Retailers, consumers and prices
Check out the reallocation of consumer spending.
Pricey coffee? Out. Spending at the dollar store? In.
Family Dollar posted a better-than-expected quarterly profit, helped by tight control of inventory and expenses, and said June sales were better than expected as consumers received their tax rebate checks.
While traffic was down, customers were spending more on each trip.
Meanwhile, as the economy softens, so has Starbucks’ business.
The coffee shop operator now says it will close 600 U.S. stores, six times the number it had targeted in January.
Gone are the days when a Starbucks on every corner worked for the company. Most of the stores to be closed are near other locations, so pruning the underperforming locations might help the others grow.
” ‘Reverse cannibalization’ should be felt in the relatively near future as the bulk of stores are located within close proximity of another unit and will be closed by the first half of 2009,” J.P. Morgan analyst John Ivankoe said.
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ANALYSIS-UK grocers to shun price war as shoppers trade down
Stores look to lure millennial generation (WWD)
The maker of Pepperidge Farm cookies and V8 juice has raised prices to offset soaring commodity costs and announced a $1.2 billion share buyback program that should help boost shares.
Check out Nike just not doing it in the U.S.
The athletic shoe and apparel maker apparently is not immune to the sluggish U.S. economy. The company said Wednesday that U.S. orders for goods through November were flat.
It also said sales in the fourth quarter rose 4 percent in the U.S., compared with a 16 percent increase for the entire company. U.S. apparel sales rose only 2 percent.
Nike said it will focus on more premium merchandise that is better distributed and can stand out. It also stressed that U.S. profit margins are not eroding.
For Nike, getting through the tough U.S. economy might just be an invigorating workout.
“Strong companies who are able to navigate through those tough times can come out even stronger,” Nike CEO Mark Parker said in a conference call.
Ooh, feel the burn!
Also in the basket:
Anheuser-Busch to reject $46.3 billion InBev offer
The road runs out: Streetwear adapts as market implodes (WWD)
Steve & Barry’s Hits Trouble: Hyped clothing retailer hires turnaround help (WSJ)
“Kroger continues to help customers stretch their budgets in a number of ways, including lower prices and our expanded generic drug and gas discount programs,” chief executive David Dillon said in a statement.
Check out the quarterly results at Walgreen, one of the largest U.S. drugstore operators.
The company posted a 2 percent increase in quarterly profit, amid a weak U.S. economy and slowing growth in sales of prescription drugs — in the reported quarter, Zyrtec was switched to over-the-counter status.
Check out how high gas and commodity costs are crimping Hershey and Best Buy.
However, the largest U.S. chocolate company, which is meeting with analysts, said the pressures it faces — soaring prices for cocoa , energy and other commodities — remain the same.
Check out a bunch of retail executives talking about the state of the industry, economy and the outlook for holiday shopping.
It’s the Reuters Consumer and Retail Summit, being held this week in New York, featuring top executives from Borders, Best Buy, Toys “R” Us, Jones Apparel, Perry Ellis and others.
The executives meet with Reuters reporters as most retailers are struggling to attract consumers that have been clobbered by $4-a-gallon gasoline, falling home prices, a credit crunch and rising food costs.
Sales got a bit of a boost in May as consumers started to spend their tax rebates. But analysts say that bump could be fleeting, with consumers still under pressure after the rebates have been spent.
To find out what retailers think, check out the Retail Summit page all week.
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InBev cautions Bid about striking Modelo deal
Trust chairman sees change, but no sale, at Hershey
CostPlus rejects Pier 1 acquisition offer
Starbucks says international growth to cushion U.S. weakness
Upon entering Wal-Mart Stores annual shareholder meeting, an observer might be forgiven for thinking they had just walked into a lively, national political convention.
Patriotic red and blue buntings covered the 16,000-seat arena at the University of Arkansas, the music hardly stopped and the crowd was treated to a constrant stream of well-tuned public relations bullet points — in this case, sustainability, community relations and saving shoppers money.
Another 27,000 retail jobs disappeared in May, according to the U.S. government’s monthly employment report. That makes 152,000 retail jobs eliminated since the beginning of the year.
Overall, nonfarm payrolls fell by 49,000. But even more worrisome for the economy and for retailers could be the jump in the unemployment rate to 5.5 percent. That half-point jump was the largest such move in 22 years and brought the unemployment rate to its highest level in 3-1/2 years.
Retailer’s May sales reports yesterday were mostly better than expected, causing some analysts to think they could signal the beginning of a consumer turnaround.
But others said it just showed a blip in spending that was caused by the tax rebate checks consumers have begun to receive.
Economic concerns could still linger after all that stimulus money is gone, they say, and things could get worse if consumers, already hit by $4-a-gallon gasoline, soaring food prices and falling home values really start to worry about their jobs.
Wonder how a half-point jump in the unemployment number plays into that?
Meanwhile, to take your mind of the jobs report, there’s always the company pep rally that masquerades as the Wal-Mart annual meeting. The world’s-largest retailer flies in employees from all around the world to help pack the basketball arena at the University of Arkansas, where stars entertain the crowd (this year’s acts include Miley Cyrus), everybody does the Wal-Mart cheer, and, oh yeah, shareholders get to ask questions.
Also in the basket:
New Wal-Mart director may herald changing of the guard (Wall Street Journal, subscription required)
Target grows makeup artist brands, adds testers (WWD)