Retail Sales Jump 0.8%
Retail sales soared 0.8% in November as the holiday shopping season got underway. Results were more than double what economists were expecting. October sales were revised up from a 0.2% to a 0.5% increase. Home centers, stores that sell home furnishings, apparel retailers, sporting goods outlets and restaurants all reported strong sales. Gas sales rose on higher prices at the pump. Excluding automobiles, gasoline, building materials and food services, core retail sales, which factor into GDP, increased 1.0% in November after rising 0.3% in October. Sales at online retailers rebounded and rose 2.5% after unexpectedly falling 0.3% in October. Retail sales account for one-third of all consumer spending, with services accounting for the other two-thirds.
Holiday Shopping Update
Retail sales over the holiday shopping season rose at their best pace since 2011, according to Mastercard SpendingPulse, which tracks both online and in-store spending. Sales excluding automobiles rose 4.9% from November 1 through Christmas Eve, compared to a 3.7% gain over the same period last year. Ecommerce sales rose 18.1%, with analysts saying that Amazon captured nearly half of all holiday ecommerce sales. Walmart had a good online season, according to market audits, but actual sales will not be reported until January. In past years holiday spending has been driven by high-income shoppers, but this year spending was broader based and there was more spending in middle and lower income groups. Consumers are expected to spend about $69 billion in the week between Christmas and New Year’s as they return unwanted presents, shop sales and spend their holiday gift cards.
Retailers Compete For XPO
Analysts are reporting that The Home Depot and Amazon may make competing bids for shipping giant XPO. Both companies work with XPO to deliver large appliances and furniture like refrigerators. At the end of 2016, XPO served more than 50,000 customers out of 1,425 locations in 34 countries.
The Home Depot
THD updated their strategic priorities and sales and earnings guidance. They expect FY 2017 sales to rise about 6.3%, with comp store sales rising 6.5%. They plan to invest more in stores, employees, the supply chain and the customer experience over the next three years as they pursue a target of reaching nearly $120 billion in annual sales by fiscal 2020, which would equate to growth of 4.5% to 6% annually. Annual capital spending will represent about 2.5% of sales.
THD acquired home décor online retailer The Company Store from Hanover Direct in mid-December. Terms of the deal were not disclosed. THD said the acquisition does not include The Company Store’s five retail locations, which are in Wisconsin, North Carolina and Maine. The Company Store was founded in 1911 and reportedly has strong relationships and capabilities in the development and sourcing of textiles across bedding, bath and related categories. CEO Craig Menear said that the acquisition will help THD expand their online décor business into broader categories.
Lowe’s has hired former Amazon associate Vikram Singh for the newly created role of senior VP, chief digital officer. His job is to further accelerate Lowe’s digital evolution and drive a holistic integrated strategy to make shopping more flexible, convenient and intuitive across all channels and enhance operational effectiveness to fully integrate digital initiatives across core business functions, including supply chain and marketing. Singh’s background also includes developing and executing ecommerce strategies for EBay, PayPal and Fujitsu.
Lowe’s pledged $1 million for Habitat for Humanity housing in the Charlotte region. A 2014 study by Harvard University and the University of California-Berkeley found that Charlotte residents born in poverty are most likely to remain poor compared to residents of the United States’ 50 largest cities; that means Charlotte is last among the top 50 for economic mobility.
Walmart quietly changed its name from Wal-Mart Stores Inc. to simply Walmart Inc. CEO Doug McMillon says the change is symbolic of how customers shop with them today and how they will shop increasingly in the future. The name takes the emphasis off brick and mortar stores and acknowledges that no matter how customers shop, there is only one Walmart.
Scott Price, who was executive vice president of global leverage for Walmart, joined UPS as its chief transformation officer in mid-December. The purpose of the newly created position is to help UPS identify and execute opportunities for profitable growth within existing business units and in untapped markets and segments.
Walmart may acquire Humana, a healthcare and health insurance provider, for $46 billion, according to Financial Deals Tracker
Q3 sales fell to $3.66 billion from $5.03 billion, with store closures accounting for more than half of the drop in sales. Comp store sales fell 15.3%, with Sears comps falling 17% and Kmart comps dropping 13%. At the close of the third quarter Sears operated just 1,104 locations compared to 1,503 at the close of Q3 in 2016. Sears’ shares soared after results were reported, because they were better than analysts had expected.
Sears has started selling DieHard auto products through Amazon. The move came less than six months after Sears began selling their full line of Kenmore appliances through Amazon. Passenger car tires are expected to be available sometime in 2018. Sears is also developing new DieHard accessories, including wiper blades, that will be sold on Amazon.
True Value is shifting marketing toward more local and more targeted advertising and promotions. Senior VP of Marketing David Elliott said broadsheets, paid search, social media, email, online advertising, point of purchase, direct mail and mobile push were marketing vehicles they favored. They noted that more people are canceling cable TV and engaging with their smart phones. True Value’s Rewards program is being enhanced to provide coupons and deals for local stores. The approach marks a big change from True Value’s 2015 television campaign that showcased intimate life moments between friends and family centered around home improvement. CEO John Hartman called the move “adjusting to the new reality.”
Amazon had its biggest holiday shopping season ever, with customers around the world shopping at record levels. In just one week more than four million people started Prime free trials or began paid memberships to benefit from free two-day, one-day or same-day shipping. Amazon technology devices, including Amazon Echo, Echo Dot and Fire TV stick with Alexa, were among the best-selling products across all product categories.
Amazon acquired Blink, a company that makes internet-connected doorbells and security cameras. Analysts say the move could help Amazon compete in the fast-growing home security camera market and against similar devices made by Nest, a subsidiary of Google parent company Alphabet. Terms of the deal were not disclosed.
Amazon increased its staff by 77% to 541,900 full-and part-time workers in 2017, largely thanks to their purchase of Whole Foods and a rapid buildout of regional warehouses. That number does not include more than 120,000 seasonal jobs for the holidays. Amazon is second only to Walmart, which has 2.3 million employees.
The number of people who are Amazon Prime members did not grow in the third quarter, according to a new report from Morgan Stanley. The results showed that 40% of individuals surveyed were Prime members, exactly the same percentage as in the fourth quarter 2016 survey.
Amazon now sells more than 1,500 products under their Amazon Basics house brand, according to Quartz. Amazon is tight-lipped about their private label sales and the manufacturers they use. Amazon Basics started out as a private label collection of consumer electronics basics like batteries, but has now expanded into more than a dozen categories.
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