The Conference Board Consumer Confidence Index Rebounds

October 28, 2014

The Conference Board Consumer Confidence Index, which had decreased in September, rebounded in October.  The Index now stands at 94.5, up from 89.0 in September.  The Present Situation Index edged up from 93.0 to 93.7, while the Expectations Index increased sharply to 95.0 from 86.4 in September.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: "Consumer confidence, which had declined in September, rebounded in October.  A more favorable assessment of the current job market and business conditions contributed to the improvement in consumers' view of the present situation.  Looking ahead, consumers have regained confidence in the short-term outlook for the economy and labor market, and are more optimistic about their future earnings potential.  With the holiday season around the corner, this boost in confidence should be a welcome sign for retailers."

Consumers' appraisal of current conditions was moderately more favorable in October than in September.  Their view of business conditions was mixed; while the proportion saying conditions are "good" inched up from 24.2 percent to 24.5 percent, those claiming business conditions are "bad" also increased slightly, from 21.2 percent to 21.7 percent.  Consumers' assessment of the job market improved moderately, with the proportion stating jobs are "plentiful" increasing marginally from 16.3 percent to 16.5 percent, and those claiming jobs are "hard to get" declining slightly from 29.4 percent to 29.1 percent.

Consumers' optimism, which had declined considerably in September, improved in October.  The percentage of consumers expecting business conditions to improve over the next six months increased from 19.0 percent to 19.6 percent, while those anticipating fewer jobs fell from 16.9 percent to 13.9 percent.  The proportion of consumers expecting growth in their incomes rose from 16.9 percent in September to 17.7 percent in October, while the proportion expecting a drop in income fell from 13.4 percent to 11.6 percent.

Source: The Conference Board

New Home Sales Edge Up 0.2 Percent From Revised Down August Rate

October 24, 2014

Sales of newly built, single-family homes inched up 0.2 percent in September to a seasonally adjusted annual rate of 467,000 units, the highest level in six years, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Sales numbers for August were revised down from 504,000 to 466,000.

"Three consecutive months of sales upticks demonstrate steady growth in the housing market," said Kevin Kelly, chairman of the National Association of Home Builders and a home builder and developer from Wilmington, Delaware.  "Consistent job creation and low mortgage interest rates are spurring the release of pent-up consumer demand."

"The August revision was not unexpected, as this figure seemed out of line with the modest housing recovery we have been seeing," said NAHB Chief Economist David Crowe.  "The continuing increase in the inventory of new homes points to builders' confidence in the market."

The inventory of new homes for sale increased to 207,000 in September, which is a 5.3 month supply at the current sales pace.

Regionally, new home sales rose 12.3 percent in the Midwest and 2 percent in the South.  Sales were unchanged in the Northeast and dropped 8.9 percent in the West.

Source: National Association of Home Builders

The Conference Board Leading Economic Index For The U.S. Increased In September

October 23, 2014

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.8 percent in September to 104.4, following no change in August, and a 1.1 percent increase in July.

"The LEI picked up in September, after no change in August, and the strengths among its components have been very widespread over the past six months," said Ataman Ozyildirim, Economist at The Conference Board.  "The outlook for improving employment and further income growth are expected to support the moderate expansion in the U.S. economy for the remainder of the year."

"The financial markets are reflecting turmoil and unease, but the data on the leading indicators continue to suggest moderate growth in the short-term," said Ken Goldstein, Economist at The Conference Board.  "Meanwhile, the weak advances in the housing market remain a bigger risk to the outlook than short-term financial gyrations."

The Conference Board Coincident Economic Index (CEI) for the U.S. increased 0.4 percent in September to 110.2, following a 0.1 percent increase in August, and a 0.3 percent increase in July.

The Conference Board Lagging Economic Index (LAG) for the U.S. increased 0.1 percent in September to 125.1, following a 0.3 percent increase in August, and a 0.2 percent increase in July.

Source: The Conference Board

Remodeling Market Index Reclaims All-Time High

October 23, 2014

The National Association of Home Builders (NAHB) Remodeling Market Index (RMI) reclaimed the high-water mark of 57 in the third quarter of 2014.  This is the sixth consecutive quarter for an RMI reading above 50.

An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.  The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

"Most remodelers remain confident that the market is improving as home owners undertake renovations, large and small," said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, N.H.  "The consistency and longevity of positive RMI readings are in line with the gradual recovery of the housing industry."

The RMI's future market conditions index rose to 58 from 56 in the previous quarter.  All four of its subcomponents - calls for bids, amount of work committed for the next three months, backlog of jobs and appointments for proposals - increased or remained level with the previous quarter's reading.

The current market conditions component of the RMI increased one point to 57 this quarter.  A two point gain was made among the categories of large additions as well as smaller remodeling jobs with readings of 56 and 58, respectively.

"The stabilization of the RMI in the mid-50s for more than a year demonstrates the slow, steady recovery of the housing industry that we expect to continue," said NAHB Chief Economist David Crowe.  "The major headwind to a stronger recovery is a shortage of qualified labor and subcontractors in some parts of the country, making it difficult for remodelers to employ carpenters and finish projects as quickly and economically as many of their customers expect."

Source: National Association of Home Builders

JCP Picks A President And Eventual CEO

October 13, 2014

Home Depot EVP Marvin Ellison will become president of J.C. Penney on November 1 and succeed Mike Ullman as CEO of the department store retailer next August.

Ellison, 49, is an interesting choice for a retailer focused on apparel and accessories given his extensive background in operations as opposed to merchandising.  He spent the past 12 years at Home Depot and most recently served as EVP of stores since 2008.  Prior to his current role he served as president of Home Depot's northern division and also held the role of SVP of global logistics.  Before Home Depot, Ellison spent 15 years in a variety of operational roles at Target including corporate director of asset protection.  Ellison serves on the board of FedEx and earned a business administration degree in marketing from the University of Memphis and an MBA from Emory University.

Plans call for Ellison to replace Ullman as CEO on August 1, 2015 at which time Ullman will become executive chairman of the board for a one year period.

"The Board has completed its search for the right CEO to lead the next stage of J.C. Penney's growth.  We are delighted to have found that person in Marvin Ellison, a highly accomplished retail executive with a history of delivering top and bottom line results at major American retailers," said J.C. Penney chairman Thomas Engibous.  "He brings to the role, among other assets, an extensive knowledge of store operations and supply chain management as well as a demonstrated ability to successfully run large retail organizations.  In light of these attributes, we believe he is well equipped to return the company to profitable growth."

Engibous also spoke highly of Ullman's contributions, noting that he agreed to return to the company during the most difficult period in its history.  Ullman is credited with stabilizing the business and improving performance after the company attempted an ill-fated transformation under the leadership of prior CEO Ron Johnson.

"(Marvin Ellison's) experience and leadership are exactly what we need to accelerate the progress we have made over the last 18 months," Ullman said.  I look forward to working closely with him and the rest of our outstanding team in the coming months to ensure a smooth transition and a successful future for J.C. Penney."

Ellison added, "as president and, ultimately, CEO, I will be focused on positioning the company to compete in a rapidly changing retail environment for the benefit of our customers, shareholders, suppliers and associates.  I am confident that we have the customer proposition, the brand, and the talent to make J.C. Penney successful over the long term."

Source: Retailing Today

Price Investments Hinder Supervalu Profits

October 16, 2014

Supervalu president and CEO Sam Duncan is encouraged with the progress the retailer is making and why not.  Identical store sales in the company's Save-A-Lot units were up 6.5% in the second quarter.

The company's total sales for the period ended September 6, increased 1.8% to $4.02 billion while profits declined to $31 million, or 11 cents a share, from $40 million, or 15 cents a share.  When adjusted for some non-recurring items, second quarter earnings were $34 million, or 13 cents a share.

"Midway through fiscal 2015, I am encouraged with the progress we have made across the business," said president and CEO Sam Duncan.  "The investments we have made at Save-A-Lot continue to drive sales and our retail food stores recorded their third consecutive quarter of positive identical store sales.  The addition of the Rainbow stores this past quarter is a positive for our independent business and we are encouraged by the early results."

Identical store sales in the Save-A-Lot Network increased 6.5% while identical store sales in the company's retail food segment increased 0.4%.

In Supervalu's largest segment, the independent business unit, sales were down slightly to $1.82 billion from $1.84 billion primarily due to lost accounts.  The company said it lost one new Albertson's banner that completed the transition to self-distribution, a larger lost customer and lower military sales, partially offset by new business including increased sales to existing customers.

Second quarter Save-A-Lot net sales increased 8% to $1.05 billion, but operating profits fell to $26 million from $32 million the prior year due to investments in price.

Source: Retailing Today

Dollar General Adds Another DC

October 16, 2014

Even if Dollar General doesn't prevail in its efforts to acquire Family Dollar, the company's expanding distribution infrastructure is positioned to support future growth.

Dollar General said it plans to build the 13th distribution center in its nationwide network in San Antonio.  The facility will measure more than 900,000 sq. ft., employ roughly 530 people and serve more than 1,000 stores when it opens in October 2015, the company said.

"This distribution center is another important investment in the growth of Dollar General and our substantial presence in Texas where we have nearly 1,200 stores and more than 9,400 employees," said Rick Dreiling, chairman and CEO of Dollar General.  "We operate more stores in the Lone Star state than in any other state and we have found Texas is a great place to do business.  We are proud to continue investing in the economic growth of Texas and we look forward to bringing an additional 530 jobs to Bexar County."

Dollar General's 12 other distribution centers are located in Alabama, California, Florida, Indiana, Kentucky, Mississippi, Missouri, Ohio, Oklahoma, Pennsylvania, South Carolina and Virginia.  Those facilities served the company's more than 11,500 stores nationwide.

Source: Retailing Today

Nationwide Housing Starts Top 1 Million For Third Time This Year

October 17, 2014

For the third time this year, nationwide housing starts surpassed the million-mark, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Total housing production in September rose 6.3 percent to a seasonally adjusted annual rate of 1.017 million units.

"These numbers show starts returning to levels we saw earlier this summer, where they hovered around one million units," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "We are hopeful this pattern of modest growth will continue as we close out the year."

"September's uptick reveals that last month's dip in production was more of an anomaly than a market reversal," said NAHB Chief Economist David Crowe.  "I expect we will see a continued recovery as job creation grows and consumers gain more confidence in the housing market."

Single-family housing starts were up 1.1 percent to a seasonally adjusted annual rate of 646,000 units in August, while multifamily production climbed 16.7 percent to 371,000 units.

Combined housing starts increased in all regions of the country.  The Northeast, Midwest, South and West posted respective gains of 5.3 percent, 3.5 percent, 4.2 percent and 13.9 percent.

Issuance of building permits registered a 1.5 percent gain to a seasonally adjusted annual rate of 1.018 million units in September.  Multifamily permits rose 4.8 percent to 394,000 units while single-family permits decreased 0.5 percent to 624,000 units.

Regionally, the Northeast, Midwest and West registered overall permit increases of 12.3 percent, 8.2 percent and 5.9 percent, respectively.  The South posted a 4.7 percent loss.

Source: National Association of Home Builders

Gift Givers Plan To Splurge On Friends, Family This Holiday Season

Average shopper to do 44% of their holiday shopping online, most in survey's history.

October 16, 2014

It's the most wonderful time of the year for millions of Americans, and according to the National Retail Federation's Holiday Consumer Spending Survey, gift recipients are in for a real treat this holiday season.  NRF's survey found the average person celebrating Christmas, Kwanza and/or Hanukah will spend $804.42, up nearly 5 percent over last year's actual $767.27. 

"Retailers have plenty of reasons to be optimistic this holiday season, and one of the most important pieces of evidence is the confidence holiday shoppers are exuding in their plans to spend on gifts for their loved ones," said NRF President and CEO Matthew Shay.  "While not completely throwing caution to the wind, Americans' frugal spending habits will still be visible this holiday season as they continue to rely on discounts and sales and comparison shop.  Consumers will put retailers to the test when it comes to the product mix and value companies can offer today's shopper who is focused on much more than just price."

The survey found consumers will spend an average of $459.87 on gifts for their family, up 6.5 percent from $432.00 last year, and $80.00 on gifts for friends, up from $75.00 last year.  Those celebrating the holidays will also spend more on gifts for their co-workers ($26.23 vs. $24.52 in 2013), and others like their babysitter and even their pets ($30.43 vs. $26.65).

Spending on traditional items such as decorations and food will remain flat: according to the survey, consumers will spend an average of $104.74 on food, $53.68 on decorations and $29.18 on greeting cards and $20.30 on flowers.

Shoppers shift budgets to make room for others

One of the more popular trends in recent years - self-gifting - will decrease this year as shoppers opt to shift their budgets towards spending on others: 56.9% of holiday shoppers say they plan to take advantage of sales and discounts to purchase non-gift items for themselves or others, and will spend an average of $126.68, down from $134.77 last year.

Mobile, online shopping big focus for consumers this holiday season

If it wasn't official last year, it will be this year - holiday shoppers are eager to shop online for their gifts and other needs.  According to the survey, 56 percent plan to shop online, up from 51.5 percent last year and the most in the survey's 13-year history.  Additionally, the average person plans to do 44.4 percent of their shopping online, the most since NRF first asked in 2006.

Looking for great prices and value as they shop around for holiday items, many consumers will visit discount (61.9%), department (59.7%) and grocery stores (51.2%).  Others will head to clothing or accessories stores (36.7%), electronics (30.8%), drug (19.2%) and craft and fabric stores (18.8%).

As mobile grows in use and scope, consumers this holiday season will turn to their on-the-go devices for a plethora of reasons.  The survey found the majority of smartphone owners (55.7%) will use their device in some fashion, up from 53.8 percent last year.  Specifically, 35.8 percent will research products/prices, the highest amount in the four years NRF has been asking.  Nearly one-quarter (23.9%) will redeem coupons and 19.1 percent will actually purchase items - another survey high.

Almost two-thirds (63.2%) of tablet owners will use their device to research and purchase holiday items, which is the same as last holiday season.  Nearly half (47.4%) will research products and one-third (33%) will purchase items.

More than one-quarter of smartphone/tablet owners comfortable using device to pay for merchandise

For the first time, NRF asked consumers about their comfort level using a smartphone or tablet to pay for merchandise at a store checkout counter.  According to the survey, 27.4 percent said they would be somewhat or very comfortable; however, two in five (41.9%) say they are not very or not at all comfortable paying for items that way.

Broken out by age, 41.1 percent of 25-34 year olds are somewhat or very comfortable using their device to pay for items at the register, compared to just 14.4 percent of those 65+.  Men are much more likely to feel comfortable with the technology (32.6% vs. 22.5% of women).

Four in 10 still shopping before Halloween, mostly to spread out their spending

Early-bird shoppers have already been out and about this year.  The survey found four in 10 (40.4%) begin their holiday shopping before Halloween - consistent with more than 10 years of survey findings.  The survey also found 40.9 percent will begin in November, up slightly from 38.8 percent last year, and 15.5 percent will begin in the first two weeks of December, flat with 16 percent last year.

When asked why they begin shopping for the holiday season as early as September, most agree it helps them spread out their spending (61.9%).  Half choose to do so to avoid holiday crowds (51.7%), and another 51.0 percent say shopping early helps them avoid the stress of last-minute shopping.  Nearly three in 10 (29.9%) say they shop for the holiday season year-round, and more than one-quarter (27.3%) say the desire to get their hands on specific items drives them to shop early; unsurprisingly, 44.7 percent shop early because the deals and promotions are too good to pass up.

Mobile sites, discounts, quality of merchandise factors in consumers' decision to shop somewhere

When it comes to why consumers chose to shop where they do during the holiday season, retailers should take heed: one-quarter of shoppers say easy-to-use mobile websites is an important factor in their decision to shop with a specific retailer.  Those polled also say free shipping/shipping promotions (42.3%) are important factors.  Consumers add that helpful, knowledgeable customer service (30.3%), convenient locations (47.9%), low prices (41.2%) and sales or price discounts (74.7%) also aid in their decision to shop at a particular retailer.

As the market becomes more competitive than ever before, retailers in recent years have begun to stress quality and selection of merchandise, and shoppers are paying attention:  according to the survey, six in 10 say quality of merchandise (60.9%) and selection of merchandise (59.4%) are important factors in their decision to shop somewhere.

"Even with expectations for increased spending this year, smart shopping strategies will be very important to those celebrating the holidays.  Overall, consumers feel better about where they stand compared to a year ago, and as such could find themselves stretching their dollars to give their loved ones a holiday season to remember.  Retailers, however, should still expect to see high demand for sales, coupons and other promotions as shoppers focus on 'what's in it for them'."

Gift cards, jewelry high on wish lists

For the eighth year in a row, gift cards are the most requested gift item among those celebrating the holidays.  According to the survey, 62 percent say they'd most like to receive a gift card, followed by clothing (52.5%), books, CDs, DVDs or video games (43.1%), and electronics (34.6%).  One-quarter (24.8%) say they'd like to receive jewelry, up from 23.3 percent last year.

Economic impact dramatically decreases

When asked if the state of the U.S. economy would impact their holiday spending plans, four in 10 (41.4%) said yes, down almost 20 percent from last year and the lowest amount since NRF first asked in 2009.  Of those who said yes, most agree they will compensate by spending less overall (75.6%).  Others will shop for sales more often (49.0%), comparison shop online more often (34.4%), use coupons more often (37%), buy more practical gifts (28.4%) and use last year's decorations (24.8%).

NRF is forecasting holiday sales to increase 4.1 percent.

Source: National Retail Federation 

Home Improvement Spending Continues Toward More Moderate Growth

October 16, 2014

Reflecting the slow pace of recovery in the overall housing market, the home remodeling industry is expected to continue its path of moderating growth, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.  The LIRA projects annual growth in home improvement spending to ease to 3.1% through the second quarter of 2015.

"Stronger gains in remodeling activity are unlikely given the recent slowdowns we've seen in housing starts, sales, and house price gains," says Chris Herbert, Acting Managing Director of the Joint Center.  "While the continued recovery in employment should ultimately keep the market on an upward trajectory, remodeling is likely to see slower growth rates moving into 2015."

"Growth in home remodeling activity continues to hover around its longer-term average of mid-single digit gains," says Abbe Will, a research analyst in the Remodeling Futures Program at the Joint Center.  "Even though the housing market overall has been lackluster, many areas of the country remain economically healthy and remodeling contractor sentiment remains high."

Source: Joint Center for Housing Studies of Harvard University 

Black Friday Gets Even Blacker This Year

October 15, 2014

A delayed start to the shopping season is causing consumers to postpone their holiday purchases until Thanksgiving weekend.

Sixteen percent of consumers had already started their holiday shopping, versus 15% last year.  An additional 19% stated they plan to start shopping before Thanksgiving, compared to 22% last year.  However, 18% claim they will start during Thanksgiving weekend, a sharp contrast to last year's 13%.  Among the consumers reporting that they will begin their shopping during Thanksgiving weekend, 12% plan to shop on Black Friday, while the remaining 6% plan to do their shopping on Saturday and/or Sunday.

"Consumers are anticipating the Thanksgiving weekend door-buster deals and other savings incentives, and as a result of their proven interest in special sales and deals, retailers last year began to open on Thanksgiving Day, with more stores jumping on this new tradition this year.  However, it's important to keep in mind that this doesn't mean more sales at the register.  After all, how many more family members and friends do consumers need to shop for just because the stores decided to open earlier?  How much more money do they have in their holiday budget because the stores started promoting earlier?  This year we'll see more shopping happening in the Thanksgiving zone, a deeper lull following, and finally a mad dash at the end for the last-minute shoppers."

The holiday forecast is bright for online retailers.  Nearly 60% of consumers plan to do at least some of their holiday shopping online this year, making online the leading channel for holiday shopping.  Women are more likely than men to shop online as are those with children in the household.

Online is leading the way for consumers through all phases of their purchases, from pre-shopping homework to the checkout counter.  Two-thirds of those who do pre-purchase research claim that they will utilize online research to learn more about products before making a holiday purchase, topping consumer reviews and television ads, among others.  In addition to special prices and overall value, consumers list convenience and free shipping as top purchase drivers, tying into the online appeal.

"Online has truly become the place for consumers to start and finish their holiday shopping.  Last year we saw a mad dash at the end, with many consumers disappointed because gifts were delayed due to so much last minute online shopping.  Hopefully stores and shippers learned from that mistake, and will be more prepared for the even bigger crush to come closer to the holidays this year.  Until retailers drive the consumers back into the stores, online will continue to grow at a faster pace than traditional store shopping.  The convenience and bargains offered online are too plentiful for the consumer to pass up."

Source: Retailing Today

Four Month Upturn Ends As Builder Confidence Falls In October

October 16, 2014

After four consecutive monthly gains, builder confidence in the market for newly built single-family homes fell five points to a level of 54 on the National Association of Home Builders/Wells Fargo Housing Market (HMI), released today.

"We are seeing a return to the mid-50s index level trend established earlier in the summer, which is in line with the gradual pace of the housing recovery," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

"While there was a dip this month, builders are still positive about the housing market."  After the HMI posted a nine year high in September, it's not surprising to see the number drop in October," said NAHB Chief Economist David Crowe.  "However, historically low mortgage interest rates, steady job gains, and significant pent up demand all point to continued growth of the housing market."

Derived 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 declined in October.  The index gauging current sales conditions decreased six points to 57, while the index measuring expectations for future sales slipped three points to 64 and the index gauging traffic of prospective buyers dropped six points to 41.

Looking at the three month moving averages for regional HMI scores, the Northeast and Midwest remained flat at 41 and 59, respectively.  The South rose two points to 58 and the West registered a one point loss to 57.

Source: National Association of Home Builders

Walmart Slows Physical Expansion In U.S.

October 15, 2014

A much anticipated acceleration of small format Walmart stores failed to materialize on Wednesday when the retailer announced plans to curtail domestic new store growth in 2016.

Walmart said it would open between 200 and 220 Neighborhood Market stores and 60 to 70 supercenters next year.  Both figures are below the company's projections for current year openings.  Walmart said it will end its current fiscal year with 240 Neighborhood Market stores, below the range of 270 to 300 openings that had been forecast earlier in the year.  The number of supercenters that will open this year is expected to be 120 units, slightly higher than the projection shared at the beginning of the year.

As a result, Walmart said its capital expenditures in the U.S. would range between $6.1 billion and $6.6 billion compared to $6.6 to $6.9 billion during the current year.  Total capital expenditures, including international operations, Sam's Club and e-commerce, in 2015 are expected to range from $11.6 billion to $12.9 billion, below the $12.5 billion to $13 billion the company expects to spend this year which is below the $13.1 billion spent in 2013.

"We know that our supercenters are an important format for the stock-up trip, but we want to be thoughtful about our investment, ensuring that we align the space to evolving customer needs," said Walmart U.S. president and CEO Greg Foran.  "To do this, we will moderate supercenter growth in fiscal 2016.  Our investment in Neighborhood Markets will go forward because they continue to show strong results across the box and they provide our customers with convenient access to grocery, pharmacy services, and other quick-trip needs."

The reduced pace of supercenter expansion isn't surprising as Walmart currently operates 3,375 of the large stores, but Neighborhood Market is a different story.  Walmart currently operates 428 Neighborhood Market stores and in prior meetings with analysts and during quarterly earnings calls the company has raved about the strong mid-single digit same store sales performance of the small format food and drug stores.  In recent weeks, the company also implemented a new organizational structure which appeared to foretell of greater things to come for a concept said to be gaining share.

Offsetting the reduced pace of physical expansion, Walmart said it was increasing investment in e-commerce to a range of $1.2 billion to $1.5 billion, ahead of current year spending of roughly $1 billion and well ahead of the $400 million spent in 2013.  Those investments will enable the company to build one million square foot online fulfillment centers in Georgia and Pennsylvania and new facilities in Brazil and China.

The increased e-commerce spending comes as Walmart failed to realize current year online sales targets.  The company said current year e-commerce sales will total roughly $12.5 billion, roughly $500 million less than guidance for e-commerce sales of $13 billion shared last year at this time.

Overall, Walmart presented a fairly bleak outlook at its 21st annual fall investor conference which explained why the company's shares tumbled $2.78 on Wednesday.  In addition to the reduced physical expansion and less than expected online sales, the company said it is operating in a tougher sales environment than it anticipated a year ago.  Consequently, sales for the current fiscal year are expected to increase between 2% to 3% on top of last year's sales of $473.1 billion.

The rate of sales growth in 2015 has the potential to improve slightly, based on guidance the company provided at its meeting.  Sales are forecast to increase between 2% and 4% next year resulting in the addition of between $10 billion and $20 billion in sales volume.  However, at that rate of growth profits will come under pressure as Walmart said its operating expenses are expected to grow at a somewhat faster rate which in turn will cause operating income to be flat to slightly down in 2015.

Despite a number of worrisome disclosures at the meeting, Wal-Mart Stores, Inc., president and CEO Doug McMillon sought to reassure members of the financial community that the company's prospects are bright.

"This is an exciting time for Walmart, as there are so many new ways to serve customers.  Exceeding customer expectations has always been our goal, and we have short and long-term opportunities to do that even better," McMillon said.  "We'll change the mix of our capital spend next year to provide greater access, while continuing to focus on price leadership, service, and a broad assortment.  We'll give customers the choices they want and need in ways that only Walmart can."

Source: Retailing Today

September Retail Sales Decreased 0.1 Percent

October 15, 2014

The National Retail Federation calculates that September retail sales - excluding automobiles, gasoline stations and restaurants - decreased 0.1 percent seasonally adjusted month-to-month yet increased 4.6 percent unadjusted year-over-year.  While seasonal factors were apparent, especially in August's downward revision, the drop-off in retail sales was worse than expected.

"Retail sales were surprisingly weak in September," NRF Chief Economist Jack Kleinhenz said.  "Despite increasing consumer confidence, an uptick in employment, lower gas prices, and with inflation in check, consumers still slowed spending.  Reconciling consumer confdence with consumer spending continues to be a challenge."

"The consumer appears to have a brighter economic outlook heading into the holiday shopping season," Kleinhenz said.  "However the erratic stock market, geopolitical events and Ebola may contribute to continued volatility.  Despite the weak results this month, our outlook remains positive."

Most retail categories witnessed a decrease in sales in September, including clothing, online and nonstore retailers, but the release of new smartphones lifted electronics sales.

Additional findings from NRF's retail sales analysis include:

• Building material and garden equipment and supplies delaers:
  • -1.1% month-to-month
  • +7% year-over-year
• Clothing and clothing accessories stores:
  • -1.2% month-to-month
  • +3.3% year-over-year
• Electronics and appliance stores:
  • +3.4% month-to-month
  • +8% year-over-year
• Furniture and home furnishing stores:
  • -0.8% month-to-month
  • +2.5% year-over-year
• General merchandise stores:
  • +0.2% month-to-month
  • +2.1% year-over-year
• Health and personal care stores:
  • +0.3% month-to-month
  • +8.1% year-over-year
• Online and other nonstore retailers:
  • -1.1% month-to-month
  • +8.2% year-over-year
• Sporting goods, hobby, book & music stores:
  • -0.1% month-to-month
  • +2.7% year-over-year

Source: Retailing Today

New NAHB Study Shows Substantial Regional Differences In New Single-Family Home Characterisitics

October 14, 2014

A recent study from the National Association of Home Builders (NAHB) revealed significant regional differences in new single-family home characteristics, ranging from price, design features, building materials and even financing.  The new findings come from analysis of the 2013 Census Bureau Survey of Construction.

Of the homes built for sale, the most expensive homes are in New England where the median sales price of new single-family homes started in 2013 reached $400,000.  The least expensive homes are in the East South Central and West South Central divisions with median sales price reaching $221,000 and $223,000 respectively.  Regional differences in home size however do not seem to correlate to home prices.  The nation's most expensive homes in New England also ranked as some of the smallest with the median size of 2,240 square feet.

"This recent analysis really illustrates the many different types of homes built throughout the country," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "It is fascinating to see how newly built homes can vary significantly not only in design features and building materials, but also in terms of lot size, home prices and financing methods used, simply based on where a home is built."

Regional home design differences include variations in siding preferences, the number of floors in a home and the type of foundation used.  Nationally, vinyl is the most common primary siding material, used in close to 31 percent of new single-family homes started in 2013, with brick following at nearly 24 percent.  Regional variations in home siding are significant however, with vinyl dominating in the Northeast and Midwest, brick in the South, and stucco was the top choice for new single-family homes in the West.

When it comes to home foundations, most homes in colder climates such as the Northeast and Midwest have basements, unlike new single-family homes in the South that are more typically built on a slab.  The data also showed that 58 percent of the homes built nationwide last year had two or more stories.  Similarly, most of the homes built in the Northeast are two stories, and more than half of the homes started last year in the West have two or more stories.  The South region varies within division but ranges from 47-65 percent of homes built with two or more stories.  In contrast however, more than half of new homes started in the Midwest have only one story.

Among outdoor features, porches ranked as the most popular feature nationwide.  Patios however dominate the new home building in the West South Central division and are as common in the West.  Despite a decline in popularity nationwide, decks remain a top choice for single-family homes built in New England where 63 percent of new homes are built with the feature.

Source:  National Association of Home Builders

Imports To Set New Record Before Holidays

October 10, 2014

Import cargo volume at the nation's major retail container ports is expected to see a final surge and set a new monthly record in October as the holiday season approaches, according to the monthly Global Port Tracker report released late this week by the National Retail Federation.

"Increasing congestion at the nation's ports as well as the ongoing West Coast labor negotiations are ongoing concerns and retailers are making one last push to make sure they're stocked up for the holidays," said NRF VP for supply chain and customs policy Jonathan Gold.  "Retailers are working hard to make sure customers can find what they're looking for regardless of what happens at the ports."

Import volume at U.S. ports covered by the Global Port Tracker report is expected to total 1.53 million containers in October, topping the 1.52 million monthly record set in August.  Cargo volume has been well above average each month since spring as retailers have imported merchandise early in case of any disruption in the docks.

The contract between the Pacific Maritime Association and the International Longshore and Warehouse Union expired on July 1, prompting concerns about potential disruptions that could affect back-to-school and holiday merchandise.  Dockworkers remain on the job as negotiations continue but the lack of a contract and operational issues have led to record congestion at the ports.

The 1.52 million 20 ft. equivalent units handled in August, the latest month for which after-the-fact numbers are available, was up 1.5% from July and 2.1% from August 2013.  One TEU is one 20 ft. cargo container or its equivalent.

September was estimated at 1.48 million TEU, up 2.8% from the same month the prior year, and October's forecast of 1.53 million TEU would be up 6.4% from 2013.  November is forecast at 1.39 million TEU, up 3.7%, and December at 1.37 million TEU, up 3.9%.

Those numbers would bring 2014 to a total of 17.1 million TEU, an increase of 5.3% from 2013's 16.2 million.  Imports in 2012 totaled 15.8 million.  The first half of 2014 totaled 8.3 million TEU, up 7% from the previous year.

January 2015 is forecast at 1.42 million TEU, up 3.5% from January 2014, while February is forecast at 1.35 million TEU, up 8.5% from the previous year.

The import numbers come as NRF is forecasting 4.1% holiday season sales growth and 3.6% growth for 2014 overall.  Cargo volume does not correlate directly with sales but is a barometer of retailer's expectations.

Source: Retailing Today

Holiday Shopping To Decrease 7.5%

October 7, 2014

The 2014 holiday shopping season will be characterized by cautious spending, while economic realities create one of two American holiday shoppers - survivalists and selectionists - according to a new report released from PricewaterhouseCoopers U.S. and Strategy, titled "2014 Holiday Outlook: Top trends, consumer behaviors and implications for retailers."

The report was based on a survey of more than 2,000 shoppers nationwide and was far different from the National Retail Federation's bullish seasonal spending forecast.

"The upcoming holiday shopping season will look very similar to 2013 as shoppers remain cautious on the economy and are concerned about disposable income, the rising cost of living and insufficient salary, leading surveyed participants to project an average household spend of $684, down from $753 in 2013," stated Steven Barr, PwC's U.S. retail and consumer practice leader.  "The spending divide among shoppers is widening, creating two distinct groups that we are tracking - survivalists and selectionists - and retailers must cater to both segments.  And with shoppers coming to expect a seamless omnichannel experience, deals to woo them into stores and having no tolerance for another season of data privacy invasion, it's a complex retail landscape that retailers need to master - or they risk losing loyal shoppers."

10 trends are expected to drive the 2014 holiday shopping season:

1. Shoppers express strong overall concerns about holiday shopping, as they remain cautious on the economy with 72% believing a same or worse environment when compared to the year before.
2. The 2014 holiday shopper is segmenting into two distinct groups: survivalists - those making under $50,000 per year, representing 67% of American shoppers; and selectionists - those making more than $50,000 per year, representing 33% of American shoppers.
3. Spending drivers are clearer than ever this holiday season, with as many as 84% of shoppers citing best practices as the main reason for choosing a place to purchase gifts (up from 74% in 2013).
4. Expect more channel fragmentation as shoppers budget for not only dollars, but their time.
5. It will be important to understand the cash/credit position of shoppers during the entire season.
6. The 3 S's of shopping - searching, showrooming and selection - have become permanent.
7. Shoppers are clear about what they will spend their holiday dollars on, making it critical for retailers to differentiate within those categories.
8. Shoppers recognize that experiences are beginning to count just as much, or more, than gifts.
9. Shoppers plan to shop at multiple stores as well as websites.
10. Retailers have significantly upped their game in planning for and investing in improved in-store and omnichannel experiences.

"With consumers having even higher demands for their shopping experience - no matter the channel - we conducted this survey to better understand how retailers can meet the needs of their shopping habits this holiday season," Barr said.  "What we learned was that to compete effectively at retail this year, it demands a new level of organizational and operational excellence."

Source: Retailing Today

Fred's September Sales Promise Restored Growth Ahead

October 9, 2014

Fred's CEO Bruce A Efird is confident about the company's initiatives to reposition the convenience-center model, expand marketing and implement new technology - all factors that he expects will help restore growth in the fourth quarter and next year.

Efird added that the initiatives are already producing positive results, despite customer traffic remaining a challenge in the company's markets.

Total sales for September increased 3.3% to $183.6 million from $177.8 million in September 2013.  Comparable store sales for the month increased 0.2% on top of an increase of 2.8% in the same period last year.  General merchandise inventory has been significantly lowered, Efird said, and the company's clearance programs to address unproductive inventory, once again, exceeded the sales plan for September.

Fred's total sales for the year-to-date period increased 1.5% to $1.32 billion from $1.30 billion for the same period last year.  On a comparable store basis, year-to-date sales decreased 0.5% versus an increase of 0.8% for the year-earlier period.

"Our September comparable store sales continued the positive trend we have experienced in recent months in spite of the strong sales performance posted in the same month last year.  Our initiatives to emphasize our convenience-center model continue to gain traction throughout the business," Efird added.  Additionally, our pharmacy department performed well with increases in both comparable scripts and sales.  We are very excited to have our new pharmacy prime vendor agreement in place, which will not only accelerate gross margin improvement in the pharmacy department, but will also support our pharmacy expansion initiatives."

During the month, Fred's closed five full service stores and one Xpress location.  Fred's operates 701 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.

Source: Retailing Today

Decreased Customer Traffic Affects Family Dollar's Q4

October 9, 2014

Family Dollar's fourth quarter results were affected by decreased customer traffic, prompting chairman and CEO Howard R. Levine to point out that the company is still in the early stages of its turnaround plan.

Levine expects that the strategic actions taken in fiscal 2014 will position the company for better sales and earnings performance in fiscal 2015.  Although he anticipates that the first quarter will be the most challenging of fiscal 2015, Levine is optimistic that momentum will build through the rest of the year.  But he stopped short of giving specific details regarding financial guidance for 2015 in light of the company's pending merger with Dollar Tree.

Total net sales for the quarter increased 4.5% to $2.61 billion from $2.5 billion in the prior-year quarter.  Comparable store sales increased 0.3% as a result of an increase in the average customer transaction value, partially offset by fewer customer transactions.  Sales in the fourth quarter of fiscal 2014 were strongest in the consumables and seasonal and electronics categories.

Gross profit for the quarter was $861.3 million or 32.9% of net sales.  During the quarter, the company implemented a series of restructuring initiatives, including the closing of 375 underperforming stores.  As a result, the company incurred $10.4 million in inventory write-downs in an effort to sell through merchandise at stores scheduled to close.

Net income in the quarter was $34.5 million compared with $102.2 million in the fourth quarter last year.  Adjusted to exclued the inventory write-downs, restructuring charges and merger fees in the quarter, and the favorable accounting adjustment in the quarter, net income for the quarter was $83.9 million, compared to adjusted net income of $99 million in the fourth quarter last year.

"Although our fourth quarter results continue to reflect the difficult competitive environment, as well as the financial challenges facing our customers, we are continuing to execute our previously announced restructuring initiatives to improve our performance," added Levine.

Source: Retailing Today

Excessive Lending Standards Still Affecting Home Sales

October 9, 2014

Tight mortgage lending standards continue to affect sales for single-family builders across the nation, according to a survey released by the National Association of Home Builders (NAHB).  Well over half of the single-family builders surveyed indicated that lending standards were "tight" or "very tight," while only 11 percent indicated that standards were "somewhat easy" and no builders described them as "very easy."

"While housing has seen some positive growth throughout the year, there is no denying that tight credit conditions are hindering a full, healthy housing recovery," said NAHB Chief Economist David Crowe.  "These persistently tight mortgage credit standards continue to limit the number of creditworthy borrowers, particularly younger families and first-time home buyers, from entering the housing market."

The survey also asked builders if they had lost any sales over the last six months due to buyers not qualifying for a mortgage.  Eighty-three percent answered "yes," and of these, the average share of sales lost was 9.7 percent.  NAHB estimates that this 9.7 percent translates to 18,700 new-home sales lost because buyers were unable to qualify for mortgages.

"NAHB advocates for prudent lending standards, but we've seen banks and regulators swing the pendulum too far and create an environment where lending standards are too restrictive," said Kevin Kelly, NAHB chairman and a home builder and developer from Wilmington, Delaware.  "We want a return to reasonable lending standards where qualified borrowers are able to obtain a mortgage and create the American dream for themselves."

NAHB has supported many housing finance reform policies that would help reverse tight lending conditions, including:

• Improved credit scoring models
• A reduction of guarantee fees - known as g-fees
• Passage of the Housing Finance Reform and Taxpayer Protection Act of 2014 (Johnson-Crapo)
• FHA and FHFA to continue and expand their efforts to reduce lender concern over mortgage insurance denials and forced loan buybacks

A tight lending market for potential home buyers is just one of the headwinds impacting the housing recovery today.  Builders also report that rising costs for building materials and shortages of finished lots and labor are problems they are facing.

Source: National Association of Home Builders