Spending survey: Expect record web sales this holiday season

Retailers could see record web traffic this year, according to Deloitte's 31^st annual holiday survey of consumer spending intentions and trends.

Among the findings from the 2016 study:

The Internet gallops ahead as the top shopping destination

• More consumers than ever before plan to shop online.
• Half (50 percent) of survey respondents plan to shop online for gifts, giving the Internet a bigger lead than ever over discount/value department stores (43 percent), which rank as the No. 2 destination for gift shopping.
• This rise in web traffic could bring retailers more cheer from their e-commerce sales. Survey respondents anticipate they'll spend 47 percent of their budget online – matching what they plan to spend at physical stores for the first time. In prior years, people planned to spend more in the stores.
• Online shopping may also take some share from physical store categories big and small. Fewer people surveyed plan to visit standalone "big box" retail stores, dropping from 63 percent to 59 percent this year; traditional malls fell slightly from 53 percent to 50 percent, and independent stores not in a mall dropped four percentage points to 38 percent.

Consumers upbeat about economy and cash flow, but will rein in non-gift holiday spending

• Most households surveyed remain positive about the U.S. economy's prospects and continue to report improving finances. The majority (88 percent) expect the economy to improve or remain the same in 2017. Three-quarters (75 percent) indicate their household financial situation is the same or better than the prior year, up from 58 percent five years ago.
• Holiday shoppers plan to purchase an average of 14 gifts this year, on par with 2015, and will spend an average of $426 on gifts and gift cards.
• After four years of rising non-gift spending intentions, respondents are starting to rein in the amount they plan to put toward these categories. Holiday travel and dining out, entertaining, non-gift clothing for themselves or families, home/holiday furnishings and decorations, and other miscellaneous holiday purchases total $572 in this year's survey.
• Overall, people surveyed plan to spend an average of $998 on the holidays this year. Despite the ubiquity of the current presidential race, most shoppers (73 percent) say they do not think the election will impact their holiday spending.

Online and in-store channels becoming kindred spirits

• Two-thirds (66 percent) of respondents expect they'll be "webrooming," looking at items online before making a purchase in a store.
• Half (50 percent) of shoppers responding will take part in "showrooming" by going to a store to look for an item, then searching online for the best price and making their purchase there instead of the store.
• More than four in 10 (43 percent) shoppers surveyed expect they will use retailers' "buy online, pick up in store" feature.
• This year's survey also showed an increase in the number of shoppers who plan to research via mobile phone: More than half of smartphone owners using their devices for holiday shopping say they plan to shop or browse online (56 percent), read reviews (51 percent) and get product information (50 percent) – all increased from last year.
• While research still trumps purchases on smartphones, mobile transactions are gaining ground. This holiday season, 43 percent of smartphone owners surveyed expect to make a mobile purchase, up from 35 percent last year.

"The way people shop online is having a profound impact on holiday spending this year," said Rod Sides, vice chairman, Deloitte LLP and U.S. retail, wholesale and distribution practice leader. "Retailers must cater to that digital mindset long before someone walks into a store. If retailers treat online and in-store shopping as mutually reinforcing rather than competitive forces, they can create more opportunities across the business. Customer expectations are being shaped as much by the digital experience as the in-store experience. As a result, retailers should map digital features that matter to the consumer to their brand."

Sides added, "Retailers may also find that while consumers uphold the spirit of gift-giving, people may not feel the need to indulge on themselves as much this year. We saw a lot of replenishment in non-gift categories over the last few years, and that may be starting to cool off a bit. As people find lower costs for expenses such as travel, they may choose to hang on to those extra savings. Several years of extended and highly competitive holiday promotions among retailers have also reinforced consumers' expectations that they don't have to pay full price."

For more information about Deloitte's 2016 Annual Holiday Survey, please read the full survey report or follow us //twitter.com/@DeloitteCB" target="_blank">@DeloitteCB. An infographic and complete survey results are also available for download.

Cat earnings show continued struggle in third quarter

It was one of those types of quarters for Caterpillar Inc. in the third quarter of 2016, in that little seemed changed from almost every quarter the past few years. Sales and profits were lower as markets continued to struggle worldwide.

It appears it will be more of the same again in 2017, based on the company’s preliminary outlook for next year. Except there may actually be a bright side coming the second half of next year, the company said Tuesday when it announced its third quarter financials.

That outlook, which will be updated at the end of the fourth quarter, says the first half of 2017 will be down again, but that the second half, should commodity prices remain stable, could see sales and revenues start to move into positive territory.

“We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum,” said Doug Oberhelman, chairman and CEO.

Said Mike DeWalt, vice president of financial services, “It’s hard enough to predict one quarter out, let alone a full year. But we have seen some positive signs; they just haven’t translated into sales. So, we’re being cautiously optimistic. Uncertainty is our enemy.”

The third quarter of 2016, as noted, was nothing to shout about. The company announced it had a profit of 48 cents a share on sales and revenues of $9.2 billion, well off the profit of 94 cents a share and 16 percent below the $11 billion in sales and revenues during the third quarter of 2015. Those numbers include restructuring costs, which the company anticipates will reach $800 million by year’s end.

While those results actually topped expectations of Wall Street analysts, who by consensus predicted a profit of 76 cents a share, the investment community was put off by the fact the company lowered its outlook for the remainder of the year, from sales of $40 billion to $39 billion and a profit of $2.35 a share, down from $2.75.

Cat stock closed Tuesday at $84.48 a share, down $1.51 as 11.6 million shares – or about 2.5 times the average volume – traded.

Oberhelman, in prepared remarks, said the struggles continued in the third quarter because “Economic weakness throughout much of the world persists and, as a result, most of our end markets remain challenged. In North America, the market has an abundance of used construction equipment, rail customers have a substantial number of idle locomotives, and around the world there are a significant number of idle mining trucks.”

“However, there were a few bright spots this quarter,” he added “Both the construction industry and our machine market position improved in China. Most commodity prices, while low, seem to have stabilized. Parts sales have increased sequentially in each of the last two quarters. Our machine market position and quality remain at high levels and our work on Lean and restructuring are continuing to help us lower costs.

“I’m pleased with how Caterpillar has responded and our team’s incredible focus on reducing costs and pulling through profit despite sluggish end markets. In the third quarter, despite a $1.8 billion decline in sales and revenues, our operating profit pull through was significantly better than our target range. Lower variable manufacturing costs of $234 million and lower period costs of $420 million enabled us to offset much of the negative impact from a weak sales environment and continue investment in products and digital capabilities.”

In its preliminary outlook for 2017 Caterpillar said sales and revenues will not be significantly different than 2016 and in the first half of the year will likely be negative. “We are, however, encouraged that most commodity prices important to our business have improved from the lows earlier in 2016. Should commodity prices show relative stability and move higher in 2017, it is reasonable to expect that our business would respond, and we could see a more positive second half. Our preliminary outlook for 2017 is based on our expectation that world economic growth will remain subdued at close to 2.5 percent – similar to the past few years,” the company said.  

The company listed positive and negative factors it believes could influence 2017 sales and revenues. They include:

Positive factors

• Prices for some commodities have improved from earlier lows.
• Most prices for mined commodities have risen from lows earlier this year, and average prices in 2017 should be flat to up modestly from 2016.
• The construction industry and our market position have continued to improve in China.
• Construction sales in Brazil and Russia have likely bottomed in 2016.
• After several years of decline, surveys of capital expenditures in the mining sector indicate spending should level off in 2017. 

Negative factors

• While sentiment around mining has improved, there are still many idle trucks on customer sites and there has not been an increase in orders for new equipment.
• Construction activity and construction equipment sales in North America during the second half of 2016 are anticipated to be lower than in the company’s previous 2016 outlook.
• There is continuing uncertainty in Europe, particularly around the impact of Brexit on European economic growth, business confidence and investment.
• While sales in China have improved, there is risk of slowing if Chinese government monetary and fiscal policy become less supportive.
• Power generation sales are expected to be down, particularly in oil-producing regions of Africa/Middle East.

“While we are seeing early signals of improvement in some areas, we continue to face a number of challenges. We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum,” Oberhelman said. “Whether or not that happens, we are continuing to prepare for a better future.”

Oberhelman noted his decision to retire next year and that he will be succeeded by Group President Jim Umpleby. “He’s been a key part of the leadership team for several years and is absolutely ready to lead Caterpillar. I’m confident I’m turning over a company that’s ready for a better future. We have a great team, our product portfolio is the best ever, our machine market position and quality remain at high levels and we’ve significantly improved our cost structure. At some point, and I think we’re getting closer to that point, our businesses will turn up.”

In a meeting with reporters, DeWalt noted the last four years have been the roughest patch he’s experienced in 36 years with the company, but he said the situation would have been much worse if not for the difficult decisions that came with restructuring, including the layoffs of about 20 percent of the workforce. Cat now employs 108,800 people worldwide; its peak was 143,000 just four years ago.

The restructuring has enabled Caterpillar to remain profitable and improve its market position in every business in which it is involved. Most companies, he believes, would have posted operating losses under similar circumstances.

DeWalt said the company has had to go beyond the restructuring moves it announced in September 2015 because weaknesses in the markets have not abated. In that announced last year the company said it would reduce the workforce by more than 10,000, consolidate and close 20 facilities and reduce manufacturing square footage by 10 percent.

Since then the workforce has been reduced by more than 14,000 and there have been 30 facilities closed or expected to close, which would reduce square footage by 11 percent. Also, the company has ended production of on-highway vocational trucks and track drills and consolidated two divisions in Resource Industries.

DeWalt said the company hasn’t finished restructuring yet.

Molly Crusen Bishop: From where her hopes spring eternal

My memories of neighbors on the West Bluff are vast and still can bring forth sweet emotions from the days of yesteryear. The first distinct one takes place early in the mornings on weekends with Mr. Van Norman playing his bagpipes and pacing from one end of his large front porch to the other. His handlebar mustache blended nicely with the echoing sounds of his unusual instrument. Years later I would take Irish dancing lessons with his daughter Erin, forever tying this Irish man and the sound of bagpipes together for me.

The Van Normans moved just before my kindergarten year at Whittier and an even more interesting family moved into the large brick home next door to my home on Barker. The Maynard family arrived around 1976 and brought excitement and education to my little self that left a permanent impression on me.

David and Jane Maynard and their children spiced up the West Bluff in many good ways. David was the minister at the Universalist Unitarian Church. He and his wife were kind and thoughtful people who opened my eyes to the world outside of my own. Their views were often different than that of my parents, but there was never an attitude of judgment from anyone. They had a tire-swing and a huge backyard where the Maynard kids, neighborhood children, and I would play for hours.

I loved riding in the Maynard’s green VW van to special events at their beautiful church. (The UU church was ultimately demolished and turned into a part of Methodist Hospital years later. Les Kenyon, who saved the GAR Hall and founded the Central Illinois Landmarks Foundation, fought valiantly to save this amazing piece of architecture, to no avail.)

The Maynards would often take us to visit some of their friends a little further down the West Bluff, at the always-exciting Traynor family house! The fun green VW van filled with kids would travel down Barker, Moss Avenue, and then down Union Hill and head slightly left to what was then 701 West Seventh Avenue, now 701 Martin Luther King Jr. Drive, to one of Peoria’s most historic homes and also an ancient secret in their back yard, Peoria Mineral Springs.

We would rush out of the van and head to the house to say our expected greetings, then proceed like banshees into the woods.

I loved the cobblestone road and the two story brick home that told a story all on its own. There was a large rock with a metal hoop to tie up horses and the frames on the windows were distinct. The architect of the original structure was Revolutionary War hero Capt. Zeally Moss. It was built between 1843-1845 in a Federal style, or post-Colonial style, with many additions over the next several decades. It ending up being shaped like a T, with wings to the west and to the east. The additions were done well and the house is beautiful.

I recollect running back up the hill to trees behind the home and viewing the amazing brick arched structure. We were told about the ancient mineral spring water flowing continuously under the structure.

The brick “vault” in the hillside was mysterious and a million thoughts and pictures of what was inside ran through my child mind. The Traynor family salvaged the mineral spring when they purchased the home, literally digging dirt out of the cavern. They would often find Native American artifacts and their energy and love for the mineral spring and the history made all of the children visiting excited.

We all became a part of the story of the Peoria Mineral Springs.

The glacial ice that covered this part of America more than 14,500 years ago is the source of the water that is flowing continuously today. This spring was the source of water for the original settlers on the West Bluff. Wooden pipes once funneled the pristine water that came from three different mineral springs into one source and then carried it more than two miles away to Hancock Street. When Peoria’s population became too large, Illinois River water was  used as the main source for the city’s residents.

However, the mineral springs were used for decades for different bottling companies, including some owned by Ransom Hickey and later Preston Clark.

The Maynards moved away in the early 1980s but the Traynor family remains on Peoria’s historic West Bluff and with Peoria Mineral Springs to this day. The Traynor family had the house, structure, and land listed on the National Register of Historic Places. They have been fantastic caretakers of this special and ancient piece of Peoria history.

Tobias Traynor is the current owner and his father Charles Traynor is one of several caretakers. Charles recently let me see copies of some very special papers. There is a deed signed by Lydia Moss Bradley, who was willed the land. The deed states that she conveyed and warranted the land, spring, and house to Mr. Preston Clark on Nov. 4,^, 1892, at 3:40 o’clock P.M.

It also states that Lydia Moss Bradley had her own special pipes bring in water up from the spring to to her house on Moss Avenue.

“The spring situated on line of her residence, Lots no. 2 & 3 Moss, addition comprising reservoirs, walls, pipes, and supports, now in the ground and easements forever of the underground flow or stream discharging, into said reservoirs, and the further right to make and maintain forever lines of pipe at a convenient depth in the ground, from said spring in a direct line, along a lot line to Seventh Street together with right of entry, at all times, to said spring along the said line of pipes, the Grantor, Lydia Bradley, reserves the right to attach a pipe, and take water for domestic uses from spring.”

This deed was signed by Lydia Moss Bradley and notarized by her attorney, W.W. Hammond, Notary Public.

The Traynor family has been working diligently tuck pointing the brick structure. It is interested in making the Peoria Mineral Springs water come to the surface and turning the many acres of wooded hillside into a wildlife area, as well as continuing to upgrade the brick vault and historic house. The family is in the process of acquiring the funds to ensure longevity and keep the historic landmark in wonderful condition.

They will need support from the community to be able to do this massive undertaking, but it’s a cause that is worth preserving in Peoria.

The ancient Peoria Mineral Springs is a mystical, beautiful place. The water is pure and flowing and must be used. You can find out more about one of Peoria’s historic treasures on their Facebook page, Peoria Mineral Springs, and ask for a tour so that you too can share in the story that makes up part of the historic West Bluff. 

Oberhelman to analysts: 'no drama' behind decision to retire

Seeking to debunk the notion he is being forced out at Caterpillar Inc., Doug Oberhelman on Tuesday told stock analysts there was “no drama” surrounding his decision to retire at the end of March 2017.

In a conference call with the analysts that coincided with Caterpillar’s third quarter financial release, Oberhelman was adamant that the decision to go before his 65^th birthday, when company bylaws would require he retire, was his alone.

“There was no drama here, contrary to a lot of the stuff that’s been going around. I picked the timing,” Oberhelman said at the outset of the conference call.

He said there also have been questions about the Caterpillar board of directors’ decision to split the duties of chairman and CEO for the first time since 1990. The board decided to do it now since company leadership will be in transition, he added.

Jim Umpleby, currently a group president, was named to replace Oberhelman as CEO effective Jan. 1. David Calhoun, a director since 2011, will became the non-executive chairman of the board on April 1, 2017. “I am very much supportive of Jim and the process,” Oberhelman said.

“Jim will run the company as usual and Dave will coordinate the board as executive chairman. Again, no drama, just a different way of doing thing and I think we’ll carry on without missing a beat,” he added. “I am excited to move into the next phase and I am very excited for Jim and the executive team. We’ve been through an awful rough period the last four years but I do think we’re set up for the future.”

Umpleby was introduced into the conference call and told the analysts, “I have great respect for Doug and I am proud to be part of this team that has kept Caterpillar strong through some of the most difficult market conditions we have ever faced. I will pull together a team of leaders that will refresh our enterprise strategy in the coming months.”

Oberhelman’s retirement after 41 years with Caterpillar was announced last week and it was immediately met with thoughts that it was a board decision because of the fact Caterpillar is in the fourth consecutive year of decreasing sales and profits. The company has remained profitable in that time but mostly because of cost cutting measures the last few years that have included a 20 percent reduction in workforce and the closure of more than 10 facilities.

This after Caterpillar reached its peak in sales and revenues as well as profits in 2012.

Oberhelman has been chairman and CEO since 2009. He replaced Jim Owens, who retired when he was 64, as well, and after a long transition period between him and Oberhelman. The company noted that in its announcement about Oberhelman’s retirement.

However, the announcement came only one day after the Wall Street Journal published an extensive article about some of the moves Caterpillar made under Oberhelman – including the acquisition of Bucyrus Mining Inc. -- that did not turn out well because the bottom dropped out of the mining and energy markets shortly thereafter. That further fueled speculation, particularly by television commentators, that Oberhelman’s decision to retire wasn’t entirely his.