Why Are New Homes Getting So Big? Look At Who's Buying Them

February 25, 2014

Though the average size of new homes keeps getting bigger, there is more to this home buying trend than meets the eye, according to Census Bureau data presented by the National Association of Home Builders during the International Builders' Show in Las Vegas.

"The average home size has continued to rise for the past four years, from 2,362 square feet in 2009 to 2,679 square feet in 2013," said Rose Quint, NAHB assistant vice president for survey research.

The share of new homes with at least four bedrooms has also been on an upward trend, rising 34 percent in 2009 to 48 percent last year.  Meanwhile, the percent of homes with at least three full bathrooms has gone from 23 percent in 2010 to 35 percent in 2013, and the share of homes with three-plus garages has climbed from 16 percent in 2010 to 22 percent last year.

The upward trend also applies to the percentage of two-story single family homes started, with the share steadily rising from 51 percent in 2009 to 60 percent in 2013.

As homes get bigger, so does the average sales price, rising from $248,000 in 2009 to $318,000 in 2013.  To find out why homes are getting so big, you need to look at who is buying them.

"It requires a high credit score and a nice income to qualify for a mortgage," said Quint, who noted that the spread between the average Experian credit score of all U.S. consumers and the average home borrower's score has risen from 33 points in the early 2000s to 58 points in 2013.

The median income of new home buyers has steadily climbed from $91,768 in 2005 to $107,607 in 2011.

During the same period, the number of new home sales has dramatically declined, from 1.28 million to 306,000.

"There are not as many people who have the income that can qualify for a new home," said Quint.

Source: National Association of Home Builders

New Home Sales Rebound In January

February 26, 2014

Sales of newly built, single family homes rose 9.6 percent to a seasonally adjusted annual rate of 468,000 units in January from an upwardly revised pace of 427,000 units in the previous month, according to data released today by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  This is the strongest sales pace since July of 2008.

"The fact that the cold weather that hit much of the country didn't stop home buyers from going out and purchasing a piece of the American dream is a great sign," said Kevin Kelly, chairman of the National Association of Home Builders and a home builder from Wilmington, Delaware.  "However, the very low supply of new homes on the market and the continued concern of available buildable lots still have builders cautious about getting ahead of themselves."

"We saw a weaker sales number in December 2013 than was previously trending, and I think much of January's increase is due to sales catching up with pent up demand," said NAHB Chief Economist David Crowe.  "Still, there is little doubt that historically low interest rates, affordable home prices and a healing economy are bringing buyers back into the marketplace."

Regionally, new home sales were generally strong with three of the four regions posting large gains.  The South, the West and the Northeast showed improvement, with respective increases of 10.4 percent, 11.0 percent and 73.7 percent.  New home sales in the Midwest fell by 17.2 percent. 

The inventory of new homes for sale remained steady at 184,000 units in January, which is a 4.7 month supply at the current sales pace.

Source: National Association of Home Builders

Home Depot posts strongest comp growth in 14 years

The Home Depot Announces Fourth Quarter & Fiscal 2013 Results; Increases Quarterly Dividend By 21 Percent And Provides Fiscal Year 2014 Guidance

Sales for fiscal year 2013 were $78.8 billion, an increase of 5.4 percent from fiscal year 2012. Excluding the 53rd week in the prior fiscal year, sales for fiscal year 2013 increased 7.2 percent from fiscal 2012. Total company comparable store sales for fiscal year 2013 increased 6.8 percent, and comp sales for U.S. stores were positive 7.5 percent for the year.

"In 2013, we posted our strongest comp sales growth in 14 years as solid execution and the recovering housing market aided our performance," said Frank Blake, chairman & CEO. "I'd like to thank our associates for their hard work and commitment to our customers."

The Company provided the following guidance for fiscal year 2014:

• Sales growth of approximately 4.8 percent
• Comparable store sales growth of approximately 4.6 percent
• Seven new stores
• Flat gross margin
• Operating margin expansion of approximately 70 basis points
• Tax rate of approximately 37 percent
• Share repurchases of approximately $5 billion
• Diluted earnings-per-share growth after anticipated share repurchases of approximately 16.5 percent to $4.38
• Capital spending of approximately $1.5 billion
• Depreciation and amortization of approximately $1.8 billion
• Cash flow from the business of approximately $8.8 billion

Dillard's, Inc. Reports Fourth Quarter And Fiscal Year Results

February 24, 2014

Dillard's, Inc. announced operating results for the 13 and 52 weeks ended February 1, 2014, including record fiscal year earnings per share adjusted for certain items of $6.99 versus $6.33 in the prior year. 

Summary of the Company's Fourth Quarter Performance

• A 2% increase in comparable store sales
• Diluted earnings per share excluding certain items of $2.69 versus $2.87
• Retail gross margin decline of 180 basis points of sales
• Operating expense improvement of 90 basis points of sales

Fourth Quarter Results

Dillard's reported net income for the 13 week period ended February 1, 2014 of $119.1 million ($2.71 per share) compared to net income of $161.4 million ($3.36 per share) for the 14 weeks ended February 2, 2013.  Included in net income for the 13 week period ended February 1, 2014 is an after tax credit of $0.8 million ($0.02 per share) representing the reversal of asset impairment charges on a store held for sale.  Excluding this item, Dillard's would have reported $118.3 million ($2.69 per share) for the 13 week period ended February 1, 2014.

Included in net income for the prior year 14 week period ended February 2, 2013 is a net after-tax credit totaling $23.9 million ($.50 per share) comprised of the following items:

• a $6.8 million after-tax gain ($0.14 per share) related to the sale of a former retail store location
• after-tax asset impairment and store closing charges of $1.1 million ($0.02 per share)
• approximately $18.1 million ($0.38 per share) in tax benefit due to a one-time deduction related to dividends paid to the Dillard's, Inc. Investment and Employee Stock Ownership Plan

Excluding these items, Dillard's would have reported $137.6 million ($2.87 per share) for the 14 week period ended February 2, 2013.

Dillard's Chief Executive Officer, William T. Dillard, II, stated, "Although it was a profitable fourth quarter, we are disappointed in our gross margin performance, as lower than anticipated sales necessitated heavier markdowns.  We are pleased with our expense control as well as with our strong cash flow for the year."

Fiscal Year Results

Dillard's reported net income for the 52 week period ended February 1, 2014 of $323.7 million ($7.10 per share) compared to net income of $336.0 million ($6.87 per share for the 53 week period ended February 2, 2013.

Included in net income for the 52 week peroid ended February 1, 2014 is a net after-tax credit totaling $5.1 million ($0.11 per share) comprised of the following three items:

• A $7.6 million after-tax gain ($0.17 per share) related to the sale of an investment
• A $1.0 million after-tax credit ($0.02 per share) related to a pension adjustment
• After-tax asset impairment and store closing charges of $3.5 million ($0.08 per share)

Excluding this credit, Dillard's would have reported net income of $318.6 million ($6.99 per share) for the 52 week period ended February 1, 2014, marking a record setting fiscal year earnings per share performance.

Included in net income for the prior year 53 week period ended February 2, 2013 is a net after-tax credit totaling $26.2 million ($0.54 per share) comprised of the following items:

• after-tax gains of $7.4 million ($0.15 per share) related to the sale of three former retail store locations
• after-tax asset impairment and store closing charges of $1.0 million ($0.02 per share)
• approximately $1.7 million ($0.03 per share) in tax benefit due to the reversal of a valuation allowance related to a deferred tax asset consisting of a capital loss carryforward
• approximately $18.1 million ($0.37 per share) in tax benefit due to a one-time deduction related to dividends paid to the Dillard's, Inc. Investment and Employee Stock Ownership Plan

Excluding these items, Dillard's would have reported $309.8 million ($6.33 per share) for the 53 week period ended February 2, 2013.

Net Sales - 13 Weeks

Total merchandise sales for the 13 week period ended February 1, 2014 were $2.013 billion and $2.087 billion for the 14 week period ended February 2, 2013.  Similar to many other retailers, the Company follows the retail 4-5-4 reporting calendar which included an extra week of operations in the fourth quarter of 2012.  Based upon comparable 13 week periods ended February 1, 2014 and February 2, 2013, total merchandise sales increased 1% and sales in comparable stores increased 2% for the fourth quarter.

Sales trends for the fourth quarter were strongest in ladies' accessories and lingerie followed by shoes.  Sales trends were strongest in the Central region, followed by the Eastern and Western regions, respectively.

Net sales (which include the operations of the Company's construction business, CDI Contractors, LLC ("CDI") for the 13 weeks ended February 1, 2014 were $2.034 billion and $2.106 billion for the 14 weeks ended February 2, 2013.

Net Sales - Fiscal Year

Total merchandise sales for the 52 week period ended February 1, 2014 were $6.439 billion and $6.489 billion for the 53 week period ended February 2, 2013.  Based upon comparable 52 week periods ended February 1, 2014 and February 2, 2013, total sales increased 1% and sales in comparable stores increased 1% for the fiscal year.

Net sales (including CDI) for the 52 weeks ended February 1, 2014 were $6.532 billion and $6.593 billion for the 53 weeks ended February 2, 2013.

Gross Margin/Inventory

Gross margin from retail operations (which excludes CDI) decreased 180 basis points of sales to 32.8% for the 13 weeks ended February 1, 2014 compared to 34.6% for the 14 weeks ended February 2, 2013.  The decline resulted from increased markdowns in response to lower than anticipated sales.  Consolidated gross margin for the 13 weeks ended February 1, 2014 decreased 180 basis points of sales to 32.6% from 34.4% during the 14 weeks ended February 2, 2013.

Gross margin from retail operations decreased 40 basis points of sales to 35.7% for the 52 weeks ended February 1, 2014 compared to 36.1% for the 53 weeks ended February 2, 2013.  Consolidated gross margin for the 52 weeks ended February 1, 2014 decreased 30 basis points of sales to 35.3% from 35.6% during the 53 weeks ended February 2, 2013.

Inventory increased 4% at February 1, 2014 compared to February 2, 2013.

Selling, General & Administrative Expenses

Selling, general and administrative expenses ("operating expenses") decreased 90 basis points of sales during the fourth quarter ended February 1, 2014.  Operating expenses were $439.2 million and $474.9 million for the 13 weeks ended February 1, 2014 and 14 weeks ended February 2, 2013, respectively.  The $35.7 million decline in operating expenses is primarily due to the additional week of operations in the prior year fourth quarter.

Operating expenses decreased 40 basis points of sales during the fiscal year ended February 1, 2014.  Operating expenses were $1632.0 million and $1671.5 million for the 52 weeks ended February 1, 2014 and 53 weeks ended February 2, 2013, respectively.

Share Repurchase

During the fiscal year ended February 1, 2014, the Company repurchased $301.6 million (3.9 million shares) of Class A Common Stock at an average price of $78.30 per share under the Company's share repurchase plan.  No shares were repurchased during the fourth quarter of 2013.  Remaining authorization under the share repurchase programs at February 1, 2014 was $290.4 million.

Total shares outstanding (Class A and Class B Common Stock) at February 1, 2014 and February 2, 2013 were 43.9 million and 47.8 million, respectively.

Store Information

During the fourth quarter of 2013, the Company closed its University Mall location in Chapel Hill, North Carolina (64,000 square feet), its Collin Creek Mall location in Plano, Texas (195,000 square feet) and its Twin Peaks Mall location in Longmont, Colorado (90,000 square feet).  The Company closed six locations during fiscal year 2013.

Dillard's plans to open two new stores in October of 2014:

• The Shops at Summerlin in Las Vegas, Nevada (200,000 square feet)
• The Mall at University Town Center, Sarasota, Florida (180,000 square feet)

At February 1, 2014, the Company operated 278 Dillard's locations and 18 clearance centers spanning 29 states and in Internet store at www.dillards.com.  Total square footage at February 1, 2014 was 50.5 million.

Source: Dillard's, Inc. Investor Relations

Housing Affordability Holds Steady In Fourth Quarter

February 20, 2014

Slightly lower median home prices along with uptick in mortgage rates contributed to housing affordability holding steady in the fourth quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, released today.

In all, 64.7 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $64,400.  This is virtually the same as the 64.5 percent of homes sold that were affordable to median-income earners in the third quarter.

Meanwhile, the national median home price dipped from $211,000 in the third quarter to $205,000 in the fourth quarter, while average mortgage interest rates rose from 4.45 percent to 4.54 percent in the same period.

"Housing affordability is stabilizing at a time when pent-up demand and ongoing job growth are helping housing markets across the nation to gradually strengthen," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "While this bodes well for housing in 2014, builders continue to face challenges, including tight credit for home buyers, inaccurate appraisals, and a shortage of workers and buildable lots."

Youngstown-Warren-Boardman, Ohio-Pennsylvania was the nation's most affordable major housing market, as 89.4 percent of all new and existing homes sold in this year's fourth quarter were affordable to families earning the areas' median incomes of $53,900.  Meanwhile, Kokomo, Indiana claimed the title of most affordable smaller market, with 96.3 percent of homes sold in the fourth quarter being affordable to those earning the median income of $60,100.

Other major U.S. housing markets at the top of the affordability chart in the fourth quarter included Harrisburg-Carlisle, Pennsylvania; Syracuse, New York; Buffalo-Niagara Falls, New York; and Scranton-Wilkes-Barre, Pennsylvania; in desceneing order.

Smaller markets joining Kokomo at the top of the affordability chart included Springfield, Ohio; Monroe, Michigan; Vineland-Milville-Bridgeton, New Jersey; and Cumberland, Maryland-West Virginia.

For a fifth consecutive quarter, San Francisco-San Mateo-Redwood City, California held the lowest spot among major markets on the affordability chart.  There, just 14.1 percent of homes sold in the fourth quarter were affordable to families earning the area's median income of $101,200.

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

All of the five least affordable small housing markets were in California.  At the very bottom of the affordability chart was Santa Cruz-Watsonville, where 18.6 percent of all new and existing homes sold were affordable to families earning the area's median income of $73,800.  Other small markets at the lowest end of the affordability scale included Salinas, San Luis Obispo-Paso Robles, Napa, and Santa Rosa-Petaluma, respectively.

Go to nahb.org/hoi for tables, historic data and details.

Source: National Association of Home Builders.

Cold Weather Drives Housing Starts Down In January

February 19, 2014

Due largely to unusually severe weather across much of the nation, housing starts fell 16 percent to a seasonally adjusted annual rate of 880,000 units in January, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Meanwhile, single-family permits, which are often a harbinger of future building activity, posted a modest 1.3 percent decline to a seasonally adjusted annual pace of 602,000 units.

"Cold weather clearly put a chill on new home construction last month and this is also reflected in our latest builder confidence survey," said Kevin Kelly, chairman of the National Association of Home Builders and a home builder and developer from Wilmington, Delaware.  "Further, builders continue to face other obstacles, including rising materials prices and a lack of buildable lots and labor."

"Though the decline in starts is largely weather related, it is worth noting that on the upside, housing production for the fourth quarter was above 1 million for the first time since 2008 while single-family permits held relatively steady," said NAHB Chief Economist David Crowe.  "The less weather sensitive permits data suggests that our forecast for solid growth in single-family housing production in 2014 remains on track, as pent-up housing demand is unleashed."

In January, single-family housing starts posted a 15.9 percent decline to 573,000 units while multifamily production fell 16.3 percent to 307,000 units.

Regionally, single-family housing starts activity rose 10.7 percent in the West and 2 percent in the Northeast and fell 13.8 percent in the South and 60.3 percent in the Midwest.

Overall permit activity fell 5.4 percent to 937,000 units in January.  The decline was due primarily to a pullback in buildings with five units or more, where permits fell 13 percent to 309,000 units.

Regionally, overall permit issuance was down 10.3 percent in the Northeast and 26 percent in the West, but rose 8.6 percent in the Midwest and 3.4 percent in the South.

Source: National Association of Home Builders

Walmart Thinking Big With Small Formats Amid Soft Sales

February 20, 2014

Walmart knew fourth quarter results announced Thursday morning were going to be bad and its outlook weak, so it gave investors something more substantial to digest by announcing plans to double the number of small format stores it will open this year and an increased omnichannel focus.

Just four months after announcing plans to open between 120 and 150 small format stores under the banners of Walmart Neighborhood Market and Walmart Express, the company upped its growth target to a range of 270 to 300 units.  Walmart currently operates 346 Neighborhood Market stores and 20 Walmart Express stores, which it said continue to deliver positive same store sales and traffic each quarter.  Last year, comps for the Neighborhood Market format rose 4% and were driven by fresh food and pharmacy, according to the company.

The greater than expected expansion of the small formats - Walmart maintained its forecast of 115 new supercenters in 2014 - required the company to increase its capital expenditure budget for the Walmart U.S. division by $600 million to a range of $6.4 billion to $6.9 billion from a forecast provided last October that called for spending between $5.8 billion and $6.3 billion on U.S. growth.

"Customers' needs and expectatons are changing.  They want to shop when they want and how they want, and we are transforming our business to meet their expectations," said Walmart U.S. president and CEO Bill Simon.  "Customers appreciate the broad assortment of our supercenters for their stock-up trips as well as our small store formats for fill-in trips.  By unlocking this growth opportunity and further combining our supercenters and small store formats with an unlimited selection available through ecommerce, we provide our customers with anytime, anywhere access to our brand."

Walmart has been methodical, to put it mildly in its approach to small format expansion, considering the first Neighborhood Market stores opened in the late 90s.  However, Thursday's announcement marks the beginning of an era of accelerated growth for a format viewed as a key element in Walmart's omnichannel approach to serving shoppers whose expectations are evolving rapidly.

"Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail.  This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash," Simon Said.  "In addition to providing best-in-class one-stop shopping at supercenters, we believe that accelerating our small store expansion will also strengthen our market share and create greater effieiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience."

News of the small format expansion helped soften the blow of Walmart's worst financial performance in recent memory and an inauspicious beginning to Doug McMillon's tenure as president and CEO of Wal-Mart Stores.  McMillon assumed his current responsibilities on February 1 after former president and CEO Mike Duke stepped down and McMillon was elevated from his role as president and CEO of Walmart International.

Total company sales during the fourth quarter increased 1.4% to $128.8 billion, including a $1.8 billion negative impact related to foreign currency translation.  Net income fell 21% to $4.4 billion while earnings per share fell 19.8% to $1.34 from $1.67 in the fourth quarter the prior year.

For the full year, Walmart's sales increased $1.6 billion to $473.1 billion, including a $5.1 billion negative impact from foreign currency translation.  Net income declined 5.7% to $16 billion and earnings per share fell 3.2% to $4.85 from $5.01 the prior year.

Those numbers, while bad, had been previously announced several weeks ago when a portion of the weakness was legitimately attributed to terrible winter weather and a greater than anticipated sales impact resulting from a reduction in the federal government's Supplemental Nutrition Assistance Program.  That left McMillon free to look forward and offer a more positive view of the future and initiatives to drive growth.

"Comp sales improvement is a key priority, and we'll focus on being even stronger item and category merchants, delivering value and improving our service level.  We'll remain focused on our expense structure, and innovate to improve productivity and aid our ability to deliver every day low prices.  Our EDLP approach earns trust with customers and helps us keep our cost structure low," McMillon said.  "We'll invest aggressively in e-commerce and increase our small store rollout in the U.S., as we've done in several other countries, to deliver value and convenience.  The combination of supercenters and smaller formats closer to customers' homes, along with e-commerce and mobile commerce, will enable us to increase our relevance for the Walmart brand around the world."

In the meantime, Walmart anticipates challenging market conditions in the first quarter and year ahead, which could cause profits to fall below prior year levels.  Same store sales at the Walmart's U.S. stores and Sam's Club are expected to be flat as the new fiscal year got off to a rocky start with more bad weather.

"We expect economic factors to continue to weigh on our outlook," said Walmart CFO Charles Holley.  "Some of the factors affecting our consumers include reductions in government benefits, higher taxes and tighter credit.  Further, we have higher group health care costs in the U.S.  These concerns, combined with investments in e-commerce, will make it difficult to achieve the goal we have of growing operating income at the same or faster rate than sales."

He indicated a 3% to 5% increase in sales during the current fiscal year that was forecast last fall now looks overly optimistic and said the company expects to be toward the lower end of that forecast.

Source: Retailing Today

California Market Guide

The Accelerated Analytics team is pleased to announce the California market guide is complete and ready for download.  This valuable guide provides DIY / Hardline vendors with detailed insights into the California market.  

Click here to buy now!

The California market, with a population of 32,253,956 and total housing units of 13,680,081, represents a significant portion of both Home Depot and Lowe’s business in the United States. In fact, Home Depot drives about 10% of total revenue from California, and Lowe’s drives about 6% of its total revenue from California.

The California market report provides vendors with detailed research on California which can be used for understanding sales trends and for future planning. 

Key topics covered in this report include:

• Unemployment
• Construction activity
• Drought conditions
• Heating degree days
• Cooling degree days
• 2014 to 2017 economic forecast
• Demographics by store including: population, median age, percentage of high school graduate or higher, total housing units, median household income, foreign born population, individuals below the poverty line, consumer spending per household. 
• Store grade (A, B, C, D) assigned to each Home Depot and Lowe’s store based on 2013 dollars sold for all Accelerated Analytics vendors.
• Tutorial on how to conduct store analysis and assign store grades for your products.
• Comparison of store grades in zip codes with both a Home Depot and Lowe’s store. 
• Password for an interactive map of Home Depot and Lowe’s stores in California colored by store grade.
• Excel data file with data for each store which can be used for additional analysis.

Click here to buy now!

More Consumers Will Hold Onto Those Tax Refunds

February 19, 2014

More Americans this year are expected to put their tax returns in the bank.  According to the National Retail Federation's Tax Returns Survey conducted by Prosper Insights & Analytics, 46% of those expecting a refund this year will put their money into savings, up from 44% last year and the highest percent in the survey's history.

Two-thirds (66.6%) of those surveyed are expecting a refund this year.  As for other ways consumers will use their refunds, 37.7% will pay down debt, and one-quarter (25.3%) will use it toward everyday expenses.  One in ten (10.7%) will treat themselves and invest in a major purchase, and 12.8% will spend their refunds on a vacation.

Young adults between 18 and 24 are most likely to save their tax returns, with nearly six in ten (57.7%) planning to contribute to their savings accounts, higher than any other age group.  They are also the most likely to use their refunds for everyday expenses (34%) and to purchase a big ticket item such as a new television or piece of furniture (18.3%).  Three in ten (30.2%) will use their checks to pay down debt, second to last behind those 65 and older (27%).

"Financial security is top of mind for all Americans, and refunds can play a huge role in helping achieve that," said NRF president and CEO Matthew Shay.  "Whether consumers use a refund to pay down debt, bulk up their savings, or buy that big ticket item they've been saving for, a check from Uncle Sam, large or small, goes a long way these days."

Source: Retailing Today 

Lowe's Gears Up For Its Busiest Season

February 19, 2014

A week after rival Home Depot announced plans to hire 80,000 seasonal spring employees, Lowe's announced its plans to hire approximately 25,000 seasonal employees at its U.S. stores for the busy spring season.

Seasonal jobs available are focused on customer support and include cashiers, lawn and garden employees, loaders and stockers.

The number of hours worked per week will vary based on the needs of individual stores, but, on average, seasonal employees could work an estimated 20 or more hours per week.  The length of the seasonal employment varies; however, seasonal employees are most needed in spring and summer months, typically from February until September.  The company plans to hire and train new seasonal employees first in areas where the climate has begun to warm, and continue on a market-by-market basis by climate and geography.  Hiring has already begun in Florida, south Texas, Arizona and southern California where warmer, spring-like temperatures are arriving.

"Warmer temperatures stir homeowners to get started on projects they've planned during winter and they are often challenged when choosing the right products and solutions for their homes," said Scott Purvis, VP, human resources, operations.  "As spring arrives, our stores are stocked with popular new tools, lawn and garden, paint and patio products.  We want our stores staffed with knowledgeable employees who provide exceptional service and make shopping and selection easier for our customers."

Source: Retailing Today

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

February 20, 2014

The Conference Board Leading Economic Index for the U.S. increased 0.3 percent in January to 99.5, following no change in December, and a 0.9 percent increase in November.

"The U.S. Leading Economic Index continues to fluctuate on a monthly basis, but the six-month average growth rate has been relatively stable in recent months, which suggests that the economy will remain resilient in the first half of 2014 and underlying economic conditions should continue to improve," said Ataman Ozyildirim, Economist at The Conference Board.  "Correspondingly, the U.S. Coincident Economic Index, which measures current conditions, has continued rising steadily."

"The increase in the Leading Economic Index reflects an economy that is expanding moderately, although the pace is somewhat held back by persistent and severe inclement weather in most parts of the country," said Economist Ken Goldstein.  "If the economy is going to move on to a faster track in 2014 compared to last year, consumer demand and especially investment will need to pick up significantly from their current trends."

The Conference Board Coincident Economic Index for the U.S. increased 0.1 percent in January to 108.1, following a 0.1 percent increase in December, and a 0.4 percent increase in November.

The Conference Board Lagging Economic Index for the U.S. increased 0.3 percent in January to 121.6, following a 0.4 percent increase in December, and no change in November.

Source: The Conference Board

Ace Enjoys Record Year

February 19, 2014

Ace Hardware's unique value proposition allowed it to withstand strong competition from Home Depot and Lowe's in 2013 and grow annual sales by 8.2% to a record $4.2 billion.

"We outperformed our operating plan, exceeding $4 billion in consolidated revenues and $100 million in net income for the first time in our history," said president and CEO John Venhuizen.

Net income was $104.5 million for fiscal 2013, an increase of $22.7 million, or 27.8%, compared with $81.8 million in fiscal 2012.

The results for fiscal 2013 included a charge of $6.2 million related to the estimated costs to close the Toledo, Ohio Retail Support Center, while fiscal 2012 included a charge for the loss on the early extinguishment of debt of $19.9 million.

The results for fiscal 2012 also included a $7.0 million gain on the sale of paint assets, net of acquisition and disposition costs.

Total revenues for the fourth quarter of 2013 were $1.0 billion, an ancrease of 12.1%.  Net income was $23.4 million for the fourth quarter of 2013, an increase of 4.5% from the $22.4 million earned in 2012.

"Ace retailers also had a very good year," continued Venhuizen.  "Comparable-store retail sales were up 3.5% in the fourth quarter and up 4.3% for the year, with 75% of retailers surveyed reporting record net profits."

The December 2012 acquisition by Ace of WHI Holdings Corporation, the indirect owner of the 85 store Westlake Ace Hardware retail chain, resulted in the consolidation of WHI's financial statements into Ace's financial statements for 2013.  This affects the comparability of the 2013 and 2012 financial statements and results in a reduction of reported wholesale revenues, as wholesale revenues from Ace to WHI are now eliminated.  This elimination totaled $83.7 million in wholesale revenues for all of 2013 and $21.6 million for the fourth quarter of 2013.

Ace added 152 new domestic stores and canceled 85 domestic stores in fiscal 2013 for a net increase in store count of 67.  This brought the company's total domestic store count to 4,171 at the end of 2013.

Source: Retailing Today

Poor Weather Puts A Damper On Builder Confidence In February

February 18, 2014

Unusually severe weather conditions across much of the nation along with continued concerns over the cost and availability of labor and lots caused builder confidence in the market for newly-built, single-family homes to post a 10-point drop to 46 on the National Association of Home Builders/Wells Fargo Housing Market Index, released today.

"Significant weather conditions across most of the country led to a decline in buyer traffic last month," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor."

"Clearly, constraints on the supply chain for building materials, developed lots and skilled workers are making builders worry," said NAHB Chief Economist David Crowe.  "The weather also hurt retail and auto sales and this had a contributing effect on demand for new homes."

Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home 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.

Looking at three-month moving averages for regional HMI scores, the West was unchanged at 63 in February while the Midwest registered a one-point decline to 57, the South registered a three-point decline to 53 and the Northeast posted a four-point decline to 38. 

More information on housing statistics is available at housingeconomics.com.

Source: National Association of Home Builders

NRF Calls For Immediate Adoption Of Chip-And-PIN Tech

February 12, 2014

At a press conference this week, the National Retail Federation called for widespread adoption of chip-and-PIN payment card technology by U.S. retailers and their partners.

"The chip validates that it's the real card," said Tom Litchford, VP retail technologies for NRF.  "The PIN provides two levels of validation."

Litchford said that while an encrypted microchip makes creating a counterfeit card impossible, the PIN number makes it much harder for a thief to impersonate a customer using a stolen card.  Litchford and fellow panelists Mallor Duncan, senior VP and general counsel, NRF and David French, senior VP government relations, NRF, all agreed that only verifying a chip-enabled card with a customer's signature does not go far enough to take advantage of the chip technology's capabilities to prevent card fraud.

Whether the U.S. retail industry adopts chip and PIN or chip and signature, migrating to chip-based cards will not be cheap.  Duncan estimated that switching to either form of chip-based card verification would cost the U.S. retail industry $20 billion to $30 billion during a period of several years.  This includes costs of installing and upgrading hardware and software, as well as costs of the chip cards themselves, which run to a few dollars per individual card.

The NRF wants banks, acquirers, card issuers and other partners in issuing and accepting payment cards to share costs associated with migrating to chip-and-PIN technology.  Duncan said that while technically the acquiring merchant bank usually has to pay any costs associated with card fraud, the costs often wind up getting shifted back to retailers after the fact.

"Our goal is to start migrating right away," Litchford said in urging retailers not to wait for the upcoming October 2015 shift in card fraud liability.  At that point, any U.S. retailer that experiences card fraud relating to a customer using chip-based cards must assume any costs if they do not have equipment that can process chip-based card payments.

Looking ahead, Litchford said he expects that eventually, retailers will use contactless payment technology.

"We can easily provide contactless capability," said Litchford.  "Chip cards would also have an NFC chip.  It's 'tap and go' payment where you don't swipe a card.  It will probably migrate faster on mobile phones than cards.  Isis, Visa and Square are all involved in contactless payment."

Source: Retailing Today

February 2014 Monthly Economic Review: Looking Back, Looking Forward; Stronger Economy Points To Brighter Outlook For Retail

February 6, 2014

2013 was a challenging year for retailers that concluded with one of the most interesting holiday seasons on record.  Looking ahead in 2014, the economic outlook is strengthening and the moderate growth seen during the second half of 2013 should provide greater confidence as we move further into the new year.

NRF expects retail industry sales (which exclude automobiles, gas stations and restaurants) for 2014 to increase 4.1 percent over the previous year - slightly higher than the preliminary 3.7 percent growth the industry garnered in 2013.  Digital channels will also experience solid growth this year, with online sales expected to increase between 9 and 12 percent, the same pace as the preliminary 10.3 percent gain in 2013.*

But before wee look ahead, let's look at 2013.  The economy progressed slowly early in the year but gave way to stronger results in the second half.  Specifically, the overall economy grew a mere 1.1 percent annual rate during the first quarter last year, rising to 4.1 percent in the third quarter and moderating to 3.2 percent in the fourth quarter.  And, job creation, still very much needed in this economic recovery, had an average monthly growth rate of 182,500 last year, seen by many as 'unspectacular.'

The pace of retail sales growth was only 4 percent faster than it was in 2012, based on the three-month moving average, year-over-year.  And though that appears steady, we know that retail spending throughout 2013 was incredibly volatile, falling off in the spring to just 3.2 percent year-over-year average growth.

Consumers started the year faced with higher taxes, surging gasoline prices and federal budget cuts, and while these factors eventually evened themselves out in relation to the impact on consumer spending, interest rate increases in May and June, and the Federal policy impasse in the fall pulled the economy in the opposite direction.  Despite these challenges, consumer spending remained resilient and continues to contribute greatly to the current momentum.

Although early reports for the holiday season came in blurry, American consumers gave the economy a boost in the final months of the year.  It was a tricky holiday season to navigate by retailers and consumer alike; initial concerns about a hangover from October's federal government shutdown, a shortened holiday season calendar and unusually strong winter storms all proved to be quite challenging for companies looking to make the most of consumers limited discretionary budgets.  As early as October, intense promotion and discounting ensued, continuing well into the season. 

Looking ahead to 2014, while the economy looks better for retailers, consumers could be conditioned to expect a continuation of holiday promotions and discounts, putting pressure on many retailers' bottom lines once again.  Some of the fundamental building blocks for the year ahead are:

• Economic growth is expected to be above its long-term historical average.  The baseline estimate for growth in the economy as measured by real GDP is between 2.6 and 3 percent, a noticeable improvement from the estimated 1.9 percent rate for 2013, and the fastest pace in the past three years.
• The labor market is expected to continue its modest recovery, averaging approximately 185,000 jobs per month, helping drop unemployment to near 6.5 percent or lower by the end of 2014.
• Inflation as measured by the CPI is predicted to inch higher to as much as 1.7 percent in 2014.
• The housing sector is expected to continue to improve in 2014, and stronger household and business confidence should spur more consumers spending overall.

While we are cautiously optimistic, we cannon discount the unexpected possibility of a replay of the last two years.  Though government headwinds subsided i part due to the bipartisan budget agreement, there are other issues creating uncertainty.  The expired Emergency Unemployment Compensation, the debt ceiling, and other regulatory uncertainty pose downside risks to the outlook.

Regarding Federal Reserve monetary policy, the data outlined above is consistent with their decision to reduce asset purchases.  However, their challenge is to bring about a normalization of short-term interest rates without creating undue market volatility, letting inflation get out of control and undoing all the positive effects of their multi-year efforts.  Of course, geo-political issues are ever present.  Slower global growth, a tightening of financial conditions or a pop in oil prices are all major risks to the outlook.

Bottom line: given the strong performance of recent economic data and the appearance of a healthier consumer and business outlook, 2014 could finally be the year that the recovery gets traction.  While we are confident in the economy's progress, the pace is not expected to reduce the slack that accumulated during the recent recession.

*NRF forecasted 3.4 percent increase in retail sales for 2013 and online sales to grow between 9.0 and 12.0 percent.  Final 2013 revisions will be available from the U.S. Census on or about April 30, 2014.

Source: National Retail Federation

Home Depot Prepares For Its Busiest Season

February 12, 2014

Against the backdrop of a growing national debate over the minimum wage and part-time versus full-time workers, Home Depot has begun a huge seasonal hiring surge in preparation for spring.

The nation's largest home improvement retailer said it planned to hire approximately 80,000 seasonal employees, many of whom are part-time, the same day that President Obama was expected to sign an executive order unilaterally increasing to $10.10 the minimum wage the federal government pays contract workers.

"Spring is our peak hiring season, giving us the opportunity to find some of the best associates who are passionate about customer service," said Tim Crow, EVP human resources.

Job seekers can research openings and begin applying now at www.careers.homedepot.com.  All applicants must apply online.  Job opportunities are available on a market-by-market basis, based on individual store needs and geographical variance in climate.  The company encourages college students, retirees, veterans and reservists to apply.

Source: Retailing Today

January Retail Sales Take A Hit From Mother Nature

February 13, 2014

Consumers leveled off post-holiday shopping ans spending in the beginning of the year due in part to severe winter weather in much of the country.  According to the National Retail Federation, January 2014 retail sales, excluding automobiles, gas stations and restaurants, were flat seasonally adjusted month-to-month, yet increased 3% unadjusted year-over-year.

January retail sales released by the U.S. Census Bureau, which include categories such as automobiles, gas stations, and restaurants, decreased 0.4% seasonally adjusted month-to-month, yet increased 2.6% year-over-year.

Other findings from the January retail sales report include:

• Building material and garden equipment and supplies dealers stores' sales increased 1.4% seasonally-adjusted month-to-month and 3.3% unadjusted year-over-year.
• Clothing and clothing accessories stores' sales decreased 0.9% seasonally-adjusted month-to-month, yet increased 1.4% unadjusted year-over-year.
• Electronics and appliance stores' sales increased 0.4% seasonally-adjusted month-to-month, yet decreased 4.9% unadjusted year-over-year.
• Furniture and home furnishings stores' sales decreased 0.6% seasonally-adjusted month-to-month, and 2.1% unadjusted year-over-year.
• General merchandise stores' sales decreased 0.1% seasonally-adjusted month-to-month, yet increased 1.4% unadjusted year-over-year.
• Health and personal care stores' sales decreased 0.6% seasonally-adjusted month-to-month, yet increased 3.1% unadjusted year-over-year.
• Non-store retailers' sales decreased 0.6% seasonally-adjusted month-to-month, yet increased 6.5% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores' sales decreased 1.4% seasonally-adjusted month-to-month and 1.5% unadjusted year-over-year.

"Following a solid holiday sales season, it seems that many consumers decided to take a break from the stores and shopping malls this January in an attempt to avoid the winter weather," NRF president and CEO Matthew Shay said.  "While the dip in retail sales was somewhat anticipated, it is concerning that both jobless claims came in above projections and that consumer spending was flat in January; it's not the way to kick off a new year."

Source: Retailing Today

Record Year For CVS

February 11, 2014

CVS Caremark's fourth-quarter results came in at the high end of expectations and helped produce a record year; however, one of the key topics analysts discussed was the company's recent decision to stop selling tobacco products in all its stores by October 1.

"Last week we announced our decision to exit the tobacco category, a category that we believe is inconsistent with our growing role in the changing healthcare marketplace," Larry Merlo, president and CEO, told analysts.  "Simply put, this was the right decision at the right time.  There is a far greater focus emerging on health outcomes, managing chronic disease and reducing costs, and exiting the tobacco category more closely aligns us with the goals of patients, clients and providers, positioning our company for future growth."

Merlo made note of the overwhelmingly positive response across an array of key constituents, including customers, prospective and current clients, benefit consultants, legislators and policymakers, and public health and Medicaid officials.  "All of whom see the health benefits, as well as the role that pharmacy can play in advancing smoking cessation and better managing chronic disease," Merlo said.

As reported, the move is expected to result in a loss of approximately $2 billion in revenues on an annual basis from the tobacco shopper.  The $2 billion represents about 3% of earnings.

"When you look at that eight feet to ten feet that tobacco commands today, there will be something replacing that space, and to be clear, it is not going to make up $2 billion in revenues, but it will be something.  And there are some things that are being tested as we speak," Merlo said when asked about its plans at retail and the steps it would take to help offset some of the loss.

"We are seeing this tobacco decision as an opportunity to connect even more consumers as an expert in health and beauty and to build our loyalty with them.  As we focus specifically on the front store, it is really around driving what we will call 'smart growth' and I think ther it has three elements: taking ExtraCare to the next level, the second is focusing on our core strength in health and beauty, and the third is driving our store brand penetration," added Helena Foulkes, president of CVS/pharmacy.

During the quarterly call with analysts, Merlo also provided analysts with a broad-reaching business update including:

• The impact of the Affordable Care Act and the role CVS Caremark can play in serving new customers and supporting health plans.
• Its joint venture with Cardinal Health to form the largest generic sourcing entity in the United States.  The venture will help spur innovative purchasing strategies with generic manufacturers and is expected to be operational by July.
• The 2014 selling season, which has resulted in net-new wins of about $2 billion, excluding attrition in the Med D business.  Merlo said that while it is too early to provide an update on the 2015 selling season, the company is "well-positioned" to both retain business and gain share.
• The specialty pharmacy business, which posted a revenue increase of about 22% year over year.

Merlo added that the company expects to see significant growth in the specialty space and is well-positioned to capitalize on the opportunity.  Enter its acquisition in January of Coram, the specialty infusion services and enteral nutrition business unit of Apria Healthcare Group.

"This provides us with a new set of capabilities to manage not just the cost of infused drugs, but also to reduce the length of hospital stays and to help patients move from higher cost sites of service, like hospital outpatient centers, to more cost-effective locatons, such as the patient's home or a physician's office," Merlo said.

Furthermore, its new Specialty Connect offering is on schedule to roll out in 2014.  Analogous to the Maintenance Choice program, Specialty Connect integrates mail and retail capabilities to provide both greater choice and convenience for members.

CVS Caremark's MinuteClinic business posted a revenue increase of more than 10% during the quarter and reached a milestone with 800 total clinics in 28 states and Washington, D.C.

Net revenues for the three months ended December 31 increased 4.6%, or $1.4 billion to $32.8 billion, up from $31.4 billion the year-ago period.  For the year, total revenue rose 3% to $126.8 billion compared with $123.1 billion last year.

Revenues in the retail pharmacy segment increased 5.6% to $17.2 billion during the quarter.  Same-store sales rose 4%, with pharmacy same-store sales up 6.8%.  Front-end same-store sales decreased 1.9% due to softer traffic, which was partially offset by an increase in basket size, the company stated.  For the year, total revenue in the retail pharmacy segment rose 3.1% to $65.6 billion.  Same-store sales increased 1.7% for the year, with pharmacy same-store sales up 2.6% and front-end, same-store sales down 0.5%.

Income from continuing operations attributable to CVS Caremark for the three months increased 12.4% to $1.3 billion, compared with $1.1 billion in the year-ago period.  Adjusted earnings per share from continuing operations attributable to CVS Caremark for the three months ended December 31, 2013 and 2012 was $1.12 and $0.96 respectively, at the high end of guidance.

Income from continuing operations attributable to CVS Caremark for the year increased 18.8% to $4.6 billion.  Excluding a gain from a legal settlement and the loss on early extinguishment of debt, adjusted EPS increased 15.7% in 2013 to $3.96, at the high end of guidance.

"I'm very pleased with our fourth-quarter results, with adjusted earnings per share coming in at the high end of our guidance at $1.12 per share, capping off a terrific year," Merlo said.  "For full year 2013, we delivered strong growth in revenues, gross margins, operating margins and earnings across the CVS Caremark enterprise."

Source: Retailing Today

Walmart Doubles Down On Canadian Brick And Mortar

February 6, 2014

Walmart is marking the 20th anniversary of its entry into Canada this year by spending big bucks to expand physical stores and distribution capacity while devoting a much smaller portion of a $500 million budget to e-commerce.

Walmart said it would spend close to $500 million in Canada this year with $376 million of that amount dedicated to 35 supercenter projects totaling one million square feet of new selling space.  Walmart currently operates 389 stores in Canada, of which 247 are supercenters.  By year end it expects to have 395 stores of which 282 will be supercenters.

To support the expanded food footprint, $91 million of the $500 million capital expenditure budget will be used for new and existing distribution center projects.  Getting the short end of the cap-ex stick is Canadian online operations where $31 million, or slightly more than 6% of the $500 million, is allocated for e-commerce projects.

"Customers in every region of Canada are looking to save money on their entire list of shopping needs," said Shelley Broader, Walmart Canada's president and CEO.  "Delivering on our commitment to help lower the cost of living is our top priority, and our growing network of supercentres and our expanding walmart.ca offering enable us to do just that."

Source: Retailing Today

Sears Launches Pickup Service For Online Purchases

February 10, 2014

Sears has launched a new service powered by the chain's Shop Your Way mobile app that enables customers to pick up their online purchases at any Sears store within five minutes of arrival.  The service allows members to pick up purchases without leaving their cars, hence its name: In-Vehicle Pickup.

"The In-Vehicle Pickup option takes our 'Free Store Pickup - Ready in 5' guarantee even further and out to the parking lot," said Leena Munjal, SVP, member experience and integrated retail, Sears Holdings.  "In-Vehicle Pickup on this scale is an industry first and another example of how we are constantly innovating and adding benefits that make shopping a more convenient experience for our members."

To take advantage of the new service, Shop Your Way members shop online, completing their purchase via computer or tablet.  At check-out, they choose In-Vehicle Pickup and input details of the vehicle they will arrive in, then sign in to their Shop Your Way mobile app and enable location services before leaving for the store.  Upon arrival at their local Sears, members pull up to the In-Vehicle Pickup spots located conveniently outside of the merchandise pickup location; use the Shop'In feature in the Shop Your Way mobile app to initiate In-Vehicle Pickup - a timer will start on the phone; and five minutes later or less an associate takes the purchase to the car and verifies it by using the payment method used online.

"When the transaction is complete, members can easily provide instant feedback on their experience through the Shop Your Way app," Munjal said.  "This feedback is extremely valuable as it helps us further enhance our capabilities across all channels."

Source: Retailing Today