Author: Chad Symens

February 13, 2014

Consumers leveled off post-holiday shopping ans spending in the beginning of the year due in part to severe winter weather in much of the country.  According to the National Retail Federation, January 2014 retail sales, excluding automobiles, gas stations and restaurants, were flat seasonally adjusted month-to-month, yet increased 3% unadjusted year-over-year.

January retail sales released by the U.S. Census Bureau, which include categories such as automobiles, gas stations, and restaurants, decreased 0.4% seasonally adjusted month-to-month, yet increased 2.6% year-over-year.

Other findings from the January retail sales report include:

• Building material and garden equipment and supplies dealers stores’ sales increased 1.4% seasonally-adjusted month-to-month and 3.3% unadjusted year-over-year.
• Clothing and clothing accessories stores’ sales decreased 0.9% seasonally-adjusted month-to-month, yet increased 1.4% unadjusted year-over-year.
• Electronics and appliance stores’ sales increased 0.4% seasonally-adjusted month-to-month, yet decreased 4.9% unadjusted year-over-year.
• Furniture and home furnishings stores’ sales decreased 0.6% seasonally-adjusted month-to-month, and 2.1% unadjusted year-over-year.
• General merchandise stores’ sales decreased 0.1% seasonally-adjusted month-to-month, yet increased 1.4% unadjusted year-over-year.
• Health and personal care stores’ sales decreased 0.6% seasonally-adjusted month-to-month, yet increased 3.1% unadjusted year-over-year.
• Non-store retailers’ sales decreased 0.6% seasonally-adjusted month-to-month, yet increased 6.5% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores’ sales decreased 1.4% seasonally-adjusted month-to-month and 1.5% unadjusted year-over-year.

“Following a solid holiday sales season, it seems that many consumers decided to take a break from the stores and shopping malls this January in an attempt to avoid the winter weather,” NRF president and CEO Matthew Shay said.  “While the dip in retail sales was somewhat anticipated, it is concerning that both jobless claims came in above projections and that consumer spending was flat in January; it’s not the way to kick off a new year.”

Source: Retailing Today

February 11, 2014

CVS Caremark’s fourth-quarter results came in at the high end of expectations and helped produce a record year; however, one of the key topics analysts discussed was the company’s recent decision to stop selling tobacco products in all its stores by October 1.

“Last week we announced our decision to exit the tobacco category, a category that we believe is inconsistent with our growing role in the changing healthcare marketplace,” Larry Merlo, president and CEO, told analysts.  “Simply put, this was the right decision at the right time.  There is a far greater focus emerging on health outcomes, managing chronic disease and reducing costs, and exiting the tobacco category more closely aligns us with the goals of patients, clients and providers, positioning our company for future growth.”

Merlo made note of the overwhelmingly positive response across an array of key constituents, including customers, prospective and current clients, benefit consultants, legislators and policymakers, and public health and Medicaid officials.  “All of whom see the health benefits, as well as the role that pharmacy can play in advancing smoking cessation and better managing chronic disease,” Merlo said.

As reported, the move is expected to result in a loss of approximately $2 billion in revenues on an annual basis from the tobacco shopper.  The $2 billion represents about 3% of earnings.

“When you look at that eight feet to ten feet that tobacco commands today, there will be something replacing that space, and to be clear, it is not going to make up $2 billion in revenues, but it will be something.  And there are some things that are being tested as we speak,” Merlo said when asked about its plans at retail and the steps it would take to help offset some of the loss.

“We are seeing this tobacco decision as an opportunity to connect even more consumers as an expert in health and beauty and to build our loyalty with them.  As we focus specifically on the front store, it is really around driving what we will call ‘smart growth’ and I think ther it has three elements: taking ExtraCare to the next level, the second is focusing on our core strength in health and beauty, and the third is driving our store brand penetration,” added Helena Foulkes, president of CVS/pharmacy.

During the quarterly call with analysts, Merlo also provided analysts with a broad-reaching business update including:

• The impact of the Affordable Care Act and the role CVS Caremark can play in serving new customers and supporting health plans.
• Its joint venture with Cardinal Health to form the largest generic sourcing entity in the United States.  The venture will help spur innovative purchasing strategies with generic manufacturers and is expected to be operational by July.
• The 2014 selling season, which has resulted in net-new wins of about $2 billion, excluding attrition in the Med D business.  Merlo said that while it is too early to provide an update on the 2015 selling season, the company is “well-positioned” to both retain business and gain share.
• The specialty pharmacy business, which posted a revenue increase of about 22% year over year.

Merlo added that the company expects to see significant growth in the specialty space and is well-positioned to capitalize on the opportunity.  Enter its acquisition in January of Coram, the specialty infusion services and enteral nutrition business unit of Apria Healthcare Group.

“This provides us with a new set of capabilities to manage not just the cost of infused drugs, but also to reduce the length of hospital stays and to help patients move from higher cost sites of service, like hospital outpatient centers, to more cost-effective locatons, such as the patient’s home or a physician’s office,” Merlo said.

Furthermore, its new Specialty Connect offering is on schedule to roll out in 2014.  Analogous to the Maintenance Choice program, Specialty Connect integrates mail and retail capabilities to provide both greater choice and convenience for members.

CVS Caremark’s MinuteClinic business posted a revenue increase of more than 10% during the quarter and reached a milestone with 800 total clinics in 28 states and Washington, D.C.

Net revenues for the three months ended December 31 increased 4.6%, or $1.4 billion to $32.8 billion, up from $31.4 billion the year-ago period.  For the year, total revenue rose 3% to $126.8 billion compared with $123.1 billion last year.

Revenues in the retail pharmacy segment increased 5.6% to $17.2 billion during the quarter.  Same-store sales rose 4%, with pharmacy same-store sales up 6.8%.  Front-end same-store sales decreased 1.9% due to softer traffic, which was partially offset by an increase in basket size, the company stated.  For the year, total revenue in the retail pharmacy segment rose 3.1% to $65.6 billion.  Same-store sales increased 1.7% for the year, with pharmacy same-store sales up 2.6% and front-end, same-store sales down 0.5%.

Income from continuing operations attributable to CVS Caremark for the three months increased 12.4% to $1.3 billion, compared with $1.1 billion in the year-ago period.  Adjusted earnings per share from continuing operations attributable to CVS Caremark for the three months ended December 31, 2013 and 2012 was $1.12 and $0.96 respectively, at the high end of guidance.

Income from continuing operations attributable to CVS Caremark for the year increased 18.8% to $4.6 billion.  Excluding a gain from a legal settlement and the loss on early extinguishment of debt, adjusted EPS increased 15.7% in 2013 to $3.96, at the high end of guidance.

“I’m very pleased with our fourth-quarter results, with adjusted earnings per share coming in at the high end of our guidance at $1.12 per share, capping off a terrific year,” Merlo said.  “For full year 2013, we delivered strong growth in revenues, gross margins, operating margins and earnings across the CVS Caremark enterprise.”

Source: Retailing Today

February 6, 2014

Walmart is marking the 20th anniversary of its entry into Canada this year by spending big bucks to expand physical stores and distribution capacity while devoting a much smaller portion of a $500 million budget to e-commerce.

Walmart said it would spend close to $500 million in Canada this year with $376 million of that amount dedicated to 35 supercenter projects totaling one million square feet of new selling space.  Walmart currently operates 389 stores in Canada, of which 247 are supercenters.  By year end it expects to have 395 stores of which 282 will be supercenters.

To support the expanded food footprint, $91 million of the $500 million capital expenditure budget will be used for new and existing distribution center projects.  Getting the short end of the cap-ex stick is Canadian online operations where $31 million, or slightly more than 6% of the $500 million, is allocated for e-commerce projects.

“Customers in every region of Canada are looking to save money on their entire list of shopping needs,” said Shelley Broader, Walmart Canada’s president and CEO.  “Delivering on our commitment to help lower the cost of living is our top priority, and our growing network of supercentres and our expanding walmart.ca offering enable us to do just that.”

Source: Retailing Today

February 10, 2014

Sears has launched a new service powered by the chain’s Shop Your Way mobile app that enables customers to pick up their online purchases at any Sears store within five minutes of arrival.  The service allows members to pick up purchases without leaving their cars, hence its name: In-Vehicle Pickup.

“The In-Vehicle Pickup option takes our ‘Free Store Pickup – Ready in 5’ guarantee even further and out to the parking lot,” said Leena Munjal, SVP, member experience and integrated retail, Sears Holdings.  “In-Vehicle Pickup on this scale is an industry first and another example of how we are constantly innovating and adding benefits that make shopping a more convenient experience for our members.”

To take advantage of the new service, Shop Your Way members shop online, completing their purchase via computer or tablet.  At check-out, they choose In-Vehicle Pickup and input details of the vehicle they will arrive in, then sign in to their Shop Your Way mobile app and enable location services before leaving for the store.  Upon arrival at their local Sears, members pull up to the In-Vehicle Pickup spots located conveniently outside of the merchandise pickup location; use the Shop’In feature in the Shop Your Way mobile app to initiate In-Vehicle Pickup – a timer will start on the phone; and five minutes later or less an associate takes the purchase to the car and verifies it by using the payment method used online.

“When the transaction is complete, members can easily provide instant feedback on their experience through the Shop Your Way app,” Munjal said.  “This feedback is extremely valuable as it helps us further enhance our capabilities across all channels.”

Source: Retailing Today

February 10, 2014

The Home Depot has opened a new direct fulfillment center (DFC) in the Locust Grove suburb of Atlanta. 

It is the first of three new DFC’s the company will open across the U.S. in the next two years, adding more than 3 million sq. ft. and approximately 1,000 jobs to its supply chain. The new distribution centers will increase the number of orders the company can ship the day they are received, increasing the speed of delivery for HomeDepot.com orders.

The company is also enabling faster order picking and shipping through new warehouse management and material handling systems. 

“This is a significant investment in our ability to say yes to customers with confidence,” said Mark Holifield, SVP, supply chain.  “Yes, you have access to our entire inventory to fulfill your order.  Yes, you can expect a speedy delivery.  And yes, you can rely on information updates about your delivery.”

The DFC’s will stock approximately 100,000 products, extending The Home Depot aisle beyond the 35,000 products typically available at the average physical store.

The Locust Grove DFC will initially employ approximately 125 people, and will eventually employ approximately 300.  Future DFCs are scheduled to open in Perris, California and Troy, Ohio.

The Home Depot has 2,263 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.  In fiscal 2012, The Home Depot had sales of $74.8 billion and earnings of $4.5 billion.  The company employs more than 300,000 people.

Source: Retailing Today

December 12, 2014

The Home Depot reportedly plans to invest $300 million on technology and supply chain upgrades during its fiscal year 2014, which begins in February 2014.  According to the Wall Street Journal, the results will include three new fulfillment centers in California, Atlanta and Ohio by 2016, as well as same-day shipping for some online orders.

The new centers will dramatically increase the number of orders the chain can ship the same day they are received, which significantly expands the number of orders it will be able to deliver within two days or less.  With this same day shipping capability, these centers are geographically positioned to leverage parcel freight carriers’ networks to deliver 90% of customers’ parcel orders within two days, using economical ground service.  For example, when the network is complete, most customers will be able to order on a Wednesday by 5 p.m. with the product delivered by Friday, according to Home Depot.

Home Depot’s total sales are expected to reach $79 billion during fiscal 2013, aided by a boost in online sales.  Other new programs for the upcoming fiscal year may include expanded in-home assembly and installation services.

Source: Retailing Today

February 6, 2014

The weather posed a significant challenge for Fred’s in January.  According to CEO Bruce A Efird, Mother Nature not only disrupted consumer shopping patterns, but also resulted in more than 120 store closings during the final week of the month.

“Prior to the last week of January, sales were running in the mid-range of our forecast, with reconfiguration departments leading the way,” Efird explained.

Fred’s total sales for January were $134.8 million compared with $173 million for the five-week year-earlier period.

Adjusting to make January sales results comparable with those of the prior year, the company eliminated the first week of the month.  On this adjusted basis, total sales in January decreased 1.1%.  Comparable-store sales for the month decreased 1.8% versus flat comparable store sales in the year-earlier period.

“In the final week of the month, comparable store sales dropped into the negative double digits, culminating in a weather effect on comparable store sales for all of January that is estimated at more than 300 basis points,” added Efird.

Efird noted that lower-than-anticipated sales in the last week of January will reduce earnings for the final quarter by approximately $0.03 per share.  Fred’s now expects to report fourth quarter earnings per diluted share in the range of $0.13 to $0.16 cents versus earnings of $0.15 per diluted share for the comparable 13-week period last year.

“With January closing out the fourth quarter, we had success in several areas, most notable in our reconfiguration departments that include pharmacy, pet, auto and hardware, which will carry forward in 2014.  We are also in the process of revamping our fourth quarter marketing, promotion and pricing strategies to respond to changing consumer buying habits, along with the increasing popularity of internet shopping.  We are confident that our strategies to build a strong presence in specialty pharmacy and clinical services, together with accelerating pharmacy acquisitions and new pricing, promotion and marketing programs, will lead to continued success in 2014.”

During January, Fred’s opened one new store and two Xpress pharmacies.  For the year, Fred’s added a net total of 25 locations, consisting of 11 new stores and 14 new Xpress pharmacies, which was offset by the closing of 25 store locations and eight Xpress pharmacies.  The company also opened 26 new pharmacies in 2013 and closed 17, for a net addition of nine pharmacies during the year.

Fred’s operates 704 discount general merchandise stores, including 21 Fred’s stores, in the southeastern United States.

Source: Retailing Today

February 6, 2014

Retail industry sales (which exclude automobile, gas stations, and restaurants) will increase 4.1% in 2014, up from the preliminary 3.7% growth seen in 2013, according to the National Retail Federation.  The association’s 2014 economic forecast calls for online sales to grow between 9% and 12%.

A number of factors contributed to NRF’s 2014 economic forecast, including:

• Economic Growth is expected to be above its long-term historical average.  Early estimates for growth in the economy as measured by real GDP could fall between 2.6% and 3%, a noticable improvement from the estimated 1.9% rate for 2013, and the fastest pace in the past three years.
• The labor market is expected to continue its modest recovery averaging approximately 185,000 jobs per month, helping decrease unemployment to near 6.5% or lower by the end of 2014.
• Inflation as measured by the CPI is predicted to inch higher to as much as 1.7% in 2014.
• The housing sector is expected to continue to improve in 2014, and stronger household and business confidence should spur more consumer spending overall.

“The economy remains susceptible to buffets as we are already witnessing in the new year, thanks to harsh winter weather, domestic and global financial issues,” said NRF chief economist Jack Kleinhenz.  “While we are careful not to ignore the challenges, we are optimistic and hopeful that future disruptions will be limited, allowing employment and business investment to grow all the while giving retailers and their customers the confidence in the economy they need.”

Source: Retailing Today

February 6, 2014

Kohl’s January sales were significantly lower than planned as a result of lower traffic and low levels of clearance merchandise.  Comparable-store sales decreased 2%.  Combined November and December same-store sales increased 0.8%.

Unanticipated expenses in servicing its e-commerce business led to higher-than-expected costs for the quarter.  As a result of these expenses, the company is lowering its fourth quarter diluted earnings per share estimates from $1.59 to $1.74 to approximately $1.53.  Fiscal 2013 diluted earnings per share are now expected to be approximately $4.03, compared to previous guidance of $4.08 to $4.23.

The company will release its detailed report on the fourth quarter February 27.  Kohl’s operates 1,158 stores in 49 states.

Source: Retailing Today

February 4, 2014

On the heels of a healthy yet modest holiday shopping season, cautious consumers aren’t quite ready to splurge on Valentine’s Day this year, continuing to keep their budgets in check.

According to the National Retail Federation’s 2014 Valentine’s Day spending survey conducted by Prosper Insights and Analytics, 54% of Americans will celebrate with their loved ones this year, compared to 60% in 2013.  The average person plans to spend $133 on candy, cards, gifts, dinner and more, up slightly from $130.97 last year.  Total spending is expected to reach $17.3 billion.

Valentine’s Day will continue to be a popular gift-giving event, even when consumers are frugal with their budgets.  This is the one day of the year when millions find a way to show their loved ones they care,” said NRF president and CEO Matthew Shay.  “Consumers can expect Cupid’s holiday to resemble the promotional holiday season we saw just a few months ago, as retailers recognize that their customers are still looking for the biggest bang for their buck.”

Gift-givers will find the perfect gift for their loved ones that fits their budget, whether it’s candy, flowers, jewelry, clothing, an evening out or simply a greeting card.  Nearly half (48.7%) will buy candy, a third (37.3%) will give flowers and more than half (51.2%) will send greeting cards.  Nineteen percent will treat their significant other to something sparkly – jewelry spending will total $3.9 billion, and 37% will celebrate with an evening out, spending an estimated total of $3.5 billion.  Others will give more practical gifts like clothing (15.8%) or gift cards (14%) so their loved ones can have that item they’ve been eyeing in the store.

Men will spend $108.38 on gifts for their significant others – twice as much as women who will spend $49.41 on their special someone.  But Valentine’s Day isn’t just for couples; people will show their appreciation for family members (59.4%), friends (21.7%), teachers (20.4%) and colleagues (12.1%).  And like every holiday, Americans won’t forget about their pets with 19.4% buying gifts for their furry friends, spending an average of $5.51.

“While fewer are planning to celebrate Valentine’s Day this year, millions of shoppers will still make room in their discretionary budgets to send cards and gifts to loved ones or enjoy a special evening out,” says Prosper Insights and Analytics Director Pam Goodfellow.  “Consumers can expect promotions on everything from flowers to date night dinner packages in the coming days, leaving plenty of ideas for those looking to spoil their Valentines.”

Cautious consumers do their research when it comes to shopping, and many will purchase gifts online.  The survey found that 26.1% plan to shop online this Valentine’s Day, flat with last year’s 26.3%.  Many will turn to their tablets or smartphones before making their final gift decisions; 24% will research products or compare prices on their smartphones and 32.25 will do so on their tablets.

The NRF’s Valentine’s Day spending survey was designed to gauge consumer behavior and shopping trends related to Valentine’s Day.  The survey was conducted for NRF by Prosper Insights & Analytics.  The poll of 6,417 consumers was conducted from January 2-13, 2014 and has a margin of error of plus or minus 1.2 percentage points.

Source: Retailing Today