The Conference Board Consumer Confidence Index Declines

November 25, 2014

The Conference Board Consumer Confidence Index, which had rebounded in October, declined in November.  The index now stands at 88.7, down from 94.1 in October.  The Present Situation Index declined from 94.4 to 91.3, while the Expectations Index decreased sharply to 87.0 from 93.8 in October.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: "Consumer confidence retreated in November, primarily due to reduced optimism in the short-term outlook.  Consumers were somewhat less positive about current conditions and the present state of the job market; moreover, their optimism in the short-term outlook in both areas has waned.  However, income expectations were virtually unchanged and gas prices remain low, which should help boost holiday sales."

Consumers' assessment of present-day conditions was moderately less favorable in November than in October.  The proportion saying business conditions are "good" decreased from 24.7 percent to 24.0 percent, while those claiming business conditions are "bad" increased from 21.3 percent to 22.4 percent.  Consumers' assessment of the job market was slightly less favorable, with the proportion stating jobs are "plentiful" falling from 16.5 percent to 16.0 percent, and those claiming jobs are "hard to get" increasing marginally from 29.0 percent to 29.2 percent.

Consumers' optimism, which had improved in October, retreated in November.  The percentage of consumers expecting business conditions to improve over the next six months decreased from 19.4 percent to 17.6 percent, while those expecting business conditions to worsen rose from 8.9 percent to 10.7 percent.  Consumers' outlook for the labor market was also less optimistic.  Those anticipating more jobs in the months ahead decreased from 16.0 percent to 15.0 percent, while those anticipating fewer jobs rose from 14.1 percent to 16.4 percent.  The proportion of consumers expecting growth in their incomes edged down from 16.7 percent to 16.3 percent, while the proportion expecting a drop in income was virtually unchanged at 11.4 percent compared to 11.3 percent in October.

Source: The Conference Board 

Developers' Sentiment About Multifamily Market Off Recent Peak, But Remains Positive

November 20, 2014

The Multifamily Production Index (MPI), released today by the National Association of Home Builders (NAHB), reached 54 in the third quarter, four points below the previous quarter's reading.  This is the 11th quarter with a reading of 50 or above.

The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100.  The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and "for-sale" units, or condominiums.  Although all three components fell from 2014 peaks in the second quarter, all remain at 50 or above.  The MPI component tracking low-rent units dipped one point to 51, market-rate rental units fell four points to 64 and for-sale units dropped six points to 50.

"Despite the slight drop in the index, multifamily developers remain positive about where the market is headed," said W. Dean Henry, CEO of Legacy Partners Residential in Foster City, California, and chairman of NAHB's Multifamily Leadership Board.  "Current growth in employment is strong enough to fuel demand for multifamily housing."

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, rost three points to 41, with higher numbers indicating higher vacancies.  After peaking at 70 in the second quarter of 2009, the MVI improved consistently through 2010 and has been fairly stable since 2011.

"We are seeing the MPI return to the mid-50s level where it has been for much of the past three years," said NAHB Chief Economist David Crowe.  "The moderation in multifamily builder sentiment aligns with a leveling off in production at a historically high level sufficient to keep up with rental demand."

Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing invormation on likely movement in the Census figures one to three quarters in advance.

Source: National Association of Home Builders 

Thanksgiving Weekend Shopping, By The Numbers

November, 2014

The biggest shopping weekend of the year is only days away and retailers are gearing up for another Thanksgiving weekend of holiday shopping and promotions.

Since the recession, retailers competing for shopping dollars and market share have had to rethink tried-and-true holiday marketing strategies.  Good prices, great value, unique product assortment and convenience are just a few of the aspects that contribute to happy holiday shopping experiences.

Some companies are generating buzz and responding to consumer demands by opening on Thanksgiving Day, while others look to promote their brand by resisting early openings on Thursday.

Here's a look at key numbers from Thanksgiving Day and Black Friday in 2013:

• 44.8 million: Consumers who shopped on Thanksgiving Day, up 27 percent from 2012.
• 92.1 million: Consumers who shopped on Black Friday in 2013.
• $407: Average amount spent by holiday shoppers from Thanksgiving Day to Sunday, down 4 percent from 2012.
• 248.7 million: Number of shoppers who were in stores and online over Thanksgiving weekend in 2013, up 0.5 percent over the previous year.
• 4.9 percent: Portion of holiday shopprs who were at stores by 5pm on Thanksgiving Day.
• 37 percent: Portion of holiday shoppers who were at stores by 12:01am on Black Friday, up from 28 percent in 2012.
• 64 percent: Portion of holiday shoppers who went out on Thanksgiving Day or visited stores by 10am on Black Friday.
• 45 percent: The amount of holiday shopping the average consumer had completed by the Sunday after Thanksgiving, up from 42 percent in 2012.

With more than $50 billion in sales on the line for just a single weekend during retail's most competitive season, retailers will be looking for ways to wow their customers.  It's too soon to say if the Thanksgiving Day shopping trend will fade or if the buzz will build in 2015, but this year, we're betting on another strong turnout.

Source: National Retail Federation

Single Family Starts Up 4.2 Percent While Overall Production Drops Slightly In October

November 19, 2014

Single family housing production in October reached its highest level since November 2013 while the more volatile multifamily sector brought combined nationwide starts activity down 2.8 percent to a seasonally adjusted annual rate of 1.009 million units, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

"The rise in single-family starts is more proof that the economy is firming and consumer confidence is growing," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  "We expect continued upward momentum into next year."

"The increase in single-family starts shows that the housing market continues to recover at a steady, gradual pace," said NAHB Chief Economist David Crowe.  "On the multifamily side, production is stabilizing above historic levels as demand for rental housing increases."

The 2.8 percent decline in overall starts in October was due primarily to a 15.4 percent decline on the multifamily side, which brought that sector's annual production pace to 313,000 units on a seasonally adjusted annual basis.  Meanwhile, single-family starts posted a 4.6 percent gain to 696,000 units.

Regionally in October, combined housing production dropped in the Northeast, Midwest and West, with respective losses of 16.4 percent, 18.5 percent and 10.9 percent.  Total production rose in the South by 10.1 percent.

Issuance of building permits registered a 4.8 percent gain to a seasonally adjusted annual rate of 1.08 million units in October.  Multifamily permits rose 10 percent to 440,000 units while single-family permits increased 1.4 percent to 640,000 units.

Regionally, the Northeast and Midwest registered overall permit losses of 21.5 percent and 11.4 percent, respectively.  The South and West posted respective gains of 8.8 percent and 21.6 percent.

Source: National Association of Home Builders 

The Conference Board Leading Economic Index For The U.S. Increased Again

November 20, 2014

The Conference Board Leading Economic Index for the U.S. increased 0.9 percent in October to 105.2, following a 0.7 percent increase in September, and no change in August.

"The LEI rose sharply in October, with all components gaining over the previous six months," said Ataman Ozyildirim, Economist at The Conference Board.  "Despite a negative contribution from stock prices in October, and minimal contributions from new orders for consumer goods and average workweek in manufacturing, the LEI suggests the U.S. expansion continues to be strong."

"The upward trend in the LEI points to continued economic growth through the holiday season and into early 2015," said Ken Goldstein, Economist at The Conference Board.  "This is consistent with our outlook for relatively good, but not great, consumer demand over the near term.  Going forward, there are continued concerns about slow business investment and lackluster income growth."

The Conference Board Coincident Economic Index for the U.S. increased 0.1 percent in October to 110.2, following a 0.3 percent increase in September, and a 0.1 percent increase in August.

The Conference Board Lagging Economic Index for the U.S. declined 0.1 percent in October to 124.9, following a 0.1 percent increase in September, and a 0.5 percent increase in August.

Source: The Conference Board

140 Million Holiday Shoppers Likely To Take Advantage Of Thanksgiving Weekend Deals

November 20, 2014

Americans are readying for the upcoming Thanksgiving weekend by making sure they have a menu for their family gathering and a complete shopping list for their weekend shopping activities.  According to NRF's Thanksgiving Weekend Expectations survey, which provides a preliminary look at shopping expectations over Thanksgiving weekend, six in 10 (61.1%) say they will or may shop either Thursday, Friday, Saturday or Sunday, which equates to more than 140.1 million unique shoppers.  Expectations are similar to last year's preliminary survey results of 140.3 million.

Specifically, 67.6 million holiday shoppers (29.5%) say they will shop, down slightly from 69.4 million who planned to do so last year, and 72.5 million (31.6%) say they will wait and see if the deals are worth it before they decide, up 2 percent over last year's 71 million "maybe" shoppers.

"Consumers today want more than just the discounts they've been showered with since the start of the recession; they want exclusive offerings and a good reason to spend their discretionary budgets," said NRF President and CEO Matthew Shay.  "We could witness a see change this holiday season as consumers' reliance on extremely deep discounts over the biggest shopping weekend of the year shifts to more of a 'wait-and-see' mentality around what retailers will be offering on Thanksgiving Day and Black Friday.  We are positive retailers have a few tricks up their sleeve that will draw their customers to their stores and websites, deciding the deals are worth it after all."

When it comes to preliminary expectations for when people will shop, of the 61.1 percent who will or may shop in stores and online over the weekend, 18.3 percent (25.6 million) say they will check out retailers' Thanksgiving Day deals and shop Thursday, down from the preliminary 23.5 percent last year; 74 percent of those who plan to shop on Thanksgiving Day say they shopped on Thanksgiving Day last year.

Additionally, more than two-thirds (68.2%) will shop on Black Friday (95.5 million), two in five (42.9%) will shop on Saturday (60 million) and one in five (21.6%) will shop on Sunday (30.3 million).

For the first time NRF asked shoppers about their intentions to shop on Small Business Saturday.  The survey found of those shopping on Saturday, nearly three-quarters (72.7%) say they will or may specifically shop for Small Business Saturday.

"More than just a shopping day, Small Business Saturday highlights the millions of entrepreneurs and visionaries who help make retail the dynamic and community-focused industry that it is," continued Shay.

Much talk has surfaced in the last few years over the number of young adults who shop on Thanksgiving, and this year millennials are indicating they are once again anxious to take advantage of what retailers have to offer.  According to the survey nearly eight in 10 (79.6%) 18-24 year olds will or may shop over the weekend, the highest of any age group.  Specifically, nearly one-quarter (22.6%) will shop on Thanksgiving Day, down slightly from 27.8 percent last year and 79.9 percent will shop on Black Friday, up from 71.5 percent who planned to do so last year.  Nearly three-quarters (73.2%) of 18-24 year olds say they shopped on Thanksgiving last year.

"For younger shoppers, shopping on Thanksgiving and Black Friday is as much a social experience as it is a buying mission.  While these shoppers may not have the biggest holiday budgets or the longest shopping lists, they still enjoy the 'tradition' of heading out with friends and family on two of retail's most exciting shopping days."

Source: National Retail Federation 

Nordstrom Rolls On, Loyalty Expands

November 14, 2014

New stores, 3.9% same store sales growth and increased loyalty propelled Nordstrom to record third quarter sales.

The company's total sales increased 8.9% to $3 billion thanks to the addition of new stores and a 3.9% same store sales increase that was driven by online growth.  Profits increased 3.6% to $142 million compared to $137 million while earnings per share increased 5.8% to 73 cents from 69 cents.

The company said sales at full line stores increased 0.5%, reflecting the addition of three new stores during the quarter and flat same store sales.  Nordstrom Rack sales increased 15% thanks to the opening of 16 stores and a 1.7% comp increase.  The greatest growth came from the company's direct business which increased 22% as assortments were expanded.

The Nordstrom Rewards loyalty program continues to contribute to the company's overall results as well.  Members shopped more frequently and spent more on average than non-members.  The company opened approximately 275,000 new accounts in the third quarter, an increase of 18% compared with the prior year.  With 4.2 million active members, sales from members increased 13% in the third quarter and represented 38% of sales compared to 37% the prior year.

The company ended the quarter with 118 full line stores and 167 Rack stores.

Source: Retailing Today.

October Retail Sales Rebound After Shadows Of Doubt

November 14, 2014

October's retail sales report helps strengthen the National Retail Federation's holiday expectations for sales growth of 4.1 percent, and offers an optimistic look ahead for the busiest consumer spending time of the year.  According to NRF, October retail sales, excluding autos, gas and restaurants, grew a healthy 0.7 percent month-to-month seasonally adjusted over September, and 44 percent unadjusted year-over-year.  NRF also finds the three-month moving average for year-over-year growth is a steady 3.9 percent.

"Consumers regained the energy to spend again in October, removing some of the concerns surrounding the slower consumer spending results seen as of late," said NRF Chief Economist Jack Kleinhenz.  "Much of the spending power stems from lower gas prices, accelerated job growth, wages and salary gains, and the recent rise in stock prices.  We expect that the next two months will bring forth confident holiday shoppers who have the ability and desire to spend on gifts and more."

The Commerce Department found overall October retail sales increased 0.3 percent seasonally adjusted over September and 4.1 percent unadjusted year-over-year.

"Consumers have once again proven resilient to the pressures they are still facing from a slow-moving economic recovery, receiving a helping hand from lower costs at the pump and gains in the labor market," said NRF President and CEO Matthew Shay.  "Moving forward, retailers will continue to find ways to entice holiday shoppers with great bargains while also focusing on other value-added promotions.  It is clear that Americans have the spending power, they just need to see continued improvement in the economy before they return to shopping habits from pre-recession."

All business lines, excluding electronics, showed gains on a month-to-month basis.

• Clothing and clothing accessories sales increased 0.5 percent seasonally adjusted over September and a healthy 1.3 percent unadjusted from 2013.
• Non-store sales increased a robust 1.9 percent seasonally adjusted month-to-month, and 8.7 percent unadjusted year-over-year.
• Sporting goods sales increased a solid 1.2 percent seasonally adjusted month-to-month, and 3.6 percent unadjusted over 2013.
• Sales at electronics companies decreased 1.6 percent seasonally adjusted from the previous month, possibly as a result of fall-off from the Apple iPhone roll-out in September, but increased 2.8 percent year-over-year.
• Furniture and home furnishing sales increased 0.2 percent seasonally adjusted from September, and 2 percent unadjusted year-over-year.

Source: National Retail Federation

Builder Confidence Rises Four Points In November

November 18, 2014

Builder confidence in the market for newly built single-family homes rose four points to a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

"Growing confidence among consumers is what's fueling this optimism among builders," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "Members in many areas of the country continue to see increasing buyer traffic and signed contracts."

"Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery," said NAHB Chief Economist David Crowe.  "After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015."

Dervied from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," fair" or "poor."  The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low."  Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components increased in November.  The index gauging current sales conditions rose five points to 62, while the index measuring expectations for future sales moved up two points to 66 and the index gauging traffic of prospective buyers increased four points to 45.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose three points to 44, the South posted a four-point gain to 62, and the West edged up one point to 58.  The Midwest registered a two-point loss to 57.

Source: National Association of Home Builders

Holiday Shoppers To Spend More Than $31 Billion On Gift Cards This Year

November 13, 2014

The growth in gift card popularity is irrefutable, and this holiday season spending on tiny plastic or digital gift cards will top all previous records.  According to NRF's Gift Card Spending Survey, the average person buying gift cards will spend $172.74, up from $163 last year.  Total spending is expected to reach $31.74 billion.  In an October NRF survey, 62 percent of shoppers said they would like to receive a gift card, making gift cards the most requested gift item eight years in a row.

"No longer impersonal or only about convenience, gift cards have become the perfect, practical gift item for millions of holiday shoppers," said NRF President and CEO Matthew Shay.  "And, as the most requested gift item for eight years in a row, we're sure there will be plenty of happy individuals this holiday season who can look forward to treating themselves to something shiny and new come January when retailers start to offer promotions on fresh new merchandise."

According to the survey, shoppers will spend an average of $47.87, up from $45.16 last year.  Total spending on gift cards has increased 83 percent since NRF began tracking consumers' intentions to buy gift cards as holiday gifts in 2003.

Gift cards are a go-to gift for consumers of all ages; the survey found adults 65+ will spend the most on gift cards at an average of $204.59.  Young adults between 18-24 years old will spend the least at an average of $113.75.  Additionally, men plan to spend significantly more than women on gift cards ($180.81 vs. $165.09 respectively).

"These days, shoppers simply love the idea of gifting someone they care about with a little 'free money' in the form of a gift card.  Consumers young and old want to find the best way possible to create a happy holiday experience for their loved ones, and gift cards are a great option every time."

There are a plethora of options for shoppers when it comes to what type of card to get, and it is clear department stores, restaurants and coffee shops are among the most popular choice for gift givers.  According to the survey 37.7 percent of gift card buyers will give their loved ones a gift card from a department store, and 34 percent will give their friends and family the gift of a meal at a restaurant.  One in five (20.6%) will pick up coffee shop gift cards, 18.1 percent will give the gift of entertainment, such as a movie theatre gift card, and 18.9 percent will give gift cards to electronics stores.

Source: National Retail Federation

Home Improvement Surging Ahead Of Holidays

November 19, 2014

Lowe's said its third quarter same store sales spiked 5.1% a day after Home Depot reported an even stronger increase.

Total company sales increased 5.6% to $13.7 billion driven by increased productivity of existing stores as evidenced by a 5.1% comp increase.  Home Depot said its third quarter same store sales increased 5.8%.  Lowe's profits increased 17.3% to $585 million while earnings per share increased 25.5% to 59 cents and were aided by $900 million in share repurchase activity.

"We are pleased with our performance, and continue to be cautiously optimistic about the home improvement landscape," said Lowe's chairman, president and CEO Robert Niblock.

Looking ahead, the company said it expects full year sales to increase 4.5% and same store sales to increase 3.5% to 4%.  The company plans to open six home improvement stores and four hardware stores this year.  Lowe's currently operates 1,836 home improvement and hardware stores.

Source: Retailing Today

Housing Affordability Slightly Lower In Third Quarter

November 13, 2014

Firming home prices in markets across the country contributed to a slight dip in nationwide housing affordability in the third quarter of 2014, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.

In all, 61.8 percent of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income of $63,900.  This is down from the 62.6 percent of homes sold that were affordable to median income earners in the second quarter.

The national median home price increased from $214,000 in the second quarter to $221,000 in the third quarter.  Meanwhile, average mortgage interest rates decreased from 4.44 percent to 4.35 percent in the same period.

"Low mortgage rates, strong job growth and affordable home prices make this a good time to buy a home," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

"Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards," said NAHB Chief Economist David Crowe.  "Rising employment and incomes, interest rates that remain near historically low levels, and pent-up demand should contribute to positive momentum heading into next year."

Youngstown-Warren-Boardman, Ohio-Pennsylvania claimed the title of the nation's most affordable major housing market, as 89.1 percent of all new and existing homes sold in this year's third quarter were affordable to families earning the area's median income of $52,700.  Meanwhile, Cumberland, Maryland-West Virginia and Kokomo, Indiana each tied as the most affordable smaller market, with 94.8 percent of homes sold in the third quarter being affordable to those earning the median income of $54,100 in Cumberland and $56,900 in Kokomo.  Other major U.S. housing markets at the top of the affordability chart in the third quarter included Syracuse, New York; Indianapolis-Carmel, Indiana; Harrisburg-Carlisle, Pennsylvania; and Dayton, Ohio; in descending order.

Meanwhile, smaller markets joining Cumberland and Kokomo at the top of the affordability chart included Davenport-Moline-Rock Island, Iowa-Illinois; Mansfield, Ohio; and Springfield, Ohio; in descending order.  For an eighth consecutive quarter, San Francisco-San Mateo-Redwood City, California was the nation's least affordable major housing market.  There, just 11.4 percent of homes sold in the third quarter were affordable to families earning the area's median income of $100,400.

Other major metros at the bottom of the affordability chart were Los Angeles-Long Beach-Glendale, California; Santa Ana-Anaheim-Irvine, California; San Jose-Sunnyvale-Santa Clara, California; and New York-White Plains-Wayne, New York-New Jersey; in descending order.

All five least affordable small housing markets were in California.  At the very bottom was Napa, where 10.2 percent of all new and existing homes sold were affordable to families earning the area's median income of $70,300.  Other small markets included Santa Cruz-Watsonville, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles; in descending order.

Source: National Association of Home Builders

October 2014 Manufacturing ISM Report On Business - PMI At 59%

November 3, 2014

New Orders, Employment and Production Growing; Inventories Growing; Supplier Deliveries Slowing

Economic activity in the manufacturing sector expanded in October for the 17th consecutive month, and the overall economy grew for the 65th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business. 

The report was issued today by Bradley J.  Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.  "The October PMI registered 59 percent, an increase of 2.4 percentage points from September's reading of 56.6 percent, indicating continued expansion in manufacturing.  The New Orders Index registered 65.8 percent, an increase of 5.8 percentage points from the 60 percent reading in September, indicating growth in new orders for the 17th consecutive month.  The Production Index registered 64.8 percent, 0.2 percentage point above the September reading of 64.6 percent.  The Employment Index grew for the 16th consecutive month, registering 55.5 percent, an increase of 0.9 percentage point above the September reading of 54.6 percent.  Inventories of raw materials registered 52.5 percent, an increase of 1 percentage point from the September reading of 51.5 percent, indicating growth in inventories for the third consecutive month.  Comments from the panel generally cite positive business conditions, with growth in demand and production volumes."

Manufacturing expanded in October as the PMI registered 59 percent, an increase of 2.4 percentage points when compared to September's reading of 56.6 percent.  This is the same reading as reported in August 2014, which is the highest reading for the index since March of 2011 when it registered 59.1 percent.  A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 43.2 percent, over a period of time, generally indicates an expansion of the overall economy.  Therefore, the October PMI indicates growth for the 65th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 17th consecutive month.  Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (55.6 percent) corresponds to a 4.1 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for October (59 percent) is annualized, it corresponds to a 5.2 percent increase in real GDP annually."

Of the 18 manufacturing industries, 16 are reporting growth in October.

Source: Institute for Supply Management

JCP Turnaround In Holiday Homestretch

November 13, 2014

J.C. Penney is in the final phase of its turnaround and the company's stores are customers' preferred destination for great style, quality and value, according to company CEO Mike Ullman.

Those comments came after J.C. Penney said its third quarter same store sales were flat and it forecast a fourth quarter comp increase of 2% to 4%.  Total sales in the quarter ended November 1 declined slightly to $2.76 billion from $2.78 billion.

The company reported an operating loss of $54 million, but that was a massive improvement from the prior year when the company reported a staggering operating loss of $401 million.  Other positives from the quarter were gross margins which expanded to 36.6% of sales, compared to 29.5% in the same quarter last year, thanks to strength in the home and fine jewelry categories.  The company also reduced expenses and reduced inventories by 10.4%.

"This quarter shows the progress we are making in the final phase of J.C. Penney's turnaround.  We continued to significantly improve the profitability of our business with gross margin expansion of 710 basis points, a $342 million improvement in EBITDA and bottom-line financial results that exceeded even our own expectations," Ullman said.  "Like most retailers, following a strong start to the back-to-school season, sales did slow in September and October as unseasonably warm weather hindered the sale of fall goods."

Ullman's observation on the third quarter was that during what he called "appointment shopping periods" such as back to school and holidays, J.C. Penney is the customers' preferred destination for discovering great style, quality and value.

"This year, we are confident customers will once again choose J.C. Penney for meaningful holiday gifts that fit their family budget.  We are well positioned to complete this holiday season and I would like to thank our associates for their hard work, warrior spirit and commitment to delivering an exceptional customer experience every day," Ullman said.

Source: Retailing Today

Kohl's Misses Earnings Estimates

November 13, 2014

Kohl's is heading into the holidays with a loss of momentum after third quarter same store sales declined 1.8% and the company missed analysts' earnings estimate by four cents.

The third quarter comp decrease of 1.8% was on top of a prior year decline of 1.6%.  Total sales at the operator of 1,163 stores declined slightly to $4.37 billion from $4.44 billion.  Net income declined to $142 million, or 70 cents a share, from $177 million, or 81 cents a share.

The 1,163 stores Kohl's operated at the end of the quarter was five more units than the company had in operation at the end of the third quarter the prior year.

Source: Retailing Today

Dillard's Well Positioned For Holidays

November 13, 2014

A third quarter same store sales decline of 1% at Dillard's wasn't enough to dissuade CEO William Dillard, II from declaring the company is very well positioned for the holidays.

Total merchandise sales also declined 1% to $1.42 billion while net incomes increased to $55.2 million, or $1.30 a share, compared to $50.9 million, or $1.13 a share.  The third qurater earnings per share benefited from a one time gain of $3.8 million, or nine cents a share, related to the sale of a store location.

"Returning cash to shareholders was a high priority during the quarter, and we completed the remaining $224 million of share repurchase authorization," Dillard said.  "Although comparable sales declined 1%, we were pleased with a 69 basis point merchandise gross margin improvement, with our inventory control and with our strong operating cash flow.  We believe we are positioned very well for the holiday season, and we look forward to providing premium Dillard's service to our customers."

The company said its sales trends were strongest in juniors' and children's apparel followed by men's apparel and accessories.  Sales were weakest in the home and furniture category.  Sales trends were strongest in the central region, followed by the eastern and western regions, respectively.

Source: Retailing Today

Walmart Gives Gift Of Positive Comps

November 13, 2014

Walmart's same store sales turned positive during the third quarter, ending a two year drought, prompting the company to forecast a U.S. comp increase of as much as 1% during the fourth quarter.

Third quarter same store sales at U.S. stores increased 0.5% and were aided by inflation and the impact of a 5.5% comp increase at the company's Neighborhood Market locations.  Fourth quarter comps at U.S. stores are forecast to be flat or up 1%.  One percent may not sound like much, but if realized or possibly exceeded the additional sales volume would be substantial considering the U.S. stores division generated third quarter sales of $70 million, a 3.4% increase from the prior year.

Total company sales increased 2.8% to $118.1 billion, including a negative impact of nearly $400 million related to currency exchange fluctuations.  Profits declined 0.7% to $3.7 billion, but earnings per share increased by a penny from the prior year to $1.15, squarely in the middle of the company's guidance range of $1.10 to $1.15 and three cents better than analysts forecast.  Walmart's earning per share calculations benefited from the repurchase of 1.1 million shares during the quarter.

Despite the slight advance in earnings, Walmart Stores, Inc., president and CEO Doug McMillon called the profit performance "solid."  He singled out as positives the U.S. stores comp increase, a 21% increase in e-commerce sales and profitablility of the Sam's Club and Walmart International businesses.

"We're investing in key areas of our business, including wages in our U.S. stores and in e-commerce and mobile capabilities.  We continue to see opportunities to improve our business," McMillon said.  "Being the price leader is an ongoing priority for us and a commitment to customers.  As with every year, that is even more important during the holiday season.  We have some things in our favor this fourth quarter, including lower fuel prices in the U.S. and other key markets, and we're set to deliver for customers during this time."

Same store sales at Sam's Club, excluding fuel, increased 0.4% and total sales, excluding fuel, increased 2.3% to $12.7 million.  Despite the modest top line growth, operating profits increased 12% to $493 million, the strongest improvement of Walmart's three divisions.

Walmart International sales increased 1.7% to $33.7 billion, but on a constant currency basis increased 2.9% to $34.1 billion.  Operating profits increased 3.7% to $1.43 billion.  Operating profits at U.S. stores declined 1.2% to $4.9 billion.

Looking forward, Walmart forecast fourth quarter earnings between $1.46 and $1.56 and full year earnings per share to range from $4.92 and $5.02, lower than the company's earlier guidance of $4.90 to $5.15.

"Our earnings per share guidance assumes several important factors, including the economic conditions in several of our largest markets, and a highly promotional holiday season," said Walmart CFO Charles Holley.  "As a reminder, our full year EPS guidance includes the four factors we discussed last quarter, which were higher U.S. health-care costs, incremental investments in e-commerce, ongoing investments in Sam's Club, and our effective tax rate."

Source: Retailing Today 

Bargain Hunters Holding Out For Hot Holiday Deals

November 12, 2014

Procrastinators and bargain hunters alike are taking their time getting started with their holiday shopping bonanza, possibly to take advantage of deeper discounts over Thanksgiving weekend and late in the season.  According to NRF's Holiday Consumer Spending Survey, 45.6 percent of holiday shoppers say they haven't started shopping yet, relatively flat with last years' 46.2 percent but the lowest in the sruvey's seven-year history.

"Many consumers are going to wait and see how great the promotions will be later this season before making any commitments," said NRF President and CEO Matthew Shay.  "Retailers have reacted to this 'wait and see' mentality with fewer October deals and a much quieter entry into November, when we'll start to see retailers ramp up with offers for exclusive merchandise, deep discounts and unique online savings opportunities."

The survey found that while slightly fewer people haven't started shopping yet, 20.6 percent have finished 10 percent or less of their shopping, while 12.4 percent have completed about one-quarter of their lists; 2.2 percent are saying they can sit back and relax as they have already finished their shopping for friends and family.

Unsurprisingly, apparel, toys and video games will be popular gift items this year.  The survey found six in 10 (60.9%) will buy clothing and accessories, 46.3 percent will buy books, CDs, DVDs and video games, and two in five (42%) will buy toys.  Likely having loaded up on wearable technology items and new smartphones throughtout the year, slightly fewer people will buy electronic items as gifts (30.7% vs. 33%).  Some people are in for a real treat: 24 percent of shoppers will buy jewelry for a friend or family member, the highest percent since 2006.  Gift cards continue as a favorite for both shoppers and recipients as six in 10 (60%) will buy gift cards, similar to the 59.2 percent who planned to do so last year.  In an October NRF survey, 60 percent of shoppers also said they'd like to receive gift cards, making gift cards the most requested gift item for eight years in a row.

Shoppers look for inspiration for gifts from every corner, and with the innovative creation of retailers' wish lists, many consumers this holiday season will take to the web to point loved ones to specific, perfect gift ideas.  The survey found 32.1 percent say they will look for inspiration on wish lists, up from 28.8 percent last year.  Others will conduct online searches (47.7%), discuss options with family and friends (41.7%), check out advertising circulars (34.3%) and email advertisements (20.1%), and even search Facebook (10.6%).

"Retailers make holiday shoppers' job easy with so many options to find the perfect gift, and with little room to waste on gifts that don't make sense, consumers today want to be sure what they buy is used and enjoyed by their loved ones.  On the hunt for bargains, quality merchandise that is unique and even exclusive, gift givers this holiday season will seek out both practical and indulgent gift items, though being sure not to break the bank."

When it comes to how shoppers will pay for their gifts, nearly four in 10 (38%) will use their credit card, the most in the survey's history and up from 28.5 percent last year; one in five (21.6%) will use cash and 38.4 percent will use their debit or check card.  Just 2.1 percent will use a check, the lowest in the survey's history.

When broken down by age group, young adults ages 18-24 are the least likely to use credit to pay for gifts at just 17.7 percent, and 65+ are the most likely to use credit cards at 56 percent.  Nearly half of 18-24 year olds (48.9%) plan to use their debit or check card to buy gift items.

Source: Retailing Today 

Disappointing Global Growth Likely For Fourth Straight Year In 2015

November 12, 2014

World economic growth, which stands at 3.2 percent for 2014, will accelerate modestly to 3.4 percent in 2015, The Conference Board reported today.

The Conference Board Global Economic Outlook provides output growth projections for 2015, 2015-2019, and 2020-2025, including 11 major regions and over 50 mature and emerging economies.  Overall, annual global growth is projected to average 3.3 percent from 2015-2019, but could decline to an average of 2.7 percent in the period 2020-2025 on the basis of the current trend.  According to the Outlook, long-term growth around 3 percent is sufficient to sustain a moderate increase in global living standards, but is too low to meet all the future challenges posed by rising middle classes in emerging markets and aging populations in mature economies.

"Growth in 2014 met our cautious projections, which were at the low end of analysts' views," said Bart van Ark, Chief Economist of The Conference Board.  "Optimists are poised to be similarly disappointed in 2015 - and more so as the long-term growth trend dips below 3 percent.  While many in both advanced and emerging economies continue to await a 'full recovery' to pre-crisis growth rates, we believe businesses and policymakers would stand better to focus on managing three key macroeconomic certainties that will define the slowdown in the decade ahead: First, a looming labor shortage; second, a drop in productivity growth; and finally, a lack of investment in productive assets."

Recovery "Bonus" Shrinking for Mature Economies

Across the advanced economies, the Outlook predicts 2.3 percent growth in 2015, compared to 1.9 percent in 2014.  Growth in the Euro Area should improve to 1.6 percent from 0.9 percent in 2014; Europe as a whole is projected to grow 2.0 percent.  This modest spike in recovery is expected to last a few years and is apt to bring European growth somewhat higher - and closer to U.S. levels - than anticipated by the current consensus forecasts.  Beyond a brief period of upside potential, however, the long-term picture remains stagnant: The Outlook sees Euro Area growth averaging 1.9 percent across 2015-2019, before dipping back to 1.2 percent in 2020-2025.

Meanwhile, U.S. growth is expected to rise from 2.2 percent in 2014 to 2.6 percent in 2015.  This improvement reflects an economy steadily returning to full capacity - and will be difficult to sustain into the future as the risks of slower productivity growth sink in.  In the medium-term, the Outlook does expect the U.S. to sustain 2.4 percent annual growth during 2015-2019, but the long-term trend sees growth slowing to just 1.9 percent in 2020-2025.  In the same two periods, Japan is expected to grow at 1.4 percent and 1.1 percent, respectively.

"For much of this decade, forecasters have assumed that mature economies still face a large output gap between their actual production and their potential performance if operating at full capacity," said van Ark.  "This offered a recovery 'bonus' that would allow advanced economies to make up what was lost in the recession at growth rates higher than the longer-term trend.  While the U.S., Europe, and others will still see some of these effects in 2015 and the following few years, we believe the output gaps have shrunk considerably and any post-recession 'bonus growth' will be relatively small and fleeting."

Easy Growth Coming to and End in Emerging Economies - and the World

From the late 1990s until recently, emerging markets have powered the global economy, based on an unprecedented growth differential between emerging and advanced economies.  This historical anomaly is fading as many emerging economies are entering a phase in which rapid catch-up growth has come to an end, with the need for serious, long-term and politically problematic economic reforms coming to the fore.  In 2014, positive growth surprises in India and Mexico couldn't offset major disappointments in Brazil and Russia, while China's extended "soft fall" proceeded apace.

Overall, growth in developing and emerging economies is projected to inch down to 4.7 percent in 2015, compared to 4.8 percent in 2014 and 6.2 percent in 2010-2013.  The slowdown will be largely driven by the Chinese economy, for which growth is anticipated to decline further in 2015 to 6.5 percent, down from 7.3 percent in 2014.  Other large emerging markets will remain stagnant or see slight improvements in 2015, with growth projected at 5.5 percent in India; 4.3 percent in the rest of developing Asia; 1.8 percent in Latin America; and 3.4 percent in the Middle East and North Africa.  Sub-Saharan Africa will see solid growth improvement, from 4.2 to 5.0 percent, while growth will rebound to a still-anemic 1.4 percent in Russia, Central Asia, and Southeast Europe.

Looking further ahead, the medium trend in Chinese growth is projected to fall to an average of 5.5 percent in 2015-2019 and 3.9 percent in 2020-2025.  The corresponding numbers in India are 5.5 percent and 5.0 percent, meaning the Indian economy is likely to be growing significantly faster than China's by the beginning of the next decade, making it a potential bright spot and strengthening contender in the global market.  Growth throughout 2015-25 should average 3.1 percent in Brazil and 2.8 percent in Mexico.  By the middle of the 2020s, emerging markets will still substantially outpace advanced economies - growing at an average 3.7 percent versus 1.8 percent - but by perhaps the smallest margin in a generation.

"While the growth contributions from emerging economies are by no means gone, and their growth will continue to be faster than that of mature economies, the significant downshift in their growth trajectories should make us aware that success from the recent past provides no guarantees for the future," explained van Ark.  "For the year ahead in particular, the confluence of multiple geopolitical fissures in Eastern Europe, the Middle East, Western Asia, and (to a less urgent extent) the South China Sea make it even less likely that an emerging-market boom will ride to the rescue of global growth, as it has in the recent past."

While the global picture appears downcast, it does offer opportunities for firms and governments with a realistic understanding of the challenges.  Ultimately, this decade of slower growth could offer a foundation for overcoming the risk of extended stagnation.

"At 3 percent global growth on average," said van Ark, "the next ten years may come to look like the 1980s - a time of modest growth during which structural reforms in many economies facilitated the transition from the old post-World War II 'golden years' to an era driven by the rise of services and new innovations."

Source: The Conference Board 

Macy's Views Omnichannel As Q4 Advantage

November 12, 2014

Macy's third quarter sales were lower than expected but the company still managed to grow profits by 30% and expressed optimism regarding the fourth quarter.

The department store retailer said same store sales declined 0.7% while total sales declined 1.3% to slightly less than $6.2 billion during the third quarter ended November 1.  Net income increased 22.5% to $217 million while earnings per share, aided by the repurchase of nine million shares, increased 30% to 61 cents a share.

"We knew we were up against very strong third quarter sales growth for our company last year, and thus we had anticipated that our year-over-year comparison would be lower in the third quarter than in the fourth quarter.  Even so, sales did not live up to our expectations in the quarter," Lundgren said.

Looking forward, the company said it expects same store sales to increase 2% to 3% in the fourth quarter, but also lowered its full year profit forecast to a range of $4.25 to $4.35 cents from a range of $4.40 to $4.50 cents.

Lundgren said he is optimistic about the fourth quarter for a variety of reasons, including strong digital capabilities.

"First we have developed an outstanding merchandise assortment for holiday gift-giving and self-purchase rooted in great style, exclusive offerings and outstanding value during this key shopping period," Lundgren said.  "Second, we have enhanced our transition to fresh post-holiday vacation and resort assortments.  Third, we have new store, omnichannel and marketing strategies in place that we believe will drive incremental business throughout the fourth quarter."

For example, Macy's said its buy online pickup in store capability is now rolled out to full-line Macy's and Bloomingdale's locations and it has same day delivery pilots up and running in eight major Macy's markets and four Bloomingdale's markets.  The company said it also has improved functionality and usability in upgraded mobile apps.

Lundgren is also counting on the weather to lend a hand this holiday season.

"We are poised to capitalize on a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year," Lundgren said.

Source: Retailing Today