Home Depot focuses on Retailing

Results Better Than Expected

Home Depot's better than expected results, given the fact that the economy really isn't growing, shows that the management focus on it's core retailing base is starting to pay off. The forays away from the core home retailing business are over.

The home improvement and "DIY" sectors of the economy have taken a big hot, along with the housing market and decrease in home values. People are fixing what needs repaired or replaced, but really aren't, in most markets, making the big home improvement purchases right now.
Lowes and other home improvement retailers and suppliers are all experiencing the downturn in the housing market firsthand.

There's too much uncertainty in the future course and timing of economic recovery for people to feel comfortable about big discretionary expenditures. So, going back to the basics of good service and knowledgeable associates to assist their customers will pay off in the long run. Working on improving the in store experience for their customers is a great strategy.

They have closed the Expo design centers, are serious about cost controls, and management is really concentrating on being the best home improvement retailer they can be. As long as they continue to look at efficiencies and increasing per square foot sales, the things HD’s management can control, it bodes well for future results.

As long as they stay focused on that very worthwhile goal, HD will come through the balance of the recession poised for renewed growth.

Crude Oil flirts with $70 a Barrel before falling back

Done for the Examiner.com Sunday June 7

Crude Oil broke through the $70 a barrel level for a while on Friday, before falling back to $68.44, down 37 cents for the day. Prices are steadily moving higher, and as the economic recovery seems to be taking shape, the market is betting on energy going higher as activity picks up.

Natural gas Futures are up; Heating Oil and Gasoline are heading higher, consumers see first hand when they fill up at the gas pump that the overall outlook for energy prices is bullish. Multiple studies are suggesting we will see $85 a barrel oil this year.

A strong dollar move Friday contributed to Crude prices falling back, but on the whole, it looks as though Crude has plenty of room to move higher. The big question is; what does this do to the potential for recovery, not just here in the US, but worldwide? Most of the “Big Engines” in the worldwide economy are net oil importers, so it’s bound to create a drag on growth.

US consumers were just getting used to lower prices for gasoline, heating oil and natural gas, will the price shock send them back to hiding from all but the most necessary spending? The US economy needs consumers to feel good moving forward to get spending rolling again, while sentiment is up right now, it won’t take many weeks of $3.00/Gal gasoline to end that feeling.

As the summer driving season rolls in, tourism interests have to be feeling a bit nervous. What will increased costs do to traditional “Summer Vacation” destinations like Orlando and Seaside resorts?

Well, Oil seems like it’s going to go higher. Had the worldwide economy not been in a serious recession, it’s wise to think it never would have gone down below where it is right now. As growth picks up, energy costs are bound to rise.

Gasoline up 47 cents a gallon since Easter

Published in the Examiner.com


The report released yesterday by the Energy Information Administration (EIA) shows gasoline, on average, has gone up 47 cents a gallon since Easter. Oil hit a 7 month high at close of trading yesterday. As economic uncertainty recedes, energy prices are heading back up.

While not close to the historic levels of last year, this price climb with the world economy not yet back to growth mode means energy costs to the consumers, and the fortunes of oil and natural gas companies, are going to continue up. OPEC is saying they would be comfortable with $70-$75 per barrel oil, and we are heading back there right now.

US domestic exploration and production had slowed down after the large price drop for Oil and Natural gas last year, but the firming market makes US domestic supply plays look like a good bet moving forward.

For the motorist, this means more expensive fill-ups are going to remain a fact of life. Had the US and worldwide economies not contracted over the last 9 months, the price respite we just received as drivers never would have happened. Heating Oil customers should be budgeting for higher prices over the winter.

The world is still a hydrocarbon based energy consuming system, and it will be for quite some time, so as demand ramps back up with the increase in economic activity, so will oil and Natural Gas prices. Can the fledgling economic growth trend sustain itself in the face of higher prices for Oil, Natural Gas, and Energy in general? How much of the economic slowdown of the last year was caused by higher energy prices?

This summer will an interesting test of those questions, as well as the resiliency of motorists in the face of climbing gasoline prices.

Starbucks asking for Rent Reductions Good First Move

Source Article: Starbucks Pushing Landlords for 25% Cut in Cafe Rents | www.bloomberg.com (view article)

Implications:
1) Cost reductions pay off every month over term of lease

2) Opportunistic move or readying for Market Share battle?

3) Cost Reduction good Defence, what about adjusting to competition.

Analyis:

As reported, numerous landlords have received letters from Starbucks asking for rent reductions of between 20 and 25%. This is a good tactic, and the resulting reduced costs are good for operating results every month.

My question is, is this an opportunistic way to reduce overhead, and admission that they were paying too much for sites when times were better, or are they getting ready to defend market share, as the QSR's lead by McDonald's and Dunkin Donuts, takes a bead on the market Starbucks has dominated for so long? Maybe a combination of the three.

The rent reduction initiative is a good defensive move, but is just another admission that the "Fat times" are over for Starbuck's unless this move is followed up with some "offense."

In other words, pushing back in a big way against the Fast feeders coffee push. Otherwise, at some point, Starbucks will hit the point where a reduced market share cannot be covered by cutting costs.

Innovative advertising, a new food product or two, sharper pricing and promotions, and a real competitive challenge to the upgraded competitors are the real key to long term survivability for Starbucks.