“Interview: Target’s Interim CEO Speaks with Star Tribune” by Kavita Kumar. “John Mulligan is fully aware of those embarrassing photos floating around the Internet — the ones showing empty shelves at some of Target’s Canadian stores and visibly illustrating the company’s inventory struggles up north. “I’ve seen those for far too long, and I would tell you I have the same reaction as the entire Canada team: it’s unacceptable,” Target Corp.’s interim chief executive said Wednesday in an interview with the Star Tribune.” Read more
“Bezos: Alibaba IPO won’t affect Amazon; 10,000 robots coming to fulfillment centers” by Emily Parkhurst at Puget Sound Bus. Journal. “Jeff Bezos took the stage at the Seattle Repertory Theatre on Wednesday for the company’s annual shareholders’ meeting…Amazon has started offering tours of its fulfillment centers. So far, 14,000 people have signed up to take these tours, Bezos said, and they’re sold out through March 2015. “We’re looking at ways to increase supply to meet demand there,” Bezos said.” Read more
“Retail a ‘prisoner’ of quarterly report: Ex-CEO” by Krystina Gustafson at CNBC. “Former Bloomingdale’s CEO Michael Gould said there’s another underlying issue in the sector that’s stifling its success: There’s not enough risk-taking or newness. “You’re a prisoner of the quarterly report,” he said. “The problem in the business today is that risk-taking and fashion is an oxymoron.” Read more
“Could No. 2 Lowe’s ever catch No. 1 Home Depot?” by Ken Elkins at Charlotte Bus. Journal. “That was the question that I posed today to Robin Diedrich, consumer discretionary analyst for Edward Jones. Her answer: Yes … well maybe.“It definitely can be done,” Diedrich says. “There is an opportunity to catch back up with sales and sales per square foot.” Read more
“Wal-Mart’s Founders Don’t Control Their Family Photos (and Neither Do You)” by Susan Berfield at Bloomberg. “Bob’s Studio of Photography in Fayetteville, Ark., has negatives, proofs, and prints of more than 200 photographs, including images of the Waltons as children, the parents of founder Sam Walton…Now the family and the retail giant (in the form of the Walmart Museum) have filed a lawsuit alleging that those photos belong to them, not to the studio.” Read more
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“Best Buy U.S. Comp Sales Fall 1.3%, Online +29%” “Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronics categories in which we compete.” Read the release
“Sears to Close Around 80 More Stores this Year – Comp Sales Up .2%” by Michael Calia at WSJ. “Sears domestic same-store sales rose 0.2% in the period ended May 3—its first such growth in more than a year—compared with a 2.4% decline last year, hurt by a continuing slump in consumer electronics. Kmart felt a similar impact from the category, as its same-store sales fell 2.2%.” Read more
“Heard on the Target Call” – Highlights from Yesterday’s Target Q1 2014 Earnings Call”
John Mulligan – Interim President & CEO
The Board and our team are aligned on three priorities. The first is growing traffic and sales in our U.S. segment…second, we must improve our Canadian segment performance…Finally, we need to accelerate our digital transformation and become a leading Omni-channel retailer.
First quarter penetration on our REDcards was 20.4%, up 3.3 percentage points from last year.
Second quarter comparable sales should be flat to slightly positive.
Canada: we expect to report a single-digit decline in second quarter Canadian segment comparable sales.
On sales tax, we definitely see an impact when Amazon collects sales tax.
Kathryn Tesija – Chief Merchandising and Supply Chain officer
Our efforts produced mixed results for the quarter, reflecting unfavorable weather in February, followed by the strongest results in March and weaker than expected Easter sales in April.
First quarter performance was meaningfully better than the fourth quarter as comparable sales improved by more than 2 percentage points and comparable transactions improved even more.
In our U.S. business, first quarter comparable sales were strongest in hard lines, driven by a mid-single-digit increase in electronics.
Comparable sales in our less discretionary food, health and beauty categories were slightly positive, while home and apparels saw small comp declines, with our digital channels’ first quarter sales were strongest in health and beauty and home.
U.S. segment comparable traffic was down a little more than 2%, which was nearly offset by a healthy 2.1% increase in basket size.
First quarter digital visits were up more than 20% from a year ago, which according to comScore was the fastest growth among a group consisting of Target and seven of our largest online competitors.
The share of digital visits from a mobile phone or a tablet continues to grow and in the first quarter, almost two-thirds of our digital traffic was on one of these devices.
In March, Target.com launched over 2,000 new furniture items from Safavieh.
When Frozen was released on DVD and Blu-ray in March, it became the most successful first day release for any movie in Target history. In the first month alone, we sold more units than we sold in the first year of Finding Nemo, which previously held the record for our biggest release.
The Frozen soundtrack also held the number one spot throughout the first quarter, selling more units in April than all of our other releases combined.
We are planning to launch a guest facing $10 rush delivery pilot in June in the Minneapolis, Boston and Miami markets, offering guests the ability to order as late as 1.30 p.m. in the afternoon and receive a delivery of qualifying items between 6.00 p.m. and 9.00 p.m. the same day. Later in the year, we plan to rollout standard shipping from 136 stores in 38 markets across the country.
In entertainment and electronics, we’re testing a new layout… This redesigned experience is currently being tested in 17 stores and will determine future plans based on guests feedback.
We plan to roll out enhanced apparel displays to 50 additional stores this summer and several hundred more stores this fall.
Team member call outs: …putting all of our style business together, both merchandising and design all under Trish Adams, having our essentials and hard lines business all under Jose Barra, having inventory and all operations under Keri Jones, and then our Omni-channel efforts all under Casey Carl, are really important to be able to leverage that expertise and move very quickly in improving our results.
“Heard on the Lowe’s Call” – Highlights from Yesterday’s Lowe’s Q1 2014 Earnings Call”
Robert Niblock – Chairman, President & CEO
In the south and west, where weather was more favorable, comps were in the mid single digits. The northeastern part of the country which was the most impacted by poor weather conditions during the quarter experienced negative comps.
For the quarter, seven of our 12 products categories had positive comps
Overall indoor products which accounted for roughly 65% of sales had solid performance with positive comps of approximately 2%.
In areas of the country where weather was more cooperative, indoor comps were mid-single digits. Outdoor products declined approximately 1.5% overall.
We continue to see strength in our ProServices business which outperformed the Company average during the quarter and I am pleased to share that our team in Canada delivered double digit comps in local currency for the fourth consecutive quarter.
Performance has already improved in May…and keen focus on productivity and flow through continue to give us confidence in our business outlook for 2014.
Our dot com business was up a little more than 25% in the quarter.
We still continue to see about 50% of what is bought online is actually picked up in store. There’s about another 20% that is delivered from the store up to the consumers’ homes. If you think about it, about 70% of what we sell online is fulfilled through store channels.
We think the weather impacted our Q1 sales by approximately 150 basis points, about 35% of our sales are outdoor or mix related.
Q2 looks like it’s going to be our highest comp in quarter at this point.
Mike Jones – Chief Customer Officer
We drove strong sales in fashioned fixtures, we saw particular strength in light bulbs driven by LED and other energy efficient products and in fashioned plumbing products such as bath faucets, vanities and toilets.
We also drove solid performance within tools and hardware particularly in power tools.
Our second area of focus is to better capitalize on the pro market which is growing faster than the consumer market, so we are enhancing our product and service offering for this important customer.
The mix in customer shopping electrical wire is roughly 70% pro and 30% DIY. We are losing share in this core category, particularly with electricians, so within last year’s line review, we focused on why and what we needed to change.
Pro: we added to our selection of wire types, gauges and colors as well as full rows of wire and cable to supplement the offering of wire sold by the foot along with contractor packed pricing so pros could benefit from buying bulk rolls.
This quarter, we will relaunch lowesforpros.com, testing it with our pro customers before rolling it out more broadly.
Patio furniture: we removed 15 bays of steel racking to create a showroom fill with about 35% more open space which is made possible by our larger store format. It helped customers envision their outdoor space.
Patio furniture: we have determined brand to be a less important shopping attribute for outdoor living products, we can leverage our direct sourcing capability to buy these high quality products at a competitive cost which should benefit both sales and gross margin.
We just recently introduced stain master pet protect, and exclusive in the home center channel. This carpet is made with a new fiber specifically designed to withstand the toughest pet stains.
Brand call outs: Bosch power tools, South Wire hand tools, Valspar Reserve
Bob Hull – CFO
Comps were essentially flat in February, 2.5% in March and flat in April.
We believe that we’ll recover the majority of the Q1 sales shortfall. As a result, we have not adjusted our outlook for the year.
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