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.


UAE hyperloop to finish initial construction in 2020: chairman

Updated 2 min 47 sec ago
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UAE hyperloop to finish initial construction in 2020: chairman

ABU DHABI: The company building the world’s first superfast hyperloop train system in the United Arab Emirates will complete the first phase of its construction next year, a top executive said Thursday.
Elon Musk’s Hyperloop Transportation Technologies, based in California, plans to build 10 kilometers (six miles) of a 150-kilometer route linking Abu Dhabi and Dubai next year, company chairman Bibop Gresta told the official WAM news agency.
Gresta did not give a specific date for the launch of the high-speed transport system but said estimates put the cost at $3 billion to $6 billion.
Last April, Hyperloop signed a memorandum of understanding with Al-Dar Properties, a major real estate firm based in Abu Dhabi, for the construction and operation of the near-supersonic transport link.
The first capsule of the UAE train has now left the assembly facility in Spain to Toulouse, France where it will be tested on a prototype track, Gresta said.
A hyperloop is a shuttle pod that travels on magnetic rails, somewhat like a train, but which runs in a tube with little or no air.
In theory, hyperloops could allow travel faster than the speed of sound.