2016 WAS A GREAT YEAR FOR DIY RETAIL

The holiday season is upon us, and how DIY retail will fare remains to be seen, but 2016 by most accounts has been a great year for DIY retail. The North American Retail Hardware Association (NRHA) is estimating industry growth for 2016 to end at 5.8%. The Home Improvement Research Institute (HIRI) is estimating a little higher, at 6%. The US Census Bureau reports home improvement industry sales through September at 6.7% growth over 2015.

Building materials and home improvement retail sales are 3 to 1 higher than overall retail sales increases for this year.

What has led to the success, and which areas in the DIY space have seen the best results?

Most economists agree that the renewed housing market seen in 2016 will continue into 2017. Add to that higher consumer confidence rates, multi-family housing construction has led to higher sales at home centers and lumber dealers. Remodeling projects and big-ticket purchases are stronger. Big ticket items, such as appliances, have seen the biggest sales uptick in the segment.

Accelerated Analytics DIY customers, using their retailer POS data to analyze sales and inventory, are experiencing the same trends. Across the Accelerated Analytics customer index, June and July showed poor results, followed by an improving August and strong September. 20% of Accelerated Analytics customers’ sales tickets are big ticket items, over $900 per sale. These items were identified as appliances and other expensive items, along with supporting/supplemental products.

The NHRA is predicting 2017 sales to continue this trend and that home improvement product sales should continue to outpace overall retail sales in 2017, anticipating DIY industry growth in the range of 5%.

For more industry stats and observations, download the Accelerated Analytics Retail Industry Briefing Book, which is a monthly publication of key retail industry trends, published to over 7,000 subscribers per month.

Sources: Accelerated Analytics, Hardwareretailing.com

THE HOME DEPOT’S HOMETOWN OF ATLANTA DISCUSSES THE RETAILER’S TECH EDGE

Atlanta news station 11Alive (NBC) sat down Sunday with The Home Depot’s Sr. Director of Digital Strategy & Mobile Applications, Matt Jones, about how the company uses technology to enhance in-store and online customer experiences.

Says Mr. Jones about the retailer’s mobile app, the latest strategy has been to help the customer navigate in the store while shopping. The app also gives consumers the ability to read product ratings and look up detailed product information while looking at products in the aisle, enhancing the shopping experience.

“One of the challenges is being able to visualize how the products will look in your home, “says Mr. Jones. “A door could be an example, a patio set could be an example.”  

When asked how the use of technology has impacted sales, the bottom line and overall efficiencies within the organization, Mr. Jones says the blending of the in-store and digital experiences has definitely been a driver of sales success.

Who is The Home Depot’s tech consumer? “We’ve got a very diverse customer base, from the professional customer…to the customer buying home décor…to the customer doing a DIY project at home.” This year marks the biggest wholesale change to the mobile app in years.

There are a few things Home Depot is focused on for 2017 according to Mr. Jones: giving customers a way to personalize their app and online shopping to focus on their interests. He feels that the faster you can get a consumer to the information they want and will find most valuable is the key to success.

Source: 11Alive.com 

HOME DEPOT SEES BIG GAINS IN 3RD QUARTER GOING INTO HOLIDAY SALES

The Home Depot posted one of the biggest retail jumps post-Halloween among US retailers, seeing online visits increase 17.4% and daily visits to HomeDepot.com over 20 million in the first week of November. The Home Depot is also poised to increase mobile traffic to 53% over the 2015 holiday season.

Online sales increased 17% during the third quarter and US same-store comps grew 5.9%. Significantly, over 40% of online orders placed were items picked up in the store, driving their omnichannel success.

For the first 9 months of the year, sales were $72.39 billion, up 7.2% from last year. The Home Depot attributes the growth to an increase in the number of people who made purchases in its stores and the amount of spend per customer transaction. The company expects its 2016 year to end with increases of 6.3%.

One thing to watch as the holiday season continues – last year Q4 numbers were very high due to prolonged warm weather, up 8.9% over 2014, making it harder for Home Depot to beat same store sales this year.

Sources: Internet Retailer, CNBC

ACCELERATED ANALYTICS LUXURY FRAGRANCE VENDORS POISED TO GROW 5.9% BY 2026

Future Market Insights released a report today that estimates the global perfume market is estimated to reach $39.67 billion by the end of this year, and expects growth of this segment of 5.9% over the next ten years. The firm looked at several Accelerated Analytics beauty and fragrance companies for its report, including Estee Lauder Companies, LVMH, Coty Inc., L’Oreal International, Elizabeth Arden Inc., Shiseido Co. Ltd., Puig and Parlux/Perfumania Holdings Inc.

The reports found that demand is being bolstered by the millennial consumer segment, as well as increased online retail strategies from these companies. Female fragrances are leading the increase, with year-over-year increases from 4-5.2% over 2015 to 2026. While online retailing is the most attractive shopping means to this segment of consumers, in-store remains 80.5% of the market share, due to the personal and olfactory nature of fragrance marketing.

Millennials are drawn to products that have natural ingredients. Fragrance vendors are offering more “Eau Fraiche” (alcohol free) products.

The Western Europe market is the largest consumer, and expected growth consumer, of fragrance products, followed by North America.

To get more retail insights from the Accelerated Analytics team, register for our (free) monthly Retail Industry Briefing Book here.

Source: Luxury Daily

HOLIDAY SHOPPING IS HERE …..ARE CONSUMERS WAITING UNTIL AFTER ELECTION RESULTS?

The National Retail Federation (NRF) conducted a survey last week, and found that more than 25% of shoppers say the election will affect their spending.  43% of consumers also state they are being more cautious with their spending because of election uncertainty.

Retailers are seeing this effect and are making adjustments. Target and Wal-Mart are adjusting their holiday season marketing ahead of November 8.

In addition, retailers are challenged to get their marketing messages out amid all of the election noise. “Everywhere you turn — whether you’re picking up a newspaper or watching television — political advertisements are taking up ad space that retailers typically use to get holiday shopping on the minds of consumers across the country,” NRF President and CEO Matthew Shay said.

Once November 9 rolls around, the NRF predicts the holiday shopping season will kick up. The NRF is still predicting a 3.6% increase in retail spending in November and December, which would make 2016 the most successful holiday shopping season in years. This forecast is in alignment with other predictions from Deloitte, RetailNext and Kantar retail, reports CNBC. This spike is expected regardless of who wins the presidency.

Source: WSJ, NRF, CNBC

HOME DEPOT FOCUSES ON THE ONLINE SHOPPER…BY FOCUSING ON THEIR STORES

The Home Depot has been on the great end of the rebounding housing market with a continued 4% increase in sales in the last quarter, while homeowners work on big remodeling projects like installing decks or remodeling kitchens. Without plans to add more new stores, Home Depot focuses on how to use their existing stores in new ways.

About 42% of Home Depot online shoppers order online, but pick up in the store. To accommodate that, Home Depot is allocating capital to build out store storage to hold those products. When the customer is in the store, the retailer is trying new displays that help the customer shop easier. For example, the spray-paint section is set up like a soft drink display, so as one can is selected, the next can pops into place. In the lumber and millwork flooring area, the displays are easier for the customer to shop off of on their own, and the signage has been improved.

For the increasing online sales where customers want the items shipped to their homes, Home Depot has opened 3 new fulfillment centers that can deliver orders to 90% of their customers within 2 business days. They are also looking into leveraging their store locations to use local economical transportation for buy-online, ship-to-store orders.

Source: Wall St. Journal, IHRC

LOWE’S GOES FUTURISTIC WITH VIRTUAL REALITY HOME IMPROVEMENT FOR CUSTOMERS

Lowe’s has successfully tested the Microsoft HoloLens in its stores in Raleigh and Seattle – so successfully that it plans to expand the technology to three more yet-to-be-disclosed locations.

The HoloLens brings high definition hologram images overlaid to real world surroundings. A customer can use the technology to visualize their home improvements. For example, a customer can go into a Lowe’s store and design their kitchen while sorting through Lowe’s assortment of appliances and material samples. To take it even further, a customer can select an item they saw and liked on Pinterest, and a similar item sold by Lowe’s will appear.

Kyle Nel, executive director of Lowe's Innovation Lab, told USA TODAY in a briefing: "Mixed reality takes some getting used to, because we're all used to pinching to zoom to get closer to things instead of just walking forward. The idea of using small samples and swatches to try and imagine what a room looks like seems very antiquated now."

To try out the HoloLens in the store requires an appointment, especially on the weekends. Lowe’s Innovation Lab is looking for ways to stay ahead of technology, and stay ahead of rival Home Depot.

Source: Investopedia

HOME DEPOT TURNS STORES INTO MINI DISTRIBUTION CENTERS

The Home Depot announced a 6.6% increase in revenue and a 9.3% increase in net profit to $2.4 billion.

The retailer stated that customers are taking advantage of their new options for retrieving their ecommerce orders. In the second quarter, about 42% of Home Depot’s online orders and almost 90% of its online returns were handled by its stores.

Ecommerce sales were just 5.6% of Home Depot’s sales in the second quarter, but were up 19% from a year ago, showing significantly higher growth in sales than in-store. Home Depot is choosing now to invest in infrastructure and order management software to address ecommerce fulfillment from their stores. Online purchases can now be delivered from over 700 stores, faster and with shorter scheduled-delivery windows than possible before.

Source: Wall St. Journal

WILL RETAILER DISCOUNTING HARM BRAND VALUE?

In an effort to get out of this year’s retail doldrums, department store retailers have been reducing prices on fashion brands they typically do not run promotions on. Promotions reached an all-time high in the last quarter, and in July over 2,000 emails advertising specials were sent to shoppers across the US. Some prices in May, June and July were reduced as much as 80%.

Luxury brands most heavily discounted included Michael Kors, Ralph Lauren and Eileen Fisher. Michael Kors is trying to rectify the situation by ending all coupons and friends-and-family sales at department stores. Ralph Lauren is reducing excess inventory. The brands hold the power with the ability to push sales in their own stores and online web sites.

How much are department stores discounting? Saks is leading with an average discount of 60%. Neiman Marcus’s average is around 50% and Bloomingdale’s and Nordstrom are averaging 40% discounts. 

With massive discounting, consumers will expect these luxury brands to be available at the lower price points, bringing down the value of the brand.

Source: Bloomberg Pursuits, Chain Store Age

WILL THIS WEEK BRING AN OLYMPIC RISE TO RETAIL SALES?

Even before the Olympics started, the retail industry has experienced a big spike in athletic apparel. The growing popularity of “athleisure” clothing have helped athletic apparel see an increase this year of 14% to $45.7 billion as of the end of May.

Now the Olympics are in full swing, and the athletes are all decked out in sponsor apparel and logos. Many retailers are selling specifically to the Olympics market. While these retailers may not separate out specific Olympic-driven sales, several are counting on its popularity to drive sales. Athletic apparel in the children’s department is expected to be successful, as younger viewers look up to the athletes. Patriotic colors of red, white and blue are also expected to be popular.

Dick’s Sporting Goods will have specific Olympic displays. Dick’s CEO Edward W. Stack, announced his company’s plan to donate $1,000 for every medal won by Team USA. Macy’s has an exclusive partnership with Ralph Lauren to sell opening and closing ceremony outfits in its stores. Nike, as an official Olympics sponsor, has over 100 Team USA products for sale, and Under Armour has a “country pride” collection.

Retail sales for June will be announced this Friday. May saw an uptick in sales. Retailers are hoping June and July were positive with back to school shopping, followed by buoyed sales in the athletic apparel segment this week. Check back to our blog page to see how the summer retail news is shaping up.

Sources: USA Today, Forbes

BACK TO SCHOOL AND COLLEGE SALES HELP RETAIL SUMMER SLUMP

Back to School sales helped raise retail sales by .3% over the previous week and 2.5% over one year ago, following a four-week decline in June into July. Expectations are that Back to School sales will rise another 2.5% from July through September, which will be a successful repeat of the 2015 season.

Discounters and wholesale clubs were the strongest contributors to the rise in sales last week, with focus on electronics, clothing, shoes and books. Back to School season is highly promotional as retailers clear inventory for the upcoming holiday season. The National Retail Federation expects total spending to reach $75.8 billion, up from $68 billion in 2015. 60.5% of consumers plan to shop in discount stores, followed by 59.6% shopping in department stores. This rising trend over 2015 is significant, as 2015 was a drop from 2014’s splurge year by consumers in the Back to School/Back to College season.

Source: WWD.com, NRF

JUNE RETAIL SALES LOOK GOOD FOR DEPARTMENT STORES

Department stores and general merchandise stores helped June have a strong increase in retail sales. Department stores rose .7% to $13.2 billion and general merchandise stores rose .4% to $56.1 billion. Overall, retail sales rose .6% in June, to $457 billion, above economists’ expectations for the month.

“June’s retail sales grew at a solid pace on the heels of a strong showing for both May and April,” said Jack Kleinhenz, chief economist at the National Retail Federation. “Consumer spending has rebounded strongly in the second quarter after two weak previous quarters. Additional job gains and rising wages are supporting the strength in retail sales and should provide momentum going into the second half of 2016.”

Apparel and accessories stores had a slight decline of a 1% drop in sales to $21.1 billion. Those clothing stores did have a strong May.

Economists are optimistic for a continued strong second half of the year, and expect back to school sales growth slightly higher than was seen last year.

Source: WWD.COM

HOME IMPROVEMENT SPENDING EXPECTED TO REACH $321 BILLION BY MID-2017

After the housing crash of 2006, the US home remodeling market saw its worst downturn in history. Growth in home improvement spending has grown on average about 4.9% since then. Now, with home equity back and home prices on the rise, people are putting their cash to work to remodel and repair their homes.

Growth is expected to reach 8% by the start of 2017 and annual spending should reach an estimated $321 billion by the middle of next year, according to a new report from Harvard’s Joint Center for Housing. Kitchen and bath remodels are popular, along with high-yielding investments such as replacing insulation. Many are choosing to do multi-room remodels at the same time, up 67% from a year ago.

Growth in home remodeling is sure to boost sales for retailers such as The Home Depot, Lowe’s and Sherwin Williams.

Vendors who want better insights into their sales and inventory at their DIY retailers can CLICK HERE to learn more about our POS reporting solutions. 

Source: CNBC

TOP RETAIL BRANDS OF THE YEAR ANNOUNCED

The 2016 Harris Poll EquiTrend Retail Brands of the Year study results were announced, with several retailers getting high points for engaging customers. For the fourth straight year, 2 brands took top honors in their segment categories: The Home Depot for hardware and home brand of the year, and Kohls.com as online department store of the year.

Other top winners included Macy’s as department store of the year, Nordstrom as luxury department store of the year, TJ Maxx as off-price retailer of the year, Best Buy as electronics store of the year, DSW shoes as discount shoe store of the year and Cabela’s as sporting goods store of the year.

Within retail, hardware and home store was the top ranked category, with baby boomers and GenX shoppers driving that, investing in home improvements and moving up from starter homes. 

Over 97,000 US consumers rated more than 200 retail brands for the survey. The scores take into account familiarity, quality and purchase consideration.

Source: Chain Store Age

HOME DEPOT AND LOWE’S ATTENTION TO PROS SHOW DOUBLE DIGIT SALES INCREASES

Both Home Depot and Lowe’s report that they have increased sales to professional customers by double digits. They have taken several steps to seek out professional and MRO buyers, including adding products to their pro business lines as well as offering new services, making it easier for pro customers to order and receive supplies. “We continue to strengthen our pro business, driving comps well above the company average, by further advancing our products and services offering to better serve the pro customer,” said Lowe's COO Ricky Damron during the company's Q1 earnings conference call.

Lowe’s has developed an omni-channel approach to pro business, using Account Executive Pro Services with more than 180 representatives in the field. They also have a targeted marketing strategy aimed at the professional customer and buying events in store to generate new business.

Home Depot offers pros private label cards with extended terms and special return policies. They are also expanding a flexible delivery program seven days a week and next-day delivery, as well as in-store pick-up in 2 hours. Home Depot says it currently has a small percentage of sales in building and maintenance and Menear said “we think there’s lots of opportunity to grow.”

Source: Inddist.com

ACE HARDWARE RANKS #1 IN CUSTOMER SATISFACTION FOR THE 10th YEAR IN A ROW

The J.D. Power 2016 Home Improvement Retailer Satisfaction Survey awarded Ace Hardware top ranking for their 10^th straight year. The study surveys 2,995 customers who purchased home improvement-related products from a home improvement retailer in the last 12 months, and was conducted in January and February 2016.

On a 1,000 point scale, Ace Hardware scored 810 in overall customer satisfaction, followed by Menard’s with a score of 803. Lowe’s placed 3^rd at 799. The overall average across retailers was 795, up from 788 a year ago. The Home Depot was just at the average with 794. The study found that average drops significantly when an initial greeting in the store takes longer than 2 minutes. Customers also want the retailer to provide advice, and be able to answer their questions effectively in the store. "The retailer's staff is most critical to differentiating the experience provided to customers, especially when it comes to the timeliness of greeting customers, answering their questions or providing advice," said Greg Truex, senior director of the at-home practice at J.D. Power. "Retailers that train their employees to engage with customers proactively and assist them are more likely to provide them with a satisfying experience during these moments of truth."

Ace scored 855 in staff and service compared to 811 average.

According to the Home Improvement Research Institute, home improvement consumer spend is on the rise, with an expected 4% increase this year to $332 billion.

Source: Chain Store Age, JD Power.com 

US MANUFACTURING INDEXES TAKE A DIVE; STOCK LEVELS REACT

The New York Empire Manufacturing Index dropped to -9.02 from April’s positive 9.56 in May, missing estimates for a slight decline to positive 7.0. Stocks reacted negatively to the news, but were offset by gains in the energy and industrial sectors. Domestically oriented US manufacturers are seeing steadier business with bright auto, housing and job markets, while global manufacturers are struggling in markets from Brazil to Europe to China.

“Domestic demand is what has been supporting the manufacturing sector overall and preventing a sharper downturn,” said Gregory Daco, chief U.S. economist at Oxford Economics. “Domestic-oriented sectors are faring relatively well.”

Earlier in May, the Institute for Supply Management also reported its index results, but showed manufacturing activity already falling from March. A strong US dollar and low oil prices, plus weakness overseas, depressed demand for US exports.

The Philadelphia Federal Reserve also reported a decline in its index, reporting that mid-Atlantic manufacturing activity declined for the 8^th time in 9 months.

These reports maintain the overall picture of sluggish economic growth, and a newfound possibility that the Federal Reserve could raise interest rates as soon as June.

Sources: WSJ, Nasdaq.com, Investors.com, CalculatedRiskBlog.com 

CONGRATULATIONS 2016 GRADUATES! GRAD GIFT SPEND HIGHEST IN 10 YEARS!

The National Retail Federation (NRF) reports that 2016 graduation spending will reach a 10-year high this year, with spending expected to reach $5.4 billion. Americans celebrating high school and college graduations give special gifts, and retailers are offering a lot of options for the best gifts possible. Retailers will need to keep graduation gift items up front and in stock, and advertise locally for shoppers who look online before going shopping.

NRF’s 2016 Graduation Spending Survey revealed the average person buying graduation gifts will spend $106.45, up 3.9% from last year. Each individual graduate should not get too excited, though – the average shopper is buying for 2 graduates this year, so the spend is higher but spread out among more recipients.

Not helping retailers is the fact that cash is the most popular gift, given by 56%. Greeting cards, with the cash inside, will make up 39% of spend. This is followed by gift cards at 31%, clothing at 14% and electronics at 11%.

While the amount of spend averages $106.45, the age group of the gift giver makes a difference. Spending by those aged 45-54 will average $120.74, compared with $78.08 from those 18-24.

Source: NRF.com 

HOUSING GAINS AND MILD WEATHER KEEP HOME DEPOT GOING STRONG

The Home Depot’s stock opened at a record-high level today, after announcing they topped first quarter expectations. Mild weather and a strong housing rebound are attributed to their successful first quarter. Revenue increased to $22.76 billion from $20.89 billion. Same store year over year sales rose 6.5% overall,up 7.4% in US stores.

Chairman and CEO Craig Menear said the company saw “week to week demand spikes caused by weather variability”. Home Depot originally forecasted 2016 earnings of $6.12 to $6.18 per share, with revenue predicted to increase 5.1-6% and same store sales to rise 3.7-4.5%. With its positive first quarter, Home Depot now predicts 2016 earnings of $6.27, sales to rise 6.3% and same store sales to rise 4.9%.

Having cited a strong housing rebound as another reason for a strong first quarter, steady growth for the housing market looks like it will continue. The National Association of Home Builders reported continued strong sentiment in May. Low mortgage rates are fueling demand that have boosted expectations for home sales in the next six months to the highest level of the year. More housing data is due out later this week, including housing starts and existing home sales.

Source: US News & World Report, Wall S. Journal

APRIL RETAIL SALES REBOUND. WILL RETAILER STOCKS RECOVER?

Wall Street analysts are calling last week “Retail Wreck” due to numerous retailers’ news of poor sales, profits and future outlook on consumer spending. April retail sales came in higher than expected with a positive 1.3% gain, the highest gain in a year. Will strong sales in the first month of the second quarter help with a stock rebound for retailers?

Last week’s poor results were reported by many retailers, including Macy’s, Kohl’s and Nordstrom’s. Department stores are also responding to the strong online sales versus in-store that was reported, with online sales soaring 10.2% over last year. They are struggling with putting inventory in the right place to meet their increasingly complicated inventory and distribution demands.

Investors are waiting for home-improvement results this week from Home Depot, Lowe’s, Target and Wal-Mart to try to determine if the profit misses in the retail space is a problem just for department stores and apparel makers, or if it is a broader problem ahead for the consumer-driven US economy.

See the Accelerated Analytics’ blog from last week, reporting on the stock decreases across several retailers and apparel manufacturers: http://www.acceleratedanalytics.com/blog/2016/5/12/retail-stock-market-was-a-bear-yesterday-dropping-to-worst-l.html and continue to monitor our blog http://www.acceleratedanalytics.com/blog/ page this week as additional retailers report on Q1 results.

Sources: The Wall Street Journal, USA Today