Author: Chad Symens

August 21, 2014

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.9 percent in July to 102.2, following a 0.6 percent increase in June, and a 0.6 percent increase in May.

“The LEI improved sharply in July, suggesting that the economy is gaining traction and growth and should continue at a strong pace for the remainder of the year,” said Ataman Ozyildirim, Economist at The Conference Board.  “Although housing has been one of the weakest components this year, the sharp gain in building permits helped boost the LEI in July.  Financial markets and labor market conditions have also supported recent gains, but business spending indicators remain soft and their contribution marginal.”

“The pace of economic activity remained reasonably strong in July,” said Ken Goldstein, Economist at The Conference Board.  “Although retail sales were a little disappointing, hiring and industrial activity improved.  July’s increase in the LEI, coupled with its accelerating growth trend, points to stronger economic growth over the coming months.”

The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.2 percent in July to 109.6, following a 0.3 percent increase in June, and a 0.2 percent increase in May.

The Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.2 percent in July to 124.6, following a 0.5 percent increase in June, and a 0.4 percent increase in May.

Source: The Conference Board

August 21, 2014

Dollar Tree delivered its 26th consecutive quarter of positive comparable store sales growth in the second quarter, but profit declined 2.6% thanks to increased freight costs and investments in higher-value products.

Consolidated comparable store sales increased 4.5% on a constant currency basis.  Adjusted for the impact of Canadian currency fluctuations, the comparable store sales increase was 4.4%.  Consolidated net sales increased 9.5% to $2.03 billion from $1.85 billion in the prior year’s second quarter.

Gross profit in the quarter increased 7% to $694.1 million from $648.7 million in the prior year’s second quarter.

Net income, compared to the prior year’s second quarter, including acquisition-related costs, decreased approximately $3.2 million to $121.5 million, and diluted earnings per share increased by 5.4% to $0.59.  Excluding acquisition-related costs, net income increased approximately $1.4 million to $126.1 million and diluted earnings per share increased 8.9% to $0.61.

“I am very pleased with our second quarter results,” CEO Bob Sasser said.  “Expanded assortments of high-value product contributed to our strongest quarterly comparable store sales performance in two years.  Pet supplies, hardware, household products, food, electronics and party goods all performed well in the quarter.  Our 4.5% comp sales resulted from increases in both customer traffic and average ticket.  I am paticularly proud of our store associates.  Our store teams continue to execute at a high level as the company delivered its 26th consecutive quarter of positive comparable store sales growth.  In challenging macro environments, consumers are increasingly relying on Dollar Tree to be part of the solution in managing their family’s budget.  Our stores are well-stocked with incredible values and we are prepared for the fall selling season.”

The company opened 90 stores, expanded or relocated 20 stores and closed 4 stores during the quarter.  Retail selling square footage increased to 44.8 million sq. ft., a 6.8% increase compared to the prior year.

Looking ahead, the company estimates sales for the third quarter to range from $2.02 billion to $2.07 billion, based on low to mid-single digit positive comparable store sales.  Diluted earnings per share are estimated to range from $0.61 to $0.66, excluding acquisition-related costs.

Full-year 2014 sales are now estimated to range from $8.44 billion to $8.55 billion.  This estimate is based on a range of low to mid-single digit positive comparable store sales.  Diluted earnings per share, which includes $0.02 per share of second quarter acquisition-related costs, are expected to range from $2.94 to $3.06, excluding third and fourth quarter acquisition-related costs.

Dollar General bid $78.50 for Family Dollar Monday morning in a $9.7 billion deal that exceeds the $74.50 a share Dollar Tree offered for Family Dollar on July 28.  The deal would create a small format powerhouse with nearly 20,000 stores in 46 states and sales of more than $28 billion.  In a statement released this morning, Family Dollar’s board of directors has unanimously rejected the non-binding proposal made by Dollar General on the basis of antitrust regulatory considerations.  The Family Dollar board also unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree.

Source: Retailing Today 

August 21, 2014

Family Dollar Stores rejected a $9 billion, all-cash takeover offer from Dollar General, pointing to antitrust concerns and reaffirming its support for its deal with smaller rival Dollar Tree.

Family Dollar’s agreement with Dollar Tree, reached late last month, is worth about $8.5 billion in cash and stock, or $74.50 a share.  Family Dollar shares fell slightly to $79.65 in recent remarket trading, still above Dollar General’s offer of $78.50, indicating investors expect the fight to drag on.

“Our board reviewed, with our advisers, all aspects of Dollar General’s proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed,” Chairman and Chief Executive Howard R. Levine said.  “Accordingly, our board rejects Dollar General’s proposal and reaffirms its support for the pending merger with Dollar Tree.”

A representative from Dollar General wasn’t immediately available, while Dollar Tree declined to comment.

The battle over Family Dollar, the second-largest U.S. dollar chain, has come as so-called dollar stores have performed with relative strength compared to the rest of the retail sector, which has been consolidating as customer traffic declines and online competition grows.

Dollar General, the largest of the three dollar stores, had said it would divest 700 stores after a potential merger with Family Dollar to satisfy regulatory concerns.  A combination of Dollar General and Family Dollar would have about 20,000 stores in 46 states, with sales of more than $28 billion, Dollar General has said.

Dollar Tree is No. 3 in the market.

Investor Nelson Peltz’s Train Fund Management LP also cited antitrust worries while it offered support for Family Dollar’s deal with Dollar Tree.

“Given the significant antitrust issues involved with Dollar General’s proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations,” Train co-founder and partner Ed Garden said in Family Dollar’s release Thursday.  “We remain fully committed to the Dollar Tree transaction.”

Combined, Train and Mr. Levine own 16% of Family Dollar’s shares.  Train itself had attempted to buy Family Dollar with a $7.75 billion offer the retailer rejected in 2011.  The firm has had a representative on the retailer’s board since 2001.

Source: The Wall Street Journal 

August 20, 2014

A day after Home Depot reported strong second-quarter results, it was Lowe’s turn to deliver strong quarterly earnings.

And the Mooresville, North Carolina-based retail giant did just that.  The company reported net earnings of $1.04 billion for the quarter ended August 1, marking a 10.4% increase over the second quarter last year.  Sales for the quarter were up 5.7% to $16.6 billion, as comparable-store sales were up 4.4%.

“We were able to recover most of the outdoor product sales missed in the first quarter due to unfavorable weather conditions,” said Robert Niblock, president and CEO.

For Lowe’s the expectation is that home improvement spending will continue to grow in concert with job and income growth.  The company’s forecast for earnings per share remains unchanged, but Lowe’s made a “modest reduction” to its sales outlook  for the year, based partly on year-to-date performance.  For the year, total sales are expected to increase about 4.5%, as comps are expected to increase about 3.5%.

The company operated 1,837 home improvement and hardware stores as of August 1, representing 200.8 million square feet of retail space.

Source: Retailing Today

August 14, 2014

Same store sales growth of 6% and e-commerce strength helped J.C. Penney dramatically reduce its second quarter operating loss and demonstrate growing momentum of its turnaround.

Sales at the operator of 1,060 stores increased to $2.8 billion from $2.66 billion and the 6% comp increase the company reported was against an easy prior year comparison when comps declined 11.5%.  Online sales through jcp.com were $249 million for the quarter, up 16.7% versus the same period last year.

The company reported an operating loss of $70 million that, while sizable, was dramatically less than a prior year loss of $395 million.  The company’s net loss of $172 million, or 56 cents a share, was also markedly better than the prior year loss of $586 million, or $2.66 a share.

“Our turnaround initiatives continue to produce improved financial results.  In the second quarter, we gained additional market share while significantly increasing gross margin in a highly competitive promotional environment,” said J.C. Penney CEO Mike Ullman.  “Our customers know they can count on J.C. Penney to deliver relevant stylish merchandise at a price that fits their budget.  With our unique assortment of powerful private brands, key national brands and exclusive attractions – all at prices customers can afford – we expect to continue driving profitable sales this back to school season.  As we approach the completion of our turnaround, we are focused on re-establishing J.C. Penney as the premier shopping destination for the moderate consumer.”

The company singled out women’s and men’s apparel and accessories, home and fine jewelry as its top performing businesses during the quarter.  Sephora inside J.C. Penney also continued its strong performance, according to the company.

Looking ahead, J.C. Penney said it expects third quarter comps to grow in the mid single digit range.

Source: Retailing Today

August 19, 2014

Fueled by strong single and multifamily growth, nationwide housing starts rose 15.7 percent to a seasonally adjusted annual rate of 1.093 million units in July, the highest level since November 2013, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“A return to production levels over one million confirms that consumer confidence continues to improve,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  “Propelled by a healthier economy, more and more people are feeling ready to buy a home.”

Single-family housing starts were up 8.3 percent to a seasonally adjusted annual rate of 656,000 units in July, while multifamily production jumped 28.9 percent to 437,000 units.

Regionally in July, combined single and multifamily housing production rose in the Northeast, South and West, with respective gains of 44 percent, 29 percent and 18.6 percent.  Total production fell by 24.8 percent in the Midwest from an unusually high June level.

“July’s increase in starts combined with rising builder sentiment proves that June’s production dip was more of an anomaly than a reversal of the market,” said NAHB Chief Economist David Crowe.  “We should continue to see a gradual, consistent recovery throughout the rest of the year.”

Issuance of building permits registered an 8.1 percent increase to a seasonally adjusted annual rate of 1.052 million units in July.  Multifamily permits rose 21.5 percent to 412,000 units while single-family permits increased by 0.9 percent to 640,000 units.

The Northeast, South and West registered overall permit gains of 18.8 percent, 9.6 percent and 7.2 percent, respectively, while the Midwest posted a 0.6 percent loss.

Source: National Association of Home Builders

August 20, 2014

Recognizing that a number of the best deals of the summer are still to come, some families have only scratched the surface of their back-to-school shopping lists as of mid-August.  According to NRF’s latest Back-to-School/College Surveys, the average family with children in grades K-12 completed just half (49.9%) of their shopping by that time, down slightly from last year (52.1%).

“As the shopping season draws to a close, budget-conscious parents are likely hoping that end-of-summer sales and promotions will be just what they need to wrap up their school lists,” said NRF President and CEO Matthew Shay.  “Much of the delay this summer could also stem from families holding out for a sales tax holiday in their state, as well as from influential teenagers who want to first see what their friends are buying before they ask mom and dad to commit to their fall needs.”

According to the survey, as of August 12, fewer families had stepped out to take advantage of retailers’ special school savings opportunities; specifically, one-quarter (23.6%) had not started shopping yet, up from 20.9 percent last year.  However, there were some who were eager to get started as they looked to spread out their spending: 15.7% say they have completed their lists, which is about the same amount as last year.

College families on the other hand, got a good jump on retailers’ sales and promotions this summer: 23.4 percent say they are completely finished with their lists, up from 20 percent last year.  Additionally, slightly fewer families this year say they haven’t started shopping (26.2% vs. 28.8% last year).

Hoping to trim the costs where they can, some back-to-school shoppers made it a point to look for coupons and sales while scouring for new footwear, supplies, electronic items and apparel.  And, according to the most recent survey, 15.2 percent of back-to-school shoppers said 100 percent of their purchases were influenced by coupons, sales and promotions, the highest percent since 2011; 14.8 percent of college students and their families say 76-99 percent of their shopping was influenced by coupons, also the highest for that range in the survey’s history.

In July, NRF found eight in 10 (81.1%) families with children in grades K-12 said the state of the economy would impact their school spending in some way; seven out of 10 (77.2%) college students and their families agreed.

In the survey, when asked what payment method back-to-school families used most often to purchas school necessities, 44.9 percent say they have or will use their debit cards more than cash (24.9%) and credit cards (27.9%).  College students and their families have or will use debit cards (43.4%), followed by credit cards (33.7%) and cash (18.9%).

To wrap up their lists, most back-to-school shoppers will shop at discount (54%), department (47.7%) and clothing stores (35%), and online (24.8%).  One-third (33.7%) will visit an office supply store and 10 percent will shop local and support small business.

Back-to-college shoppers will finish their shopping at discount (47.4%), department (40.3%) and clothing stores (26.8%).  The most in the survey’s history – 37.4 percent will wrap up their lists online.

School Requirements for Supplies, Electronic Purchases

To gauge the level of influence a school may have on both back-to-school and college shoppers’ intentions to buy supplies and/or electronics, NRF asked parents this year about specific course/school requirements.

According to the survey, nearly one in five parents (18.2%) say that 100 percent of their back-to-college electronics purchases were influenced by course/school requirements.

For back-to-school families, whose lists often include supplies needed for the classroom, 21 percent of parents say that 100 percent of the supplies they buy are influenced by classroom and school requirements.  When it comes to electronics, 16.4 percent said that every electronic item they buy is influenced by classroom lists and school requirements.

“As schools look to parents more and more to help fund classroom needs, parents are looking for as many ways as they can to cut costs, and that could very well be why we’re seeing more people seek out coupons and sales this summer.  Low prices at the end of the season will definitely drive more college and school families to shop last minute, especially for those with specific items they need in order to start the school year.”

Source: National Retail Federation

August 14, 2014

Nordstrom’s second quarter earnings were in line with its expectations.  The results come two weeks after the company said it was acquiring Trunk Club, a men’s personalized clothing service, for $350 million.

Profit for the quarter remained flat compared to last year’s second quarter at $183 million.  Net sales for the quarter were $3.3 billion, a 6.2% increase from $3.1 billion in the prior-year quarter.  Comparable sales increased 3.3%.

Nordstrom Rack net sales increased $114 million, or 18%, compared with the same period in fiscal 2013, reflecting incremental volume from existing stores and the impact of 25 store openings since the second quarter of fiscal 2013.  Nordstrom Rack comparable sales increased 4%.

The Nordstrom Rewards loyalty program continues to contribute to overall results, with members shopping more frequently and spending more on average than non-members.  The company opened nearly 370,000 new accounts in the second quarter, an increase of 18% compared with the same period last year.  With 4.1 million active members, sales from members in the second quarter increased 11% in the second quarter and represented 44% of sales, from 42% for the same period last year.

Nordstrom entered into an agreement to acquire Trunk Club July 31.  Founded in 2009, Trunk Club delivers a stylist service that combines the convenience of online with a high-touch, personalized shopping experience.  Trunk Club is a high-growth company and expects to achieve operational profitability and more than double its annual sales to more than $100 million.  The company believes this acquisition represents a natural extension of its core business, aligns with its strategic priorities around a relevant customer experience and accelerates entry into this fast-growing market.

Trunk Club will operate as an independent, wholly owned subsidiary and will be managed by its current leadership.  The transaction is expected to close in the third quarter, subject to closing conditions including customary regulatory and shareholder approvals.

Nordstrom plans to open three full-line stores (The Woodlands, Texas; Calgary, Canada and Jacksonville, Florida) later this year.  To date in fiscal 2014, the company opened 11 Nordstrom Rack stores and plans to open 16 additional stores during the remainder of the year.  In the second quarter of 2014, the company opened a Nordstrom Rack store in Manhasset, New York.

Source: Retailing Today

August 19, 2014

A 6.4% second quarter same store sales increase at U.S. stores enabled Home Depot to handily exceed analysts’ profit estimates and prompted the company to increase its full year outlook.

The nation’s largest home improvement retailer said its sales for the quarter ended August 3 increased 5.7% to $23.8 billion and net income grew 14.2% to $2.1 billion from slightly less than $1.8 billion the prior year.  Earnings per share increased 22.6% to $1.52, seven cents better than analysts forecast, from $1.24 the prior year.  Home Depot’s profit performance was aided during the quarter by aggressive share repurchase activity which reduced the number of outstanding shares by 6.2%.  The company spent $3.5 billion during the first six months of the year buying its own shares.

“In the second quarter, our spring seasonal business rebounded, and we saw strong performance in the core of the store and across all of our geographies,” said Frank Blake, Home Depot’s chairman and CEO.

The company’s overall same store sales growth, including locations in Canada and Mexico was 5.8%.  The growth was driven by a 4.2% increase in the number of transactions and a 1.8% increase in average transaction size which was $58.43 in the second quarter of 2014 compared to $57.39 in the second quarter the prior year.

Based on the strong second quarter performance, Home Depot confirmed its forecast for 2014 sales growth of 4.8% and increased its earnings per share target to $4.52.  The company also said it planned to spend another $3.5 billion during the back half of the year buying its own shares.

Source: Retailing Today

August 18, 2014

Builder confidence in the market for newly built, single-family homes rose two points to 55 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today.  This third consecutive monthly gain brings the index to its highest level since January.

“As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor.”

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.

All three HMI components posted gains in August.  The indices gauging current sales conditions and expectations for future sales each rose two points to 58 and 65 respectively.  The index gauging traffic of prospective buyers increased three points to 42.

“Each of the three components of the HMI registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring,” said NAHB Chief Economist David Crowe.  “Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand.”

Every region saw a gain in its three-month moving average HMI score in August.  The Midwest posted a seven-point increase to 55 and the West registered a four-point gain to 56.  The Northeast posted a two-point gain to 38 and the South was up one point to 52.

Source: National Association of Home Builders