Analyst: Above average retail growth for 2018 predicted
At total level, year-over-year growth of 4% in December does not seem all that impressive. Indeed, it is a little way below the average monthly rate for 2017 and quite a bit below the 6.6% uplift recorded in November.
However, the figure is affected by weak sales of autos which were up by only 0.4% over the prior year. When this, and other non-core categories are removed, pure retail sales increased by 4.6%. This represents a significant increase over the average monthly 3.8% uplift for 2017 and puts December as the third best month for retail growth of the year.
Growth within retail was broad-based with most categories performing well. Home and furniture stores led the way with 7.5% growth over the prior year. Some of this is a consequence of a robust housing market, which continues to spur home spending, but some is also the result of more gifting of home products. Our consumer data showed that small home-related items like decor and accessories were one of the most popular gifting categories this holiday season.
Electronics, which has been relatively flat for most of 2017, ended the year with a flourish. The 5.7% growth rate the category enjoyed is largely thanks to a much better line up of consumer electronics products, including the latest iPhones and a host of new Amazon devices. Strong promotional activity, especially on products like home speakers, stimulated consumer interest and drove volume across many retailers.
Notably, both home and electronics are categories where individual items can be expensive. That they did well underlines the fact that consumer confidence across the period was very strong. Our weekly tracker shows consumers ended the year on a high for sentiment about their household finances and the economy in general. This was extremely helpful in driving trade over the holiday period.
Smaller ticket sectors like clothing did reasonably well, although growth of 1.1% puts the sector near the bottom of the holiday league table. Given that the cold weather was mostly helpful to retailers over December, the issue in apparel is that consumers are bored with offers that appear samey and undifferentiated and so they are not driven to buy. This, in turn, leads to excessive discounting which reduces sales values and growth.
In keeping with its status across most of 2017, sporting goods remained a challenged part of the market with sales declining by 1.5% on a year-over-year basis. Except for Lululemon and a few other players, there was a lack of inspiration and excitement in the segment this holiday which made it easy for consumers already saturated with sports apparel and footwear to either shun making purchases or to do so at generalist players like department stores.
After a strong end to the year, all eyes now turn to 2018. From a confidence point of view, the year has started well with consumer optimism rising further. In our opinion, bonuses and raises which have come off the back of the tax cuts will likely support spending through the early months of the year. Growth may drop back from holiday levels but will remain above average.
Sam’s Club’s Turner-Mitchael to retire
Sam’s Club senior vice president and GMM of consumable and health and wellness will be retiring at the end of the fiscal year, a Sam’s Club spokesperson confirmed Wednesday. Turner-Mitchael is a 26-year veteran of the company, having joined Walmart in 1992 as a pharmacist in Lubbock, Texas.
During her time at the company, Turner-Mitchael has led various teams at Walmart and Sam’s Club, including Walmart’s pharmacy operations team and Sam’s Club’s merchandising, operations and health and wellness divisions. She has received the Sam M. Walton Blue Coat Award of Excellence.
“Jill leaves a lasting legacy, both as a merchant and as a disruptor in the health care industry,” the company said. “Her passion in raising awareness of health and wellness issues and in testing exciting new concepts in clubs such as free screenings, health kiosks and caregiver support programs has helped the company to become a leader in affordable health care. Jill has also made a strong impact on associates throughout the company with her mentorship and focus on championing women’s advancement in the workplace.”
The company said it has not yet named Turner-Mitchael’s successor and will do so once it has been announced internally.
Supervalu’s Q3 shows results of acquisitions on wholesale business
Grocery retailer and wholesaler Supervalu has shared the results from its fiscal 2018 third-quarter, which included a boon to its wholesale business in the form of its Unified Grocers acquisition, even as retail sales declined. The Minneapolis-based company’s total continuing operations saw net sales of $3.94 billion — up 31% from $3 billion in the same period last year.
Supervalu’s retail division netted $1.02 billion in sales, down 4.1% from last year’s $1.06 billion, which the company attributed to a 3.5% dip in same-store sales and store closings, offset by new and acquired store sales. The company’s retail operating loss was $6 million for the quarter, a number that included $3 million in costs related to store closures. Supervalu’s third-quarter operating loss was well below the loss it posted in the same period last year, when it reported $14 million.
The impact of retail losses on Supervalu’s bottom line was buoyed somewhat by its wholesale division’s performance. The wholesale business posted $2.89 billion in net sales, an increase of 52% over the prior period, which the company said was driven by the Unified Grocers acquisition, as well as new customer sales and increased sales to existing customers. Operating earnings were down slightly from last year, coming in at $48 million after being adjusted for $2 million of merger and integration costs. In the prior third quarter, Supervalu’s wholesale division brought in $52 million in operating earnings.
“With the influx of significant new business in certain distribution centers, we experienced a larger-than-anticipated increase in expenses, but we're encouraged by the work we are doing to address those costs and believe they are manageable going forward,” Supervalu president and CEO Mark Gross said. “We remain committed to investing in our wholesale business to drive future growth.”
On the corporate side, Supervalu saw fees earned of $33 billion from services agreements, and its new corporate operating loss was $1 million — which included $3 million of merger and integration cost. This is compared with net corporate operating earnings of $4 million last year.
With the Unified Grocers acquisition completed in Q3, the company set its sights on its Associated Grocers acquisition, closing it early in its fourth quarter.
“We're pleased to have completed our acquisition of AG Florida early in the fourth quarter,” Gross said. “The work done in the third quarter concluded with this deal which, combined with the acquisition of Unified Grocers earlier this fiscal year, demonstrates our commitment to the strategic growth of our Wholesale business. Furthermore, we're extremely pleased with the integration work at Unified and the progress made in that market.”