IHL: Retailers expect strong sales growth in 2018; new stores, remodels up
The nation’s retailers are bullish on the new year.
North American retailers expect a 6.2% increase in sales in 2018, according to research from IHL Group. The report found that retailers are increasing the number of stores in 2018 by an average of 5.6%, with planned remodel of stores expected to rise more than 5%.
IT spend is also up. Store level IT Investment is expected to rise 5.8% this year over 2017 levels.
“Despite what the headlines might say, retail grew over $220 billion in the U.S. and Canada in 2017,” said Greg Buzek, president of IHL Group. “Retailers are projecting even stronger growth in 2018, including 4.8% growth in sales at stores.”
IHL’s 2018 Retail Transformation Study looks at retail sales growth at store level, e-commerce, mobile commerce, and how retailers plan to increase both stores and IT spending to meet customer demands and effectively compete with Amazon and Walmart. The research included 123 retail senior executives surveyed, most with annual sales over $1 billion.
Jewelry giant reports disappointing holiday results
The parent company of such chains as Kay Jeweler’s, Jared and Zales Jewelers saw its total holiday sales fall over last year as issues related to outsourcing its credit transactions negatively impacted business.
Signet’s total sales for the nine weeks ending Dec. 30 fell 3.1% to $1.88 billion. Same-store sales dropped 5.3%.
Same-store sales at Zales Jewelers rose 4.6%. Signet’s online outlet, R2Net, had a comp-sales gain of 38.6%. Same-store sales declined 10.8% at Key and 5.9% at Jared.
“During the holiday season, we made positive progress on our strategic priorities, offset primarily by the negative impact of the credit outsourcing transition, as evident by the mixed performance across our banners and channels,” stated Virginia C. Drosos. “Our overall e-commerce business grew double-digits, and our Zale division, where our strategic initiatives are beginning to take hold unencumbered by the credit transition, delivered same store sales growth with strength in both bridal and fashion. Conversely, progress in our Sterling division was overshadowed by the negative impact of the credit outsourcing transition in stores.”
Signet affirmed its fiscal 2018 same-store sales outlook of down in the mid- single-digit percentage range. The company raised its earnings-per-share outlook to $6.45 to $6.50 from $6.10 to $6.50 to reflect an expected lower tax rate after the tax reform legislation.
Sears’ holiday sales plunge; lines up new financing, cost-cutting measures
Sears Holdings had a miserable holiday season.
The beleaguered retailer reported that its overall same-store sales fell 16% to 17% for the first two months of the fourth quarter. Sears results came as the majority of retailers were reporting strong holiday results and as overall holiday sales rose 4.9%, the biggest increase since 2011.
Sears also announced that it has raised $100 million in new financing and is seeking to borrow an additional $200 million from other parties. The chain said it has also amended terms on its existing second lien notes and is in talks with other lenders to improve the terms on up to $1 billion of non-first lien debt.
“As previously announced, we are actively pursuing transactions to adjust our capital structure in order to generate liquidity and increase our financial flexibility,” stated CFO Rob Riecker said in a statement. “The new capital we have secured represents meaningful progress towards those objectives and demonstrates that we continue to have options to finance our business.”
In addition, Sears plans to streamline its operations to achieve another $200 million in cost reductions on an annualized basis in 2018 (excluding store closures.) Last week, Sears announced yet another round of store closures, with 103 locations to be shuttered by spring.
In a blog post, Sears chairman and CEO Eddie Lampert continued to maintain that the company is on track to turn a profit in 2018. But he also warned that, if the refinancing is not “fully successful,” the Sears’ board will “consider all other options to maximize the value of Sears Holdings’ assets.”
There was one positive note in Sears’ most recent announcement. The retailer expects a smaller loss for the fourth quarter compared to last year. The company expects a loss of between $200 million and $320 million, excluding charges from closing stores, severance and tax-related matters, compared with a net loss of $607 million during the year-ago period.