Author: Chad Symens

March 6, 2014

Markets in 59 out of the approximately 350 metro areas nationwide 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 one from the previous month.

The index’s nationwide score held steady at .87.  This means that based on current permits, prices and employment data, the nationwide average is running at 87 percent of normal economic and housing activity.  Meanwhile, 32 percent of metro areas saw their score rise this month and 84 percent have shown an improvement over the past year.

“Despite the cold weather that has constrained economic and housing activity across much of the nation this winter, markets are returning to normal levels,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “As the job and housing markets continue to mend and the onset of spring releases the pent-up demand for new homes, this will bode well for the remainder of 2014.”

“The strong energy sector is at the forefront of the recovery and centered in many small and mid-sized markets in Texas, Louisiana, North Dakota and Wyoming,” said NAHB Chief Economist David Crowe.  “In fact, these four states account for eight of the top 10 markets on the LMI and 45 percent of the markets that are at or above normal.”

“The number of markets on this month’s LMI at or above 90 percent of previous norms has climbed to 130 – a positive trend to watch as the year progresses,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.

Baton Rouge, Louisiana, tops the list of major metros on the LMI, with a score of 1.41 – or 41 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 Harrisburg, Pennsylvania and Pittsburgh – all of whose LMI scores indicate that their market activity now exceeds previous norms.

Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning that their markets are now at double their strength prior to the recession.  Also at the top of the list of smaller metros are Casper, Wyoming; Bismarck, North Dakota; 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. 

March 4, 2014

Lowe’s has named Michael A. Jones as the company’s chief customer officer, effective April 30.  Jones currently serves as Lowe’s chief merchandising officer, overseeing the full merchandise offering for all Lowe’s U.S. stores and Lowes.com, as well as all global sourcing activities.

Jones will succeed Gregory M. Bridgeford, who plans to retire after 32 years with the company. In his new role, Jones will be responsible for overseeing customer experience design, merchandising, marketing and communications and digital interfaces.

“I am confident that Mike is the right person to succeed Greg as chief customer officer.  During the past 14 months, Mike and Greg have worked closely together and have made terrific progress in further elevating and enhancing the Lowe’s customer experience,” said chairman, president and CEO Robert A. Niblock.  “In assuming this new role, Mike brings extensive leadership experience, expertise in key product categories relevant to the home improvement business, understanding of the need for vendor collaboration, and a clear focus on the customer.  We look forward to his further contributions to Lowe’s.”

Jones joined Lowe’s in January 2013 with more than a decade of executive leadership experience in sales, service, product management and international business, serving with Husqvarna as president and EVP for North and Latin America from 2009 until joining the company in 2013.  Before his role at Husqvarna, Jones spent 15 years at General Electric, where his most recent role was general manager of global cooking products from 2007 to 2009.  Jones received a bachelor’s degree in business administration from California Coast University in Santa Ana, California.

“At the same time, Lowe’s thanks Greg for his extraordinary dedicaton to the company throughout the past three decades,” added Niblock.  “As Lowe’s has grown from a regional hardware chain in the 1980s to the nation’s second-largest home improvement company today, Greg has been a valued member of our organization.  Two years ago, I asked Greg to delay his retirement plans and assume the role of chief customer officer to lead our efforts as we became a more customer-focused enterprise.  Greg has built a world-class team that is executing on our strategy, so that the timing is now right for Greg to pass the baton to Mike.  We wish greg all the best in his retirement.”

Bridgeford was promoted to chief customer officer in 2012, after serving as EVP of business development since 2004.  Bridgeford joined Lowe’s in 1982 as executive assistant to the chairman, and has served in a variety of increasingly responsible positions, including VP of corporate development, SVP of merchandising/general merchandising manager, SVP of marketing, and SVP of business improvement, and real estate, engineering and construction.  Bridgeford has a bachelor’s degree in psychology from the University of Virginia and earned an MBA from Wake Forest University.

Source: Retailing Today

March 4, 2014

The nation’s leading home improvement retailer is no stranger to e-commerce, but its efforts to offer a more robust omnichannel experience took a major step forward recently with the opening of the company’s first direct fulfillment center.

The approximately 1 million sq. ft. facility less than an hour south of Atlanta in the community of Locust Grove is the first of three new direct fulfillment centers Home Depot plans to build in the next two years.  The other two facilities, strategically located in Perris, California, and Troy, Ohio, will stock more than 100,000 items, which are capable of being shipped to 90% of zip codes in the United States within 48 hours.

“We tried to look at it from the customer’s perspective of how they want to be supported instead of designing a facility based on how we want to support customers,” said Scott Spata, Home Depot’s VP of distribution.  “These facilities are designed for same-day order picking and they will also allow us to experience out of stocks less often.”

In addition to accelerating shipments to customers and more reliablle in-stock levels, Spata said the DFCs combined with a network of more than 2,000 stores will help the company more effectively satisfy shoppers’ expectations for a seamless experience.  Currently, about one third of Home Depot’s e-commerce volume results from shoppers who buy online and have their goods shipped from DFCs to stores, or shoppers who buy online and pick up goods that are already stocked at the stores.

An even more extensive assortment of more than 500,000 items is available from what Spata called the long tail of the Home Depot’s product offering.  While the company can satisfy the majority of shoppers’ needs between the 35,000 items in stores and the 100,000 items in DFCs, a more extensive assortment is available from the company’s vendor-direct program.

“It is a seamless experience for the customer,” Spata said, referring to orders placed on HomeDepot.com that are fulfilled directly by suppliers.

To further develop its omnichannel capabilities, Home Depot expects to pilot this year ship-from-store capabilities and refine the processes on how products ordered online and returned to stores are returned to distribution centers or made available for sale.  “Buy online, return in stores has been an absolute homerun for customers,” Spata said.

However, those items are then accumulated in stores for shipment back to the DFC since Home Depot doesn’t allow non-store SKUs returned to stores to be sold in stores.  That may change over time as the company’s e-commerce volume builds, but for now the approach involves leveraging back haul capabilities and the creation of regional reclamation centers to more efficiently process returns.

While Home Depot has considerable work ahead to execute its omnichannel vision, the company has enjoyed tremendous e-commerce growth.  About the time the DFC opened last month, Home Depot CEO Frank Blake reported the company’s U.S. stores produced a 4.9% comp increase and e-commerce sales grew by 50%.

“Our online customer satisfaction scores improved as we continued to enhance the experience across our full site, mobile and tablet and we’re seeing accelerated improvement in our conversion rates,” Blake said.

Those metrice are poised to improve going forward as the company integrates its new DFC into the supply chain and takes the locations in California and Ohio online.

Source: Retailing Today

March 3, 2014

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

Economic activity in the manufacturing sector expanded in February for the ninth consecutive month, and the overall economy grew for the 57th 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 (ISM) Manufacturing Business Survey Committee. 

Manufacturing expanded in February as the PMI registered 53.2 percent, an increase of 1.9 percentage points when compared to January’s reading of 51.3 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 February PMI indicates growth for the 57th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the ninth consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the PMI for January and February (52.3 percent) corresponds to a 3 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for February (53.2 percent) is annualized, it corresponds to a 3.3 percent increase in real GDP.

As in January, several comments from the panel mention adverse weather conditions as a factor impacting their businesses in February.  Other comments reflect optimism in terms of demand and growth in the near term.

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

Source: Institute For Supply Management

February 28, 2014

The Home Depot has promoted Craig Menear to president, U.S. retail.  Menear was previously EVP, merchandising, responsible for all merchandising departments and merchandising services and strategy; the company’s supply chain network; global sourcing; vendor management; marketing; and online sales.

In his new role, Menear will add responsibility for all U.S. store operations, with Marvin Ellison, EVP, U.S. stores, reporting to Menear.

The company also announced that Mark Holifield, SVP, supply chain, has been elevated to EVP, supply chain and product development, with responsibility for sourcing and proprietary brands.  Holifiled will continue reporting to Menear.

“Craig is a world-class retailer and has done a terrific job in recent years leading some of the most important and successful initiatives in our company,” said chairman and CEO Frank Blake.  “And Mark has successfully led one of the most extensive supply chain transformations in retail history.  Both are very deserving of their new leadership roles, and I look forward to their continuing contributions to our business.”

Menear, a 34 year retail veteran, joined the Home Depot in 1997 as a merchandising manager in the company’s Southwest Division, and steadily rose through the company’s merchandising ranks to his current position.  Prior to joining the company, Menear held various merchandising positions at other retailers including Ikea, Builders Emporium, Grace Home Centers and Montgomery Ward, as well as operating an independent retail business.

Holifield has more than 30 years of experience in supply chain management.  He joined the Home Depot in 2006 to design and implement a complete transformation of the company’s supply chain and logistics infrastructure, resulting in steadily improving inventory turns and in-stock levels.  Prior to the Home Depot, Holifield spent 12 years at Office Depot in supply chain roles of increasing responsibility, and earlier in his career, held supply chain roles at Frito-Lay and H.E. Butt Grocery.

Source: Retailing Today

February 27, 2014

As far as sales go, Sears Holdings didn’t have a very happy holiday.  But the company was still able to narrow its loss for the fourth quarter, as it lowered expenses and reduced inventory.

The company said the costs of transforming into a member-centric retailer using an integrated online platform and the omnichannel Shop Your Way membership program fueled its net losses.  It attributed declining revenues to lower same store sales and having fewer stores in operation.

Sears lost $358 million for the period ended February 1, compared with a loss of $489 million a year ago.

Sales dropped 14% to $10.6 billion, from $12.3 billion.  Same store sales fell 6.4%.  At Sears stores, the metric was down 7.8%.  It fell 5.1% at Kmart.

For the fiscal year, Sears reported a net loss of $1.4 billion, compared to a $930 million net loss in the previous fiscal year.

Revenues also declined during the fourth quarter and fiscal year.  Quarterly revenues dropped 14% to $10.6 billion from $12.3 billion, and annual revenues declined 9% to $36.2 billion from $39.9 billion.  Same store sales declined 3.8%, with decreases of 3.6% at Kmart and 4.1% at Sears Domestic.

“During 2013, we made progress in our continuing transformation into a member-centric retailer leveraging Shop Your Way and integrated retail, which we believe will position us for enhanced growth and profitability to create long-term shareholder value,” said Edward S. Lampert, Sears Holdings’ chairman and CEO.  “Our full year results are impacted during this transformation as we continue supporting traditional promotional programs and marketing expenditures while we invest in our Shop Your Way program and integrated retail strategy.  We have been investing hundreds of millions of dollars annually in our transformation and will continue to invest in the future of the company.”

The company said it continues to explore “strategic alternatives” for its auto centers and Lands’ End business.

Source: Retailing Today

February 26, 2014

In a sign of some progress in its turnaround efforts, J.C. Penney reported a net profit of $35 million for the fourth quarter ended February 1, compared to a loss of $552 million a year ago.  Excluding a tax benefit and other items, Penney had a loss of $206 million for the quarter.

Looking forward, the company expects same store sales to increase approximately 3% to 5% for the first quarter and to increase mid-single digits for the full year 2014.

Net sales for the quarter fell 2.6% to $3.78 billion from $4.88 billion in the year ago quarter, which included an additional 53rd week.  Analysts had expected $3.85 billion.

Same-store sales rose 2% for the quarter, with holiday sales up 3%.  Online sales were $381 million for the quarter, up 26.3% versus the same period last year, excluding the 53rd week.

The company’s top performing merchandising divisions were home, men’s apparel, women’s accessories and Sephora.

“J.C. Penney achieved what it set out do to on a number of important fronts in 2013,” said CEO Myron Ullman.  “We stabilized our business, both financially and operationally, and restored our process disciplines, promotions, inventory levels and focus on the customer.  As a result, we generated positive comparable store sales in the fourth quarter and ended the year with more than $2 billion in total available liquidity.”

For the full year, the company reported an operating loss of $1.42 billion, which includes $215 million of restructuring and management transition charges.

Ullman said the retailer’s turnaround is gaining momentum.  “With the most challenging and expensive parts of the turnaround behind us, we will focus on improving gross margin, managing expense and steadily growing our sales in 2014.  Our strategic plan seeks to enhance performance across all of the key drivers of our business: merchandising, marketing, store experience, jcp.com, our teams, and our operations.  The goal is to deliver consistently improving financial results, and to restore J.C. Penney as a leader in American retail.”

Source: Retailing Today

February 26, 2014

Target continues to cope with the fallout of a data breach, which, as expected, hurt the company’s fourth quarter results.  The company incurred $61 million in expenses related to the breach during the quarter, but was able to bring the total impact to $17 million after applying a $44 million insurance payment.

But the retailer added that it is not only unable to estimate future expenses related to the data breach but also warned that those costs may adversely affect operations results in the first quarter and full year 2014 and future periods.

Expenses may include payments associated with potential claims by the payment card networks for alleged counterfeit fraud losses and non-ordinary course operating expenses (such as card re-issuance costs), REDcard fraud and card re-issuance expense, payments associated with civil litigation, governmental investigations and enforcement proceedings, expenses for legal, investigative and consulting fees and incremental expenses and capital investments for remediation activities.

“For more than 50 years Target has succeeded by focusing on our guests,” said chairman, president and CEO Gregg Steinhafel.  “During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales. However, results softened meaningfully following our December announcement of a data breach.  As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks.”

Net earnings dropped to $520 million from $961 million in the prior year period.  Sales decreased 6.6% to $20.9 billion from $44.4 billion last year, reflecting the impace of an additional accounting week in 2012 as well as a 2.5% decrease in comparable-store sales, partially offset by the contribution of new stores.

Target operates 1,917 stores: 1,793 in the United States and 124 in Canada.

Source: Retailing Today

February 25, 2014

Since Office Depot completed its merger transaction with Office Max November 5, 2013, the company has been aggressively executing its integration plan.  The company’s fourth quarter results for the period ended December 28, 2013 include OfficeMax’s operations, which generated $939 million of sales.

Chairman and CEO Roland Smith said that the company is focused on a number of key priorities, which include creating a lean organization with clear roles and accountabilities as well as defining its vision, mission and long-term global growth strategy.  Smith anticipates that the company’s comprehensive reorganization will be completed by the end of the month.

“For 2014, we are committed to delivering not less than $140 million of adjusted operating income,” he added.

Total sales for the quarter increased 33% to $3.5 billion compared to the prior year quarter.  The company also reported an operating loss of $118 million for the quarter compared to operating income of $5 million in the prior year quarter, and a net loss attributable to common stockholders of $144 million, or $0.34 per share, compared to a net loss of $17 million, or $0.06 per diluted share in the prior year quarter.  The reported results include merger-related expenses, asset impairment and other charges.

Following the merger with Office Max, divisional reporting was aligned to the three divisions historically utilized by Office Depot: North American Retail, North American Business Solutions, and International.  The former OfficeMax U.S. Retail business is included in North American Retail, the former Office Max U.S. Contract and Canada businesses are included in Business Solutions and the former Office Max businesses in Australia, New Zealand and Mexico are included in International.

North American Retail Division sales in the quarter increased 31% to $1.4 billion compared to the prior year quarter, primarily reflecting $384 million of sales from the OfficeMax stub period, from the merger closing date to December 28.  Same-store sales decreased 4% primarily due to lower average order values and lower transaction counts, resulting from decreased store traffic.

Office Depot ended 2013 with a total of 1,912 retail stores in the North American Retail Division, made up of 1,089 Office Depot branded locations and 823 OfficeMax branded locations.  During the fourth quarter of 2013, the company closed 16 Office Depot stores and seven OfficeMax stores, and opened one store under each brand.

Business Solutions Division sales increased 54% to $1.2 billion in the quarter compared to the prior year period, primarily reflecting $422 million of sales from the OfficeMax stub period.

International Division sales increased 15% to $911 million in the quarter – an increase of 12% on a constant currency basis – compared to the prior year period, including $133 million of sales from the OfficeMax stub period.

Source: Retailing Today

February 27, 2014

Weather Trends International expects March 2014 to trend similar in temperature to last year and below normal for the U.S. as a whole.  The month starts out with cold, possibly record-breaking in the North, along with some potentially snowy and/or icy weather as a storm system moves through.  Colder trends linger into the second week of the month, but toward St. Patrick’s day, temperatures look to take a turn toward trending warmer than last year.  Unfortunately, following a lousy March for spring categories in 2013, this year will be similar temperature-wise across much of the North with some improvement arriving toward the mid to latter half of the month.  In the West, temperatures will trend cooler than last year but still near or above normal.  Like last year, this year is expected to be snowier than normal with much of the East seeing similar amounts to last year and the Mountain West will see a significant boost in snowfall, especially in weeks two, four and five.  Overall, spring categories, like apparel and sun care, will start the month off very weak, but some improvement will arrive around mid-March.  Demand for spring categories will be generally flat to last year, except in the Southeast where warmer temperature trends are expected.

Source: Retailing Today, Weather Trends International