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Retail Sales Rise 0.1% Retail sales rose 1.0% in August after rising 1.0% in July, according to the Commerce Department. The small increase was an improvement over the 0.3% decline economists had expected but revealed a lot of underlying weakness. Sales were up 1.4% for online retailers in August and were up 7.8% year over year. Home and garden centers and sporting goods stores sales also rose, but sales were down in many other categories. Sales have risen at a modest 2.1% pace in the past 12 months. Before the pandemic, retail sales rose by about 3.6% a year. Consumers have been showing signs of stress, with credit-card debt rising and savings rates falling, trends that could weigh on spending in future months. Retail sales represent about one-third of all consumer spending and offer clues on the strength of the economy. The Home Depot Goldman Sachs Retailing Conference: The consumer is hanging in there. Home values have gone up 50% since the end of 2019. That translates into about $18 trillion of incremental value in US housing stock, which is currently pushing $45-plus trillion. That is a compelling wealth effect. The THD customer is in good shape. Their customer tends to have good employment, wage growth and own their home. Significant incremental spending in home improvements was fueled by the pandemic shift in consumer spending from services to goods combined with working from home and stay at home orders. So they track consumer spending trends back to pre-pandemic levels for the share of PCE and goods and services. There has been a dramatic fall off in housing turnover in the last 18 to 24 months. They don't traditionally talk a lot about the demand base on housing turnover because it has been relatively stable at 4% to 5%, with about 5 million to 6 million homes turning over every year. When people sell or buy a home they spend much more than they typically do. Turnover went down by about 1.5 million units in a very short period of time. So if you do the math, $10,000 in incremental spend per unit, that's $15 billion a year that's off the table. So that has been a bit of a headwind. People are still putting off big projects. There is too much uncertainty about interest rates, the economy, the job market and the impact of the upcoming election. Maintenance and repair continues to be strong; when something breaks, people fix it. Even when the housing market picks up there is a big lag time between purchase and projects. Offer to closing to moving in and figuring out what you want to do can take many months. Small fixes and repairs get done quickly; bigger projects may get put off or just take longer to get going. When they study all the metrics, they definitely feel they are taking market share. They are also trying to build their share with bigger Pros and go from emergency fill in to steady supplier. To do that, they have to be totally reliable and consistent. They feel as if they cannot disappoint this customer because mistakes impact the entire jobsite. They continue to gain momentum with their core small- to mid-sized Pro customers and delivered mid-single-digit positive Pro comps this quarter. The recent investments they’ve made in job site delivery and high velocity Pro SKUs are paying dividends, making it easier for them to fulfill larger orders and quickly replenish inventory within stores. Pro online sales are also growing beyond expectations as Pros appreciate the enhanced online shopping experience they’ve created specifically for them. Everyone in the industry is in a wait and see mode on what impact the election will have on tariffs. They are pleased with the progress they’ve made working with their suppliers to take out costs that they absorbed over the last few years. They continue to work together with their suppliers to claw back these costs while also looking to reinvest into their marketing and merchandising strategies to drive traffic and sales. Investors frequently ask whether or not perpetual productivity improvement, or PPI, initiatives negatively impact the customer experience. They have found the opposite to be true. PPI initiatives also enable them to reduce returns, which are now at historic lows. Other News: THD has further reduced the environmental impact of their packaging. They’ve eliminated two substances which don’t easily biodegrade from packaging for their private label products. THD redesigned more than 1,280 private-label packages to reduce size and materials from 2017 through 2023. Now they are removing expanded polystyrene (EPS) foam and polyvinyl chloride (PVC) film in new packaging for their private-brand products sold in the US, Canada and online. During 2023, THD eliminated approximately six million cubic feet of EPS, equal to about 67 Olympic-sized swimming pools, and more than 39 million sq. ft. of PVC film, enough to cover more than 500 football fields, from their private-brand packaging. Amazon Amazon Prime Big Deal Days will take place October 8 and 9, kicking off at midnight on the 8th. Prime Big Deal Days offer special discounts to Amazon Prime members, who now number around 180 million in the US. The Prime Big Deal Days event will slash prices on top tech, everyday essentials and of course Amazon's own devices. Amazon employees will be required to return to the office five days a week beginning in January 2025. CEO Andy Jassy announced the news in a memo. Employees have been required to put in three days a week in the office since May 2023, although many have reportedly found ways to work around the requirement. They are also adjusting the ratio of employees to managers by 15%, which will mean more employees and fewer managers, and presumably a lower payroll. Jassy says the goal is to flatten the organization and reduce layers. Drivers with Amazon Delivery Service Partners are getting a 7% pay bump to an average of $22 an hour from the previous raise given last year to $20.50. The increase in wages is part of a new $2.1 billion investment Amazon is making in their delivery program. Amazon doesn't directly employ drivers but relies on thousands of third-party businesses that deliver millions of customer packages every day. The Teamsters and other labor groups have argued that Amazon exercises great control over the subcontracted workforce, including determining their routes, setting delivery targets and monitoring their performances. The Teamsters want Amazon treated as a joint employer. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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