Monday, October 27, 2014

Bring on the Holiday Cheer!

It’s always about this time of year that prognosticators toss out the holiday sales forecasts and retailers announce seasonal hirings. But there is something different in the air this year that smells…well…pretty good!

In years past, holiday forecasts have been all over the map. As we pointed out in our January 2013 KeyPoints article, Missing the Bull’s Eye: Holiday Sales Forecasts, the actual sales increase during the holiday season turned out to be a paltry 0.7% following predictions ranging from 2.5% up to 4.1%. And these came after Black Friday, when sales results of the most “foretelling” day of the year were already in the books.

Then as the season went along, the real story came out:  weekly results leading up to Christmas started looking pretty modest and retailers reacted with heavy promotional activity at the expense of gross margin in an attempt to drive sales and avoid getting stuck with the goods when the New Year rolls around.

So far, from what I’ve seen, it appears that this year’s projections show a much tighter range, falling between 4% and 5% for the most part. The National Retail Federation was one of the first to announce its forecast: a holiday sales increase of 4.1%. If that holds, it will easily top industry sales results from 2012 and 2013 of 2.9% and 3.1% respectively. The NRF’s 13th annual Holiday Consumer Spending Survey, which was released last week, indicates that per-person holiday spending will rise 5%. (If my math is correct, doesn’t that suggest that the US is losing population? Oh, well.) It’s important to note, however, that this same survey also indicated that 44% of this spending would be done online; that’s not going to help foot traffic in stores now-is it?

Also last week, the International Council of Shopping Centers came out with its own annual estimate, which indicated that holiday sales will increase by 4%. Similar to the NRF report, ICSC pointed to a rebound in the US labor market, decreasing unemployment rates, and year-over-year gains in personal income as likely reasons to expect a solid increase in holiday spending.

A month ago, Deloitte projected a 4.0% to 4.5% holiday sales gain, adding that “debt levels remain at historical lows, and stock market gains coupled with increasing home prices have a wealth effect on consumers, which may encourage increased spending compared with prior years…”.

But the thing I really like seeing is that a number of major retailers are bumping up hiring this holiday season. Kohl’s is increasing its hiring by 17,000 seasonal employees, bringing its total to 67,000 part-time jobs. Wal-Mart is gearing up with 5,000 additional employees for a total count of 60,000 holiday workers. Macy’s will be adding 86,000 part-timers, an increase of 3,000 employees from a year ago, while GameStop is increasing its seasonal count by 8,000 jobs and will be employing 25,000 Christmas helpers this year. Even Target, which continues to be impacted by its data breach since the 2013 holiday season, is maintaining its 2013 seasonal hiring level at 70,000 employees this year.

How does this translate to brick-and-mortar sales performance? Well, I suppose it depends on where those seasonal workers will be reporting to work. Of the new workers Macy’s is hiring, for instance,  10,000 will be based in the company's direct-to-consumer fulfillment centers (compared with 7,000 last year), evidence of the retailer's big push into integrating its online and in-store offerings. Although Kohl's will be increasing its hiring by 34% this year, it will add an average of only 50 workers per store, while  9,300 employees will be assigned to distribution centers to fulfill orders placed on Kohls.com and to oversee stocking at nearly 1,163 stores.

And we can’t forget about brick-and- mortar’s number one nemesis this holiday season: Amazon is hiring 10,000 additional workers this year, bringing its total to 80,000 seasonal hires. But we shouldn’t be surprised about this particular distribution of part-time help. After all, haven’t we seen double-digit increases in online sales for what seems like an eternity? Emarketer is predicting another robust year for ecommerce with a 16.6% gain forecast in online sales while Shop.org, the NRF’s digital division, is looking at a more moderate increase of only 8% to 11% in online sales this holiday season.

All in all, I’m conservatively optimistic that we will better the 4% overall holiday sales target this year. It just a matter of which retail pocket it ends up in.

Bob Sheehan, Vice President of Research
BSheehan@KeyPoint Partners.com

Company News

New Business: New leasing assignment: a 5,000 s/f space at 62 Main Street, Brockton, MA. Michale Branton is handling the assignment. Employee News: Brent Lydon has joined the Burlington Office as a Property Accountant. Brent’s most recent experience was at Restaurant Accounting Services. Brett Yancey has joined the Brookline, MA Office as an Assistant Property Manager. Brett has prior property management experience at Jones Lang LaSalle. Lauren DeWynGaert has joined the Burlington Office as an Assistant Property Manager. Lauren has prior property management experience with Compass Property Management.

National News

September comparable-store sales posted a year-over-year gain of 5.0% based on the ICSC’s final tally of 11 retail chains that report monthly sales. L Brands was up 6.0%, Gap was flat, Rite Aid was up 5.1%, Walgreen’s rose 1.7%, and Costco gained 6.0%. See our sales report below...Kmart is the latest retailer to be hit by a data breach. The company does not yet know the number of credit and debit card numbers that were stolen. However, it does not believe that debit card PINs, Social Security numbers or email addresses were compromised. Kmart is working closely with federal law enforcement authorities, banking partners and IT security firms in the ongoing investigation.  It also is deploying advanced software to protect customers' information. Staples Inc. is also investigating a possible security breach involving customer credit-card data. Stores in New York, Pennsylvania and New Jersey appear to have been targeted...Sears Holdings Corporation has entered into lease agreements with fashion retailer Primark for seven standalone stores.  Sears will continue to have a significant presence in six of these locations with a streamlined store format of up to 100,000 selling s/f at each store. Primark will lease from Sears a total of approximately 520,000 gross s/f of retail space (400,000 net s/f) in mall-based stores in the Northeastern United States.  The space is expected to be delivered to Primark over the next 12-18 months. The first of these stores will open at King of Prussia Mall in King of Prussia, PA, where Primark will join DICK's Sporting Goods as a subtenant of Sears. Another expected location is in Staten Island, NY, at the Staten Island Mall.  The other locations and projected store openings will be announced by Sears soon. Sears has also announced layoffs and store closings: see the Decelerating section below.

Accelerating News

Toys “R” Us and Claire’s have entered into a partnership to open nearly Claire’s in-store shops in 12 US Toys “R” Us locations, by year-end. The shops will feature an assortment of jewelry, headbands, hair and fashion accessories, jewelry holders, legwear, seasonal items and more...Timberland plans to expand its global retail store presence by adding 130 stores to its current base of approximately 230 stores...Saks Fifth Avenue parent Hudson’s Bay Company has signed a lease to open two stores in downtown Manhattan: an 85,000 s/f Saks Fifth Avenue store in Brookfield Place and a 55,000 s/f Saks Off 5th store at One Liberty Plaza. The new Saks Off 5th reflects the company’s strategy to expand its off-price concept into urban markets...Urban Outfitters Inc. aims to open 25 to 50 Anthropologie stores in the next five years that will be three times larger than current locations, which average about 7,100 s/f. Urban Outfitters will also test the larger format for its namesake and Free People chains...Microsoft will open its first flagship location, on Fifth Avenue in Manhattan. Microsoft also plans to open 10 new stores across the US in time for the 2014 holiday season. Microsoft currently operates 104 stores...Christopher & Banks announced the grand opening of 37 stores that combine its plus-sized CJ Banks brand under the Christopher & Banks banner. With these openings, Christopher & Banks will operate 190 stores with the combined format...Villa Enterprises has opened 34 Villa Italian Kitchen restaurants in General Growth Properties, Inc. regional malls throughout the US. The new locations total over 27,000 s/f of space...Woolrich, the outerwear and lifestyle brand, opened its first-ever freestanding store in North America, in New York’s SoHo neighborhood. The two-level flagship carries men’s and women’s clothing and accessories. The 1,400 s/f ground floor space features antique windows and furniture, recovered from an old hardware store, while the 500 s/f basement level is designed as a contemporary “Woolrich Men’s Club” which will double as event space...Discount Tire/America’s Tire opened 6  stores - 3 in Texas, 2 in California and 1 in Iowa, expanding the dealership’s network to 890 stores in 23 states...CEC Entertainment, Inc. (CEC), which operates 577 Chuck E. Cheese's stores in 47 states and 10 foreign countries, announced that it has acquired Peter Piper Pizza, a pizza and entertainment restaurant chain operating 32 company-owned locations and 115 franchises in the southwestern US and Mexico, from affiliates of private equity firm, ACON Investments, L.L.C. (ACON) for an undisclosed sum...Family Dollar Stores Inc. has set Oct. 30 as the date for stockholders to vote on a proposed merger with Dollar Tree Inc. Family Dollar has not yet set the time or location of the vote. Family Dollar agreed to sell its outstanding shares to Dollar Tree for $74.50 per share, or about $8.5 billion, in August. The retailer rejected a higher offer of $80 per share, or about $9.1 billion, from Dollar General, citing concerns about SEC approval of the deal. Dollar General has extended a hostile buyout offer of $80 per share to Family Dollar shareholders until Oct. 31...Sleepy’s opened its 1,000th store, a showroom in Joliet, Illinois.

Decelerating News

Sears Holdings Corp. is laying off at least 5,457 workers and closing 46 Kmart, Sears and Sears Auto Center locations, many before Christmas. More closures may be added. In August, Sears announced it may close additional stores on top of the 130 closures that were already underway for 2014...Bi-Lo Holdings, parent company of the Bi-Lo, Harveys and Winn-Dixie, has decided to close 23 underperforming stores after a review of all 827 locations in its operating area by Nov. 19. Bi-Lo Holdings acquired Winn-Dixie in March 2012, and later purchased the Harveys, Sweetbay and Reid’s chains from Delhaize Group...113-year-old retailer Alco Stores Inc. and its subsidiary, Alco Holdings Ltd Liability Co. filed for Chapter 11 bankruptcy. Alco, which operates nearly 200 stores, said it hoped to sell its profitable locations and liquidate the others.

New England News

Urstadt Biddle Properties Inc. sold the 328,000 s/f Five Town Plaza Shopping Center in Springfield to an institutional real estate company for $31 million...WS Development has signed a 20-year lease with Kerasotes ShowPlace Theatres for a 41,375 s/f movie theater at One Seaport Square, a new development slated for South Boston’s Seaport District...The Best Buy attached to the Westfield Meriden Mall will close Nov. 1. The closing will leave the mall down two major tenants weeks before peak holiday shopping months: in May, JC Penney closed its under-performing store in the Mall...West Marine opened a new store at the corner of Coogan Boulevard and Maritime Drive in Mystic, CT. The 13,000 s/f store replaces the 8,000 s/f location at the nearby McQuade's Marketplace complex...Best Buy is closing its store at Boston’s Landmark Center, an early step in the new development to come in the Fenway area...Normandy Real Estate Partners and Harbinger Development plan to build a 10-story, 225-room hotel and a two-story glass food pavilion on Parcel 9, between Blackstone Street and the Rose F. Kennedy Greenway, next to the outdoor Haymarket vendors...Panera Bread opened of its newest bakery-cafe in Seabrook Commons, at 700 Lafayette Road, Seabrook, NH...The Presque Isle, ME Sears store at the Aroostook Centre Mall, including the auto center, will close its doors by mid-January. The store will begin a liquidation sale on Oct. 31... Popeyes Louisiana Kitchen is looking to triple its number of Boston area locations. The chain entered Massachusetts in 2005, and now has 8 locations in the Boston metro area. It wants to add another 15- 20 over the next 5 years. In 2013, Popeyes opened 124 US restaurants. The company ended 2013 with 2,225 locations...The Revere, MA Market Basket store has opened. The 80,000 s/f location has been ready for months, as has another in Attleboro. but infighting over the last year kept either store from opening as planned. The conflict also delayed construction on another forthcoming store in Waltham.

September Retail Sales Report


























Notes: figures gathered from individual company websites, press releases, and Federal filings.  Not all companies report all figures; results not reported will be marked “n/r”. Quarterly results will be updated when available; quarterly figures are shown in italics. Figures from companies not calculated to one decimal point automatically received an ending digit of 0. 

Commerce Department Monthly Sales

The Commerce Department that seasonally adjusted retail sales dropped 0.3% from the previous month. Sales have risen 4.3 %in the past 12 months, slightly below their historical pace. Auto sales fell 0.8% in September, after revving up 10.4%in August.

Source: U.S. Department of Commerce - commerce.gov

Treasury Yields

















Treasury Yield Sources:  federalreserve.gov; ustreas.gov

Consumer Confidence Index

The Conference Board Consumer Confidence Index®, which had increased in August, declined in September. The Index now stands at 86.0 (1985=100), down from 93.4 in August. The Present Situation Index decreased to 89.4 from 93.9, while the Expectations Index dropped to 83.7 from 93.1 in August.

Source: The Conference Board - www.conference-board.org

Purchasing Managers Index

Manufacturing expanded in September as the PMI® registered 56.6 percent, a decrease of 2.4 percentage points when compared to August’s reading of 59 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Source: Institute for Supply Management - Manufacturing Report on Business - www.ism.ws