Author: Chad Symens

September 11, 2014

In July, unemployment rates remained mixed in Europe, according to unemployment rates and employment growth data compiled and standardized by The Conference Board International Labor Comparisons (ILC) program.

Unemployment decreased in Germany (from 5.0 to 4.9 percent), the Netherlands (from 6.8 to 6.7 percent) and Sweden (from 7.9 to 7.7 precent), but increased in France (from 9.8 to 9.9 percent) and Italy (from 12.5 to 12.7 percent).

“The variation in recent unemployment trends throughout Europe – remaining elevated and increasing in France and Italy while gradually coming down in the Netherlands and Sweden – highlights the mixed paths toward labor market recovery in the region,” said Elizabeth Crofoot, Senior Economist with the International Labor Comparisons Program at The Conference Board.  “Contrary to most other European markets, Germany shows signs of existing labor market shortages given an overall upward trend in employment and historically low and declining unemployment rates, dipping below 5 percent for the first time since unification in 1991.”

In the U.S., joblessness rose (from 6.1 to 6.2 percent) after four straight months of steady or declining unemployment.  Australia and Japan also saw the unemployment rate rise, while remaining stable in Canada.  While Japan’s unemployment rate remains the lowest of all countries compared (3.2 percent) and has largely been on a downward trend since September 2013, it has increased in the previous two consecutive months.

Source: The Conference Board

September 10, 2014

Since Family Dollar’s board of directors unanimously rejected Dollar General’s second and sweetened tender offer from September 2, Dollar General has decided to make the tender offer directly to the company’s shareholders.

The company’s all-cash offer of $80 per share beats Dollar Tree’s offer of $74.50 per share cash/stock offer originally made July 28.  The Family Dollar board has rejected both Dollar General’s offers on the basis of antitrust regulatory considerations.

But Dollar General is appealing to Family Dollar’s shareholders with approximately $640 million of additional aggregate value over Dollar Tree’s offer – a premium of 31.9% over the closing price of $60.66 for Family Dollar stock on the day prior to the Dollar Tree announcement.

As part of a definitive merger agreement with Family Dollar, Dollar General would be willing to agree to divest up to 1,500 stores if required by the FTC and to pay Family Dollar a $500 million reverse breakup fee if the transaction does not close for reasons related to antitrust approvals.

The offer is not conditioned upon any financing arrangements, according to Dollar General, which added that it has received written financing commitments that are in full force and effect from Goldman, Sachs & Co. and Citigroup Global Markets for all the financing necessary to consummate the proposed all-cash transaction.

“Our offer provides Family Dollar shareholders with significantly greater value than the existing agreement with Dollar Tree, as well as immediate and certain liquidity for their shares,” said Rick Dreiling, chairman and CEO of Dollar General.  “By taking this step, we are providing all Family Dollar shareholders a voice in this process, and we urge them to tender into our offer.  Additionally, we now can begin the antitrust review process and will have an opportunity to present our position directly to the FTC.  As we previously have stated, we are confident in the results of our antitrust analysis, and we look forward to a constructive dialogue with the FTC.”

Meanwhile, the Family Dollar board has confirmed that it will review and consider Dollar General’s latest move in accordance with applicable law, and advise shareholders of its position regarding the tender offer by making available to shareholders, and filing with the Securities and Exchange Commission, a solicitation/recommendation statement on Schedule 14D-9.

“Applicable securities laws prevent Family Dollar from making any further comments on Dollar General’s tender offer or its terms until after this filing is made on Schedule 14D-9 which will be no later than September 23, 2014.  Until that time, Family Dollar shareholders are advised to take no action,” the board said in a statement, adding only that it has not changed its recommendation in support of the merger with Dollar Tree.”

Source: Retailing Today 

September 8, 2014

CVS Health has completed the purchase of Miami-based Navarro Discount Pharmacy.

The acquisition includes Navarro’s 33 retail locations and Navarro Health Services, a specialty pharmacy serving patients with complex or chronic diseases.  The retail pharmacies will retain the Navarro Discount Pharmacy name.

“Navarro has a rich history and commitment to Hispanic consumers and we are excited to welcome them into the CVS Health family,” stated Helena Foulkes, president of CVS/pharmacy, the retail division of CVS Health.  “We value the strength of the Navarro brand and we look forward to combining Navarro’s unique understanding of its customers’ needs with CVS/pharmacy’s best in class pharmacy services and high quality health, beauty and personal care products, a combination that will strengthen our service to the Hispanic community.”

Navarro Discount Pharmacy caters to Hispanic and ethnic marketplaces and further differentiates itself by offering many products and services that are not found in traditional drug stores such as wireless phones, designer fragrances and a large assortment of OTC drugs and vitamins.

Source: Retailing Today

September 8, 2014

The Conference Board Employment Trends Index increased in August.  The index now stands at 121.29, up from 120.62 (an upward revision) in July.  This represents a 6.4 percent gain in the ETI compared to a year ago.

“The strong increase in the Employment Trends Index in recent months signals robust job growth through the fall,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “The disappointing employment numbers for August seem to be a one month deviation from a stronger trend.”

Augus’ts increase in the ETI was driven by positive contributions from seven of its eight components.  In order from the largest positive contributor to the smallest, these were: Percentage of Firms with Positions Not Able to Fill Right Now, Industrial Production, Ratio of Involuntarily Part-time Workers, Real Manufacturing and Trade Sales, Number of Temporary Employees, Job Openings, and Percentage of Respondents Who Say They Find “Jobs Hard to Get.”

The Employment Trends Index 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 aggregaed 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)

The Conference Board

September 4, 2014

Costco said it plans to open nine new warehouse stores before the end of calendar year 2014, following a boost in net sales for August and the fourth quarter.

During the month of August, net sales were $8.8 billion, an increase of 10% from $8 billion during the similar period last year.  Same-store sales in the United States increased 7%.

For the 16 week fourth quarter, the company reported net sales of $34.8 billion, an increase of 9% from $31.8 billion in the year-ago period.  Same-store sales in the United States increased 6%.

For the 52 week fiscal year ended August 31, Costco reported net sales of $110.2 billion, an increase of 7% compared with the year-ago period.  U.S. same-store sales rose 5%.

Source: Retailing Today

September 5, 2014

A gain of only 142,000 new jobs in August, relative to a stronger trend in hiring in previous months of over 200,000 new jobs per month, is somewhat surprising as the economy overall has been quite strong recently.  Retail employment has dropped, which may relate to weaker consumption figures in the past month.  Still, most likely this was just a one off.  For example, some leading indicators, such as part-time employment for economic reasons, dropped.  Also, unemployment continued its downward path, closing in on the 5.5 percent natural unemployment rate we expect in 2015.  If that is the case, it could still mean tightening of the labor market, leading to upward pressure on wages later in 2015, as also discussed in The Conference Board’s new report, From Not Enough Jobs to Not Enough Workers, released earlier this week.

Source: The Conference Board

September 4, 2014

Rite Aid reported a 3.2% lift in sales for the 26 weeks ended August 30, ringing in $12.9 billion.

Same-store sales for the period increased 3.6% over the prior-year period.  Front-end same store sales increased 0.6%, while pharmacy same store sales increased 5.1%.  Prescription count at comparable stores increased 3% over the prior-year period.

Prescription sales represented 68.6% of total drug store sales for the 26 week period, and third party prescription sales represented 97.5% of pharmacy sales.

Same-store sales for the 13 week period ended August 30 increased 4.1% over the prior-year period.  Front-end same store sales increased 1.1% while pharmacy same store sales increased 5.6%.  Prescription count at comparable stores increased 3.7% over the prior-year period.

Total drug store sales for the 13 week period increased 3.7% with sales of $6.5 billion.  Prescription sales represented 68.8% of total drug store sales.

Rite Aid posted sales of $2.5 billion for the five weeks ended August 30, representing a 3.7% lift.  Same-store sales increased 3.9% over the prior-year period.  August front-end same-store sales increased 1.1%.  Pharmacy comparable sales, which included an approximate 219 basis points negative impact from new generic introductions, increased 5.2%.  Prescription count at comparable stores increased 3.7% over the prior-year period.

Prescription sales accounted for 69.3% of drug store sales.

Source: Retailing Today 

September 4, 2014

Just two days after reporting second quarter results, Fred’s posted August results.  Improved sales and traffic in the month were driven, according to CEO Bruce A. Efird, by initiatives that the company implemented for the first time in August.

Total sales for the month increased 6% to $147.6 million from $139.4 million in August 2013.  Comparable store sales for the month increased 2.3% compared with flat store sales in the same period last year.

“We saw ongoing improvements in virtually all general merchandise departments during August, and our pharmacy department continued to post strong growth in comparable scripts and sales,” said Efird.  “Going forward in the third quarter, we will continue to transform Fred’s based on the convenience/pharmacy-centric model we recently outlined, a strategy that brings clear advantages to our store operations and customers.”

During the month, Fred’s opened three Xpress pharmacy locations.

Fred’s operates 707 discount general merchandise stores, including 21 franchised Fred’s stores, in the southeastern United States.

Source: Retailing Today

September 4, 2014

In July, 2014, annual inflation as measured by the Harmonized Index of Consumer Prices (HICP) declined in 10 of the 16 economies compared, including in the U.S., Japan and the Euro Area as a whole.

Spain experienced the largest decline in price growth (from 0.0 to -0.4 percent), returning to deflationary territory for the second time this year.  Inflation in Switzerland (-0.1 percent) was unchanged, meaning that the Swiss economy also remains in a deflationary environment.  Prices accelerated substantially in Norway (from 1.8 to 2.2 percent), followed by slight gains in Denmark (from 0.4 to 0.5 percent).

“In July, inflation continued to slow in most European economis compared and reached a five year low in France, Italy, Spain, and Belgium,” said Elizabeth Crofoot, Senior Economist with the International Labor Comparisons program at The Conference Board.  “German inflation has also been on a slowing path, declining from nearly 2 percent 12 months ago to 0.8 percent in July.  As price growth is one factor determining cost competitiveness, slowing German prices makes it increasingly difficult for firms in the Euro Area to compete against the region’s largest economy without increases in productivity or further cost reductions.”

July inflation remains below 1 percent in all Euro Area countries compared, except Austria (1.7 percent).  Inflation is above 1 percent in Japan (4.1 percent), Norway (2.2 percent), the U.S. (1.8 percent) and the United Kingdom (1.6 percent).

Source: The Conference Board

September 4, 2014

Walgreens reported August sales of $6.4 billion, an increase of 3.6% from the same month in fiscal 2013.  Total sales for fiscal 2014 were $76.4 billion, an increase of 5.8% from fiscal 2013.

Total front-end sales increased 2.1% in August compared with the same month in fiscal 2013, while comparable-store front-end sales increased 1.4%.  Customer traffic in comparable stores decreased 1.7% while basket size increased 3.1%.

Prescriptions filled at comparable stores increased by 1.1% in August and increased 3.2% on a calendar day-shift adjusted basis.  August 2014 had one additional Sunday and one fewer Thursday compared with August 2013.  These calendar shifts negatively impacted prescriptions filled at comparable stores by 210 basis points.

August pharmacy sales increased by 5.4%.  Comparable-store pharmacy sales increased 5% and increased by a calendar day-shift adjusted 7.1%.  Calendar day-shift adjusted comparable-store pharmacy sales were negatively impacted by 180 basis points due to generic drug introductions in the last 12 months.  Pharmacy sales accounted for 65.7% of total sales for the month.

Sales in comparable stores increased by 3.7% in August.  Calendar day shifts negatively impacted total comparable sales by 140 basis points.  Generic drug introductions in the last 12 months negatively impacted total comparable sales by 120 basis points.

Total sales for fourth quarter 2014, which ended August 31, were 19.1 billion, up 6.2%.  Comparable store sales for the fourth quarter of fiscal 2014 increased 5.6%, while front-end comparable store sales for the quarter increased 1.3%.  Prescriptions filled at comparable stores increased 3.9% in the fourth quarter and comparable pharmacy sales increased 8.2%.

Calendar 2014 year-to-date sales for the first eight months were $50.9 billion, an increase of 5.7% from $48.2 billion in 2013.

Walgreens stated on its August 6, 2014 conference call with analysts that in the fourth quarter, it expected gross profit margin to be down a similar percentage year-over-year to what was experienced in the third quarter.  This is due to ongoing gross profit margin pressures, including recent changes in the environment of the company’s pharmacy business including ongoing generic drug inflation, reimbursement pressure and a shift in pharmacy mix toward 90-day prescription refills at retail locations and Medicare Part D.  The company also pointed out that last year’s fourth quarter included net gains from certain litigation matters, which reduced selling, general and administrative expenses by just under 1 percentage point.

Walgreens opened 23 stores during August, including four relocations, and closed five.  On August 31, Walgreens operated 8,309 locations in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.  That includes 8,206 drug stores, 91 more than a year ago, including 70 net stores acquired over the last 12 months.  The company also operates infusion and respiratory services facilities, specialty pharmacies and mail service facilities.  Its Take Care Health Systems subsidiary manages more than 400 in-store convenient care clinics.

Source: Retailing Today