Wednesday, December 21, 2016

Bits and Pieces for the Holidays - Revisited!

It’s been quite a while since our last “bits and pieces” article - 9 years to be exact.  That article included some not-so-random thoughts about then-current retail topics as we headed into the New Year. We decided to take another shot at it and follow the same Twelve Days (uh…thoughts) of Christmas theme from nearly a decade ago. So here we go…

On the first day of Christmas, my true love said to me:  Who in the world would buy groceries online before examining the goods first? I am now finding out the answer - many people. I thought Grocery would be the last category standing when it came to shopping online, but Ahold Delhaize just announced that it plans to double its e-commerce sales by 2020.

On the second day of Christmas, my true love asked me:  So what do you think? Will Sears be around a year from now? Probably so, based on the company’s sheer magnitude and its considerable real estate holdings. At the same, Sears recently announced its biggest loss in more than four years, and its 20th consecutive quarterly decline in sales.  Expect more store closings and possible brand sales in the coming year.

On the third day of Christmas, my true love asked me:  When is that acquisition going to occur between Walgreens and Rite Aid? Well, they have to find buyers for the excess stores first. With Kroger, Fred’s, and Albertsons as the latest possible purchasers mentioned, it could be getting close, with the merger coming to fruition in 2017.

On the fourth day of Christmas, my true love said to me:  As if Amazon hasn’t caused enough chaos within the retail industry, it’s now coming directly to the battlefield to face brick-and-mortar retailers. First we saw Amazon Books, and now Amazon Go. While Amazon recently denied a report of a 2,000 store expansion for Amazon Go, the success of the concept will likely determine what that number really is.

On the fifth day of Christmas, my true love asked me:  Would you rather shop online or in a store? Well, that depends on the purchase. You read many articles strongly indicating that shoppers prefer the physical store experience. After all, 90% of retail sales, give or take, are rung up through brick-and-mortar cash registers. But it has been over two years since online book sales surpassed brick-and-mortar. Nonetheless,  a recent report shows that physical stores remain the go-to location for cosmetic and grooming purchases. It seems as if there’s no single answer to this question.

On the sixth day of Christmas, my true love asked me:  What about Target’s small store strategy? Target announced last month that “hundreds” of small stores were planned. Dense, urban areas and college towns are Target’s focus for these small-format locations.  For years Target wouldn’t even think about opening a store concept in which its full assortment could not be offered. Times have certainly changed.

On the seventh day of Christmas, my true love said to me:  “Malls are becoming scary places!” I said, “You want to see scary? Come back in 10 years and I’ll show you scary.”

On the eighth day of Christmas, my true love said to me: So what’s the next big thing in retail development?  For sure everything has its day, as we’ve seen with lifestyle centers. While outlet centers, mixed-use, and urban retail are experiencing a renaissance of sorts, in due course the spigot will run dry with these venues as it has for others.  As far as the next big thing, an educated guess might be something focused on omnichannel retailing. Does anyone remember Service Merchandise and Best Products, catalog showrooms where the customer saw the item in-store, and then placed an order at the front desk?  Well, what if shoppers could touch and feel the merchandise before placing an online order, eliminating the guess work and possibly a big disappointment? Watch for it!

On the ninth day of Christmas, my true love asked me:  Can Barnes & Noble make a comeback with its new concept store? While it looks like a great presentation, it’s finally all about price: can you say Amazon?

On the tenth day of Christmas, my true love asked me:  Is Best Buy in the clear or in the eye of the hurricane? Just like B&N, it’s all about the price, baby!

On the eleventh day of Christmas, my true love asked me:  Are millennials having as much influence on retail as baby boomers did back in the 60s? It’s interesting that millennials, or echo boomers as some call them, are actually the children of boomers. And I would answer that question by saying yes, and then some.  Boomers influenced retail fashion in the age of bell bottoms and miniskirts. Millennials, now overtaking baby boomers as the largest generation in history, are definitely changing the way people shop and retailers sell.

On the twelfth day of Christmas, my true love asked me:  Are you headed out to the store, or looking for your laptop? I couldn’t make up my mind!

Bob Sheehan, Vice President of Research
BSheehan@KeyPointPartners.com

Happy Holidays, and best wishes for the New Year from all of us at KeyPoints!

KeyPoint Partners Company News






















Happy Holidays, and best wishes for the New Year from all of us at KeyPoints!

Mark Becker
Partner/CFO/Editor-in-Chief

Bob Sheehan
Vice President of Research

Chris Cardoni

Marketing Manager


National News

Shoppers increased retail spending just slightly in November, a possible sign of a lackluster holiday season. Retail sales rose only 0.1% in November, after a downwardly-revised 0.6% growth in October, the Commerce Department announced. Consumers bumped up purchases at restaurants and home furnishers, but also trimmed spending at auto dealers and department stores. Online and mail-order retailers posted a lukewarm 0.1% gain, compared to a robust 11.5% increase so far this year. Clothing sales were flat in November.Among retailers still reporting monthly same-store sales, L Brands was up 1.0%, Gap was down 1.0%, and Costco was up 1.0%. See our sales reports on Page 4... GNC Holdings is changing its pricing structure and marketing, and adding tech enhancements to its store environment. The company announced that all corporate stores will close on Dec. 28 and reopen on Dec. 29, when GNC will offer customers a “dramatically improved experience. ” The new initiative will launch in all 4,464 US owned and franchised locations.

Accelerating News

Adidas opened a new, 45,000 s/f four-story flagship store on the corner of 5th Avenue and 46th Street in New York City, the largest store ever for the company…Barnes & Noble opened new-concept stores in NY and MN this month. The stores have a smaller footprint and feature a full-service restaurant and bar. Others will open soon in CA and VA…Starbucks unveiled an ambitious 5-year strategy that calls for approximately 12,000 new stores globally by 2021, including two new formats. The expansion will bring Starbucks’s total store portfolio to approximately 37,000 locations…Apparel rental company Rent the Runway opened its biggest store yet, a 5,000 s/f store in Manhattan that will replace its current Flatiron District flagship…Sweaty Betty, the London-based retailer of activewear for women, opened its 9th US.store and 3rd in Los Angeles. Sweaty Betty plans  at least 50 US stores over the next five years, with eight to 10 locations opening during the next 12 months... Casey’s General Stores, Inc. plans to build or acquire 77 to 116 stores, replace 35 existing locations, and complete 100 major remodels in 2017…Sears Hometown and Outlet Stores have been opening inside existing Ace Hardware locations around the country. The latest is in Santa Paula, CA, inside the Heritage Ace Hardware. This is the 16th new Sears Hometown Store this year. The format makes major Sears brands available to customers in smaller communities... Lidl has acquired an industrial building in Philadelphia in preparation of its upcoming US launch. Lidl, operates nearly 10,000 stores in 27 countries, and plans to open between 120 and150 stores on the US east coast by the end of 2017... PetSmart opened 20 stores across the US and Canada for the quarter ending October 31, 2016. This adds to the 23 stores it opened in the first and second quarters, bringing the total number for the year to 43 new locations. PetSmart is also testing new formats. PetSmart Pet Spa and PetSmart at the Beach are concept stores in which the company is testing innovative ways to combine pet services and an enhanced pet lifestyle experience in a smaller retail footprint. The stores feature a unique, modern design with 5,000-8,000 s/f footprints, smaller than PetSmart’s typical 18,000 -20,000 s/f stores. In addition to brick-and-mortar expansion, PetSmart launched an improved web site, with one-page checkout and new home delivery options such as recurring subscription-based shipping, as well as same-day and scheduled delivery in 16 US markets... Caleres owner of Famous Footwear, has acquired 100-year-old men’s footwear and accessories brand Allen Edmonds from private equity firm Brentwood Associates for $255 million. Caleres operates over 1,200 stores under a variety of banners. Its brands include Naturalizer, Sam Edelman, Via Spiga Vince, Dr. Scholl’s Shoes and George Brown Built... Childcare franchise leader Discovery Point is primed to grow with 47 locations in operation, and five more set to open in 2017, Discovery Point plans to expand in North Carolina, Florida, Tennessee, Georgia, and Texas…Rise Biscuits Donuts announced the signing of a multi-state development agreement that will introduce the Rise concept to Georgia, South Carolina, and Kentucky. MDO Holdings, an investment and management firm with a current portfolio of over 30 companies including such brands as O2 Fitness, Happy+Hale, and Cyclebar, joined the Rise franchise system in June to develop locations in Georgia and South Carolina. In November, MDO Holdings increased their development commitment to include Kentucky, bringing the total to almost 30-units. Their first store is projected to open in early 2017... Shreve & Co. has opened a two-level, 15,000 s/f flagship store in its San Francisco home town, its first new, permanent location in 110 years. The centerpiece is a semi-spiral staircase that offers sweeping views of the store. A waterfall chandelier of lights and crystals is suspended inside the arch of the stairway. A cascade of crystals and lights hangs from the 30-foot ceiling.The store features in-store boutiques, private viewing suites for personalized consultations and an entertainment room.  It also houses an array of services, from a dedicated watchmaker to an estate jewelry appraiser and consultant…Mall of America is adding a 40,000 s/f arcade called Smaaash that includes a multilevel go-cart track, virtual reality and video games, and a restaurant and bar.The venture represents one of the largest investments ever made by a company inside the mall, and means that the mall’s fourth floor - its least-visited floor, which has seen many ventures come and go - is fully leased for the first time in years... Best Buy opened five outlet locations dedicated to major appliances this month in TX, NC, DE, and CA

Decelerating News

American Apparel  received approval to close nine under-performing stores in New York, Washington, D.C., Seattle, Atlanta, Dallas, Memphis, Santa Cruz, Calif., Evanston, Ill., and Burlington, Vt., by Dec. 31.U.S. Bankruptcy court approved an agreement with liquidators Merchant Resources LLC and Gordon Brothers Retail Partners LLC, that gives the company permission to begin “going out of business” sales for the next two weeks.  .. CVS Health has embarked on a streamlining initiative which will include the closing of 70 stores in 2017. The store closings should provide a $265 million benefit to CVS, mostly in 2017.

New England News

Shinola, retailer of high-end watches, bicycles and leather goods, opened its first Boston store in this month in the Prudential Center... Target will open one of its flexible format stores at the Redstone Shopping Center in Stoneham, MA. The 48,000 s/f store will open in July. Flexible format stores are substantially smaller than standard Target locations, less than 50,000 s/f compared to an average 170,000 s/f or more. Target is planning to open 27 flexible format stores in the next 3 years.

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

Retail sales rose 0.1% in November, after a downwardly-revised 0.6% growth in October, the Commerce Department said. Purchases at restaurants and home furnishers were up slightly, but spending at auto dealers and department stores was lower, limiting the overall advance in retail sales.

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 declined in October, increased significantly in November. The Index now stands at 107.1 (1985=100), up from 100.8 in October. The Present Situation Index increased from 123.1 to 130.3, while the Expectations Index improved from 86.0 last month to 91.7.

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

PURCHASING MANAGERS INDEX

Manufacturing expanded in November as the PMI® registered 53.2 percent, an increase of 1.3 percentage points from the October reading of 51.9 percent, indicating growth in manufacturing for the third consecutive month. 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