March Consumer Price Index Results

The Consumer Price Index for All Urban Customers increased 0.2 percent in March, reported by the US Bureau of Labor Statistics on April 17.

The index for all items less food and energy rose 0.2 percent in March, the same as seen in January and February. Many sub-indexes rose in March, including apparel, household furnishings and operations and recreation. Apparel grew 0.5 percent, its third consecutive increase. Household furnishings and operations rose 0.2 percent.

The Consumer Price Index for April 2015 is scheduled for release on Friday, May 22.

Source: US Bureau of Labor Statistics

Recent Reversal in 20-Year Trend Towards Lower Inventory-to-Sales Ratios by Retailers

The US Census Bureau reports monthly on inventory levels for retail, wholesale and manufacturing sectors. This trend will impact retailers themselves, consumer goods manufacturers, suppliers to those manufacturers and transportation carriers.

The inventory-to-sales ratio in retail has been declining pretty steadily for the last 20 years, with the exception of 2008 when the recession hit full force and retailers were caught with too much inventory relative to quickly declining demand. But most recovered quickly, shedding inventories to put things back on the downward trend line within one year.

The retail inventory-to-sales ratio reached a low sometime during early 2012, but has been slowly increasing since then, mainly due to the fact that interest rates are so low (meaning the cost of holding inventory is less), but also perhaps due to increased optimism on the part of retailers as well.

Source: Supply Chain News

Smaller Markets Drive Clothing Sales in US

Total apparel industry dollar sales grew 2% in the retail calendar year ended February 2015. However, in-store sales of apparel fell 2%. While New York and Los Angeles are the biggest US markets selling clothing, smaller regions like Orlando and Washington, DC are now the top markets for dollar volume increase for the apparel industry. Washington, DC showed in-store sales up 14%.

Both Orlando and Washington, DC generated strong sales performance both in-store and online. Online sales in the industry grew 19% overall. The top markets such as Los Angeles did grow online sales by double digits. However, in most cases the markets that are outperforming in the industry as a whole are those with greater in-store sales growth than online gains.

“The big regions are no longer leading apparel industry sales growth,” said Marshal Cohen, chief industry analyst for The NPD Group, in a statement. “When New York and Los Angeles don’t even make it into the top 10 list of DMAs driving apparel growth, we have a big opportunity gap in the market. We need to understand the cause in order for the apparel industry to regain traction moving forward.”

Source: Forbes

Spring Black Friday Events Take Place Among Several Retailers

Traditional Black Friday takes place the day after Thanksgiving, the biggest shopping day of the year and the most recognized branding for shoppers. Retailers are attempting to use that recognition to drive sales this spring with “Spring Black Friday” events.

Home Depot stores started its “Spring Black Friday” with a cyber week of deals at HomeDepot.com. Trying to make an online event stick is important to Home Depot because it is becoming more reliant on its web site sales for growth. The chain did not open any new stores in the US last year, but e-commerce sales grew 37% to $3.8 billion, accounting for 5% of total revenue.

Home Depot competitor Lowe’s is holding its Spring Black Friday event for the third straight year. Retailers outside of home improvement are also trying to make Spring Black Friday a tradition. Bon-Ton Stores has held one every year since 2012 and had its most recent one two weeks ago.

Source: Bloomberg Business

Key Trade Legislation Receives Kudos From Retailers

Major retailers, trade groups and politicians gave an outpouring of congratulatory remarks last week following the introduction of trade legislation with potentially large implications for the retail industry and US economy.

The trade promotion authority (TPA) legislation, titled the “Bipartisan Congressional Trade Priorities and Accountability Act of 2015” is a necessary precursor for the President to negotiate and finalize free trade agreements such as the Trans-Pacific Authority Agreement and the Environmental Goods Agreement, both of which are seen as benefitting to the retail industry.

The TPA is designed to provide clear negotiating objectives for trade agreements that create new opportunities for American business and its global competitiveness. The most important issues for retailers in the agreement, which covers 14 Asian countries except China, are the elimination of duties and creation of workable rules on high-tariff items, such as apparel and footwear.

The Retail Industry Leaders Association (RILA) issued a statement in January when the trade policy was introduced to the agenda. "Trade is crucial to the retail industry and to breaking down barriers to provide open access to products and markets around the world. Trade Promotion Authority (TPA) could create tremendous new opportunities for generations of American workers.”

Sources: RILA, Retailing Today

Top US Housing Markets For Spring 2015

A new Auction.com Research report identifies the top major single-family housing markets based on current and expected future housing fundamentals. Of the 49 largest US markets, the top five have displayed consistently strong demand, home price appreciation, and economic and demographic growth. Retailers with stores in Denver, San Antonio, Nashville, Fort Lauderdale and Dallas might see some strong sales in the months ahead. The report notes the considerable impact a healthy housing market has on all of retail, not just the home improvement retailers like Home Depot and Lowe’s.

“As the U.S. housing market has continued to recover from the Great Recession, we’ve seen significant regional variances in terms of both price appreciation and sales volume,” said Auction.com executive VP Rick Sharga. “Earlier in the recovery, most of the growth came from markets that had suffered the biggest declines during the housing bust, but what we’re seeing today is more in line with fundamental economic trends: markets with the best job growth and population growth are recovering most quickly.”

The Southwest remains the strongest US region overall. The Southeast and West also show promise, as markets in those regions are improving rapidly.

Sources: Auction.com, Chain Store Age

US Consumer Sentiment Rises in April

US consumer sentiment, which measures Americans’ assessment of their personal finances, rose higher than expected in April, based on a University of Michigan survey released Friday. Analysts were hoping to see a rating of 94 in April, after a March rating of 93. Preliminary results for April rises the rating to 95.9. The survey did a reading of consumer expectations, and it rose, as well, to 88 from 85.3 in March.  "Although the leading economic index still points to a moderate expansion in economic activity, its slowing growth rate over recent months suggests weaker growth may be ahead," said Ataman Ozyildirim, Economist at The Conference Board, in a statement.

However, this is the second-highest level of consumer confidence in more than eight years. The report “is encouraging given that the March payroll report was a little bit weaker and some of the other data around the consumer has been softer,” said Michelle Meyer, deputy head of U.S economics at Bank of America Corp. in New York. “The fact that consumers are feeling better hopefully will translate into greater expenditures over time and that’s been a missing link to the economic recovery this year.”

Sources: CNBC, MarketWatch, Bloomberg

Retailers Home Depot, Sears, Kohl's and JCPenney Among Winners of EPA Star Partner Awards

The US Environmental Protection Agency and Department of Energy will be hosting its annual Energy Star Partner of the Year awards in Washington, DC, on April 20. Of the approximately 16,000 companies who partner with the EPA on their broad-based energy efficiency program, 128 companies are being recognized as Energy Star Partners of the Year.

Retailers among the 128 winners include Home Depot, Sears, Best Buy, Kroger, Kohl’s, Food Lion, Staples and JC Penney. “Energy Star Partner of the Year Award winners are delivering advanced energy efficiency solutions that help American families and businesses save money by saving energy. Their efforts play an important role in protecting the environment by reducing greenhouse gas emissions, while also moving our nation closer to a clean energy future.” said Department of Energy Secretary Ernest Moniz. Adds EPA Administrator and event key note speaker Gina McCarthy, “Our Energy Star Partner of the Year award winners demonstrate that energy efficiency is a smart business decision that supports their bottom line, and helps their customers save money and energy.”

Source: Retailing Today

Tax Refunds, Retail Deals and Spending Trends

The National Retail Federation conducted a Tax Return Survey to determine where refund money will be spent by consumers. Two-thirds of the shoppers surveyed were expecting a refund. 47% of shoppers will put their refund into savings, 39.1% will pay down debt and 25.1% will use their refund for daily expenses.

Among consumers surveyed between the ages of 18 to 24, 54.9% plan to put their refund into savings and 34.4% will pay down debt. “Americans are thinking of the future, and remaining financially secure is a big part of that,” said NRF president and CEO Matthew Shay.

However, a survey conducted by the International Council of Shopping Centers found that 47% of consumers would spend their refunds on goods and services including apparel, electronics and convenience items.

Retailers are vying for tax refund dollars with specials and marketing campaigns. Banana Republic is conducting email marketing that states “the antidote to taxes is a click away” and Amazon is urging customers to “take a break from filing taxes and scoop up new spring footwear”. Other online retailers, such as Foot Locker, Babies R Us, Bon Ton, The Gap and Ann Taylor are offering deals on Tax Day with percentage-off specials.

Sources: Forbes, International Business Times, Huffington Post

Home Depot Offers Shoppers an Omnichannel Experience

The Home Depot kicks off the Spring season with a variety of omnichannel shopping features. Online shoppers can have purchases sent directly to their home or shipped to their nearest store for pick up. In 2014, 40% of online orders on Homedepot.com were picked up in a local store. Online tools and calculators, such as a Pest Problem Solver and Grass Seed calculator help solve customer problems and assist them in purchasing the right products and the right amounts.

Inside stores, The Home Depot mobile app identifies where products are on the shelves, and offers “expanded aisles” connecting customers to a variety of product options available online.

The Home Depot also has tools in place to help shoppers plan and design their outdoor living space. The Garden Club features tips and expert advice tailored to a customer’s gardening region. The Fencing Project Planner and Decking Project Planner guide additions, upgrades and restorations.

Source: Chain Store Age

Household Consumer Spending Rebounds in March

The latest Survey of Consumer Expectations from the New York Fed stated that as of March consumers expect their spending will increase by 4.5% over the next year. This is a big change from February findings, when consumers thought spending would be just 3.8%. The February decline is attributed to the poor weather conditions.

Retail sales are expected to show a 1% increase in March, after declines in January and February.

Source: Business Insider

BELK INC EXPLORING POSSIBLE SALE OR MERGER

Belk Inc., founded in 1888 by William Henry Belk and in the third generation of Belk family leadership, has hired Goldman Sachs to help it evaluate strategic alternatives, including a potential sale. Belk is the largest family owned department store chain in the US, valued at as much as $4 billion.

In fiscal year 2014, ending January 31, 2015, Belk posted net sales of $4.1 billion, up 1.8% compared to the previous year. After Reuters reported on the potential sale, Belk issued a statement that it had hired Goldman Sachs to help them explore all options and expect to conclude its analysis in the next several months.

US consumer spending has been slow moving this year despite lower gas prices, due to weather conditions and consumers’ desire to save. This has affected department store sales, prompting chains to resort to smaller store models and aggressive discounting.

The last major acquisition in the department store sector was Canadian chain Hudson’s Bay Co, owner of the Lord & Taylor chain, which acquired Saks in 2013 for $2.9 billion. Major department stores like Macy’s and Nordstrom are expected to be contacted by Belk to solicit their interest in a deal. Neither Goldman Sachs, Macy’s nor Nordstrom responded to requests for comment.

Belk operates 297 stores in the southern US and is based in Charlotte, North Carolina.

Source: Reuters.com

HOME DEPOT APPOINTS ITS FIRST CHIEF INFORMATION SECURITY OFFICER

Home Depot Inc. has hired Jamil Farshchi as its first CISO. He will manage information security, data protection and vulnerability management, and will report to CIO, Matt Carey.

Mr. Farshchi was CISO at Time Warner Inc., where he created a federated, risk-based security program. Prior to that, he was vice president for global information security at Visa Inc.

This announcement comes months after the home improvement retailer confirmed its payment systems were breached, resulting in stolen email and credit card information at 2,200 US and Canadian stores.

 Source: The Wall Street Journal

BELK STORES REPORTS FISCAL YEAR RESULTS AND STRATEGIC INITIATIVES

Belk, with 297 stores in 16 Southern states, announced several key strategic initiatives for this year, to include increasing their store count, remodeling other stores and improving its e-commerce fulfillment center in Jonesville, S.C.

After reporting a holiday season sales increase of 5.2%, Belk finished its fiscal year on January 31 down 7.8% in net income to $146.1 million versus $158.5 million last year. “Despite challenges early in the year, we ended FY15 with strong holiday sales and are pleased to report our fifth consecutive year of positive comparable store sales,” CEO Tim Belk said. “Although our annual earnings continue to be impacted by additional expense associated with key strategic initiatives, fourth quarter net income rose 8.3 percent on a sales increase of 5%. We are encouraged by the recent trends and believe we are well positioned for the year ahead.”

Net sales totaled $4.11 billion, up 1.8% from $4.04 billion the year before. Same store sales climbed 1.5% and saw the highest growth rate in activewear, ladies contemporary, resort and bridge fashions. Ladies suits, men’s sportswear and juniors.

Source: Retailing Today

AAFES CONDUCTS FIRST-EVER EXCHANGE IMPACT WORKSHOP TO DETAIL GO TO MARKET STRATEGIES

The Army and Air Force Exchange Service (AAFES) conducted a workshop in Dallas, detailing the Exchanges’ go to market strategy, with over 50 AAFES representatives and an audience of manufacturers, brokers, distributors and service providers. The goal of the workshop was to simplify the process of selling to AAFES.

AAFES representatives discussed store repositioning strategies and individual category breakouts including hard lines, soft lines, consumables and e-commerce. They also covered legislative and policy issues affecting military resale. The average company can take two to four years to navigate the military resale environment, but a workshop such as this one can help shorten that to a six to twelve month learning curve.

The workshop was led by AAFES Chief Merchandising Officer Ana Middleton.

Resource: Retailing Today

SWAROVSKI ALLOWS BARTERING AT ITS NEW, SPARKLING LAS VEGAS STORE

Swarovski is the centerpiece of Las Vegas’ newest retail destination, Grand Bazaar Shops. To keep with the Grand Bazaar theme, Swarovski has opened their first-ever “bartering window”, allowing shoppers to negotiate the price they pay for select items. Most items to be found in the bartering window are limited edition items such as crystallized Beats Headphones and black and pink skulls. Inside the store is a large video screen with scenes from exotic bazaars, alongside specially crafted panels as platforms to display their jewelry and décor.

Outside, the store is designed to look like a cut crystal. Towering above the store is a 14 foot diameter starburst made of 911 custom-cut Swarovski crystals. The tower puts on a three minute light show every night at midnight, choreographed to music.

Source: Chain Store Age

CONSUMER PRICE INDEX HIGHER IN FEBRUARY

After sinking 0.7% in January, the biggest drop in 6 years, the consumer price index rose 0.2% in February. This is attributed to a rise in gas costs and broad increases in other categories.

Outside of food and energy, the cost of rents, clothes, new and used cars and airfares all also increased 0.2% last month. Even with February’s uptick in prices, economists expect the strong dollar to keep inflation in check in coming months because it makes imported goods cheaper. The dollar has risen sharply in value in the past year compared with the euro and yen, in part because the U.S. economy is growing faster than those in Europe and Japan.

“It is too early to say inflation is turning higher,” said Jennifer Lee, an economist at BMO Capital Markets. The dollar’s strength “takes time to filter through to prices, and the recent increase will show up in coming months.”

The Fed has said in a statement that it might be appropriate for an interest rate increase after further improvement in the labor market, as long as inflation remains at its 2% target.

Source: Austin Statesman

NRF ANNOUNCES AMERICANS ARE POISED TO SPEND THIS EASTER

The National Retail Federation released its 2015 Easter Spending Survey, gauging consumer behavior and shopping trends leading to the holiday. The report finds that the average person celebrating Easter will spend $140.62, over 2014’s $137.46 average spend. Total spending is expected to reach $16.4 billion.

“Easter will be the perfect segue into spring for both consumers and retailers who have longed for warmer weather for quite some time,” said NRF President and CEO Matthew Shay. “As one of the busiest times of year for several retail sectors and as shelves begin filling with both traditional spring and holiday merchandise, retailers are looking forward to welcoming shoppers with attractive promotions on home goods, garden equipment and traditional Easter items.”

The survey found that 45% of those celebrating will purchase clothing, spending more than $2.9 billion. They will also spend $2.4 billion on gifts, $1.1 billion on flowers, $998 million on decorations and $695 million on greeting cards.

58% plan to spend at discount stores, while 41% will shop at department stores. Additionally, 21.8% will shop at a specialty store and 18.8% will shop online.

Source: Retailing Today

Analysts Reduce Retailer Earnings Estimates Due To Strong US Dollar

The US dollar has increased 12% so far in 2015 against the euro and is up 27% from a year ago. This has prompted Wall Street analysts to make deep cuts to earnings forecasts of US multinational companies, and increasing the appeal of smaller, domestically focused companies.

As a result, investors are keeping a continued bias toward U.S.-based stocks that do less business abroad, such as shares of small companies that tend to be more domestically focused, and on companies outside the U.S. that stand to benefit from a weakening of their home currency as the dollar strengthens, particularly European manufacturers. Tiffany & Co. announced sales fell 1% in January but would have risen 3% if not for currency moves.

Wells Fargo looked at how 2015 consensus earnings estimates for retailers have evolved over the past two years alongside how their stocks performed. Among the 51 firms sampled, estimates fell for 42, or 82%, of them. Three companies—Shutterfly, Aeropostale and J.C. Penney—saw declines of more than 100%. Yet retailers’ stocks performed fairly well over the period. Shares only declined for 13 of the 51. On average, the share price among the sample actually increased 46%. In other words, valuation multiples expanded.

Companies that generate more than 50% of sales outside the U.S. are expected to post an earnings decline of 11.6% in the first quarter when results start rolling in next month. Companies that generate less than half of sales outside the U.S. are expected to post flat earnings for the quarter.

David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc., said that when the dollar has rallied in the past, consumer-discretionary and consumer-staples stocks have fared better than the broader market. These sectors have relatively low exposure to overseas markets.

Source: The Wall Street Journal

Price Waterhouse Cooper Total Retail Survey Online Shopping Results 2015

PwC administered a global survey to understand and compare consumer shopping behaviors and the use of different retail channels across 19 territories. Key findings:

US Consumers Shopping Online

• 39% of US consumers surveyed make online purchases monthly
• Top 3 reasons why US shoppers buy online instead of in store: lower prices/better deals than in stores (52%), ability to shop 24/7 (47%), and no need to travel to a physical store (40%)
• Top 3 reasons shoppers choose their favorite online retailers: “The prices are good”, “They usually have the items I want in stock”, and “I trust the brand”
•  US consumers do their research before buying online: books/music/movies/video games 75%, toys 62%, electronics/computers 73%
• The ability to return purchased items online sways consumers to purchase from certain retailers. Most important to shoppers were paid return labels provided with shipment (86%), online purchase returns available in-store (76%), can return purchase to a convenient location (61%)
•  Even with free shipping, consumers are willing to pay for same day (61%) and 1-2 day delivery (58%)

Source: PwC.com