FINANCE

Deloitte Consumer Spending Index retreats

BY Marianne Wilson

New York — After nearly a year of steady gains, the Deloitte Consumer Spending Index (Index) fell in November due to a slowdown in the rise of new home prices and an accelerating decline in real wages. The Index tracks consumer cash flow as an indicator of future consumer spending.

“After a period characterized by improving housing data and waning energy prices this fall, the underlying fundamentals for consumer spending are beginning to deteriorate,” said Carl Steidtmann, Deloitte’s chief economist and author of the monthly Index. “However, the impact may not be felt until the beginning of 2013. While the fiscal cliff debate continues, it is unlikely to significantly weigh down holiday season sales. However, tax increases early in the year are likely to take an immediate toll on consumer spending.”

The Index, which comprises four components — tax burden, initial unemployment claims, real wages and real home prices — fell sharply this month to 3.89 from a reading of 4.14 the previous month. The Index reflects data through October but does not yet reflect the complete impact of Hurricane Sandy.

Deloitte’s analysis of factors influencing consumer spending further indicate:

  • Significant downward revisions in both new home sales and income data were published this month. The new home sales data shows sales began to flatten out in February. The increased building activity in recent months may increase the market inventory rather than reflect homes sold, and may result in a pullback in building next year. The inventory issue is now putting downward pressure on home prices.
  • Incomes were revised down sharply for the past six months. Real disposable income in October is $20 billion below May levels. Like housing, incomes had a nice run-up in the early months of the year but now appear to have stagnated since the end of spring.
  • October consumer spending data shows a 0.3% decline. Further declines may emerge in the November data as a result of Hurricane Sandy’s impact. With 70% of GDP coming from consumer spending, there is a risk that fourth-quarter GDP could be negative. A negative outcome to the fiscal cliff debate will likely contribute to a weak first-quarter GDP number as well.

“Retailers are positioned to finish the holiday season on a high note, but the outlook for the New Year puts added pressure on them to outperform ahead of a possible slowdown in January,” said Alison Paul, vice chairman, Deloitte LLP and retail & distribution sector leader. “Their focus should now be on engagement, keeping the customer’s attention and driving repeat trips via online, mobile and store channels. Using analytics capabilities, retailers can stay sharp on promotions and markdowns to move inventory and keep levels low heading into the beginning of the year. That data should also help them determine when to dial-up staffing levels to match traffic peaks and put forward their best service to assist customers and increase holiday sales.”

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FINANCE

CVS Caremark optimistic going into 2013

BY Marianne Wilson

Woonsocket, R.I. — CVS Caremark executives expressed optimism going into 2013 and outlined its strategic growth framework during its annual Analyst Day held on Thursday in New York City.

“CVS Caremark is very well-positioned for continued growth. The rapidly changing environment creates significant challenges across the healthcare universe, but this also creates significant opportunities. We are uniquely positioned to address these opportunities through pharmacy innovation,” Larry Merlo, president and CEO of CVS Caremark, told analysts.

The retailer was equally optimistic with regards to its retail operations.

“Our retail business is really firing on all cylinders,” Mark Cosby, EVP and president of CVS/Pharmacy, told analysts. “We are continuing to grow market share, and we are significantly outpacing our competition in both the front store and in the pharmacy.”

Touching upon its core growth opportunities, Cosby discussed the company’s plan to drive pharmacy growth, differentiating the front store and growing its store base.

The retailer said is working to expand its myCVS store clustering initiative, which focuses on store designs that match the needs of customers within each type of trade area.

“We have defined eight unique clusters to match our customer base, and we are organizing to capitalize on this cluster opportunity,” Cosby said. He added that the company is designing a new store prototype that will be fully oriented toward each of the eight clusters.

The effort kicked off in 2011 with its urban cluster, and now the company has set its sights on a suburban-focused pilot in 2013. This will feature an enhanced pharmacy and an elevated health and beauty assortment.

The suburban cluster will be rolled out through remodels and as part of its new store program. The company will also test new clusters that will be rolled out starting in 2014.

“The myCVS clustering effort will be a powerful growth driver for us both in the front store and in the pharmacy,” Cosby said.

The company also announced it would accelerate MinuteClinic’s growth plan and now plans to operate at least 1,500 clinics by 2017 and will continue to enter new markets, including Hawaii and Louisiana next year.

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OPERATIONS

ShopperTrak: Retail foot traffic for week ending Dec. 8 up 7.8%

BY Marianne Wilson

Chicago — Shoppers continued their holiday quest during the week ending Dec. 8, according to ShopperTrak. Consumer activity drove a 7.8% increase in foot traffic and 6.5% increase in sales from the previous week.

Consumers, however, were not as active as they were at this time last year, and retail foot traffic decreased 0.7% and sales decreased 1.5% when compared to the same period in 2011.

The lags were not unexpected by ShopperTrak. This holiday season holds an extra full weekend between Thanksgiving and Christmas, allowing shoppers more time to postpone their holiday purchases. Additionally, last week’s unseasonably mild weather across the country hindered sales of cold-weather seasonal merchandise.

While foot traffic and sales may have decreased slightly compared to last year, the week-over-week numbers improved, thanks in part to the onset of Chanukah. Many shoppers spent the week completing their purchases before the holiday began on Saturday, Dec. 8. ShopperTrak expects this pattern to continue with gains in foot traffic and sales leading up to the week of Dec. 16. The retail technology company forecasts that the week before Christmas will generate the largest weekly sales volume of the year.

“Shoppers have twelve days, including two full weekends, to complete their Christmas purchases,” said Bill Martin, ShopperTrak founder. “After this week, stores and malls are going to see business picking up as droves of consumers tick off the final items of their shopping lists.”

The best way for retailers to translate this expected increase in retail foot traffic into more sales is to measure and manage their shopper conversion rates, according to Martin.

“This information will allow them to respond to the holiday shopper’s uneven behavior and secure their bottom lines as the year draws to a close,” he said.

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Mar-20-2013 05:47 am

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