Home furnishings giant submits plans for new location
Ikea is looking to expand in presence in North Carolina.
The retailer said it is submitting plans to the Town of Cary, N.C., for a potential Raleigh-area store, which would be the second Ikea location in the state. The proposed 15-acre site would be located adjacent to the existing Cary Towne Center, approximately 12 miles west of downtown Raleigh and two miles from downtown Cary.
This submittal of a development plan allows Cary to formally consider an Ikea-specific use at the location and begin the town council’s review of the proposal for an approximately 359,000-sq.-ft. store and a two-level parking structure with 1,000 parking spaces. If approved, Ikea Cary store could open as early as summer 2020.
“We are excited about the opportunity for a potential second North Carolina Ikea store at this location in Cary,” said Ikea U.S. president Lars Petersson. “A store in the Raleigh area would complement our strong presence established in Charlotte and eventually provide customers in Central and Eastern North Carolina an Ikea store closer to them.”
After town approval, Ikea will evaluate potential on-site power generation to complement the current U.S. renewable energy presence at nearly 90% of its U.S. locations. Other U.S. sustainable efforts include: recycling waste material; building with energy-efficient HVAC and lighting systems, recycled construction materials, warehouse skylights, and water-conserving restrooms; and operationally, eliminating plastic bags from the check-out process, and selling only LED lighting. Ikea U.S. has installed electric vehicle charging stations at 16 locations and solar arrays at 90% of its locations in addition to owning two wind farms in the U.S.
Analysis: Walmart is winning market share across many categories
Although Walmart is an old-school retailer, it is not afraid to learn new tricks and to shift its thinking. This youthful and innovative approach has helped it deliver another solid set of results in a highly competitive market.
The overall net revenue gain of 1.4% may not sound stellar, but for a company of the size of Walmart, this is a significant uplift in dollar terms. At Walmart U.S., the 2.9% increase in net sales equates to an additional $2.1 billion taken over the first quarter — an impressive achievement given 2016 included an extra day of trading from the leap year. From an already high base, Walmart is now winning market share across many categories.
There is some benefit to the numbers from Walmart's recent acquisitions, but with underlying sales also rising at a reasonable clip, these are the icing on the cake rather than the sole reason for Walmart's growth. Within Walmart U.S., comparable sales increased by 1.4% – an encouraging outcome given much of the increase was down to strong uplifts in traffic. In our view, Walmart's investments in price, its focus on service in stores, and its omnichannel push are all paying dividends. The delay in tax refunds, which resulted in lower sales of higher ticket merchandise over the early part of the quarter, put a small dent in growth, but not by enough to cause serious concern.
Looking in more detail at the various strands of Walmart's initiatives, a sharper focus on price is cutting through — especially on grocery. From our data, Walmart is winning back some — but by no means all — customers from dollar stores. It is also picking up some customers from mainstream grocers. The response to Walmart flexing its price muscles has been good, and we expect further small gains over the rest of this year. A more disciplined focus on low prices is also important as Aldi, and now Lidl, expand into the market.
That said, we believe the threat of the two chains – especially to players like Walmart — is overstated. There are aspects of the deep discounters such as limited range, smaller stores, and a relative lack of national brands — that is off-putting for many U.S. consumers. Our data also show that, in some markets, the price differences between the discounters and others are wildly exaggerated. In our view, this means Walmart is unlikely to need to respond much more aggressively than it already has.
While stores are working, Walmart's e-commerce business is in the ascendancy. Gross merchandise value for the online businesses rose by 69% over the prior year. Although this includes the contribution from the acquired businesses, it nonetheless shows that Walmart is growing its digital market share at a significant pace. Positive changes to free shipping requirements and the addition of millions of more products to the online store have both resulted in steady uplifts in customer numbers.
We are particularly pleased that Walmart is using discounting to encourage online shoppers to use more economical store pickup rather than delivery. We see the effective use of its real estate assets as one of Walmart's major strengths over Amazon.
All these initiatives necessitate higher levels of investment and, indeed, within the U.S. business operating expenses as a percentage of net sales increased by 14 basis points over the prior year. However, we are very encouraged that this was offset by strong sales, resulting in the first increase in U.S. operating income for three years.
While the home market continues to power ahead, Walmart's international operations remain patchy. Overall performance is sound, but weaknesses persist in the U.K. where Asda continues to lose ground. There is a sense that Walmart is getting to grips with some of the issues, but we believe it will be some time before all parts of international make a solid contribution.
Overall, this is an encouraging start to the year for Walmart. In our view, the business has not only the strength to hold its own, but to take on the likes of Amazon and new value players. This is one U.S. retailer that is ahead of the curve in responding to the evolving landscape.
Ace gains on income with minimal movement on revenue
Ace Hardware reported a slight increase in revenue during the first quarter, as well as more substantial progress in net income.
Revenue came in at $1.2 billion, up 0.1% from the first quarter of 2016. Net income of $28.3 million was up 8.4% over the year.
Same-store sales were down 0.2% due to decreased customer traffic, reported by the approximately 3,000 Ace retailers who share daily retail sales data.
John Venhuizen, president and CEO of Ace, acknowledged the somewhat lackluster sales performance.
“I’m delighted to report an 8.4% increase in net income, a double digit jump in accrued patronage dividends for our owners and surpassing a global store count of 5,000 stores in the quarter," said Venhuizen. “While revenue improved, our increase fell short of our expectations. And despite the obvious temptation, I’ll resist pinning the blame on the less than favorable weather.”
Retail revenues from Ace Retail Holdings were $52.0 million in the first quarter of 2017, however, up 2.8% from the first quarter of 2016 thanks to the addition of new retail stores. However, same-store sales decreased 3.0%.
The co-op also added 16 new domestic stores and cancelled 21 for a net decrease of 5 stores during the quarter — a total domestic store count of 4,358. This was still up 56 stores from the first quarter of 2016.