Author: Chad Symens

February 4, 2014

J.C. Penney scored its first positive quarterly sales result since 2011, reporting a same store sales increase of 2% in the fourth quarter, which included the holiday season.

“While 2013 brought a lot of change and challenges to J.C. Penney, the steady improvements in our business show that the company’s turnaround is on track.  In spite of the significant headwinds facing all retailers this season, including unprecedented harsh weather conditions in many parts of the country, we delivered on our promise to generate positive comparable store sales growth in the fourth quarter,” said CEO Myron E. Ullman.

Same-store sales increased 3.1% in the nine weeks through November and December.  The increase was fueled by solid performances in beauty (Sephora), activewear, sweaters, outerwear, dresses, boots, men’s clothing, luggage and housewares.

“As we look ahead to 2014, our associates are encouraged by the company’s results and we remain steadfast in our focus to build on these achievements and return to profitable growth,” Ullman added.

The company said it closed its 2013 fiscal year with total available liquidity in excess of $2 billion.

Source: Retailing Today

February 5, 2014

Strong demand for apartments will increase over the next several years, said panelists during a press conference at the National Association of Home Builders (NAHB) International Builders’ Show (IBS) in Las Vegas.  And while multifamily construction continues to be strong, NAHB does expect the speed to decrease as sustainable levles are reached in 2015 or 2016.

“The multifamily market has rebounded significantly from its trough in 2009 at 82,000 multifamily housing starts to 340,000 in 2013,” said NAHB Chief Economist David Crowe.  “NAHB is forecasting 363,000 multifamily housing starts in 2015, which is above the previous longer term average of 340,000 as more young adults prefer renting.”

The strong performance in multifamily comes from three sources, explained Crowe.  “First, during the collapse, production of multifamily housing had significantly decreased, so part of the resurgence in 2011 was just catching up with a more normal flow.  Second, the strong demand for apartments is being fed by a rising demographic of echo boomers that will continue to grow in size as we absorb people born after 1980.  Third, young adults who might have otherwise chosen homeownership, and some older adults as well, are hampered by a variety of issues, such as unusually tight underwriting standards for mortgages, lower credit scores because of the slow employment market and lower entry salaries.  As a result, the share of households that rent rather than own has increased steadily since 2004 and will likely continue until jobs are more secure, mortgages more accessible and careers more stable.”

Many markets have regained their footing and are producing at least as many multifamily units as they did during the relatively stable period between 1996 and 2006.  “The multifamily market has come a long way since the collapse,” said panelist Guy K. Hays, president of Legacy Partners Residential Inc. in Foster City, California.  “Overall, supply and demand are in balance and in most markets there is a need for the continued production of new units.”

While both panelists are optimistic about the future of the multifamily housing market, there are still challenges that face the industry such as the availability of labor and rising cost of some building materials.  But demand for apartments is strong enough for developers to proceed in most markets, the panelists noted.

Source: National Association of Home Builders

January 31, 2014

Bad weather and a reduction in food stamps led to weaker-than-expected sales at Walmart and Sam’s Club, which combined with greater-than-expected international expense, prompted an uncharacteristic pre-announcement from the company that fourth quarter profits would be worse than expected.

Walmart said its earnings per share adjusted to exclude several non-recurring and greater-than-expected expenses related to international operations would be below the low end of a previously provided forecast of $1.60 to $1.70 and full year earnings per share would be below earlier guidance in the range of $5.11 to $5.21.

The earnings miss for the quarterly period ended January 31 was attributed to a number of factors.  In the U.S., same-store sales at Walmart stores ad Sam’s Club are both expected to be slightly negative, according to Walmart CFO Charles Holley, compared to earlier guidance which called for comps at Walmart to be roughly flat and comps at Sam’s in the range of flat to 2%.

“Despite a holiday season that delivered positive comps, two factors contributed to lower comp sales performance for the 14-week period for Walmart U.S.,” Holley said.  “First, the sales impact from the reduction in SNAP (the U.S. government Supplemental Nutrition Assistance Program) benefits that went into effect November 1 is greater than we expected.  And, second, eight named winter storms resulted in store closures that impacted traffic throughout the quarter.  Sam’s Club was also impacted by the weather throughout the quarter.”

The pre-announcement by Walmart is unfamiliar territory for a company accustomed to meeting or exceeding its forecasts.  It also marks an inauspicious beginning to a new leadership era at the world’s largest retailer.  Walmart International president and CEO Doug McMillon assumes the role of president and CEO of Walmart Stores on February 1 when current president and CEO Mike Duke steps down.

Walmart is scheduled to report fourth-quarter results on February 20.

 Source: Retailing Today

January 31, 2014

When it comes to meeting consumer expectations, the stakes for retailers have never been higher.  Digital age consumers are more discerning, have high expectations for the quality of product information and use technology in a variety of ways to make educated purchasing decisions.  They use search engines to get more information about a product or brand.  They comparison-shop online.  They visit manufacturers’ websites.  They read online endorsements, reviews and recommendations.  Given this reality, retailers need to focus on their omnichannel strategy and strengthen their capabilities to deliver the desired product into the hands of customers wherever they are, or risk losing sales.

Research conducted by Ipsos OTX and Google after the 2012 holiday shopping season found that 51% of consumers researched online then visited stores to make a purchase.  Forty-four percent researched online befor buying online, 32% researched both online and in person before buying online and 17% researched in person and then bought online.

These findings illustrate the need for industry to get ahead of consumers to serve them well and create lifelong loyalty.  Many companies have started to successfully embrace omnichannel retailing, in which the walls between brick-and-mortar stores and online shopping have been broken down.  Using omnichannel strategies, retailers essentially deliver a seamless fulfillment experience for customers who require a fast and easy shopping experience, and expect the retailer to anticipate their needs and preferences.

Some retailers are excelling when it comes to omnichannel.  One of the secrets to their success is recognizing that the interdependency between consumer-facing operations and supply chain practices is crucial for aiming high and achieving omnichannel fulfillment goals.  An efficient omnichannel operation includes placing an emphasis on unique product identification and accurate attributes, as well as customer preferences, purchase history and paths to buying decisions and purchasing.  Simply put, omnichannel fulfillment is about knowing what a retailer has, knowing that it’s available and following through on promises to the consumer.

There are many benefits to this approach.  Consider the following example, published in a research paper in MIT’s Sloan Management Review this summer:

 Tasmia Kashem, a resident of Burbank, California, went to the Beverly Center mall in Los Angeles to shop for shoes.  After browsing at Nine West, a fashion retail chain store, Kashen didn’t see anything she liked.  As she was leaving the store, an associate offered to show her additional collections on an iPad.  Upon scanning through the online offerings and reading reviews, Kashem decided to preorder a new style that was arriving at the store the following week.  In this example, the retailer’s omnichannel approach turned a “walk out” into a sale.  In the process, they also probably gained a repeat customer.

For omnichannel retailing to work in this way, retailers need to be aligned with their suppliers, distribution centers, logistics providers and stores.  What makes omnichannel retailing possible is unique product identification and a standards-based approach to business processes across the supply chain – from warehouse operations, to inventory management, to consumer-facing applications.  Standardized product information, including extended attributes, is exchanged not only with trading partners, but also with the consumers whose buying behavior is heavily influenced by digital information.  Armed with complete and accurate product information, retailers can prepare their systems for product sales on a repeatable basis no matter where it comes from.

Better data means better inventory management – an essential piece of an omnichannel strategy.  Macy’s is one leading retailer embracing this concept.  After a recent investment in its fulfillment operations this year, two-thirds of Macy’s stores are equipped to effieiently ship online orders as well as orders from other stores, trimming inventory and getting items to customers faster than ever.

However, not all systems operate this way.  The use of varying product identification standards and proprietary systems by different companies has created inconsistencies from trading partner to trading partner.  These inconsistencies result in flawed, incorrect and out-of-date product information that frequently leads to negative user experiences.  Global research conducted by GS1 revealed that 74% of consumers surveyed consider it important that product information is trustworthy.  Thirty-eight percent would not purchase the product if they did not trust the product information displayed about it on their smartphone, and 35% would never use an app that contained untrustworthy information again.

In addition to accuracy and consistency, better consumer data also promotes better targeting and greater knowledge of consumer needs.  Retailers can take advantage of more detailed product and consumer information to provide purchase recommendations in much the same way as online retailers or other online shopping organizations that use previous purchase information and customer preferences.

Today’s smart, connected consumer can be a boon for retailers seeking better targeting and deeper relationships.  Standardized data and reliable product information helps businesses communicate with their partners efficiently to the ultimate benefit of both the industry and the consumer.  Forward-thinking retailers should consider adapting to the savvy shopper and embrace universal product standards – or risk being left behind.

 Source: Retailing Today

February 3, 2014

Homeowners Doled Out $130 Billion Last Year For Renovations

Americans are spending lavishly again to upgrade their homes, indicating they remain confident about the long-term prospects for the recovery despite recent signs of weakness.

Homeowners spent $130 billion on remodeling projects last year, according to data released Monday by the U.S. Census Bureau.  That was up 3.1% from 2012 and was the largest amount of home-remodeling spending since 2007, the year that the housing downturn began.  Permits for remodeling jobs in the U.S. rose 5.1% last year from 2012, the largest increase since 2010 when the figures began their rebound from a 10-year low, according to permit-tracking company BuildFax.

Rising spending on remodeling is in contrast to recent signs of slowing in new-home construction activity, indicating that a growing number of consumers have decided that upgrading their home might be a better investment than buying a new one.  Other factors at play include the limited inventory of existing homes and rising home values, which have made it easier for homeowners to finance their remodeling projects by borrowing against their equity.

Home-equity lending, which sank to its lowest level of the past 10 years in 2010, jumped 18% last year to $123.4 billion, according to estimates by Moody’s Analytics.  That increased lending stems mostly from rising home values, which created more equity for many homeowners and lifted some who previously owed more than their home was worth, into positive territory.  According to real estate data firm CoreLogic, two-thirds of all U.S. homeowners had at least 20% equity in their homes as of last year’s third quarter, up from 53.2% two years earlier.

“If home prices are going up and people have more equity in their home, things like remodeling and refurbishment will do well, because it’s effectively the way of playing the reinvestment game,” said Joseph LaBorgna, chief U.S. economist for Deutsche Bank AG.

The increased remodeling activity comes as thousands of contractors and tradesmen are expected to convene in Las Vegas this week at two trade shows geared to the remodeling and home-building industry, the International Builder Show and the Kitchen and Bath Industry Show.  The combined attendance is expected to exceed 80,000, the highest since 2008.

“From 2010 to 2013 is the difference between night and day,” said Gary Drake, chief executive of Drake General Contractor Inc., a Los Angeles remodeling company that says it posted a 30% increase in revenue last year to $4 million.  “The phone is ringing more.  Old clients are calling me.  Architects are offering me work.  I’m actually turning down work now.”

The increase in remodeling projects has revved up sales for a variety of home-improvement companies, from retailers such as Lowe’s to paint company Sherwin-Williams, and local contractors who install everything from granite countertops to carpeting.

Michael Grosswendt, a builder and renovator of high-end homes in the Los Angeles area, said revenue and staff at his company, All Coast Construction, were nearly halved during the downturn to as low as $10 million and 25 workers.  As the market recovered in 2013, Mr. Grosswendt’s revenue climbed to $15 million.  These days he’s turning down work while keeping his staff at 25 and spending more time on fewer projects.

Suppliers are cashing in, too.  Masco Corporation, owner of brands including KraftMaid cabinets, Behr paints and Delta fauctes, posted $2.2 billion in sales in the third quarter, up 12% from a year earlier partly on strong sales of windows and cabinets.  Residential remodeling projects typically account for roughly three-quarters of Masco’s sales.

Mohawk Industries, a global manufacturer of tile, carpet and flooring, saw U.S. sales of its product lines decline by 30% to 40% during the downturn.  In 2013, Mohawk posted quarterly gains, such as a 12% increase in sales of ceramic tile in the U.S. and a 3% boost in carpet sales, due at least in part to more remodeling.

“Those year-over-year gains for our products for remodeling are the first we have seen in the past six years,” said Frank Boykin, Mohawk’s chief financial officer.  “This is an indication of the potential pent-up demand in the remodel market.”

Source: The Wall Street Journal

January 28, 2014

Ross Stores has promoted Michael Hartshorn to CFO, retaining his SVP title, effective February 2.  Hartshorn will be responsible for the accounting, treasury, financial planning, tax, risk management and investor relations functions.  As CFO, he will continue to report to John Call, group SVP finance and legal, and corporate secretary.

“Michael is a very talented executive with 24 years of broad-based financial experience.  He joined our company 14 years ago and has held various management positions in our finance, IT and supply chain organizations, most recently as SVP and deputy CFO,” said vice chairman and CEO Michael Balmuth.  “His strong management skills, financial expertise and in-depth knowledge of our business will be valuable assets in his new role.  Michael will continue to work closely with John Call, who has been our CFO for the past 16 years and who will continue in his senior leadership role, overseeing our finance and legal functions.  Our company will continue to benefit from the proven leadership and financial expertise of these two exceptional executives.”

Hartshorn has been SVP and deputy CFO of Ross Stores since January 2012.  Prior to this, he was group VP, finance and treasurer from March 2011 to January 2012 and VP, finance and treasurer from April 2006 to March 2011.  From 2002 to 2006, he served in various management roles in the Ross IT and supply chain organizations, focusing on network strategy and operating initiatives.  He initially joined the company in 2000 as director and assistant controller.

Hartshorn began his career at the public accounting firm of Cooprs & Lybrand where he spent three years in their audit practice, followed by seven years in various financial roles at the May Department Stores Company.  He has a bachelor of science in accountancy from the University of Missouri.

Source: Retailing Today

January 30, 2014

Walmart Supercenters in California benefit communities by supporting additional job creation, small business growth and more robust sales tax revenues, according to a new economic impact report.

The study was conducted by economist Lon Hatamiya of the Hatamiya Group and the results were announced by Walmart.  Key findings of the study show the following:

• On average, California communities with Walmart Supercenters fared far better on taxable retail sales than those communities without Walmart Supercenters.
• Total taxable retail sales in California communities with Walmart supercenters increased by an average of 20.3% after the opening of those stores.
• Total taxable retail sales in California communities without Walmart Supercenters decreased by an average of 11.7% over the same time period.
• On average, California communities with Walmart Supercenters experienced even stronger gains in the number of retail business permits issued than those communities without supercenters.
• Total retail business permits in California communities with Walmart Supercenters increased by an average of 48.5% arfter the opening of those stores.
• Total retail business permits in California communities without Walmart Supercenters also increased, but only by an average of 20.3% over the same time period.

“I first launched this study in 2008 and found similar results,” study author Hatamiya said in a press release distributed by Walmart.  “I added an element to the current version by looking at communities without Walmart Supercenters and comparing the results.  It’s clear that communities with a Walmart Supercenter experience overall positive economic benefits to a local economy when compared to a community without a Walmart Supercenter.”

 Source: Retailing Today

February 3, 2014

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

Economic activity in the manufacturing sector expanded in January for the eighth consecutive month, and the overall economy grew for the 56th 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 January as the PMI registered 51.3 percent, a decrease of 5.2 percentage points when compared to December’s seasonally adjusted reading of 56.5 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 January PMI indicates growth for the 56th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the eighth consecutive month.  Holcomb stated, “The past relationship between the PMI and the overall economy indicates that the PMI for January (51.3 percent) corresponds to a 2.7 percent increase in real gross domestic product (GDP) on an annualized basis.”

A number of comments from the panel cite adverse weather conditions as a factor negatively impacting their businesses in January, while others reflect optimism and increasing volumes in the early stages of 2014.

Of the 18 manufacturing industries, 11 are reporting growth in January.

Source:  Institute For Supply Management

February 3, 2014

Builder confidence in the 55+ housing market for the fourth quarter of 2013 is up sharply, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today.  All segments of the market – single-family homes, condominiums and multifamily rental – registered strong increases compared to the same quarter a year ago.  The single-family index increased 20 points to a level of 48, which is the highest fourth-quarter reading since the inception of the index in 2008 and the ninth consecutive quarter of year over year improvements.

“We are seeing continued improvement in the 55+ housing market because consumers have gained confidence in the economy and are able to sell their current homes and move into a new home or an apartment that fits the lifestyle they desire,” said Robert Karen, chairman of NAHB’s 50+ Housing Council and managing member of the Symphony Development Group.  “We expect this optimism from builders and developers to carry on into 2014.”

There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums.  Each 55+ HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic).  An index number below 50 indicates that more builders view conditions as poor than good.

All of the components of the 55+ single-family HMI showed significant growth from a year ago: present sales climbed 26 points to 53, expected sales for the next six months rose 24 points to 62 and traffic of prospective buyers increased 9 points to 33.

The 55+ multifamily condo HMI posted a gain of 16 points to 35, which is the highest fourth-quarter reading since the inception of the index.  All 55+ multifamily condo HMI components increased compared to a year ago.  Present sales increased 20 points to 37, expected sales for the next six months increased 15 points to 40 and traffic of prospective buyers increased 9 points to 30.

The 55+ multifamily rental indices also showed strong gains in the third quarter.  Present production increased 12 points to 43, expected future production rose 12 points to 46, current demand for existing units increased 16 points to 54 and future demend increased 16 points to 55.

“The 55+ segment of the housing market contains more discretionary purchases so as expected it has taken longer for that segment to join the housing recovery,” said NAHB Chief Economist David Crowe.  “The 20 point year-over-year increase in 55+ HMI for single-family homes matches earlier gains in the NAHB/Wells Fargo HMI for the overall single-family market and surpasses the more recent gains in other housing segments.”

Source: National Association of Home Builders

January 30, 2014

Two of Staples’ senior most executives were given new responsibilities to bolster the company’s re-invention efforts and competitive posture in a market that has become more challenging with the addition of a newly merged Office Depot and Office Max.

Staples elevated Joe Doody to the role of vice chairman from his prior position as president of the company’s North American commercial division.  Filling Doody’s role is Staples executive Shira Goodman who previously served as EVP of global growth.  Both will continue to report to long time Staples chairman and CEO Ron Sargent.

“Joe (Doody) has done a tremendous job leading our commercial businesses through a time of enormous change and growth.  His proven success and deep experience will be crucial to our reinvention as we continue to expand into new categories and build on our e-commerce and delivery capabilities to provide every product businesses need to succeed,” Sargent said.  “Shira (Goodman) is an outstanding leader with unmatched experience across our company.  Her experience with our reinvention will be a huge asset as we continue to drive growth in our North American Commercial business by expanding into new categories, such as facilities and breakroom, technology, print, furniture and promotional products.”

In his new role, Doody will lead Staples’ strategic reinvention with responsibility for strategic planning and business development as well as the company’s operations in Australia, New Zealand and high-growth markets.  Doody joined Staples in 1998 as president of what was known at the time as Staples Contract and Commercial.  He held that role until 2002 when he was named president of Staples North American Delivery.  He was named president of North American Commercial in 2013.

Goodman joined Staples in 1992 and prior to her recent role as EVP of global growth she served as EVP of human resources and EVP of marketing from 2001 to 2009.  Prior to 2001, Goodman served as SVP of StaplesDirect.com, the company’s e-commerce and catalog operation.

The appointment of Doody and Goodman to new roles follows several other significant developments at Staples which are part of the company’s reinvention efforts.  In early January, Staples unveiled a new branding campaign with the tagline, “make more happen,” which replaced its long-running, “that was easy,” tagline.  The company also made a subtle change to its logo.

The new campaign is designed to showcase Staples’ expanded assortment, thus the “make more happen,” positioning, whereas with “that was easy,” the emphasisi tended to be on how Staples simplified customers lives.

“We’re adding thousands of new products every day.  Our expanded product assortment appeals to businesses across a wide range of industries, from medical and restaurants to professional services and retail,” Goodman said when the campaign launched.

Other recent reinvention moves are focused on the company’s intellectual capacity.  For example, last fall Staples named Tom Conophy as its Chief information officer to oversee all aspects of the company’s global IT organization.

“Tom (Conophy) is a creative and innovative leader, and his skills complement the talents of our IT leadership team as we build the systems and processes to support our strategic reinvention,” CEO Sargent said at the time.

One of the biggest commitments the company made to stay on the leading edge of technology related to the creation last September of a new e-commerce development center in Seattle.  The move was designed to help the company attract top talent in the areas of engineering, product management, usability, analytics and online merchandising.

Staples is changing the way customers shop online,” said Faisal Masud, Staples EVP of global e-commerce.  “Seattle is an innovation hub rivaling Silicon Valley and features some of the world’s biggest technology companies.  Staples new Development Center will allow us to tap into the wide range of talented engineering and e-commerce professionals on the West Coast.”

Source: Retailing Today