Author: Chad Symens

February 25, 2014

The Conference Board Consumer Confidence Index, which had increased in January, fell moderately in February.  The Index now stands at 78.1, down from 79.4 in January.  The decline was driven by the Expectations Index, which dropped to 75.7 from 80.8.  The Present Situation Index, by contrast, climbed from 77.3 to 81.7.

“Consumer confidence declined moderately in February, on concern over the short-term outlook for business conditions, jobs, and earnings,” said Lynn Franco, Director of Economic Indicators at The Conference Board.  “While expectations have fluctuated over recent months, current conditions have continued to trend upward and the Present Situation Index is now at its highest level in almost six years (April 2008, 81.9).  This suggests that consumers believe the economy has improved, but they do not foresee it gaining considerable momentum in the months ahead.”

Consumers’ appraisal of current conditions improved for the fourth consecutive month.  Those claiming business conditions are “good” increased to 21.5 percent from 20.8 percent, while those claiming business conditions are “bad” declined to 22.6 percent from 23.4 percent.  Consumers’ assessment of the labor market also improved.  Those claiming jobs are “plentiful” increased to 13.9 percent from 12.5 percent, while those saying jobs are “hard to get” decreased slightly to 32.5 percent from 32.7 percent.

Consumers’ expectations, which had been improving over the past two months, retreated in February.  The percentage of consumers expecting business conditions to improve over the next six months decreased to 16.3 percent from 17.0 percent, while those anticipating business conditions to worsen increased to 13.3 percent from 12.2 percent.  Consumers’ outlook for the labor market was also more pessimistic.  Those expecting more jobs in the months ahead declined to 13.3 percent from 15.1 percent, while those anticipating fewer jobs increased to 20.6 percent from 19.0 percent.  The proportion of consumers expecting their incomes to increase declined from 16.6 percent to 15.4 percent, but those anticipating a decrease in their incomes also declined, from 13.9 percent to 13.1 percent.

Source: The Conference Board

February 25, 2014

Despite an 11% profit increase in the fourth quarter, sales at Macy’s missed forecasts as ongoing winter storms hurt the retailer’s results in January.

Macy’s reported net income of $811 million during the fourth quarter, up 5% from $730 million in the same period a year earlier.  Sales dropped 1.6% to $9.2 billion from $9.35 billion.  Analysts had expected a more modest decline to about $9.28 billion.  Same-store sales grew 1.4% for the quarter, less than the 2.5% projected by Wall Street.

During the full fiscal year, net income rose 19% to about $1.45 biooion.  Net sales totaled $27.93 million, up 0.9% from $27.69 million.  Same-store sales increased 1.9%.

Although same-store sales in November and December 2013 rose 3.6% due to strong holiday performance, a worse-than-expected post-holiday slump in January 2014 led to Macy’s net sales loss for the quarter.  Macy’s said severe weather resulted in 244 Macy’s and Bloomingdale’s stores across the country being shut down at some point during the month.

Macy’s credited part of its net income growth to its ability to place more of the 2,500 employees who were laid off in January 2014 into new jobs than it had expected.  In addition, Macy’s said its core business strategies, My Macy’s localization, omnichannel integrationand magic selling, which are known by the acronym of M.O.M, helped drive profitability and will continue to do so in the future.

“As has been the case since we began implementing these strategies in the 2008/2009 period, our competitive advantage is in the unique combination of localization, omnichannel and enhanced customer engagement,” said president, chairman and CEO Terry J. Lundrgen.  “Customers are able to shop for and buy the products that they want and prefer in our stores, via mobile devices and on computers in a shopping environment that delivers outstanding value and is supported with great service.”

The company is reiterating its annual sales and earning guidance, initially provided January 8.  Same-store sales growth in fiscal 2014 is expected in the range of 2.5-3%.  Earnings of $4.40 to $.50 per share are expected in 2014.

The company also announced plans for new Macy’s stores in Sarasota, Florida; Las Vegas; and the Bronx, New York, in fiscal 2014.  A new Bloomingdale’s will open in Palo Alto, California, to replace an older store in the same shopping center.

Source: Retailing Today

February 26, 2014

Severe winter weather was no match for Lowe’s in the fourth quarter.  The company reported sales of $11.7 billion, up 5.6% from the same quarter last year, as comps increased 3.9%.  The company also posted fourth-quarter net earnings of $306 million, up 6.3%.

“During the quarter, we delivered solid performance in core home improvement categories, balancing softer sales of seasonal gifts and holiday decorations,” said CEO Robert Niblock.  “When extreme winter weather arrived late in the quarter, our distribution network responded quickly and efficiently to move product where it was most needed.”

For the full year, sales reached $53.4 billion, a 5.7% increase over 2012 sales.  Comps for the year finished at 4.8%, as net income surged 16.7% to $2.3 billion.

Looking ahead, Lowe’s expects total sales for fiscal 2014 to increase about 5%, and comparable store sales to increase about 4%.  The company expects to open about 15 home improvement stores and five Orchard Supply hardware stores.

Niblock added that he was pleased with the progress Lowe’s made during 2013 and that the retailer continues to “transform.”

As of January 31, Lowe’s operated 1,832 stores in the U.S., Canada and Mexico.

Source: Retailing Today

February 25, 2014

Although the Home Depot’s overall sales missed analysts’ expectations, the retailer said the calendar shift, which resulted in one fewer week in the fourth quarter compared to the prior year quarter, affected its results.

The world’s largest home improvement retailer reported fourth quarter total sales of $17.7 billion, down 3% from the same quarter last year, which benefited from an extra week in the calendar.  On a 13 week basis, the company’s sales actually increased 3.9%.

Comp-store sales in the quarter increased 4.4% company-wide and 4.9% in the United States.  Net earnings were $1.01 billion, down slightly from $1.02 billion a year ago.

For the full year, the company pointed to strong performances across the board.  Net sales increased 5.4% to $78.8 billion – excluding the 53rd week from the prior year, the increase was 7.2%.  Comp-store sales increased 6.8% for the company, and increased 7.5% for the U.S.

“In 2013, we posted our strongest comp sales growth in 14 years as solid execution and the recovering housing market aided our performance,” said Frank Blake, CEO and chairman.

Looking ahead, the company expects sales growth of about 4.8% in 2014, with comp-store sales growth of about 4.6%.  The company’s guidance also called for seven new stores.

Source: Retailing Today

February 24, 2014

Dillard’s CEO William T. Dillard II voiced disappointment in the retailer’s gross margin performance despite what he called a profitable fourth quarter.  Although comparable sales gew 2%, the retailer said lower-than-expected sales necessitated heavy markdowns.

The company reported a net income of $119.1 million for the quarter and fiscal 2014, a 26% decline from $161.4 million for the same period a year earlier.  Net sales in the fourth quarter declined 3% to $2.03 billion from $2.1 billion.  During the fiscal year, net income dropped about 4% to $323.7 million from $336 million, and net sales slightly declined to $6.53 billion from $6.59 billion.  Same-store sales rose 1%.

Looking ahead, Dillard’s plans to open two new stores in October 2014: a 200,000 sq. ft. location in The Shops at Summerlin in Las Vegas and a 180,000 sq. ft. location in The Mall at University Town Center in Sarasota, Florida.

Source: Retailing Today

February 25, 2014

Though the average size of new homes keeps getting bigger, there is more to this home buying trend than meets the eye, according to Census Bureau data presented by the National Association of Home Builders during the International Builders’ Show in Las Vegas.

“The average home size has continued to rise for the past four years, from 2,362 square feet in 2009 to 2,679 square feet in 2013,” said Rose Quint, NAHB assistant vice president for survey research.

The share of new homes with at least four bedrooms has also been on an upward trend, rising 34 percent in 2009 to 48 percent last year.  Meanwhile, the percent of homes with at least three full bathrooms has gone from 23 percent in 2010 to 35 percent in 2013, and the share of homes with three-plus garages has climbed from 16 percent in 2010 to 22 percent last year.

The upward trend also applies to the percentage of two-story single family homes started, with the share steadily rising from 51 percent in 2009 to 60 percent in 2013.

As homes get bigger, so does the average sales price, rising from $248,000 in 2009 to $318,000 in 2013.  To find out why homes are getting so big, you need to look at who is buying them.

“It requires a high credit score and a nice income to qualify for a mortgage,” said Quint, who noted that the spread between the average Experian credit score of all U.S. consumers and the average home borrower’s score has risen from 33 points in the early 2000s to 58 points in 2013.

The median income of new home buyers has steadily climbed from $91,768 in 2005 to $107,607 in 2011.

During the same period, the number of new home sales has dramatically declined, from 1.28 million to 306,000.

“There are not as many people who have the income that can qualify for a new home,” said Quint.

Source: National Association of Home Builders

February 26, 2014

Sales of newly built, single family homes rose 9.6 percent to a seasonally adjusted annual rate of 468,000 units in January from an upwardly revised pace of 427,000 units in the previous month, according to data released today by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  This is the strongest sales pace since July of 2008.

“The fact that the cold weather that hit much of the country didn’t stop home buyers from going out and purchasing a piece of the American dream is a great sign,” said Kevin Kelly, chairman of the National Association of Home Builders and a home builder from Wilmington, Delaware.  “However, the very low supply of new homes on the market and the continued concern of available buildable lots still have builders cautious about getting ahead of themselves.”

“We saw a weaker sales number in December 2013 than was previously trending, and I think much of January’s increase is due to sales catching up with pent up demand,” said NAHB Chief Economist David Crowe.  “Still, there is little doubt that historically low interest rates, affordable home prices and a healing economy are bringing buyers back into the marketplace.”

Regionally, new home sales were generally strong with three of the four regions posting large gains.  The South, the West and the Northeast showed improvement, with respective increases of 10.4 percent, 11.0 percent and 73.7 percent.  New home sales in the Midwest fell by 17.2 percent. 

The inventory of new homes for sale remained steady at 184,000 units in January, which is a 4.7 month supply at the current sales pace.

Source: National Association of Home Builders

The Home Depot Announces Fourth Quarter & Fiscal 2013 Results; Increases Quarterly Dividend By 21 Percent And Provides Fiscal Year 2014 Guidance

Sales for fiscal year 2013 were $78.8 billion, an increase of 5.4 percent from fiscal year 2012. Excluding the 53rd week in the prior fiscal year, sales for fiscal year 2013 increased 7.2 percent from fiscal 2012. Total company comparable store sales for fiscal year 2013 increased 6.8 percent, and comp sales for U.S. stores were positive 7.5 percent for the year.

“In 2013, we posted our strongest comp sales growth in 14 years as solid execution and the recovering housing market aided our performance,” said Frank Blake, chairman & CEO. “I’d like to thank our associates for their hard work and commitment to our customers.”

The Company provided the following guidance for fiscal year 2014:

• Sales growth of approximately 4.8 percent
• Comparable store sales growth of approximately 4.6 percent
• Seven new stores
• Flat gross margin
• Operating margin expansion of approximately 70 basis points
• Tax rate of approximately 37 percent
• Share repurchases of approximately $5 billion
• Diluted earnings-per-share growth after anticipated share repurchases of approximately 16.5 percent to $4.38
• Capital spending of approximately $1.5 billion
• Depreciation and amortization of approximately $1.8 billion
• Cash flow from the business of approximately $8.8 billion

February 24, 2014

Dillard’s, Inc. announced operating results for the 13 and 52 weeks ended February 1, 2014, including record fiscal year earnings per share adjusted for certain items of $6.99 versus $6.33 in the prior year. 

Summary of the Company’s Fourth Quarter Performance

• A 2% increase in comparable store sales
• Diluted earnings per share excluding certain items of $2.69 versus $2.87
• Retail gross margin decline of 180 basis points of sales
• Operating expense improvement of 90 basis points of sales

Fourth Quarter Results

Dillard’s reported net income for the 13 week period ended February 1, 2014 of $119.1 million ($2.71 per share) compared to net income of $161.4 million ($3.36 per share) for the 14 weeks ended February 2, 2013.  Included in net income for the 13 week period ended February 1, 2014 is an after tax credit of $0.8 million ($0.02 per share) representing the reversal of asset impairment charges on a store held for sale.  Excluding this item, Dillard’s would have reported $118.3 million ($2.69 per share) for the 13 week period ended February 1, 2014.

Included in net income for the prior year 14 week period ended February 2, 2013 is a net after-tax credit totaling $23.9 million ($.50 per share) comprised of the following items:

• a $6.8 million after-tax gain ($0.14 per share) related to the sale of a former retail store location
• after-tax asset impairment and store closing charges of $1.1 million ($0.02 per share)
• approximately $18.1 million ($0.38 per share) in tax benefit due to a one-time deduction related to dividends paid to the Dillard’s, Inc. Investment and Employee Stock Ownership Plan

Excluding these items, Dillard’s would have reported $137.6 million ($2.87 per share) for the 14 week period ended February 2, 2013.

Dillard’s Chief Executive Officer, William T. Dillard, II, stated, “Although it was a profitable fourth quarter, we are disappointed in our gross margin performance, as lower than anticipated sales necessitated heavier markdowns.  We are pleased with our expense control as well as with our strong cash flow for the year.”

Fiscal Year Results

Dillard’s reported net income for the 52 week period ended February 1, 2014 of $323.7 million ($7.10 per share) compared to net income of $336.0 million ($6.87 per share for the 53 week period ended February 2, 2013.

Included in net income for the 52 week peroid ended February 1, 2014 is a net after-tax credit totaling $5.1 million ($0.11 per share) comprised of the following three items:

• A $7.6 million after-tax gain ($0.17 per share) related to the sale of an investment
• A $1.0 million after-tax credit ($0.02 per share) related to a pension adjustment
• After-tax asset impairment and store closing charges of $3.5 million ($0.08 per share)

Excluding this credit, Dillard’s would have reported net income of $318.6 million ($6.99 per share) for the 52 week period ended February 1, 2014, marking a record setting fiscal year earnings per share performance.

Included in net income for the prior year 53 week period ended February 2, 2013 is a net after-tax credit totaling $26.2 million ($0.54 per share) comprised of the following items:

• after-tax gains of $7.4 million ($0.15 per share) related to the sale of three former retail store locations
• after-tax asset impairment and store closing charges of $1.0 million ($0.02 per share)
• approximately $1.7 million ($0.03 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward
• approximately $18.1 million ($0.37 per share) in tax benefit due to a one-time deduction related to dividends paid to the Dillard’s, Inc. Investment and Employee Stock Ownership Plan

Excluding these items, Dillard’s would have reported $309.8 million ($6.33 per share) for the 53 week period ended February 2, 2013.

Net Sales – 13 Weeks

Total merchandise sales for the 13 week period ended February 1, 2014 were $2.013 billion and $2.087 billion for the 14 week period ended February 2, 2013.  Similar to many other retailers, the Company follows the retail 4-5-4 reporting calendar which included an extra week of operations in the fourth quarter of 2012.  Based upon comparable 13 week periods ended February 1, 2014 and February 2, 2013, total merchandise sales increased 1% and sales in comparable stores increased 2% for the fourth quarter.

Sales trends for the fourth quarter were strongest in ladies’ accessories and lingerie followed by shoes.  Sales trends were strongest in the Central region, followed by the Eastern and Western regions, respectively.

Net sales (which include the operations of the Company’s construction business, CDI Contractors, LLC (“CDI”) for the 13 weeks ended February 1, 2014 were $2.034 billion and $2.106 billion for the 14 weeks ended February 2, 2013.

Net Sales – Fiscal Year

Total merchandise sales for the 52 week period ended February 1, 2014 were $6.439 billion and $6.489 billion for the 53 week period ended February 2, 2013.  Based upon comparable 52 week periods ended February 1, 2014 and February 2, 2013, total sales increased 1% and sales in comparable stores increased 1% for the fiscal year.

Net sales (including CDI) for the 52 weeks ended February 1, 2014 were $6.532 billion and $6.593 billion for the 53 weeks ended February 2, 2013.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) decreased 180 basis points of sales to 32.8% for the 13 weeks ended February 1, 2014 compared to 34.6% for the 14 weeks ended February 2, 2013.  The decline resulted from increased markdowns in response to lower than anticipated sales.  Consolidated gross margin for the 13 weeks ended February 1, 2014 decreased 180 basis points of sales to 32.6% from 34.4% during the 14 weeks ended February 2, 2013.

Gross margin from retail operations decreased 40 basis points of sales to 35.7% for the 52 weeks ended February 1, 2014 compared to 36.1% for the 53 weeks ended February 2, 2013.  Consolidated gross margin for the 52 weeks ended February 1, 2014 decreased 30 basis points of sales to 35.3% from 35.6% during the 53 weeks ended February 2, 2013.

Inventory increased 4% at February 1, 2014 compared to February 2, 2013.

Selling, General & Administrative Expenses

Selling, general and administrative expenses (“operating expenses”) decreased 90 basis points of sales during the fourth quarter ended February 1, 2014.  Operating expenses were $439.2 million and $474.9 million for the 13 weeks ended February 1, 2014 and 14 weeks ended February 2, 2013, respectively.  The $35.7 million decline in operating expenses is primarily due to the additional week of operations in the prior year fourth quarter.

Operating expenses decreased 40 basis points of sales during the fiscal year ended February 1, 2014.  Operating expenses were $1632.0 million and $1671.5 million for the 52 weeks ended February 1, 2014 and 53 weeks ended February 2, 2013, respectively.

Share Repurchase

During the fiscal year ended February 1, 2014, the Company repurchased $301.6 million (3.9 million shares) of Class A Common Stock at an average price of $78.30 per share under the Company’s share repurchase plan.  No shares were repurchased during the fourth quarter of 2013.  Remaining authorization under the share repurchase programs at February 1, 2014 was $290.4 million.

Total shares outstanding (Class A and Class B Common Stock) at February 1, 2014 and February 2, 2013 were 43.9 million and 47.8 million, respectively.

Store Information

During the fourth quarter of 2013, the Company closed its University Mall location in Chapel Hill, North Carolina (64,000 square feet), its Collin Creek Mall location in Plano, Texas (195,000 square feet) and its Twin Peaks Mall location in Longmont, Colorado (90,000 square feet).  The Company closed six locations during fiscal year 2013.

Dillard’s plans to open two new stores in October of 2014:

• The Shops at Summerlin in Las Vegas, Nevada (200,000 square feet)
• The Mall at University Town Center, Sarasota, Florida (180,000 square feet)

At February 1, 2014, the Company operated 278 Dillard’s locations and 18 clearance centers spanning 29 states and in Internet store at www.dillards.com.  Total square footage at February 1, 2014 was 50.5 million.

Source: Dillard’s, Inc. Investor Relations

February 20, 2014

Slightly lower median home prices along with uptick in mortgage rates contributed to housing affordability holding steady in the fourth quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, released today.

In all, 64.7 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $64,400.  This is virtually the same as the 64.5 percent of homes sold that were affordable to median-income earners in the third quarter.

Meanwhile, the national median home price dipped from $211,000 in the third quarter to $205,000 in the fourth quarter, while average mortgage interest rates rose from 4.45 percent to 4.54 percent in the same period.

“Housing affordability is stabilizing at a time when pent-up demand and ongoing job growth are helping housing markets across the nation to gradually strengthen,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  “While this bodes well for housing in 2014, builders continue to face challenges, including tight credit for home buyers, inaccurate appraisals, and a shortage of workers and buildable lots.”

Youngstown-Warren-Boardman, Ohio-Pennsylvania was the nation’s most affordable major housing market, as 89.4 percent of all new and existing homes sold in this year’s fourth quarter were affordable to families earning the areas’ median incomes of $53,900.  Meanwhile, Kokomo, Indiana claimed the title of most affordable smaller market, with 96.3 percent of homes sold in the fourth quarter being affordable to those earning the median income of $60,100.

Other major U.S. housing markets at the top of the affordability chart in the fourth quarter included Harrisburg-Carlisle, Pennsylvania; Syracuse, New York; Buffalo-Niagara Falls, New York; and Scranton-Wilkes-Barre, Pennsylvania; in desceneing order.

Smaller markets joining Kokomo at the top of the affordability chart included Springfield, Ohio; Monroe, Michigan; Vineland-Milville-Bridgeton, New Jersey; and Cumberland, Maryland-West Virginia.

For a fifth consecutive quarter, San Francisco-San Mateo-Redwood City, California held the lowest spot among major markets on the affordability chart.  There, just 14.1 percent of homes sold in the fourth quarter were affordable to families earning the area’s median income of $101,200.

Other major metros at the bottom of the affordability chart included Santa Ana-Anaheim-Irvine, California; Los Angeles-Long Beach-Glendale, California; New York-White Plains-Wayne, New York-New Jersey; and San Jose-Sunnyvale-Santa Clara, California; in descending order.

All of the five least affordable small housing markets were in California.  At the very bottom of the affordability chart was Santa Cruz-Watsonville, where 18.6 percent of all new and existing homes sold were affordable to families earning the area’s median income of $73,800.  Other small markets at the lowest end of the affordability scale included Salinas, San Luis Obispo-Paso Robles, Napa, and Santa Rosa-Petaluma, respectively.

Go to nahb.org/hoi for tables, historic data and details.

Source: National Association of Home Builders.