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Retail sales inch up in October

BY Marianne Wilson

U.S. retail sales edged up slightly in the month before the holiday shopping season starts in earnest.

Retail sales in October rose 0.1% over September, and were up 4.3% year-over-year, according to the National Retail Federation. The NRF numbers exclude automobiles, gasoline stations and restaurants.

“There was broad strength across most sectors, and households clearly have the wherewithal to spend going into the holiday season,” NRF chief economist Jack Kleinhenz said.

Sales at building materials stores were down from September after a strong surge that followed the series of late-summer hurricanes. Weather continues to play a role in consumer spending.

“Weather is always an important factor for seasonal purchases, and the cooler temperatures experienced in later October and early November should provide a good start for winter purchases,” Kleinhenz said.

October sales results by category include:

• Sporting goods stores showed the strongest increase, up 1.5% over September (down 2.4% year-over-year.)
• Clothing and accessories stores were up 0.8% (up 0.4% year-over-year).
• Health and personal care stores were also up 0.8% (up 4.8% year-over-year).
• Furniture and home furnishings stores were up 0.7% (4.8% year-over-year).
• Electronics and appliance stores were also up 0.7% (up 2.1% year-over-year).
• General merchandise stores were unchanged from September but up 1.4% year-over-year.
• Online and other non-store sales were down 0.3% (up 9.6% year-over-year).
• Building materials and supplies stores were down 1.2% (up 11% year-over-year).

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Petco acquires online company featured on Shark Tank

BY Marianne Wilson

Petco has expanded its digital offerings, entering the subscription box business by acquiring an online start-up.

Petco has acquired PupBox, an online subscription service company that delivers customized products and training information to new puppy and dog parents based on their pet’s current stage of development and physical characteristics. The terms of the deal were not disclosed. The entire PupBox team will join Petco.

In line with the acquisition, Petco and PupBox have launched the first-ever PupBox Holiday Box, a gift assortment of toys, treats and holiday training tips. Available online and in Petco stores, each box is customized based on pet size and features a few seasonal favorites. It will sell for $29.

Petco and its rival, PetSmart, have been beefing up their digital offerings to compete with online competitors. In April, Petco acquired PetCoach, a digital services company that connects pet owners with veterinary professionals who give personalized answers to health questions and concerns. Also in April, PetSmart acquired fast-growing pet food and product site Chewy.com.

Petco’s latest acquisition, PupBox, is focused on a core subscription offering that delivers monthly boxes filled with developmentally appropriate products that range from toys and treats to grooming tools and accessories. Each PupBox also includes a training guide filled with information to help pet parents keep up with their pet’s changing training, developmental and physical needs.

“Helping pet parents improve the health and wellbeing of their pets while deepening their bond is at the very core of our mission,” said Petco CEO Brad Weston. “Combining Petco’s breadth of product and services offerings with PupBox’s highly customized monthly subscription service takes the guess work away from pet parents and provides everything they need to raise a healthy, happy pup at every stage of life.”

PupBox was co-founded by Ben and Ariel Zvaifler in 2014 after they adopted a puppy and then then struggled to find products that were perfectly suited for her constantly changing needs. After success as an early stage start-up, the San Diego-based company appeared on ABC’s Shark Tank in November 2016. One of the “sharks,” Robert Herjavec, invested $250,000 in exchange for 15 percent equity, implying a $1.7 million valuation, the San Diego Union Tribune reported.

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Target Q3 tops Street but holiday forecast worries

BY Marianne Wilson

A warning about a “highly competitive” holiday season overshadowed what was, in many ways, a positive quarter for Target Corp.

Sales rose 1.4% to $16.67 billion in the quarter, up from $16.4 billion in the year-ago period. Analysts had expected $16.61 billion.

Same-store sales inched up 0.9%, also more than expected. Comparable traffic grew 1.4%.

Target’s comparable digital channel sales increased 24%, and contributed 0.8 percentage points to comparable sales growth. Target’s online sales now account for 4.3% of total sales, up from 3.5% last year.

Net income fell to $480 million, or 88 cents a share, amid higher costs, compared with $608 million, or $1.06 per share, a year earlier. Adjusted earnings per share were $0.91, compared with a forecast profit of 86 cents per share, and down 13.1% from the same period last year.

Target devoted $847 million to capital investment in the quarter, during which it opened 12 stores and completed 37 store remodels as part of its ongoing store overhaul initiative. It said it seeing an average 2%- to 4% comp sales lift in remodeled units.

The chain’s quarterly SG&A expense rate was 21.1%, compared with 20.3% last year, driven by higher compensation costs. Starting in October, its minimum hourly wage was increased to $11 per hour.

“We’re very pleased with Target’s third quarter performance, including traffic and sales growth that demonstrate we’re building on the progress we saw in the first half of the year,” said Brian Cornell, chairman and CEO. “The investments we’re making in our business will help Target drive long-term success and ensure we’re well positioned to deliver for guests in the all-important holiday season. While we expect the fourth-quarter environment to be highly competitive, we are very confident in our holiday season plans.”

Analyst Neil Saunders, managing director, GlobalData Retail, commented while Target is making progress, it needs to be bolder and more creative.

“Many legacy issues, such as a lack of stock control which leaves frequent gaps on shelves, also need to be resolved,” he noted. “All that said, the company is now in a much stronger position than it was at this time last year which bodes well for the holiday quarter and beyond.” For more, click here.

For the fourth quarter ending in January, Target expects per-share earnings to range from $1.05 to $1.25, missing Wall Street projections for $1.27. It Target expects fourth quarter 2017 comparable sales growth of flat to 2%.

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