Thursday, December 27, 2012 | Edited by Daniel Moores
||Retailers Scramble After Lackluster Holiday Sales
The 2012 holiday season may have been the worst for retailers since the financial crisis, with sales growth far below expectations, forcing many to offer massive post-Christmas discounts in hopes of shedding excess inventory.
While chains like Wal-Mart Stores Inc. and Gap Inc. are thought to have done well, analysts expect much less from the likes of Barnes & Noble Inc. and J. C. Penney Co.
The latest sign of trouble came from MasterCard Advisors Spending Pulse, which reported holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year.
The preliminary estimate from SpendingPulse was in line with other estimates showing weak growth during the holiday season, when retailers can book about 30 percent of annual sales -- and in many cases, half of their profits.
On Tuesday, the International Council of Shopping Centers and Goldman Sachs Weekly Chain Store Sales Index showed sales rose only 0.7 percent in the week ended Saturday.
The estimates are still preliminary and focus on sales, not profits. A handful of retailers will post sales data next week, but most, including heavyweights like Wal-Mart, will not report results at the register until they release financial results in mid-February.
Analysts have also said many retailers entered the season with inventories under control, which could help protect margins.
Still, the latest holiday season sales could end up the weakest since 2008, during the last recession, when sales dropped 4.4 percent in November and December.
"The broad brush was Christmas wasn't all that merry for retailers, and you have to ask what those margins look like if the top line didn't meet their expectations," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
Analysts and industry groups already expected sales to grow at a slower pace than in 2011 and 2010. The National Retail Federation predicted 4.l percent sales growth, versus a 5.6 percent increase a year earlier.
But growth of less than 1 percent is weaker than even some of the most pessimistic forecasts, and markets reacted accordingly.
The S&P retail index fell 1.8 percent in midday trading Wednesday. The 13 weakest stocks in the broader S&P 500 were all retailers or consumer brands.
One concern for retailers is that weak sales will mean an excess of inventory that will force some to slash prices.
Among other brands, Barnes & Noble offered 50 percent discounts in stores via email promotions on Wednesday, while Ann Inc had half-off at its Loft stores, and Bloomingdale's promoted discounts of up to 75 percent in some cases.
"Retailers are no longer chasing sales, they are chasing inventory management. That means the discounts that they would have liked to be at 50-60 (percent) off have climbed to 75 to even 80 (percent) off," said Marshall Cohen, chief industry analyst at The NPD Group.
Erica Ayala, 31, a mother of four who lives in New York's Harlem neighborhood, waited until the day after Christmas to shop for that very reason, saving more than $150 on kids' clothes alone at Gap's Old Navy chain.
"You can't go wrong with that," she said.
A variety of factors were thought to be at fault, starting with Superstorm Sandy, which depressed sales in the Northeast in late October and early November.
Sales recovered in the second part of November, with early hours and promotions helping drive traffic during the "Black Friday" weekend after Thanksgiving, analysts said.
But there was a deep lull in early December as a winter storm in parts of the United States may have limited sales, said Michael McNamara, vice president of research and analysis at MasterCard SpendingPulse.
The SpendingPulse data estimates sales of apparel, electronics, luxury goods, online and furnishings across all payment types, including credit cards, cash and checks, and not just the MasterCard payment network.
On top of that, there were fears that taxes will rise in the new year if Washington cannot negotiate a solution to the end-of-year "fiscal cliff" dilemma.
A recent Ipsos poll for Reuters found that only 17 percent of shoppers were spending less due to cliff fears, though analysts said the damage was still done.
"The government usually does not have a role in holidays but this year they did. They got right in the midst of it; the timing couldn't have been any worse," NPD's Cohen said.
One bright spot has been online sales, which continue to grow at a faster pace.
On Christmas Day, online sales jumped 22.4 percent, outpacing the 16.4 percent increase in 2011, according to IBM Digital Analytics Benchmark, which tracks more than 1 million e-commerce transactions a day from 500 U.S. retailers.
Whether online or off, some of the winning retailers were expected to be Wal-Mart, which attracted shoppers with early deals on the night of Thanksgiving and kept its focus on value, and apparel chains like Gap Inc., whose bright sweaters were successful, according to analysts.
Toys sold well, and hot items that were harder to find later in the season included certain Mattel Barbie dolls and LeapFrog Enterprises Inc's LeapPad2 tablet computer, according to B. Riley Caris analyst Linda Bolton Weiser.
For retailers who have struggled, analysts said all hope was not lost. Many have fiscal quarters that end in January, so they still have time to benefit from a post-Christmas rebound.
(Source: Reuters, 12/26/12)
||Gen X Most Vulnerable Financially
Different generations responded differently to the recession, according to a study, leaving Generation X members the most vulnerable in terms of their lack of financial planning.
El Segundo, Calif.-based Financial Finesse studied the distinct financial issues, priorities, and vulnerabilities of Millennials, Generation X, Late Baby Boomers, and Early Baby Boomers, with a focus on strengths, weaknesses, opportunities, and threats each generation faces, as well as their distinct financial education and planning needs.
Millennials are managing their finances surprisingly well, despite having by far the lowest income levels, while Gen Xers are having a harder time with debt, making ends meet, and most aspects of overall financial planning.
Early and late baby boomers with minor children appear to be over-prioritizing college planning at the cost of their own financial security and leaving themselves very vulnerable to major catastrophic events as a result of not taking care of their own needs.
Liz Davidson, CEO and founder of Financial Finesse, says the report brought to light just how differently the characteristics of each generation impact financial behaviors and habits.
"When you look at the groups as a whole, you recognize that they are really dealing with issues stemming from perspectives and habits rooted in their generations," she said in a release. "Millennials entered the workforce during a time when it was 'cool' to be thrifty, Gen Xers lived in the shadow of the Boomers and have a generally cynical attitude toward achieving their goals, and Boomers, both late and early, are part of a generation that had everything tailored to their needs. This really creates a different set of issues as a result for each group."
Greg Ward, director of Financial Finesse's Think Tank and an 18-year veteran of the financial planning industry, says this is why it is crucial for financial professionals to reform their traditional approach to financial planning and adopt a new approach that targets younger generations' concerns.
"There is no one-size-fits-all formula to financial planning anymore," he says. "These younger generations, in a lot of ways, are relying on the industry to help them with what they don't know, and they need more targeted guidance that makes sense to the issues they face, not the ones their parents and grandparents dealt with. It's definitely time for society to recognize the specific financial issues of these groups."
Only 16% of early baby boomers and 10% of late baby boomers reported having a long-term care insurance policy even though the average cost of a private room in a nursing home is $90,520 a year according to the 2012 MetLife Market Survey of Long-Term Care Costs, making it one of the most significant threats to financial security in retirement.
Retirement planning remains the one issue all generations are most vulnerable in, even for late baby boomers that are on the cusp of normal retirement age. Within this group, 50% have not run a retirement projection, and only 25% know they are on target to retire comfortably.
While this is concerning, even lower numbers for younger generations could pose a greater threat considering that younger employees are less likely to receive full Social Security benefits and more likely to face higher taxes and inflation when they retire.
Davidson notes that the financial services industry hasn't typically recognized these differences, thinking of financial planning from a more analytical and technical perspective rather than relating to the different attitudes generations have about managing their money. This has been particularly costly to Gen Xers and Millennials, who are distinctly different than early and late baby boomers in terms of how they need to be approached.
There has been great emphasis on the significant challenges facing Boomers when it comes to retirement -- namely that more and more employees in this generation are being forced to delay retirement, or worse, are having to retire for health reasons with insufficient savings, but not enough emphasis has been placed on younger generations who are already struggling more than Boomers did at their age due to the recession, Davidson says.
"This is hugely concerning because there will be an even larger crisis if other generations, especially the Millennials who are now the largest generation in our history, cannot retire comfortably," she says.
(Source: Marketing Daily, 12/09/12)
||Many Farms Have Become Very Successful Small Businesses
The American farmer might not be as poor as you think.
Despite the common notion that family farms have fallen on tough times and been pushed out by big agribusinesses, tens of thousands of families in the United States actually run multi-million dollar farming operations that produce the majority of the nation's food.
While million-dollar independent farms aren't the norm -- there are many times more small farms that struggle to make ends meet -- these slightly larger farms have been able to take advantage of their size, more advanced technologies and the recent commodity boom to become very successful small businesses.
"Times have been pretty good," said Matt Schuiteman, who has 2,400 hogs and farms 2,500 acres in northwest Iowa with the help of his sons and a few hired hands. "We've been dealing with an environment where the price of all commodities has been going up."
Schuiteman's farm is one of over 50,000 nationwide that have gross sales of over a million dollars a year, according to the United States Department of Agriculture.
Lumping in farms with sales of over $250,000 a year, and these so called large-scale commercial farms represent just 10% of the country's farms but account for 82% of its overall food production.
"People, on average, that are running large commercial farms are making substantial amounts of money," said Jim MacDonald, an economist at USDA, noting their the average household income is over $200,000 a year.
What makes them so successful?
The biggest driver of their income is their ability to take advantage of their larger size. A farm with 300 dairy cows will produce ten times as much milk as a farm with 30 cows. But the barn to house those extra cows isn't ten times as expensive, nor is the equipment or the laborers to do the work. The payoff for more land is well worth the expense.
And these large independent farmers often have the means to supply the big food companies like Tyson Foods or Dole with their raw product.
Plus, farm subsidies from the federal government, which are doled out largely based on the output of the farm, are another advantage. Subsidies, which total about $14 billion a year, represent about about 5% of the gross cash income for all farms, according to USDA.
Large farmers also have the capital to put down on new technologies that smaller farmers can't afford, like GPS-guided tractors that drive themselves (and save fuel) and computer programs that monitor the health and productivity of livestock. They're often more savvy at using hedging strategies to protect against future uncertainties.
"I call it an information technology gap," said David Miller, an economist at the Iowa Farm Bureau who also has a 350-acre corn and soybean farm outside Des Moines.
With sales of about $200,000 a year and profits of about $50,000, Miller considers himself on the borderline between large and small operator. He makes decent money, but his tractor is 20 years old and does not have GPS.
It also helps that he farms corn and soybeans in Iowa -- two crops that are in strong demand in China and elsewhere.
Things are very different for Clark Hinsdale, a dairy farmer in northern Vermont.
With 300 cows and sales that usually top a million dollars a year, Hinsdale has a large commercial farm. But with the high price of corn to feed the cows and gasoline for the tractors, turning a profit has still been tough.
"Grain prices have virtually doubled," he said. "I think I'll lose money this year."
It's even harder for many of his neighbors.
The Northeast is home to many smaller commercial farms. These are the 30-cow, 200-acre operations that many consider "traditional farms." There are about three times as many of these smaller farms nationwide as there are the large farms.
Most of these farmers can no longer support themselves by working the farm alone. The average farm income for this group is about $8,000 a year, according to USDA. As a result, many have at least one family member take a job outside the farm as a primary means of income.
But even though they may not be money machines, the farming lifestyle is still attractive for a lot of people.
"We don't need the big pickup and the fancy tractor," said one Vermont dairy farmer. "We do it because we enjoy it."
(Source: CNNMoney, 11/27/12)
Daily Sales Tip: Overcoming Call Reluctance
Hesitation to make contact with prospective new clients causes more failures for salespeople than any other single factor. Why? Because if you don't approach enough people, it makes little difference how thorough your expertise is. Without a steady flow of prospects, your magnetic personality, credentials, product knowledge, and perfect presentations won't make much impact. Inactivity on the prospecting front nullifies your ability to engage these other strengths.
Successful selling usually involves five steps:
1. Identifying prospective clients (includes identifying referral sources).
2. Initiating contact with prospective clients and referral sources.
3. Introducing yourself, your products and your services.
4. Informing prospective clients of how you can help (giving your sales presentation).
5. Influencing the prospect's decision to buy from you.
Many salespeople are uncomfortable with steps 2 and 3, initiating and introducing -- but without them, informing and influencing can't happen! Ultra-professional presentation skills, dazzling rapport-building, detailed product knowledge and clever closes cannot and will not return a penny of profit if you don't have enough prospects.
The math is simple: Successful salespeople consistently initiate contact with more prospects than their less-than-successful counterparts.
Source: Sales coach/trainer Connie Kadansky