%1

The COVID-19 pandemic was supposed to deliver a knockout punch to department stores and specialty retailers. Instead, many of them are bouncing back healthier, the Wall Street Journal reported. Profits are exceeding 2019 levels at companies ranging from Macy’s Inc. M -2.71% to Ralph Lauren Corp. RL 2.36% Dozens of chains restructured through bankruptcy or worked to shed money-losing locations and now have stronger balance sheets. Even the supply-chain problems bedeviling companies have produced a silver lining: it has helped retailers break a cycle — at least temporarily — of overbuying and discounting that has eroded profits for decades, executives and analysts said. “We were carrying too much inventory for years,” Macy’s Chief Executive Officer Jeff Gennette said Thursday. “Through the pandemic, our opportunity to work through our stock and get in line with demand is a benefit we’ll hold on to going forward.” He said stocking fewer goods translates into less cluttered stores, which is a better experience for customers, and results in more full-priced sales. “It’s not pile it high and let it fly anymore,” Joanne Crevoiserat, CEO of Coach parent Tapestry Inc. said last week, referring to an industry maxim about selling large quantities of goods at low prices. Ms. Crevoiserat said Tapestry had begun reducing inventory even before the pandemic. “We’re not competing on price anymore,” she said.

Retail sales jumped 1.7 percent in October, according to data released Tuesday by the Census Bureau, beating expectations and rising for the third straight month, The Hill reported. U.S. retailers, restaurants and bars made $638.2 billion in sales last month without adjusting for inflation, up from $627.5 billion in September. Analysts expected a 1.4 percent increase from September, which saw sales grow 0.8 percent from August, according to revised figures released yesterday. The surprisingly strong month of retail sales is a promising sign for the U.S. economy amid high inflation and plummeting consumer confidence. While the labor market, wage growth, stock market and consumer spending have all held steady this fall, a 30-year high in consumer price growth has strained household budgets and turned public opinion against President Biden’s handling of the economy. Even so, the persistence of strong retail sales growth shows a willingness among consumers to power through what economists expect to be a temporary surge in inflation.

Federal Reserve officials said yesterday that they are vigilant of the ways that higher inflation can affect U.S. households and dampen consumer sentiment and want to get it under control, Reuters reported. While wages are rising for some workers, consumer sentiment is down to a "level that you might associate with a recession," said Richmond Fed President Thomas Barkin, citing the consumer sentiment survey from the University of Michigan. "I think that's very much because of the impact that prices have on people," including those who spend a significant part of their pay on food and gas, Barkin said during a virtual panel organized by the Fed. Atlanta Fed President Raphael Bostic said the central bank aims for low inflation because it doesn't want households to stress about rising prices. "That's one of the reasons why, you know, I think you've heard from all of us concerns about the higher levels of inflation that we've seen recently and the need to get that back under control," Bostic said. The Fed this month began to reduce the pace of its monthly asset purchases, the first step in scaling back the support offered to the U.S. economy during the pandemic. Fed officials would like to wind down the bond purchases before they raise interest rates. Some policymakers say that the Fed should be prepared to act in case inflation lasts longer than expected. St. Louis Fed President James Bullard, speaking earlier in the day, said the Fed should "tack in a more hawkish direction" over its next couple of meetings to be prepared in case inflation does not ease.

Inflation is hammering restaurants, dismantling the industry’s fragile recovery from pandemic-induced shutdowns just as customers resume dining out, The Hill reported. The price of produce, meat, oils and even non-food items like heat lamps and to-go containers has skyrocketed, saddling restaurants with unprecedented costs. And supply chain disruptions are making it difficult for smaller, independent restaurants to secure essential products in the first place. Surging prices and scarcity of goods — coming on top of severe workforce shortages and relatively weak demand for dining-out — has left restaurant groups appealing to Congress for help, warning of further negative impacts without another round of federal relief. The U.S. experienced the highest rate of inflation in three decades over the last year, according to Labor Department data released last week. The price of groceries rose by 5.4 percent year-over-year, with the largest increase — 11.9 percent — coming among meats, poultry, fish and eggs. Restaurant owners say they’re dealing with even larger increases for some wholesale products in recent months, costs that are passed on to customers. Prices at full-service restaurants rose by 5.9 percent over last year, the largest annual increase on record.

With its revenues slashed in half by mandatory store closings in 2020, Solstice Sunglasses sought bankruptcy protection. It now has been able to emerge from chapter 11 with fewer shops and smaller rents, ChainStoreAge.com reported. RCS Real Estate Advisors reports that it was able to help Solstice pare its real estate portfolio and reduce rents by 2/3 in the stores the chain kept. “We believe in Solstice’s future because we now have turnaround plan to remain one of America’s leading purveyors of sunglasses,” said Solstice CEO Mikey Rosenberg. “There’s room in the market for a retailer that makes it convenient and more affordable to buy luxury eyewear." Solstice stocks top designer brands such as Dior, Gucci, Jimmy Choo and Givenchy, ranging in price $135 Carrera aviators to $875 Dita navigators. It currently operates 40-plus stores, primarily on the East Coast and in California and Texas and runs an online business.

Companies are paying higher wages, spending more for materials and absorbing record freight costs, pushing up economic inflation gauges. They are also reporting some of their best profitability in years, the Wall Street Journal reported. Executives are seizing a once in a generation opportunity to raise prices to match and in some cases outpace their own higher expenses, after decades of grinding down costs and prices. Industries from retail and manufacturing to biotech have seen their profits rise. Other industries, largely those still climbing out of pandemic lockdowns, such as travel, or those too weighted with inflationary costs, have raised prices but not experienced a profit boost. Nearly two out of three of the biggest U.S. publicly traded companies have reported fatter profit margins so far this year than they did over the same stretch of 2019, before the COVID-19 outbreak, data from FactSet show. Nearly 100 of these giants have booked 2021 profit margins — the share of each dollar of sales a company can pocket — that are at least 50% above 2019 levels.

Truck drivers have been in short supply for years, but a wave of retirements combined with those simply quitting for less stressful jobs is exacerbating the supply chain crisis in the U.S., leading to empty store shelves, panicked holiday shoppers and congestion at ports, the New York Times reported. Warehouses around the country are overflowing with products, and delivery times have stretched to months from days or weeks for many goods. A report released last month by the American Trucking Associations estimated that the industry is short 80,000 drivers, a record number, and one the association said could double by 2030 as more retire. Supply-chain problems stem from a number of factors, including an extraordinary surge in demand for goods and factory shutdowns abroad. But the situation has been compounded by a shortage of truckers and deteriorating conditions across the transportation sector, which have made it even harder for consumers to get the things they want when they want them.

Retailers, expecting the holiday shopping season to be bustling once again this year after being upended by the coronavirus in 2020, are scrambling to find enough workers to staff their stores and distribution centers in a tight labor market, the New York Times reported. It is not proving easy to entice applicants to an industry that has been battered, more than most, by the pandemic’s many challenges, from fights over mask-wearing to high rates of infection among employees. Willing retail workers are likely to earn larger paychecks and work fewer hours, while consumers may be greeted by less inventory and understaffed stores. Macy’s is offering referral bonuses of up to $500 for each friend or family member that employees recruit to join the company. Walmart is paying as much as $17 an hour to start and has begun offering free college tuition to its workers. And some Amazon warehouse jobs now command signing bonuses of up to $3,000. While some of the most generous perks, like tuition reimbursement, are being offered mainly to long-term workers, even seasonal workers will see higher pay than usual. It’s especially critical for retailers to hire temporary help this year because existing employees are already strained from nearly two years of pandemic conditions. The National Retail Federation, an industry group, is anticipating record holiday sales and has forecast that retailers will hire 500,000 to 665,000 seasonal workers, significantly more than the 486,000 in 2020.

24 Hour Fitness Worldwide, Inc. and Equinox Holdings Inc. are pursuing out-of-the-box ways to raise cash from investors, as the gym franchises manage through a prolonged downturn catalyzed by the COVID-19 pandemic, WSJ Pro Bankruptcy reported. After burning through much of its cash this year, 24 Hour Fitness in October agreed to borrow up to $70 million in a transaction that will help the company fund its operations into next year. The company didn’t project that it would need additional capital when it exited bankruptcy late last year, according to court filings. Privately owned Equinox is also low on cash to fund operations, with $39 million on its balance sheet as of June 30 and cash burn from its operations averaging $46 million a quarter during the first half of this year, according to a quarterly earnings report. It also made less from membership fees in the first six months of 2021 than in the same period in 2020, despite the reopening of a majority of its clubs, the report showed.