Increased costs bite US retailers despite higher holiday sales

Several US retailers reported small or moderate increases in comparable store sales during the critical November-December period. (AFP)
Updated 11 January 2019
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Increased costs bite US retailers despite higher holiday sales

  • Mastercard SpendingPulse in December estimated holiday sales growth of around 5.1 percent to more than $850 billion, the strongest jump in the last six years
  • The 2018 holiday shopping season was a strong one — just not for retailers

NEW YORK: Holiday shopping reports released Thursday underscored anew the challenges US retailers face in the Amazon era — even if consumers are willing to open their wallets to spend.
The updates were a mixed bag overall, with several retailers reporting small or moderate increases in comparable store sales during the critical November-December period.
But a report from Macy’s aroused the most angst on Wall Street, after the chain slashed its profit forecast even as it signaled a modest increase in sales.
Shares in Macy’s plunged almost 20 percent, while nearly every major retailer was pulled down as well.
That included companies like Target that reported higher holiday sales and confirmed — but did not raise — profit forecasts.
The results were an ugly finale to a holiday shopping season that opened with high expectations owing to robust consumer confidence amid a strong employment market, relatively low gasoline prices and a boost from tax cuts.
Mastercard SpendingPulse in December estimated holiday sales growth of around 5.1 percent to more than $850 billion, the strongest jump in the last six years.
By that estimate, the 2018 holiday shopping season was a strong one — just not for retailers.
“It was a good season. Consumers had more money to spend. They spent it,” said retail industry consultant Dana Telsey.
“But the cost of doing business is getting higher.”
Traditional brick-and-mortar retailers have invested in heavily beefing up their online platforms and offering incentives to lure buyers, such as free shipping during the peak holiday season.
At the same time, these companies also have spent heavily to improve the in-store experience, hiring consultants to help beautify the surroundings and in many cases employing more workers during the peak festive season.
The latest results suggested retailers still have not found a winning recipe for the transition to the e-commerce era.
“We know expenses are always a problem as more and more stuff moves online because people simply will not pay for you shipping it to them,” said retail industry consultant Jan Rogers Kniffen.
“They want it to be the same price in the store in my door. That’s just the way it is.”
Experts say the retail industry is still undergoing an existential shakeout.
Companies like Macy’s, JC Penney and Gap have shuttered stores in recent years, while Toys “R” Us went out of business — a fate that could soon befall iconic American retailer Sears.
Macy’s shares tumbled 18.7 percent after it reported an increase of 1.1 percent in comparable sales, but lowered its annual earnings forecast to a range of $3.95 to $4.00 a share from $4.10 to $4.30.
Sales were dented by a fire in a distribution center in West Virginia and a pre-Christmas “earn and redeem” promotional event that was unsuccessful, Macy’s said.
“The holiday season began strong,” Macy’s Chief Executive Jeff Gennette said, “but weakened in the mid-December period and did not return to expected patterns until the week of Christmas.”
Target said comparable sales grew 5.7 percent over the holiday, while Kohl’s put sales growth at 1.2 percent. L Brands, the parent of Victoria’s Secret, reported flat comparable sales for the five weeks ending January 5.
Bookseller Barnes & Noble estimated sales growth at 1.3 percent over the two-month period, adding that its earnings guidance “may be reduced by as much as 10 percent” due to increased advertising and promotional costs.
Analysts said the declines were exacerbated by expectations that earnings growth will be tough in 2019 after a strong 2018 following the US tax cut enacted in late 2017.


Saudi Aramco boss reveals gas and LNG ambitions amid petchems push

Updated 28 min 2 sec ago
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Saudi Aramco boss reveals gas and LNG ambitions amid petchems push

  • Saudi Aramco CEO Amin Nasser: We are in discussions in different countries with a lot of partners. We are reviewing these opportunities to make final decisions in terms of investment
  • Amin Nasser: A lot of it is in partnerships with leading companies around the world and it is either in gas investment, LNG investment or both

London: Saudi Aramco is eyeing gas and LNG acquisitions as it also prepares for the potential purchase of the Kingdom’s biggest chemical maker, CEO Amin Nasser revealed on Tuesday.

He made the disclosure in an interview with Bloomberg TV on the sidelines of the World Economic Forum in Davos.

“We are in discussions in different countries currently with a lot of partners. We are reviewing these opportunities to make final decisions in terms of investment,” Nasser said.

“A lot of it is in partnerships with leading companies around the world and it is either in gas investment, LNG investment or both.”

Aramco has also been in discussions with a credit rating agency ahead of a planned bond sale.

It comes ahead of the potential purchase of Saudi Basic Industries Corporation (SABIC), the Kingdom’s biggest chemical maker and a key part of Aramco’s ambitions to grow its global petrochemicals business.

“We will decide soon how much we would like to take from the bond market. Definitely it is going to be an international bond. We are currently in discussion with regard to how much and where,” Nasser said.

He said that the purchase price for SABIC was still under discussion.

“We are in discussion currently with the Public Investment Fund about acquisition of 70 percent of the share of SABIC. We are in discussion with regard to the price at this stage,” he said.

Earlier this month Saudi Energy Minister Khalid Al-Falih said Aramco would issue bonds in the second quarter of 2019.

Aramco’s planned acquisition of SABIC is expected to involve buying all or nearly all of the 70 percent stake in the chemicals company held by the Public Investment Fund (PIF), the Kingdom’s principal sovereign wealth fund.

Nasser said that there was no plan to acquire the 30 percent of the company that is currently publicly traded in Saudi Arabia.