Employment Report story

It turns out that everyone who ever told you to “get an education,” was onto something.

Individuals 25 and older with a bachelor’s degree or higher were far more likely to be employed in October 2012 than those who did not, according to the latest Employment Situation report released by the Bureau of Labor Statistics.  For those without a high school diploma, October was an even tougher month than September.

Only 3.8 percent of college graduates were unemployed last month, down from 4.1 percent in September, according to the report.  In October 2011, the unemployment rate for college graduates was 4.4 percent.  For those with some college experience, or an associate’s degree, the rate was 6.9 percent in October, higher than it was in September, when the rate was 6.5 percent, though still improved from a year ago, when the rate was 8.2 percent.

Having at least some college experience is the way to be below the national unemployment rate of 7.9 percent, according to the bureau’s statistics.

Those with a high school diploma, but no college experience, had an unemployment rate of 8.4 percent, while those without a high school diploma or equivalent had a rate of 12.2 percent.  In September, the rate of unemployment for those without a high school diploma was 11.3 percent.  In October 2011, the rate was 13.8 percent.

The Department of Labor’s Bureau of Labor Statistics releases its Employment Situation report each month.  The unemployment rate is determined through a survey of approximately 60,000 individuals, and carried out by the U.S. Census Bureau.

Alternate Lede for "Japan's Economy Contracts in Third Quarter"

Japan's gross domestic product decreased 3.5 percent in the most recent quarter, according to data released Monday.  With the country's consumption, exports, and business investments all in steep decline, a recession could be on the horizon.

Start of a Market Story

The U.S. market entered the weekend on a downward slide.  At the close of Friday, the Dow was down 139.46 points to 13,093.16, while the Standard & Poor’s 500 had dropped 13.39 points to 1,414.20.  Of major indices, the New York Stock Exchange Energy Index saw the biggest downturn, falling 1.39 percent to 12,570.23.  The energy index is comprised of such companies as Exxon Mobile Corp., Chevron Corp., BP Plc., and more than 150 other leaders in oil and gas.

Three Possible Stories Based On the Costco Earnings Statement

Story #1

Compare and contrast with how Sam’s Club and BJ’s Wholesale are doing.  Especially in area of membership as Costco seems to be doing well there.

Story #2

Dive into Costco’s operating costs…if profit is up 27%, but revenue is only up 14%, then it must be doing something right on the costs side of things.  What is it they’re doing?

Story #3

How much does the average person spend at Costco?  How often does the average person go to Costco?  Does Costco supplement, or replace, the more “traditional” supermarket for most customers?   Once the answers to these questions have been obtained, how is this reflected in the earnings statement?

Three Earnings Stories

Earnings Story #1: Costco

            Costco Wholesale Corporation finished its fiscal year strong with its largest profit increase of the past 12 months.

The Washington-based membership warehouse club last week reported a 27% increase in fourth-quarter profit to $609 million from a year earlier.  Revenue grew 14% to $32.2 billion.

The company’s fourth-quarter success was powered in part by its continued growth in revenue generated by Membership fees.  Membership fees saw a 17% increase from last year, while revenue generated from sales saw a 14% increase over the same time period.

“In terms of Membership, we continue to benefit from strong renewal rates rounding up to 90% [in] U.S. and Canada and worldwide, 86%,” said Costco’s Chief Financial Officer, Executive Vice President, and Director Richard A. Galanti in an earnings call held a week before the release of the company’s annual report.  “We continue to experience increasing penetration of the executive membership,” he added.

Executive membership is Costco’s highest membership level, according to the company’s website, and costs $110 and must be renewed annually.  Unlike the company’s Gold Star membership ($55), Executive membership includes additional savings, and a “household card,” which is available to any member’s spouse or immediate family member over the age of 18.

Costco opened in Seattle in 1983, and has grown to include warehouse locations across the world.

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Costco Quarter Four Earnings/Revenue

                        Q4 2012                      Q4 2011

Earnings:        609m                           478m               = 131/478 = 27% increase

Revenue:

Sales:               31,524                         27,588

Membership:   694                              590

Total:               32,218                         28,178             = 4040/28178 = 14% increase

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Earnings Story #2: Target

            Target Corporation reported no growth in second-quarter profit last August, staying steady at $704 million in earnings.

            The Minneapolis, Minnesota based retailer did report a 3% increase in revenue from a year earlier, rising from $16.2 billion to $16.7 billion.

            A 4% rise in the cost of sales, or, the cost of producing its products, as well as rises in selling, general, and administrative expenses helped account for the lack of profit growth despite the bump in revenue.

             The company’s 3% revenue growth is entirely attributable to a nearly 4% growth in sales, as the retailer experienced a 0.5% decrease in revenues from Target credit cards from a year earlier.

            It’s no surprise then that Target announced this week it would be selling its credit card portfolio to TD Bank Group at “face value,” according to a report in Minneapolis’ “Star Tribune” newspaper.

            “There’s no question the portfolio is performing well,” Terry Scully, Target’s president of financial and retail services, told the paper.  “But we are a retailer.”

            The company’s second-quarter sales growth confirms that retail is in fact where Target’s strength resides.

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Target Quarter Two Earnings/Revenue

Q2 2012                      Q2 2011

Earnings:        704m                           704m               = 0/704 = 0% increase

Revenue:         16,779m                      16,249m          = 534/16,240 = 3% increase

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Earnings Story #3: McDonald’s

            McDonald’s Corporation’s second-quarter earnings dropped 4.5% to $1.3 billion, from a year earlier, according to the company’s quarterly report released last August.  Revenue grew 0.2% to $6.9 billion for the same period.

            Revenue growth for the fast food giant is attributable to revenue generated by its franchised restaurants, which saw a 1.6% gain from a year earlier.  Revenue generated from sales by company operated restaurants actually fell 0.5%.

            “We view ourselves primarily as a franchisor,” the company wrote in its quarterly report, “and believe franchising is important to delivering great, locally-relevant customer experiences and driving profitability.”

            Revenues collected from franchised restaurants include rent and royalties, according to the report.

            A rise in McDonald’s operating costs and expenses are partly to blame for the dip in earnings for the quarter.  Tellingly, there was a 5% increase in selling, general, and administrative expenses, to $617 million from a year earlier.

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McDonald’s Quarter Two Earnings/Revenue

Q2 2012                      Q2 2011

Earnings:        1,347.0m                     1,410.2m         = 63.2/1,410.2 = 4.5% decrease

Revenue:         6915.9m                      6905.4m          = 10.5/6905.4 = 0.2% increase

Rada Boutique and Upscale Consignment #2

It isn’t every day that a small business owner tells a customer not to buy something.  But for Rada Frohlichstein, owner of Rada Boutique and Upscale Consignment located at 394 Main St. in downtown Wakefield, sometimes doing just that makes good business sense.

Take the customer who came in one day looking for a new top.  The customer had a date that night, and she said she “needed” a white lacey top to wear.  What she’d forgotten, but Frohlicstein remembered, was that she already had such a top.  She’d bought it at Rada a year earlier.

“Oh my God,” the customer said.  “I forgot all about it.”

Frohlichstein may have lost a sale that day, but the customer would be back.  She bought some jewelry on her return trip, Frohlichstein recalled at the shop last Friday.

So why didn’t Frohlicstein just let the customer buy the top?

Because if she did, then the customer would be wasting her money, she said, and that’s no way to keep people coming back.

“You lose it [the sale] for one day,” Frohlicstein added, “but you gain so much more by being honest with your customer.”

Of course Frohlicstein doesn’t just talk customers out of buying things; she makes actual sales as well.  Rada averages about $500 a day in sales, Frohlicstein said.

Prices at Rada vary, with boutique items priced as low as $8 and as high as $228.  The range for consignment, or used, items is even greater, with merchandise going for as little as $5, and as much as $1,500.  Chanel bags and Christian Dior fur coats are the items found at the high end of the consignment price range, Frohlicstein said.

The folks at Rada pride themselves on making sure customers know how to work their new purchases into their many different looks.  It’s not just about selling their customers clothes, Frohlicstein said; it’s about “dressing” them.

“That’s what’s cool here,” Debbie Luisi, Frohlicstein’s longtime friend who helps at the shop on an as needed basis, said at the shop a few weeks ago.  “You know everyone that comes in.  We know their sizes.  You know what they like.”  When a new piece of clothing comes in that matches a particular customer’s style, Luisi noted, they’ll hold it for that customer.  It’s all part of knowing their customers and understanding these customers’ individual styles.

Given this commitment to “dressing” her customers, does Frohlicstein ever talk customers out of buying clothes she doesn’t think look good them?

“God yes,” she said, and gave an example of a woman who wanted to buy a jumpsuit that was about three sizes too small.

Frohlicstein worked harder that day to not make a sale than she’s ever worked to make a sale, she said.  She assured the customer that she could order a better size, and in the end, she succeeded in talking the customer out of the purchase.  But only temporarily.

“Three days later she came back when I wasn’t here and bought the suit,” Frohlicstein laughed.

Well, she tried.