Distribution July 2016
RETAIL SALES RISE 0.5%
Retail sales rose 0.5% in May after jumping 1.3% in April and were up 2.5% year-over-year. May’s gain was led by online and nonstore purchases, which increased 1.3% in May after rising 2.1% in April. Nonstore sales were up 12.2% from May 2015. Core retail sales, which exclude automobiles, gasoline, building materials and food services, rose a solid 0.4% in May after jumping 0.9% in April. These core retail sales correspond most closely with the consumer spending component of gross domestic product. Retail sales account for about one-third of all spending, with services making up the other two-thirds. Analysts said that the report showed that the economy was strengthening.
THE HOME DEPOT
From the RBC Capital Markets Consumer Retail Conference where THD was represented by Richard McPhail, SVP Finance:
They are projecting a 5% appreciation in housing prices this year. They see 2% to 3% as normalized appreciation. They believe that home price appreciation is one of the big drivers behind home improvement spending.
An aging housing stock supports long-term growth in home improvement spending. In the year 2000, about 52% of homes were 30 years or older. In 2015, 65% of homes fell into that age range. This trend indicates growing home improvement spending because people spend more on older homes.
They spend a lot of time working with and studying millennials. They do not think the trend to delaying household formation has hurt their business.
Back in 2008 they looked at the “threat” they faced from ecommerce, and decided to turn it into an opportunity. They grew their online business by more than 20% in the first quarter.
They believe there is a noticeable trend away from DIY to DIFM (Do It for Me). Boomers aging in place either can’t or don’t want to do all the project work they used to, and millennials often did not grow up in as much of a DIY environment as boomers did.
The pro is the primary target for the DIFM market, as people are generally hiring a pro to do it for them.
Despite the impact of online, having products available in store for people to see and touch is very important.
All of their acquisitions are designed to bring a capability they did not have before and stretch it across the enterprise.
Lowe’s C$3.2-billion (US$2.4 billion) acquisition of Canada’s home improvement retailer Rona closed in late May, and Lowe’s has developed a list of priorities to build their Canadian business. With the acquisition of Rona, Lowe’s now has about C$6 billion in annual sales in Canada, about $1 billion less than Home Depot Canada. CEO Sylvain Prud’homme says their goal is to become the number one choice for home improvement retail in Canada. Prud’homme says that Lowe’s needs to build brand awareness, and that actually the leading brand in Canada is Home Hardware, the number three retailer by volume. Lowe’s thinks their mix of super-stores and smaller format stores will give them a competitive advantage.
Walmart CEO Doug McMillon expects to add $45 billion to $60 billion in new sales over the next three years. He went over the company’s sales plans at the Consumer Goods Forum in Cape Town, South Africa.
Walmart is testing a grocery delivery service with Uber and Lyft as part of their efforts to compete with Amazon. What’s known as “last mile delivery” has turned into a hotly contested battleground, with startups like Instacart and DoorDash competing with Uber, Amazon and the USPS. Walmart is testing a similar service at Sam’s in Miami using Deliv Inc., a startup that handles same-day delivery for Kohl’s, Macy’s and other retailers.
Walmart rolled out their own mobile pay solution, Walmart Pay, to stores in four more states after slowly rolling their app out in Arkansas and Texas in May. Walmart says the app is “a checkout-changing service.” Walmart says there are 20 million active users of the Walmart app each month, and that they are the only retailer to offer their own mobile payment solution that works with any iOS or Android device, at any checkout lane, and with any major credit, debit, pre-paid or Walmart gift card, all through the Walmart mobile app.
Walmart launched a free 30-Day trial of ShippingPass, their two-day shipping program for shoppers designed to compete with Amazon Prime that is timed to coincide with Amazon’s second annual Prime Day event. Walmart will reportedly offer new members a free 30-day trial to their ShippingPass program, and existing members will receive an extra free month of service. At $49, ShippingPass is about half the price of Amazon Prime. However, Walmart offers about 7 million items, and Amazon Prime offers about 20 million, along with member access to a growing library of streaming video and music.
Walmart invited 450 entrepreneurs to their home office to pitch their American-made products, and surprised everyone by promising that each of the 800 products pitched would, at minimum, be available on their website. The unique approach allows Walmart to expand their online inventory, which has grown to about 10 million items, and allows them to test new products in the real world. Walmart has committed to purchase an additional $250 billion in American-made products by 2023.
Walmart took the top spot on Fortune’s Global 500 list, with $482.1 billion in revenue compared to runner-up Exon Mobile’s $246.2 billion. Apple came in third with $233.7 billion in revenue. Walmart has taken the top spot on the annual list a total of 12 times.
Walmart Canada’s CEO Dirk Van den Berghe is taking over Walmart’s Asia region, which includes China and Japan. Sean Clarke, the current CEO of Walmart in China, is replacing Andy Clarke as head of the Asda, their struggling U.K. unit.
Walmart Canada will no longer accept Visa cards; reportedly they were unable to agree on terms with Visa. Walmart has 405 stores in Canada. Walmart will continue to accept MasterCard, American Express, Discover and other cards. Walmart is also suing Visa in the U.S. over the right to choose how customers verify debit-card purchases at the register. Walmart wants customers to use a PIN number and says Visa has prohibited them from requiring PINS.
Lee Tappenden will take over Walmart’s Canadian business from Dirk Van De Berghe, who is taking over operations in China. Tappenden is currently COO of the Canadian division.
Walmart intends to sell their Chinese ecommerce business and form a strategic alliance with online retailer JD.com, China’s second-largest ecommerce company. Walmart is essentially handing over its Chinese business for about 145 million shares of new JD.com stock, about 5% of the Chinese company. China is the world’s largest ecommerce market, and online sales in China could exceed $1 trillion by 2019, according to a report last year from Forrester Research.
Grainger's daily sales rose 1% in May compared to May 2015. The sales growth included 4% from Cromwell Group (Holdings) Limited, acquired September 1, 2015. Excluding acquisitions, organic daily sales were down 3%, driven by a 1% decrease in volume, a 1% decline in price, and a 1% negative impact from the wildfires in Alberta, Canada. Daily sales in the U.S. were down 3%. Daily sales in Canada were down 20% in U.S. dollars and 15% in local currency.
Amazon is expanding its Dash Button again, adding 50 new brands to the growing program. There are now more than 150 Dash Buttons available compared to 29 last year. The line-up of new names includes Campbell's Soup, Pepperidge Farm, Cascade, Dial Liquid Hand Soap and others. Amazon reports getting Dash orders every thirty seconds, double the rate of just three months ago. The devices are basically free to Prime subscribers. Though there is a $4.99 charge per button, that amount is credited back after their first Dash order.
Amazon is widely expected to have a second annual Prime Day event sometime in mid-July. Last year the one-day sales event offered thousands of special deals available online only to Amazon Prime subscribers. The day was first announced as a way to celebrate Amazon’s 20th anniversary as an e-retailer. Amazon hasn’t announced an actual date yet for Prime Day 2016.
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