Walmart Testing Convenience Concept

March 18, 2014

Walmart this week opened its first small format convenience store branded as Walmart To Go in its hometown of Bentonville.

The concept offers a familiar blend of convenience store products, prepared foods and gasoline and is not to be confused with Walmart's other small format concept known as Walmart Express.  The Express format measures about 15,000 sq. ft. and also appeals to convenience minded shoppers with gas, a pharmacy and fresh food offerings.  The Walmart To Go store bears the same name as a home delivery grocery service the company launched three years ago in San Francisco and expanded to Denver last year.

The Walmart To Go store is located at the heavily trafficked intersection of South Walton Boulevard and S.W. 14th Street, less than a half mile south of Walmart's headquarters.  The intersection is well suited to a convenience store format with easy ingress and egress.  However, as retail tests go, Walmart won't get a true read on the viability of the concept until it is exposed to competition in a market where the shopper base is not distorted by those who work for or sell products to Walmart.  The proximity to the retailer's headquarter ensures that a large percentage of those visiting the store will have some type of Walmart affiliation.  Also of note is the fact that the most meaningful competition for Walmart To Go will come from other Walmart formats.  A Walmart supercenter with a gas station is located adjacent to Walmart's headquarters and a 45,000 sq. ft. Neighborhood Market store, which is also designed to satisfy shoppers' convenience needs, opened last year and is less than a mile from the new Walmart To Go.

Source: Retailing Today

The Conference Board Leading Economic Index For The U.S. Increases

March 20, 2014

The Conference Board Leading Economic Index for the U.S. increased 0.5 percent in February to 99.8, following a 0.1 percent increase in January, and a 0.1 percent decline in December.

"The U.S. LEI increased sharply in February, suggesting that any weather-related volatility will be short lived and the economy should continue to improve into the second half of the year," said Ataman Ozyildirim, Economist at The Conference Board.  "The strengths and weaknesses in the LEI were balanced in February, with large increases in housing permits and the interest rate spread more than offsetting decreases in the workweek in manufacturing, consumer expectations and rising initial claims for unemployment insurance."

"While the CEI shows the pace of economic activity remained slow at the start of 2014, the trend in the LEI remains quite positive," said Ken Goldstein, Economist at The Conference Board.  "The biggest challenge continues to be weak consumer demand, pinned down by weak wage growth.  These conditions were still in evidence the first two months of the year, but will likely improve as spring arrives."

The Conference Board Coincident Economic Index for the U.S. increased 0.2 percent in February to 108.2, following a 0.1 percent increase in January, and a 0.4 percent increase in December.

The Conference Board Lagging Economic Index for the U.S. increased 0.3 percent in February to 122.1, following a 0.5 percent increase in January, and a 0.4 percent increase in December.

Source: The Conference Board

Kenmore And Craftsman Can't Help Sears

March 14, 2014

Sears Hometown and Outlet Stores said Fourth-quarter same-store sales declined 3.4% as two of the company's best known brands had disappointing results. 

Sales in the fourth quarter declined 4.5% to $602.4 million due to the combination of a 3.4% same-store sales decline and an extra week in the fourth quarter the prior year, which added sales of $36.5 million.  The same-store sales decline was made up of a 4% decline at the Hometown division and a 1.5% decline at the Outlet division.

The comp decline was primarily driven by lower consumer electronics sales following a planned exit from the category in most Hometown stores, lower sales in the tool category in both segments, lower apparel sales in Outlet stores and lower major appliance sales in Hometown.  The decreases were partially offset by higher lawn and garden sales in Hometown and higher major appliance and furniture sales in Outlet.  If consumer electronics are excluded from the comp calculations, the total decline was only 1.1% overall, consisting of a 1% decrease at Hometown stores and a 1.3% decrease at Outlet stores.

"Fourth quarter results were disappointing, especially in the Hometown and Hardware segment where holiday sales and margins of our important Kenmore appliances and Craftsman tools significantly underperformed management's expectations," said president and CEO Bruce Johnson.  "In the Outlet segment, increased holiday promotional spending did not drive the expected sales increases.  Total company January sales were negatively impacted by the unusually severe winter weather in many of our trade areas." 

That said, Johnson noted that the company made significant progress on four key strategic fronts during the quarter that leave it favorably positioned for 2014.  For starters, Johnson said 30 new stores were opened during the past fiscal year with half of those coming in January.  "Total sales from these 30 new stores during the first quarter of 2014 to date have met our expectations, with particularly strong sales from the new Outlet Stores, which accounted for 13 of the 30," Johnson said. 

The company also continued its transition to a model whereby stores are operated primarily by independent dealers and franchises.  After 19 conversions in the fourth quarter, 1,115 of the company's 1,260 stores are now operated by dealers and franchisees.  Johnson also said the company achieved double-digit year-on-year growth in both online and multichannel sales, particularly at Searsoutlet.com, where sales for the quarter grew nearly 80% from the prior year to approximately $11 million.

Finally, new Outlet sourcing initiatives began to shift inventory positions in furniture, apparel and out-of-box appliances, to products Johnson said he is confident will deliver higher overall merchandise margins than in the fourth quarter of 2013.

Source: Retailing Today

Retailer Portals

My team has the opportunity to spend a significant amount of time in various retailer portals downloading store lists, POS data and other files as part of the work we do for our customers.   We routinely encounter errors with the portals and in particular during peak times like early morning.   When prospective customers ask me why they should purchase a service like Accelerated Analytics instead of just using HomeDepotLink or RetailLink or Partners Online I often let them know one reason is because those portals tend to unavailable for significant portions of the day.   

Looks like today is going to be one of those days….

Shopping Paused This Winter, Will Pick Up This Spring

March 13, 2014

Consumer spending on retail sales rose a healthy 0.3 percent in February, despite widespread inclement weather.  This good result essentially offsets the declines registered in January.  The core retail sales measure that excludes autos, building materials and gasoline also advanced a solid 0.3 percent supporting consumer spending in Q1.  Online store sales rose a robust 1.2 percent, as shoppers turned to the internet given the inclement weather in the month.  Although there is some lingering uncertainty about the strength of the labor market going forward - delivering more jobs and perhaps higher wages.  There could be a further bounce this spring as some shoppers finally get out as warmer weather arrives.  Still, the direction of the consumer market for the remainder of the year is more dependent on the strength of the labor market.  The upscale market is and will continue to do fine.  For the mid to lower-scale retail market, better weather could mean a little better sales record but sales are likely still to be constrained on the upside by sluggish wage gains.

Source: The Conference Board

Housing Starts Hold Steady In February

March 18, 2014

Nationwide housing starts were virtually unchanged in February, inching down 0.2 percent to a seasonally adjusted annual rate of 907,000 units, according to newly released data from the U.S. Department of Housing and Urban Development and U.S. Census Bureau.

"Continuing the January trend and in line with our recent surveys, builders are in a holding pattern.  Poor weather is keeping many from getting into the field and they continue to face challenges related to a shortage of lots and labor," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

"While housing construction is in a recent lull due to unusual weather conditions, we expect to see an improvement as the winter weather pattern subsides and builders prepare for the spring selling season," said NAHB Chief Economist David Crowe.  "Competitive mortgage rates, affordable home prices and an improving economy all point to a continuing, gradual strengthening of housing activity through the rest of the year.  Moreover, building permits, which are less dependent on weather and are a harbinger of future building activity, rose above 1 million units in February."

Single-family housing construction rose 0.3 percent in February to a seasonally adjusted annual rate of 583,000 units while multifamily starts edged 2.5 percent lower to a 312,000-unit pace.

Regionally, combined housing starts activity was mixed in the month, posting gains of 34.5 percent in the Midwest and 7.3 percent in the South and declines of 37.5 percent in the Northeast and 5.5 percent in the West.

Issuance of new building permits rose 7.7 percent to a seasonally adjusted annual rate of 1.02 million units in February.  Single-family permits edged down 1.8 percent to 588,000 units and multifamily permits rose 27.6 percent to 407,000 units.  Regionally, overall permits rose 6.3 percent in the Northeast, 9.9 percent in the South and 17.9 percent in the West but declined 11.8 percent in the Midwest.

Source: National Association of Home Builders

Labor Market Holding Up At A Reasonable Rate

March 7, 2014

The economy generated a gain of 175,000 jobs in February.  Whether that is enough to dissipate uncertainty about where the economy is headed this year remains the big question.  Even though the number of workers unable to report to work due to inclement weather increased strongly, and average weekly hours declined, the number of construction jobs continued to increase at a moderate rate.  Going forward we see things improving as many of the underlying fundamentals of the economy have continued to improve.  The Conference Board Leading Economic Index and the latest reading from the survey of purchasing managers point to strengthening conditions over the next few months.  Catch up from weather-delayed plans could push job gains over 200,000 per month.  And more jobs mean more paychecks, lifting consumer confidence and sending consumers out shopping once the weather improves.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  In sum, we look for a spring thaw to warm up the economic readings, including most notable employment and housing indicators.

Source: The Conference Board

Builder Confidence Treads Water In March

March 17, 2014

Builder confidence in the market for newly-built, single-family homes rose one point to 47 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

"The March HMI mirrors last month's sentiment, as builders continued to be affected by poor weather and difficulties in finding lots and labor," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

"A number of factors are raising builder concerns over meeting demand for the spring buying season," said NAHB Chief Economist David Crowe.  "These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale."

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 for 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.

The index's components were mixed in March.  The component gauging current sales conditions rose one point to 52 and the component measuring buyer traffic increased two points to 33.  The component gauging sales expectations in the next six months fell one point to 53.

The three-month moving averages for regional HMI scores all fell in March.  The Northeast dropped three points to 35, the Midwest fell three points to 53, the South posted a four-point decline to 49 and the West registered a two-point drop to 61.

Source: National Association of Home Builders

The Conference Board Employment Trends Index Increases In February

March 10, 2014

The Conference Board Employment Trends Index (ETI) increased in February.  The Index now stands at 116.39, up from 115.99 (a downward revision) in January.  This represents a 4.4 percent gain in the ETI compared to a year ago.

"February's job report and the ongoing improvement in the Employment Trends Index should provide some relief for those concerned about weakness in the U.S. economy and labor market," said Gad Levanon, Director of Macoreconomic Research at The Conference Board.  "The majority of the ETI's components have been steadily rising in recent months, suggesting solid job growth will continue in the coming months."

February's increase in the ETI was driven by positive contributions from six of its eight components.  In order from the largest positive contributor to the smallest, these were:  Number of Temporary Employees, Job Openings, Real Manufacturing and Trade Sales, Industrial Production, Consumer Confidence Survey Percentage of Respondents Who Say They Find Jobs "Hard to Get," and Ratio of Involuntarily Part-time to All Part-time Workers.

The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area.  Aggregating individual indicators into a composite index filters out "noise" to show underlying trends more clearly.

The eight labor-market indicators aggregated into the Employment Trends Index include:

• Percentage of Respondents Who Say They Find "Jobs Hard to Get" (The Conference Board Consumer Confidence Survey)
• Initial Claims for Unemployment Insurance (U.S. Department of Labor)
• Percentage of Firms With Positions Not Able to Fill Right Now (National Federation of Independent Business Research Foundation)
• Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
• Ratio of Involuntarily Part-time to All Part-time Workers Job Openings (BLS)
• Job Openings (BLS)
• Industrial Production (Federal Reserve Board)
• Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

Source: The Conference Board

NRF Weighs In On February Retail Sales

March 13, 2014

Many retailers have pointed to a persistent and severe winter for weak holiday and fourth-quarter sales.  But according to the National Retail Federation (NRF), retail sales rebounded in February.

The NRF said that February retail sales, excluding automobiles, gas stations and restaurants, increased 0.2% adjusted month-to-month and 2.3% year-over-year.

"Today's positive retail sales report indicates that the economy is primed for growth," said president and CEO Matthew Shay.  "Retailers and consumers endured the harsh winter and they're hoping both the natural and man-made obstacles to growth will leave with the snow."

Shay went on to say that retailers are facing "serious" headwinds placed on them by policymakers in Washington who are pushing for new overtime mandates and a higher minimum wage.  According to Shay, for the economy to fully recover, the administration and Congress neet to "quit politicking and focus on growth and job creation."

"Despite a long and cold winter, consumers continued to persevere and spend in February," added chief economist Jack Kleinhenz.  "This month's retail sales data is encouraging and above expectations.  However neither the jobs nor retail data reflect the fundamental health of the economy.  While the weather continues to play tricks on economic forecasts and figures, we expect much-needed clarity come spring as consumers release pent-up demand."

Additional NRF findings from the February retail sales report include the following:

• Building material and garden equipment and supplies dealers stores sales increased 0.3% seasonally-adjusted month-to-month and 3.2% year-over year.
• Clothing and clothing accessories stores sales increased 0.4% seasonally-adjusted month-to-month and 2.4% unadjusted year-over-year.
• Electronics and appliance stores sales decreased 0.2% seasonally-adjusted month-to-month and 2.3% unadjusted year-over-year.
• Furniture and home furnishing stores sales increased 0.4% seasonally-adjusted month-to-month and remained unchanged unadjusted year-over-year.
• General merchandise stores sales decreased 0.3% seasonally-adjusted month-to-month and 0.9% unadjusted year-over-year.
• Health and personal care stores sales increased 1.2% seasonally-adjusted month-to-month and 5.6% unadjusted year-over-year.
• Nonstore retailers sales increased 1.2% seasonally-adjusted month-to-month and 6.8% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores sales increased 2.5% seasonally-adjusted month-to-month yet decreased 5.3% year-over-year.

Source: Retailing Today

Bad Weather Not Slowing Dollar General Growth

March 13, 2014

An unrelenting Dollar General continues to push forward with plans to open 700 stores this year despite reporting weak financial results and a 1.3% same-store sales increase for the fourth quarter.

Sales during Dollar General's fourth quarter ended December 31, increased 6.8% to nearly $4.5 billion and were driven mainly by the addition of new locations as same-store sales increased just 1.3%.  The comp increase was due to growth in customer traffic and average transaction amount with tobacco and perishables singled out as key contributors, according to the company.  However, growth in those categories negatively affected the company's gross margins as did an increase in the shrink rate, which caused gross margins to decline to 31.9% from 32.5%.  Expenses were essentially flat with the prior year at 20% of sales.

Profits in the fourth quarter increased 1.6% to $322 million or $1.01 a share, compared to a profit of $317 million, or 97 cents a share, in the fourth quarter the prior year.

"Sales in the fourth quarter were impacted by severe winter weather, including many days with significant store closures, an aggressive competitive retail landscape and our customers' uncertainty about spending in the current economic environment," Dollar General chairman and CEO Rick Dreiling said.  "In spite of these headwinds, both customer traffic and average ticket increased in our same-stores in the fourth quarter.  In addition, we controlled our expenses well and successfully managed the business to deliver a gross margin rate that was better than we anticipated.  Although some of the severe weather impact has continued into the first quarter, we are pleased with our sales performance on days when weather is more normalized."

The impact of weather can be seen in Dollar General's expectation for a first quarter same-store sales increase in the range of 2% to 3%, compared to a 2.6% comp increase in the first quarter of 2013.  For the full year, the company expects sales to increase in the range of 8% to 9% and same store sales to rise between 3% and 4%, which implies an acceleration of comp growth later in the year.  Earnings per share are expected to range from $3.45 a share to $3.55.

The key contributor to those results will be the company's breakneck pace of expansion which calls for 700 new stores as part of a $450 million to $500 million capital expenditure program.  The new store construction program, the most ambitious in the retail industry, follows a record year of square footage expansion in 2013.

"Among our other many accomplishments for the year, we successfully opened 650 new stores, ending the year with 11,132 stores serving customers in 40 states," Dreiling said.  "Dollar General is a strong and growing business with high return store growth opportunities that we intend to capture.  While we remain cautious on the current operating environment and the many challenges our customer is facing in 2014, we have a business model that generates significant cash flow, putting us in a position to invest in these growth opportunities, while continuing to return cash to shareholders through share repurchases."

Dollar General will come close to surpassing $20 billion in annual sales this year if its same-store sales and expansion goals are realized.  Last year, the company's sales increased 9.2% to $17.5 billion from $16 billion and full-year same-store sales increased 3.3%.  As in the fourth quarter, those results were driven by an increase in customer traffic and average transaction size and strength in categories such as tobacco, perishables, candy and snacks.

Source: Retailing Today

Albertsons Acquiring Safeway For $9 Billion

March 6, 2014

Albertsons plans to acquire Safeway for $32 a share in a deal valued at roughly $9 billion that will create a supermarket chain with roughly 2,400 locations to rival market leader Kroger.

The deal announced late Thursday ended longrunning speculation regarding the potential acquisition of Safeway.

"This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country," said Albertson's CEO Bob Miller.  "It also brings together two great organizations with talented management teams.  Safeway CEO Robert Edwards and his team have done an outstanding job in positioning Safeway's core business for success, by investing in its stores and creating innovative strategic marketing programs that contribute to shareholder value.  Working together will enable us to create cost savings that translate into price reductions for our customers.  Together, we will be able to respond to local needs more quickly and deliver outstanding products at the lowest possible price, more efficiently than ever before."

Source: Retailing Today

Digging Out Of One Of The Longest Winters Ever: The Good, The Bad And The Ugly

March 10, 2014

For meteorologists, scientists, weathermen and millions of others, this winter has been absolutely dreadful.  And, although spring is on the horizon, much of the country is still covered in snow.  In fact, the nation's 21st winter storm just wrapped up this past weekend.

When it comes to the impact weather has on businesses, most industries, including retail, manufacturing, construction and auto, recognize the ebb and flow of weather as a significant part of their plans.  For retailers, weather forecasting models can impact everything from merchandising decisions to shipping and receiving, and even sales and staffing.

Looking back on the past few months, it's evident the 2013-2014 winter season has been a serious thorn in the side for the nation's largest industries.  In the Federal Reserve's recently released "Beige Book," a summary of commentary on current economic conditions, "weather" was mentioned 119 separate times to describe November and December alone.

Just how severe was this winter?

• Ohio had used almost a million tons of salt for its roadways as of late February, compared with 630,000 tons used on average each winter
• Erie, Pennsylvania became America's snowiest city with a population over 100,000, recording a whopping 123.9 inches of snow
• According to the National Oceanic and Atmospheric Administration, December and January averaged over the contiguous 48 states were the third-coldest months in the last 30 years
• As of January 31, there were 1,073 different snowfall records set across the country at various times
• The meteorological winter, beginning December 1 and ending March 1, marked Chicago's coldest winter in 30 years

As for the latest results from retail, industry sales in January fell 0.4 percent from December 2013, according to the Department of Commerce, led by a drop in auto sales and in categories like clothing, furniture stores and restaurants, sectors largely depending on foot traffic.  Seasonal hiring in February showed retailers took a more cautious approach to staffing their stores during the brutally cold month.

But for some retailers it hasn't been bad news:

• Ace Hardware has reported it is having its best winter in more than a decade thanks to increased sales of snowblowers and shovels
• Maine-based retailer L.L. Bean has sold out of its famous waterproof boots
• Sales for company Delivery.com are up 30 percent compared with last year as more people looked for ways to get their laundry, dry cleaning and grocery shopping done without leaving home
• Carmex, maker of their namesake cult-favorite lip balm, says its sales are up 9 percent over the past eight to ten weeks
• Pawz Dog Boots, which makes fun, colorful booties for dogs that protect them from salt and snow, says sales have more than doubled

Looking ahead, it's too soon to say if NRF's outlook for 2014 needs to be adjusted based on recent sales reports; the impact from the severe weather could have just been a blip on the radar, so to speak.  When the ground finally thaws and consumers can start enjoying spring-like weather, we will re-evaluate consumer spending.  Until then, we can only hope that winter is done having its fun with us.

Source: National Retail Federation

Bon-Ton Seeks New CEO

March 11, 2014

Following disappointing fourth-quarter sales, the Bon-Ton Stores president and CEO Brendan L. Hoffman has notified the company's board of directors that he will not renew his employment agreement with the company when it expires February 7, 2015.  Hoffman also plans to resign as a director of the company.

"I am extremely proud of the Bon-Ton team and what we have accomplished since I joined in 2012.  I truly enjoyed working for the company these past two years.  However, I have made the difficult decision to end my tenure with the company for strictly personal reasons.  I remain committed to continuing to execute the strategic initiatives we put forward as the company searches for a new chief executive officer," said Hoffman.

The board of directors will undertake a national search to find a CEO to succeed Hoffman.

Comparable-store sales for the fourth quarter decreased 7.3%.  The company reported net income for the quarter of $61.3 million, or $3.04 per diluted share, compared with net income of $74.4 million, or $3.71 per diluted share, for the prior-year quarter.

Hoffman was optimistic and said that despite the disappointing results the company is making progress on several strategic initiatives that he believes will drive improved performance.  Multiple snowstorms and the polar vortex during the December and January periods resulted in a sharp decline in traffic and ultimately hurt comparable-store sales in the quarter.

"In spite of these top line pressures, we were able to achieve a gross margin rate slightly better than prior year and reduce expenses," Hoffman said.  "In addition, we effectively managed our inventory such that we ended the year with inventory levels approximately 5% below that of the prior year, including a significant reduction in carryover merchandise, leaving us well positioned for the spring season."

Hoffman was equally optimistic about the company's burgeoning e-commerce business.

"We are excited about our new e-commerce fulfillment center, which will permit significant expansion of our shipping capacity with improved operational efficiency.  We will continue strengthening our foundation to deliver profitable sales growth in the coming years," he added.

Looking ahead, the company expects comparable store sales to increase in a range of 1% to 3%.

Source: Retailing Today

Smaller Format Stores

March 11, 2014

Smaller format stores are all the rage these days.  Dollar General, which already operates nearly 12,000 stores, plans to open 700 more  this year.  Walmart recently announced plans to accelerate growth of its smaller format stores by opening between 270 and 300 small stores, more than double the 120 to 150 store range it projected last fall.  Even Target has gotten in on the action with plans to open its first Target Express store near downtown Minneapolis this summer.

Source: Retailing Today

NAHB Study Reveals Key Differences In Home Preferences Based On Race Or Ethnicity

March 10, 2014

Today, the National Association of Home Builders (NAHB) released the results of a new study, What Home Buyers Really Want: Ethnic Preferences.  The latest release from NAHB's publishing arm, BuilderBooks is a further analysis of the 2013 study, What Home Buyers Really Want, which presented preferences of all home buyers combined.  This new study compares and contrasts how housing preferences are affected by the racial or ethnic background of a home buyer, after controlling for factors such as age and income.

"The new data reveals some interesting findings about home buying preferences broken down by race and ethnicity," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "It contains invaluable information for builders by providing a window into the preferences of potential home buyers, and allowing them to tailor things to better meet the needs of their customers."

The survey data confirmed that there are some significant differences across the various ethnic groupd of buyers such as:

• Minority home buyers are typically younger than White non-Hispanic buyers.  The median African-American buyer is 39, the Hispanic buyer is 37, and the Asian buyer is about 36, while the median White buyer is 43 years old.
• Fifty percent or more of buyers in all racial/ethnic groups are married couples: 80 percent of White buyers, 50 percent of African-Americans, 74 percent of Hispanics, and 79 percent of Asians.  Most also have children living at home.
• Asian home buyers have the highest median household income of all four groups, $72,797, compared with $67,747 for Whites, $50,221 for Hispanics, and $43,774 for African-Americans.  Asians also expect to pay the most for their home: $283,469, compared with $205,775 among Whites, $181,444 among Hispanics, and $176,397 among African-Americans.

 Source: National Association of Home Builders

Severe Weather Affects Gap's February Sales

March 7, 2014

Severe weather that persisted during the year's shortest month affected Gap's February sales results.

The company reported net sales for the four-week period ended March 1 of $929 million, compared with net sales of $966 million for the four-week period ended March 2, 2013.  Comparable-store sales for the month declined 7%, versus last year's 3% increase.

"While February was clearly a difficult month, we remain focused on executing our global priorities," said chairman and CEO Glenn Murphy.

Comparable sales by global brand for the month were as follows:

• Gap: down 10% versus last year's 2% increase
• Banana Republic: down 7% versus last year's 5% decrease
• Old Navy: down 6% versus last year's 6% increase

The company said that more than 450 stores had to close during February due to weather.

In line with its strategic priorities, the company is preparing to open its first Gap store in Taiwan.  The brand expects to end fiscal year 2014 with more than 100 Gap stores across the Greater China region.

Gap will report March sales April 10.

Source: Retailing Today

Bon-Ton Invests In Growing E-Commerce Business

March 7, 2014

The Bon-Ton Stores is investing in its growing e-commerce business.  The company has signed a lease with Duke Realty Corp for a 743,000 sq. ft., automated, direct-to-consumer fulfillment center in West Jefferson, Ohio.

The company expects the facility to be fully operational and ship its first orders in spring of 2015.

The new facility will consolidate the e-commerce fulfillment that is currently being performed at Bon-Ton's four distribution centers.  When fully operational, the fulfillment center will employ approximately 139 new Ohio associates, with additional seasonal jobs expected to be created during the peak holiday shopping season.

"In response to the rapid growth in our e-commerce business, we are taking this step to ensure extraordinary service to our customers," said president and CEO Brendan Hoffman.  "This new fulfillment center will permit significant expansion of our shipping capacity with improved operational efficiency."

The consolidation will impact associates involved in the direct-to-consumer fulfillment at the company's four distribution centers.  Affected associates will be offered the opportunity to interview for available positions at the new West Jefferson facility or receive career transition benefits, including severance, according to established practices and state employment service support.  Bon-Ton does not expect that the combined severance and other expenses associated with the consolidation, which it expects to incur during the next 16 months, will be material.

Source: Retailing Today

Retail Jobs Down In February

March 7, 2014

National Retail Federation president and CEO Matthew Shay and chief economist Jack Kleinhenz issued a response to the organization's February jobs report.

"While there are signs of modest momentum in the economy, now is not the time to play partisan politics with the recovery by forcing federal mandates on retailers and small business owners like an increase in the minimum wage," Shay said.  "Such policy decisions could hamper economic growth and actually drive up the unemployment rate."

NRF calculated retail employment down 6,700 in February, yet up 205,500 year-over-year.  The biggest job losses were seen in electronics and appliance stores, and sporting goods, hobby, book and music stores.  December and January retail employment figures were also revised downward.

"Retailers continued to rearrange and maximize their payrolls and inventories following the holiday shopping season," added Kleinhenz.  "This decline should be temporary in nature and viewed as a speed bump.  We really need to lift the snow screen to adequately measure the economy and jobs situation."

Kleinhenz went on to express optimism for continued ecoomic and employment gains this year and says the NRF is encouraged by growth in construction jobs and building material employment last month, which suggests a forthcoming improvement in residential and nonresidential spending along with household and business confidence.

Shay and Kleinhenz also added that the Bureau of Labor Statistics Employment Situation Summary showed that February total nonfarm payroll employment rose by 175,000 with the unemployment rate at 6.7% and the labor force participation rate at 63%.

Source: Retailing Today

Ascena Reduces Outlook Further

March 3, 2014

Ascena Retail Group, the operator of Lane Bryant, Justice and Dress Barn stores, cited increased spending on growth initiatives and a challenging sales climate for a second quarter profit decline and its second full year earnings guidance reduction in two months.

Sales for the company's second quarter ended January 26 increased 2% to $1.3 billion, while consolidated same-store sales were essentially flat.  A 3% comp decline at physical stores was offset by 28% e-commerce growth to achieve the overall flat comp increase.  Net income fell to $31.9 million, or 19 cents a share, from $47 million, or 29 cents a share last year.

The decrease was due primarily to profit declines at Justice stores and increased operating expenses from growth-related investments in new stores, merchandising and design resources and e-commerce capabilities, according to the company.

"Second quarter net income was slightly above our revised expectations, despite softer than expected sales in January driven primarily by challenging weather that continued to negatively impact sales into early March," said Ascena president and CEO David Jaffe.  "However, in warmer regions sales have been in line with expectations.  We are implementing promotional strategies and receipt flow adjustments to bring inventory balances back to targeted levels."

Jaffe remained optimistic about the company outlook, citing very good progress on long range strategic priorities related to synergy initiatives and recently completed construction of a new national retail distribution center and a new e-commerce fulfillment center that becomes operational in the spring.

Ascena's profits were expected to be under pressure following a January 13 announcement regarding holiday sales during November and December.  At the time, Jaffe noted that "a challenging holiday selling season resulted in increased promotional activity.  We successfully cleared excess inventory and have taken the necessary markdowns in the second quarter to transition cleanly into the spring season."

As a result, the company shaved as much as 20 cents of its full year profit forecast, reducing the range of earnings possibilities to $1.10 to $1.15 from earlier guidance of $1.25 to $1.30 for its fiscal year ending in July.  However, late Monday, the company further reduced its full year estimate to a range of $1 to $1.05.

The soft holiday sales and expense pressure followed a respectable showing in the company's first quarter ended October 26 in which each of its formats posted positive same store sales growth.

Source: Retailing Today