Retailers Are Starting Off 2014 With Deeper Discounts

January 23, 2014

U.S. retailers are getting 2014 off to a heavily promotional start, building on last year's deep-discounting trends, according to Morgan Stanley Analyst Kimberly Greenberger.  The 26 retailers she covers are about 40% more promotional than they were during the same month last year, she wrote in a research note.  "Our data indicates not only are promotions more widespread this year, but also discounts are deeper."

The pain retailers felt at the end of 2013 isn't showing signs of relief in the new year.  Following the worst holiday season since 2008 - one that was underscored by dramatically reduced prices and lower margins - the heavily promotional environment has persisted into January.

"The 'Polar Vortex' likely hindered week one, but our mall visit indicated week two was only marginally better, despite temperatures essentially in-line with last year."

Of the 26 retailers that Greenberer tracks, only Urban Outfitters' Anthropologie was "unequivocally less promotional" than last January.  Abercrombie & Fitch and Gap's Banana Republic were among stores that had a higher percentage of inventory on promotion, as did Macy's, which outperformed most of the sector in the November to December period.

Management at Lululemon and Express made statements earlier this month that traffic in January has continued to be weak, with Express saying it expects to remain promotional during the month.  On Thursday, the women's clothing retailer offered shoppers 40 percent off every item, a deal that was prevalent in its pre-holiday rush.

Although January tends to be big on discounts, as retailers make room for spring products, news of heavier-than-typical promotions does not bode well for the sector, which saw its margins crushed by widespread, deep price cuts at the end of 2013.  Experts had warned that retailers needed to wean consumers off of these discounts in the new year to protect their profits. 

Mainly as a result of these discounts, Thomson Reuters said Tuesday that 74 retailers so far have trimmed earnings per share estimates for the fourth quarter, compared with only 15 who had positive things to say about the quarter.

Retail Metrics' Ken Perkins sent out his preliminary same-store sales estimates for January, saying he predicts comparable sales for the month will increase a tepid 2.7 percent, versus last January's 5.1 percent gain.

Among those expected to report on February 6, Perkins predicts Gap - which posted a relatively strong 1 percent comp in the November to December period - will post its first monthly decline since September.  Perennially strong L Brands - parent of Victoria's Secret - is also expected to follow up its disappointing holiday sales with a slight 0.8 percent gain in January.

"The coal looks to keep coming in January," Perkins said.

Source: SmartBrief, CNBC

Home Depot Closes Acquisition Of Blinds.com

January 24, 2014

The Home Depot has acquired Blinds.com, the Houston-based online window coverings retailer.  In explaining the appeal of the partnership, Home Depot cited Blinds.com's integrated user experience, on-demand staff and knowledge base.

"We're delighted to welcome the Blinds.com team into The Home Depot family," said Home Depot chairman and CEO Frank Blake.  "The acquisition of Blinds.com positions us well for expansion in the quickly growing online window coverings market.  In addition, their unique sales and service model is one we hope to learn from as we continue to create even better interconnected retail experiences for our customers."

"We're joining forces with The Home Depot because there is a huge opportunity to utilize each other's strengths, take additional share in this category and move even faster toward our vision of making the design, purchase and installation of quality window coverings as easy and affordable as possible," said Blinds.com founder and CEO Jay Stanfield.

The Blinds.com management structure and staff will remain in place at its Houston headquarters.  Specific terms of the deal were not disclosed.

Source: Retailing Today

Nordstrom To Open Online Fulfillment Center

January 21, 2014

Nordstrom plans to open its third fulfillment center at Conewago Industrial Park in Elizabethtown, PA, in summer 2015.  The approximately 672,000 sq. ft. building, with an additional 470,000 sq. ft. mezzanine, will enable faster delivery for Nordstrom.com, Nordstrom mobile app and Nordstrom catalog orders.

In its first three years, the new fulfillment center will offer nearly 400 full-time positions and additional opportunities for part-time and seasonal roles.  In the future, Nordstrom expects to increase hiring - up to 700 full-time roles or more - as business continues to grow.

The new facility joins the company's existing fulfillment centers in Cedar Rapids, IA and San Bernadino, CA.  Nordstrom.com currently serves customers in 98 countries and offers everyday free shipping and free returns within the U.S.  Since 2009, Nordstrom has operated with an integrated inventory platform between its stores and online, as well as the ability to fulfill online orders from any of its 117 full-line stores across the country.

"Speed of delivery is simply just part of our customers' expectations of what good service means today," said Jamie Nordstrom, president of Nordstrom Direct.  "This is an ideal location to add to our fulfillment capabilities and improve the delivery experience for our customers.  E-commerce is the fastest growing area of our business and this is another example of how we're investing in people and capabilities to help us support this growth and responding to our customers' changing definition of service."

"Today's announcement continues Pennsylvania's steady economic progress with another company expanding and more jobs for our citizens," said Governor Tom Corbett.  "It's a testament to why Pennsylvania is built to advance - our keystone location, our talented and hardworking people - all contributed to Nordstrom bringing hundreds of new jobs to Lancaster County."

The fulfillment center is located at Conewago Industrial Park, which is owned by Martin and William Murray, and will be built by H&M company.  Jones Lang LaSalle served as the broker for Nordstrom.  Construction on the project began early this week.

Source: Retailing Today

Hudson's Bay Invests In M-Commerce

January 23, 2014

Hudson's Bay Company plans to launch a new mobile shopping application for both Hudson's Bay and Lord & Taylor.  HBC is partnering with Pounce, a consumer-facing mobile app, to integrate traditional media with m-commerce, providing customers the opportunity to purchase merchandise displayed in print media using tablets and smartphones.  According to Pounce, it is the only Hudson's Bay and Lord & Taylor approved mobile app that allows customers to instantly buy products seen in print by simply scanning an image.

The app launched in Canada today, just ahead of this year's Olympic Winter Games.  Hudson's Bay is the official apparel sponsor of the Canadian Olympic and Paralympic Teams for the Sochi 2014 Olympic and Paralympic Winter Games, and the upcoming ads for HBC Olympic apparel will be the first to display the Pounce mobile app opportunity for customers.  The app also launched in the United States for Lord & Taylor.

"Our goal with this initiative is to complement traditional media with popular mobile technology, and Pounce creates the opportunity to combine offline and online channels in a seamless way," said Michael Crotty, chief marketing officer for HBC. "Pounce's unique capability is a natural fit as we roll-out and grow our omnichannel strategy for HBC."

"Traditional media is a successful marketing channel, but consumers also want the power of instant purchasing," said Avital Yachin, CEO of Pounce.  Our technology turns static print into digital storefronts, satisfying the instant purchasing needs of consumers."

Hudson's Bay customers can download Pounce free on iOS devices via the Apple App Store.

Source: Retailing Today

Lowe's Partners With Porch.com

January 15, 2014

In an effort to expand its service capabilities, Lowe's has partnered with Porch.com, a home improvement network that connects homeowners with over 1.5 million professionals.  The partnership aims to connect customers with home improvement pros for nearly any project outside of what Lowe's currently offers as part of its installation services. 

"Working with Porch is another great example of how Lowe's supports our customers throughout every step of the home improvement journey," said Jay Rebello, VP new business development and corporate innovation at Lowe's.  "By partnering with Porch, Lowe's can help our customers achieve their home improvement dreams by providing them with the confidence of knowing who their neighbors have used successfully, and benefit our professional customers by providing them greater opportunities to grow their business."

"For millions of people, the home is the biggest investment of their lives.  Home improvement projects are an essential part of owning or renting a home - finding the right professionals should be easy, delightful, and connected," said Matt Ehrlichman, CEO of Porch.  "Now, Lowe's customers can not only buy high-quality products to make their home improvement projects a reality, they can connect directly with local professionals their neighbors have used."

To be introduced at Lowe's stores, the partnership will make its first touchdown in 139 stores in the Carolinas and the Seattle metro area.

Source: Retailing Today

Dillard's To Donate More Than $1 Million To Ronald McDonald House Charities Local Chapters Through Sale Of Southern Living Christmas Cookbook

January 24, 2014

Dillard's, Inc. announced today that it will make a significant contribution of more than $1 million to local chapters of Ronald McDonald House Charities.  This donation was made possible through the sale of Dillard's exclusive Southern Living Christmas Cookbook.

For the sixth time, Dillard's offered a special custom edition of the Southern Living Christmas Cookbook to benefit RMHC.  This Exclusive, 288-page hardbound cookbook is filled with fabulous holiday recipes, color photos, menus, decorting tips and entertaining ideas.

With this year's contribution, Dillard's has donated more than $11.4 million to local RMHC chapters to support the Ronald McDonald House program since 1994.  "Over the past 20 years, Dillard's has developed a strong and lasting bond with our local RMHC chapters," said Denise Mahaffy, Vice President.  "The work they do every day to bring comfort to children and families inspires us and makes the sale of the cookbooks an enormous source of pride and satisfaction."

Every night, Ronald McDonald Houses offer comfort, care, hope and healing to more than 8,000 families of seriously ill children.  And after a long day at the hospital, there is nothing more comforting than for these families to be welcomed with a home-cooked meal prepared by loving volunteers.

"The Dillard's Southern Living Christmas Cookbook and the funds raised highlight how a good meal can provide sustenance and strength to families caring for a hospitalized child," said J.C. Gonzalez-Mendez, president and CEO, RMHC.  "We are immensely grateful for the ongoing generosity of Dillard's and its customers.  Together, we are able to give sick children the best medidine of all - their famillies."

For more information, visit www.rmhc.org and www.dillards.com.

Weather Trends: February 2014

January 23, 2014

February 2014 is projected to be the coldest in four years and drier than last year for the U.S. as a whole.  Much colder year-on-year trends will be widespread at the start of the month, especially across the Central U.S.  The axis of colder temperatures shifts to the Northern Tier of the U.S. by the second week of the month.  Much colder trends early in the month will help to clear remaining winter merchandise.  A taste of spring arrives in the Deep South in retail week three, making this a favorable time for categories such as sun care, apparel and cold beverages.  After a very dry January along the West Coast, the ridge of high pressure in the West will finally break down allowing for rain and snow to return to the West.  The first two weeks of February will yeild the greatest risk of snow in the Mid-Atlantic and Ohio and Tennessee River Valleys; weeks one, two and four will be the highest risk for the Northwest.

Source: Retailing Today, Weather Trends International

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

January 23, 2014

The Conference Board Leading Economic Index for the U.S. increased 0.1 percent in December to 99.4, following a 1.0 percent increase in November, and a 0.1 percent increase in October.

"Despite month-to-month volatility in the final quarter of 2013, the U.S. LEI continues to point to gradually strengthening economic conditions through early 2014," said Ataman Ozyildirim, Economist at The Conference Board.  "The LEI was lifted by its financial components in December, but consumer expectations for business conditions and residential construction continue to pose risks."

"This latest report suggests steady growth this spring, but some uncertainties remain," said Ken Goldstein, Economist at The Conference Board.  "Business caution and concern about unresolved federal budget battles persist, but the better-than-expected holiday season might point to sustained stronger demand and could put the U.S. on a faster growth track for 2014."

The Conference Board Coincident Economic Index for the U.S. increased 0.2 percent in December to 108.1, following a 0.4 percent increase in November, and a 0.1 prcent increase in October.

The Conference Board Lagging Economic Index for the U.S. increased 0.3 percent in December to 121.2, following no change in November, and a 0.3 percent rise in October.

Source: The Conference Board

Hudson's Bay CFO Takes Leave of Absence

January 22, 2014

Hudson's Bay Company's CFO Michael Culhane is reportedly taking a leave of absence from the company.  Assuming the CFO role will be Donald Watros, who on February 1 will be stepping into his new role as president of the company.

HBC did not provide further details on Culhane or the CFO position.

Culhane has been CFO of Hudson's Bay Comapny since February 2009.  He is responsible for financial planning, profit improvement, accounting, treasury, income taxes, audit, legal and credit/loyalty marketing.  He also served as CFO and EVP of Lord & Taylor from 2004 to 2009 and held other executive financial positions with the May Department Stores Comapny from 1997 to 2004.

The company has been restructuring its leadership so it can focus on managing and growing HBC's presence in North America, as well as its expanding portfolio of brands.

Source: Retailing Today

Holiday Retail Sales Come in at NRF Expectations

The National Retail Federation recapped Holiday 2013 in a PR... and sales were pretty good.  It remains to be seen however how profits fair due to heavy discounting.  The next quarterly filings by retailers will tell that tale. 

Holiday Retail Sales Come in at NRF Expectations
Sales Increased 3.8% to $601.8 Billion; NRF Projected 3.9% to $602 Billion

NEW YORK, January 14, 2014 – Severe winter weather did not dampen December retail sales as shoppers took advantage of heavy promotions and last-minute deals. According to the National Retail Federation – the world’s largest retail trade association – December retail sales, which exclude automobiles, gas stations and restaurants, increased 0.4 percent seasonally adjusted month-to-month, and 4.6 percent unadjusted year-over-year.

Total holiday retail sales, which include November and December sales, increased 3.8 percent to $601.8 billion, which was in line with NRF’s projected forecast of 3.9 percent and $602.1 billion. In addition, non-store holiday sales, which is an indicator of online and e-commerce sales, grew 9.3 percent to $95.7 billion.

“Despite facing a truncated holiday season, severe weather, and shaky consumer confidence, retailers rose to the challenge and executed their strategies with proven success,” NRF President and CEO Matthew Shay said. “Today’s holiday sales numbers are a testament to a resilient industry that knows what their customers want, when they want it and how they want to get it. Considering that retail sales are an important barometer when measuring the overall health of our national economy, this report provides a level of true optimism that the recovery is picking up steam, and once again, retail leads the way.”

December retail sales, released today by the U.S. Census Bureau, which include categories such as automobiles, gasoline stations, and restaurants, increased 0.2 percent seasonally adjusted month-to-month, and 4.1 percent adjusted year-over-year.

“Retail sales have been volatile all year and the holiday shopping season was no exception,” NRF Chief Economist Jack Kleinhenz said. “Solid job growth in the months of October and November led to a more-confident consumer and healthy holiday shopping season for many retailers. While economic and policy uncertainties remain, the economy seems set for steady growth in the New Year.”

“Undoubtedly, some of the increase came at the expense of margin. Retailers are still stressed and a long-term promotional environment may actually hurt the bottom line,” said Kleinhenz.  “As consumer confidence grows, there will be less need for retailers to heavily promote and discount their offerings.”

Other findings from the December retail sales report include:

• Building material and garden equipment and supplies dealers stores’ sales decreased 0.4 percent seasonally-adjusted month-to-month yet increased 4.2 percent unadjusted year-over-year. 
• Clothing and clothing accessories stores' sales increased 1.8 percent seasonally-adjusted month-to-month and 4.7 percent unadjusted year-over-year. 
• Electronics and appliance stores’ sales decreased 2.5 percent seasonally-adjusted month-to-month and 1.5 percent unadjusted year-over-year. 
• Furniture and home furnishing stores’ sales decreased 0.4 percent seasonally-adjusted month-to-month yet increased 5.0 percent unadjusted year-over-year. 
• General merchandise stores’ sales were flat seasonally-adjusted month-to-month and flat unadjusted year-over-year. 
• Health and personal care stores’ sales increased 0.6 seasonally-adjusted month-to-month and 5.9 percent unadjusted year-over-year. 
• Nonstore retailers’ sales increased 1.4 percent seasonally-adjusted month-to-month and 14 percent unadjusted year-over-year. 
• Sporting goods, hobby, book and music stores’ sales decreased 0.6 percent seasonally-adjusted month-to-month yet increased 5.8 percent unadjusted year-over-year.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. www.nrf.com 

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

January 2, 2014

Economic activity in the manufacturing sector expanded in December for the seventh consecutive month, and the overall economy grew for the 55th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report on Business.

The PMI registered 57 percent, the second highest reading for the year, just 0.3 percentage point below November's reading of 57.3 percent.  The New Orders Index increased in December by 0.6 percentage point to 64.2 percent, which is its highest reading since April 2010 when it registered 65.1 percent.  The Employment Index registered 56.9 percent, an increase of 0.4 percentage point compared to November's reading of 56.5 percent.  December's employment reading is the highest since June 2011 when the Employment Index registered 59 percent.  Comments from the panel generally reflect a solid final month of the year, capping off the second half of 2013, which was characterized by continuous growth and momentum in manufacturing.

*A PMI in excess of 42.2 percent, over a period of time, generally indicates an expansion of the overall economy.  Therefore, the December PMI indicates growth for the 55th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the seventh consecutive month.  The past relationship between the PMI and the overall economy indicates that the average PMI for January through December (53.9 percent) corresponds to a 3.7 percent increase in real gross domestic product (GDP) on an annualized basis.  In addition, if the PMI for December (57 percent) is annualized, it corresponds to a 4.6 percent increase in real GDP annually.

Source: Institute For Supply Management

Store Traffic Declines

The growth of e-commerce and the omni-channel retail strategy appears to be having a significant impact on retail store foot traffic according to ShopperTrak.   An article in today’s WSJ highlights the issue  “Retailers got only about half the holiday traffic in 2013 as they did just three years earlier, according to ShopperTrak, which uses a network of 60,000 shopper-counting devices to track visits at malls and large retailers across the country. The data firm tracked declines of 28.2% in 2011, 16.3% in 2012 and 14.6% in 2013.”  Urban Outfitters Inc. CFO Frank Conforti commented on an investor conference call “The reality is, we just don’t see that changing.”

These changes in store foot traffic may explain part of the reason retailers like Home Depot Inc, Gap, and Sears Holdings are closing stores or cutting back new store openings.  As fewer consumers show up to walk the isles retailers do not need as much retail space.  Only 44 million square feet of retail space opened in the 54 largest U.S. markets last year, down 87% from 325 million in 2006, according to CoStar Group, Inc., a real-estate research firm.

Bon-Ton Reduces Full-Year Sales

Bon-Ton Stores Inc. (BONT) slashed its expectations for the year and the retailer warned poor winter weather in the majority of its markets led to lower traffic and hampered promotional events tied to the Christmas holiday.

The retailer, which operates 273 department stores with locations in the Northeast, Midwest and upper Great Plains states, said the disappointing results could be blamed on bad weather.

"We are disappointed with the deceleration in sales during December, particularly given the strong start to the holiday season beginning with Black Friday and extending through the early part of the month," President and Chief Executive Brendan Hoffman said.

Bon-Ton said promotional events on key weekend days leading up to and continuing after Christmas were affected by the poor weather.

The company now expects same-store sales for the fiscal year to fall about 3.5%, worse that the November estimate of growth between 1.5% to 2.5%.

As a result, Bon-Ton warned per-share results for the year could range between a 15-cent profit to a 30-cent loss, down from the prior estimate of earnings between 15 cents to 75 cents. As recently as May, Bon-Ton had guided for full-year profit as high as $1 a share.

Shares, inactive in after-hours trading, closed down 2% to $15.50 on Friday.

source: WSJ, John Kell

Sears Holdings Corp Holiday Sales Down

Sears Holdings Corp announced sales at comp stores at Sears stores were down 9.2% in the nine weeks that ended January 6 and down 5.7% percent at Kmart stores. 

Sales at the company have been falling since 2005, when billionaire hedge fund manager Edward Lampert merged the two U.S. chains in an $11 billion deal.

"The results that we posted are not nearly what we want them to be," Lampert, Sears Holdings' chief executive officer and top shareholder, wrote in a blog post.

The company has made a big bet that its strategy to make targeted offers through digital and social means to members of its "Shop Your Way" rewards program, which generated about 69 percent of holiday sales, can fix the company.

In his blog, Lampert lamented that the holiday results "overshadow" the progress Sears had made with the program.

Lampert told Reuters in November he saw room for further store closings in 2014.

The Conference Board Leading Economic Index for the U.S. Increased

December 19, 2013

The Conference Board Leading Economic Index for the U.S. increased 0.8 percent in November to 98.3, following a 0.1 percent increase in October, and a 1.0 percent increase in September.

"The LEI continues on a broad-based upward trend, suggesting gradually strengthening economic conditions through early 2014," said Ataman Ozyildirim, Economist at The Conference Board.  "Improving labor markets and new orders in manufacturing, combined with strong financial indicators, drove November's gain.  However, consumers' outlook for the economy and the drop in housing permits continue to pose risks in 2014."

"November data reflect a U.S. economy that is expanding modestly, discounting some renewal in activity after the government shutdown," said Ken Goldstein, Economist at The Conference Board.  "The coincident economic index shows the economy expanding at a relatively slow pace.  The trend in the leading economic index is stronger, signaling for some time that the economy is developing forward momentum, and will continue to strengthen through early 2014."

The Conference Board Coincident Economic Index for the U.S. increased 0.4 percent in November to 107.2, following a 0.1 percent increase in October, and a 0.3 percent increase in September.

The Conference Board Lagging Economic Index was unchanged in November, remaining at 119.9, following a 0.3 percent increase in October and a 0.6 percent increase in September.

Source: The Conference Board

Bloom Out At Family Dollar, Reiser Named CMO

January 9, 2014

The search is on for a new president and COO at Family Dollar following the resignation of Michael Bloom amid deteriorating financial results and a 3% same store sales decline in December.

Bloom, who recently donned a disguise to appear in an episode of the CBS show "Undercover Boss," spent two years as Family Dollar's president and COO and joined the company from CVS.  In conjunction with his departure, Family Dollar elevated Jason Reiser to the role of EVP and Chief Merchandising Officer and he will report directly to Family Dollar chairman and CEO Howard Levine.  Reiser joined Family Dollar in July 2013 as SVP of merchandising after a 17 year career with Sam's Club and by October of last year he had already been promoted to the role of SVP/Lead Merchandising Officer.

The senior leadership moves were announced in conjunction with dismal sales results for the company's first quarter ended November 30 and a 3% decline in December same store sales, which prompted the company to forecast further top line weakness and lower its profit forecast.  Family Dollar said sales for its first quarter, ended November 30, increased a meager 3.2% to $2.5 billion, due to the addition of new stores.  Same store sales declined 2.8% as fewer people shopped its stores and those who did spent less money.

Reversing those trends now falls to new head merchant Reiser who will have responsibility for the company's merchandising, global sourcing, marketing, replenishment and financial planning teams.

"Continuing to refine our assortment to meet the needs of our customer is critical to being a compelling place to shop," said Levine.  "Jason's proven leadership, merchandising experience and deep understanding of our customer position him well to ensure that we grow both customer trips and market share."

Improvement is not expected to be immediate, however, as Levine noted a challenged consumer and intensified promotional environment continue to affect the company's business.  That was the case in December when Levine said the company was forced to react to softness in discretionary categories by becoming more promotional.

"Reflecting our December results, our expectations that the macroeconomic trends will continue, and the impact of investments we plan to make to strenghten our value proposition, we have lowered our earnings expectations for the second quarter of fiscal 2014 and the full year," Levine said.  "While we have made meaningful progress to improve our execution, our financial performance has not met our expectations.  We have a great business model and ample growth opportunity, and I know we can do better."

The immediate focus for Family Dollar, according to Levine, is to execute the basics of reatil; re-accelerate customer traffic, strengthen the value proposition and enhance the relevancy of its assortment.

"We also intend to maintain our focus on reducing costs while also selectively investing in new stores, our renovation program and supply chain improvements to position our long-term growth," Levine said.

Source: Retailing Today

Macy’s Inc. Announces strong 2013 Holiday sales and Cost Reduction Initiatives

CINCINNATI--(BUSINESS WIRE)--Jan. 8, 2014-- Macy’s, Inc. (NYSE:M) today announced that its comparable sales, together with comparable sales from departments licensed to third parties, rose by 4.3 percent in the 2013 holiday shopping season – the months of November and December combined – compared with the same period last year. November/December 2013 comparable sales were up 3.6 percent.

 “The 2013 holiday season was successful for Macy’s and Bloomingdale’s as we offered fresh and distinctive merchandise, delivered great value to the customer and provided a robust omnichannel shopping experience which served our customers whenever, however and wherever they chose to shop and to buy,” said Terry J. Lundgren, Macy’s chairman, president and chief executive officer. “Even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us.”

CINCINNATI--(BUSINESS WIRE)--Jan. 8, 2014-- Macy’s, Inc. (NYSE:M) today announced it will implement focused cost reductions, including organizational changes, as it prepares to sustain profitable sales growth in the years ahead.

 “Our company has significantly increased sales and profitability over the past four years, and we have created a culture of growth at Macy’s, Inc. We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope. As the success of these strategies has unfolded, we have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers,” said Terry J. Lundgren, Macy’s, Inc. chairman, president and chief executive officer.

“The actions being announced today reinforce our focus on continuous improvement in our M.O.M. strategies (My Macy’s localization, Omnichannel integration and Magic Selling customer engagement) and will help us to maximize the impact of the exceptional talent we enjoy at every level of our organization,” Lundgren said.

U.S. Consumer Confidence Rebounds in December

The Conference Board Consumer Confidence Index, which had decreased in November, rebounded in December.  The Index now stands at 78.1, up from 72.0 in November.  The Present Situation Index increased to 76.2 from 73.5.  The Expectations INdex increased to 79.4 from 71.1 last month.

"Consumer confidence rebounded in December and is now close to pre-government shutdown levels (September 2013, 80.2).  Sentiment regarding current conditions increased to a 5 1/2 year high (April 2008, 81.9), with consumers attributing the improvement to more favorable economic and labor market conditions.  Looking ahead, consumers expressed a greater degree of confidence in future economic and job prospects, but were moderately pessimistic about their earning prospects.  Despite the many challenges throughout 2013, consumers are in better spirits today than when the year began", says Lynn Franco, Director of Economic Indicators at The Conference Board.

Consumers' appraisal of overall current conditions improved.  Those claiming business conditions are "good" edged down to 19.6 percent from 20.4 percent.  Consumers' appraisal of the job market was also more upbeat.  Those saying jobs are "plentiful" ticked up to 12.2 percent from 12.0 percent, while those saying jobs are "hard to get" decreased to 32.5 percent from 34.1 percent.

Consumers' expectations, which had decreased in November, improved in December.  The percentage of consumers expecting business conditions to improve over the next six months increased to 17.2 percent from 16.7 percent, and those expecting business conditions to worsen decreased to 14.0 percent from 16.1 percent.

Consumers' outlook for the labor market was considerably more optimistic.  Those anticipating more jobs in the months ahead increased sharply to 17.1 percent from 13.1 percent, while those anticipating fewer jobs decreased to 19.0 percent from 21.4 percent.  The proportion of consumers expecting their incomes to increase declined to 13.9 percent from 15.3 percent, while those expecting a decrease in their incomes declined to 14.0 percent from 15.5 percent.

Source: December 2013 Consumer Confidence Survey, The Conference Board

U.S. Industrial Production Hits Prerecession Peak

WSJ, WASHINGTON—U.S. industrial output in November surpassed its prerecession peak for the first time, the latest sign of momentum for the economic recovery.

Industrial production, which measures the output of U.S. manufacturers, utilities and mines, surged a seasonally adjusted 1.1% from the prior month, the Federal Reserve said Monday. That was the biggest jump in a year.

The ascent in part reflects big gains for volatile mining and utilities components, though underlying figures point to steadily rising demand for an array of industrial goods. "It does look like there is a little momentum building here," said J.P. Morgan economist Daniel Silver. "We're getting a little more optimistic as we get these numbers."

Manufacturing, the largest component of industrial production, remains below its prerecession peak. But the sector expanded 0.6% in November, the fourth straight month of gains. Overall factory output is up 2.9% from a year earlier.

Source: WSJ, Jeffrey Sparshott

The Home Depot 2013 Year in Review and 2014 Guidance

Home Depot hosted a 2013 investor conference call which had a wealth of information about managements review of the year and forecasting for 2014.  Here some highlights for The Home Depot’s 2014 forecast:

• Sales growth of approximately 5%
• 8 new stores most of which will be in Mexico.
• Operating margin expansion of approximately 70 basis points
• Share repurchases of approximately $5.0 billion
• Diluted EPS growth after share repurchases of approximately 17%
• Capital spending of approximately $1.5 billion.

The numbers above and managements discussion of the numbers and the business strategy make clear they feel their opportunity is in maximizing sales and productivity of their existing footprint and not in expanding the footprint.   Frank Blake commented “New store growth no longer plays a dominant or even significant role in sales growth or capital allocation.  U.S. and Canadian markets are effectively saturated.”  I wonder how the folks over at Lowe’s feel about that observation since their footprint is significantly smaller than The Home Depot.  Mr. Blake continued, “Since our June 2012 conference we exited our big box stores in China and we have no intent to build stores in other areas of the world and here is the main reason why.  In the second quarter of 2013 the three-months of May, June and July we grew comps in our U.S. business by $2 billion in three months.  A wildly successful venture into a foreign county might yield $2 billion in sales after a decade of effort.  So opportunity and capital efficient strongly argue for intense focus here.”

Other interesting stats from the conference call:

• 15 million visits per week to homedepot.com
• Marvin Ellison commented stores stock about 35,000 SKU’s.
• Pro is 3% of THD customers, but 35% of sales.
• The program launched for small engine repair in about 1000 stores has repaired over 600,000 units YTD 2013. 
• THD historically ran 40% of store labor on customer service and 60% operational activities.  The have successfully flipped this after a multi-year
• Craig Menear commented the aging boomer pollution are electing more ‘do it for me’ as they retire which represents an opportunity for the THD service business and growth of their pro channel.  About 10,000 boomers retire each day.   Emerging Gen Y group is at the early stages of DIY and THD must instill confidence and in product and projects.
• The bifurcation of income in the U.S. creates opportunities for cost conscious consumers and luxury consumers. 
• TTI (an Accelerated Analytics customer) was discussed as an example of a strategic supply partnership that is creating additional value. 
• Mr. Menear comments that “We are a branded house and we intend to remain a branded house to satisfy our customers preferences” when discussing the THD private label portfolio.
• MET is approximately 20,000 associates.
• Localization of assortments has been proven to help sales and will accelerate in 2014.   Mr. Menear “So we’ve recently begun to use our more sophisticated assortment in clustering tools and there is a lot of runway ahead of us as we integrate this into our core merchandising activities”. 
• One-third of online orders are getting picked up or fulfilled out of a physical store. 
• Mark Holifield gave three key goals of the supply chain:
  • Must be in stock [see Accelerated Analytics exceptions reports]
  • Must optimize inventory productivity to drive the best use of working capital [see Accelerated Analytics SKU assortment reports, SKU sales summaries with GMROI]
  • Must be the leader at having the right product at the right place at the right time as the lowest cost in the industry.  [See Accelerated Analytics SKU assortment analysis by market & store]
  • Management expects fiscal 2013 sales to increase by approximately 5.6%, with comp sales growth on a 52 week like-for-like basis of approximately 7%.
  • Management believes the health of the home improvement market rest on two drivers; GDP growth and housing.  U.S. GDP is forecasted to grow about 3% over the next several years based on the Federal Open Market Committee.  Housing turnover is expected to moderate towards the historical average of about 4.6% of units.  Housing prices are up about 11% this year but they are still 23% off their peak back in 2006.  Once homeowners view their homes as an investment, and not an expense management believes they will spend more money on their homes. 
  • In the third quarter of 2013 we saw a double-digit growth in premium price point product. 
  • Approximately 63% of all homes in the U.S. are more than 27 years old.  As homes ages they need repair, which speaks to continued growth in maintenance and repair categories.
  • Management believes we’ve moved past the workout stage of the housing recovery that we shared with you back in June 2012 and we are not in phase II of the recovery.  In stage II of the recovery, we expect ourselves to grow at a rate of GDP plus 2%.