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Retail Sales Rise 0.5% Retail sales rose a relatively mild 0.5% in March after rising a significantly upwardly revised 0.8% in February. Gas stations posted a robust 8.9% increase in sales, but that was primarily due to rising prices. Gas is a necessity, so high gas prices leave consumers with less to spend on other goods and services. Ecommerce spending fell 6.4% in March but was up year over year. Some analysts believe dropping online sales reflect a return to in-store shopping. Core retail sales crept up 0.2% for the second consecutive month, leaving the Commerce Department to refer to them as “virtually unchanged.” Core retail sales correspond most closely with the consumer spending component of GDP. The Home Depot CFO Richard McPhail represented THD at JPMorgan’s 8th Annual Retail Roundup. THD recently had their first in-person store managers meeting in 3 years, something they typically do every year in Las Vegas. The product walk consists of a space equivalent to several Home Depot stores where all the major vendors come and show the latest product innovations. They believe the level of innovation has never been higher and 90% of the products in the walk will be brand new for them. Morale is high and associates are optimistic about the future because THD did very well during the pandemic and has grown by more than $40 billion in the last two years. Their push to penetrate the planned order portion of Pro’s business is progressing. Pros have traditionally used THD for convenient purchases, but THD has not been able to handle flatbed jobsite delivery and was not regarded as dependable. As they are improving and building out those capabilities, they are realizing that customer wallets are much deeper than they ever anticipated. For example, one large Pro customer has grown from about $50,000 per year to more than $500,000. Large Pros demand dependability, not just on-time delivery, as well as having the depth of product they need always in stock. THD’s new flatbed distribution centers make Pros confident they can trust THD to fulfill their order. Pricing is important and they are becoming more scientific about optimizing pricing, but they are definitely in the experimental learning phase. Labor costs are a significant component of project costs so the more time they can save Pros the better. They don’t make long-term projections because they manage their business in a very short-cycle way. They turn inventory 5x a year and staff stores and create schedules a few weeks in advance. Operating that way makes them nimble and flexible. No one knows how inflation will ultimately impact consumer behavior, but home equity and the importance of the home has never been higher. Only 5% of homes change hands each year. More than 90% of the homes bought in the last two years were financed using very long-term fixed-rate mortgages, so they don’t believe rising rates will have much impact on the home improvement market. Because of rising equity, the debt to equity ratio is extremely low. They don’t do promotions; they think about events as time periods where customers are more likely to come in to the stores. They want people to count on THD to deliver the best price for any project on any given day and not wait for sales and promotions. They believe that product innovation creates demand and delivers the best value to their customers. They also believe they need to sell projects across categories to maximize their share of wallet. They are committed to delivering the best interconnected experience in retail and have invested heavily in improving their platforms. They are not immune to inflation; they just believe they will be able to manage successfully in any environment. Project demand is healthy and heading into the year they took steps to be able to manage and respond to cost pressures. Other News: THD cut their overall workforce by 2.8% in the fiscal year that ended January 30, 2022, but increased the number of salaried employees by 19.9%. About 89% of THD’s 490,600 employees are located in the US. THD introduced an improved search platform that caters to the growing number of customers who search their website. There are now more than 400,000 unique searches every day. Their team wants to increase the number of searches that eventually turn into purchases. So, in addition to building accurate, lightning-fast results, they are making their search engines smarter by creating a search platform that focuses on the intent of the person searching, not just the actual words used. This lets them account for geographic and other differences in terminology. They’re also creating a personalized experience so that their online channels consider location, past searches, personalized deals and profession when populating search results. For example, an electrician who is looking for pliers will be shown electrician’s pliers. The Home Depot Foundation is teaming up with Operation Blessing in Grand Prairie, Texas, to build nearly 800 relief kits in preparation for disaster season. The kits will provide immediate resources to those affected by severe weather events. Last year the Foundation’s partnership enabled Operation Blessing to provide 2,500 disaster relief kits, complete 12 long-term disaster recovery projects and respond to disasters in more than 20 cities. Lowe’s Brandon Sink is the Lowe’s new CFO. He took over from Dave Denton, who stepped down to accept a position as CFO for pharmaceutical giant Pfizer. Denton joined Lowe’s in 2018 from CVS. Sink has been with Lowe’s since 2010 and is currently senior vice president, retail finance. Lowe’s CEO Marvin Ellison got a $17.9 million compensation package from Lowe’s last year, which was down about 23% from his 2020 package. Ellison’s base salary remained $1.45 million; the rest of the compensation package was stock awards, options and other incentive payments. Lowe’s committed $9 million to eight higher-education institutions and scholarship programs to help underrepresented students and build their own talent pipeline. The initiative will provide full-tuition scholarships that will help more students reach their full potential. Lowe’s is also supporting two universities who offer construction business schools. Walmart Walmart rolled out new Marketplace perks and incentives designed to attract more third-party brands to their online sales channels. Sellers who join Walmart Marketplace by the end of May or start selling on Walmart.com by the end of June will get a 50% discount on commission rates for their first 90 days. Walmart also extended their Walmart Fulfillment Services (WFS) introductory offer for new sellers who want to take advantage of Walmart’s low-cost fulfillment option. Approved sellers who fulfill all the program requirements by the end of June will get 90 days of free storage and a 10% discount on fulfillment fees on the first 10,000 units. Walmart launched WFS in February 2020. Items sold through WFS arrive in a Walmart box and are categorized as “fulfilled by Walmart,” similar to Amazon’s program. Ace Hardware Ace Hardware will hire more than 40,000 new employees this spring for stores and distribution centers. Ace opened 182 new US stores in 2021 and saw comp store sales rise 7.5% for the year. Ace says a sharp increase in consumer demand is behind their hiring plans. Ace customers can now get unlimited 3% Daily Cash Back when they use Apple Card with Apple Pay for purchases in the app, on the website and at store locations nationwide. Ace says they are the first home improvement store to offer these benefits. Ace stores across the nation hosted the New at Ace Launch Party on April 23 to unveil new products from Traeger, Weber and EGO. The party featured demonstrations, deals and giveaways. Ace Hardware stores in Virginia are partnering with Virginia 811 to offer a special sweepstakes during April, National Safe Digging Month. The Ace Your Outdoor Space Sweepstakes gives all Virginians an opportunity to win one of four $1,000 Ace Hardware gift cards. National Safe Digging Month is a reminder to contact Virginia 811 before you dig for any landscape or home-improvement project so you can avoid electric, communications, natural gas, water and sewer lines. Amazon Amazon's overall revenue grew 7% from the same period last year to $116.4 billion, slightly beating analyst forecasts but slower than the 9% growth in the final months of last year. The company forecast that revenue growth would slow further next quarter, anticipating a growth rate of between 3% and 7%. Analysts say that Amazon’s 20-year growth spurt is definitely slowing down. Amazon noted that they will be focused on improving productivity and cost efficiencies throughout their fulfillment network. Amazon said that higher inflation, fuel prices and labor constraints added $2 billion in costs, and the huge boom in hiring necessitated by the pandemic has left them overstaffed. Amazon Prime Day will be in July this year; Amazon has not released any further details but typically Prime Day creates a promotional event opportunity for many other retailers, who also offer in-store and online deals. Amazon aims to deliver 1 million packages by drones by 2025. But after working on Prime Air for ten years, Amazon is still grappling with the cost structure of using drones to drop packages on customers’ doorsteps within an hour of ordering. Internal projections showed that each drone delivery could cost $63 per package compared to the current on-the-ground delivery cost estimated to be less than $5.50. Amazon has been quietly testing Prime Air deliveries in a handful of rural areas in Oregon and California for the past 18 months. Johns Hopkins University and Amazon have teamed up on a new initiative for Interactive AI, which focuses on making interactions between humans and AI more natural through language technology and visual improvements. The initiative is focused on advancing research through fellowships to students, faculty grants where professors may work with an Amazon scientist and sponsored research projects. The amount of money Amazon is investing was not disclosed. Amazon is adding a 5% surcharge to delivery fees to pass along rising fuel costs and inflation to sellers on the Amazon marketplace. The fee will be applied to US sellers only and apply to products delivered under the Fulfillment by Amazon option. Experts don’t think third-party sellers will pass along costs to customers. An Amazon warehouse in New York became Amazon’s first warehouse in the US to be unionized. The Teamsters union was voted in after a two-year battle during which Amazon steadfastly maintained their workers were better off without a union, and reportedly engaged in many old-line union-busting tactics. The Staten Island warehouse that is now unionized is Amazon’s largest fulfillment center in New York. Amazon isn’t planning on adding cryptocurrency to their payment options any time soon, according to CEO Andy Jassy. Jassy believes crypto will continue to become bigger over time but noted he doesn’t personally own any. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval.
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