Sunday October 31, 2010
When the National Retail Federation (NRF) released its annual Halloween Consumer Actions and Intentions Survey results, all indications seemed to be that happy Halloween spending was the precursor to Merry Christmas consuming. But the results of a recent Gallup consumer survey seem to indicate that Halloween predictions are just statistics wearing recovery costumes and that Halloween sales treats are probably just numbers tricks.
The NRF Halloween survey focused on the $5.8 billion that was expected to be spent by 148 million Americans for Halloween costumes, candy, decorations, and party fare and how willing consumers were to "embrace" the holiday. The focus of the NRF report of the Halloween survey was on all the ways in which consumer behavior was almost the same it was back in the Halloween holiday of 2008.
At the same time the NRF was making its happy Halloween predictions, October was coming to a close and consumers were responding to a different survey conducted by the Gallup people. In the Gallup survey consumers self-reported that their spending in October was just about the same as it had been in August and September, which was not such a big treat.
So, while it may be true that more Halloween alter egos will be unleashed and more Halloween sugar will be exchanged in 2010 than in 2009, the broad inferences and long-term predictions that some would like to make based on Halloween consuming behaviors are just not valid with easily spooked consumers in a ghoulish economy.
The NRF survey reports that 50% of Americans intended to decorate their home or yard for Halloween this year. Either I live in the city where the 50% of non-decorators live or else those decorations are behind closed doors and blinds. I noticed a definite drop in Halloween decorating during last year's spooktacular Recession and I don't see many people hauling out their tree ornaments, orange twinkle lights, or yard inflatables this year either. It's hard to even find a window jack-o-lantern this year. Unless the sample of the NRF survey specifically included an appropriate proportion of people who are unemployed, underemployed, or treading water in their underwater mortgages, I'm not sure the survey percentages can be validly extrapolated to the U.S. population as a whole.
One underreported result from the NRF Halloween survey is that 30.1% of people said that the U.S. economy will impact their Halloween plans. This is a slightly higher percentage than last year and I think it's pretty safe to assume the respondents didn't mean that the economy will be impacting their Halloween in a good way. So, 13 months after Ben Bernanke informed the world that the U.S. recession was over, there are still millions of Americans who feel like they are starring in Nightmare on Main Street and wondering if this movie is on a perpetual loop that will never end.
Halloween is not one of the biggest events on the U.S. retail sales calendar in terms of total holiday-related purchases. However, retail industry onlookers watch Halloween for signs about the mood of consumers. It is assumed that if consumers are in a festive Halloween mood, then their festive spirit will carry over to the crucial Christmas holiday shopping season too. In 2010, that common assumption may or may not hold true. There's a whole lotta economic news days and a potential political upheaval between now and Christmas. Consumer moods are anything but steady and predictable these days.
And then there's that pesky post-recession reality that nobody seems to want to acknowledge.
Just because holiday spending increases doesn't mean that the retail industry is getting healthier overall. There's one question that the NRF needed to add to every one of its Consumer Actions and Intention Surveys in 2010... "Will you cut back on other spending to compensate for the amount you will be spending for [insert holiday name here]?"
The sales patterns of 2010 have indicated that with each holiday spending increase, there is a correlating spending decrease in the spaces between the holidays. So it doesn't matter how much jingle bling is purchased during the 2010 Christmas shopping season if consumers are pinching pennies before and after the holiday to pay for it. The net out isn't all that much to celebrate.
When the economy is in the middle rapid expansion retail holiday numbers have a larger significance. In 2010, however, a holiday is just a holiday, with much less significance to the overall health or recovery of the U.S. retail industry. So, as much as everyone - analysts, economists, investors, and consumers - wants to look backwards to compare our economic present and future with our pre-recessionary past, it's like comparing candy apples and bad-blood oranges. The pre-recession economic model is as workable and practical as the pre-9/11 security model so why does it continue to be factored into the discussion?
All the time we spend focusing on what was and what is will only delay what could be becoming. Do we really want to keep focusing on whether we've all returned to our reckless pre-meltdown consuming behaviors or do we want to shift our focus to building a new, healthy and sustainable economic future? To me it's really clear which focus is filled with tricks and which focus contains genuine treats.
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Tuesday October 26, 2010
There is no question that the political game has changed. The question is whether the more aggressive retail participation in the political game will change consumer and investor behaviors or not.
Here is just a partial list of some of the U.S. retail industry political campaign contributions that have been made so far in the 2010 mid-term elections:
- Fry's Electronics, Google (GOOG), and Disney (DIS) are all making political contributions to support former eBay (EBAY) CEO Meg Whitman in her campaign to become the Republican CEO of the state of California.
- Limited Brands (LTD) has donated more than $110,000 of employee dollars to Republican Patrick Tiberi's Congressional campaign. Perhaps Tiberi will be autographing the Victoria's Secret support garments of his supporters to show his thanks.
- Disney is reportedly the number one source of campaign contributions for Democratic candidate Patrick Leahy. Disney's headquarters are in California and Leahy's campaign is in Vermont, but I guess everything makes sense in a Citizens United political paradigm.
- General Motors (GM) donated more than $600,000 to political campaigns n 2008, but after crawling up Capitol Hill on its knees to beg for a bailout, GM is watching the current political game from the sidelines. There are no corporate contributions in the 2010 mid-term elections from GM... that we know of.
- Microsoft is reportedly the 13th biggest corporate political contributor since 1989. In 2010, though, Google is reportedly catching up and is the third largest corporate tech campaign contributor.
- Wal-Mart (WMT) is helping Republican John Boozman save money in his political campaign, and hopefully live better as a re-elected congressman from Arkansas.
- Multi-level vitamin supplement company Herbalife (HLF) is trying to perk up the campaign of Democratic Senator Tom Harkin while multi-level competitors Nu Skin and Amway are backing Republicans.
Of course the U.S. Chamber of Commerce is spending a staggering $75 million to support mostly Republican candidates. There's no way to know exactly which U.S. or global retail companies contributed to that, but it's logical to assume that there were one or two retail organizations that added some of their PAC or corporate funds to the Chamber's campaign kitty especially since it is, in essence, a political hush fund.
Last week I was at a Boston Market restaurant and was asked at the cash register if I would like to make a donation to the Make-a-Wish Foundation. The restaurant chain was supporting its pet project of the month and I didn't mind being asked to participate. I'm not sure if I would be as amiable, though, if retailers started asking me to contribute to their political funds, particularly if they have a track record of supporting the political party that I'm not particularly fond of.
But retailers don't have to ask me or any other consumer to contribute to the political candidate of their choice. They can just add the cost of their political contributions into the price of the products that they sell.
But now that corporations are getting extremely aggressive in their monetary political support and not trying to hide their political affiliations so much, it's easier for consumers to notice that the purchase of a product or a share of stock from The Limited, Fry's, Google, Wal-Mart, or Amway, is the equivalent of a monetary vote for a Republican. For some people that's perfectly aligned with how they would spend their political dollars anyway. For other consumer-investor-voters, not so much.
When consumers figure out that a purchase at a retail store is like casting a vote against their own candidates, will it change their retail loyalties? When shareholders realize that a portion of their investment is being siphoned off to support a political candidate they don't like, will it change their investing strategies?
Share your opinion about the political spending by the U.S. retail industry in the poll to the right or in the comments below.
More About the Retail Industry and Politics:
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Tuesday October 19, 2010
The most widely reported surveys and statistics in the past couple of weeks have told us these things about holiday season sales and jobs for the U.S. retail industry in 2010:
- 600,000 temporary holiday jobs will be filled, which will be 100,000 fewer than the highest level in 2006, but much more than the dismal 384,000 holiday temps hired in 2008.
- Retail spending is expected to increase 2.3% over the 2009 holiday retail season
- Overall the U.S. retail industry has lost more than 1 million jobs since August, 2007, and the temporary holiday hiring will not change that for much longer than six weeks.
Based on this often quoted information, the conclusion is that the 2010 retail holiday season is going to be fa-la-la-lucrative for all concerned. A much less-publicized survey of chief financial officers of major U.S. retail industry companies provides a much more ho-ho-holistic view of the 2010 retail holiday season, however.
According to a survey of retail CFO's conducted by accounting and consulting firm, BDO, 47% of retail CFOs surveyed said they expect their overall 2010 sales revenue to be higher than it was in 2009. This means that there are still 53% of retail executives who don't expect to end 2010 with any more sales revenue than they managed to pry out of customer wallets in the dismal retail year of 2009. And this is not a survey that was conducted last January. These are the results of a survey that was conducted in August and September. So these are pretty well-informed predictions.
Another interesting finding of the BDO survey reveals what retailers are worried about in the 2010 holiday shopping season. The CFOs surveyed were split between worrying about too much inventory (53%) and too little inventory (47%) which basically amounts to the flip of a coin. I think this tells us that from the inside out, the retail holiday season in 2010 is going to be pretty much of a crap shoot for most retail chains.
Considering this inventory dilemma, it's surprising to find out that inventory levels are not what most CFOs think will eat into their profit margins during the most important shopping season this year. Store operating and administrative costs are a bigger threat to margins, according to 38% of the CFOs surveyed, which seems to indicate that the half-life of the extreme cost-cutting measures that were used to produce profits is expiring.
This reminds me of a budget-conscious period in the recent history of the Walt Disney Company (DIS). I remember that there were a few years during the what's-best-for-Michael-Eisner's-bonus-is-best-for-Disney era when 2% operating cost cuts were mandated across the board in all departments at the Walt Disney World Resort. Even though Disney is known for being Scrooge McDuck frugal in most of its business dealings, trimming 2% of fat from the budget was not a big challenge for anyone.
Each subsequent 2% cut that was mandated became more difficult and more painful, however. When there was no more fat to trim we were cutting into the meat of the Disney business, and before the 2% mandates ended we were hitting budget-cut bone.
In the short-term, Disney was able to maintain its profitable posture for shareholders (and Michael Eisner was able to maintain his compensation levels), but the operating cuts were too deep and, therefore, unsustainable. They damaged the core of the business, diminished the quality of the customer interactions, and threatened the value of the brand.
In order to prevent the #1 vacation destination in the world from becoming a beat-up amusement park staffed by surly part-time personnel in overextended polyester garb, some spending needed to resume. At some point Disney had to start spending operations money again in order to protect its brand essence, despite the effect that it had on short-term profits. Loyal customers are only willing to be forgiving for so long.
This is the point that the U.S. retail industry seems to be approaching quickly. Yes, it is wonderful that for six to eight weeks 600,000 people will be wearing plastic name tags they've never worn before, working for retail employers they've never worked for before, performing duties that they've never performed before, being asked to handle customer service situations that they've never encountered before this holiday season.
The charm of that wears off for the customers well before their patience has been tested with the 600,000th temp employee who has been taught only the most basic retail employee survival skills because store training budgets were cut 2% every month throughout the recession in order to make profit margins look good to the shareholders. Holiday shoppers are only willing to be forgiving for so long.
The BDO survey seems to reveal that CFOs are realizing that their present operating cost levels are unsustainable. These retail executives should rightfully be concerned about current operating expenditures because extreme cost cutting eventually starts eating into your ability to do the things that make retailing successful in the long-term. That is, your ability to create a compelling retail sales experience and the ability to build loyal customer relationships.
So in the hiring of 600,000 temporary employees to handle temporary retail sales increases, and staff temporary holiday pop-up shops, we see that most of the U.S. retail industry is just not willing to make a commitment. With consumer confidence hitting some new lows, and unemployment hitting hew highs, that is understandable.
What is not understandable is the wilingness of retail organizations to continue to be driven by the short-term expectations of Wall Street analysts who don't have enough practical retail experience to be qualified for a retail holiday temp job. But that's another blog for another meltdown.
If all 26.8 million people who are unemployed and underemployed were to apply for the 600,000 temporary retail positions, that means 45 people would be applying for every open retail position. Luckily, though, 3.5 million of the unemployed have given up looking for a job altogether, so that improves the odds of snagging a temporary retail job during the 2010 holiday season to 39-to-1. Studies, statistics, and predictions mean nothing if you are the one in thirty-nine who desperately wants that retail job.
So, how can retail job hunters improve their odds of snagging one of this year's 600,000 coveted holiday retail positions?
Top Five Tips for Finding and Getting a Temporary Retail Holiday Job:
#5 - Check out the complete 2010 Retail Job Holiday Hiring list to find the seasonal hiring plans for Macy's (M), Target (TGT), Best Buy (BBY), The Limited (LTD), and other major retail employers
#4 - Utilize less popular alternate job-hunting resources and use job-hunting strategies to sidestep the job-hunting competition.
#3 - Be prepared to make an extraordinary first impression in an on-the-spot interview when you fill out an in-the-store job application. Use expert interview tips to help you get ready to outshine all the other retail job applicants
#2 - Remember that all 600,000 retail jobs are not sales floor jobs. Look at the current retail job openings online to discover temporary jobs in fulfillment, customer service, and back office support positions too.
And the #1 tip for finding and getting hired for a temporary retail holiday job is...
Be worthy. Just because you are desperate for a job doesn't mean that a retail employer is desperate to hire you. Your ultimate responsibility in any temporary holiday retail job will be to help a retail company sell a whole lotta merchandise in a very short period of time. You have to be worthy of that challenge.
So, if you're not willing to be your best, do your best, and work harder and smarter than you ever have before, then step aside. Because there are 38 people standing behind you, resume in hand, who are willing to do exactly that and more.
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Tuesday October 12, 2010
A surge of store closings in the fourth calendar quarter of 2010 that far surpasses the number of new store openings may actually be an indicator that the economy is improving, or at least temporarily stabilizing. When the root cause of a majority of the new additions to the 2010 Store Closings list can actually be found in retail failures, it actually proves that the weak economy isn't having as much of a detrimental effect on the U.S. retail industry as it has in the recent past.
This, of course, is of no consolation to the employees of Ford (F) Lincoln dealerships, Rite Aid stores (RAD), Blockbuster Video (BLOAQ), or Jack-in-the Box (JACK) restaurants who will be joining the ranks of unemployment. But with the critical retail holiday season just ahead, last-minute store openings and seasonal hiring may make October not such a bad month to lose (and find) a retail job. We hope.
Jack-in-the-Box Store Company-Owned Closings and Closeouts
The 40 stores being closed by Jack-in-the-Box don't seem like many, compared to the 2,200 or so restaurants in its chain. But those 40 stores were all company-owned. Added to the 50 company-owned Jack-in-the-Box locations that were sold to franchisees this year, it's a little more significant.
I've always wondered what it says about a company that makes more money collecting fees from franchisees than from running its own retail locations. It seems to indicate that something is off in the concept, the system, or the retail capabilities of the management team. Whatever is motivating Jack-in-the-Box to divest itself from its own operations probably doesn't bode well for its franchisees in the short-term future.
A Zack's analyst blamed the Jack-in-the-Box closings on rising unemployment and lower consumer spending. These lame excuses were not articulated in the official press release from Jack-in-the-Box, however. Hopefully the Jack-in-the-Box management team is less fixated on U.S. economic indicators and more fixated on why customers are increasingly willing to pay premium prices for a sandwich at Panera despite the latest unemployment figures, but are not so willing to place their lunch order into the clown's mouth. (Or maybe bringing back the drive-through clown head would be just the USP that Jack-in-the-Box needs to recapture some of its fast food market share.)
Quizno's Company-Owned Openings Don't Offset Franchise Closings
In direct contrast to Jack-in-the-Box, Quizno's is aggressively ramping up the number of company-owned restaurants that it operates in the U.S. Reportedly there are 70 company-owned Quizno's restaurants that are being developed, which is just a fraction of the 600 that new CEO Greg MacDonald wants to create.
I wonder what's actually being "developed?" Certainly it couldn't be the retail facilities that need "developing." It seems like Quizno's could just re-open one of the 1,000 Quiznos restaurant locations that have reportedly gone out of business in 2010. It would be quite a statement if Quiznos deemed those failed franchise locations to be good enough for franchises to operate, but not good enough for the company to own.
Hopefully what's being "developed" is some kind of change that will make franchise locations more competitive and profitable. I suspect when the company is responsible for making 600 stores work, that it will change the way the system works. Most things have to be experienced in order to be fully understood.
If Stockholders Had a Nickel for Every Day Blockbuster Should Have Declared Bankruptcy
The 145 additional stores closed by Blockbuster as part of its Chapter 11 reorganization were neither a surprise nor a result of the economy. Since Blockbuster's April 2009 SEC filing when it revealed to the world that it had "substantial doubt about our ability to continue as a going concern," it's been a matter of when, not if, the Blockbuster legal team would file the official papers. I guess Blockbuster CEO Jim Keyes won a small victory because I don't think anybody else bet on the 17-month space on the Blockbuster bankruptcy betting pool.
For the 17 months, the Blockbuster management team was hoping to not have to file bankruptcy at all. But what if they had just done it and gotten over with it 17 months ago? It seems as if the company might be 17 months ahead in its own recovery today.
The retail industry is much about the power of positive thinking and future optimism, but isn't it the it's-not-so-bad attitude of Blockbuster's leaders that led the company into its vulnerable state of irrelevancy in the first place?
Sometimes things are that bad. Admitting there's a problem is a first step that CEO Keyes and his executive management team don't take easily. Responding to the problem is a second step that CEO Keyes and his executive management team don't take quickly. A misstep on either step could prove to be fatal in a relentlessly fast-paced retail industry.
Ironically, the price of a Blockbuster share of stock is the same as Jack-in-the-Box is paying for every person who "likes" them on their Facebook page. Apparently in a recovering economy a nickel can buy you an addition to your customer mailing list or a fractional ownership of a once-great retail organization.
Ford Closes Retail Stores In Response to Dying Product Line
In contrast to Blockbuster's legendary change-resistance, Ford seems to be proactively anticipating the irrelevance of one of its legendary products. Closing 175 of its Lincoln retail dealerships is Ford's acknowledgement that the Lincoln product needs a new customer base.
Since the average age of a Lincoln driver is 59, seemingly its customer base is literally dying off. But actually there will be no lack of 59 year-old baby boomers for another decade. The truth of the matter is that those 59 year-olds aren't particularly interested in what the current Lincoln has to offer them. The fact that Ford realizes this and is responding proactively to it probably explains why it is the only major U.S. auto company that kept itself out of bankruptcy court.