Retail Sales Rise 1.6%
Retail sales rose 1.6% in September after falling 0.1% in August. Sales were up 3.2% from September 2016. Sales rose less than expected. Gas sales jumped 5.8%, the most in four and a half years, most likely reflecting price spikes before and during Hurricanes Harvey and Irma. Sales at home and garden supply stores rose 2.1%, most likely due to preparations for the hurricanes and then the beginning of cleanup and recovery. Grocery store sales were up 0.8%, attributed to both stocking up before the storms and replenishing supplies lost due to lengthy power outages. Online and non-store sales were up 0.5%. Core retail sales, which exclude auto sales, gas and building materials, and factor into GDP, rose 0.5% in September after rising an upwardly revised 0.1% in August. Nonstore retail sales, which include internet and catalog sales, rose 0.5% in September after dropping 1.1% in August and were up 9.2% from September 2016. Retail sales account for one-third of all consumer spending, with services accounting for the other two-thirds.
Holiday Sales Forecast
Retail sales for November and December are expected to increase between 3.6% and 4% to approximately $682 billion, up from $655.8 billion in 2016, according to the National Retail Federation (NRF). The NRF says this is the first time they’ve used a range for a percentage impact, and noted that the recent hurricanes in the South would most likely impact results. Christmas is 32 days after Thanksgiving this year, one day later than last year, and since Christmas is on a Monday, people have an extra weekend to complete their shopping. NRF expects online sales to grow 11% to 16% this year and reach about $114 billion. Retail employment is already up this year, so retailers are reportedly hiring fewer seasonal employees. NRF expects retailers to hire 500,000 to 550,000 temporary workers this year, down from 575,000 last year. Also, this year NRF will release spending data on Tuesday, November 28, the day after Cyber Monday, rather than on the Sunday after Thanksgiving as has been typical.
The Home Depot
THD cut down on Halloween inventory in stores in hurricane-ravaged Texas and Florida, choosing to focus on storm recovery products that will help homeowners with rebuilding. THD typically sells about 1.5 million pumpkins every season. THD also leased an additional 300,000 square feet of warehouse space in Houston that will store needed inventory such as electrical supplies, drywall and flooring repair materials.
Lowe’s has formed a working partnership with Stanley Black & Decker to be the exclusive retailer for Craftsman Tools in the home store channel. Lowe’s will begin selling Craftsman power tools and wrenches during the second half of next year. More on this story in the Power Tools section.
Lowe’s leased an additional 250,000 square feet of space in Houston from New Jersey-based NFI, a supply chain provider that works with Fortune 500 companies. NFI will work exclusively with Lowe’s to keep shelves stocked.
From Walmart’s Investor’s Meeting:
Walmart will open just 15 supercenters and 10 Neighborhood Markets in the U.S. next year. They opened 40 this year, down from 60 in the last fiscal. It would be the fewest number of store openings in 25 years. Walmart plans to open 255 new stores outside the U.S., with a focus on Mexico and China, during the 2019 fiscal year.
Walmart will remodel existing buildings and invest in their ecommerce infrastructure and services like home grocery delivery.
Walmart wants to lower expenses as a percentage of sales from 21%, although they did not give a target range for expenses. WM expects to save $20 million this year by using slightly smaller plastic shopping bags.
WM will institute zero-based budgeting, which means each business expense must be justified. Zero-based budgeting is used more widely in the consumer products and packaged foods sectors.
WM expects online sales will rise 40% in the next fiscal year. WM will double the number of U.S. curbside locations for online grocery shoppers at Walmart stores.
Walmart acquired Brooklyn, New York-based delivery service Parcel Inc. Walmart plans to use Parcel to offer same-day deliveries from Walmart and Jet.com to customers in New York City. Walmart says Parcel has developed unique expertise and the acquisition will allow Walmart to continue to test ways to offer fast delivery while also lowering operating costs. Financial terms were not disclosed, but Walmart said it was a smaller purchase than online retailer Shoes.com ($70 million), Moosejaw ($51 million) and Bonobos ($310 million). Walmart paid $3.3 billion to acquire Jet.com last year. Walmart also unveiled a partnership with August Home and Deliv for a test in Silicon Valley that allows people with smart locks to have groceries delivered and put away inside their homes.
U.S. ecommerce chief Marc Lore is said to be trying to position Jet.com as an upscale online retailer that offers specialty goods that can’t be bought elsewhere and also to separate and differentiate Jet.com from parent Walmart. They are also expected to introduce a line of private-label brand products called Uniquely J designed for the “metro millennial consumer.”
Walmart is rolling out Mobile Express Returns in November. The program will let customers get a refund for online orders in just 30 seconds by scanning auto-generated QR codes in any Walmart store. Walmart says the average return takes five minutes. Walmart plans to expand the program to allow returns of merchandise bought in stores next year.
Walmart is reportedly nearing a deal that would give department store chain Lord & Taylor dedicated space on Walmart.com, according to the Wall Street Journal. Retailers including Amazon.com and Alibaba Group offer dedicated space to brands on their website. These arrangements allow companies to increase traffic to their ecommerce platforms and allow retailers to boost their online assortment. Lord & Taylor will reportedly continue to operate their own website, but shoppers at lordantaylor.com will be able to pick up and return items at Walmart’s 4,700 U.S. retail stores.
Chairman Eddie Lampert’s hedge fund, ESL Investments, has lent Sears another $100 million. Over the last two years, Lampert and his hedge fund have loaned Sears close to $2 billion to help keep the struggling retailer afloat. Sears announced plans to close more than 300 Kmart and Sears stores this year. The closings will bring Sears’ store count down to fewer than 1,140 from 2,073 just five years ago.
Sears will no longer sell Whirlpool appliances. A dispute over pricing ended a partnership that stretched back more than a century. Whirlpool brands include Maytag, KitchenAid, Whirlpool and Jenn-Air. Hundreds of Whirlpool listings disappeared almost immediately from the Sears website. As recently as 2002, Sears sold four out of every 10 major appliances in the U.S., far more than their nearest rivals. But Sears share of the market fell 22% in the 12 months that ended in March, according to market research firm TraQline. Sears said that Whirlpool’s demands would have made it impossible for them to offer Whirlpool appliances at reasonable prices.
Ace Hardware acquired a majority stake in The Grommet, an ecommerce startup that brings products from independent entrepreneurs and emerging companies to market. Since its launching in 2008 The Grommet has worked with more than 2,500 inventors, entrepreneurs and small businesses. FitBit, IdeaPaint, OtterBox and SodaStream are among the products launched. Ace will not alter the company’s strategic direction, and terms of the deal were not disclosed. Ace CEO John Venhuizen says that he believes The Grommet can offer their customers more creative products from local entrepreneurs. The Grommet evaluates and selects products called Grommets across 16 categories and promotes them on its network by telling the stories behind each product. Only 3% of all products submitted and evaluated are actually launched. In 2016 The Grommet partnered with Ace for a pilot program called Innovation Incubators, a freestanding Grommet display in Ace’s stores that hold about 40 different products they test each quarter.
The winners of Ace’s Maker to Market contest were the Casus Grill, a portable biodegradable BBQ grill that retails for $12.99, and a 3D-printed phone case that holds four tools stored within the phone case. The grill weighs 2.2 pounds, and can be burned in a bonfire after use, leaving no trace. Both winners will present and market their products at the Ace Hardware 2018 Spring Convention in Dallas.
W. W. Grainger
Q3 sales rose 3% to $2.6 billion, beating analysts’ expectations. Sales for Grainger U.S. fell 1% but were up 1% on a daily basis compared to the third quarter of 2016. Segment volume rose 7%, which was partially offset by declines of 5% from price and 1% from the divestiture of specialty businesses. Sales got a 1% boost from intercompany sales and 1% from hurricane-related sales, which were offset by declines of 1% from the timing of the July 4 holiday and 1% from seasonal sales.
Grainger reported solid response from digital marketing, particularly from mid-sized customers. They are continuing to streamline their portfolio, divesting themselves of noncore U.S. specialty businesses, which affects sales but positions them more favorably for future growth.
Grainger is focused on improving gross margins and reducing their cost structure in Canada, where they find higher expenses challenging. In addition, Grainger’s oil and gas and energy exposure in Canada is very high.
Grainger lowered their sales guidance for the year and now expects 2017 sales growth of 1.5% to 2.5% compared to initial guidance of growth between 1% and 4%.
Amazon’s net sales rose 34% to $43.7 billion in the third quarter. The results included $1.3 billion from Whole Foods Market, which Amazon acquired in August. Results also included Amazon’s cloud computing division (AWS), where revenue rose 42% to $4.58 billion from $3.2 billion last year, exceeding expectations. Excluding Whole Foods Market and the $124 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 29% compared to third quarter 2016. Results greatly exceeded analysts’ expectations.
Amazon is projecting that holiday sales will rise 28% to 38% compared to last year. Holiday revenue grew 22% year over year in both 2015 and 2016.
Amazon received 238 proposals from 54 states, provinces, districts and territories asking to be considered as the site of Amazon’s second U.S. headquarters, which the media refers to as HQ2. A decision is not expected until next year. Some applicants are reportedly offering up to $7 billion in tax and other incentives. But some cities expected to submit proposals eventually declined, or decided to submit proposals without big incentives. Many analysts are speculating that one of the reasons behind these decisions is the fact that some locations are already home to big and powerful corporate headquarters, whose CEOs are not enthused about competing with Amazon for top talent. Amazon has already said that the new headquarters will create 50,000 jobs, many highly skilled and technology-driven.
Amazon is reportedly testing a new delivery service they’re calling Seller Flex. The test is on the West Coast, with a potentially broader rollout in 2018. As part of the service, Amazon will oversee the pickup of packages from warehouses of third-party merchants and delivery to customers that is currently handled by UPS and FedEx. While both UPS and FedEX will still be used, Amazon will decide how a package is sent rather than leave that to the merchant.
Amazon is planning on hiring 120,000 people in the U.S. to fill holiday jobs, some of which could turn into full time jobs next year. The jobs include a full range of benefits, and are available at fulfillment centers, sort centers and customer service sites throughout the country.
Amazon is reportedly considering buying luxury retailer Nordstrom, according to Financial Deals Tracker.
Amazon’s digital voice assistant Alexa will finally be able to tell voices apart and offer a personalized experience based on who is speaking. Features include playing messages, personalized music playlists, flash briefings and personalized shopping.
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