Toys “R” Us to start liquidation sales; economist says closings don’t represent entire industry

Jack Kleinhenz, Ph.D and chief economist for the world’s largest retail trade association, said while the rash of reported national retail store closings and job losses are real, he wouldn’t say they are a direct indication that the retail industry is moving backward.

“I think there is misinformation or a misunderstanding about the health of the retail industry,” said Kleinhenz, who is also principal and chief economist of Kleinhenz and Associates, a Cleveland-based registered investment advisory firm that specializes in financial consulting and wealth management services.

“We recognize these store closings are happening, but overall we’ve got to be careful to not focus just on store closings because other areas are performing,” he said, noting that in February, according to the Bureau of Labor Statistics, 50,000 jobs were added in retail nationwide including auto sales and gas sales. “If we take out those two categories then, still 46,000 retail jobs were added in the month of February.”

However, according to U.S. Labor Department data, job loss can’t be ignored. Between 2001 and 2016, jobs at traditional department stores fell 46 percent. For perspective, that’s a bigger drop than other troubled industries such as coal mining (32 percent drop) and factory employment (25 percent drop) during the same time span.

MarketWatch reported that in 2017, department stores alone lost 29,900 jobs, while general merchandising stores cut 15,700 workers. In addition, last year’s BLS data also showed retail discharges and layoffs grew to a total of 212,000 nationwide – the highest level in nearly two years.

Kleinhenz said based on all of the area data he’s analyzed and the NRF’s forecast, they still believe 2018 will be a stronger year for retail.

Some department stores are moving toward cost fulfillment centers, while other e-commerce retailers, discount stores, luxury goods, and even some small businesses with specialized niches are growing.

In Northeast Ohio for instance, Amazon is building a fulfillment center in Euclid in what once was a retail strip that included a shuttered Toys “R” Us. The dead mall will be replaced by an Amazon fulfillment center, scheduled to open in 2019.

A similar, but larger, project is under construction and set to open next year in North Randall, where Randall Park Mall once stood. Between the two Amazon facilities, the company will employ more than 3,000 people.

“The landscape is changing and the way the industry is operating is changing. They’re looking to be more cost efficient. Ultimately retailers want to deliver good price and value, which is no different than any other industry,” he said.

“Undoubtedly they’re facing significant competition and consequently they need to change the way they’re operating given the environment.”

RETAIL CLOSINGS

The national retail landscape is changing rapidly with a great deal of upheaval as brick-and-mortar stores continue to struggle to change and adapt in the highly competitive digital age.

Claire’s Chapter 11 bankruptcy filing on Monday, is the latest in a string of mall-based stores shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.

But mall-based stores aren’t the only casualties of consumers increasingly more comfortable ordering products online. Toys “R” Us, another company left deep in debt from a leveraged buyout, said last week that it was liquidating its 735 stores in the United States. The bankrupt retailer is closing one-fifth of its U.S. outlets, which could end up being more than 180 stores including locations in Mentor, Western Hills, Dayton and Dublin, Ohio. Liquidation sales were to begin Thursday, but were delayed this morning until possibly Friday or later.

In 2017, nearly 9,000 stores closed across retail sectors. Cushman & Wakefield said that number will be between 10,000 and 11,000 doors this year–and that’s fewer than the 13,000 the analysts initially forecast, thanks in part to Simon Properties’ legal action attempting to block Starbucks from closing Teavana locations.

“Not everyone is shrinking! Off-price apparel, discounters, warehouse club stores and dollar stores will continue to post record growth,” Garrick Brown, vice president of Retail Intelligence for the Americas, said in a January blog.

“Grocery stores and most restaurants will continue to account for growth, even as the weakest concepts will increasingly struggle with a saturated marketplace,” he said.

Still, last year was a record year for both store closings and retail bankruptcies. Dozens of retailers including Macy’s, Sears, and J.C. Penney shuttered thousands of stores — far exceeding recessionary levels — and 50 chains filed for bankruptcy.

The commercial real estate firm CoStar has estimated that nearly a quarter of malls in the U.S., or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor tenant. Chains that have confirmed they will be closing locations in 2018 include Bon-Ton, Gap, Sears-Kmart and Walgreens.

In January, Walmart announced plans to close 63 Sam’s Club stores across the U.S. including one in Cincinnati.

Teen retailer Abercrombie & Fitch is bouncing back by cutting its stores. The New Albany, Ohio-based company was praised by analysts easier this month after it announced positive same-store sales growth in its fourth-quarter results. Same-store sales were up 9 percent overall at the company, boosted by 11 percent growth at Hollister and 5 percent at the Abercrombie brand itself.

But at the same time, the company also announced it would be closing up to 60 Abercrombie and Hollister stores in 2018. Closing store locations have not been identified yet.

By Marcia Pledger, The Plain Dealer

cleveland.com

Retailers are hiring more people. One reason: Home renovations.

The nation’s unemployment rate remained unchanged in February, but there was one bright spot many economists weren’t expecting: an influx of retail jobs.

In all, retailers added 50,300 jobs in February — four times the number from the month before — even as the U.S. unemployment rate stayed steady at 4.1 percent.

One reason for the gains, economists said: Americans are increasingly renovating their homes instead of buying new ones, helping create thousands of retail jobs at companies like Home Depot and Lowe’s.

Building-material stores hired more than 10,000 workers in February to keep up with booming demand, according to data from the Bureau of Labor Statistics. Those positions accounted for more than one-fifth of the total retail jobs added last month.

The gains are part of a larger trend. Building-material and garden supply stores have added roughly 49,000 jobs in the past year.

“This is a housing repair and remodeling story — and not just because of the recent hurricanes and fires,” said Diane Swonk, chief economist at professional-services firm Grant Thornton. “In many cases, people are realizing it’s cheaper and easier to add on to their homes than to buy new ones.”

Low housing supply and high costs, particularly in larger cities, are prompting prospective buyers to think twice before buying a house, Swonk said. Other factors, such as rising interest rates and changes to mortgage-related tax credits, are also contributing to their decisions.

“Add to that the housing stock is older and more decrepit than it used to be, and you’re seeing a boom in remodeling,” Swonk said, adding that she is in the process of replacing the roof on her Chicago-area home.

Homeowners are projected to spend $340 billion on home improvements and repairs this year, up 8 percent from last year, marking the highest increase since before the Great Recession, according to Harvard University’s Joint Center for Housing Studies.

Increased demand is also helping create new jobs, albeit low-wage positions that are often seasonal. Home Depot announced plans to hire 80,000 workers last month, while Lowe’s said it would hire more than 53,000 seasonal employees to prepare for spring.

“What’s striking about these numbers is that they are unaffected by online retail,” said Jed Kolko, chief economist at the online jobs site Indeed. “Most people aren’t buying their lumber or potting soil online.”

But wages remain low: The median pay for retail workers is about $11.01 per hour, or $22,900 a year, according to BLS data.

The jump in employment is a departure from recent months: The retail sector lost 25,900 jobs in December but added 14,800 in January. (Warehouse jobs, which are not counted in the retail figures, grew by about 400 positions in February.)

“I did not expect a large increase in February, in all honesty,” said Jack Kleinhenz, chief economist for the National Retail Federation, a trade group that lobbies on behalf of the industry. “This was a substantial increase at the industry level.”

General-merchandise stores such as Walmart, Target and Costco added 17,700 jobs, while clothing and accessories stores hired 14,900. A number of those newly created positions, economists said, were probably focused on retailers’ growing online and mobile businesses.

Walmart, for example, has hired more than 18,000 personal shoppers in recent years as it builds up its shop-online, pick-up-in-store service, executives said on a Tuesday call with reporters.

“Companies are putting more people on the floor,” Swonk said. “We don’t have a handle on whether they’re hiring for online operations vs. in-store, but we know they’re hiring.”

Abha Bhattarai

The Washington Post

5 Things Consumers Are Buying More of Despite Slowing Retail Sales

Consumer spending, which accounts for two-thirds of U.S. economic activities, slowed down in the first two months of 2018 after a booming quarter at the end of 2017. The U.S. retail sales in February missed economists’ forecasts by 0.5 percent and came out 0.1 percent lower than January, according to the monthly retail sales report released by the Commerce Department on Wednesday.

It is also the first time since April 2012 that retail sales have declined for the third straight month.

The decline in February was mainly triggered by slowing sales in automobiles (down 0.9 percent), gas (down 1.2 percent) and department stores (down 0.9 percent).

However, there are five categories where spending grew against the trend. Spending in building material and home improvement supplies was up by 1.9 percent; sporting goods, books and music products were up by 2.2 percent; online retailers overall saw 1.0 percent growth; clothing and accessories were up by 0.4 percent; and restaurants and bars were up by 0.2 percent.

While spending growth in some of these categories may be simply due to seasonal factors, such as sporting goods and restaurant spending, others signal bigger changes in consumer spending trends.

“Month-to-month trends are really hard to interpret, because seasonal factors can cause biases. It’s the year-over-year numbers that are more important,” said Jack Kleinhenz, chief economist at the National Retail Federation.

“What’s going on in furniture and home building material, as well as electronics and appliances, is reflecting the activities in the housing market,” Kleinhenz told Observer. “People are in the process of renovating their homes. Sales of newly built homes and existing homes have both increased in the last year, and they need to be outfitted with new furnishing and new appliances. So those categories are often correlated.”

Sales for existing homes grew by 2.6 percent in 2017 from 2016, according to the National Association of Realtors, continuing an upward trend since 2009. New home sales also increased by nine percent in 2017 from 2016, according to Census data.

Stimulus in home-related spending has also fueled sales at major home improvement chains like Home Depot and Lowes, both of which saw growth in same-store sales over the latest quarter.

By  • 

The Observer

Retail Jobs Increased by over 46,000 in February

WASHINGTON–(BUSINESS WIRE)–Retail industry employment increased by 46,400 jobs in February over January, the National Retail Federation said today. The number excludes automobile dealers, gasoline stations and restaurants. Overall, the economy added 313,000 jobs, the Labor Department said.

“This substantial gain in retail jobs is a significant positive sign regarding the health and viability of the industry,” NRF Chief Economist Jack Kleinhenz said. “It is stronger than expected and there were broad gains across most retail sectors. Beyond retail, labor markets continued to strengthen in all industries in February, and more jobs throughout the economy will mean more consumers shopping in retail stores. With tax reform in effect, consumer confidence increasing and strong underlying economic fundamentals, 2018 is off to a good start and we expect a prosperous year ahead.”

The February increase was more than four times the gain of 10,800 jobs seen in January over December. The three-month moving average in February showed an increase of 10,600 jobs.

General merchandise stores were up by 17,700 jobs, fueled mostly by gains at warehouse and supercenter stores, while clothing and accessories stores were up by 14,900 jobs and building materials stores were up by 10,300 jobs. There were declines totaling 5,400 jobs spread across health and personal care, sporting goods and miscellaneous stores.

Kleinhenz noted that retail job numbers reported by the Labor Department do not provide an accurate picture of the industry because they count only employees who work in stores while excluding retail workers in other parts of the business such as corporate headquarters, distribution centers, call centers and innovation labs.

Economy-wide, average hourly earnings in February increased by 68 cents – 2.6 percent – year over year. The Labor Department said the unemployment rate was 4.1 percent, unchanged for the fifth straight month.

About NRF

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.

PERMALINK

Contacts

National Retail Federation
J. Craig Shearman, 855-NRF-PRESS
PRESS@NRF.com

Americans Spend More Than Expected as Holiday Season Heats Up

November retail sales up 0.8% from prior month; economists saw 0.3% increase

Customers checking out at a Target store in Alexandria, Va., in November.
Wall Street Journal

 

Americans are spending more than expected this holiday season, fueled by income gains, confidence in the economic outlook, buoyant financial markets and modest inflation.

The boost includes in-store and online spending at brick-and-mortar retailers such as Wal-Mart Stores Inc. and Nordstrom Inc., which clocked the largest year-over-year November sales increase in seven years. Home-furnishing stores and electronics-and-appliance stores also logged strong spending numbers, despite competition from online-shopping websites, which also posted robust gains.

“It’s an impressive start to the holiday season and probably the best in the last few years,” said Jack Kleinhenz, chief economist at the National Retail Federation, a group that represents retail stores. “When you put the pieces together, job and wage gains, modest inflation, healthy balance sheet and elevated consumer confidence…there’s an improved willingness to spend.”

Altogether, sales at online retailers, brick-and-mortar stores and restaurants rose 0.8% in November from the prior month, well above the 0.3% increase economists surveyed by The Wall Street Journal had expected. That was up 5.8% from a year earlier, the largest yearly November increase since 2011. Despite their woes from online competition, general merchandisers such as department stores fared well, registering a 3.6% sales increase from a year earlier, the best November performance since 2010.

“Overall these data are much stronger than expected,” said Ian Shepherdson, an economist at Pantheon Macroeconomics, in a note to clients. “People have the inclination and the wherewithal to continue spending at a robust pace.”

Taken altogether, the data suggest the U.S. is on track for robust growth in the fourth quarter. Macroeconomic Advisers, a forecasting firm, estimated the economy is growing at a 2.8% annual pace in the October-to-December period, up from a 2.6% forecast before the retail-data release. The Federal Reserve Bank of Atlanta estimated a 3.3% growth rate.

One caveat: Spending is so strong it is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.

Spending comparisons to last year were boosted by a weak holiday season in 2016 for retailers, which were plagued by high inventories and a slowdown in purchases by international tourists amid a rising dollar.

This year, some brick-and-mortar stores appear to be better managing their inventory. In their most recent quarter, both Macy’ s Inc. andKohl’s Corp. said their stores had less excess merchandise to clear out at steeply reduced prices. “We don’t have the albatross of a lot of extra inventory like we did last year,” Macy’s Chief Executive Jeff Gennette said in an interview on Black Friday. That, in turn, resulted in less discounting, Mr. Gennette said.

Mr. Kleinhenz said increasingly sophisticated website and app advertising is helping brick-and-mortar retailers too. “It’s a combined strategy that retailers have developed that integrates the use of the internet with the brick-and-mortar shopping approach,” he said.

A Brief History of Retail

The retail industry is undergoing another major shift — to e-commerce. How did we get here?

Since Nov. 1, online revenue has risen 24% compared with the same period last year, said Slice Intelligence, a research firm that tracks online purchase receipts. Online sales at Target Corp. ,Kohl’s Corp. and Costco Wholesale Corp. rose the fastest, the firm said, though Amazon continued to grow rapidly from a larger sales base.

Better-than-expected quarterly results were reported by some mall stalwarts that have been battered, including Macy’s Inc. and Gap Inc. “There is a consolidation taking place” in the apparel market, Gap CEO Art Peck told analysts on Nov. 16. “Almost regardless of consumer sentiment, we’ve got an opportunity to drive growth and gain market share,” Mr. Peck said, as the company closes stores, remodels others and speeds up its product pipeline.

 The closure of thousands of stores this year could be giving those left standing a boost.

“On an overall basis, a portion of our improvement in our sales trend is attributable to our targeted efforts to capture share from competitive store closures in some of our trade areas, and we expect this will continue, if not accelerate, through the holiday season,” Kohl’s CEO Kevin Mansell told analysts in November.

Some businesses, meanwhile, are feeling a boost from the stronger labor market. Pete Benck, owner of Madison, Wis.-based vintage clothing store Good Style Shop, said this holiday season’s business has been stronger than last year’s.

“We have had a lot of foot traffic, and I think there’s a lot of confidence in our consumers lately,” Mr. Benck said.

The National Retail Federation expects consumers nationwide to spend about 4% more during the holiday shopping season than they had in 2016. That would make 2017 the strongest holiday season since 2014. Mr. Kleinhenz said the U.S. appears to be on track to meet that goal.

Write to Sharon Nunn at sharon.nunn@wsj.com

Photo credit: Customers checking out at a Target store in Alexandria, Va., in November. PHOTO:REYNOLD/EPA/SHUTTERSTOCK

Retailers Are Hoping For the Best Christmas Sales Since the Recession

With consumer spending surging, retailers are hoping for something they haven’t seen since the last recession began a decade ago: a truly great Christmas.

The Commerce Department reported better-than-expected U.S. retail sales for November and revised its October figures upward, bringing a fresh wave of optimism to a long-embattled industry.

Holiday shoppers are snapping up Nintendo Switch devices and Fingerlings toys as their disposable income grows, according to Craig Johnson, head of the Customer Growth Partners. His research firm just boosted its forecast for holiday sales to 5.6 percent, well above the 4.3 percent it had targeted earlier.

“We think this marks the beginning of a real and sustained rebound,” Johnson said in an interview. After tracking the 50 largest retailers across 90 major shopping venues, he believes that spending will grow more this season than in any holiday since before the Great Recession began in 2007.

“It’s all demographics, and it’s geographically widespread,” he said.

Austin Kreitler, a 21-year-old college student in New York, is one shopper who is ready to open his wallet this holiday season.

“I definitely spent more this year than I have in previous years,” he said during a visit to Bloomingdale’s in Manhattan. “I got some novelty things, but I also got my mom a pearl necklace and earring set.”

E-Commerce Growth

The spending uptick is good news for retailers of all stripes, but some are faring better than others. Online spending growth is expected to outpace brick-and-mortar expenditures, and plenty of companies are still struggling.

Pier 1 Imports Inc., the home-furnishings chain, saw sales weaken in the first two weeks of December. The slow start to the holiday season weighed on the company’s fourth-quarter forecast, sending the shares on their worst rout in almost three years Thursday.

Traditional retailers are increasingly chasing online dollars. Wal-Mart Stores Inc. has acquired web brands such as Jet.com and Bonobos, and it’s offering two-day free delivery to entice shoppers. Target Corp., meanwhile, agreed to buy e-commerce startup Shipt Inc. this week for $550 million, aiming to challenge Amazon.com Inc.

The greater emphasis on online orders may be one reason why a rosier holiday season isn’t translating into traffic gains at many malls. During Black Friday, foot traffic was down slightly for the second year in a row, according to data compiled by Prodco Analytics and Bloomberg.

Genevieve Domingo, a shopper who was trying on boots at Bloomingdale’s, said she’s getting most of her gifts online this year, including a Game of Thrones drinking horn and a DNA kit for her brother.

Broad Gains

Merchants without physical stores saw their biggest sales gain last month since October 2016, the Commerce Department reported on Thursday. But retail growth was broad-based, with 11 of 13 categories posting increases. Apparel sales had their third straight uptick, the longest such stretch since mid-2014.

The numbers indicate that household spending, which accounts for about 70 percent of the economy, is picking up during the final stretch of the year. The job market remains strong, with solid hiring and an unemployment rate that’s the lowest since December 2000. In addition, stock-market gains and rising home values are boosting household wealth.

If this season’s sales reach Customer Growth Partners’ target, it would be the best holiday performance since 2005. The industry posted a 6.1 percent increase that year, when the economy was still booming and a red-hot housing market was fueling spending.

Tax Cut?

One wild card is the tax bill wending its way through Congress. The legislation promises to to lower the burden for households by doubling the standard deduction, but consumers who can’t withhold as much of their state and local taxes could lose some spending power.

The National Retail Federation, the industry’s biggest trade group, has argued that consumers are spending more this season because they anticipate a tax cut. About 174 million Americans shopped during the long Thanksgiving weekend, 10 million more than expected, the organization said.

“All in all, it’s really portending for a very solid and maybe one of the best holiday seasons that we’ve seen in years,” Jack Kleinhenz, the NRF’s chief economist, said in an interview. “We’ll have to wait and see how December plays out.”

— With assistance by Matthew Townsend, and Sho Chandra

Bloomberg

Photo credit: Pedestrians view a holiday window display at a department store in New York.Photographer: Victor J. Blue/Bloomberg

Americans Spend More Than Expected as Holiday Season Heats Up

Shoppers

 

Americans are spending more than expected this holiday season, fueled by income gains, confidence in the economic outlook, buoyant financial markets and modest inflation.

The boost includes in-store and online spending at brick-and-mortar retailers such as Wal-Mart Stores Inc. and Nordstrom Inc., which clocked the largest year-over-year November sales increase in seven years. Home-furnishing stores and electronics-and-appliance stores also logged strong spending numbers, despite competition from online-shopping websites, which also posted robust gains.

“It’s an impressive start to the holiday season and probably the best in the last few years,” said Jack Kleinhenz, chief economist at the National Retail Federation, a group that represents retail stores. “When you put the pieces together, job and wage gains, modest inflation, healthy balance sheet and elevated consumer confidence…there’s an improved willingness to spend.”

Altogether, sales at online retailers, brick-and-mortar stores and restaurants rose 0.8% in November from the prior month, well above the 0.3% increase economists surveyed by The Wall Street Journal had expected. That was up 5.8% from a year earlier, the largest yearly November increase since 2011. Despite their woes from online competition, general merchandisers such as department stores fared well, registering a 3.6% sales increase from a year earlier, the best November performance since 2010.

“Overall these data are much stronger than expected,” said Ian Shepherdson, an economist at Pantheon Macroeconomics, in a note to clients. “People have the inclination and the wherewithal to continue spending at a robust pace.”

Taken altogether, the data suggest the U.S. is on track for robust growth in the fourth quarter. Macroeconomic Advisers, a forecasting firm, estimated the economy is growing at a 2.8% annual pace in the October-to-December period, up from a 2.6% forecast before the retail-data release. The Federal Reserve Bank of Atlanta estimated a 3.3% growth rate.

One caveat: Spending is so strong it is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.

Spending comparisons to last year were boosted by a weak holiday season in 2016 for retailers, which were plagued by high inventories and a slowdown in purchases by international tourists amid a rising dollar.

This year, some brick-and-mortar stores appear to be better managing their inventory. In their most recent quarter, both Macy’s Inc. and Kohl’s Corp. said their stores had less excess merchandise to clear out at steeply reduced prices. “We don’t have the albatross of a lot of extra inventory like we did last year,” Macy’s Chief Executive Jeff Gennette said in an interview on Black Friday. That, in turn, resulted in less discounting, Mr. Gennette said.

Mr. Kleinhenz said increasingly sophisticated website and app advertising is helping brick-and-mortar retailers too. “It’s a combined strategy that retailers have developed that integrates the use of the internet with the brick-and-mortar shopping approach,” he said.

The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press Related Video

Since Nov. 1, online revenue has risen 24% compared with the same period last year, said Slice Intelligence, a research firm that tracks online purchase receipts. Online sales at Target Corp., Kohl’s Corp. and Costco Wholesale Corp. rose the fastest, the firm said, though Amazon continued to grow rapidly from a larger sales base.

Better-than-expected quarterly results were reported by some mall stalwarts that have been battered, including Macy’s Inc. and Gap Inc. “There is a consolidation taking place” in the apparel market, Gap CEO Art Peck told analysts on Nov. 16. “Almost regardless of consumer sentiment, we’ve got an opportunity to drive growth and gain market share,” Mr. Peck said, as the company closes stores, remodels others and speeds up its product pipeline.

The closure of thousands of stores this year could be giving those left standing a boost.

“On an overall basis, a portion of our improvement in our sales trend is attributable to our targeted efforts to capture share from competitive store closures in some of our trade areas, and we expect this will continue, if not accelerate, through the holiday season,” Kohl’s CEO Kevin Mansell told analysts in November.

Some businesses, meanwhile, are feeling a boost from the stronger labor market. Pete Benck, owner of Madison, Wis.-based vintage clothing store Good Style Shop, said this holiday season’s business has been stronger than last year’s.

“We have had a lot of foot traffic, and I think there’s a lot of confidence in our consumers lately,” Mr. Benck said.

The National Retail Federation expects consumers nationwide to spend about 4% more during the holiday shopping season than they had in 2016. That would make 2017 the strongest holiday season since 2014. Mr. Kleinhenz said the U.S. appears to be on track to meet that goal.

Sarah Nassauer Wall Street Journal

Yahoo Finance!

Write to Sharon Nunn at sharon.nunn@wsj.com

Photo credit:Black Friday shoppers sort through their purchases while waiting for their rides at The Mall at Turtle Creek in Jonesboro, Ark. Americans, by most measures, appear ready to shop this holiday season. (Staci Vandagriff/The Jonesboro Sun via AP, File)

Retailers Hope For Strong Holiday Season As November Sales Beat Expectations

U.S. retailers are looking forward to a strong holiday season this year after new numbers show higher than expected sales for November.

The Commerce Department said Thursday that retail and food sales were up 5.8 percent last month over November 2016, according to advance estimates. And, sales were up a seasonally adjusted 0.8 percent from October of this year.

“This has been an impressive start to the holiday season, perhaps the best in the last few years,” Jack Kleinhenz of the National Retail Foundation said in a statement. The group, which represents retail stores, released its own similar estimates Thursday. “The combination of job and wage gains, modest inflation and a [healthy] balance sheet along with elevated consumer confidence has led to solid holiday spending by American households,” he added.

According to The Wall Street Journaleconomists had predicted only a 0.3 percent increase in sales for November.

Sales were up 2.1 percent over the previous month at electronics stores and 1.2 percent at furniture stores, the agency reported.

Surveys show customers are the most confident they’ve been since 2000, according to The Associated Press. The most recent unemployment report from the Bureau of Labor Statistics put the country’s unemployment rate at 4.1 percent in November, the same as it was in October. It’s the lowest unemployment rate since before the economic recession that began a decade ago.

In a sign of confidence in the economy, the Federal Reserve raised interest rates this week for the third time this year and the fifth time since the economic crisis.

Though to add some caution to the optimism, the Journal noted that strong spending “is outpacing income gains, meaning Americans are saving at a slower rate, which could lead to a spending slowdown later or the threat of rising debt levels.”

The newspaper also said that “high inventories and a slowdown in purchases by international tourists amid a rising dollar” contributed to a poor holiday season for retailers last year.

The National Retail Federation said sales for this year’s holiday season, which they define as November and December, “are on track to meet or exceed NRF’s holiday sales forecast for an increase between 3.6 and 4 percent over last year.”

Retail jobs climb amid ‘one of the strongest gains all year’

Dive Brief:

  • Retail jobs rose by “an unusually high 12,900 jobs” in November from October (excluding automobile dealers, gasoline stations and restaurants), according to a press release from the National Retail Federation.
  • Overall, employers added 228,000 jobs in November, another healthy economic sign as retailers wind down the year with the holiday sales push, according to the monthly report from the Labor Department. November’s unemployment rate is 4.1%, according to another report from the same office, a 17-year low.
  • But wage growth remains tepid: average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5%, according to the Labor Department — a rate that was “below expectations,” according to a statement Friday from U.S. Secretary of Labor Alexander Acosta.

Dive Insight:

Retailers’ holiday hiring may be helping boost November’s numbers. The annual hiring of temporary holiday workers is on track to reach the high end of the NRF’s forecast of between 500,000 and 550,000 positions, the organization said in a press release on Friday. The NRF forecasts that this year’s holiday sales will grow between 3.6% and 4%.

“This was one of the strongest gains we’ve seen all year,” NRF Chief Economist Jack Kleinhenz said in a statement. “You expect employment to be up during the holiday season and retailers are expecting strong holiday sales with related job growth, but overall growth in the economy has to be recognized here as well. We’re also seeing new jobs in other sectors of the economy, particularly industrial, and that means more demand for retail goods and a need for more retail workers.”

Employment rose in most retail sectors last month but there were some decreases, in electronics and appliance stores; clothing and clothing accessories stores; as well as non-store sales, which includes e-commerce, the NRF noted.

The Labor Department’s characterization of retail jobs hasn’t quite caught up with e-commerce, Kleinhenz also noted: It counts store employees, but not retail workers in corporate offices, distribution centers, call centers and innovation labs. Warehouse and storage employment, for example, was up by 8,100 jobs in November, but those don’t count as retail jobs even when they’re at retailers.

Still, holiday holiday hiring announcements are slightly behind last year’s totals, according to outplacement consultancy Challenger, Gray & Christmas, Inc. Companies have announced 608,129 seasonal hires so far this year, 2% fewer than the 620,700 announced last year, according to Challenger tracking. However, total hiring announcements reached over one million, the highest number on record, according to Challenger’s report, which was emailed to Retail Dive.

While tax reform is a wild card when it comes to retail hiring — it could mean more hiring or more workforce consolidation — increased merger and acquisition activity among retailers could mean lost jobs.

“While job-cut announcements have remained low all year, major M&A activity, such as the CVS/Aetna deal and the possibility of Amazon buying generic pharmaceutical manufacturers, could lead to a spate of large-scale job-cut announcements to open 2018, especially at Pharmaceutical, Retail, and Health Care companies,” John Challenger,Challenger, Gray & Christmas Chief Executive Officer said in an email to Retail Dive.

Year-over-year October jobs drop 0.4% in region

Although the uptick shouldn’t be seen as part of a long-term trend, the increase of an estimated 1,250 jobs in the goods-producing sector of the Northeast Ohio economy in October largely offset a decline in service-sector payrolls for the month, resulting in a net regional loss of 57 jobs from September, according to the latest Crain’s Employment Report (CER).

That’s a barely measurable percentage of the total October payrolls, which were 1,168,796 on a seasonally adjusted basis.

Meanwhile, service-providing firms appear to have decreased payrolls by 1,306 during October. Importantly, though, Jack Kleinhenz, the Cleveland Heights economist who developed the CER model, reports that the service sector is showing a gain of 972 jobs over the level in October 2016.

Overall, estimated October payrolls were down 5,255 from a year ago, a 0.4% loss. The larger service sector employed an estimated 963,241 people in October; the goods-producing sector had 205,555 workers on payrolls.

“The recent gain in the manufacturing sector is being helped by strong foreign demand and a softer dollar,” Kleinhenz said. “The global economy has shifted into higher gear, and foreign demand for U.S. goods has accelerated, reaching their highest level since December 2014.”

Kleinhenz noted that new factory orders were up 1.4% in September, the latest month available, and that new orders for manufactured goods jumped nearly 7% since September 2016, “a healthy pickup that is consistent with recent business optimism.”

The one-month increase in jobs in the goods-producing sector — largely comprising the manufacturing and construction industries — comes on the heels of a month-to-month loss of 3,544 between August and September. In addition, the sector has lost about 6,228 jobs since October 2016, according to CER data.

The year-over-year loss is part of an expected long-term decline in manufacturing jobs, according to a recent report from Team Northeast Ohio.

The business development nonprofit forecasts that the number of jobs in the manufacturing sector in the 18-county region of Northeast Ohio it surveys will decline from 265,437 in 2017 to 236,179 by 2027, a drop of 11%.

The flat employment seen in the seven-county region compares unfavorably to a statewide survey taken by ADP LLC. ADP’s report estimates that Ohio added 8,280 jobs in October. ADP is a national business outsourcing firm that surveys 406,000 U.S. companies monthly and breaks down the data to the state level for its report.

SEASONALLY ADJUSTED DATA

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Month Non-Farm Small (1-49) Mid-Sized (50+) Goods-producing Service Producing
March 2017 Actual 1,176,199   478,968   697,231 211,385 964,814
April (est) 1,173,870   478,121   695,749 209,521 964,349
May (est) 1,170,995   477,036   693,959 207,776 963,219
June(est) 1,167,608   475,681   691,927 206,819 960,789
July(est) 1,172,637   477,722   694,915 207,818 964,819
August (est) 1,173,201   477,957   695,244 207,849 965,352
Sept (est) 1,168,852   476,378   692,474 204,305 964,547
Oct (est) 1,168,796   476,268   692,528 205,555 963,241
Recent Month’s Estimated Change
Sept ’17 to Oct ’17 (57)   (110.91)   54 1,250 (1,306)
Diff from Oct 2016 (5,255)   (1,772)   (3,484) (6,228) 972
Trend
3-month 1,170,283   476,868   693,415 205,903 964,380
6-month 1,170,348   476,840   693,508 206,687 963,661