Shop Talk

Retailers, consumers and prices

Analyst puzzles over Sears’ higher EBITDA plans


sears.jpgSears Holdings Corp reported a quarterly loss this morning. But the thing that left analysts like Credit Suisse’s Gary Balter scratching their heads was the company’s expectations for higher earnings before interest, taxes, depreciation and amortization (EBITDA) for the full year.

“We are struggling with what we are missing in the context of Q1 being down over $385 million in EBITDA and other comments in the release that talk about the expected difficult sales and gross margin environment,” Balter said in his research note.

Sears said sales fell about 6 percent to $11.1 billion in the quarter. Total U.S. same-store sales were down 8.6 percent as the appliance, lawn, garden and apparel segments languished.

Balter described the second half of the past year for Sears as an “unmitigated disaster” with very high inventories, and expenses that pointed to sales levels that were not reached.

Grocer gears up for Free Gas Friday


bilosmall.jpgAs rising gasoline prices threaten to put the brakes on consumers’ plan to travel for the Memorial Day weekend, various promotions are cropping up nationwide to help ease the pain at the pump.

For instance, in Chattanooga, Tennessee, the BI-LO chain of grocery stores is planning to give away $25 in free gas to the first 200 people who show up at a certain BP gas station later today.

Check Out Line: Discounting the discounter


wmt.jpgCheck out Wal-Mart’s earnings.

The world’s largest retailer posted a 7 percent rise in quarterly profits.

But even as the discounter drew cash-strapped consumers looking to save money, the company also indicated that it could miss second-quarter earnings estimates, which pressured its stock price in the morning.

Tax rebates are here … and so are those nagging bills!


Tax rebate checks are in the mail and some of the rebate cash has already made its way to consumers’ wallets. But will this cash infusion give the economy (and struggling retailers) a boost?grocery.jpg

According to interviews Reuters conducted with consumers across the United States over the past week, the answer seems to be that most of the extra money will be heading toward the basics — like food, fuel and credit card payments — with just a little left over for splurges.

Check Out Line: Let the sunshine in


sun21.jpgCheck out a little retail sunshine.
The weather finally got a little better in April, which helped retailer’s sales even as the economy stayed week, according to Planalytics.
“While April 2008, on a national level, may have been an ‘average’ month in terms of temperature — the weather helped unleash pent up demand, improving sales in the Northeast, Midwest and the Ohio Valley,” the consulting firm said.
The company, which provides weather information for businesses, said home centers, restaurants and softline retailers all showed positive year-on-year gains. 
It called out Bon-Ton, Dress Barn, Family Dollar and Lowe’s as having the strongest sales gains.
“While the economy remains sluggish, the weather has certainly done its part this month to improve business’ fortunes,” said Scott Bernhardt, Planalytics Chief Operating Officer.
Also in the basket:
Dr Pepper Snapple to focus on brands, U.S.
Unilever looks for Bertolli sale deal: sources 

(Photo: Reuters)

American small business owners put on a brave face – survey


clouds12.jpgAmerican small business owners are a resolute lot, pushing ahead with plans to grow their operations despite losing a large chunk of sales to soaring energy costs, an American Express OPEN survey showed on Friday.

Ironically, most are also day-dreamers who look on the bright side , the survey added.

Check Out Line: Food for thought


shopper.jpgCheck out upcoming earnings and what they might say about food costs.
Food inflation is one of many factors putting pressure on U.S. consumers. (Housing, the credit crunch and soaring gasoline prices are some of the others.) But so far, big packaged food companies have been sticking to the mantra that consumers are willing to pay a little more for their wares as long as perceive they are getting a benefit in return.

Next week promises to offer snapshots on how rising food costs may be affecting consumer behavior. That’s because both Kraft, the largest North American food company, and Kellogg, the largest cereal maker, are slated to report earnings.
Kraft gave reporters a preview this week of new products they are launching, and none seemed to be geared to consumers trying to cut back on spending.
But grocery store operators seem to know that many consumers are scrambling to pay for necessities like food these days. Both Kroger and Supervalu are offering bonuses for consumers who turn their tax rebate checks onto gift cards to be used in the store. (Those rebate checks also are expected to start coming next week.)
So the question is, are things different this time around? Will the rising cost of fuel and food and an economy that might be in recession cause consumers to trade down to store brands and other cheaper alternatives?
Also in the basket:
Rising food prices are “global crisis”: U.N. chief
Charming Shoppes exploring alternatives on non-core assets
Protest-hit Carrefour cancels China sales plan
Plastic bottle scare is a boon for some (N.Y. Times)

Check Out Line: Wal-Mart customers stretch for groceries


wmtarmour3.JPG Check out what Wal-Mart customers have to say about the economy and how it is changing how they shop.
Reuters reporters went to Wal-Mart stores in New Jersey, Illinois and California this week to see how the weak economy (see today’s jobs report) has made them change how they grocery shop.
Here are some of their comments. For the full story, click here. For the Reuters Television video, click here.
“I don’t buy a lot of expensive meat anymore. I buy more vegetables, because they are cheaper.” — Fran Allen, 77-year-old part-time factory employee from Romeoville, Illinois.
“I buy what is on the list and nothing that isn’t on the list.” — Patricia Norris, homemaker in Romeoville.
“That doesn’t cover it…. I went over again … It’s almost impossible to stay on budget.” – Barbara Armour, whose family food budget is $350-$400 month, after shopping at a Santa Clarita, Cal. store.
“Something has to be done, because these prices are just getting ridiculous.” — Karen Stewart, hospital housekeeper from Plainfield, Ill.
“I’m making changes just because of how much I’m paying on gas…. I went to a gas station with $100 and came out with nothing.” — Jamie Dorgan, homemaker from Joliet, Ill.

“People might not buy clothes, shoes, jewelry, but they need food. People have to eat.”
— Ravi Varma, a convenience store operator who uses the Secaucus Wal-Mart as his supplier.

Also in the basket:

Family Dollar profit falls, cuts full-year forecast

Brands’ dilemma: Target elbows way into upscale beauty world (WWD)

Claiborne to shape up U.S. assets

Driving far for deals despite high gas prices

Fred Katayama visits a Wal-mart just outside New York City to see how consumers socked with high gas prices and a sputtering economy are changing the way they shop. His full report hits the website on Friday. It’s part of a Reuters multimedia presentation in text, video and pictures.

Check Out Line: Is it getting worse out there?


recession.jpgCheck out the warning from J.C. Penney.
The retailer slashed its first-quarter earnings forecast and said Easter sales were well below expectations.
That may be a pretty good snapshot of where the American economy is right now. J.C. Penney says half of American families are its customers and those families are under pressure from higher energy costs, a deteriorating job market, the housing downturn and the credit crunch.
Not much news there. But according to J.C. Penny’s forecast, things are much worse than the company thought.
The warning comes the same week Williams-Sonoma Chief Executive Howard Lester said the economic environment was probably the worst he’s seen in the 30 years he has been in the business.
Oh, and Lester added this cheery note:
“We believe there are circumstances under which it could get progressively worse, particularly if we find ourselves in a protracted recession.”
Also in the basket:
Cash-rich retailers stand to gain in credit crunch
Li & Fung’s 3-Year Plan: Sourcing Giant Aiming For $20 Billion in Sales (WWD)
Office Depot Holder Group files proxy statement 

(Photo: Reuters)