Shop Talk
Retailers, consumers and prices
Check Out Line: Surprise, surprise, a discount retailer is doing well
Check out the strong quarterly profit at discount retailer Dollar General.
The company, which prices most of its merchandise below $10, posted a stronger-than-expected profit thanks to bargain-seeking consumers who spent more per visit. Company executives talked of building sales momentum during the quarter and sales results in the current three-month period were encouraging.
As a result, Dollar General, which has received a boost from high U.S. unemployment rates, raised its full-year earnings forecast.
U.S. consumer spending rose in July at the strongest pace in four months, offering hope that consumers will be able to keep contributing to a modest economic recovery.
Meanwhile, overseas the message was mixed as Carrefour, Europe’s top retailer, said the summer sales trend was mixed in Europe but demand was holding up in emerging markets. Company executives acknowledged sales trends in Europe in August were slightly disappointing after a satisfactory July.
French luxury goods group Hermes posted a 52-percent rise in first-half operating profit, boosted by leather goods and slightly raised its full-year financial targets, while in Australia retail sales were surprisingly strong in July, suggesting the economy there looks solid.
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Check Out Line: How Lowe’s can you go?
Check out the weaker-than-expected earnings at Lowe’s.
Giving fuel to pessimists about the U.S. economy, Lowe’s, the No. 2 home improvement chain behind Home Depot, posted a quarterly profit and sales that missed analysts’ expectations, and also forecast lackluster earnings in the current quarter, underscoring “limited visibility into near-term demand.”
Sales at companies like Lowe’s had benefited immensely from the homeowner tax credit and cash for appliances programs, but now more and more uncertainty seems to be the watchword.
Last week, retailer J.C. Penney forecast a full-year profit below Wall Street’s expectations, stoking fears it would need further discounts to clear out inventory. That was a day after department stores Kohl’s and Nordstrom gave conservative profit outlooks.
“We are taking a relatively conservative approach to the economic climate and especially the moderate consumer,” Chief Executive Myron Ullman said.
U.S. retail sales rebounded in July but showed hints of lingering economic softness. However, investors can search for more clues this week with earnings from retail giant Wal-Mart Stores.
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Check Out Line: A decline in weekly sales numbers
Check out the decline in weekly U.S. same-store sales gains. After two consecutive weeks of strong positive weekly sales gains, retailers saw their sales take a breather with a 1.5 percent decline in the week ending July 10, according to the International Council of Shopping Centers and Goldman Sachs. Sales in the weeks ending July 3 and June 26 rose 1 percent and 2.1 percent, according to the report. On a year-over-year basis, sales also slowed to 3.2 percent, but continued to remain positive. “Sales showed a mixed performance over the past week as the seasonally-adjusted year-over-year pace continued to rise — although the unadjusted pace was much stronger due to the holiday-sales lift from a calendar shift when the Independence Day federal holiday was celebrated in 2010 and 2009,” ICSC chief economist Michael Niemira said in a statement. The ICSC reaffirmed its outlook for July U.S. same-store sales to increase in the range of 3 percent to 4 percent, compared with a 5 percent decline last year. However, U.S. retailers relied heavily on promotions to boost June sales, suggesting profit margins may suffer as they head into the key back-to-school shopping season. The Weekly Chain Store Sales Snapshot is produced by the ICSC and Goldman to measure U.S. same-store sales, excluding restaurant and vehicle demand, and represents about 75 retail chain stores. Meanwhile, Goldman analyst Michelle Tan said in a separate research note that there are few reasons to buy stocks in the apparel retail sector assuming a slow recovery. It cuts its 2010, 2011 and 2012 profit estimates by an average of 7 percent. “In a slow recovery with little sequential improvement in employment, sector sales have averaged less than 2 percent with flattish margins; this implies about 9 percent risk to Street forecasts,” Tan wrote. “History suggests downside risk to estimates in a double-dip scenario is roughly two times the upside in a robust recovery.”
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Dr Pepper Snapple sets new $1 bln share buyback
Calif Pizza raises Q2 profit veiw, shares up
Borders to sell stationery maker for $31 mln
Nissan says Hitachi delay may hit US, Mexico output
(Reuters photo)
Check Out Line: Easter bounce
Check out how high March retail sales bounced off last year’s weak results — and how April sales are expected to falter.
March same-store sales topped expectations for retailers ranging from teen-focused stores to discounters and department stores, helped by an early Easter, warmer weather and a recovering job market.
But some retail executives rained on the parade, saying that some consumers had shifted their shopping into March due to the earlier timing of the holiday and that sales in April could suffer.
“March was a very solid month, but I think there’s more than enough hints that the American consumer is still fully not back,” said Brean Murray, Carret & Co analyst Eric Beder. “We’re going to see, barring a miracle, materially weaker numbers for April.”
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Check Out Line: Magic 8 ball says better year for retail
Check out a prediction for increased U.S. retail sales this year.
The National Retail Federation said U.S. retail sales should rise 2.5 percent this year, signaling that stores have made it through the worst of the downturn as improvements in the housing and job markets bolster shoppers’ confidence.
The projected increase would be a step up from a 2.5 percent decline last year and 1.3 percent increase in 2008, NRF said.
Don’t get excited, however, as the outlook remains modest.
“I wouldn’t describe this as a very strong year,” NRF Chief Economist Rosalind Wells said in an interview. “We’re not going to have a V-shaped recovery in the economy, and we won’t have a V-shaped recovery in consumer spending or retail sales. It’s a slow return to a more normal level.”
U.S. retailers just completed a better-than-expected holiday season as retail sales rose 1.1 percent instead of the 1 percent drop the NRF had expected for the November-December period. Retail chains improved upon a dismal 2008 (sales down 3.4 percent) by cutting inventories and offering more targeted discounts for frugal shoppers.
In its latest spending and saving tracking survey, American Express found consumers entering 2010 with optimistic yet prudent goals. The poll showed 30 percent of the general population and 42 percent of young professionals will rein in extras such as ”morning lattes and manicures.”
Black Friday: The Ecstasy and the Agony
The annual ritual began with all the proper signs. Shoppers lined up before midnight on Friday. Some wore pajamas, others imbibed hot coffee or alcohol. Store managers straightened rows of sweaters and blew dust mites off flat-screen TVs while their doors remained closed. Then the rush started. There were fights over toy hamsters, a clamor for laptops under $500 and even a leather jacket or two was purchased. Retailers prayed and tried to banish the ghosts of a terrible 2008.
Traffic was strong. Americans left malls with more shopping bags in their hands than a year ago. And yet.
ShopperTrak told us today that sales were only up 0.5 percent on Black Friday. In 2008, when the banking system seemed on the verge of collapse and global recession loomed, sales rose 3 percent on Black Friday. We know it is still early in the season. We remember from last year that it is very hard to call the holiday season. But we can’t help but wonder, what happened?
Reuters photo
I take it as a good sign of wise spending. The consumers are buying what they want and what they need, instead of just grabbing at whatever on offer.
Check Out Line: Frugal fatigue?
Check out what women buy when they get tired of being a frugalista: boots, plaid and outerwear.
Those were some of the products that helped October U.S. retail sales improve from a year ago, when the unfolding financial meltdown had shoppers fearing a second Great Depression.
“Frugal fatigue is setting in,” said NPD Group analyst Marshal Cohen. After a year of scrimping, he added, the numbers suggest that some women are going in for a little retail fix.
“Women (not only moms) are shopping their closets, discovering new and fresh looks and filling in with some key updates,” he said.
But selective shopping is not enough to ease worries about the all-important holiday sales.
Thomson Reuters research shows that while October sales rebounded, results from individual retailers were mixed.
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Check Out Line: Warning! Murky outlook ahead for retailers
Check out the latest outlook on October sales at U.S. retailers.
While most industry experts expect a 1.2 percent rise thanks to the weather gods and easy comparisons, the forecast doesn’t really say it all.
For instance, while sales trends have improved from a disastrous October 2008, data on the economy and consumer spending gives mixed signals and indicates shoppers remain cautious.
News of the U.S. economy returning to growth may have renewed some hopes of a revival in spending late last week, but the Commerce Department talked about consumer spending falling 0.5 percent in September.
It may be too early to raise hopes based on expectations for October. One thing is certain — the future is unclear.
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FWIW, the retail store I work at is in a mall. In October, we had essentially the same customer count and were down about 6%.
Check Out Line: Young professionals trimming turkey-time travel, spending
Check out a survey showing that younger U.S. consumers are trimming travel plans as well as turkeys during Thanksgiving. More young professionals (37 percent) are adjusting their Thanksgiving travel and spending plans than the affluent and general population (both 30 percent), according to a survey by American Express. Young professionals are defined as less than 30 years old, having a college degree and a minimum annual household income of $50,000. The young guns also are pulling back in other areas: * 11 percent of young professionals plan to drive instead of flying, compared to 7 percent of the general population and 6 percent of the affluent, who are defined as having a minimum annual household income of $100,000. * 8 percent of young pros plan to shorten their stay for the Thanksgiving holiday weekend, compared to the affluent and general population (both 3 percent). * 7 percent of young pros will use rewards points, miles and special offers to offset the cost, versus 4 percent of the affluent and 3 percent of the general population. Overall, American Express found 30 percent of U.S. consumers plan to adjust this year’s travel plans for Thanksgiving — historically one of the busiest travel days of the year — but only 21 percent expect those expenses to decline from last year. Those who are changing their plans said they will rely more on travel by car, stay for a shorter time and cash in rewards to help pay for holiday trips as they become more selective amid the high unemployment and soft housing market.
However, in a positive sign, sales at U.S. retailers excluding vehicle sales rose for the second straight month in September, raising cautious optimism consumer spending could support the economic recovery. The American Express survey also showed that the young professionals are cutting back for Halloween, when consumers spent $5.8 billion last year according to the National Retail Federation. * 36 percent of young pros are buying less expensive costumes and decorations. The rate is 16 percent among the affluent group and 15 percent among the general population.
* 26 percent of young pros are making their own costumes or using hand-me-downs. Again, that is higher than the 13 percent of affluent respondents and 11 percent of the general population. Looking ahead to the winter holiday season, sale prices are still king when it comes to early shoppers. Eighty-two percent overall said they would be enticed by some sort of discount, with almost all of the young professionals (96 percent) and affluent (94 percent) agreeing. It appears easier to entice the young set. They would be willing to spend with discounts as low as 10 percent, according to American Express. The affluent said it would take a discount of nearly 30 percent, on average, for them to buy. Also in the basket:
Pepsi, Anheuser to jointly buy goods, services
Kraft opens $50 mln Russian biscuit factory
I’m 23 and have started a job in my career path, but I’m in a city a long way from my parents. I won’t have the money to travel back for Christmas so I guess I’ll qualify in your statistics for doing a driving vacation. Some friends and I are renting a timeshare (we used http://www.redweek.com) just an hour from here. This way we get to have our Christmas holidays by staying at a resort, but we’ll still be able to get to work on the days we have to. Not the same as “home for the holidays” but it gives us a cheap and fun way to celebrate.
Check Out Line: September surprise for retailers
Check out the unexpected increase in September same-store sales at U.S. retailers.
Providing hope that demand may be improving ahead of the holiday shopping season, retailers posted a surprise 0.6 percent increase last month in stores open at least a year, instead of the 1.1 percent decline analysts had expected.
And International Council of Shopping Centers sees October same-store sales even with a year ago. TJX Cos, which operates the T.J. Maxx and Marshalls chains, cited strong momentum heading into October.
“The consumer is dipping their toe back into the discretionary waters right now, but just their toe,” said Retail Metrics President Ken Perkins.
Among the retailers posting better-than-expected results were Aeropostale, Kohl’s, Children’s Place and American Eagle Outfitters. Many others posted declines that were not as weak as expected.
While this year’s later Labor Day holiday pushed a good chunk of sales from August into September, analysts had wondered if rising unemployment would weigh more heavily on spending. However, sales of clothing for the back-to-school season fueled many retailers’ performances, and the number of U.S. workers filing jobless claims fell more than expected last week.
But the economy is not out of the woods yet. Holiday spending could be further constrained by consumer aversion to debt, as total U.S. consumer credit posted a deeper-than-expected drop in August, suggesting consumers are opting to cut debt rather than spend.
The recession kicked into full throttle in September 08. Now a recovery is starting, and people are surprised sales are up? I’ve been looking forward to this news for about 3 months now.
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Resident Shop Talk Expert
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