The year 2014 may be remembered as the year the economy started to rebound.
Stocks soared, fuel prices fell and Americans started to spend money again. So why did Family Stores Inc. feel the pinch? The mega-dollar chain, which is vying to acquire Dollar Tree for $8.5 billion, reported profits in the most recent quarter fell to $41.4 million, compared to $78 million a year earlier?
Family Dollar says margins were squeezed due to a strategic shift, transitioning from a more promotional model to one that depends on everyday lower prices. In addition, the average ring fell slightly, by 0.4%.
The timing of Family Dollar’s mediocre performance was less than ideal. The news comes after its shareholders for the second time pushed back a vote on Dollar Tree, which has allowed the third of the Big 3 dollar chains, Dollar General Corp., to seduce Family Dollar with a $9.1 billion offer. In short, Dollar General is trying to buy Family Dollar, which is trying to buy Dollar Tree. Get it?
J.C. Penney Co. opened 2015 by saying it will close 40 stores, representing roughly 4% of its 1,060 sites, over the next year.
While hemorrhaging of the retail chain has slowed dramatically, the company continues to struggle for a winning long-term strategy.
“We continually evaluate our store portfolio to determine whether there’s a need to close or relocate underperforming stores,” company spokesman Joey Thomas told Masslive.com. “Reviews such as these are essential in meeting our long-term goals for future company growth.”
So my dollar store is struggling, my department store is closing … Let’s grab a Big Mac!
But hang on a second: McDonald’s is sticking to its new year’s resolution to trim down—with a leaner company. It’s cutting $100 million, including laying off 63 people at its headquarters in Oak Brook, Ill., following a long sales slump.
Yet McDonald’s isn’t just merely trying to cut the fat; it’s also investing in digital and new restaurant platforms, including the Create Your Taste concept, which will expand from a pilot to 2,000 locations this year. It lets hungry patrons customize burger and chicken sandwiches through in-store digital kiosks. Also, McD’s is eliminating eight items from the menu and simplifying ingredients. Let’s hope these moves help. It’s been more than a year since the company reported growth.
Are you bent on Brent?
The new year began with a shocker: The price of Brent crude oil fell below $50 a barrel for the first time since May 2009. With a barrel of light, sweet crude plunging to $48, Big Oil heaved as motorists were pleased.
Across much of the country, street prices fell below $2—quite a surprise to those accustomed to sticker shock and good news for c-store operators who are benefiting from higher in-store rings.
Big Oil isn’t so happy. Companies such as ExxonMobil, Shell and BP are re-evaluating costly new drilling investments, uncertain if oil prices will soon recover.
“With no sign that OPEC will do anything about overproduction, it seems likely that we could well see further declines toward $40 in the coming weeks,” said CMC Markets analyst Michael Hewson.
Tight Savings
A recent survey by personal-finance website Bankrate.com presents a frightening picture of just how fragile our nation’s economic recovery is.
- 62% Percentage of Americans with no emergency savings.
- 39% Percentage of Americans with a “rainy day” fund to cover three months of expenses.
- 48% Amount who could cover a $400 emergency expense without borrowing or cutting regular spending.
- 82% Amount who kept a household budget, up from 60% in 2012.
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