Author: Chad Symens

As a group our Home Depot vendors are up 9% YTD over the prior year comp for US stores, Canadian stores are up 96%. (the Canadian sample is smaller)   Lowe’s stores are up 2% YTD over the prior year comp for US stores.   Home Depot will be releasing Q3 2012 earnings results on November 13 and Lowe’s releases their earnings on Nov 19.  We typically find that our vendors who are aggressively using POS data to drive business improvements are out in front of their competitors so I wonder how earnings overall will compare to our sample group of vendors who are doing pretty well on a year over year basis? 

Retail sales rose in October which is encouraging, and optimism for a good holiday sales period appear to be growing.  Some report highlights:

• Target same store sales rose 2.4%
• Macy’s same store sales increased 4.1%
• Kohl’s comps rose 3.3% – more than the expected 1.1%
• Nordstrom posted a rise of 9.9% in same store sales which was 3.9% higher than forecasted.
• The 17 retailers Thomson Reuters tracks reported a 4.7% growth in same store sales.
• Gap same store sales rose 4%

WASHINGTON — The National Retail Federation released its 2012 holiday forecast on Tuesday, which shows sales increasing 4.1% to $586.1 billion, down from last year’s 5.6% growth.

However, the NRF’s 2012 estimate tops the 10-year holiday sales growth average of 3.5%.

“This is the most optimistic forecast NRF has released since the recession. In spite of the uncertainties that exist in our economy and among consumers, we believe we’ll see solid holiday sales growth this year,” NRF president and CEO Matthew Shay said. “Variables including an upcoming presidential election, confusion surrounding the ‘fiscal cliff’ and concern relating to future economic growth could all combine to affect consumers’ spending plans, but overall we are optimistic that retailers promotions will hit the right chord with holiday shoppers.”

Recent government data released show a crosscurrent of indicators that could impact holiday sales, including unimpressive job and income growth and an unemployment rate stuck at 8%. However, positive indicators are emerging that show a cautious but capable consumer, such as increases in confidence and home prices.

“While moderate compared to what we experienced the last two holiday seasons, the forecast is a very pragmatic look at what to expect this year given the current rate of economic growth,” NRF chief economist Jack Kleinhenz said.

In preparation for the holiday selling season, NRF has forecasted that retailers will hire between 585,000 and 625,000 seasonal workers, compared with the 607,500 seasonal employees hired last year.

The role of analytics in retail has evolved substantially over the past few years and it’s having a significant positive impact.  The days of hearing a vendor say “Oh, we get an EDI 852 but we don’t really do anything with it” are starting to fade into the rear view mirror.  This blog post will discuss some of the mega trends we see occurring in business intelligence in retail and their impact on demand planning and forecasting.   

Retailers are much more open to sharing point of sale (POS) data with vendors now than they were a few years ago.  Wal-Mart paved the road with Retail Link, which gives vendors access to a wealth of data, and most other retailers use EDI 852 or a web site of some kind to make data available.  [As a side note there are some major retailers like ACE Hardware and Publix that still refuse to share POS data, which is pretty amazing]  Mega-trend:  retailers will begin to expand the metrics they share and they will slowly move toward providing daily data.  We have recently seen retailers begin to share on hand data and sales dollars which they had not shared previously.  Providing those additional data elements enables category management and demand planners to greatly expand their analytics.  We are also seeing retailers begin to make daily data available, which is probably the most exciting development in business intelligence for retail.  Demand planning and forecasting for retail is dramatically improved by daily data vs. weekly data and daily data creates the opportunity for things like weather analysis.   

Key performance indicators for retail are pretty easy to define and calculate.   Sell-through, weeks of supply, year over year comp or % change, gross margin, gross margin return on investment, etc.    We find however that many demand planners do not have the time or tools to monitor KPI’s at the store / SKU level of detail which diminishes the value that should be realized.   Mega-trend: vendors are using cloud based software as a service (SaaS) to get access to sophisticated retail reporting without having to invest into business intelligence tools and a bunch of expensive development.   Retail point of sale reporting and analytics can basically be purchased ‘out of the box’ and then customized to fit your precise business needs in a very small amount of time.  When a large customer like The Home Depot is asking you to get into the POS data, you don’t have the luxury of waiting on your IT team.   Outsourcing your retail POS reporting and analytics provides a very fast path to keeping your customer happy. 

Mega-trend: Vendors use of EDI 852 and POS analytics will become more and more sophisticated.    Not that long ago, when a vendor invested in POS reporting, they were getting ahead of their peers by using technology to improve their business.  They would build relatively simple retail dashboards with key performance indicators for retail stores, like units and dollars sold.  Today, however, we are seeing increasingly complex analysis for demand planning and forecasting, complex retail replenishment models, category management and even weather and demographic analysis.  This is a natural evolution of business intelligence in retail and it is driven by the availability of SaaS tools and very real results that vendors are experiencing.

Lowe’s posted declines in net sales, comp-store sales and earnings in the second quarter ended August 3.

“Our results fell short of our overall expectations,” said Robert Niblock, Lowe’s chairman, president and CEO.  “However, I have confidence in our strategy and in our employees, and while we recognize the significant magnitude of change that we’ve asked the organization to absorb as we transform our business, we fully understand that we must improve our level of execution.”

The world’s second largest home improvement retailer posted sales of $14.2 billion in the quarter, down 2.0% from $14.5 billion in the same quarter last year.  Comp-store sales in the quarter were negative 0.4%.  Earnings of $747 million were down 10.0% from the same quarter a year ago.

The quarterly comparisons in 2012, which is a 52 week year, are impacted by a shift in comparable weeks.  For the six month period, comparable store sales increased 1.0%.

Currently, Lowe’s operates 1,748 stores in the United States, Canada and Mexico, with 196.8 million square feet of retail selling space.  That compares with rival Home Depot’s store count of 2,255 stores.  Last week, Home Depot reported gains in comps and sales and a double digit percentage gain in net earnings.

Source:  retailingtoday.com

The U.S. Census Bureau announced that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $403.9 billion, an increase of 0.8 percent (±0.5%) from the previous month and 4.1 percent (±0.7%) above July 2011.  Total sales for the May through July 2012 period were up 4.3 percent (±0.5%) from the same period a year ago.  The May to June 2012 percent change was revised from -0.5 percent (±0.5%) to -0.7% (±0.2%).

Retail trade sales were up 0.8 percent (±0.5%) from June 2012 and 3.7 percent (±0.7%) above last year.  Nonstore retailers sales were up 11.8 percent (±3.1%) from July 2011 and sporting goods, hobby, book and music stores were up 10.6 percent (±4.3%) from last year.

Source:  census.gov

A fourth consecutive quarter of same store sales growth at Walmart’s U.S. business helped the company achieve a slightly better than expected profit performance.

Second quarter earnings grew 8.3% to $1.18, one cent better than the consensus estimate of analysts and at the top of the company’s forecast range of $1.13 to $1.18.  Total company sales increased 4.5% to $113.5 billion, and net income increased 5.7% to slightly more than $4 billion.  The key driver of the improved performance was continued strength of the Walmart U.S. business where same store sales increased 2.2%, within the company’s guidance range calling for an increase of 1% to 3%.

“I’m really pleased with the continued momentum we see in our Walmart U.S. stores, and this now marks three consecutive quarters of positive comp trafic and four quarters of positive comp sales,” said Wal-Mart Stores president and CEO Mike Duke.  “There’s such a clear focus among the leadership team to drive the strategy of broad assortment and price leadership.  We continue to win back customers and attract new ones.  We will not let up on our passion to reduce operating expenses so that we can invest in lower prices.  This is the promise that our customers expect from Walmart and what drives greater loyalty.”

Sales at U.S. stores grew 3.8% to $67.4 billion, while operating profits increased 5.3% to $5.25 billion.

“Customers are responding to our continued focus on providing the right assortment at everyday low prices,” said Walmart U.S. president and CEO Bill Simon.  “During the quarter, our average comp traffic increase was equal to serving an average of 80,000 additional customers every day of the 13-week period.”

“We believe that the improvements in our quality and overall merchandise offerings are key to driving these results,” said Sam’s Club president and CEO Rosalind Brewer.  “In fact, member engagement scores continue to achieve record levels.  We’re also investing in price to deliver greater value on top of these quality improvements.”

Internationally, sales increased 6.4% on a constant currency basis to $32 billion and operating profits increased 5.4% to nearly $1.5 billion.  A strengthening of the U.S. dollar had a major impact on the comparisons to the prior year.  On a constant currency basis sales would have increased by 7.2% to $32.3 billion and operating profits would have increased 11.9% to $1.6 billion.

“Every market delivered positive comps, and I’m pleased that our largest markets, the United Kingdom, Mexico and Canada, collectively delivered stable growth, solid margins and expense leverage, despite challenging environments,” said Walmart International president and CEO Doug McMillon.

Walmart increased by a penny and narrowed its full year profit forecast to a range of $4.83 to $4.93 from a prior range of $4.72 to $4.92.

Source: retailingtoday.com

Home Depot reported sales of $20.6 billion for the second quarter of 2012, a 1.7% increase from the second quarter of fiscal 2011.  Comparable sales for U.S. stores were positive 2.6%, and overall same-store sales for the second quarter were positive 2.1%.

Net earnings for the world’s largest home improvement retailer were $1.53 billion for the second quarter, which ended July 29.  This compares with net earnings of $1.36 billion in the same period a year ago, reflecting a 12.4% increase.

“As expected, second quarter sales reflected the pull forward of seasonal activity into the first quarter,” said Frank Blake, chairman and CEO.  “But we saw continued demand for core products and delivered second quarter earnings above our expectations.”

The Atlanta retailer expects fiscal 2012 sales will increase approximately 4.6% from the prior year on a 53 week basis.

At the end of the second quarter, Home Depot operated a total of 2,255 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces, Mexico and Canada.

Source:  retailingtoday.com

Retail sales advanced 0.8% in July, the first gain in four months, according to a report released by the Commerce Department.  Sales were fueled by strength from the automobile sector, electronics and appliance outlets, and department stores.

The bigger than expected increase followed a 0.7% decline in June that was weaker than first reported.  Bloomberg had forecast a 0.3% rise in July.  The results have buoyed feelings overall that the economy may be improving, albeit at a moderate pace.

“We’re looking for consumption to pick up,” Credit Agreicole CIB chief economist Michael Carey told Bloomberg.  “There was improved consumer confidence in July plus job gains that were a little better than expected, which is certainly constructive for the household outlook.”

Retail sales, which climbed the most since February, followed a quarter in which household spending grew at the slowest pace in a year.  Consumer purchases, about 70% of the economy, increased at a 1.5% annual rate from April to June.

All 13 major retail categories showed a gain last month, led by a 0.8% jump at auto dealers, a 0.9% rise at electronics and appliance outlets, and a 0.6% increase at department stores that was the most since September.

Spending increased 0.8% at clothing stores and 0.7% at general merchandise stores.  Health and personal care sales jumped 1.1%, the most since May 2011.

Industry data also showed that same-store sales at the more than 20 retailers tracked by Retail Metrics Inc. gained 4.4% in July, almost four times analysts’ estimates, after only a 0.3% rise in June.

Sales excluding automobiles and service stations advanced 0.9%, the most since January.

Source:  retailingtoday.com

Helped by hot weather and clearance sales, many retailers reported solid results in July, a month that can be slow leading up to the back to school shopping season.  Some of the strongest showings in the month were in the department store category, as all those reporting showed July gains.  

Macy’s led the pack with a 4.1% same-store rise in sales.  Total sales increased 5.1% to $1.7 billion over the four-week period.  “Despite some challenges from a sluggish macroeconomic environment and a temporary disruption of sales from the remodeling project at our Herald Square flagship store in New York City, the spring season met our expectations,” said Macy’s president and CEO Terry Lundgren.

Kohl’s reported a lesser 1.7% gain in same-store sales, with total sales up 3.4%.  “We are pleased with the improvement in July’s comparable store sales,” said Kevin Mansell, president and CEO.

Other department store July results include: Nordstrom same-store sales edged up 0.9%; Saks increased 3.5%; Bon-Ton Stores rose a slight 0.1%; and Stage Stores gained 5.3%, beating the 2.2% rise expected by Wall Street.

Source: retailingtoday.com