Dollar General Growth Continues with 1,900 New Stores by 2017

In an era when e-commerce is growing and chains like Kohl’s, Macy’s and Staples are closing stores, Dollar General is expanding. At it’s annual investor day last Thursday, the discount chain announced it will open 900 new stores this year and plans to open another 1,000 in 2017. Adding 1,900 new stores will bring Dollar General’s store count to over 14,000.

Last year was Dollar General’s 26^th straight year of same-store sales growth and they have added new stores consistently for the past 8 years, growing from 8,362 locations is 2008 to nearly 12,500 by the end of 2015.

In the late 2000’s, as the economy rebounded from the recession, deep discount retailers like Dollar General, Dollar Tree and Family Dollar exploded in popularity as consumers sought discounted items at no-frills stores located close to home so they could save on gas. Consumer’s frugal spending habits have continued and Dollar General is targeting annual sales growth of 7% to 10%.

Source: Fortune.com

Taking the Guesswork Out Of Online Sizing

It’s a challenge all clothing retailers have to face: excessive returns based on poor fit. According to a 2015 report by The Retail Equation and backed by NRF data, “fit” is the stated reason for nearly 11% of all merchandise returns. The associated costs include processing, sorting, repackaging and remarketing the item, and they’re a headache every apparel retailer would like to avoid.

Now there is a tool that offers help to customers looking for a perfect fit, all while creating an informational bridge between consumers and clothing manufacturers. Fittery.com offers a tool for men that finds clothes that fit them across a wide selection of brands based on their body type, fit preferences and measurements. The site has been live since September and is well positioned for growth.

Upon visiting the site for the first time shoppers are asked for basic information such as weight, height and body silhouette, plus waist and collar measurements. The process also asks them to identify their fit preference through images rather than words.

“We’ve done a lot of research, and found that different people have different concepts of what a slim or a classic fit might be,” says CEO Catherine Iger. “Pictures, as opposed to words, result in greater accuracy.”

The customer’s information is matched to the precise sizes of garments available through Fittery.com such as Thomas Pink, J.Crew, Boden and Lands’ End. Customers are shown choices that are best for their body based on exact product dimensions in the Fittery.com database. Customers can also measure themselves with a tape measure while being coached with a short tutorial video. “Either way, the process is 96.3 percent accurate,” Iger says.

The sizing technology is only currently available for dress and casual men’s shirts.  Future plans include expansion into slacks, sport coats and more. Fittery.com also offers an array of accessory items, including ties, messenger bags and sunglasses, also through affiliated retailers.

Women’s clothing is planned for a future rollout. “We’re careful to expand our offerings slowly so that the data can be gathered completely and the algorithms can be adequately tested so we’re confident in their reliability,” Iger says.

Source: NRF.com

Warm Weather Expected to Boost Consumer Spending and Apparel Sales

Despite an expected snow storm in the mid-Atlantic States and New England, consumer spending and apparel sales should both rise as the weather improves, according to analytics firm Planalytics. In its weekly report, Planalytics said that warmer weather is resulting in “many consumers thinking and purchasing spring. The warming conditions during the Easter run-up period will help drive demand for seasonal apparel as well as live goods.” Looking ahead, the analytics firm said, “western locations can expect strong gains for both spring apparel and consumables.”

Last week, the warmer weather already had an impact on retail sales – but not in all regions. Chief economist of the Retail Economist LLC,  Michael Niemira said spring-like “weather continued to drive interest in spring clothing in the east over the past week, but cool and wet weather in the west curtained demand.” Easter sales are getting a slight boost due to the holiday falling early in the season this year.

Looking ahead, Planalytics said that businesses throughout North America can expect above normal temperatures in most markets over Easter weekend. “Sandals, short sleeve shirts, cold beverages and sun care will be in demand as temperatures rise above normal,” researchers said

Source: planalytics.com

Macy's CEO Thinks Amazon Threat is Overstated

Last year, Wall Street firm Cowen & Co. famously predicted that Macy’s would be be dethroned by Amazon.com as the top apparel retailer in the U.S. But Macy’s CEO Terry Lundgren believes that Macy’s nearly 800 stores offer a huge advantage over Amazon. He noted that shoppers typically order multiple sizes of the same piece of clothing, keep the one that fits, and send the rest back.

According to a Cowen research report published in July, Amazon’s apparel business was on pace to hit $16.34 billion for the year, compared to $22.2 billion for Macy’s in 2015. But as Amazon pushes further into fashion beyond basic clothing, it could get dinged by all that merchandise being sent back.

“They’re going to have an interesting challenge when they start getting all those returns coming back online,” said Lundgren. He added, “The large, large majority of online purchases which are returned in our case come back to stores because they’re so convenient. And so we at least have a shot at selling them something else.”

Despite closing 36 stores this year, Macy’s is now the fourth largest U.S. internet retailer according to eMarketer, with annual online sales in 2015 of about $5 billion. Their position as a leader in the online market is a result of years of multi-billion dollar investments in integrating its stores and its digital business. The ability to handle returns of online orders is key to generating traffic to stores.

Source: Fortune.com

Sporting Goods Retailers Struggle With Declining Sales

It seems that sporting goods retailers are in a slump. Last week The Sports Authority filed for bankruptcy and said it will close nearly a third of it’s 450 stores over the next three months. It ha not yet been disclosed which stores will close. Bankruptcy has been looming since January when the retailer disclosed that it had missed a $20 million debt payment.  

Earlier this week, Performance Sports Group Ltd., one of the biggest makers of baseball bats and other sporting equipment slashed their 2016 fiscal year forecast. The company expects to report revenues of approximately $125 million, or 9% lower compared to the same quarter last year. Shares of Performance Sports fell 65% to about $4.00 in trading on Tuesday.

"The second half of fiscal 2016 has been impacted by adverse market conditions and related customer credit issues," said Kevin Davis, CEO, Performance Sports Group. "The baseball/softball market is experiencing an unexpected significant downturn in retail sales, including in our important bat category. This weakening of consumer demand, coupled with the chapter 11 filing by one of the largest U.S. national sporting goods retailers, is reducing our sales for baseball and softball products.”

Also this week, Dick’s Sporting Goods Inc. reported weak holiday results, with both fourth quarter and full-year same-store sales declining. Despite the decline in profits, Dick’s announced ambitious store expansion plans in 2016 and points to the success of their e-commerce business. The company ended the year with e-commerce penetration at a record 15.7% of sales, compared to 14.4% in the fourth quarter of 2015.

“This is certainly a unique time in the industry. The competitive landscape is evolving, which is creating pressure for some and opportunities for others,” said Dick’s CEO Edward Stack.

A Decline in Consumer Spending Is Forecasted for March

According to data from Chain Store Guide’s Consumer Spending Report, the month of March is likely to see a slowdown in consumer spending. While current economic reports are varied, the unpredictable stock market and upcoming elections have likely created unease among consumers.

When polled on the state of the U.S. economy, nearly 30% of those asked would rate the economy as “Poor” compared to only about 25% the previous month.  The data did, however, reveal some positive trends as well.  Notably, 80% of consumers polled reported personal finances as either “excellent”, “good” or “fair”. And, all three of CSG’s indexes – US Spending Monitor, Restaurant Spending Monitor and Retail Spending Index – are close to their 12-month averages.

Source: Chain Store Guide

Source: Chain Store Guide

J.C. Penney Reports Strong Q4 Sales and Reveals “Penney Days” Promotion

Last Thursday, J.C. Penney announced impressive increases in same-store sales and earnings, as well as a new marketing campaign called Penney Days.

For the fourth quarter ending on January 30th, the retailer announced that same store sales grew 4.1% . “We are very pleased with our performance for the fourth quarter and full year. Our focus on private brands, omni-channel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment," said Marvin R. Ellison, CEO. "We are also pleased that we delivered strong fourth quarter results while effectively managing our inventory, which finished the year up 2.6 %. I would like to thank our over 100,000 associates who embrace our strategy and come to work each day focused on driving sales and providing excellent customer service.”

They also announced a new promotional event called Penney Days. At different times throughout the year they will make limited number of some of their highest rated private brand items available for one cent. The new campaign will give J.C. Penney the opportunity to showcase the company’s assortment of private brands and it will give customers the opportunity to try them for just a penny.  J.C. Penney will promote Penney Days through television spots, weekly sales circulars and digital marketing. They will also launch a social media campaign reminding users of the power of a penny and will promote the hashtag "#SoWorthIt" with all elements of the campaign.

Economists Say Tide May Be Turning Toward Single-Family Homes

The Wall Street Journal recently reported that while apartment construction has been a bright spot in the recovery of the nation’s housing market over the last six years, economists say the tide might be turning away from apartments and toward single-family homes.

For the past six years, the construction of apartments and condos has grown at a faster rate than that of single-family homes. Last year U.S. builders began construction on 396,000 units in buildings with two units or more, the most in a year since 1988.  In contrast, single family home construction has remained below the historical 20-year average of about 1.05 million homes. Last year builders started just 714,600 homes.

But 2016 could be the year the trends reverse. Both the National Association of Home Builders and housing-research firm Metrostudy are forecasting significant growth in single family home starts this year. Their predictions of 19% growth and 14.6% growth respectively outpace their single-digit growth predictions for multi-family construction.

Six years of rapidly rising rents across the U.S. have driven prices to a point that is out of reach for many, far outpacing income growth. Chief economist at Metrostudy, Brad Hunter pointed out that “after six years of strong performance, the apartment market is poised for a breather. We’ve reached a point where we can’t continue to grow that sector.”

The NAHB made a similar prediction last year when they forecasted 26% growth for single-family construction and only 2% for multi-family. The two sectors grew at similar rates with single-family seeing 10.3% growth compared to 11.6% for multi-family in 2015.

Calculating Sell-Thru

Sell through (or sell-thru) is a very useful metric for vendors to use in evaluating item performance, because it provides a composite measure of sales and inventory. But like many business measures, there is more than one method of calculating sell through.

The most common calculation is: Sell Thru % = Units Sold / (Units On-Hand + Units Sold). Sell thru is typically evaluated on a daily basis for fast moving products or weekly for slower moving or replenishment based products.  A higher value is better, indicating your sales velocity is good and your inventory is appropriately forecasted. If sell thru is low, this indicates either poor sales or too much inventory. In most cases, sell-thru for an item is compared in recent periods like current week and last week, as well as in aggregate across several months or even a year.

When evaluating sell-thru, it is also useful to group together products which have been selling for a similar period of time and/or which are sold into the similar store types. For example, comparing sell-thru for a product with 5 weeks of selling activity against a product with 20 weeks of selling activity most likely will not produce a useful comparison. In the same way, comparing sell-thru for a product in a group of stores in a highly affluent area is not likely to compare favorably to a group of stores with a low income level.

Most retail buyers have a set sell-thru percentage they use to judge vendors based on product category or department.  It is important for vendors to discuss the sell-thru expectations with the buyer in order to align with those objectives.

For reference, we've compiled sell-thru percentage data that you can use as a benchmark. The complete infographic includes the sell-thru percentage for eight retail categories each at 8, 13, 26 and 52 weeks. To download the complete infographic, simply complete the form below and we will e-mail you the link to download it.

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At Accelerated Analytics, we work extensively with The Home Depot, Lowe’s, and Wal-Mart data and we know how to integrate your item catalog, shipping data, plan o gram, and other key files for a comprehensive reporting solution.  With our services, you'll have more timely reporting in a consistent format available to any user with an internet connection, iPad, or iPhone.  Your analysts will be able to focus on the business instead of making spreadsheets. Plus you will have store / SKU level reporting.  Talk about powerful!

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Economic Mixed Messages

By Chad Symens

This article recently caught my attention and the wheels started turning: http://www.cnbc.com/2016/02/11/is-the-us-economy-running-out-of-gas.html

The current economic situation is confusing to the casual observer.  On the one hand, President Obama regularly speaks about the US economy being the strongest and most resilient economy in the world, and yet articles like this create doubt in the minds of the average observer.  Gas prices are at historic lows, and the unemployment rate is back down to pre-recession levels.  Yet polls consistently show that Americans are unhappy with the the direction of the economy and the leading presidential candidates are outsiders running campaigns against the "establishment".  Q4 earning and full year earnings are also confusing. Home improvement stores are doing very well, but department stores and large mass merchants are struggling.  Today the Federal Reserve sent conflicting messages about the economy being strong, and the possibility of a recession is still out there.  

What are we supposed to make of all this?  

I'm no economist but my observation is the average American consumers are pulling back on discretionary spending and focusing on paying down debt and putting some extra money into their savings.  Home improvement retail sales clearly show consumers are investing into their homes and taking the savings at the gas pump and putting it into their homes or their savings accounts. Depending on your point of view this can be both positive and negative considering US consumers have historically had higher levels of debt than other countries. But the debt level of the US consumer is rapidly decreasing. Does the generally conservative approach to finances mean consumers, who drive the economy, are pulling back and won't help to sustain the economic recovery?  

Business at Accelerated Analytics has been expanding exponentially in the last 90 days. We are seeing companies across multiple retail channels invest into analytics and reporting because they understand that to win at retail they have to be smarter and faster than their competition.  Those businesses are investing into productivity and technology, not pulling back.  These businesses are small, medium, and large. They represent a good cross section of the economic landscape and watching them invest makes me optimistic.  I believe the economy is going through a routine cycle of smart and successful companies growing and investing and conservative companies that only risk and fear pulling back.  To me it seems to be a very Darwinian cycle where the smartest and strongest will thrive and the weak will struggle and possibly fail.  

I'm bullish on the economy's prospects.  What do you think?

NRF THINKS 2016 WILL BE A HAPPY NEW YEAR FOR RETAIL

The NRF forecasts a 3.1% increase in retail sales growth in 2016, which will exceed the 10 year industry average of 2.7%. The National Retail Federation also forecasts ecommerce growth to be between 6-9%.

The NRF makes this forecast based on assumptions on employment gains. It believes that prospects for consumer spending are going to be higher as it expects a continued growth in the labor market. 

“Wage stagnation is easing, jobs are being created and consumer confidence remains steady, so despite the headwinds our economy faces from international developments, particularly in China, we think 2016 will be favorable for growth in the retail industry,” said NRF President and CEO Matthew Shay.

The NRF’s chief economist indicated that with lower gas prices creating more discretionary income, more jobs, and with retailers continuing to find ways to compete and succeed in a cost-conscious environment, 2016 should be a good growth year for retail.

Source: Chain Store Age

Game Changer for the Home Improvement Market?

by Chad Symens

Lowe’s acquisition of Rona could be game changer for the home improvement market. Home Depot has 2,273 stores with 182 located in Canada. Before the Rona acquisition, Lowes had 1,840 stores including Orchard Supply stores. The Rona acquisition will add 496 stores to Lowe’s portfolio which means that once it's finalized, Lowe’s will have 2,336 stores compared to Home Depot’s 2,273.

Nearly half (238) of the Rona stores are in Quebec which represents nearly 25% of the entire Canadian home improvement market; a market where Lowe’s does not currently operate any stores. The Canadian home improvement market is estimated at over C$45 billion and is forecasted to grow at a CAGR of 3.9% from 2014 to 2018.  Lowe’s will be very well positioned to capture an oversized share of the growth compared to Home Depot with their 182 Canadian stores. In 2015, Home Depot acquired Interline Brands as a strategy to expand the pro division sales.  It will be interesting to see which strategy – investing in the pro business versus acquiring more physical store space - will turn out to be the better strategy.

Five Trends That Point to a New Era for Retail

In a new report titled “How We Shop Now: What’s Next?,” Westfield London has unveiled five key trends that they believe will shape the retail industry of tomorrow. Combined, the trends paint a picture of what the store of the future is likely to look like, and the report reveals that customers will be looking for richer shopping experiences and will expect physical retailers to go beyond the transaction. The five key trends identified are:

Pay as You Go Retail: People are increasingly interested in retailers adopting the “sharing economy” made popular by companies like Uber and Airbnb. The trend is strongest among Millennials, and exercise equipment, cars, consumer electronics, bikes and clothing top the list of items people want to rent.

Classroom Retail: Stores are not just for shopping anymore. Increasingly, shoppers view retail stores as classrooms where they can learn new skills and build their social networks. Examples include health and fitness sessions at the local sporting goods store and cooking classes at a home goods store.

Lifestyle Loyalty: There is a new consumer demand for loyalty programs that reward good lifestyle choices rather than just monetary transactions. As many as one fifth of UK consumers find lifestyle rewards appealing and would like to be rewarded for recycling, exercising, spending time with family, getting enough sleep and volunteering.

Enhanced Assistance: Consumers are interested in using new technologies, such as virtual reality, to bring in-store products closer to their everyday lives. 41% of people in the UK would like to use technology to experience how products would look in their homes and 33% would like to use technology to see how clothes would look on them.

Inside-out Retail: A sensory retail experience is becoming increasingly important to consumers. All five senses were deemed to enhance the shopper experience with vision and touch coming out on top.

Download the full report here.

Lowes to Acquire Canadian Chain Rona

On Wednesday, home improvement retailer Lowe’s made a $2.3 billion bid for Quebec-based home-improvement chain Rona. The deal comes 4 years after an attempted hostile acquisition that faced opposition from major political parties. Initial indications point to a friendly deal this time around with approval from the Rona board of directors.

“One of the big differences between this and last time is obviously this time we have the unanimous approval and support of the board of directors of Rona as well as the management team” said Robert A. Niblock, Lowe’s chairman, president and chief executive. “We’re in a much better place than we were in 2012.”

Under the terms of the deal Lowes is expected to acquire all of the issued and outstanding common shares of Rona for C$24 per share in cash, and all of the issued and outstanding preferred shares of RONA for C$20 per share in cash. The total transaction value is C$3.2 billion (2.3 billion in US dollars).

"We believe the time is right to take the next step in the evolution of the RONA family. The team at Lowe’s has presented us with an excellent plan that enables our company to maintain its brand power while at the same time leveraging Lowe’s global presence to build upon and expand our reach. With commitments made by Lowe’s to our employees, potential new markets for Canadian manufacturers and product offerings for our independent dealers, this transaction presents the ideal opportunity for the continued growth of our company while delivering an attractive premium for our shareholders,” said RONA’s Chairman, Robert Chevrier.

Lowe’s has identified over C$1 billion of opportunities to further increase revenue and operating profitability in Canada. These include: expanding customer reach and serving a new portion of the market by applying Lowe’s expertise in certain product categories, such as appliances; enhancing customer relevance, utilizing Lowe’s strengths as a leading omni-channel home improvement company and drawing on its customer experience design capabilities; and driving increased profitability in Canada by leveraging shared supplier relationships and enhanced scale, as well as Lowe’s private label capabilities, in addition to eliminating RONA’s public company costs. Given these opportunities, Lowe’s believes there is potential to double operating profitability in Canada over five years.

"The transaction is expected to accelerate Lowe’s growth strategy by significantly expanding our presence in the Canadian market through the addition of RONA’s attractive business and excellent store locations across the country," added Niblock.  "Importantly, the transaction also provides Lowe’s with entry into Quebec, where RONA is the market leader and we have no presence.

Circuit City Returns this Spring

Retail veterans Ronny Shmoel and Albert Liniado are bringing back Circuit City, once the number one big-box tech chain in the marketplace before filing for bankruptcy in 2008. Their ambitious plan includes retail outlets, web sales, branded and private-label products, licensed kiosks, mobile shops and franchise opportunities, all under the iconic red and white banner. The first store is expected to open in June, most likely in the Dallas market, and the relaunch of circuitycity.com is expected to happen at approximately the same time.

“We want to bring profitability back into retail,” said Liniado, Vice President of Business Development. The stores will range from 2,000 to 4,000 square feet and the product mix will be targeted directly at millennials. According to Shmoel, CEO of the enterprise, they expect to have 50 to 100 corporate-owned stores up and running by the end of the year and eventually an additional 100 to 200 franchised locations.

Source: Twice.com

Amazon Stock Price Plummets Despite Tremendous Success

After the market’s close on Thursday, Amazon.com Inc. reported fourth quarter earnings that missed expectations and the company’s stock plunged 13%. Wall Street analysts were forecasting record revenue of $35.9 billion for the company. Amazon did hit a new revenue record, but it missed expectations with sales of $35.7 billion.

That’s despite successes that were in stark contrast to their competitors. Amazon posted record profit last quarter and double-digit sales growth over the previous year. Prime memberships grew by 51% last year and according to a Consumer Intelligence Research Partners study, just under half of all U.S. households subscribe to prime.

Amazon Web Services, which boasts big name customers like Netflix, Airbnb, Major League Baseball, Expedia and Yelp, grew from 1.4 billion in 2014 to 2.4 billion in 2015, a 71% increase.

The biggest part of Amazon remains its retail business, and it’s smart home assistant, Echo, is poised to become the company’s third billion-dollar business soon. Echo has only been widely available for about 7 months but it consistently ranks high in Amazon’s best sellers list. It is a virtual assistant and audio speaker that lets you control and connect with other services through your voice. Echo was one of the surprise stars at this year’s Consumer Electronics Show and will be prominently featured in the online store’s first-ever Super Bowl ad.

CPG Growth Opportunities in 2016

In its report series “Taking Stock of CPG Past and Future: Gear Up Now for a Year of Growth", IRI reflects on the lessons learned in 2015 and provides insight into several key trends that will drive growth in 2016.

Growth is still a significant challenge for the CPG Industry. Faced with conservative shopper behaviors and a challenging economy, the industry is struggling to generate solid volume growth. And the trend is similar across retail channels.

According to the IRI report, several new and existing trends will shape the CPG industry in 2016, but three trends “hold particular promise for growth.”

• Circle the Wagons: The internet will account for approximately 50% of industry growth in the next several years and the CPG industry can’t afford to wait if they want to capture their fair share of this opportunity. While online CPG sales are still small – only about 2% of the total – the average annual growth of online CPG spending has topped 15 percent since 2010. Additionally, according to IRI, e-commerce plays a significant role in defining how consumers approach shopping. Over three-quarters of all shopping trips now begin online as consumers conduct research and plan their shopping trips. To solidify their understanding of the online path to purchase, CPG marketers must invest in digital marketing programs and “elevate their digital expertise”. CPG marketers who don’t will suffer.
• Melting Pot Gets Hotter: With more than 54 million Hispanic consumers in the US and population growth at three times the national average, the Hispanic population has been a key target for marketers for the past several years. According to the IRI report, the key to successful growth in this market will be an investment to understand Hispanic shoppers “across a deep and wide spectrum of attitudes and behaviors.” As the Hispanic population grows, marketing to the segment as a homogeneous group is ineffective. Marketers need to see the diversity within the Hispanic market and demonstrate a detailed level of understanding within it.
• Do More With Less (Media): Forty years ago consumers viewed an average of 500 ads in a given day. Today, consumers view an average of 5000 ads a day! The result is information overload for consumers and a lot of wasted effort and dollars for marketers. CPG marketers have an opportunity to move away from the “more is better” approach to media and focus on impact over exposure, or in other words, maximum media efficiency. Though difficult, getting there isn’t impossible with the right data, analytics and insights. Marketers need to effectively communicate with high-value shoppers and employ impactful micro-targeting methods.

For the full IRI report click here. To receive Accelerated Analytics’ own monthly Retail Industry Briefing Book (RIBB) full of key retail industry data compiled by our team, click here to request a copy.

Winter Storm Impact and Using Data to Prepare for Future Weather Events

The first winter storm of 2016 slammed the Northeast and Mid Atlantic last Friday and Saturday leaving much of the area paralyzed. Despite warmer temperatures early this week, many areas are still recovering and some schools and businesses remain closed as local governments and residents dig out from up to 2 ½ feet of snow and ice.

While the economic cost of the storm due to structural damage and business interruption will likely reach into the billions, the net impact on the retail industry will essentially be neutral according to Weather Channel meteorologist and business analyst Paul Walsh. The demand generated by storm predictions creates a surge for for grocery stores, home improvement retailers and discount department stores like Walmart. This pre-storm boon essentially balances the losses experienced during the winter storm.

Whether winter weather impacts an Individual retailer positively or negatively, they can prepare for the next winter storm by analyzing historical data. Retailers can use “forecasts and analytics to understand how past storms have impacted sales so they know what kind of products to feature and the inventory needed,” explained Walsh. Accelerated Analytics can provide that data so that vendors in the retail sales and supply chain markets can tackle large weather events head-on.