Chain store sales point to a hit from tax hike

WASHINGTON, Wed Jan 23, 2013 — A slowdown in sales growth at many big U.S. retailers suggests a clutch of tax hikes enacted this month is already leading consumers to hold back on spending, putting a brake on economic growth.

Sales growth has cooled for three straight weeks when measured from a year earlier in the Johnson Redbook Retail Sales Index, data showed on Wednesday.

Similarly, the ICSC U.S. retail chain store sales index, which is the other major weekly barometer of retail spending, has showed weakening of growth in the last two weeks.

“We can very tentatively say that these numbers look consistent with our view that the increase in taxes at the start of 2013 led to a slowdown in consumer spending,” said Daniel Silver, an economist at JPMorgan in New York.

Washington this month raised taxes on most Americans.

The brunt of the tax hike came from the expiration of a temporary payroll tax cut. That cut — a 2 percentage point reduction in a levy that funds Social Security — was put in place two years ago to help the economy, which was still smarting from the 2007-09 recession.

About 160 million workers pay this tax, and the increase will cost the average worker about $700 a year, according to the Tax Policy Center, a Washington think tank.

Congress and President Barack Obama also allowed income tax rates to rise this month for households making more than $450,000 a year, a partial repeal of tax cuts put in place under President George W. Bush. The wealthy will also pay a new tax to help fund a health insurance reform passed in 2010.

These will have a smaller impact on the wider economy because they affect fewer people. But taken together, this year’s tax hikes could subtract a full percentage point from growth, JPMorgan estimates.

Some economic data appears to be bearing out economists’ predictions.

Compared to the same week one year earlier, the Redbook index rose 1.8 percent in the week ending Jan. 19, down from 1.9 percent in the Jan. 12 week and 2.1 percent in the Jan. 5 week. Sales were up 2.9 percent in the Dec. 29 week from a year earlier.


Valero may raise $3.5 billion through retail arm auction: sources

NEW YORK, Thu Sep 27, 2012 – Valero Energy Corp. is selling its retail business, which operates gas stations and convenience stores, through an auction that could fetch more than $3.5 billion and has lured the interest of private equity firms and convenience-store operators, people familiar with the matter said.

Valero’s retail business, which consists of nearly 1,000 U.S. stores and some 775 units in Canada, has around $450 million in annual earnings before interest, tax, depreciation and amortization and could sell for around 8 times EBITDA, or about $3.5 billion, two of the people said.

The U.S. refining company had said in July it would split off its gas station and convenience stores, and cited a tax-free spinoff to shareholders as one of the options.

Valero, which is being advised by Credit Suisse Group on the retail split, has sent financial information about the unit to interested parties and is expected to receive initial offers in October, those familiar with the matter said.

Several big private equity firms, including TPG Capital LP and Carlyle Group LP, are among the parties that are taking an initial look, one of the people said.

Large convenient store chains such as Alimentation Couche-Tard Inc. or 7-Eleven would also likely have some interest, two other people said.

Retailers fare well in August, sales beat estimates

WASHINGTON, Thu Aug 30, 2012 – Most retailers, including Costco Wholesale Corp. and Limited Brands Inc., posted better-than-expected sales gains at existing stores in August, in what is expected to be a healthy month as parents and students wrapped up back-to-school purchases.

Analysts expected 19 retail chains to report a 2 percent rise in August sales at stores open at least a year, or same-store sales, according to Thomson Reuters I/B/E/S. Excluding drugstores, which do not put out their numbers until next week, same-store sales are expected to rise 4.1 percent.

Same-store sales are an important measure of retailer performance because they strip out the effects from store openings and closures.

Limited, which owns the Victoria’s Secret, Pink and Bath & Body Works chains, saw same-store sales rise 8 percent, well above analysts’ average view of 4.2 percent.

Retail real estate recovery taking hold: research firm

NEW YORK, Fri Jul 6, 2012 – Vacancy rates and rents at U.S. neighborhood shopping centers improved for the second quarter in a row, further evidence the sector is moving toward recovery after years of weakness, real estate research firm Reis said on Friday.
The retail real estate sector has been among the hardest hit in commercial property. At the mercy of consumer spending, the sector has reflected the diverse pressures and changes since the housing crisis began in 2007.
The first quarter marked the first time in nearly seven years that average vacancy rates at strip malls fell, and that trend continued in the second quarter, Reis said, with the rate declining to 10.8 percent. While demand for space is weak, the firm said, new construction is even weaker.
At the same time, asking rents rose 0.2 percent, up from a gain of 0.1 percent in the first three months of the year.
“Although we still remain hesitant to claim that the market has reached stabilization, two consecutive quarters of vacancy and rent improvement is the strongest evidence to date that the sector is on the road to recovery,” Ryan Severino, Reis senior economist, said in a statement.
The firm said vacancies should continue to fall slowly through the rest of 2012, as demand outstrips construction.
Larger regional malls, meanwhile, recorded a drop in vacancies to 8.9 percent, while rents rose for the fifth quarter running. Reis said demand is stronger for malls than shopping centers, though still markedly weak.
Still, the upward trend has benefited real estate investment trusts, including high-profile mall owners like Simon Property Group Inc., General Growth Properties In.c, Macerich Co. and Taubman Centers Inc.

Retail marketers keep holiday optimism in check, survey finds

NEW YORK ― Chief marketing officers at U.S. retailers are cautious heading into the holiday season, though those at larger chains are a bit more optimistic about their prospects, according to a survey conducted by BDO USA.

Chief marketing officers expect holiday sales to rise 2.9 percent this year, a less rosy view than the 3.5 percent rise a group of CMOs predicted during the firm’s 2010 survey.

“It kind of confirmed my belief that the holiday sales were going to be tepid – positive, but not very strong,” said Doug Hart, partner in BDO’s retail and consumer product practice.

Most retailers have kept their holiday season inventory purchases about the same as last year, as they attempt to anticipate how a high unemployment rate and other economic issues will affect spending.

Retailers do not want a repeat of the 2008 holiday season, when shoppers cut back and chains that ordered too many goods had to slash prices, hitting margins, to sell them.

Sixty-five percent said their chain’s inventory purchases have stayed about the same, up from 52 percent last year.

Inventory decisions were likely impacted by the weak consumer confidence numbers over the summer, which is when most chains have to make their final calls on holiday purchases to ensure they have time for goods to arrive from overseas.

Inventory levels are expected to be up by just 0.7 percent this holiday season, down from the 2.8 percent increase that was projected in 2010.

“They’re a little bit more cautious,” said Hart, noting that CMOs often have a brighter view than executives such as chief financial officers. “The fact that these guys are certainly not optimistic is a good benchmark for where the inventory purchases are going.”

Overall, 48 percent of those surveyed anticipate their holiday season sales will stay about the same, 41 percent expect their sales to rise and 11 percent see a decline.

Among CMOs from some of the biggest retailers, just 33 percent see their sales staying about the same, while 67 percent are calling for sales at their chains to rise. No CMOs from the large chains expect their sales to fall.