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Capital Business Credit: Holiday season will experience moderate growth

BY Marianne Wilson

New York — Despite a number of economic factors that have shaken consumer confidence lately, including the government shutdown and continued high unemployment rates, retailers and manufacturers believe holiday sales will rise slightly compared to last year, according to Capital Business Credit, a non-bank lender that services the retail sector.

According to the quarterly Global Retail Manufacturers and Importers Survey, 77% of importers of retail goods believe that the winter/holiday season will be the same or slightly stronger than last year, up 3% from their predictions in 2012.

Of those who believe that it will be stronger, majority third of respondents estimate that sales will increase by approximately 3% when compared to last year. Nearly half of respondents (48.9%) cited that their retail customers ordered more this holiday season than last year.

Only 26% of manufactures indicated that they were negatively affected by the government shutdown, citing that some orders were put on hold. While only a minority was impacted by the shutdown, 50% still worry that the shutdown may affect holiday retail sales as it shook consumer confidence.

“An uptick in orders does not necessarily mean that we are in for a robust holiday season, as consumers remain reticent to open their wallets due to macro-economic factors,” said Andrew Tananbaum, executive chairman, CBC. “While the season may not be gangbusters, it won’t be negative either. In our opinion, holiday sales will moderately increase year-over-year.”

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Costco profits in first quarter 2014

BY CSA STAFF

Increased traffic at Costco helped fueled sales in the first quarter of 2014.

The company reported sales of $24.47 billion for the quarter, an increase from the $23.20 billion reported in first quarter 2013.

The company also produced a profit of $425 million, compared with the $416 profit last year.

Same-store sales for the quarter increased by 3%, including 3% in the United States and 1% in stores abroad.

While profits increased over the last quarter, the company’s earnings per share of 96 cents fell short of the $1.03 expected by analysts.

Guggenheim Securities analyst John Heinbockel gave Costco’s stock a "neutral" rating, noting that the results, while "disappointing," were not due to the health of the company itself, but rather factors such as a stronger U.S. dollar, decline in gross profits on gas and an unusual step-up in stock compensation expense. Additionally, the chain’s Canadian business was described as "robust," with an 8% increase in same-store sales.

Costco’s stock was at $118.35 per share on the NASDAQ in late-afternoon trading Wednesday, after opening at $118.10 and hitting a high of $120.30.

Costco’s quarterly results follow reports of increased traffic but less spending in November. Although the company didn’t comment specifically on Thanksgiving weekend sales during a recorded call to recap its monthly results, the company confirmed that traffic increased a little more than 4% while average transaction sizes were down slightly. Costco and its direct competitors Sam’s Club and BJ’s Wholesale Club were closed on Thanksgiving Day.

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Ulta Beauty delivers in third quarter

BY CSA STAFF

Ulta Beauty posted strong double-digit gains during its third quarter thanks in part to strength in sales of prestige cosmetics and skin care and strong online sales.

Sales for the quarter ended Oct. 27 rose 22.4% to $618.8 million. Same-store sales rose 6.8%, including the impact of e-commerce sales.

Net income increased 19.1% to $45.4 million compared with $38.2 million. Income per diluted share rose 18.6% to 70 cents per share, including 2 cents per diluted share related to a severance charge.

During the quarter, e-commerce sales grew 74.4%, representing 170 basis points of the total company same-store sales increase.

“[The third quarter] was an excellent quarter for Ulta.com, demonstrating continued momentum on the top line despite tough prior year comparisons and a major site relaunch,” said Mary Dillon, CEO, during the company’s recent quarterly conference call with analysts. “Our limited-time Beauty Breaks!, our sample beauty bags and CRM program all contributed to better-than-expected sales growth.”

The new platform was rolled out over a period of several weeks and was revamped to enhance visibility to its product assortment, highlighting bestsellers and featuring products across all categories. Search capabilities were improved and brands were recognized for greater visibility.

Ulta noted that it is the one of the first retailers to feature Responsive Web Design, a new technology that enables a consistent browsing experience regardless of the device being used — a laptop, smartphone or tablet.

Also helping to fuel sales was prestige cosmetics and skin care. Dillon noted that prestige cosmetics and skin care continue to be the strongest categories, while it experienced some softness in nail and fragrance — in line with industry-wide trends.

Dillon, who joined the company in July, said that looking ahead the company will need to find new ways to grow.

“I believe there are significant opportunities ahead for Ulta in areas such as driving higher brand awareness; developing smaller and urban store formats; increasing our digital presence, both online and in store; and growing our capabilities to enable initiatives like localization of assortment,” Dillon told analysts.

As for 2014, the company plans to embark on a number of smaller in-store projects like additional prestige boutiques and reflowing the mass cosmetics program in some of its older stores to make the shopping experience in that category more consistent across the chain.

Another area of focus: its loyalty program. Dillon said the company continues to see increases in retention in its loyalty customer base. There are currently 12.5 million active loyalty members who have shopped within the past 12 months, up 18% compared with last year.

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