CHHMA - EYE ON OUR INDUSTRY
Volume 14, Issue 44, November 20, 2014

Inside This Issue:

• Join Us in Montreal at the Industry Cocktail – December 9th
• Target Q3 Results Beat Market Expectations, Canada Shows Improvement
• Lowe’s Beats Street 3Q Forecasts, Raises Full-Year Outlook
• Home Depot Exceeds Q3 Profit and Revenue Expectations
• Sears Canada Loss More Than Doubles in Q3, While Sales Fall 10%
• Sears Canada In It for the Long-Run, Says New CEO
• Walmart Canada Reports Gains in Q3; Announces Head Office Cuts
• Wal-Mart Reports Higher Than Expected Q3 Profit But Anticipates Competitive Q4
• Hudson's Bay Takes a Chance on a New Voice to Sell Its Brand
• Nordstrom Reports Higher Q3 Sales and Profit; Calgary Store Exceeding Expectations
• Canadian Home Resales Edge Higher, Strongest October Since 2009 Led by Major Cities
• Nearly 9 in 10 Canadians Shopping North of the Border This Holiday Season
• Latest U.S. Economic News

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Association News

Join Us in Montreal at the Industry Cocktail – December 9th

A number of personnel from BMR and RONA among other retailers will be attending this year’s Industry Cocktail on Tuesday, December 9, from 5:30 p.m. to 8:30 p.m., at the Bar Dame de Coeur at the Casino de Montreal.

So join your industry colleagues and customers for the annual industry year-end celebration.

The location offers a fun and relaxing atmosphere where you can enjoy some wonderful food, drinks and conversation with friends from the industry while enjoying the festive season together.

We look forward to seeing you there.

Click here for further details and registration.

Industry News

Target 3Q Results Beat Market Expectations But Canadian Division Still Needs to Improve

Target Corp. posted third-quarter earnings that beat analysts’ estimates after U.S. sales grew faster than expected. However, although the Canadian division showed progress, results still remain unacceptable according to senior management.

Overall, company earnings amounted to 54 cents a share, excluding some items, the company reported on Wednesday. Analysts had predicted 47 cents on average, according to data compiled by Bloomberg. U.S. same-store sales increased 1.2% in the period, which ended Nov. 1, helped by online orders. Target had projected growth of as much as 1%.

The results signal that the company is rebounding under new chief executive officer Brian Cornell, a former PepsiCo Inc. executive who took the reins at Target in August. He has been working to boost U.S. traffic, repair the company’s botched expansion into Canada and regain shoppers’ trust after hackers stole millions of customers’ credit-card numbers last year.

“Expectations are rising, so CEO Brian Cornell’s ability to outline a credible plan for sustainable improvement will be key,” Peter Benedict, an analyst at Robert W. Baird & Co., said in a note before the results were released.

The shares climbed 0.6% to $67.51 (U.S.) yesterday in New York. The stock has gained 6.7% this year, trailing the 11% advance of the Standard & Poor’s 500 Index. Wal-Mart Stores Inc., meanwhile, is up 6.5% so far in 2014.

Third-quarter net income rose more than 3% to $352-million, or 55 cents a share, from $341-million, or 54 cents, a year earlier, the company said. Revenue climbed about 2.8% to $17.7-billion.

The company said that it has incurred net breach-related expenses of $158 million so far, including $12 million in the third quarter.

Looking ahead, total earnings will be $1.13 to $1.23 a share in the fourth quarter, excluding some costs, Target said. That compares with an estimate of $1.23.

On Aug. 12, Cornell became the first outsider ever to become CEO of Target. Over the past three decades, he’s worked for at least six different companies, including PepsiCo, Wal-Mart, Michaels Stores Inc. and Safeway Inc.

“We’re encouraged by the improving trend we’ve seen in our U.S. business throughout the year, and our fourth-quarter plans are designed to sustain this momentum,” Cornell said in the statement. “In Canada, we’ve made improvements to our operations, pricing and assortment in time for the holiday season, and we’re eager to measure how our guests respond.”

He told the analyst conference call that Target is now focusing on four “signature” categories of baby, kids, wellness and style. He said he doesn’t plan to reduce space in other departments but rather be more selective in what they stock. For example, in food, Target will carry more natural and organic fare, he said.

In the U.S., Target will work on ramping up its e-commerce business, he said. In Canada, Target still does not offer online shopping. And in the U.S. Target will focus more on smaller stores in urban centres to draw the growing number of consumers who are moving to more densely populated city locations.

Target Canada Making Progress But Results Still ‘Unacceptable’

“The results in Canada remain unacceptable,” John Mulligan, chief financial officer of Target, told a Canadian media conference call on Wednesday morning. “We need to see a step-change in performance there. We still have a lot of work to do.”

Mr. Mulligan would not predict when the 133 stores in Canada would turn a profit, even though the discount retailer reported that its third quarter operating loss narrowed from a year earlier while sales at existing stores rose.

“All the stores in Canada are performing well below our expectations – well below,” Mr. Mulligan said.

And he refrained from saying whether the U.S. discounter, known for its affordable fashion and home items, would eventually close some stores in Canada. Some analysts have gone as far as speculating the retailer could leave this country if it can’t make meaningful improvements.

Mr. Cornell said he expects “much better performance” from the chain here in the crucial fourth quarter, which includes the heavy holiday shopping period.

Still, he echoed Mr. Mulligan’s concerns: “We know that to succeed in Canada we will need a major step-change in performance,” the CEO said on a later conference call with analysts.

“While there is much more work to be done, I’m very pleased with the momentum we’re seeing in the U.S. business and the changes we’ve implemented to better position our Canadian segment.”

Mr. Mulligan said on Wednesday that Target Canada has made progress in stocking shelves, lowering prices and expanding its offerings.

Still, “it’s very clear to us we still have a lot of work to do, in both of our segments, the U.S. and Canada,” Mr. Mulligan said.

While shelves are better stocked in many sections of the stores, the inventory levels are inconsistent and still not where they need to be, he said. Problems persist especially in the home and apparel sections, where overseas merchandise ordering is done with long lead times, giving the retailer less flexibility to re-stock shelves quickly, he said.

“We recognize that we’re still disappointing some of our guests,” he said. Target, like some other retailers, calls its customers guests.

“Disappointing any customer at the shelf without a product is just not acceptable ever. So we know we have more work to do in Canada.”

In the third quarter, Target’s Canadian division’s operating loss narrowed to $211-million (U.S.) from $238-million a year earlier.

Sales in Canada increased 44% to $479 million in the third quarter from $333 million last year during the same period, reflecting sales from non-mature stores and a same-store sales increase of 1.6%. The same-store sales reflect results in 82 Canadian stores that became mature at various points this year, including 34 that became mature during the third quarter. Same-store sales were negatively impacted by market densification later in 2013, which redistributed sales from earlier store openings. Segment EBIT was $(211) million in the third quarter compared with $(238) million last year.

Canadian segment third quarter 2014 gross margin rate was 19.5%, reflecting the continued impact of inventory clearance, compared with 14.8% in third quarter 2013 which also reflected the impact of efforts to clear excess inventory.

For its Canadian fourth-quarter outlook, Target expects a “high-single digit increase” in total sales and “mid-to-high-single-digit” growth in same-store sales, Mr. Mulligan said. It anticipates its fourth-quarter gross margin rate to be 20%, significantly better than the paltry 4% a year earlier when the company heavily discounted unsold goods to clear them out. And it expects a fourth-quarter loss before interest, tax and amortization of $100-million, which would be a $160-million improvement from last year, he said.

Target Canada Undergoes Sales Strategy Makeover

Since the abrupt exits of former Target CEO Gregg Steinhafel and Canadian division president Tony Fisher last spring, new CEO Brian Cornell has been visiting the Canadian market frequently attempting to address myriad problems that have led to a string of disappointing sales results: a perception that prices were high relative to its U.S. stores, a lack of favourite Target U.S. brands in Canada and extensive supply chains blockages that led to empty store shelves and out-of-stocks on promoted weekly flyer items.

The retailer completed a three-month assessment of its Canadian supply chain earlier this year, and has been overstocking in key categories and reconfiguring prices to try to remedy customer complaints.

“We found some gaps,” said John Butcher, Target Canada’s senior vice-president of merchandising. “It’s not perfect yet, but we are showing signs of progress. Our in-stocks are improved, especially in commodities and in hardlines like toys and electronics. I want to see continued growth in the business, improved store traffic, larger basket sizes. Ultimately we want the guest to tell us that she loves Target.”

Part of that will be aided this holiday season, a critical period when many retailers do 30% to 40% of their annual sales, by disrupting Target’s golden rule about cluttering up its planogram, the internal corporate map that dictates ideal store layout and merchandise placement in order to maximize sales.

Unlike Canadian Tire, Loblaw and Walmart, Target normally does not roll entire merchandise palettes of goods — toys from Disney’s Frozen collection, for example — into the store aisles, preferring to stock them on shelves.

“We had to really rethink our strategy,” Mr. Butcher said. “Last year, in some cases if we didn’t bring those items front-and-centre on an end-cap or in a pallet, we either ran out or [the customer] could not find it.”

Target is also hoping to draw customers in with new and exclusive brands such as Bose and FitBit electronics, ELF cosmetics, Vitamix blenders, Fruits and Passion toiletries and Toms shoes — a strategy that has made Target an important differentiator for the brand in the U.S. market.

But it’s debatable whether it will work enough to make Canadians more loyal to the chain here, says Jim Smerdon, vice-president of retail and strategic planning at Colliers International in Vancouver.

“I am not sure if the exclusive brand idea will carry them back into public favour,” he said.

“Canadians buy on service and price, and Target’s stores in the U.S. still do well with Canadians because of that. And you’d need to sell a lot of Vitamix blenders to make up for $200-million a quarter in losses.”

Source: Target, Bloomberg News, Reuters, The Financial Post, The Globe and Mail

Lowe’s Beats Street 3Q Forecasts, Raises Full-Year Outlook

Lowe's Companies, Inc. reported on Wednesday net earnings of $585 million for the third quarter ended Oct. 31, a 17.3% increase over the same period a year ago. Diluted earnings per share increased 25.5% to $0.59 from $0.47 in the third quarter of 2013.

The results exceeded Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 58 cents per share.

For the nine months ended Oct. 31, net earnings increased 13.5% from the same period a year ago to $2.25 billion, and diluted earnings per share increased 21.7% to $2.24.

Sales for the third quarter increased 5.6% to $13.7 billion from $13.0 billion, exceeding analysts’ expectations of $13.55 billion.

Same-store sales for the quarter increased 5.1%, higher than the 4% analysts expected. For the nine month period, sales were $43.7 billion, a 4.6% increase over the same period a year ago, and same-store sales increased 3.5%.

The company raised its full-year profit and sales forecast as an improving job market encourages home owners to increase spending on renovations.

Lowe's sales have been recovering after a severe winter earlier this year hit demand for outdoor products such as roofing and tiling material.

"(We) continue to be cautiously optimistic about the home improvement landscape," Chief Executive Robert Niblock said in a statement.

Lowe's raised its profit forecast to $2.68 per share from $2.63. The company also said it expects sales to grow 4.5-5% for the year ending Jan. 30, 2015, which translates to sales of $55.82 billion-$56.09 billion. It had previously forecast sales growth of 4.5%.

Analysts on average were expecting a full-year profit of $2.63 per share and sales of $55.78 billion, according to Thomson Reuters.

The company is making progress in expansion of its omni-channel, SG&A (cost) cuts, and closing unproductive stores, but benefits are yet not visible as they remain masked by structural industry challenges, which keeps us neutral on the story," Janney Capital Markets said in a note.

Lowe's also raised its same-store sales growth forecast to 3.5-4% from 3.5%.

Source: Lowe’s, Reuters

Home Depot Exceeds Q3 Profit and Revenue Expectations

Home Depot Inc. reported a better-than-expected quarterly profit on Tuesday as an improving job market encouraged Americans to spend more on renovations.

The company reaffirmed its 2014 sales growth forecast of about 4.8% and profit forecast of $4.54 per share but said that it could not account for all possible losses from a massive data breach it revealed in September that affected 56 million debit and credit cards. For now, the company is putting those costs at $34-million as it pertains to its guidance for 2014.

The company said it may face other breach-related costs, including legal action that could have a material impact on results for the fourth quarter and future periods.

The retailer is facing at least 44 civil lawsuits related to the breach in the United States and Canada.

The company's shares were down 0.4% at $97.66 premarket.

Home Depot reported on Sept. 18 that hackers stole details on about 56 million payment cards in the attack and said earlier this month that about 53 million email addresses were also stolen in the data breach.

U.S. homebuilder sentiment hit new records in the August to October period as a firming job market unleashed pent-up demand, according to the National Association of Home Builders.

Home Depot's net income rose 14% to $1.54 billion, or $1.15 per share, in the third quarter ended Nov. 2, from $1.35 billion, or 95 cents per share, a year earlier.

Same-store sales rose 5.2%, beating the average analyst estimate of 5%, according to research firm Consensus Metrix.

Same-store sales increased 5.8% in the U.S., where Home Depot has more than 85% of its stores.

Net sales rose 5.4% to $20.52 billion from $19.47 billion, also beating the $20.42 billion in revenue that analysts had expected.

Analysts on an average had expected earnings of $1.13 per share on revenue of $20.47 billion, according to Thomson Reuters.

Up to Monday's close, the company's shares had risen 6.5% since it revealed the data breach.

Source: Reuters, The Associated Press

Sears Canada Loss More Than Doubles in Q3, While Sales Fall 10%

Sears Canada Inc. reported on Tuesday that the company had a $118.7 million net loss in its fiscal third quarter, more than double the national retailer’s comparable loss last year, as same-store sales and total revenue dropped and the bottom line felt a bigger impact from income taxes and asset write-downs.

The loss for the 3 months ended Nov. 1 amounted to $1.16 per share, compared with 2013 third-quarter net loss of $48.8 million or 48 cents per share.

On an adjusted basis, Sears Canada had a $19.4 million loss in this year’s third quarter compared with $7.3 million of earnings before interest, taxes, depreciation and amortization (EBITDA).

Sears Canada said its revenue for the 13-weeks ended Nov. 1 dropped to $834.5 million from $982.3 million, partly as a result of store closures last year. Same-store sales also decreased by 9.5%.

The third quarter net loss included a $44.4 million pre-tax impairment charge, which was double the $22.6 million recorded in the comparable period last year. The loss also included a $43.7 million income tax expense, which compared with a $16.7 million income tax recovery a year earlier.

One positive note however, was that expenses related to its multi-year “transformation” effort contributed $4 million to this year’s third-quarter loss compared with $20.2 million in the 2013 third quarter.

It’s the first financial report from Sears Canada since the appointment of Ronald Boire as acting chief executive officer. He stepped in after Douglas Campbell announced in September that he would leave the company and return to the U.S. by the end of the year for personal reasons.

Boire said the third-quarter results were disappointing but the Sears Canada management team is focused on building its relationship with consumers by providing “great fashionable product made of high quality at affordable prices.”

“The company has done well at managing expenses year to date and maintaining a strong balance sheet, and we are now working at growing our top line to have our sales match the high level of loyalty and support that Canadians have for the Sears brand,” Boire said in a statement.

Before joining Sears Holdings Corp., where Boire served as chief merchandising officer and president of the Sears and Kmart Formats, he held various retail leadership roles, including as president and CEO of retailer Brookstone Inc. and Toys R Us where he was president of the North American division.

Boire said last week that he hopes to chart a recovery for the Canadian department-store chain, including scaling back on products that don’t sell like they used to.

On Monday, the company said it will end a credit-card issuing partnership with U.S. bank JPMorgan Chase when the current 10-year agreement expires next November.

Sears Canada sold its credit and financial services business to JPMorgan Chase in 2005 for about $2.2-billion. The agreement came with a “long-term marketing and servicing alliance” between the two companies. Under that agreement, JPMorgan Chase will remain the service provider for the Sears Card and Sears MasterCard until Nov. 15, 2015.

Under certain circumstances, the U.S.-based bank could pay Sears Canada up to $174 million as part of the windup.

At one point, more than 60% of sales at Sears Canada department stores were made on Sears credit cards, which was “an incredible number,” according to retail analyst Keith Howlett at Desjardins Capital Markets.

While that proportion is far smaller now, and Sears Canada’s overall sales are declining, Mr. Howlett still thinks the company will find another firm to run its credit card operation.

However, the terms of a new agreement “might be less attractive than they were with JPMorgan,” Mr. Howlett said.

Source: The Canadian Press

Sears Canada In It for the Long-Run, Says New CEO
(Article by Hollie Shaw, The Financial Post)

The new CEO of Sears Canada wants to make it clear: the department store chain is not dead, and rumours about its inevitable demise are baseless.

Ronald Boire was named acting chief executive of the struggling Canadian chain a month ago after Douglas Campbell announced his departure from Sears Canada after a one-year tenure, citing family reasons.

The fourth CEO in three years, Mr. Boire’s move into the top Canadian seat comes at a turbulent time for cash-strapped U.S.-based Sears Holdings, which had just announced it would offer up its stake in Sears Canada to its own shareholders in a rights offering aimed at raising US$380-million.

The deal, completed last week, means that the U.S. retailer is no longer a majority owner of the Canadian operation, but Sears Holdings’ majority owner and CEO, controversial hedge fund owner Edward Lampert, now is, with about 47% of the company’s shares.

“We aren’t going anywhere,” Mr. Boire said in an interview with The Financial Post at the retailer’s head office last Wednesday, but the former head merchant at Sears and Kmart was not surprised by the question. “I think there is some of that [fear] out there, but by and large — and I get letters every day, the good and the bad — the Canadian consumer loves this brand, and loves this company.”

He said he doesn’t believe the average Canadian consumer is worrying about whether Sears Canada’s stores will close, a point underscored by a recent YouTube video the retailer released starring Mike Myers and his brother, a longtime Sears Canada employee.

Still, as Mr. Boire sits in corporate offices above what used to be the seven-floor flagship Sears store at Toronto’s Eaton Centre — now shuttered to pave way for a Nordstrom after one of many lucrative sales of Sears’ top leases back to its landlords — one wonders when or if the cost-cutting will stop.

While the retailer has moved to aggressively cut expenses, reducing costs by 13.3% in the second quarter ended Aug. 2, its sales have fallen for eight straight years to $3.9-billion last year from $4.3-billion in 2012. Sales at stores open for more than a year spiraled 6.8% in the second quarter, when it posted a loss of $21.3 million.

“Prior management did a really good job of getting the cost base under control,” said Mr. Boire. “I think that the big work ahead of us is on the brand, and the products and growing [sales]. Anybody that is doing their job has to look at all the assets all the time, but that is not what I obsess about in the morning. I obsess about the product and the services that we offer customers in store and online.

“That is what is going to transform the company — it is not going to be transformed by the balance sheet. It is going to be transformed by the product and the income statement.”

Click here to read the rest of the article.

Source: The Financial Post

Walmart Canada Reports Gains in Q3; Announces Head Office Cuts

Expanding grocery departments at stores has paid off well for Walmart Canada, boosting performance in the latest quarter.

“I’m especially pleased by the sales and profit improvements this quarter in Canada, both sequentially and over last year. The investments we’ve made to remodel our stores and drive supercentre expansion are resonating with customers,” said Doug McMillon, Wal-Mart Stores Inc. president and chief executive officer, during the firm’s third-quarter report.

Same-store-sales in Canada grew 0.6% and net sales climbed 3.3%, according to David Cheesewright, head of Walmart International.

“Fresh performed particularly well, with double-digit growth due to our increased grocery presence via new and converted stores.” Cheesewright said.

Canada also grew operating income by 3.5%, outpacing sales growth, and was able to lower operating expenses by nine basis points.

Retail analyst Keith Howlett, of Desjardins Capital Markets, pointed out that the quarter marked Walmart Canada’s second consecutive quarter of same store sales growth, following six negative quarters.

The increase was composed of 2.0% growth in basket size and a 1.4% decline in traffic, Howlett pointed out.

In Toronto, the retailer is planning to increase the number of stores offering grab-and-go lockers to 46 from 35, allowing more customers to pick up their online orders at a time and location that is convenient for them.

Wal-Mart Canada Cuts 210 Head Office Jobs

As reported last week by the Globe and Mail, Walmart Canada has indeed announced this week that the company has cut 210 jobs as it moves to streamline its operations in an increasingly crowded retail landscape. The retailer on Tuesday confirmed it made some “organizational changes” to its Mississauga head office and other management structures, resulting in the 210 cuts. In all it has about 1,400 employees at its headquarters.

“As Wal-Mart Canada positions itself competitively for the future, the company is focused on continuous improvement,” it said in a statement.

Wal-Mart said it is a “growth company,” accelerating operations in areas such as food and e-commerce. And it said the retailer, with 95,000 jobs in Canada, has added 2,900 positions this year, mostly at stores.

Wal-Mart Canada has been investing in expanding its grocery and e-commerce businesses even as it battles online shopping giant Amazon.com Inc., which is rapidly boosting its business in this country.

Wal-Mart’s latest cuts follow the company’s decision last spring to shave 750 jobs in a store management restructuring.

The changes come as other big retailers feel a squeeze, including Sears Canada Inc. and Target Corp.’s fledgling Canadian division. Smaller chains, such as Reitmans (Canada) Ltd., Danier and Bikini Village have shut stores as they feel the heat of an ultra-competitive market.

Other retailers are operating under court proceedings, including fashion chain Jacob and home goods specialists Bowrings and Bombay.

Many retailers are under pressure as growth in online sales outpaces increases in physical stores. “The digital revolution is sweeping across all facets of retail,” retail analyst Keith Howlett wrote in a report last month. “To compete in the new era, almost all discretionary retailers need to establish effective omni-channel operations.” He was referring to retailers that operate seamlessly online and in stores, allowing shoppers to purchase at either one.

In Wal-Mart Canada’s management changes last spring, 1,300 of its employees were promoted to more senior roles and about 200 store managers were added.

Source: The Globe and Mail, The Toronto Star

Wal-Mart Reports Higher Than Expected Q3 Profit But Anticipates Competitive Q4

Wal-Mart Stores Inc. reported last Thursday a higher-than-expected profit as same-store sales at its U.S. stores rose for the first time in seven quarters, helped by its small-format 'Neighborhood Market' stores and higher prices.

The world's largest retailer said overall U.S. same-store sales rose 0.5% in the third quarter.

Wal-Mart has been facing sluggish sales in the United States as its core low-income customers struggle with stagnant wage growth and higher taxes. A cut in government food stamp benefits has also reduced their spending power.

Net profit attributable to Wal-Mart fell marginally to $3.71 billion, or $1.15 per share, for the quarter ended Oct. 31, from $3.74 billion, or $1.14 per share, a year earlier.

Total revenue rose to $119 billion from $115.7 billion, beating analysts’ expectations of $118.35 billion.

Same-store sales at its Neighborhood Market stores rose about 5.5%.

Analysts on average were expecting earnings of $1.12 per share on revenue of $118.32 billion, according to Thomson Reuters.

The company also cut the top end of its full-year forecast for earnings from continuing operations to $5.02 per share from $5.15. It raised the lower end by 2 cents to $4.92.

Walmart said its forecast took into account higher health-care costs for its U.S. employees, investments in e-commerce and a highly promotional holiday season.

The retailer’s fourth-quarter profit outlook missed Wall Street expectations because of the expected fierce holiday discounting.

Walmart said that it expects fourth-quarter earnings per share to range between $1.46 and $1.56, which also includes the negative impact of closing underperforming stores in Japan. Analysts had expected $1.57 per share.

Greg Foran, chief executive of Wal-Mart U.S., which accounts for 60% of the company’s revenues, sounded a warning for the year-end.

“We expect this holiday season to be highly competitive,” he said.

He said that entertainment, which makes up a larger percentage of sales in the fourth quarter, was an especially challenging area, given falling prices of games and electronics, and a lack of new products.

Meanwhile, Wal-Mart Stores Inc. has informed managers of its roughly 5,000 stores across the U.S. that they can match prices with Amazon.com Inc. and other online retailers.

Mr. Foran said the directive was meant to formalize a practice already in place in many stores.

“About half of the stores were doing it anyway,” Foran said on a call with media following the reporting of the quarterly results.

Wal-Mart to Extend Black Friday Deals to Full Week

Wal-Mart also announced that it is making Black Friday a weeklong event, shifting away from the chaotic one-day sales that once epitomized the day after Thanksgiving.

The “New Black Friday” will include five days of sales on Walmart.com and in stores, starting at 12:01 a.m. online on Thanksgiving and running through Cyber Monday, the Bentonville, Arkansas-based company said in a statement last week.

“Black Friday has become Black Friday week,” Duncan Mac Naughton, Wal-Mart’s chief merchandising officer, told reporters. “Our customers want to shop when they want to shop so we’re trying to expand the times and product availability with them.”

Wal-Mart is spreading out its promotions to lure shoppers during a holiday season that promises to hold a number of challenges. While analysts have predicted retail sales would gain this month and next, many of those purchases are expected to shift online or be won with discounts that reduce the retailers’ profitability.

Wal-Mart is running waves of in-store sales at 6 p.m. and 8 p.m. on Thanksgiving and again at 6 a.m. on Black Friday, Mac Naughton said. Walmart.com’s deals will start early on Thanksgiving to capture the growing number of shoppers looking for deals before sitting down for turkey.

Retailers including J.C. Penney Co., Staples Inc. and Macy’s Inc. are planning to open earlier than ever on Thanksgiving to lure shoppers. Best Buy Co. joined the parade, saying it would have more than 1,000 stores open from 5 p.m. local time on Thanksgiving, with most remaining open until 1 a.m. on Black Friday. The stores will reopen at 8 a.m. Black Friday.

Target Corp. said earlier last week that it would open at 6 p.m. on Thanksgiving, two hours earlier than in 2013. The retailer offered some deals on its website on Nov. 10 and will roll out more on its mobile-phone application starting Nov. 23. Its stores will have some promotions as early as Nov. 26, the day before Thanksgiving.

Gap Inc. said that more than 800 of its Old Navy stores would open at 4 p.m. on Thanksgiving and remain open until 11 p.m. on Black Friday — a 31-hour stretch.

The race to open earlier on Thanksgiving underscores how Black Friday is becoming a less crucial shopping event amid the rise of online commerce. About 70% of consumers consider Black Friday unimportant because of the prevalence of sales throughout the holiday season, according to a report this month from Accent Marketing Services.

Shoppers also are increasingly turning to the Web and away from brick-and-mortar stores. About 49% of consumers plan to research products and make purchases on Thanksgiving morning this year, up from 31% in 2013, PricewaterhouseCoopers LLP said in its 2014 holiday outlook last month.

“Black Friday is no longer an event for customers who wake up at the crack of dawn to get great deals,” Mac Naughton said. “It’s become a family shopping tradition where everyone shops at some point throughout the weekend.”

Source: Reuters, Bloomberg News, The Toronto Star

Hudson's Bay Takes a Chance on a New Voice to Sell Its Brand
(Article by Susan Krashinsky, The Globe and Mail)

For five years, Bonnie Brooks was the Voice.

During her time as CEO of the Hudson’s Bay Company, Ms. Brooks’ low, smoky voice became intimately associated with the Bay brand. In a series of radio ads, she intoned about fragrances, housewares and designer threads at The Room. Though she was unseen, she helped to build the Bay’s image as she oversaw major changes at the retailer.

President Liz Rodbell made her debut last week in ads for the Bay’s seasonal “one-day sale” campaign. More than 16 million Canadians were expected to hear her American accent on 115 stations across the country. As Ms. Brooks did before her, Ms. Rodbell will tout a different promotion every day until Dec. 23, attempting to lure customers to the stores during the crucial holiday shopping season.

“This is one of our biggest and most important promotions of the year,” said Michael Crotty, executive vice-president and chief marketing officer for Hudson’s Bay and Lord & Taylor. It’s a high-risk time to make a big change to a company’s advertising.

“Bonnie absolutely is well known through the radio, and helped bring a lot of awareness to the brand,” he said. “For Liz, we have a strategy in place over time for introducing her. This is the first big opportunity.”

Relatively few companies use their executives as advertisers. Those that do have to bet that their bigwigs are charming, relatable and poised enough to come across well to consumers.

By making them so visible, however, they also open themselves up to criticism. While some felt Ms. Brooks’ distinctive voice was sexy, occasionally it was the subject of mockery.

“The more you put yourself out in front of the public, the more you open yourself up to opinions,” Ms. Brooks told The Globe in a 2010 interview.

When done well, the strategy puts a human face on the company and can come across as more authentic than an actor who is hired to be a pitchman.

It’s a strategy that stretches back decades. In 1979, U.S. entrepreneur Victor Kiam became famous for Remington razor commercials in which he declared, “I liked it so much, I bought the company.”

Click here to read the rest of the article.

Source: The Globe and Mail

Nordstrom Reports Higher Q3 Sales and Profit; Calgary Store Exceeding Expectations

Sales and profit for Nordstrom rose in the third quarter, a sign that retailers with a more affluent clientele have had greater success navigating tough economic conditions that have hurt some retailers.

Just seven weeks in, the performance of Nordstrom Inc.’s first Canadian store, in the Chinook Centre in Calgary, has “significantly exceeded expectations,” according to company president Blake Nordstrom.

“The warm reception we’ve received from the customers in Calgary is encouraging,” said the executive in an earnings call last Thursday. “We believe we’re going in the right direction.’’

The American retail chain is on track to open a second store in Ottawa (requiring the hiring of 400 local employees) in March, followed by four more in Canada by 2017.

“We really did our homework on Calgary,” Nordstrom’s president of stores, Jamie Nordstrom, told analysts. “I think we started on opening that store about three years ago; we put together a team and really focused on learning that customer. I think that paid off….We’re significantly ahead of plan there and pretty encouraged by the results and first impression we’ve made with that customer.”

The firm said that its sales and profit for the entire chain rose in the third quarter, another sign that retailers with a more affluent clientele have had greater success at navigating through the tough economic climate affecting other major department store chains.

The company reported that sales rose 8.9% in the quarter to $3 billion (U.S.), while profit rose to $142 million from $137 million for the same period last year.

Despite those numbers, Nordstrom lowered its expectations for the year. It predicted that earnings per diluted share would be from $3.70 to $3.75 (U.S.), down from previous estimates of from $3.80 to $3.90.

The change was attributed to the acquisition of Trunk Club, a men’s wear website. The move came as Nordstrom, like many other department stores, is trying to figure out better strategies for targeting male shoppers amid sluggish sales growth. In its earnings announcement, Nordstrom disclosed that it had purchased the site for $357 million.

The company’s earnings per share rose 5.8% to 73 cents for the quarter ending Nov. 1, compared with the third quarter last year.

The third quarter results were a tad brighter than the previous quarter’s, when sales grew 6.2% and the company reported profits that were relatively flat compared with the previous year.

Sales at Nordstrom Rack, the company’s discount chain, increased 15%, although same-store sales increased just 1.7%, which the company said was down from its year-to-date trend.

Nordstrom’s earnings come amid mixed results from retailers across the U.S., which have battled tepid sales and warm weather that has dampened appetites for winter coats and other clothes. Walmart reported that sales grew by 2.9% to $119 billion, while Kohl’s, which also caters to budget-conscious shoppers, reported its sales fell to $4.37 billion from $4.44 billion. Macy’s, which also owns Bloomingdale’s, reported that sales fell 1.3% to $6.2 billion.

Source: The Toronto Star

Economic News

Canadian Home Resales Edge Higher, Strongest October Since 2009 Led by Major Cities

According to statistics released on Monday by the Canadian Real Estate Association (CREA), national home sales activity edged higher on a month-over-month basis in October 2014.

The latest numbers from CREA show, again, that Vancouver, Calgary and Toronto are driving the gains, though they do extend beyond those three hot markets.

"Another month, another familiar tune in the Canadian housing market - very strong activity in Vancouver, Calgary and Toronto, but much more subdued conditions most everywhere else," said senior economist Robert Kavcic of the Bank of Montreal.

The number of home sales processed through the MLS Systems of Canadian real estate Boards and Associations edged up 0.7% in October 2014 compared to September.

This marks the sixth consecutive month of stronger resale housing activity compared to a quiet start to the year, and the strongest activity for the month of October since 2009.

Meanwhile, actual (not seasonally adjusted) sales in October stood 7.0% above levels reported in the same month last year. October sales were up from year-ago levels in about 70% of all local markets, led by Greater Vancouver and the Fraser Valley, Victoria, Calgary, and Greater Toronto. Combined sales in these five markets account for almost 40% of national sales activity, and nearly 60% of the year-over-year increase in national sales this month.

Actual (not seasonally adjusted) sales activity for the year-to-date in October was 5.2% above levels in the first 10 months of 2013 and slightly above (+2.5%) the 10-year average for the same period.

“Low interest rates continued to support sales in some of Canada’s more active and expensive urban housing markets and factored into the monthly increase for national sales,” said CREA president Beth Crosbie.

Canada’s housing market is, of course, a series of markets, with wide regional differences.

The Bank of Canada has said, for example, that eastern Canadian markets are showing signs of a soft landing, while the provinces of Alberta, Ontario and British Columbia continue to power ahead.

“While the strength of national sales activity is far from being a Canada-wide phenomenon, it extends beyond Vancouver, Calgary and Toronto,” said Gregory Klump, CREA’s chief economist. “Sales in a number of B.C. markets have started to recover from weaker demand over the past couple of years. They have also been improving across much of Alberta, where interprovincial migration and international immigration are reaching new heights.”

The number of newly listed homes rose 0.8% in October compared to September. While new supply was down in just over half of all local markets, outsized gains in Greater Vancouver, Calgary, Edmonton, and Greater Toronto boosted the national figure.

The national sales-to-new listings ratio was 55.7% in October. With sales and new listings having once again moved in tandem, the sales-to-new listings ratio held steady for the third consecutive month.

There were 5.8 months of inventory nationally at the end of October 2014. It has held to a narrow range between 5.8 and 6.0 months since May of this year. As with the sales-to-new listings ratio, the number of months of inventory remains well within balanced market territory while pointing to a national market that has become tighter since the beginning of the year, when sales got off to a slow start.

The Aggregate Composite MLS HPI rose by 5.51% on a year-over-year basis in October. Price gains have held steady between five and five-and-a-half per cent since the beginning of the year.

Year-over-year price growth accelerated for two-storey single family homes, townhouse/row units, and apartment units in October. By contrast, price momentum slowed further for one-storey single family homes.

Two-storey single family homes continue to post the biggest year-over-year price gains (+6.94%), followed closely by townhouse/row units (+5.83%) and one-storey single family homes (+4.75%). Price growth for apartment units remains comparatively more modest (+3.51%).

Price growth varied among housing markets tracked by the index. As in recent months, Calgary (+9.47%), Greater Toronto (+8.30%), and Greater Vancouver (+6.03%) continued to post the biggest gains.

Prices were up between one and 2.5% on a year-over-year basis in the Fraser Valley, Victoria, and Vancouver Island, flat in Saskatoon, Ottawa, Greater Montreal, and Greater Moncton, and down 3.4% in Regina.

The MLS Home Price Index (MLS HPI) provides a better gauge of price trends than is possible using averages because it is not affected by changes in the mix of sales activity the way that average price is.

The actual (not seasonally adjusted) national average price for homes sold in October 2014 was $419,699, up 7.1% from the same month last year.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets. Excluding these two markets from the calculation, the average price is a relatively more modest $330,596 and the year-over-year increase shrinks to 5.4%.

It's still largely a "three-city show," said BMO's Mr. Kavcic.

"While price momentum in Calgary might finally be slowing, Vancouver and Toronto continue to strengthen," he said.

Here's what he thinks of the various markets:

In Vancouver, where the MLS price rose 6% from a year earlier, the market "has tightened considerably in the past year, with the sales-to-new listings ratio hitting 57.5% in October, up from 49.6 % a year ago."

In Calgary, prices surged 9.5%, which is a bit softer than earlier months. "Recent weakness in oil prices could suggest that we've seen the highs for home price growth in this city for awhile."

In Toronto, prices rose 8.3% from last October, marking the fastest pace since the fall of 2011. And here's something to note: "While the highly scrutinized condo market is up 4.5% year over year, detached homes are driving the gains, up more than twice as fast (9.3%) amid strong demand from young families, but very little supply."

All points east of Toronto: "Fully seven of 10 reporting regions are seeing average prices below year-ago levels. Demographics remain very challenging for housing markets in most cities."

So what comes next?

"The Canadian housing market received a second wind following the 45-basis-point decline in interest rates at the start of this year,"
said TD Bank economist Diana Petramala.

"However, the impact is expected to fade in the coming months as pent-up demand eases. Interest rate declines of this magnitude have historically boosted sales for up to six months and October was that mark. Furthermore, affordability is likely to deteriorate as home prices are still growing at a faster pace than incomes. We continue to believe a moderation in housing activity is in the cards for the Canadian economy, but it likely won't happen until interest rates start edging higher at the end of next year."

Source: CREA, The Globe and Mail

Nearly 9 in 10 Canadians Shopping North of the Border This Holiday Season

Canadians are taking the classic carol "I'll Be Home for Christmas" to a whole new level this season.

According to the latest consumer trends survey from digital offers website RetailMeNot.ca, 87% of Canadians will shop for most of their holiday gifts in-store at Canadian retailers, and 21% will shop for most gifts online with Canadian e-tailers this holiday season.

A RetailMeNot.ca survey released last week showed that 44% per cent of shoppers indicated that they do less holiday shopping in the U.S. now that Black Friday and Cyber Monday are in Canada. “Unfortunately, many Canadians don't know how to take full advantage of pre-holiday savings," says Angela Self, co-founder of Smart Cookies, the daily guide to living a sweet life debt-free. “Only 29% of Canadians are planning to shop online during Cyber Monday, which is much lower than our savvy neighbours to the south, where 47% of Americans plan on snagging sales on Cyber Monday."

Additionally, while 57% of Canadians surveyed see Black Friday as an opportunity to get great deals before the holidays, only 13% plan to actually shop on Black Friday and Cyber Monday this holiday season.

Although more than half (54%) of Canadians polled believe everything from toys and clothes to jingle bells are marked up heading into the holidays, this does not damper the joyful spending spirit, as nearly one-fifth (19%) of Canadians plan to spend more than $1,000 on gifts. The average Canadian surveyed plans to spend $588 this holiday shopping season; British Columbia residents will be spending the biggest bucks, totaling $624 on average.

When it comes to the holidays, Canadians are true to their good-hearted reputation, with 89% of respondents purchasing gifts for family and friends because they enjoy the act of giving, not because they feel obligated to do so. However, the latest RetailMeNot.ca survey also revealed that Canadians are not taking the necessary precautions to avoid a holiday spending hangover. Nearly half (48%) of those Canadians surveyed do not know where to find the best Black Friday deals.

Other survey findings include:

• Guilty guys: 31% of Canadian men purchase gifts because they feel pressure to do so.
• Selfless giving: 84% of Canadians purchase gifts regardless of whether or not they will receive one in return.
• Quality over quantity: Nearly half (48%) of Alberta residents said they buy as few gifts as possible.
• It's not me, it's you: 56% of Canadian men find Canadian women more difficult to shop for, while 58% of women think men are more difficult to buy for.
• North-South divide: Food and entertainment gifts top the list for Canadians (63%) this year, while Americans prefer clothes (67%).

RetailMeNot.ca regularly conducts consumer behaviour surveys to examine the buying habits of Canadians.

Source: Canada NewsWire

Latest U.S. Economic News

U.S. Housing Starts Slip, But Permits Jump
U.S. housing starts unexpectedly fell in October, but a jump in permits to near a 6-1/2-year high suggested the housing market was steadily regaining strength.

Groundbreaking slipped 2.8% to a seasonally adjusted annual 1.009 million-unit pace, the Commerce Department said on Wednesday. September’s starts were revised up to a 1.038 million-unit rate.

Economists polled by Reuters had forecast starts rising to a 1.025-million unit rate from September’s previously reported 1.017-million unit pace.

The volatile multi-family homes segment accounted for the decline in housing starts last month. Starts for single-family homes, the largest part of the market, rose for a second straight month to their highest level in nearly a year, a good omen for housing.

While residential construction, homebuilder sentiment and sales have been trending higher in recent months, sluggish wage growth and stringent lending practices by financial institutions continue to constrain activity.

Still, home building is expected to contribute to U.S. GDP in the fourth quarter after being neutral in the July-September period.

Starts for single-family homes increased 4.2% last month to a 696,000-unit pace, the highest since November of last year. Multi-family homes starts fell 15.4% to a 313,000-unit rate in October.

Last month, permits jumped 4.8% to a 1.080 million-unit pace, the highest since June 2008. It was the second straight month of gains in permits, which lead starts.

Permits for single-family homes rose 1.4% to a 640,000-unit pace. Permits for multi-family housing surged 10% to a 440,000-unit pace.

Source: Reuters

U.S. Retail Sales Expand at Healthy Rate in October
U.S. retailers reported strong sales in October, a sign American consumers were spending with more gusto and could help keep the economy growing at a brisk pace.

U.S. retail sales rose a higher-than-expected 0.5% last month when stripping out volatile elements like gasoline, autos, building materials and food services, according to the Commerce Department data released last Friday.

The increase was the largest since August and supports the view that U.S. consumers are ready to play a bigger role in supporting the recent acceleration in U.S. economic growth.

“[The] numbers bode well for the crucial holiday shopping season,” said Paul Diggle, an economist at Capital Economics in London.

Analysts expect the U.S. economy will expand about 3% next year, which would be faster than the average growth rates clocked since the country emerged from the 2007-09 recession.

Retail sales account for about one-third of consumer spending, which in turn accounts for most economic activity, and overall sales rose 0.3%. The overall number would have been larger but for a 1.5% drop in receipts at gasoline retailers.

But even that is a good sign for the U.S. economy.

“Consumers are spending what they are saving at the gas pump,” said Camilla Sutton, a currency strategist at Scotiabank in Toronto.

The Labor Department said import prices fell 1.3% in September, the biggest decline in more than two years as the cost of petroleum products fell and a strong dollar made it cheaper for Americans to buy goods from abroad.

While the U.S. economy has accelerated in recent months, the global economy has appeared to slow, including in China, and the price of oil has weakened significantly.

The U.S. dollar has gained more than 10% against the currencies of U.S. trading partners since June on expectations a stronger U.S. economy will lead the Federal Reserve to raise interest rates, and Friday’s data led it to rise a little more against the yen and the euro. U.S. Treasury yields also rose.

The retail sales report showed sales at clothing retailers increased 0.5% in October and receipts at sporting goods shops gained 1.2%.

Receipts at auto dealers and parts stores climbed 0.5%.

Source: Reuters

U.S. Consumer Sentiment at More Than 7-Year High
U.S. consumer sentiment rose in November to a more than seven-year high as falling unemployment and lower gasoline prices boosted views on both current conditions and expectations, a survey released last Friday showed.

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment for this month came in at 89.4, the highest reading since July 2007, above not only the median forecast of 87.5 among 61 economists polled by Reuters, but also the highest estimate of 89.0.

The survey’s barometer of current economic conditions rose to 103.0 from 98.3 and above the 98.8 forecast.

The survey’s gauge of consumer expectations rose to 80.6 from 79.6, beating the 80.2 forecast.

Not everything was rosy, however, as expectations for income gains remained low despite rising and came in below inflation forecasts.

“Most households still expect a declining standard of living,” survey director Richard Curtin said in a statement.

The survey’s one-year inflation expectation fell to 2.6% from 2.9%, while its five-year inflation outlook was also at 2.6%, the second-lowest reading in the survey’s history after 2.5% recorded in September 2002.

Source: Reuters

Upcoming CHHMA Events

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Tuesday, December 9, 2014
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Tuesday, May 5, 2015
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Tuesday, May 26, 2015
Angus Glen Golf Club, Markham, Ontario

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