October CPI Report Offers Hope For Easing Inflation
Prices rose 7.7% in October on an annual basis, 30 bps lower than forecasted
Core CPI (excluding food & energy priced) was up 6.3%, also down 30 bps from September
Fed Chair Jerome Powell says there is still “some ways to go” in the battle for inflation, but futures markets are now anticipating a 0.5% rate hike in December, as opposed to the 0.75% hikes in recent months READ MORE
Meanwhile, St. Louis Fed leader James Bullard spooked investors this week with hawkish comments predicting interest rates may need to hit 7% before inflation can be tamed READ MORE
Retail Sales Up in October, But Most
Categories Still Lag Inflation
Sales were up 8.3% YoY, compared to a 7.7% cost of living increase
Restaurants led all categories with a +14% sales bump, e-commerce was second with +11%
Grocery stores kept pace with inflation, while all other categories lagged or declined (electronics, department stores)
Despite this seemingly good news, the Fed may see it as a sign that the economy is still too hot READ MORE
Amazon unveiled plans to lay off as many as 11,000 employees with a focus on its retail operations and device division, along with human resources.
Moody’s this week lowered Texas-based At Home’s corporate credit rating from B3 to Caa1. Moody’s also downgraded the retailer’s probability of default and its senior secured first term loan, as well as secured and unsecured senior notes. The firm maintained At Home’s stable outlook.
Chipotle is building a real estate pipeline to accelerate new unit growth with an emphasis on Chipotlanes, the company’s drive-thru format for digital order pickup. Next year, the company plans to open between 255 to 285 new restaurants, with at least 80% including a drive-thru lane. Chipotle has long-term plans to more than double its store count from 3,100 to 7,000.
Dutch Bros. Inc., is on track to meeting its store expansion goal. The fast-growing coffee chain said it
is targeting at least 150 new shop openings for 2023. The openings would enable Dutch Bros. to reach its
goal of 800 shops by the end of 2023. The company noted that it opened a record 38 locations across 11
states during the quarter, which is almost as many as it opened during the entire year of 2019.
Maurices, the women’s fashion brand, is opening three stores for its tween brand Evsie in West Jordan,
Utah; Fargo, North Dakota; and Boise, Idaho. The brand will also be available at six Maurices locations and
more than 240 shop-in-shops across the U.S., making it available at almost 800 locations in the U.S. and
Canada.
Amazon unveiled plans to lay off as many as 11,000 employees with a focus on its retail operations and device division, along with human resources.
Moody’s this week lowered Texas-based At Home’s corporate credit rating from B3 to Caa1. Moody’s also downgraded the retailer’s probability of default and its senior secured first term loan, as well as secured and unsecured senior notes. The firm maintained At Home’s stable outlook.
Chipotle is building a real estate pipeline to accelerate new unit growth with an emphasis on Chipotlanes, the company’s drive-thru format for digital order pickup. Next year, the company plans to open between 255 to 285 new restaurants, with at least 80% including a drive-thru lane. Chipotle has long-term plans to more than double its store count from 3,100 to 7,000.
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Earnings Insight
Most major retailers released their quarterly results last week and it looks like a mixed bag for Q3 as consumers were starting to feel pinched by inflation and retailers are discounting more than ever to relieve an inventory glut caused by overbuying during the 2021 supply chain crisis.
Notable callouts include Walmart’s stellar results vs. Target. This is a battle that Target won handily over the past 2 years as their omnichannel initiatives gained traction with consumers. This reversal is due in part to Walmart’s higher share in the grocery category (50% of WMT sales vs. 20% of TGT sales) along with the “trade down” effect that accompanies most economic turbulence and Target’s major inventory missteps. Target also guided their Q4 below Street estimates, though they remain positioned to be a long-term winner
Elsewhere, investors rewarded Macy’s for being perhaps the one retailer who enters the Holidays with a defensible inventory level. Beneath the hood however, there are still issues to address with sales momentum and margins. Those issues are even greater with Kohl’s, a company that had once been able to buck department store trends pre-pandemic, now finds itself scrambling to address the same issues
that have plagued their peers and pulled their full year guidance following a lackluster quarter.
Walmart’s store fleet is the key competitive advantage that the company believes it has in its fight to take share from Amazon. CNBC goes behind the scenes with Walmart’s new
e-commerce chief Tom Ward to show how being close to the consumer matters now more than ever.
Grocery stores are a modern marvel that bring together the bounty of the world’s harvest to your local shelves. This video from Wendover Productions looks at the grocery supply chain from end to end in this high stakes, low margin business.
As consumers feel the pinch from higher prices, many may be choosing to spend their gift-giving
dollars on experience-based gifts such as concert tickets and high-end dining. What’s left for retailers
to do is focus on value and marketing the Holidays as a celebration of real life moments in the first “normal” Holiday season since 2019. READ MORE
Last weekend, as my family and I did a little Holiday shopping at Old Orchard – an open-air mall/lifestyle hybrid center in our beloved hometown of Skokie, Illinois – I felt a certain feeling I hadn’t had while shopping in several years. Call it ”retail therapy” or “revenge shopping” if you like, but it was the closest to normal as shopping had been for us since at least 2019.
But a closer look would tell you this wasn’t the same shopping experience we would have had in 2019. The mall’s owners (Unibail Rodamco Westfield) had spent a considerable amount of capital over the last 3 years modernizing and refreshing the tenant mix. All this during a global pandemic in which Wall Street pundits had all but written the obituary for physical retail.
You can’t eyeball traffic numbers, of course. But what my eyes were telling me is that physical retail is more alive than ever, but only when retailers and landlords work together to make sure that the experience, the merchandise, and the dining options remain relevant to today’s lifestyles.
On our website, we assert that “we succeed when our tenants succeed” and I think in order to live up to that credo, we also need to understand not only how our tenants succeed, but also what headwinds they are facing and what consumer and cultural forces are shaping the future that they’ll need to adapt to.
In that spirit, one element of the Big V research platform will involve keeping everyone up to date on a full range of retail news and trends via this newsletter – named after the employee newsletter Dick Rosenberg published during the heyday of the Big V Supermarket era. During the company’s 80th anniversary celebration earlier this month, what struck me most was the enduring values that has embodied the company over the decades – empowering people to do their best work will always yield best in class results no matter what the challenge!
Here, you’ll see headline news about macroeconomic conditions, technological innovations, financial performance, store growth plans, and the ways in which our ever-evolving consumer culture influences the decisions retailers make to stay relevant. Most importantly, what The Big VIP hopes to accomplish is to provide the context necessary to understand how all of these disparate forces factor in how we manage the locations of what is still and will remain our tenants’ most important connection to the customer: their stores. You’ll see that context in videos, essays, special reports, and other content that I hope you’ll find as engaging to learn from as I do in curating and creating it. In other words, The Big VIP in the name of this newsletter is: You.
PS – As you’ll come to know, I’m a big music junkie. So with that in mind, nothing says Thanksgiving to me more than The Band’s 1978 concert film The Last Waltz. Please enjoy this rendition of ”The Weight” featuring The Staple Singers as my Song of the Week:
