RETAIL SALES FALL 0.3%
Retail sales fell 0.3% in March and February sales were revised from down 0.1% to flat. Retail sales have been flat or down in four out of the past five months. Core retail sales, which exclude automobiles, gasoline, building materials and food services, rose 0.1% after rising by 0.1% in February. Sales at building materials and garden equipment stores rose 1.4% compared to February and were up 11% year-over-year. Economists had expected coreretail sales to rise 0.3%. Analysts say that consumers appear to be using savings generated by cheap gasoline to pay down debt and build up bank accounts. The personal savings rate in the first quarter of the year was the highest since the end of 2012. Faltering consumer spending is a real drag on the economy, and poor retail sales are clouding economic forecasts for the rest of the year. Analysts had expected core retail sales to rise 0.3%. Retail sales account for about one-third of all spending, with services making up the other two-thirds.
ADOBE LAUNCHES DIGITAL PRICE INDEX
Adobe has launched a new digital price index (DPI) that tracks the price of goods online. They crunch big data collected on millions of online transactions they track through their online marketing service. Adobe says that many items are consistently cheaper when bought online. For example, the price of household appliances dropped 5.7% online between February 2014 and February 2015, while prices dropped only 2.7% in the Consumer Price Index. Adobe partnered with two well-known economists to create the DPI. The new price index is meant to complement the traditional Consumer Price Index released by the Labor Department. The BLS conducts surveys with shoppers each month and then inspectors go out into physical stores to check out the prices of about 94,000 individual items. They update about an eighth of the basket every six months. The Adobe index tracks about 1.7 million consumer goods, all online, in real time. Not all online prices are lower; grocery prices showed more inflation online.
IMPROVING CHIP-ENABLED CARD DELAYS
Visa and Walmart are taking steps to cut the amount of time it takes to process chip-enabled credit and debit cards. Visa is introducing new software that allows customers to remove their cards from terminals more quickly, which will shave about 18 seconds off transaction time. The software was designed in response to complaints about increased waiting time at checkout. Walmart announced they’ve cut 11 seconds off chip-card transaction time by eliminating a prompt that asked shoppers to confirm the amount of the transaction, among other steps. Both customers and merchants have been complaining about the increased time it takes to process chip enabled transactions. A study by JDA Software Group found that using a chip card typically added eight to 12 seconds to the checkout process.
THE HOME DEPOT
CEO Craig Menear’s total compensation rose by 13.7% in 2015, according to proxy statements. Menear earned about $11.6 million in total compensation last year. Home Depot’s profit grew 10.5% to $7 billion in 2015.
Rona’s shareholders voted overwhelmingly in favor of accepting Lowe’s takeover offer. Lowe’s has promised not to slash jobs as well as keep head office operations intact and continue buying from local Canadian suppliers. Rona’s CEO Robert Sawyer is expected to be replaced by Sylvain Prud’homme, currently president of Lowe’s Canada.
Walmart came in last among discount and department stores in customer satisfaction on the American Customer Satisfaction Index with a score of 66. Nordstrom took the top spot with a rating of 82. The closest chain to Walmart was Sears at 71. The survey was based on interviews with more than 9,000 customers in November and December 2015.
Walmart has invited manufacturers to The Open Call, an opportunity to pitch their products at Walmart’s home offices in Bentonville, Arkansas. It’s part of Walmart’s 10- year commitment to buy an additional $250 billion in American-made products over 10 years. The summit will be June 28. Walmart says that every year companies that attend the event have products chosen for distribution.
Walmart is in talks with WPP Group’s Haworth Media & Marketing about the possibility of hiring Target’s former lead media agency to take over Walmart’s media account. Target recently moved their media and planning business from Hayworth to GroupM. Target had been with Hayworth since 1970. Longtime Target chief marketer Michael Francis joined Walmart as a marketing consultant the first of the year. Walmart is ranked No. 13 on Ad Age’s list of the top media spenders, and spent more than $900 million on measured media in the U.S. in 2014.
Walmart will expand their curbside pickup of groceries to eight new markets, including Kansas City, Missouri and Austin, Texas. Ecommerce COO Michael Bender told Reuters that Walmart is confident they can leverage the strategy on a larger scale, and plans to expand to a more sizable portion of their nearly 4,600 U.S. stores.
Sears Holdings will close 68 Kmart and 10 Sears stores across 27 states this summer as part of their plan to accelerate the closing of unprofitable stores. All of the Sears stores and nearly all of the Kmart stores are slated to close in late July; two Kmart stores will close in mid- September. Sears says the slate of closings follows a review that took into account historical and recent store performance and the timing of lease expirations. Sears expects the closures to generate a meaningful level of cash from the liquidation of store inventory and from the sale or sublease of some of the related real estate. Together with more than $1.2 billion in debt financing that Sears raised earlier in April, CEO Eddie Lampert thinks they are making important progress toward their goal of making Sears a profitable company once again.
Grainger’s first quarter sales rose 3%, and daily sales increased 1%. Daily sales growth included 4% from Cromwell acquired on September 1, 2015 and a 1% reduction from foreign exchange. Excluding acquisitions and foreign exchange, organic sales dropped 2%, driven by a 3% reduction in price and a 1% reduction in lower sales of seasonal products, partially offset by a 2% increase from higher volume. By month, daily sales were up 4% in January, 1% in February and down 1% in March. Sales in the U.S., which accounted for 75% of total company revenue in the quarter, were down 2% on a daily basis, driven by a 3% decline in price and a 1% decline from lower sales of seasonal produce, partially offset by 1% growth in volume and a 1% contribution from increased sales to Zoro, their single channel online business in the U.S.
On a segment basis, government was up in the midsingle-digits, light manufacturing and retail were up in the low-single-digits, commercial was down in the low singledigits, contractor and heavy manufacturing were down in the mid-single-digits, reseller was down in the low-double digits and natural resources was down in the mid-teens.
Sales in Canada declined 25% on a daily basis and 17% in local currency, consisting of a 14% decline from lower volume and a 6% decline from the SAP implementation, partially offset by a 3% gain from price. Canadian sales were dragged down by weak oil, gas and commodity prices.
Grainger narrowed their sales guidance for the year and now expects flat to 6% sales growth compared to the previous forecast of a 1% decline to 7% growth.
Company daily sales dropped 1% in March compared to March 2015. Sales results included 4% from acquisitions and foreign exchange was essentially flat. Excluding acquisitions, organic daily sales dropped 5%, driven by a 3% decline in price, a 1% reduction from the timing of the Easter holiday, a 1% reduction in lower sales of seasonal products and a 1% reduction in lower sales of Ebola related products, partially offset by a 1% gain in volume.
Daily sales for March in the U.S. dropped 5%, due to a 3% decline in price, a 1% reduction from the timing of Easter, a 1% reduction in lower sales of seasonal products and a 1% reduction in lower sales of Ebola-related products, partially offset by a 1% contribution from increased sales to Zoro.
Grainger closed five branches in the U.S. in the first quarter and expects to close 50 more over the remainder of the year.
Amazon reported first-quarter revenues of $29.13 billion, up 28% from the first quarter of 2015. Despite tough competition, Amazon Web Services sales rose 64% to $2.57 billion, beating analysts' expectations. North American sales rose 27% to $16.99 billion, easily beating expectations. For the second quarter, Amazon expects net sales of $28 billion to $30.5 billion, which would mean growth between 21% and 32%.
Amazon is in talks with BMW, Daimler and Audi about taking a stake in their high-definition digital mapping company HERE. Last August the consortium of German automakers paid $2.8 billion for Nokia’s mapping business as part of plans to develop self-driving vehicles. However, they need to know that maps can cope with live updates on traffic and road conditions collected from thousands of cars. Analysts say that is undoubtedly where Amazon’s cloud computing services come into play.
Amazon is expanding the Amazon Dash program. They are tripling the number of brands being offered through Dash to more than 100. Dash debuted on April 1, 2015, and at first was thought to be an April Fool’s Day joke. Amazon said the addition of more brands has been driven by customer requests. Amazon says that over the past three months Dash Button sales have gone up 75%. Currently only Amazon Prime members can make purchases using Dash Buttons. The Wi-Fi-connected buttons reorder products that are delivered via Prime’s free two-day shipping. Each Dash Button costs $4.99, but the cost is refunded after the first use.
Amazon bought Orbeus, a start-up artificial cloud computing company. Its Phototime app recognizes and organizes the content of photos in real time. The goal is to create ways to teach computers to “see” much as people do. Analysts report that Amazon is investing heavily in artificial intelligence in order to automate warehouse operations, improve delivery systems and add new products to the Amazon Web Services cloud offering.
In a recent letter to shareholders, Amazon CEO Jeff Bezos said that Amazon does not fundamentally see itself as an online retailer, but rather as a service platform underpinned by a massive IT and logistics infrastructure. Bezos said that Amazon Prime, Amazon Web Services and Amazon’s third-party seller marketplace are their three big offerings, and they are hard at work on finding a fourth big offering.
In addition to being the world’s largest online retailer, Amazon is also the world’s largest public cloud service provider, a major online streaming service profiler, a seller of digital content and a major provider of fulfillment and advertising services to third-party retailers.
Amazon is aggressively exploring distribution options, and is now hiring part-time delivery drivers, applying for ocean freight licenses, prepping delivery drones, and leasing a fleet of Boeing 767s.
Seeking Alpha analyst Eric Jhonsa says that Amazon identifying Prime as a big offering could indicate that they are willing to allow non-Prime sales to suffer in order to increase their subscription business. Bezos said they want Prime to be such a good value, “you’d be irresponsible not to be a member.” Bezos also made it clear that while he wants Amazon to be a large, successful company, he also wants them to exhibit the “speed of movement, nimbleness and risk-acceptance mentality normally associated with entrepreneurial startups.”