NRF forecasts 4.1% rise in retail sales for 2014; online to grow 9% to 12%
Washington, D.C. — Retail industry sales (which exclude automobiles, gas stations, and restaurants) will increase 4.1% in 2014, up from the preliminary 3.7% growth seen in 2013, according to the National Retail Federation. The association’s 2014 economic forecast, released Thursday, calls for online sales to grow between 9% and 12%.
A number of factors contributed to NRF’s 2014 economic forecast, including:
- Economic growth is expected to be above its long-term historical average. Early estimates for growth in the economy as measured by real GDP could fall between 2.6% and 3%, a noticeable improvement from the estimated 1.9% rate for 2013, and the fastest pace in the past three years.
- The labor market is expected to continue its modest recovery averaging approximately 185,000 jobs per month, helping decrease unemployment to near 6.5% or lower by the end of 2014.
- Inflation as measured by the CPI is predicted to inch higher to as much as 1.7% in 2014.
- The housing sector is expected to continue to improve in 2014, and stronger household and business confidence should spur more consumer spending overall.
“The economy remains susceptible to buffets as we are already witnessing in the New Year, thanks to harsh winter weather, domestic and global financial issues,” said NRF chief economist Jack Kleinhenz. “While we are careful not to ignore the challenges, we are optimistic and hopeful that future disruptions will be limited, allowing employment and business investment to grow all the while giving retailers and their customers the confidence in the economy they need.”
Scotts improves in first quarter
Despite inclement weather this winter, Scotts Miracle-Gro’s financial results for the first quarter ended Dec. 28 showed signs of improvement.
Net sales for the quarter totaled $196.4 million, down 5% from $205.8 million during the same quarter a year ago. The company pointed to the timing of pre-season shipments to retailers for the decline.
Sales in the Global Consumer segment were $145.3 million during the quarter, compared with $153.2 million a year ago. Scotts LawnService sales were up 3% to $46.2 million in the first quarter, compared with $44.8 million in the year-ago period.
"While most of North America is gripped by winter, our sales, marketing and supply chain teams are working diligently to ensure a strong start to the lawn and garden season," said Jim Hagedorn, chairman and CEO. "In markets where gardening activity is occurring, we see solid levels of consumer participation, which gives us continued confidence in our plans for the year."
The operating loss for the Global Consumer segment was $67.3 million during the first quarter, compared with a loss of $68.7 million last year. Scotts LawnService reported operating income of $2.6 million, compared with a loss of $0.9 million during the same quarter a year ago.
The company expects company-wide net sales to increase by 2% to 3% in fiscal 2014.
Retailers in the hot seat
As if the retail industry weren’t challenging enough, those operating stores in California are facing a growing number of lawsuits related to an operational consideration known as suitable seating.
California retailers have faced a growing number of these suitable seating cases in which employees allege that they were denied suitable seating at work in violation of California Industrial Welfare Commission Wage Order 7-2001. The Wage Order requires that “[a]ll working employees” be “provided with suitable seats when the nature of the work reasonably permits the use of seats.” The order also says that when employees are “not engaged in the active duties of their employment” and “the nature of the work requires standing,” employers must provide an “adequate number of suitable seats… placed in reasonable proximity to the work area” and that the employees be permitted to use those seats when it does not interfere with the performance of their work duties.
The main controversy in these cases is whether the “nature of the work” “reasonably permits the use of seats” or instead “requires standing.” The answer to this question is critical, as employers’ obligations depend on it.
In bringing these lawsuits, employees have defined the “nature of the work” by cherry-picking a few specific job duties that are performable while seated, even if they are not representative of their overall duties.
Retailers have had some success in defending against these claims by arguing that when the “nature of the work” requires standing, seats must only be provided when employees are on breaks or “not engaging in their primary duties.” In defining the “nature of the work,” employers have looked at the employees’ job duties as a whole, as well as the employer’s reasonable expectations of their employees’ jobs.
Employers won a major victory in a San Francisco Court case involving Hilton Hotels. The court held that seating only needed to be provided to front desk guest service agents at the hotel in rest areas or when the agents were not actively engaged in their duties requiring standing.
Likewise, in a case involving CVS Pharmacy, the court dismissed a seating claim brought by CVS cashiers, finding that since “the nature of the work,” as a whole, required standing, seating only needed to be provided in rest areas (break room).
In a case involving Kmart, the court ruled that the Kmart cashiers had failed to prove that the “nature of the work” permitted seating, but did not resolve the issue of whether “lean-stools” might be required in some situations.
More recently, another court refused to dismiss a seating class action brought by sales associates. The court found that a single work duty that permits sitting might require an employer to provide seating in the work area for the entire shift. Earlier this year, the California Supreme Court was requested by the federal court of appeals to decide the proper interpretation of the seating laws and to resolve the conflicts in the courts’ interpretations described above. It is likely the state Supreme Court will agree to hear the case because the issue affects so many businesses in the state.
The best advice for retailers is, at a minimum, to provide an adequate number of seats to employees in break rooms or other areas where employees rest when not actively engaging in their duties. The employer’s expectations that standing is a required job duty should be made clear to employees, preferably in their job descriptions or in other written documents given to employees. In light of the uncertain state of the law, prudent retailers could also consider providing stools at the cash registers for employees to use, should they wish to do so.
Bob Zaletel is a shareholder at Littler, the world’s largest employment and labor law practice representing management, in its San Francisco office. He handles all phases of litigation in cases before federal, state and local courts and administrative agencies at the trial and appellate levels.
Maureen Rodgers is an associate at Littler and represents and counsels employers in a broad range of employment and labor law matters arising under federal and state laws.