Retail Sales Fall 0.8% Retail sales fell 0.8% in January after rising a downwardly revised 0.4% in December, according to the Commerce Department. Economists had expected sales to decline 0.1%. Falling gas prices helped free up cash and holiday spending was brisk. Retail sales were up 2.2% year over year. Excluding automobiles, gasoline, building materials and food services, core retail sales dropped 0.4% in January after rising a strong 0.8% in December and were up 3.1% year over year. Building materials and garden supply store sales fell a steep 4.1% after rising in December. Online sales fell 0.8%. Core retail sales, which are mostly goods and not adjusted for inflation, correspond most closely with the consumer spending component of GDP. The retail sales report covers about a third of overall consumer spending and doesn't include services, such as travel and entertainment. The Home Depot Q4 sales fell 2.9% to $34.79 billion, slightly ahead of expectations. Comp store sales decreased 3.5% overall and 4.0% in the US, as big-ticket transactions, defined as transactions over $1,000, dropped 6.9%. Full year sales fell 3% to $152.7 billion. Comp sales fell 3.2% overall and 3.5% in the US. Both Q4 and full year results were largely in line with expectations. For this fiscal, THD expects sales to rise 1% and comp store sales to drop 1%. Q4 and Full Year Conference Call with Analysts: Building materials and outdoor garden departments posted positive comps, and 6 of the remaining 12 merchandising departments posted comps above the company average, including appliances, plumbing, tools, paint, indoor garden and hardware. Q4 comp transactions decreased 2.1% and comp average ticket decreased 1.3%. However, customers continue to trade up for new and innovative products. Transactions and average ticket are beginning to equalize; that is their definition of a balanced normal market. Deflation from core commodity categories shaved 35 basis points off average ticket during the fourth quarter, driven by deflation in lumber and copper wire. Q4 Pro and DIY sales were relatively in line with one another. Their internal and external surveys suggest that Pro backlogs are lower than they were a year ago but are stable and elevated relative to historical norms. Online sales leveraging their digital platforms increased approximately 2% compared to the fourth quarter of last year. THD described 2023 as a year of moderation and opportunity. They focused on several operational improvements to strengthen the business while still investing in the growth opportunities they detailed during their June investor conference. They successfully invested approximately $1 billion in their associates by increasing annualized compensation for frontline hourly associates. That allowed them to improve customer service and attract and retain the most qualified talent, drive greater efficiency and productivity across the business and broadly improve safety. They started the year with more inventory than they prefer and worked throughout the year to reduce inventory while achieving the highest in-stock and on-shelf availability since the pandemic. They acquired Construction Resources in December as part of their commitment to strengthen their Pro business. Construction Resources is a leading distributor of design-oriented surfaces, appliances and architectural specialty products for Pro contractors focused on renovation, remodeling and residential homebuilding. The acquisition of Construction Resources will allow complex Pros to easily shop across aesthetic product categories in a showroom setting, which is how they are accustomed to shopping for those types of goods. They will continue building out new capabilities for the complex Pro this year. They plan to expand their assortments, fulfillment options and outside sales force and recently began piloting credit options for Pros. They will also continue to work on new order management capabilities to better manage complex Pro orders and plan to have 17 of their top Pro markets equipped with new fulfillment options, localized product assortments, an expanded sales force and enhanced digital capabilities by the end of the year. More job site delivery orders fulfilled from their distribution centers mean less congestion in stores and less time dedicated to picking, packing and staging orders for delivery. That gives their in-store Pro sales associates more time to dedicate to serving Pros. The ability to fulfill large orders through their distribution network also means they have more product in-stock and available for sale for all those Pros shopping in their stores. They are focusing on improving the post-sale experience for customers, the process for which has largely been unchanged for the past 44 years. In 2023, they made significant progress taking friction out of their online order management process. Now customers can more easily modify orders and also complete self-service online returns and return products by mail or in-store. In fiscal 2023 they opened 13 new stores, 8 in the US and 5 in Mexico. In the US the 8 new stores were roughly split between stores they opened in order to relieve pressure on higher-volume existing stores and stores in new high-growth areas. They plan to open 12 new stores this year. They saw continued softness in certain big-ticket, discretionary purchases as customers focus on smaller projects and defer larger ones. Big-ticket comp transactions, or those over $1,000, were down 6.9% compared to the fourth quarter of last year. This year they will be focusing on expanding their lineup of cordless outdoor tools for Pros and cordless power tools of all varieties for their Spring Gift Center. Other News: The Home Depot ranked #1 in Fortune’s specialty retailer category and moved up one spot to #19 overall on Fortune’s new list of America’s 2024 Most Admired Companies. Fortune worked with Korn Ferry to review 1,500 businesses and determine the best-regarded companies across 52 industries. The team surveyed executives, directors and analysts to rate enterprises in their own industry on various criteria, from investment value and quality of management and products to social responsibility and ability to attract talent. THD likened the effects of the pandemic to a giant, nationwide hurricane that spurs tremendous growth followed by periods of moderation followed by another cycle. If the pandemic plays out over a five-year period like a giant national storm, the coming years will be very positive for the industry. Lowe’s Q4 sales fell 17% to $18.6 billion and comp sales fell 6.2%, less than analysts expected. Prior-year quarterly sales included approximately $1.4 billion from the additional 53rd week in the reporting period, as well as $958 million generated from the sale of Lowe’s Canadian retail business. For 2023, net sales fell 11% to $86 billion. However, annual earnings increased 20% and profits were also up compared to 2022. Walmart Walmart plans to build or convert 150 new stores over the next five years and remodel existing stores. That’s a big change from 2016 when Walmart announced they were cutting back on expanding brick and mortar store in order to focus more on their online business and become more competitive with Amazon. Walmart has not opened a new US store since 2021. Walmart is reportedly in talks to buy TV maker Vizio for more than $2 billion, which would give WM many more opportunities to sell advertising and pitch products for Walmart and Sam’s. Walmart and Sam’s have been Vizio’s largest customers. Most of Walmart’s US revenues come from the grocery business, which is traditionally low margin. Last year WM reported about $2.7 billion in global advertising revenue, which is a much higher margin business. Roku has 25% of the connected TVs operating systems, Amazon accounts for 17% and Vizio makes up 8%, according to Parks Associates. Buying Vizio will give Walmart access to a powerful TV operating system and more ad inventory and ad viewership data. Walmart plans to triple the amount of goods they source from India, to about $10 billion annually by 2027. WM has sourced about $30 billion in goods from India over the past 25 years. WM is reportedly focused on finding new, price-competitive suppliers. Ace Hardware Q4 revenue dropped 3.0% to $2.1 billion and full year revenue fell 0.4% to $9.1 billion. CEO John Venhuizen said results were disappointing, but entirely due to lower sales of winter goods due to the very mild weather in December. Q4 comp retail sales fell 5.2%, due to a 3.2% decline in comp store transactions and a 2.0% drop in average ticket, according to the approximately 3,700 domestic Ace stores that share daily sales data. For the full year, comp store retail sales fell 2.2%, due to a 1.1% decrease in comp store transactions and a 1.0% decline in average ticket. Amazon Amazon’s annual sales jumped 12% to $574.8 billion in 2023. Amazon’s North American sales rose 12% to $352.8 billion. Q4 net sales increased 14% to $170 billion. Q4 sales in North America grew 13%. Amazon expects sales to grow 8% to 13% during the first quarter of 2024. Black Friday and Cyber Monday sales set all-time records. Amazon’s $1 billion dollar venture capital fund is gearing up after a slow start. Industrial Innovation was first introduced in April 2022, but couldn’t agree on which startups to fund. The fund has since made several investments in robotics and automation startups with technologies that are deployed in warehouses. Now Amazon is looking to support transportation companies that can help improve the performance of its sprawling logistics network. Amazon introduced new ad tools to help brands connect with consumers, including a generative AI solution to produce lifestyle imagery and make ads more engaging; a sponsored TV offering that lets brands run streaming TV ad campaigns with no minimum spend on Amazon Freevee, Twitch, and third-party streaming services; and new capabilities that include enhanced audience insights and optimization controls. Amazon has introduced a digital shopping assistant named Rufus that is in beta test in selective markets and will be rolled out later this year. Shoppers can ask Rufus the questions they likely already ask Google, such as "What to consider when buying headphones?" or "What are clean beauty products?" and receive helpful information to guide their shopping mission. Rufus can also answer questions about specific products. Amazon is being added to the Dow Jones Industrial Average. They’ll replace Walgreens Boots Alliance on the popular stock index. The shift was prompted by Walmart’s decision to do a 3 for 1 stock split, which reduces the stocks weighting in the index. Amazon is expanding their Ships in Product Packaging program, which allows certain goods to ship in the packaging they are stored in to eliminate what Amazon calls “packaging redundancy,” which translates to one sturdy cardboard box inside another, which virtually doubles the amount of cardboard headed to recycling or worse, to a landfill. Sellers are eligible for the program if they ship larger products that are already packaged in sturdy containers. Amazon will offer sellers that qualify incentives that allow them to save money on fulfillment costs. Amazon has traditionally shipped just 11% of products in their own packaging but expects that percentage to rise over time. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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