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First Data: Consumer spending grows 4.2% in May

BY Dan Berthiaume

Atlanta — Consumer spending in the United States grew 4.2% year-over-year in May 2014, compared to April’s 4.1% year-over-year growth. According to Spend Trend analysis from First Data Corp., spending growth was driven by May’s warm weather, which specifically spurred spending on travel and home improvement.

Gas station spending growth of 3.6% was higher compared to April’s growth of 3.3% and was another key supporting factor in overall growth as gas prices remained elevated compared to the prior year. Retail spending growth of 1.7% marked a slight uptick compared to April’s growth of 1.3% as warmer weather across most regions, with the exception of the Northeast, supported retail foot traffic. Overall retail spending growth in May marked the strongest growth in seven months, primarily driven by spending at building material & supply dealers (6.7% in May compared to 3.6% in April) and furniture & home furnishings merchants (1.4% in May compared to -0.7% in April).

Average ticket growth of 1.2 % in May gained steam against April’s 0.5% growth, driven by higher year-over-year gas prices, higher food prices and an increase in some leisure-related categories. Retail average ticket growth of 0% was an improvement from April’s negative growth of -1.1% as many retailers returned to full price selling instead of discounting used to boost foot traffic during and after the extended winter.

“A number of factors, including normalized weather, pent-up demand, falling unemployment and rising home prices supported consumers’ willingness to spend in May,” said Krish Mantripragada, senior VP, information and analytics solutions, First Data. “Credit card spending growth continued to be strong and led all other payment types. The surge in spending growth at hotel and travel merchants, building material & home furnishing merchants, where credit is the primary payment tool, was a major driver supported by easing lending standards and payroll growth.”

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European Union tax investigation could affect Starbucks, Apple

BY Dan Berthiaume

Brussels, Belgium — The European Union (E.U.) is investigating lucrative tax breaks individual member countries such as Ireland, the Netherlands and Luxembourg have been giving major global companies including Starbucks and Apple. Media reports indicate the E.U. is focusing on whether certain tax loopholes these countries have provided some corporations qualify as “state aid,” which is prohibited under E.U. bylaws.

Countries do not face fines or legal action if any tax breaks are found to be in violation of E.U. rules, but they could be required to rescind the breaks and make the companies in question pay the additional tax.

Apple has avoided paying billions of dollars in taxes by operating a variety of subsidiaries in the E.U., and Starbucks pays a low corporate tax as a result of moving its European headquarters to the U.K. In a statement, Apple said it has not received any special treatment from Irish authorities in how it conducts business and pays taxes there.

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Sportsman’s Warehouse swings to Q1 loss

BY Dan Berthiaume

Midvale, Utah — Increased selling, general and administrative expenses were a key factor in Sportsman’s Warehouse Holdings Inc. swinging to a net loss of $3.37 million in the first quarter of fiscal 2014, compared to net profit of $4.46 million in the same period a year earlier. The retailer plans to open eight new stores during the fiscal year, including four in the second quarter.

Net sales dropped 3% to $132.4 million from $136.5 million. Same store sales decreased by 18.1%, primarily as a result of the decline in demand for firearms and ammunition.

For the second quarter of fiscal 2014, net income is expected to be in the range of $3.9 million to $4.2 million, while net sales are expected to be in the range of $154 million to $157 million based on opening four new stores and a decrease in same-store sales from the second quarter of fiscal year 2013 in the range of 7-8%.

For fiscal 2014, net income is expected to be in the range of $18.2 million to $20.3 million, while net sales are expected to be in the range of $665 million to $675 million, based on opening eight new stores for the full year and a decrease in same store sales from fiscal year 2013 in the range of 6% to 8%.

"Our first quarter results, which came in better than our expectations, were impacted by the general slowdown in firearm sales against the surge-driven comparison from last year, a dynamic we expect to continue until the second half of this year,” said John Schaefer, president and CEO of Sportsman’s Warehouse.

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