Target Earnings Squeezed as Shoppers Stick to Basics

Target's getting hammered. Their grocery business takes just 3 percent of the share of total grocery sales in the U.S. And folks aren't shopping for the quasi-fashionable Target brand --- Tar-Jay. 

Maybe Target's the next Bed Bath & Beyond?

At WSJ, "Consumers cut back on nonessential items as sales come in flat; rise in theft cuts into profit."

Inflation, Shortages Push Americans to Switch Brands More Than Ever

I switched to Powerade from Gatorade, which is out of my price range now. 

Not only that, bottles now contain 28 ounces, down from at least 36. This is a longtime trend. When I was a kid my hands were too little to grasp those monster old bars of Safeguard. Now soap comes the size of a couple of Reese's.

And don't get me going about gas prices. I'm curtailing my driving, keeping it as local as possible for now. And I'm not poor, sheesh!

At WSJ, "Brand loyalty is tested as shoppers try new grocery products":

U.S. shoppers are buying what they can find—and afford.

Well-known brand names and flashy ad campaigns are no longer enough to command U.S. consumers’ loyalty in grocery stores, retail executives said. As inflation spreads and stretched supply chains leave gaps on shelves, shoppers are becoming increasingly fickle, with availability and price determining what goes into their shopping carts.

Shoppers’ new willingness to switch brands could shift the balances of power inside grocery stores. Big food companies like Kraft Heinz Co. and Kellogg Co. risk losing market share to competitors and store brands that are more readily able to fill in empty spots in store aisles, industry executives said. Supermarket operators, while grappling with shortages, said the situation is giving them more leverage with major brands and flexibility to test newer, often lower-cost products.

“We are seeing people make more choices on items because they are available,” said Tony Sarsam, chief executive officer of grocery chain SpartanNash Co. In the Grand Rapids, Mich.-based company’s supermarket aisles, Mr. Sarsam said, Tropicana orange juice lost share to Coca-Cola Co.’s Simply Orange in recent months, which has been easier for SpartanNash to stock, while Tyson Foods Inc. similarly lost share in frozen breaded chicken to Conagra Brands Inc.’s Banquet meals.

Mr. Sarsam said he and his team now are examining the variety of groceries the company sells, recently trimming the number of items it offers in cookie, cracker and salty snack sections in response to some brands’ inability to meet demand and slower sales. SpartanNash is sometimes giving more shelf space to local brands, which are better able to keep products in stock.

Tyson said it is working hard to meet high demand for its products. Coca-Cola, Conagra and private-equity firm PAI Partners, which owns Tropicana, declined to comment.

About 70% of U.S. shoppers said they had purchased a new or different brand than they had pre-pandemic, according to a survey conducted from May 2020 to August 2021 by private-label consulting company Daymon Worldwide Inc.

As consumers try less familiar names, brand loyalty for companies with supply challenges is declining, according to market research firm IRI. Brands with low availability, or in-stock rates of between 72% and 85%, have lost 0.7 percentage point of share of wallet on average, the firm said. Share of wallet, which measures brand loyalty, shows whether companies are gaining or losing buyers.

Consumers often stick to brands they know out of convenience and buy more items from names they are familiar with, industry analysts said. But shoppers are inclined to switch brands when belt-tightening if they can find a better deal. During the financial crisis, major brands across the grocery store developed lower-priced versions of their products to try to keep consumers loyal, as Procter & Gamble Co. did with cheaper versions of Tide detergent, Olay skin cream and Pampers diapers, for example.

Today, however, shoppers feel the pressure of higher prices while also facing shelves that are short on products, companies said. Those factors, in tandem, are driving more consumers to switch brands, executives said.

At 84.51 LLC, a data analysis business of supermarket giant Kroger Co., Vice President of Commercial Insights Barbara Connors said that brand switching was driven by extreme shortages and stockpiling, and that shoppers increasingly are switching to lower-cost brands including those on sale.

Production constraints are costing some food giants grocery-store turf. Kraft Heinz said in February it lost share in some supermarket categories as the company struggled to keep up with demand. Kraft Heinz had no additional comment.

Kellogg said in February that some of its cereal brands lost ground in supermarkets and that it expects to gain cereal market share in North America in the second half of the year when it can get more products back on shelves. Kellogg said that it gained market share last year in salty snacks and crackers.

“We will see market share restoration,” Steven Cahillane, chief executive of Kellogg, said on an earnings call last month. “We’re focusing first on our biggest brands.”

Some food companies said they see opportunities as more shoppers switch brands. Geoff Tanner, chief commercial and marketing officer at J.M. Smucker Co., said the maker of Jif peanut butter and Folgers coffee has benefited from being able to more consistently meet demand compared with competitors.

“There’s more to get if you can outperform,” Mr. Tanner said. About two-thirds of Smucker’s product portfolio is increasing its market share today compared with one-third before the pandemic, he said, and the company is boosting advertising...

 

This State is So F*cked (VIDEO)

First up is the news that idiot Democrat state legislators have introduced legislation to ban separate "boys" and "girls" sections in department stores. Yep. That's how psycho the deranged leadership in Sacramento has become (and these people continue to shock in their utter indifference to the real issues facing Californians).

At the Sacramento Bee, "California would ban boys and girls sections at big retailers under proposed law," and Reason, "California Bill Would Give $1,000 Fines to Retailers With Separate 'Girls' and 'Boys' Toy Sections."

In more sheer idiocy, the governor, along with the California Department of Public Health, has issues new guidelines for the states' residents to "double up" on mask wearing, which is so stupid I'm shaking my head *Eye-roll.* Next thing you know, they'll be mandating residents to wear three masks, which of course defeats the purpose anyway, since folks will suffocate to death. 

At LAT, "California urges double masking to prevent COVID spread as Texas relaxes mask rules."

Our idiot governor slammed Texas for relaxing its requirements, and I'll tell you, I was in Houston last November, and even then Texas had indoor dining, and my wife and I had no problems. I think it's the nice weather here that remains the only thing attractive about this "Left Coast" dumphole of a state. 

More at CBS News 2 Los Angeles:

 

Curfew is Costly for Night-Shift Workers

It's hard out there, and leftists make it harder for everybody.

At LAT, "For night-shift workers, curfews can be costly."

For night-shift workers, curfews can be costly https://t.co/vsh7cgsYlR

— Los Angeles Times (@latimes) June 5, 2020

'I'm afraid a lot of these stores are going to go out of business. I see that Pier 1 died, but I couldn't understand how it could still be around after all these years. What was all that junk they were selling? Did anyone need anything they had on offer?'

That's Althouse on the economy, "'Retailers that have spent years trying to get customers to linger, in hopes they’ll buy more than they need, are reimagining their stores'..."

Reopening Las Vegas

Interesting video, at CNN:

What Will Be Left of Retail?

Who knows? Won't nobody know anything until all this lockdown stuff stops happening.

At NYT, "When Shoppers Venture Out, What Will Be Left?":

When Shoppers Venture Out, What Will Be Left? Retail Sales Drop 16.4% https://t.co/mGJ1YJLN2b

— Jim Clancy (@ClancyReports) May 15, 2020

The coronavirus pandemic dealt another crushing blow to retailers in April. Now the question is what the sector will look like as the economy reopens — and how much permanent damage has been inflicted.

Retail sales fell 16.4 percent last month, the Commerce Department said Friday, by far the largest monthly drop on record. That followed an 8.3 percent drop in March, the previous record. Total sales for April, which include retail purchases in stores and online as well as money spent at bars and restaurants, were the lowest since 2012, even without accounting for inflation.

Some of the declines in individual categories were staggering. Restaurants and bars lost half their business over two months. At furniture and home furnishings stores, sales were off by two-thirds. At clothing stores, the two-month decline was 89 percent. Increased sales from online retailers didn’t come close to offsetting the downturn elsewhere.

April could prove to be the bottom for sales. The March figures were helped in part by panic buying, and stores were generally open for the first half of the month. Most states have begun to lift barriers to commerce and movement, and many economists expect spending to rise in May as people venture out.

But in contrast to the nearly vertical drop, any rebound is likely to be gradual. Big states like New York and California remain largely under lockdown, and businesses face significant restrictions elsewhere. Even as businesses reopen, there is no guarantee that customers will return in numbers previously seen.

And the financial system may be an added source of vulnerability as the economic downturn places strains on households and businesses, the Federal Reserve said Friday.

“It’s probably fair to say the worst is over in terms of a collapse, unless there are waves of new outbreaks,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities. “But how fast does it come back? The short answer is none of us really know.”

The downturn appears to have left lasting scars on a retail industry that was already struggling. J. Crew and Neiman Marcus have filed for bankruptcy protection, followed Friday by J.C. Penney, a 118-year-old chain with more than 800 stores and nearly 85,000 employees.

Surveys show that many Americans still fear the virus and are wary of crowded places. Epidemiologists and public health officials say those concerns are well founded: Anthony S. Fauci, the government’s top infectious-disease expert, told a Senate committee this week that rushing back to normal life could “trigger an outbreak that you may not be able to control.”

Even if Americans feel comfortable returning to stores, they may not have as much money to spend, since millions have lost their jobs...

Coronavirus Slams the Behemoths of the Retail World

For department stores, things may never be the same --- particularly for those that survive.

At NYT, "The Death of the Department Store: ‘Very Few Are Likely to Survive’":

All those rumors about Neiman Marcus going bankrupt? They are just the beginning. With @sapna - https://t.co/GrnWzSMciw

— Vanessa Friedman (@VVFriedman) April 21, 2020

American department stores, once all-powerful shopping meccas that anchored malls and Main Streets across the country, have been dealt blow after blow in the past decade. J.C. Penney and Sears were upended by hedge funds. Macy’s has been closing stores and cutting corporate staff. Barneys New York filed for bankruptcy last year.

But nothing compares to the shock the weakened industry has taken from the coronavirus pandemic. The sales of clothing and accessories fell by more than half in March, a trend that is expected to only get worse in April. The entire executive team at Lord & Taylor was let go this month. Nordstrom has canceled orders and put off paying its vendors. The Neiman Marcus Group, the most glittering of the American department store chains, is expected to declare bankruptcy in the coming days, the first major retailer felled during the current crisis.

It is not likely to be the last.

“The department stores, which have been failing slowly for a very long time, really don’t get over this,” said Mark A. Cohen, the director of retail studies at Columbia University’s Business School. “The genre is toast, and looking at the other side of this, there are very few who are likely to survive.”

At a time when retailers should be putting in orders for the all-important holiday shopping season, stores are furloughing tens of thousands of corporate and store employees, hoarding cash and desperately planning how to survive this crisis. The specter of mass default is being discussed not just behind closed doors but in analysts’ future models. Whether or not that happens, no one doubts that the upheaval caused by the pandemic will permanently alter both the retail landscape and the relationships of brands with the stores that sell them.

At the very least, there is expected to be an enormous reduction in the number of stores in each chain, which once sprawled across the American continent like a pack of many-headed hydras.

Department store chains account for about 30 percent of the total mall square footage in the United States, with 10 percent of that coming from Sears and J.C. Penney, according to a January report from Green Street Advisors, a real estate research firm. Even before the pandemic, the firm expected about half of mall-based department stores to close in the next five years.

Even as they have worked to transform themselves for e-commerce with apps, websites and in-store exchanges, the outbreak has laid bare how dependent the department stores have remained on their physical outposts. Macy’s said on March 30 that after closing its stores for nearly two weeks, it had lost the majority of its sales.

The Commerce Department’s retail sales report for March, released last week, was disastrous. Overall retail sales numbers for this month are expected to be even worse, given that some stores were open for at least part of March.

Retailers have begun taking extreme measures to try to survive. Le Tote, a subscription clothing company that acquired Lord & Taylor last year from Hudson’s Bay, said in a memo on April 2 that the chain’s entire executive team, including the chief executive, would be let go immediately. It also suspended payments of goods to vendors for at least 90 days, citing “immense pressure on our liquidity position.”

Macy’s, which also owns Bloomingdale’s, extended payment for goods and services to 120 days from 60 days and, according to Reuters, has hired bankers from Lazard to explore new financing. Jeff Gennette, the chief executive, is forgoing any compensation for the duration of the crisis. The company was dropped from the S&P 500 last month based on its valuation.

J.C. Penney has hired Lazard, the law firm Kirkland & Ellis and the consultancy AlixPartners to explore restructuring options, according to two people familiar with the matter, and confirmed that it skipped an interest payment on its debt last week. It is expected to make a decision on what to do, including potentially filing for bankruptcy, within a few weeks, one of the people said.

But none of them were in as immediate dire straits as Neiman Marcus, which has both an enormous debt burden — about $4.8 billion, thanks in part to a leveraged buyout in 2013 by the owners Ares Management and the Canada Pension Plan Investment Board — and a raft of expensive rents in the most high-profile shopping destinations, signed during boom times.

In late March, Neiman stopped accepting new merchandise and furloughed a large portion of its approximately 14,000 employees as the rumors of bankruptcy began to swirl. Its chief executive, Geoffroy van Raemdonck, announced that he was waiving his salary for April. The brand denied to vendors and its own employees at its sister brand Bergdorf Goodman that it was engaging advisers to explore a bankruptcy filing, but on April 14, S&P downgraded Neiman’s credit rating. Last week, the retailer did not make an interest payment that was due on April 15, angering bondholders and further fueling suspicions that a bankruptcy filing was imminent. A spokesperson for Neiman Marcus declined to comment...

Still more.

Department Stores in Trouble

Macy's and Sears made big announcements of closings and downsizing this week.

I remember just last year Macy's closed and then bulldozed its store at the Spectrum in Irvine. They closed dozens of stores nationwide back then, and now they're doing another round.

I rarely shop at department stores anymore. Every now and then I think about South Coast Plaza, which is a mall built around about a half dozen major department stores, including high stores like Saks Fifth Avenue. Sometimes I wonder how they're still in business over there. I guess they'll just bulldoze some stores when the time comes.

In any case, at USA Today, "Department stores become endangered as Sears, Macy's struggle":

Sears is  closing  150 stores and selling its vaunted Craftsman tool brand, but those steps may not be enough to stop the unraveling of the American icon.

With Sears' announcement Thursday coming only a day after rival Macy's saying it would close 68 locations, the department store concept itself is looking like an endangered species. In a retail landscape now dominated by online sellers like Amazon and big-box chains like Walmart and Home Depot, Sears finds itself in a search for a reason to exist.

"The brand has lost relevance,  it’s lost customers and it’s lost its real reason for existence on the American retail scene,'' says Neil Saunders, CEO of Conlumino, a retail consulting firm. Following "the trajectory they're on, there are no real signs of them turning it around to profitability.''

Sears has more than 1,300 stores remaining in its portfolio, so its demise could be prolonged. But if the retailer is unable to stem its financial bleeding and is forced into bankruptcy or perhaps a final assets sale, its loss would be akin to that of dominating American companies like airline Pan Am or five-and dime F.W. Woolworth.

"I honestly don’t see a spot for Sears long-term," says Van Conway, CEO of Van Conway & Partners, who has advised retail companies and other businesses on reorganization and insolvency. "My mom shopped at Sears. That was the only place she could go. Now you have 50 choices, and Sears is outdated.’’

Founded in 1886, Sears launched its first large, general catalog a decade later and for generations was the go-to source for products ranging from watches to washing machines. Though it lost its place as the nation's biggest retailer to Walmart in the 1990s, Sears enjoyed a renaissance during that decade under the helm of then-CEO Arthur Martinez, who pushed a greater focus on apparel sales and other initiatives.

The company faltered in the 2000s, selling its more than $30 billion credit portfolio to Citibank in  2003 and merging the Sears brand with Kmart, another struggling big box chain...

More.

The Never-Ending Sale

I don't worry too much about shopping on the Fourth of July, but it's a big weekend for retailers.

At WSJ, "How to Play the July 4th Sales":

With the July 4th holiday approaching, watch for emails landing in your inbox pitching big sales from retailers on this traditional summer sale day. They’ll start by offering deep discounts. Then on Monday, they’ll press the urgency—Final hours! If past experience is any guide, you may wake up July 5 to find the sale has been extended and is still going.

As they battle for attention, retailers are increasingly playing a hurry-up-and-wait game, which leaves consumers struggling to figure out when the sales are climaxing with maximum discounts.

Retailers over Memorial Day repeatedly warned shoppers they’d better move fast. “Only Hours Left!” Lands’ End announced in an email blast Monday afternoon. “Last Chance,” Pottery Barn intoned. But by Tuesday, their sales and others’ were still on. “Memorial Day might be over, but our sale is not,” said an email from menswear seller Knot Standard.

Deep discounts for some retailers including Neiman Marcus, which also extended its Memorial Day sale, have lasted virtually all month. Some Fourth of July sales started early. Pottery Barn was advertising 70% off for its Independence Day sale as early as June 23.

Retailers agonize over whether and when to offer discounts, and fashion brands hate sales. They risk teaching consumers to wait for a sale to buy and make it tougher for retailers to sell items at full price. Extending a sale with an email blast creates a potentially even more potent mix: It could make it tougher to convince consumers to buy discounted items because they wait for an even better offer. A shopper who rushes to buy after an urgent email says a sale will end may be annoyed to wake up the next morning to an email saying the sale continues.

“Basically, it’s always a sale now,” says Barry Schwartz, a Swarthmore College consumer psychologist, professor, and author of The Paradox of Choice a groundbreaking 2004 book that argued brands benefit from offering fewer choices. “The retailers are killing themselves.”

Still more.

First Quarter GDP Growth Tracking at Just 0.9 Percent

Depression economics.

Next to global Islamic appeasement, meager economic growth (due to ideology and statism) will be the key Obama legacy.

At CBNC, "Shocker cuts to Q1 growth pace show faltering economy" (via Conservative Treehouse):

First-quarter growth is now tracking at just 0.9 percent, after new data showed surprising weakness in consumer spending and a wider-than-expected trade gap.

According to the CNBC/Moody's Analytics rapid update, economists now see the sluggish growth pace based on already reported data, down from 1.4 percent last week. According to the rapid update, economists have a median forecast of 1.6 percent growth in first-quarter GDP, which includes their estimates for data not yet released.

"It's not a polar vortex winter. You can't blame the weather this year. It's the consumer. I think there's a problem with the measurement but at the end of the day if the world were as good as we'd hoped, people would feel better and it's not showing up," said Diane Swonk of DS Economics.

Personal income rose 0.2 percent in February, a tenth above expectations, and spending was up 0.1 percent. But revisions to January's spending data wiped out earlier solid gains and showed spending marginally higher — at 0.1 percent from an earlier 0.5 percent.

Fourth-quarter GDP growth was reported at 1.4 percent Friday, revised up from 1 percent.

Economists had been hopeful the first quarter would show a snapback with growth above 2 percent, and some have been optimistic that weak manufacturing was beginning to show signs of bottoming.

They note the size of the revision to consumer spending is rare.

"It's not falling off the cliff. We're not in a recession but it's consistent with worry," said Swonk...

More.

American Express-Costco Divorce Shakes Up Credit-Card Industry

This is interesting, at WSJ, "Costco Cards Account for One Out of Every 10 AmEx Cards in Circulation":

American Express Co. and Costco Wholesale Corp. are ending their 16-year relationship, a surprise move that pummeled AmEx’s stock price and will trigger a major upheaval in the card industry.

The unusual partnership, in which Costco exclusively accepted AmEx cards, had driven a significant chunk of business to the New York card company. In addition, AmEx and Costco issued a credit card together that could also be used at other merchants. When the arrangement ends next year, millions of customers will be forced to use a different credit card when shopping at the wholesale store.

The failure to agree on new terms was a fresh blow to AmEx, which was already falling short of some sales targets. American Express Chief Executive Ken Chenault said the move, affecting roughly one in 10 AmEx cards in circulation, would eat into the company’s results in the next two years.

On Thursday, AmEx’s shares dropped $5.53, or 6.4%, to $80.48, its largest one-day percentage decline since August 2011.

The move sets up a race among credit-card firms to team up with the fast-expanding wholesale club, which sells everything from car tires to smoked salmon...

More.