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

First Revenue Decline a Wake-Up Call for Retail Giant Walmart

According to its annual financial filing released on Wednesday, for the first time since the company went public 45 years ago, Walmart’s revenues declined from the year before.

With over 11,500 store in 28 countries worldwide, the retail giant brings in half a trillion dollars in sales each year. Is it possible that they’ve hit their growth limit? In February, Walmart lowered its annual net sales growth forecast to “relatively flat” from earlier guidance that called for an increase of as much as 4 percent.  Part of the 2015 sales drop is attributed to currency impacts and a decrease in fuel sales due to lower gas prices. Sales have also suffered from ongoing store closures, including its entire fleet of smaller, “Express” stores.

But, Walmart has acknowledged a shift in the way it runs the company. They’ve moved away from their previous focus on net sales and cutting operating expenses as a percentage of sales, and are now focused on making “strategic investments” to support the “long-term health of the company.”

What has been a mostly brick-and-mortar operation is morphing into one that meets the expectations and demands of consumers operating in an omni-channel marketplace. This can already be seen in its fast-growing app and its expanding grocery pick-up program.

While its first revenue decline should serve as a wake-up call, Walmart remains a massive retail force.

There is still halloween candy to eat, but retailers put the 'creep' into holiday shopping right away

Due to Christmas creep, retailers are moving out the pumpkins and putting out winter holiday right away, if not already. Some retail trends shoppers can look forward to now:

• Early season deals are popping up and not waiting for Black Friday. Wal-Mart announced November 1 launches “savings and holiday retailtainment”. The iPad mini will be priced at $199 instead of $268. Target, Amazon, Kmart and Toys R Us all introduced their “hot toy” lists in early Fall with sales starting now.
• Thanks to the broad effects of Amazon Prime, Best Buy and Target and many other retailers are offering free shipping throughout the season.
• Many retailers have implemented their in-store and curb pick-up programs in time for the holidays, using online pre-purchasing and mobile apps in store to get shoppers checked out quickly.

 Sales will increase dramatically on Thanksgiving and Black Friday, as usual, but predictions are that 15-18% sales growth will come from online sales on those days. The National Retail Federation (NRF) forecasts holiday sales to rise 3.7% this year with online sales far outpacing brick-and-mortar sales. Counting on those online sales are retailers who have decided to be closed this Thanksgiving to appeal to families: Staples, Home Depot, Lowe’s, Costco, GameStop and Nordstrom.

 Source: Money.com

Wal-Mart Cuts Profit Outlook

Health Costs, Weak Store Traffic Hinder Wal-Mart

August, 14, 2014

The world's largest retailer is having a hard time returning to growth and doesn't expect sales to improve in the U.S. for much of the rest of the year.

Wal-Mart Stores Inc. (WMT -0.66%) cut its earnings guidance for the year after it posted its seventh straight quarterly decline in U.S. store traffic and said growth in online sales would slow.  It cited sluggish consumer spending and higher costs associated with building new smaller-format stores, increased health-care expenses, and greater investments in its e-commerce operations.

Sales excluding newly opened or closed stores in the U.S. were flat.  That was a mild improvement after five straight quarters of declines, but nevertheless underscored the challenges facing a division that made up 60% of the retail giant's $476 billion in revenue last year yet hasn't seen positive comparable-store sales since 2012.

"We wanted to see stronger comps in Wal-Mart U.S. and Sam's Club," Chief Executive Doug McMillon said.  "Stronger sales in the U.S. businesses would've also helped our profit performance."

A rough streak of results from retailers is raising concerns about the health of the consumer as the economy chugs through the second half of the year.  The bad news came not just from Wal-Mart, but also from Macy's Inc. (M -0.67%), Michael Kors Holdings Ltd. (KORS -0.41%) and Kate Spade & Co. (KATE +0.29%), companies that until recently had weathered the weak demand and heavy discounting that have plagued the industry.  The Commerce Department said Wednesday that spending at U.S. retailers was flat in July.

For the three months ended July 31, Wal-Mart posted a profit of $4.09 billion, up a hair from $4.07 billion a year earlier.  Revenue rose 2.8% to $120.1 billion.

Wal-Mart investors had low expectations going into Thursday's report.  The departure of U.S. chief Bill Simon earlier this month had stoked concerns that efforts to improve store merchandise and operations hadn't managed to materially boost sales.  Meanwhile, Wal-Mart's core low-income customers continue to struggle with depressed wages and cuts in government benefits.

"Our customers are still under pressure," Chief Financial Officer Charles Holley said.  "They are concerned with their cost of living and employment.

Shoppers like Jessica Manzanares, 28 years old, continue to pinch pennies.  "All the prices are going up on gas, food, school supplies," said the mother of three as she compared notebook prices at a Wal-Mart store in Denver.  "Notebooks used to be 97 cents, now the ones my boys want are $2.47."

This year Ms. Manzanares is comparing school-supply prices between the dollar store chain where she is an assistant manager and a nearby Wal-Mart.  "It's a little bit cheaper here, and a penny here and there adds up."

One expected headwind came from health care, where costs are rising quickly as more employees sign up for coverage.  The company said it now expects to shell out an additional $500 million in health-care expenses related to increased employee enrollment and higher costs, up from the $330 million in increases it originally expected.

"Health-care costs increased approximately $180 million versus last year and were well above our initial estimates," said Wal-Mart U.S. CEO Greg Foran, who stepped into the role this week following the departure of Mr. Simon.

The company said it now expects full-year earnings of $4.90 to $5.15 a share, down from its previous range of $5.10 to $5.45 a share.  U.S. comparable-store sales in the three months ending October 31 should be relatively flat, the company said.

Mr. Foran, who has never worked in the U.S., joined Wal-Mart in 2011 after being passed over for the top job at Woolworths Ltd. (WOW.AU +0.06%) in Australia.  He served as president of Wal-Mart China, where he presided over the company's expansion as it tangled with compliance issues and government regulation, and was appointed head of Wal-Mart Asia in April.

Wal-Mart said it continued to spend on compliance costs, including $43 million on costs related to a continuing investigation into alleged violations of the U.S. antibribery law and changes to its global compliance program.  It also added more labor hours for employees in the front end of the store, as well as overnight stockers and bakery workers, bumping up salaries and wages by $200 million from the year before.

Wal-Mart now expects to spend an additional 5 cents to 7 cents a share on e-commerce, including building a new distribution center this year in Indiana.  It previously said it expected to spend an additional 2 cents to 4 cents a share.

The company also cut its online sales growth projections for the year to "mid-20s" from 30%.  Its online sales, as well as its smaller-format grocery stores, have been among the few positive sales drivers for the company.  During the quarter ended July 31, global online sales grew by 24% and contributed 0.3 percentage point to Wal-Mart's U.S. sales, excluding newly opened or closed stores.  Wal-Mart brought in $10 billion in online sales last year.

"We grew faster than the market, but we didn't grow as fast as we wanted to," said Neil Ashe, who leads global e-commerce at Wal-Mart.

Source: The Wall Street Journal 

Partnering with Walmart

There are no shortage of articles on Walmart in today's press. Some are positive, but many are written from a viewpoint of fear. Here are some interesting facts from a recent article titled "The Elephant in the Room" by Greg Buzek, which was printed in the May 2007 RIS News. The article paints the picture of just how large and dominant Walmart is in just about every category. For example, the article notes Walmart's average monthly revenue is $28.3 billion, which is greater than Federated's average annual revenue. Retail Forward predicts in 2007 18% of every food dollar will be spent in a Walmart store, and that includes restaurants. Overall, Walmart is the number one super center, grocer, drug store, electronics store, office supply store and furniture store.

So, if you are a Walmart supplier, or if you want to be, the key question is how do you partner with an organization as large as Walmart? The answer may be your organizations ability to analyze point of sale data. Walmart has invested heavily into information systems and a trading partner portal called Retail Link. As an approved Walmart vendor, you can access near real-time data on how your products are selling and stocked at every Walmart store. The trouble for many vendors is the complexity of extracting the data and then analyzing it can be a huge challenge. We work with vendors that have pulled 100 megabyte plus files from Retail Link only to realize they have no suitable tool to analyze the data. If you are in this category, the first thing to realize is Retail Link was designed to give you access to the data, but it was not designed to help you analyze data. For that, you need to invest into tools capable of doing difficult data crunching. Data files of this volume require a database and sophisticated reporting tools. Most vendors tell us this is a good candidate for outsourcing due to the cost of acquiring the technology and the engineering complexity.

Analyzing Walmart data is a key success criteria for vendors because Walmart expects vendors to proactively partner in avoiding out of stock situations and increasing sell-thru. The first thing to do is engage an outside service for POS analysis. Walmart data files are large and will require a good database to store and analyze. You will want to capture and store history, so you are going to need a good amount of disk space. Next, make sure you have access to good reporting tools. A spreadsheet is not going to cut it. You simply cannot analyze sales and on-hand data from over 3,000 stores in a spreadsheet, in any reasonable amount of time each week. Unless, of course, you have unlimited time. After you have the tools in place, start with the three most important measures: unit sales, on-hand, and sell-thru at a store level. If you can get a handle on these three performance indicators, and then put action plans in place to improve, you are well on your way. Monitor these each week and get to know which stores are having sell-thru issues. Look for patterns in the data, like chronically out of stock stores, or very slow selling items. Finally, communicate with your buyer(s). Our experience has shown they are very open to vendor initiated conversations. Especially when the vendor has quality reports with accurate data from Retail Link.

Analyzing Walmart Retail Link POS Data

If you are a Wal-Mart vendor, you have access to a wealth of data via Retail Link.  As a service provider, we work with a lot of Wal-Mart vendors, helping them to analyze the point of sale data made available by Wal-Mart through Retail Link.   Sometimes a vendor will ask us “If I have Retail Link, why do I need to hire someone to help me analyze POS data?”

Retail Link provides a method for getting POS data, but as the vendor, you will be responsible for transforming the data and you will need a database to store the data.   Both of these are critical to provide for comp week and comp year comparisons, which are the basis for accurate and insightful POS analysis.  The complexity of building a database to store Retail Link data is more than most vendors want to bite off, since it requires hardware, software, and IT skills to accomplish.

What can you do with Retail Link data if you have it stored in a database?

·   Analyze SKU/store level sales

·   Analyze SKU/store level on hand

·   Analyze average unit selling price by SKU/store

·   Analyze plan-o-gram compliance by verifying on hand and selling at traited and valid stores

·   Identify out of stock stores, and even forecast demand based on prior sales

·   Create SCRIPT forecasts for your buyer indicating where inventory is needed to maximize sales and avoid out of stocks.

·   Group stores into A, B, C categories based on SKU level sales volume. 

Wal-Mart buyers expect vendors to use Retail Link data to analyze and manage their SKU activity.  If you are not already using the data, of if you are not using it as well as you could be, then you are missing sales opportunities.  Don’t wait for your buyer to call you and ask a question you can’t address – start working with the data today. 

Making Sense of Retail Link Data

Retail Link is an internet based tool created by Wal-Mart, which allows suppliers to access point of sale data and other important information. The benefits of analyzing sales data cannot be overstated – there are case studies documenting sales increase by more than 40% per SKU.

But using Retail Link data can be a challenge. A user must navigate the system, find the correct data, download the data and then create an actionable report. This is a lot of work. Especially if you have a dozen other retail customers who make the same data available. Retail Link users consistently praise the benefits of having access to the raw data, but complain that  they do not have the time or tools to turn the data into action. This is now changing with the availability of Accelerated Analytics®.

According to an article written by Mike Troy and published in DSN Retailing Today, Retail Link has approximately 100,000 registered users, who work at 40,000 companies and run 350,000 weekly queries. Retail Link contains over 583 terabytes of data over 104 weeks. “Use Retail Link and it will grow your business at Wal-Mart, “says Dan Phillips Wal-Mart’s VP of Merchandizing Systems.

In fact, Retail Link is so sophisticated, about 50 user groups have been formed in the U.S. as an ad-hoc training and support tool. And several third party vendors provide end user training seminars on how to use Retail Link effectively.

Fortunately, now there is a tool you can use to fully gain the benefits of Retail Link, while at the same time, dramatically lowering costs.

Accelerated Analytics® can automate all of your Retail Link tasks. Accelerated Analytics® will provide automated data downloads, pre-formatted reports, exception highlighting and an executive dashboard. Plus, using Accelerated Analytics® your entire team can collaborate in real-time on the same set of reports.

Best of all, Accelerated Analytics® will allow you to combine ALL of your retail customer’s data. Imagine a single report or dashboard with JC Penny’s, Wal-Mart, Target, Sears, all on one report. And because Accelerated Analytics® is a hosted service, there is no software or hardware to purchase. We can have you up and running in a matter of days for a low monthly fee.