Tuesday, April 30, 2013

Tuesday News & Notes

Here are Tuesday's top retail reads:
  • Internet’s creative destruction in retail just getting started (The Globe and Mail)
  • Is consignment the new fast fashion? (Upstart Business Journal)
  • Cheap clothes lead to danger and tragedy in Bangladesh (CNN Money) and Shoppers want bargains, but what about worker safety? (Washington Post)
  • Mexico retail boom attracts investors (ICSC)
  • Havaianas: From Peasant Footwear to Global Fashion Powerhouse (BrandChannel)
  • Digital Coupons, Mobile Give Cheapskates Staying Power (eMarketer)
  • Price Matching: Consumer Boon or Risky Business? (Businessweek)
  • Thinning Patience for Low Profits Could Equal Higher Amazon Prices (Wired)
  • Here's How Social Media Is Changing Retail (Huffington Post)
  • Online retailers’ sales forces are ubiquitous - and insidious (Boston Globe)
  • Fab ditches flash sales to focus on exclusive products, furniture & its very own retail store (VentureBeat) and Fab Now Offers Made-To-Order Products, A Physical Retail Store (FastCo)
  • Retail's Secret Weapon: Shopping Therapy via Enhanced Mobile Commerce (Forbes)
  • Wal-Mart's grand, green plans to reduce prices (Fortune)
  • Post-Recession Consumers Place Greater Importance on Saving Money (RetailMeNot)
  • America's Best Performing Cities (The Atlantic Cities)
  • The Future of Retail in the Age of the Flagship Store (WSJ)
  • Are retailers doing enough to leverage Kindle Fire? (Mobile Commerce Daily)
  • Retail window displays innovate for a digital age (The Globe and Mail)

It seems initial fears that higher payroll taxes, delayed tax returns and an early-season spike in gas prices would crimp discretionary spending were overblown, as consumer have continued spending at a healthy clip.

Since peaking at $3.784 in late February, national prices at the pump have declined 26.4 cents, falling for 9 consecutive weeks and sitting 8.1% below year-ago levels. This extra money in consumers' pockets has helped offset the effect of higher taxes.

While tax refunds were initially delayed because of the sequester - as of March 1st, the number of refunds issued were 12.5% below last year's levels and the total amount dispersed was down 14.3%, as of April 19th activity has picked up considerably: the number of refunds issued were only 1.3% below 2012 levels and the total amount dispersed was down 3.0%, while the average refund was $2,659, or 1.8% lower than a year ago.

The one factor that has held back spending is the unseasonably cold temperatures we have seen across the country during the first half of spring, especially in the northeast. Data from Weather Trends International shows that national temperatures have been lower than last year for 10 straight weeks, and for 14 of 17 weeks since the start of the year.

Shoppers have held back upgrading spring wardrobes and spending on seasonal merchandise, and we expect retailers will blame the weather when they report weak April sales next week, and margin contraction in their 1st quarter earnings reports.

Chain store sales did perk up somewhat last week. The ICSC-Goldman Sachs Index posted its biggest jump in nine weeks, rising 2.6% over the prior year and 0.4% from last week.

"Although the U.S. chain sales performance has been a bit choppy in recent weeks, the rolling trend shows modest improvement,” said Michael Niemira, ICSC's vice president of research and chief economist.  “An extended streak of cool seasonal temperatures this year has curbed the consumers’ appetite for spring apparel and will likely mean more clearance discounting in the coming weeks.  Ideally, a bout of extended warm spring weather might do wonders to lift that seasonal demand.”
The Johnson Redbook Index rose 2.8% over last year, the best gain in a month, but for all of April sales rose just 2.2% compared to an expected gain of 2.6%:
"Weather conditions were varied across the country, sunny and warm in some regions, but unseasonably cool in others. Stores relying on spring driven apparel sales reported mixed results for the week, depending on their regional weighting; some national retailers indicated particular strength in west coast sales, where spring weather generally prevailed. Top selling merchandise categories showed a seasonal bias, concentrated on spring apparel, lawn and garden supplies and home improvement."
The Reuters/University of Michigan Index of Consumer Sentiment fell slightly in April to 76.4 from 78.6 in March, but improved considerably from the preliminary 72.3 reading earlier in the month:
Surveys of Consumers chief economist, Richard Curtin, said "Consumer confidence was not negatively affected by the Boston marathon bombing. Although confidence posted significant declines in early April, it began to improve prior to the bombing and gained strength throughout the rest of the month. Even when consumers were asked to describe in their own words their economic situation and that of the nation as a whole, there were virtually no references to the Boston marathon bombing. Of course, this does not mean that people did not grieve at the human tragedy, only that consumers did not think the events in Boston would influence national economic prospects.”
Meanwhile, the Conference Board Consumer Confidence Index jumped 10% in April on a considerably improved short-term outlook: The percentage of consumers expecting business conditions to improve over the next 6 months increased to 16.9% from 15.0%, while those anticipating business conditions to worsen decreased to 15.1% from 17.7%:
Lynn Franco, Director of Economic Indicators at The Conference Board, said "Consumer Confidence improved in April, as consumers’ expectations about the short-term economic outlook and their income prospects improved. However, consumers’ confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester. Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend."
ShopperTrak expects business to pick up in May, as consumers will splurge on moms for Mother's Day and kids for graduations, as well as pent-up demand being released for spring and seasonal merchandise as the spring weather finally arrives. 

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