollar’s recent return to appreciation may somewhat shrink the cost advantage built by U.S. manufacturing in 2010-2013 over other mature economies,” said Bart van Ark, Chief Economist at The Conference Board.  “And while emerging markets in Asia, Latin America and Eastern Europe will maintain large cost advantages over the U.S. for the foreseeable future, depreciation of their currencies could significantly narrow the gap and put more pressure on productivity gains to avoid further erosion of those countries’ competitiveness.”

In dollar terms, only Greece, Japan, and Ireland among countries compared saw slower manufacturing compensation growth than the U.S. between 2010 and 2013.  Hourly labor costs in Japan ($29.13) and the U.K. ($31.00) were below American levels in 2013; compensation was higher in most other large mature economies.  Taking a longer view, local costs in manufacturing as a percentage of U.S. costs rose between 1997 and 2013 in all economies compared except Japan, Brazil, and Taiwan.

Source: The Conference Board

December 17, 2014

Half of Consumers Polled Will Wrap Up Christmas Shopping Online

For millions of Americans the rush to find the perfect gift started early this year, and according to the National Retail Federation’s latest Holiday Consumer Spending Survey, the average holiday shopper has completed 52.9 percent of their shopping as of December 10, up from 49.9 percent last year.

“This year we witnessed ‘a tale of two holiday shoppers’ with many jumping on retailers’ early, hard-to-pass-up in-store promotions, and others waiting until the last minute to wrap up their lists,” said NRF President and CEO Matthew Shay.  “In the final stretch, retailers will continue to look for creative ways to attract those with shopping left to do by offering exclusive Super Saturday promotions, extending their in-store holiday hours and promoting deals on expedited shipping.  We are optimistic the holiday season will end on a high note for retailers.”

For the first time, NRF asked those who had completed less than half (50%) of their shopping why they have chosen to wait until December to wrap up their shopping.  The survey found that nearly half (46.8%) said they waited this year because they were still trying to decide what to buy, nearly three in 10 (28.4%) said they are waiting for input from their family and friends, and another 28.4 percent said they are waiting for the best deals on holiday merchandise.

When it comes to where people will do the remainder of their shopping, the survey found nearly half (49.1%) of holiday shoppers will shop online; two in five (44.3%) will shop at department stores, 30.1 percent will head to discount stores, 22 percent will visit clothing stores and 19.3 percent will shop at electronics stores.

NRF also asked holiday shoppers about their use of price matching this holiday season.  According to the survey, 15.6 percent said they have requested a price match from a retailer.  However, broken out by age it is clear that young adults have taken advantage of this service: nearly three in 10 (27.9%) 18-24 year olds say they have requested a price match from a retailer this holiday season; one in five (21.8%) 25-34 year olds and 18 percent of 35-44 year olds have also asked for a price match.

Christmas Day activities run the gamut for holiday celebrants, however, most say they will spend the day visiting with family and friends (66.2%).  Another 59.6 percent say they will open gifts on Christmas Day, and 48.8 percent will cook a holiday meal.  When not opening gifts or visiting with friends and family, one in five (22.2%) will browse the web and just 7.4 percent plan to actually shop online on Christmas Day.

While there’s plently of shopping left to do, nearly one-third (32.8%) plan to buy their last holiday gift before Thursday, December 18; 14.5 percent will look to Super Saturday (Saturday, December 20) to purchase their last gift, and 9.1% will wait until the very last minute and buy their last gift on Christmas Eve.  Additionally, more men than women will wait until Christmas Eve to purchase the last gift (10.5% versus 7.9% respectively).

“Though millions of eager consumers jumped on early holiday promotions, there is still plenty of shopping left to do.  Hurried last-minute shoppers will look for gift cards, clothing items, toys and other popular gifts from a variety of retailers, likely even hoping to win big with expedited shipping deals and extremely low prices online and in stores.”

Source: National Retail Federation

December 11, 2014

Lowe’s CEO Robert Niblock cited the recovering U.S. economy as among the reasons why the company plans to focus more on market differentiation and omnichannel retailing.

The company said it will outline these and other strategic priorities in a meeting with investors on December 11 in North Carolina.

“We’re at a great point in our company’s evolution.  The housing market and broader economy are recovering just as our transformation is gaining momentum,” Niblock said.  “We’re building on our past success and finding new ways to serve and connect with customers.”

Although the company shared few specifics, the company announced that it plans to increase its focus on:

• Enhancing its relevance to customers through omnichannel retailing
• Differentiating itself through better customer experiences
• Adapting to a changing home improvement landscape
• And delivering long-term profitable growth and substantial returns for shareholders

“We continue to generate solid cash flow and have exciting opportunities ahead of us,” said Robert F. Hull, Jr., Lowe’s CRO.  “Return on invested capital is expected to reach approximately 19 percent by 2017, an increase of almost 500 basis points over the next three years.”

Lowe’s also reiterated its sales and earnings guidance for the 2014 fiscal year:

• Total sales are expected to increase 4.5% to 5%.
• Same store sales are expected to increase 3.5% to 4%.
• The company expects to open six home improvement and four hardware stores.
• Diluted earnings per share of approximately $2.68 are expected for the fiscal year ending January 30.
• Lowe’s currently operates more than 1,835 home improvement and hardware stores and has more than 260,000 employees.

Source: Retailing Today

December 10, 2014

The holiday season started strong at Costco where U.S. same store sales advanced 7 percent during the company’s first quarter ended November 23.

Total company sales during the period increased 7 percent to nearly $26.3 billion from $24.5 billion.  Membership income grew slightly slower, advancing 6 percent to $582 million.  Same store sales excluding the effects of the strengthening U.S. dollar and fuel price deflation were 7 percent at U.S. and international locations.

Profits during the period increased to $496 million, or $1.12 per share, three cents better than analysts’ consensus forecast, compared to $425 million, or 96 cents a share the prior year.

Costco ended the quarter with a total of 671 warehouses, including 474 in the United States and Puerto Rico, 88 in Canada, 34 in Mexico, 26 in the United Kingdom, 20 in Japan, 11 in Korea, 10 in Taiwan, seven in Australia and one in Spain.

Source: Retailing Today

December 15, 2014

Following a four-point uptick last month, builder confidence in the maket for newly built single-family homes fell one point in December to a level of 57 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Members in many markets across the country have seen their businesses improve over the course of the year, and we expect builders to remain confident in 2015,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

“After a sluggish start to 2014, the HMI has stabilized in the mid-to-high 50s index level trend for the past six months, which is consistent with our assessment that we are in a slow march back to normal,” said NAHB Chief Economist David Crowe.  “As we head into 2015, the housing market should continue to recover at a steady, gradual pace.”

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 from 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.

Two of the three HMI componenets posted slight losses in December.  The index gauging current sales conditions fell one point to 61, while the index measuring expectations for future sales dropped a single point to 65 and the index gauging traffic of prospective buyers held steady at 45.

Looking at the three-month moving averages for regional HMI scores, the West rose by four points to 62 and the Northeast edged up one point to 45, while the Midwest registered a three-point loss to 54 and the South dropped two points to 60.

Source: National Association of Home Builders

December 9, 2014

The national level of customer satisfaction fell 0.7% in the third quarter of 2014 to 75.6 on a 100 point scale, according to the American Customer Satisfaction Index (ACSI), pointing to weak spending growth for the fourth quarter.  This is the third consecutive quarterly decline in customer satisfaction for the country as a whole, which is at its lowest level since early 2011.

While most predictions for the Thanksgiving period projected strong growth, retail sales actually fell relative to the previous year.  The suggestion that weak income growth is to blame is inconsistent with the data.  Income growth has indeed been weak, but not worse than it was in 2013.  In fact, American households are marginally better off now.  Unemployment is down, and a major factor boosting consumers’ ability to buy, gas price, is at its lowest level in years, much lower than it was in 2013.

Based on income, gas price, and even consumer confidence, ACSI says an increase in consumer spending would be expected, but not if customer satisfaction is used as a predictor.  There are two major factors that determine spending: expected satisfaction and ability to spend.  The latter has improved somewhat, but the former has gotten worse, and continues to deteriorate.  Accordingly, the ACSI prediction for the fourth quarter is weak spending growth of 1.8 to 2%, a pace behind the overall pace of the economy.

“The US economy needs more consumer demand to shake off these seemingly persistent doldrums,” said Claes Fornell, ACSI chairman and founder.  “Low interest rates, some inflation and wage growth would all help, but consumers also need a reason to buy.  Their satisfaction matters not only to them as individuals, but for the economy as a whole.”

Source: Retailing Today

December 11, 2014

Discounting throughout the month shifted consumer spending behavior

Holiday shoppers took advantage of deep discounting and early sales to lift retail spending in November, the National Retail Federation said today.  Not including automobiles, gasoline stations or restaurants, retail sales increased 0.6 percent seasonally-adjusted over October and 3.2 percent unadjusted over November 2013.  Gains were consistent with NRF’s holiday sales forecast, which anticipates an increase of 4.1 percent over last year.

“As we’ve said all along, retailers are optimistic that they will see healthy holiday sales gains this year,” NRF President and CEO Matthew Shay said.  “November sales results confirm that optimism, and we are steadfast in our belief that we are on track to reach the 4.1 percent growth in holiday sales that NRF forecasted in October.”

“Consumer trends show that the shopping experience continues to evolve for both retailers and consumers,” Shay said.  “Shoppers this holiday season are seizing opportunities to take advantage of early promotions and showing signs they may wait until the end of the season when promotions are even greater.”

“It is important to remember that for most retailers, the holiday season is a marathon, not a sprint, and there are plenty of important holiday shopping days ahead of us, including the week leading up to Super Saturday – the day many expect will be the biggest shopping day of the season,” Shay said.

“Increasing wages combined with lower gas prices are providing retailers with an early holiday present this year,” NRF Chief Economist Jack Kleinhenz said.  “Every economic indicator is pointing toward a strong holiday season.  Healthy November sales should provide momentum for an even stronger December as customers continue to seek out deals all the way to Christmas.”

All retail categories witnessed a monthly increase in sales, including clothing and clothing accessories stores, electronics and appliance stores and nonstore retailers.

Additional findings from NRF’s analysis found that:

•  Building material and garden equipment and supplies dealers:
  • +1.4% month-to-month
  • +4.7% year-over-year
• Clothing and clothing accessories stores:
  • +1.2% month-to-month
  • +2.5% year-over-year
• Electronics and appliance stores:
  • +0.9% month-to-month
  • +6.1% year-over-year
• Furniture and home furnishing stores:
  • +0.5% month-to-month
  • -0.4% year-over-year
• General merchandise stores:
  • +0.5% month-to-month
  • +2.3% year-over-year
• Health and personal care stores:
  • +0.8% month-to-month
  • +4.6% year-over-year
• Online and other nonstore retailers:
  • +1.0% month-to-month
  • +6.3% year-over-year
• Sporting goods, hobby, book & music stores:
  • +0.3% month-to-month
  • +1.3% year-over-year

Source: National Retail Federation

December 9, 2014

Higher same store sales and its purchase of Saks Inc. last year helped Hudson’s Bay Co. post a smaller quarterly loss in the third quarter.

The company had a $13 million net loss and profits of $116 million, both improvements from the same time last year.  Same-store sales rose 1.7% in the third quarter.

“We are pleased with our third quarter financial performance,” stated Richard Baker, HBC’s governor and CEO.  “We remain on track with our integration of Saks and continue to gain traction on our strategic growth initiatives, especially at HBC Digital where we experienced substantial sales growth.  We are well-positioned for the holiday shopping season with a value proposition underpinned by differentiated merchandising and superior customer service initiatives across all our banners.  We remain confident in achieving our financial performance targets for fiscal 2014.”

Total sales at HBC nearly doubled to $1.913 billion, from $984 million a year earlier.  The increased sales was mostly a result of the Saks Fifth Avenue acquisition, although e-commerce sales also grew.  Hudson’s Bay said it is on track to meet its 2014 guidance, which calls for sales of between $7.8 billion and $8.1 billion and normalized earnings of between $580 million and $620 million.

The company also announced it has appointed Ian Putnam to the position of EVP-chief corporate development officer.  Putnam has advised HBC since 2008 and has acted on the company’s behalf in all of its major  corporate transactions since that time.  Last month the company outlined a $1.25 billion refinancing plan to reduce interest payments on debt it took on after buying Saks.  Hudson’s Bay bought Saks for $2.4 billion and assumed $500 million of the U.S. company’s debt.

“We continue to progress on the five core strategies of our long-term plan to grow our sales.  We remain committed to driving digital sales across all our banners, growing OFF 5th, bringing Saks Fifth Avenue and OFF 5th to Canada, driving outsized growth at our top doors and driving synergies and efficiencies across our business.  In addition, our recently completed US $1.25 billion, 20-year mortgage on the ground portion of our Saks Fifth Avenue flagship in New York City has strengthened our financial position by providing long-term, fixed-rate capital on highly attractive terms,” Baker said.

Hudson’s Bay Co. operates 170 Lord & Taylor, Saks Fifth Avenue and Saks Fifth Avenue OFF 5th stores in the United States.

Source: Retailing Today

December 4, 2014

Momentum continues to build at Kroger where the company elevated expectations for its fourth quarter performance after a better than expected showing in the third quarter.

The company reported a 5.6 percent increase in identical store sales, extending to 44 the number of quarters in which it has posted a positive number.  It also said fourth quarter identical stores sales would increase from 4 percent to 5 percent and shared favorable 2015 preliminary guidance that implies the trend of improved productivity at existing stores isn’t about to end.  Based on the better than expected third quarter performance, Kroger raised and narrowed its current full year adjusted earnings per share guidance to a range of $3.32 to $3.36 from $3.22 to $3.28.

“Kroger continues to deliver consistently remarkable results.  We expect to exceed our long-term earnings per share growth rate for fiscal 2014,” said Kroger CEO Rodney McMullen.  “Our associates shine brightest during the holiday season and we intend to continue our positive momentum through the fourth quarter.”

In the third quarter period ended November 8, total sales increased 11.2 percent to $25 billion compared to $22.5 billion for the same period last year.  Total sales, excluding fuel, increased 13.7%.

Profits during the period totaled $362 million, or 73 cents a share, compared to $229 million, or 57 cents a share, the prior year.

Source: Retailing Today

December 8, 2014

The Conference Board Employment Trends Index (ETI) increased in November.  The index now stands at 123.24, up from 122.8 (a downward revision) in October.  This represents a 6.1 percent gain in the ETI compared to a year ago.

“The Employment Trends Index increased for the 11th straight month in November, and recent solid improvements suggest that strong job growth is likely to continue into early next year,” said Gad Levanon, Managing Director of Macroeconomic and Labor Market Research at The Conference Board.  “We will probably reach the natural rate of unemployment, 5.5 percent, within a few months, and these tighter labor market conditions should lead to acceleration in wage growth.”

November’s increase in the ETI was driven by positive contributions from five of the eight components.  In order from the largest positive contributor to the smallest, these were: Industrial Production, Ratio of Involuntarily Part-time to All Part-time Workers, Number of Temporary Employees, Real Manufacturing and Trade Sales, and Job Openings.

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

Source: The Conference Board