FINANCE

Debit cards most popular option for holiday shopping

BY Marianne Wilson

Despite the potential to earn rewards when shopping with a credit card, most Americans plan to shop with a debit card this holiday season.

That’s according to TD Bank’s “Holiday Retail Report,” which found that 36% Americans will use debit card to pay for holiday purchases, followed by a credit card (34%), check (17%), store-branded credit card (7%) and in-store financing options (4%).

Those who plan to finance all or some of their holiday shopping will do so with a bank-offered credit card (71%), a store credit card (57%) or a store-backed payment plan (39%), TD Bank found. And 96% who financed holiday shopping in the past paid it off within a year, including 33% who paid it off immediately and 24% who paid it off within the first month after making a purchase.

In other survey findings:

• Respondents were most likely to pursue financing for their holiday shopping if doing so offered them significant savings (61%).

• Millennials are more likely than Gen-X to stay loyal to the brands they favor year round during holiday time (45% vs. 21%, respectively). The two most important features when deciding where to shop were variety of products (46%), discounts offered (41%).

• The trends most likely to pique shoppers’ interests are customized coupons (37%), discounts via geotargeting (35%) and enhanced shopping atmospheres (22%).

• Thirty-nine percent of shoppers have purchased an item from social media advertising.

“Our data shows that holiday shoppers have financed responsibly in the past, which has led retailers to offer increasingly innovative financing options that provide consumers with an enticing combination of savings and rewards on their holiday purchases,” said Matt Boss, head of credit cards and unsecured lending at TD Bank. “It’s a win-win from the customer point of view. Rewards programs enhance a customer’s overall experience and increase their likelihood to shop at a retailer again and again, long after the holiday shopping season has ended.”

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Michaels turns in strong Q3

BY Marianne Wilson

Michaels Cos. reported third-quarter income and sales that beat Street expectations.

The arts and crafts retailer reported that its net income increased 5.0% to $83.8 million in the quarter ended Nov.3. Adjusted net income for the third quarter of fiscal 2018 was $79.8 million. Earnings per share came in at $0.50, an increase of 13.6% compared to the year-ago period. Adjusted earnings per share was $0.48, beating estimates of $0.44.

Net sales increased 2.7% to $1.27 billion, better than expected, amid the opening of 19 stores during the quarter. (The sales increase was partially offset by the closure of all 94 full-size Aaron Brothers stores in the first quarter of fiscal 2018.) Same-store sales rose 3.8%.

“We have invested significantly this year to create an easier shopping experience for customers, and we believe these improvements will strengthen our leadership position in the arts & crafts industry and help us deliver our revenue and earnings expectations for the year, said Chuck Rubin, chairman and CEO.

At the end of the third quarter, the company operated 1,256 Michaels stores and 36 Pat Catan’s stores.

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Kroger Q3 profit falls

BY Marianne Wilson

The Kroger Co.’s income fell in the third quarter as it continues to invest in online and offline initiatives to shore up — and transform — its business.

Kroger’s total sales decreased 0.3% to $27.67 billion, just above estimates, amid disruptions as the company continues to revamp stores to allow more shelf space to best-selling products. Excluding fuel, the convenience store business unit divestiture and the merger with Home Chef, total sales increased 1.7% in the quarter over the same period last year. Same-store sales, excluding fuel, rose 1.6%. Digital sales grew over 60%.

Neil Saunders, managing director, GlobalData Retail, commented that, given the unfavorable metrics around online, Kroger needs to counterbalance its digital efforts with growth strategies in other, more profitable parts of the business.

“In our view, online grocery has yet to prove itself as a viable business model,” Saunders explained. “Even in the U.K. – where the market is far more advanced and where the higher population density is more favorable to distribution – online has not been particularly helpful to the bottom line. If anything, it has eroded profits and put margins under severe pressure.” For more analysis, click here.

Net income fell to $317 million, or 39 cents per share, in the quarter ended Nov. 10, from $397 million, or 44 cents per share, in the year-ago period. It reported adjusted earnings of $394 million, or 48 cents per diluted share, when accounting for its investment in online U.K. grocery retailer Ocada Group, above the 44 cents a share analysts had estimated.

Kroger has launched a number of initiatives in recent months, including, most recently, a pilot with Walgreens to sell grocery items in the drug store chain’s stores. In November, it announced that it would open its first customer fulfillment center, with the automated facility leveraging digital and robotic capabilities, will be the first project that it is collaborating on with Ocado.

“Kroger is transforming our business model,” said Kroger chairman and CEO Rodney McMullin. “We’re moving from a traditional grocer to a growth company with both a strong customer ecosystem that offers anything, anytime, anywhere, and asset-light, high-margin alternative partnerships and services. We are strengthening the Kroger ecosystem by reducing costs and investing the savings in our associates, technology, and price to grow units, traffic and share. Leveraging our store, logistics and data assets in turn creates incremental new profit streams, which then further redefines the customer experience. In this way, our new growth model will be a virtuous cycle.

Kroger lowered its net earnings guidance for the year to $3.80 to $3.95 per diluted share from $3.88 to $4.03 previously. It maintained its adjusted operating profits of $2.00 to $2.15 for the year.

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