Tuesday, January 24, 2012 | Edited by Daniel Moores
||Homeowners Stop Waiting to Spruce Up
Americans are stepping up spending on home improvements for the first time in years, giving a small lift to the beleaguered construction sector.
Economists forecast that spending by homeowners and landlords on everything from minor sprucing up to full-scale remodeling rose modestly in 2011. That would mark the first year since 2006 that such spending increased.
Forecasting firm IHS Global Insight is predicting a 3.3% increase to $152.4 billion in 2011, not adjusted for inflation, and an additional 5.7% in 2012. That comes amid other signs of momentum in residential renovation, such as a report last week showing confidence among builders of single-family homes is at its highest level since mid-2007.
An index of remodeling activity compiled by BuildFax has climbed steadily from 103.3 a year ago to 137.9 in November, the latest available data. The index fell between October and November, likely due to seasonal factors, BuildFax said.
"People are remodeling instead of moving," said David Crowe, chief economist at the National Association of Home Builders.
Most of today's renovations aren't sweeping: They are more likely to feature new lighting or updated kitchen cupboards, rather than an extra bathroom. With home prices still battered, and with many owners unable to get bank loans because they owe more on their residences than they are worth, few are undertaking major projects.
The rise in home-improvement spending comes as the economy and consumer confidence are picking up. It is giving the construction industry an outsize boost because new home building -- which normally accounts for more than half the market by dollar value -- remains severely depressed by historical standards. The benefits also have extended to retailers of home-improvement materials, some of whom have seen their stocks rise in 2011, along with the uptick in projects.
Home improvements have gotten a lift from several fronts, starting with the fact that spending has been depressed for so long. Energy tax credits that were part of the government's 2009 stimulus act prompted some owners to upgrade to energy-saving roofs or heating systems, though that has expired. And while real-estate prices are still falling, they aren't seeing the precipitous declines that prevailed during the recession.
"There was a time when people were waiting for the other shoe to drop; now they realize it's just going to be a long slog so they might as well enjoy it," said Glenn Kelman, chief executive of Redfin Corp., a real-estate brokerage based in Seattle.
Rich Fitterer likes his home and wants to stay, even if he owes more to the bank than the property is currently worth. Next week Mr. Fitterer, an engineer in San Marcos, Calif., just north of San Diego, will begin construction on a $40,000 garden with native plants and a patio to replace his disheveled yard. It will have three-foot boulders, a sitting wall and a rock creek that will spring to life on the rare rainy day.
Mr. Fitterer and his wife bought their house in 2004, for $565,000, and he estimates it would fetch $400,000 today. Much as that hurts, he's doing the garden, after years of neglect, for reasons that are mostly emotional. He's secure in his employment and likes being in a neighborhood that is 10 miles from the beach and Pacific Ocean. His two children, 5 and 2, are similarly happy with their surroundings. "We've made the decision we'd like to stay here so we'd like it to be a place we can enjoy," he says.
While some homeowners have resumed repairs and renovations, others remain skittish about putting money into properties that have fallen sharply in value. Those price declines also have removed a traditional means of financing housing renovations: cash-out refinancing, where homeowners replace their mortgage with a larger loan and pocket extra cash for spending.
During the third quarter of 2011, homeowners took out around $5.3 billion in home equity from their homes by refinancing prime mortgages, according to Freddie Mac, down from $6.3 billion in the second quarter and far below the peak of $83.7 billion in the second quarter of 2006.
That's why smaller projects are powering most of the recent increase, said John Burns, a consultant for building-supply companies. Residents are "not doing big additions like adding on a room," said Mr. Burns, who expects home-improvement spending to increase through 2012.
The carnage in the housing market has made home improvements critical to both builders and the economy. Spending on single-family home construction has fallen so far that individuals now spend more on home improvements than builders do on new-home construction. At the peak in 2005, $434 billion was spent on single-family homes, more than two-and-a-half times the $164 billion spent on home improvements. That reversed in 2009. In the third quarter of 2011, improvement spending was 42% higher than single-family home construction.
Greg Rubin, owner of California's Own Native Landscape Design and Mr. Fitterer's landscaper, says remodeling jobs are keeping him afloat during the lackluster housing market. Today, he gets about five remodeling jobs from existing homeowners for every one job on a new home -- a reverse, he says, of the proportions he saw during the boom.
Homes have "gone back to being a house again instead of an ATM," he said. "I do think, long term, people think they'll get a return on their investment. But they're being realistic and realizing that's a number of years off."
(Source: The Wall Street Journal, 01/20/12)
||Grocery Stores Adapt to a Food-Stamp Environment
Supermarkets that had been adding Starbucks Corp. cafes and olive bars to draw wealthy shoppers are now catering to a different audience: food-stamp recipients.
Stores are moving their opening hours, adding products and revamping merchandise assortments as persistent joblessness pushes more shoppers to government support in buying groceries. Distributions from the federal Supplemental Nutrition Assistance Program rose 11 percent to a record $71.8 billion in fiscal 2011, according to a U.S. Department of Agriculture report.
Supervalu Inc.'s 1,280-store Save-A-Lot chain opens some supermarkets at midnight, when government benefits are loaded onto food-stamp cards, and promotes higher-priced bulk items early in the month. The chain switches to smaller sizes later as money dwindles and customers make fill-in purchases.
"What we're learning how to do is to merchandise to those events," Chief Executive Officer Craig Herkert said in an interview. “You have to learn, market by market, when is that, and you have to merchandise to it, and in some cases, run your stores to it."
A great deal is at stake for large grocers and supercenters. About 85 percent, or $54.8 billion, of all food stamps were spent there in 2010, according to the USDA. Food stamps account for about 40 percent of sales at Save-A-Lot, up from 26 percent two years ago, and their use is spreading at Eden Prairie, Minnesota-based Supervalu's Acme, Albertsons and Shaw's chains, Herkert said. The number of people receiving government food assistance is "shocking," he said.
Some relief for food-stamp recipients may be near. Economists have estimated that more new jobs will be created this year than any time since 2006. The number of Americans receiving food stamps fell to 46.2 million in October, the most recent month for which data is available, as the labor market improved. The 0.1 percent decline from the previous month is the second such drop since 2008, the USDA said Jan. 6.
Still, the stores' new strategies will be around for a while. The unemployment rate has averaged higher than 9 percent for the past two years and an estimated 29 percent of Americans owed more than the market value of their homes in the third quarter, according to a Zillow Inc. survey.
While food-stamp recipients buy less-expensive items that don't offer the higher margins of other food, it's important that retailers market to lower-income consumers because "you want those clients coming into your store, not going somewhere else," said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago.
Hitting more neighborhoods
"It's important to be positioned to deal with it," she said. "It has hit a lot more neighborhoods than people once thought, so you've got to compete in that arena."
That has pushed Supervalu to highlight boneless chicken breasts for $1.49 a pound early in the month and legs and thighs for 88 cents a pound later.
Save-A-Lot in June introduced a lower-priced store brand called "Today," which includes a four-roll package of toilet paper for 89 cents and four-ounce instant mashed potatoes for 79 cents.
Supervalu also started offering individual portions of meat for $1 and is adding 80 lower-cost items under its Shoppers Value brand. The company has expanded shelf space and displays of cheaper goods, including 10-for-$10 items and $1 frozen pizzas, Herkert said on a conference call in October.
Wal-Mart Stores Inc. adjusts staffing at midnight when benefits cards are loaded and makes sure stores are well stocked in produce and canned goods, said Greg Rossiter, a spokesman for the Bentonville, Arkansas-based company.
'To the minute'
"We are seeing customers on government assistance timing their shopping at the beginning of the month to the minute and the second" of when benefits are loaded, Rossiter said. "Some of them are doing shopping for the month or that night or that day," he said, so they also are looking for frozen food and other items that will keep throughout the month.
Recipients spend an average of 21 percent of their benefit on the day it's received and 59 percent within the first week, according to a USDA study. The money can be used to buy meat, dairy, fresh produce and dry goods such as cereal and pasta. Alcohol, cigarettes, pet food, vitamins and hot foods aren't allowed.
Drugstores and dollar stores are trying to woo those customers, too. Family Dollar Stores Inc. finished overhauling its checkout systems to accept food stamps in 2010.
That business "is growing like weeds and is an important part of the food strategy" Howard Levine, chairman and CEO of the Matthews, North Carolina-based company, said at a conference in April.
Last year, the State of Michigan staggered the days when its food-benefit cards are loaded, giving grocers a reprieve from long checkout lines at the beginning of each month.
"It helped the stores to offer more of those fresh fruits, meat, veggies and dairy products throughout the month," said Dave Akerly, a spokesman for the Michigan Department of Human Services in Lansing. The change makes it "less congested" at grocery stores, he said.
In Michigan, $2.77 billion in supplemental-nutrition benefits were redeemed in fiscal 2010, making it the fifth- largest state in terms of food-stamp receipts, according to the USDA.
(Source: Bloomberg, 01/17/12)
||Reunions Will Heat Up the Roster of Summer Concerts
Many of music's biggest names will light up concert venues in 2012, including several -- among them, the Beach Boys and Van Halen -- who will be getting the band back together after years of anticipation.
The live music industry is coming off a year in which revenues steadied after a sobering 2010. Touring trade publication Pollstar estimates that the top 100 tours of North America grossed $2.3 billion, up 6.3% over 2010's $2.2 billion, but still below the 2.5 billion earned in 2009. Those tours sold 34.7 million tickets, a drop of 2.6% from 2010's 35.7 million but offset by rising ticket prices, which climbed 8.8% to an average $67.22.
The industry has reason to expect a very good year, says Pollstar editor Gary Bongiovanni.
"There are a lot of major attractions touring, and given the current sense of growing optimism with the economy and consumer spending, (we) would probably project a record year in terms of revenue," he says. "The only question will be if we push the envelope too far on ticket prices and there is push back in the other direction."
Brian Wilson rejoins the Beach Boys as they celebrate the group's 50th anniversary with a 50-date tour that kicks off April 27 at the New Orleans Jazz & Heritage Festival. The reunited band released its debut album Surfin' Safari in 1962.
Van Halen will be joined by lead vocalist David Lee Roth, who left the band to go solo in 1985. A Different Kind of Truth, the band's first album with Roth since 1983's 1984, is due Feb. 7. Black Sabbath will hit the road with frontman Ozzy Osbourne and record a Rick Rubin-produced album for release later in the year. Stevie Nicks and Lindsey Buckingham have said they will be back with Fleetwood Mac. There is speculation that the Rolling Stones, who are also celebrating a 50th anniversary, will go out again.
"It would be a surprise if the Stones did not capitalize on their anniversary, but it's getting a little late in the game for a full-blown arena or stadium tour for this year," says Billboard's senior editor, touring, Ray Waddell. "If and when they tour, particularly if it's billed as their last, it will be massive."
No dates have been announced, but British singer Adele is expected to mount what would be one the biggest tours of the year. Bongiovanni says there's a lot of pent-up demand for Adele, whose second album, 21, has sold more than 6 million copies and topped the Billboard album chart 16 times. She was forced to cut her tour short in October for vocal chord surgery.
Madonna will be going on the road for the first time since 2008-2009's Sticky & Sweet tour, and Bruce Springsteen & the E Street Band will make their first trek without late saxophonist Clarence Clemons. Roger Waters, Katy Perry, Drake, Neil Diamond, Kelly Clarkson, Brad Paisley, Lady Antebellum, Red Hot Chili Peppers, Radiohead, Tom Petty & The Heartbreakers, Taylor Swift, Justin Bieber and Lady Gaga will also be crisscrossing the map.
Kenny Chesney and Tim McGraw's 19-city Brother of the Sun stadium tour promises to be huge and will feature Grace Potter & The Nocturnals and Jake Owen as special guests. The tour kicks off June 2 in Tampa.
"Country remains strong with a healthy mix of arena-level headliners and developing acts," Waddell says. "Rock is making a comeback of sorts. Nickelback, Radiohead, Coldplay and a wealth of heritage acts are sure to sell tickets, and Black Keys are moving up to the arena level. Electronic/dance music is now a solid ticket seller beyond just the festivals, and there are some hard-working young hip-hop acts that have revitalized that genre."
Festivals will continue to attract top acts and droves of fans. The premier Coachella Valley Music and Arts Festival in Indio, Calif., for example, this year expands to two weekends -- April 13-15 and April 20-22 -- with identical lineups headed by the Black Keys, Radiohead and Dr. Dre.
"The festivals remain the most robust part of the business in North America," says Waddel.
Top Tours of 2011
Artist | North American gross (in millions)
U2 | $156
Taylor Swift | $97.7
Kenny Chesney | $84.6
Lady Gaga | $63.7
Bon Jovi | $57.1
Elton John | $51.8
Sade | $48.6
Kanye West/Jay-Z | $48.3
Lil Wayne | $44.4
Celine Dion | $41.2
(Source: USA Today, 01/19/12)
Daily Sales Tip: Give 'Em a Choice
When you only offer one solution to a customer, the only possible response is to say yes or no. Whenever possible, offer two or more alternatives and ask the customer to choose the one that is best for them. A good way to phrase this is to say something like "...based on what you told me about your needs, I think that these two products/services would work well for you. Which would you prefer?"
There are several advantages to offering alternatives to a customer. It doesn't come across as pushy, lets the customer pick the product/service/option that works best for them, and shows the customer that you are trying to provide something that truly meets their needs.
Source: Bill McCormick, president of Sales Training And Results, Inc. (STAR)