Author: Chad Symens

April 14, 2014

Warmer spring weather spurred continued consumer spending and activity this March.  According to the National Retail Federation, March retail sales, which exclude automobiles, gas stations and restaurants, increased 0.8% adjusted month-to-month and 1.6% unadjusted year-over-year.

“Consumers shed their winter coats last month for fresh, spring merchandise,” NRF president and CEO Matthew Shay said.  “Retail sales increased in most categories and sectors as consumers took to stores to purchase new spring attire and home furnishings in hopeful expectation of warmer weather.  Sales should continue to remain positive this spring with the approach of Easter and expected tax refunds.”

Earlier this month, NRF’s Easter Spending Survey reported that the average American consumer will spend $137.46 this Easter holiday on clothing, candy, gifts and more, with total spending reaching $15.9 billion.

March retail sales, released today by the U.S. Census Bureau, which include categories such as automobiles, gasoline stations, and restaurants, increased 1.1% seasonally adjusted month-to-month ($433.9 billion).  The Census also reported that retail sales increased 2.8% adjusted year-over-year.

“Improving economic conditions and consumer confidence should push consumers to return to spending habits this spring,” NRF chief economist Jack Kleinhenz said.  “Consumers released some pent-up demand in March after two consecutive months of harsh winter weather that not only hampered employment opportunities but also retail sales.  We remain optimistic that retail sales will continue their positive march this spring.”

Additional findings from NRF’s retail sales report include:

• Building material and garden equipment and supplies dealers stores’ sales increased 1.8% seasonally-adjusted month-to-month and 6.2% unadjusted year-over-year.
• Clothing and clothing accessories stores’ sales increased 1.0% seasonally-adjusted month-to-month yet decreased 2.3% unadjusted year-over-year.
• Electronics and appliance stores’ sales decreased 1.6% seasonally-adjusted month-to-month and 2% unadjusted year-over-year.
• Furniture and home furnishing stores’ sales increased 1% seasonally-adjusted month-to-month and 1% unadjusted year-over-year.
• General merchandise stores’ sales increased 1.9% seasonally-adjusted month-to-month yet decreased 0.2% unadjusted year-over-year.
• Health and personal care stores’ sales increased 0.3% seasonally-adjusted month-to-month and 4% unadjusted year-over-year.
• Nonstore retailers’ sales increased 1.7% seasonally-adjusted month-to-month and 8% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores’ sales increased 0.3% seasonally-adjusted month-to-month yet decreased 5.5% unadjusted year-over-year.

Source: Retailing Today

April 10, 2014

In the wake of acquiring Houston-based RediClinic, Rite Aid reported revenues of $6.6 billion for the fourth quarter ended March 1, resulting from a 2.2% lift primarily attributed to an increase in pharmacy same-store sales.

For the full year, Rite Aid reported $25.5 billion in revenues, up 0.5%.

For the quarter, the company reported net income of $55.4 million or $0.06 per diluted share, and adjusted EBITDA of $356.3 million, or 5.4% of revenues.  For the full year, Rite Aid reported net income of $249.4 million or $0.23 per diluted share, and adjusted EBITDA of $1.3 billion, or 5.2% of revenues.

“Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year adjusted EBITDA,” stated Rite Aid chairman and CEO John Standley.  “These accomplishments reflect the significant progress we’re making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well,” he said.  “Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company.”

Same-store sales for the quarter increased 2.1% over the prior year, consisting of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front-end sales.  Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores decreased 1.8% over the prior year period, with 1.3% of this decrease being driven by a decrease in flu-related prescriptions and flu shots.  Prescription sales accounted for 67.5% of total drug store sales, and third party prescription revenue was 97.1% of pharmacy sales.

In the fourth quarter, the company relocated two stores, remodeled 94 stores and expanded three stores, bringing the total number of wellness stores chainwide to 1,215.  The company also closed eight stores, resulting in a total store count of 4,587 at the end of the fourth quarter.

Comparable sales for the year increased 0.7% consisting of a 1.2% increase in pharmacy sales, partially offset by a 0.2% decrease in front-end sales.  Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions.  The number of prescriptions filled in same stores decreased 0.3% over the prior year period.  Prescription sales accounted for 67.9% of total drugstore sales, and third party prescription revenue was 97% of pharmacy sales.

For the year, the company relocated 11 stores, acquired one store, remodeled 405 stores, expanded four stores and closed 37 stores.

Rite Aid said it expects sales for fiscal 2015 to be between $26 billion and $26.5 billion with same-store sales expected to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.

The company’s outlook for fiscal 2015 is based on the anticipated benefits of its wellness remodels, customer loyalty program, new pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies.  The company’s outlook also considers planned wage and benefit increases, the introduction of new generics in the second half of fiscal 2015, generic drug price increases and a challenging reimbursement rate environment.

Capital expenditures are expected to be approximately $525 million.  This number does not include the purchases of Health Dialog or RediClinic, Rite Aid noted.

Source: Retailing Today

April 10, 2014

Family Dollar plans to close 370 underperforming stores, cut jobs and lower prices on 1,000 basic items following a disappointing second quarter, which was adversely affected by the extra week in last year’s quarter, severe weather, holiday promotions and a challenging consumer environment.

The company is also slowing its new store growth beginning in fiscal 2015 to bolster its return on investment.  It now anticipates opening 350 to 400 new stores as opposed to approximately 525 stores in 2014.

Net income in the quarter ended March 1 fell 35% to $90.9 million from $140.1 million in the year-ago period.  Net sales decreased 6.1% to $2.7 billion, from $2.9 billion.  Same-store sales declined 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.

“Our second quarter results did not meet our expectations,” said chairman and CEO Howard R. Levine.  “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer.  In addition, like many retailers, our second quarter results were significantly impacted by severe weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.”

The job cuts and store closures are expected to reduce annual operating costs by $40 million to $45 million beginning third quarter of fiscal 2014.

Looking ahead, the company expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures.

For the third quarter of fiscal 2014, Family Dollar expects that same-store sales will decline in the low single digit range and for the fourth quarter of fiscal 2014, the company expects that same-store sales will be flat to up slightly.  Family Dollar also expects a low single digit increase in net sales during the full fiscal year.

Source: Retailing Today

April 9, 2014

Average spending per person is forecast to decline this Easter, despite pent up demand from a long cold winter.  

According to new consumer research from the National Retail Federation, fewer people will celebrate Easter this year and average spending per person will decline to $137 from $145 last year.  Total spending is expected to reach roughly $15.9 billion.  A key reason for the decline is that the number of Americans who said they plan to celebrate Easter fell to 80.3% this year compared to 83% last year.

“The winter doldrums left consumers with a lot of pent up demand, and though many Americans may take a cautious approach to spending on Easter items this year, retailers are anticipating that warmer weather will easily put consumers in the mood to buy bright clothes, holiday decorations and more,” said NRF president and CEO Matthew Shay.  “As one of the biggest holidays of the year, retailers are looking forward to increased customer traffic in stores and online, and will roll out promotions on everything from garden supplies and patio sets to apparel and grocery items as they help their customer prepare for the holiday.”

Though fewer Americans will celebrate this year, families are still looking forward to their traditional Sunday meals.  Those who do plan to celebrate will spend the most on a grocery bill for a family dinner or Sunday brunch out; according to the survey, 85.7 percent of those celebrating will spend an average of $43.18 on a holiday meal, totaling $5 billion.

Since the holiday traditionally marks the ceremonial start to spring, 42.9 percent will purchase new spring attire, spending an average of $22.71; total spending on apparel is expected to reach $2.6 billion.  Additionally, nine in ten (89.3%) of those celebrating will stock up on Easter candy, spending a total of $2.2 billion.  Families will also spend on gifts ($2.4 billion), flowers ($1.1 billion) and decorations ($1.1 billion).

Another notable shift relates to the number of people who now indicate that smartphones and tablets will play a greater role in their Easter decision-making.  Roughly one-third of those who own tablets said they would use the device to research products and compare prices, with the behavior most pronounced in the 18-24 year old age bracket, where 44% plan to use their tablets.  A similar phenomenon was evident with smartphones, where 23.4% of overall respondents said they would use their devices to research products, while 37.1% of those 18-24 plan to do so.

Many will use their smartphones to check off their Easter shopping list.  Of those who own smartphones, nearly one in four (23.4%) will use their device to research products or compare prices.  Just 12.2 percent will make an actual purchase with their smartphone.  Nearly one in five (19.2%) tablet owners will make a purchase on their device, but most will simply research holiday gifts, apparel and other items (30.2%).

“Americans are eager to dip their toes in the fresh green grass this Easter and celebrate the day with friends and family,” said Prosper Insights and Analytics director Pam Goodfellow.  “Though they are planning to trim their budgets in terms of spending on food, clothes and gifts, most will look for personal and fun items that won’t break the bank in order to enjoy the day.”

 Sources: National Retail Fereration and Retailing Today

April 7, 2014

The Conference Board Employment Trends Index increased in March.  The index now stands at 117.52, up from 117.01 (an upward revision) in February.  This represents a 5.1 percent gain in the ETI compared to a year ago.

“The increase in the Employment Trends Index in the first quarter is signaling solid job growth in the coming months,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board.  “With GDP forecasted to average 2.5 to 3.0 percent through the end of this year, there is little reason to expect employment growth to slow any time soon.”

March’s increase in the ETI was driven by positive contributions from four of its eight components.  In order from the largest positive contributor to the smallest, these were: Initial Claims for Unemployment Insurance, Industrial Production, Number of Temporary Employees, and Real Manufacturing and Trade Sales.

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 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 

April 4, 2014

The economy generated a gain of 192,000 jobs in March.  Undoubtedly, there was some catch up in hiring following the inclement weather this winter.  Still, the underlying hiring trend is encouraging, with more good news expected this spring and summer.  This confirms the signals from The Conference Board’s Consumer Confidence Index and Leading Economic Index for the U.S.  More jobs means more pay checks, lifting sentiment and resulting in more consumer buying.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  The key, as always, is sustained job gains in the service sector including health and education.  If these numbers continue, the much-anticipated strengthening of the economy may materialize sooner rather than later.

Source: The Conference Board

April 7, 2014

Of the approximately 350 metro markets nationwide, 59 returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today.  This represents a net gain of 11 metros year over year.

The index’s nationwide score ticked up to .88 from a March reading of .87.  This means that based on current permit, price and employment data, the nationwide average is running at 88 percent of normal economic and housing activity.  Meanwhile, 28 percent of metro areas saw their score rise this month and 83 percent have shown an improvement over the past year.

“I think the big news here is that regions outside of the energy states continue to gain ground,” said NAHB Chief Economist David Crowe.  “It’s a promising sign to see areas like Los Angeles and San Jose joining the top ten largest MSAs showing a recovery.  We still expect 2014 to be a strong year for housing and to aid in the overall economic recovery.  The job market continues to mend and with that we will see a steady release of pent up demand of buyers.”

Baton Rouge, Louisiana continues to top the list of major metros on the LMI, with a score of 1.42 – or 42 percent better than its last normal market level.  Other major metros at the top of the list include Honolulu, Oklahoma City, Austin and Houston, Texas, as well as San Jose, California and Harrisburg, Pennsylvania – all of whose LMI scores indicate that their market activity now exceeds previous norms.

“Things are getting slowly better overall,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “And with the housing market now entering the spring buying season, the fact that the nation’s economy is headed in the right direction is a very promising sign.”

“Stronger employment numbers seemed to be the driving force this month – an important factor to the recovery of our economy,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company, which co-sponsors the LMI report.

Smaller metros showing recovery continue to be dominated by the middle of the country experiencing an energy boom.  Odessa and Midland, Texas, boast LMI scores of 2.0 or better, with their markets now at double their strength prior to the recession.  Also at the top of the list of smaller metros are Bismarck, North Dakota; Casper, Wyoming; and Grand Forks, North Dakota, respectively.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity.  More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth.  For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison.  The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics.  An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.

Source: National Association of Home Builders

April 1, 2014

In a move to increase traffic and grow sales, Family Dollar said it added 400 products to its food offerings and reduced prices on 1,000 other items.

As part of the rollout, the operator of more than 8,100 stores enlisted the aid of television personality, author and chef Pat Neely.  Plans call for Neely to participate in several special events including a recipe contest in which the challenge is to prepare a meal for four for under $15.  The contest winner will receive a cooking experience with Neely at his home in Memphis.

“At Family Dollar, our focus is solely on our customer.  It’s important for us to constantly evaluate our assortment, making sure that we have the products and national brands that are relevant to her and her family, always at a great everyday value,” said Jason Reiser, Family Dollar’s chief merchandising officer.  “I am excited to add these new food items to our already robust assortment, and I am confident that our customers will be impressed by the expanded selection we have to offer.”

According to Neely, Family Dollar stores have everything shoppers need to make delicious dishes at everyday low prices whether the occasion is a quick weeknight meal, fun lunch or famly reunion.

“Pat brings a down-to-earth style and flair that resonates with Family Dollar and our customers,” Reiser said.  “We are excited to welcome Pat to the Family Dollar family.  He’s a great ambassador for us as we expand our food assortment.”

Source: Retailing Today

April 1, 2014

New Orders, Employment and Production Growing, Inventories Growing, Supplier Deliveries Slowing

Economic activity in the manufacturing sector expanded in March for the 10th consecutive month, and the overall economy grew for the 58th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.  The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

Manufacturing expanded in March as the PMI registered 53.7 percent, an increase of 0.5 percentage points when compared to February’s reading of 53.2 percent.  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 March PMI indicates growth for the 58th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 10th consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the average PMI for January through March (52.7 percent) corresponds to a 3.1 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for March (53.7 percent) is annualized, it corresponds to a 3.5 percent increase in real GDP annually.”

Of the 18 manufacturing industries, 14 are reporting growth in March.

Source: Institute For Supply Management

March 27, 2014

During New Homes Month in April, the National Association of Home Builders is sharing with home buyers the most popular features in new single-family homes in 2014.  Builders from across the country were surveyed on what features they were most likely to include in a typical single-family home this year, revealing that convenience, livability and energy efficiency are top priorities.

“Newly constructed homes can suit the specific requirements of today’s home buyers,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “And now is a great time to consider buying a new home, as consumers can take advantage of competitive home prices and low interest rates to find the perfect new home for their families.”

Home builders are including features that are practical and functional for the daily lives of today’s home buyers.  The features that are most likely to be included in a typical single-family home this year are: a walk-in closet in the master bedroom, low-e windows, a laundry room, and a great room.

Energy efficiency is a key theme with Energy-Star rated appliances, programmable thermostats and Energy-Star rated windows at the top of the list.  These features help make the home more comfortable and can save the home owner significant money over the long term.  On a median per square-foot basis, home owners spent 78 cents per square foot per year on electricity, while owners of new homes spent 65 cents per square foot per year, according to data from the 2009 American Housing Survey.

Builders also list features such as granite countertops, a double sink and a central island as winning elements in new-home kitchens, and a linen closet and a private toilet in the bathroom.  Additional features likely to be incuded throughout the home include first-floor ceilings at least nine feet high, a front porch, outdoor lighting, and a patio.

Source: National Association of Home Builders