EPISODE 4
In the latest Simon SumUp, Founder and CEO Joshua Simon talks retail's holiday cheer, sings a different tune when it comes to tax cuts (yes, he's literally singing), and touches on how the construction labor shortage is impacting less-educated worker wages.
THREE TAKEAWAYS
1) It was a merry and bright holiday season for retailers
According to a recent report by the National Retail Federation, holiday sales in November and December increased 5.5% over 2016, marking the largest year-over-year gain since 2010.
Consumers were out earlier this year, with one analyst now deeming November as “Black November”. Sales in the first three weeks of November came in 18% higher than they were in the same period of 2016. Overall, Black Friday and Super Saturday (December 23) were the two biggest shopping days of the year.
Great deals, the right inventory, and improved customer experiences, combined with a healthy economy and improved consumer confidence led to the successful season.
Stock prices rose double digits for many retailers, including Kohl’s (19%), Macy’s (21%), and Target (17%) over the holiday period. The biggest category winners in terms of sales bumps were furniture and home furnishings (7.5%), electronics and appliances (6.7%), and general merchandise stores (4.3%).
2) What tax cuts mean for the retail industry
Tax reform was the most important policy goal for retailers in recent years. That’s because retailers have paid one of the highest corporate tax rates - in some cases as high as 39%.
The new tax plan will cut that rate nearly in half, down to approximately 21%.
Some of the retailers expected to see the greatest impact of the lowered tax rate are: Gap, Nordstrom, Restoration Hardware, Dick’s Sporting Goods, Williams-Sonoma, and Ulta (all from the high 30s).
For some industries struggling with changing marketplaces and slim profit margins, such as food, beverage, and consumer products, the tax cuts will allow them to invest more in their companies and employees.
For consumers, the plan will put money back into wallets. Between the individual rate cuts and the potential wage increases, consumers will have more discretionary income, boosting demand for goods and services.
3) Construction costs, less-educated worker wages rising
One of the biggest concerns for the construction industry in the last few years has been the ongoing skilled-labor shortage.
Demand for workers continues to rise in the face of continued development, yet there are 11% fewer workers today than before the Great Recession.
A shortage of workers coupled with the fact that 75% of surveyed construction firms plan to add to their payrolls in 2018, and the industry is going to see a rise in pay rates. In fact, 60% of those surveyed firms already reported increasing base pay to meet demand.
What does that mean for less-educated, less-skilled workers? Higher wage growth than their more-educated counterparts.
To end 2017, median weekly earnings for workers 25 years and older with only a high-school diploma rose 2.3% from the same time last year. Those with a bachelor’s degree, saw just a 0.8% increase in wages.
So, look for an increase in construction costs as well as projects getting shelved, or at least a slowdown in development, in 2018.
