| Retail Sales Cannibalization Posted: 24 Jan 2014 07:40 PM PST Retail firings continue. Today, Wal-Mart announced a 2% Reduction in Sam's Club Employees to thin middle-manager ranks. Wal-Mart Stores Inc. (WMT) is laying off about 2,300 employees at its Sam's Club warehouse unit to help thin the ranks of middle managers in its weakest stores, marking the club chain's biggest round of job cuts in four years.
Nearly half the job cuts at Sam's Club will target salaried assistant managers, and the remainder will be hourly employees at underperforming stores.
"Over the years, we've migrated to a top-heavy structure in our management," said Sam's Club Chief Executive Rosalind Brewer, in an interview. "What this does is align the number of assistant managers to the sales of the club and to where our growth areas are."
The cost-cutting moves come as Ms. Brewer aims to better compete with brick-and-mortar rival Costco Wholesale Corp. (COST) as well as to take on online membership clubs like Amazon.com Inc. (AMZN) Prime service. She seeks to double revenue and turn it into a $100 billion business, roughly the size of Costco. J.C. Penney Cutting 33 Stores and 2,000 JobsThe Sam's Club cuts are fresh on the heels of this announcement: J.C. Penney cutting 33 stores and 2,000 jobsJ.C. Penney Co. is attempting to right-size itself by closing 33 under-performing stores around the country and eliminating 2,000 positions, the retailer said Wednesday.
The Plano, Texas, company said it hopes the effort will save $65 million a year beginning this year.
Units getting the ax will finish shutting down in early May. Macy's to Lay Off 2,500 Employees Also recall this announcement earlier this month: Macy's to Lay Off 2,500 Employees Amid Cost-CuttingIn the same breath as it announced a "successful" holiday season, Macy's Inc. said it would lay off some 2,500 employees as it attempts to achieve $100 million in savings a year.
In addition to the workers losing their jobs, some associates will be reassigned or transferred, the retailer said. Not all open positions will be filled. Customer CannibalizationLet's now return to the lead story, Sam's Club. " CEO Brewer aims to better compete with brick-and-mortar rival Costco as well as to take on online membership clubs like Amazon Prime service. She seeks to double revenue and turn it into a $100 billion business, roughly the size of Costco." Is that remotely possible? If so how? The only way it is possible is via reducing prices and costs to the bare bone and taking customers away from Amazon, Macy's, J.C. Penny and its own parent company, Wal-Mart. The deflationary repercussions are enormous. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Emerging Market Contagion Spreads; Argentina, Venezuela, Turkey Roundup; 50% Tax on Internet Purchases Posted: 24 Jan 2014 11:02 AM PST Argentina Institutes 50% Tax on Internet Purchases; Emerging Market Contagion Spreads; Argentina, Venezuela, Turkey Roundup Yesterday, Argentina devalued the Peso hoping to halt further declines in its currency reserves. Markets had seen this coming as charts of the Peso vs. the US dollar show. Peso vs. US Dollar One Week Peso vs. US Dollar One Month Peso vs. US Dollar Five Years In the past 12 hours the peso fell as low as 8.164 to the dollar but currently sits at 7.164. Using the current close of 7.164 as our reference, here is a summary. - In the last week the peso fell from 6.643 to 7.164.
- In the last month the peso fell from 6.362 to 7.164.
- In the last five years the peso fell from 3.07 to 7.164.
The 5-year decline is over 50%. Emerging Market Contagion SpreadsBloomberg reports Contagion Spreads in Emerging Markets as Crises GrowThe worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve's tapering of monetary stimulus, compounded by political and financial instability.
The Turkish lira plunged to a record and South Africa's rand fell yesterday to a level weaker than 11 per dollar for the first time since 2008. Argentine policy makers devalued the peso by reducing support in the foreign-exchange market, allowing the currency to drop the most in 12 years to an unprecedented low.
Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.
"The current environment is potentially very toxic for emerging markets," Eamon Aghdasi, a strategist at Societe Generale SA in New York, said in a phone interview yesterday. "You have two very troubling things: uncertainty about the Fed policy, combined with concerns about growth, particularly in China. It's difficult to justify that it's time to go out and buy emerging markets at the moment."
Venezuela Reserves
In Venezuela, the government devalued its currency for airline tickets and incoming foreign direct investment on Jan. 22. International reserves are at a 10-year low.
Turkey Reserves
The lira plunged to a record 2.3224 per dollar and also declined to an all-time intraday low of 3.2069 per euro. Turkey's central bank refrained from raising benchmark rates this week, fueling concern that it will be difficult to finance current-account deficits.
Turkey holds about $33 billion in foreign reserves, excluding deposits from commercial banks, only enough to cover 1 1/2 months of imports, according to Citigroup Inc. Argentina DevaluationYesterday, Bloomberg reported Argentina Devaluation Sends Currency Tumbling Most in 12 Years50% Tax on Internet PurchasesThe BBC reports Argentina restricts online shopping as foreign reserves dropArgentina has introduced new restrictions on online shopping as part of efforts to stop foreign currency reserves from falling any further.
Anyone buying items through international websites will now need to sign a declaration and produce it at a customs office, where the packages have to be collected. The procedure will need to be repeated for every new purchase.
Argentina's reserves of hard currencies dropped by 30% last year.
The government of President Cristina Fernandez de Kirchner has introduced a number of restrictions on transactions with foreign currency.
Items imported through websites such as Amazon and eBay are no longer delivered to people's home addresses. The parcels need to be collected from the customs office. Individuals are allowed to buy items up to the value of $25 (£15) from abroad tax free every year. Once the $25 level is reached, online shoppers in Argentina need to pay a 50% tax on each item bought from international websites.
One resident of Buenos Aires, who gave his name as Martin, described the tax as "crazy".
But he told the BBC: "The real problem is that the item is received in customs now instead of at your home. Each time you go to customs, you need to spend three or four hours. Food Price ControlsEarlier this month, Reuters reported Argentine peso at new lows as food price controls take effectArgentina's peso slid to an all-time low on Tuesday as supermarkets froze prices in a deal with the government aimed at shielding poor families from one of the world's highest inflation rates.
The year-long price fix on 200 basic food products signals continuation of President Cristina Fernandez's interventionist policies even as polls show her image has been battered by 25 percent inflation, falling reserves and electricity shortages.
Tight currency and trade controls, as well as last year's state seizure of Argentina's top energy company YPF have taken a toll on confidence, while the electricity grid, ailing from lack of investment, fails to keep air conditioners humming at the height of the Southern Hemisphere summer.
The supermarket price freeze is the biggest policy move yet by fledgling Economy Minister Axel Kicillof, a leftist academic appointed in November.
Widely discredited official figures put inflation in the 12 months through November at 10.5 percent, while private economists say Argentine inflation is running at more than 25 percent annually.
Argentina is meanwhile struggling to attract the tens of millions of dollars it needs to develop its Vaca Muerta shale formation. Lying beneath the Patagonian plains, the Vaca Muerta (Dead Cow) field is estimated to hold 661 billion barrels of oil and 1,181 trillion cubic feet of natural gas.
It could be one of the biggest formations of its kind in the Western Hemisphere. Black Market Purchases Will SoarPrice controls and currency pegs at ridiculous rates cause black markets. With the additional 50% tax on online purchases, expect black market trade to soar. Ag ConnectionArgentina gets what little foreign reserves it has, being the number 3 soybean and corn supplier, as well as its top provider of soymeal animal feed and soyoil, used in biofuels. Soybean Monthly Chart Corn Monthly Chart Soybean prices are still well above the 2009 lows, but are also far below the highs of a year ago. The price of corn is far below the highs of a year ago, and nearing the 2009 lows. These trends are heightening the already huge problems of emerging market exporters. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Anecdotes From Home Depot Employee Posted: 24 Jan 2014 09:19 AM PST In Target Drops Healthcare Coverage for Part-Time Workers I implied Target was disingenuous in its claim it would not reduce hours because of Obamacare. No Reduction in Hours?
Target claims there will be no reductions in hours worked. The only way I believe that is if Target already reduced hours, well in advance.
The huge, ongoing discrepancy between Household Survey employment, and the Establishment Survey jobs report suggests just that. Although I do not have proof or even anecdotes from Target employees, I did receive an interesting email from "Pat", a Home Depot worker. Hi Mish,
As a part-time employee of Home Depot (HD) for almost eight years now, I can affirm that every part-time worker at HD has had a cap of 29 hours placed on their work schedules. This occurred over a year ago, with no fanfare or announcement. Before the change we part-timers could count on more than 30 hours during the busy spring and summer months. Full-time jobs are only available if someone leaves the store, and sometimes not even then.
Although the store I work at seems to be doing well if one looks at sales (rewards are based on 1/2 year performance), it does not 'feel' like it is doing well...and I have not been able to determine exactly what has changed.
As a relatively new subscriber to your blog it has been good to read of what is going on economically around the globe. Much of what you highlight is not mentioned in the media I follow, so it fills a gap. Thanks!
Pat One email from one reader is not proof of anything. Heck, anecdotes in general do not constitute legitimate data. That said, I have received stacks of similar emails over the past year, all saying the same or similar thing. I even received an email from the owner of 50-store regional chain who said he was going to reduce hours (because he had to). Yet, Obama and mainstream media do not see (or admit) this happened. I maintain there is genuine supporting data for my thesis. For details, please see Employment vs. Jobs Discrepancy - December 2013 Data. Inquiring minds should also be interested in a related post Tsunami of Retail Store Closings and Downsizings Coming; Expect Layoffs and Shorter Hours. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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