February, 2019 - Sachse Construction
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Month: February 2019

Maybe Some Good News From Retailers

by Sachse Team

Retail investors have good reason to be anxious as department stores begin reporting fourth-quarter earnings. Retail stocks mostly dropped in January, when department stores reported disappointing holiday sales. Then the Commerce Department reported that overall U.S. holiday sales experienced their largest drop since 2009. Expectations are justifiably low.

Does that mean there could be some pleasant surprises, though? Macy’s , which reports fourth-quarter earnings on Tuesday, returned to growth in 2018 after suffering losses in 2017, thanks to investments in its stores and e-commerce operations. Nordstrom, which reports fourth-quarter earnings on Thursday, has a history of delivering earnings surprises, and it beat estimates in nine out of the past 10 quarters.

Walmart ’s joyous earnings report last week, which surpassed analysts’ expectations, might also stir hope that other retailers could follow suit.

 Investors shouldn’t get ahead of themselves, though. Walmart’s success had to do with the retailer’s ability to grab market share in grocery and toy sales. Those categories won’t help, or hurt, many department store retailers, who sell neither.

Year to date, Macy’s and Nordstrom shares are down 21% and 7%, respectively. Analysts have almost universally downgraded expectations for Macy’s from $2.77 a share to $2.53 a share and for Nordstrom from $3.61 a share to $3.56 a share.

But it is still possible that some retailers do marginally better than the downgraded forecasts indicate. By lowering expectations when they reported disappointing holiday results, Macy’s and Nordstrom may have set themselves up to eke out a small win.

That almost certainly will not be the case at J.C. Penney , which also reports fourth-quarter earnings on Thursday. The stock has lost nearly 70% of its value in the past 12 months and is now struggling to avoid the fate of Sears.

On the whole, this earnings season will be a far cry from last year’s, when retailers triumphantly declared their resurgence. Strong consumer sentiment hasn’t been enough to lift all boats. In 2019, the rift between the survivors and the stragglers will become increasingly stark.

Gap Inc. to Split into Two Public Companies

by Sachse Team

Gap Inc. is spinning off fast-growing Old Navy as a standalone company. It also plans to close about 230 namesake stores during the next two years.

The retailer on Thursday announced plans to create two independent publicly traded companies: Old Navy, and a yet-to-be-named company (“NewCo”), which will consist of the iconic Gap brand, Athleta, Banana Republic, Intermix and Hill City.

The retailer said the separation will be done through a spin-off that is intended to generally be tax-free to company shareholders for U.S. federal income tax purposes. The spin-off will enable each company to maximize focus and flexibility, align investments and incentives to meet its unique business needs and optimize its cost structure to deliver profitable growth, Gap said.

“Following a comprehensive review by the Gap Inc. board of directors, it’s clear that Old Navy’s business model and customers have increasingly diverged from our specialty brands over time, and each company now requires a different strategy to thrive moving forward,” said Robert Fisher, chairman Gap Inc. “Recognizing that, we determined that pursuing a separation is the most compelling path forward for our brands – creating two separate companies with distinct financial profiles, tailored operating priorities and unique capital allocation strategies, both well positioned to achieve their strategic goals and create significant value for our customers, employees and shareholders.”

After the separation, Art Peck, currently the president and CEO of Gap Inc., will hold the same position with “NewCo,” and Sonia Syngal, current president and CEO of Old Navy, will continue to lead the brand as a standalone company. The two companies will remain at their current headquarters, both of which are located in San Francisco. Old Navy’s momentum was evident in the breakdown of the separation, with the new, still unnamed company bringing in about $9 billion in annual revenue through its assorted brands and Old Navy, by itself, garnering approximately $8 billion.

As part of the restructuring of its specialty store fleet, the retailer will close approximately 230 Gap locations during the next two years.

“The remaining specialty fleet will serve as a more appropriate foundation for future growth of the brand across the specialty, outlet and online channels,” Gap stated. “There will be a healthier channel mix after the restructuring, with nearly 40% of sales coming from online, and the remainder split fairly evenly between the specialty and value channels.”

Detroit’s Sachse Construction Names Senior VP

by Sachse Team

Detroit’s Sachse Construction has named Ron Henry as the firm’s new senior vice president.

Henry’s experience includes prior leadership roles with Beaumont Health as corporate vice president of real estate, design and construction; Detroit Medical Center as senior vice president of facilities management, engineering and construction; and Plante Morgan CRESA as senior vice president of healthcare.

Henry earned his bachelor’s degree in architecture from Lawrence Technological University and his master’s degree in architecture from the University of Michigan.

DSW is Adding More In-Store Nail Salons to Its Shoe Stores

by Sachse Team

DSW is expanding its test of in-store nail salons as the footwear retailer looks to keep customers coming back to its stores.

Customers in Austin, Texas, Washington, D.C. and Dublin, Ohio can purchase both sandals and a pedicure, bringing the total number of locations with the service to seven.

The company has been testing nail services in two of its Columbus, Ohio stores since 2017 in a partnership with W Nail Bar. Both companies are based in Columbus.

“The nail bar services engage customers and create loyalty by inspiring self-expression,” Bill Jordan, president of DSW, said in a statement. “They also create repeat visits to the DSW brand, where an exciting footwear assortment awaits.”

Over the last year, DSW’s stock, with a $2.3 billion market value, is up nearly 48 percent.

Meanwhile, rival shoe retailer Payless ShoeSource began shuttering its 2,500 U.S. stores and filed for bankruptcy protection earlier this month. DSW, along with T.J. Maxx parent company TJX Companies, stands to gain from the discount footwear company’s domestic liquidation.

DSW shares trading up nearly 3 percent on Wednesday. The stock, which has a market value of $2.4 billion, is up more than 48 percent over the past year.

TJX Sales Rise as More Shoppers Flock to Stores

by Sachse Team

TJX Co TJX 3.70% s. on Wednesday reported a decline in fourth-quarter profit, but said that stronger customer traffic led to an increase in comparable-store sales.

TJX, the parent company of HomeGoods, Marshalls and T.J. Maxx, reported net income fell 4.1% from a year earlier to $841.5 million, or 68 cents a share. Analysts polled by Refinitiv were expecting a profit of 68 cents a share. The company’s income tax bill was 43% higher than in the previous year.

Net sales rose 1.5% to $11.13 billion, ahead of the $11 billion analysts were expecting. Sales climbed in the U.S. but fell in international divisions. When adjusting for currency fluctuations, TJX said sales rose in both international divisions.

Comparable-store sales rose 6% in the quarter featuring the holiday shopping season. Analysts polled by Consensus Metrix were expecting an increase of 3.5%.

Chief Executive Ernie Herrman said in prepared remarks that the company’s apparel and home categories were strong and that more customer traffic helped spur the comparable-sales growth.

TJX expects earnings for the current fiscal year to be between $2.55 and $2.60 a share, up from $2.43 a share earned in the year ended Feb. 2. Higher wages and freight costs are expected to put a damper on earnings growth, TJX said.

Comparable sales are expected to rise between 2% and 3%, but that range is less than the 6% growth obtained in the prior year and 4% growth in the year before that.

The company said it intends to increase its dividend to 23 cents from 19.5 cents. TJX also plans to buy back between about $1.75 billion and $2.25 billion of its shares during this fiscal year.

Shares rose 0.7% to $50.07 in Wednesday trading.

Seniors Housing Industry Needs Solutions for Serving Middle-Income Seniors, NIC Research Shows

by Sachse Team

The clock is ticking down for the seniors housing industry to start addressing the needs of middle-income seniors, who may not have enough funds to afford seniors housing facilities by themselves and may not qualify for assistance from the federal government. The National Investment Center for Seniors Housing & Care Industry (NIC) will release one of its first studies on that demographic, which NIC researchers call “the forgotten middle,” in April. The goal of the study is to bring into focus the gap in affordable housing availability for middle-income seniors, quantifying the need and demand for this segment of the market “to allow the private and public sector to discuss solutions” based on the findings, says NIC’s Chief Economist Beth Burnham Mace.

The report will quantify the need for seniors housing in the middle-income market, the number of people in that group and its demographic characteristics, including the estimated number of middle-income seniors with mobility limitations, chronic conditions and cognitive impairment today and up to the year 2029.

NIC’s hope is that the private investment sector will become part of the solution to serve this group of individuals. “Our theory is that the highest income cohorts have sufficient funds to take care of themselves as they age, and the lowest income tier cohort most likely has sufficient help and services provided by the federal government. The middle group or ‘forgotten middle’ needs support and other options for care and housing as they get older,” says Mace.

The timing of this study is based on the seniors housing being at the very beginning cusp of this need with the baby boomer population, born between 1946 and1964. “As the oldest baby boomer is now 73, the surge of the demand is just around the corner, with real growth taking off in 2029. We are trying to get a window into the future because otherwise the public systems such as Medicare and Medicaid will be overburdened by this population,” Mace notes.

To date, this will be one of the first studies that will look at combined housing and healthcare needs of middle-income seniors. Other research may have focused on middle-income seniors’ housing or healthcare needs alone, “but we’re combining both needs in the study,” said Mace. The physical structure and design of seniors housing properties may change to offer opportunities for this sector. The study will look at demographic statistics of how many people will require the kind of housing designed to assist with health needs such as special mobility, and those with cognitive impairments who will need more memory care units.

The data will be based on a study called the HRS, the Health and Retirement Study, a long-term report sponsored by the National Institute on Aging and the Social Security Administration and conducted by the University of Michigan. The data on aging Americans used in the report has been collected since 1990.

Today, finding basic data on the number of seniors housing facilities that cater to the middle-market demographic, as well as tracking investment sales transactions involving those types of assets, remains difficult, according to Barbara Byrne Denham, senior economist with research firm Reis Inc. “Many seniors housing facilities may not disclose whether they market to middle- income people,” she notes. “Newer facilities may be even less transparent about marketing.”

While there’s plenty of capital currently available for the development of seniors housing facilities, including loans sponsored by Fannie Mae and Freddie Mac, those facilities may not necessarily be affordable, according to Ely Razin, CEO of financial data provider CrediFi.

“The supply is there, meaning the availability of housing may be sufficient, but affordability is a different question,” he notes.

However, there are several government programs that currently provide loans to private companies to build or redevelop properties that would qualify as affordable seniors housing, Razin adds. On example is the Low-Income Housing Tax Credit (LIHTC) program, which grants developers tax credits for building seniors housing facilities. The Federal Housing Administration (FHA) and related groups are other public entities that pump money into the development and financing of affordable seniors housing facilities.

Sachse Construction Announces Ron Henry as Senior Vice President

by Sachse Team

Sachse Construction (Sachse), a premier commercial construction management firm recognized as one of the most trusted and respected construction partners in North America, today announced Ron Henry as the firm’s new Senior Vice President. Sachse President & COO Steve Berlage made the announcement.

“Ron has earned a fantastic reputation industry-wide as a well-rounded business professional with a deep understan­ding of construction, architecture, engineering, and real estate,” said Sachse Founder & CEO Todd Sachse. “Not only has he worked with some of the most notable companies in Michigan, but his project experience spans everything from healthcare and retail to sports and industrial. He will be an asset as we continue to expand our portfolio across different markets in North America and beyond.”

As Senior Vice President, Ron will be accountable for achieving financial growth, establishing and executing Sachse Construction’s business strategy, and building new customer relationships.

Ron’s experience includes prior leadership roles with Beaumont Health as Corporate Vice President of Real Estate, Design and Construction, Detroit Medical Center as Senior Vice President of Facilities Management, Engineering and Construction, and Plante Moran CRESA as Senior Vice President of Healthcare. He previously oversaw multi-million dollar projects, including the day-to-day management of large lease portfolios, tenant leasing and strategy, and land acquisitions.

Ron earned his bachelor of science in architecture from Lawrence Technological University and his masters of architecture from the University of Michigan. He has obtained licenses as a registered architect in 44 U.S. states, a member of the American Institute of Architects, and sits on the board of directors for the Rehabilitation Institute of Michigan Foundation, Engineering Society of Detroit, and the University of Michigan Taubman College of Architecture and Urban Planning.

For more information on the Sachse executive team and their wide-range of construction management services, visit www.sachseconstruction.com.

Sachse Construction is a premier commercial construction firm recognized as one of the most trusted and respected construction partners in North America. Founded in 1991 and headquartered in Detroit, Sachse Construction has built millions of square feet spanning the retail, commercial, multifamily and institutional sectors. Committed to doing the right thing and pursuing excellence by constantly raising the bar, Sachse utilizes unparalleled industry experience and enthusiasm to deliver innovative projects and solutions for every partner, every time. The firm’s sister companies include Broder & Sachse Real Estate and Zolman Restoration. For more information, visit www.sachseconstruction.com.

Construction Employment Climbs by 52K in January to 11-Year Peak

by Sachse Team

Construction employment increased by 52,000 jobs in January and by 338,000 jobs, or 4.7 percent, over the past year, while the latest reading on construction spending showed moderate increases in all major categories, according to an analysis of new government data by the Associated General Contractors of America. Association officials urged government officials to strengthen career and technical education programs and facilitate immigration for workers with construction skills before a worker shortage stalls completion of needed infrastructure.

“There has been no letup in demand for construction projects—or workers,” said Ken Simonson, the association’s chief economist. “Even though the industry added employees at more than double the pace of the overall economy in the past year, the average workweek in construction reached an all-time high and unemployment in construction hit a series low, indicating that contractors would hire even more workers if they were available.”

Construction employment totaled 7,464,000 in January, the most since January 2008. A report on construction spending—delayed a month by the partial government shutdown—showed an increase of 0.8 percent from October to November and 4.5 percent year-to-date for the first 11 months of 2018 combined compared to the same period in 2017. Year-to-date spending rose by 3.9 percent for residential construction, 3.5 percent for private nonresidential construction and 7.0 percent for public construction.

Average weekly hours in the industry increased to 39.9 hours in January, the highest since the series began in 2006, the economist noted. Average weekly hours of production and nonsupervisory employees, a series that dates back to 1947 and covers construction trades, set a record of 40.6 hours, Simonson added.

The unemployment rate for jobseekers with construction experience in January was 6.4 percent, down from 7.3 percent in January 2018. The number of such workers fell to 638,000 from 707,000 a year earlier. Both figures were the lowest for January since those series began in 2000, Simonson pointed out.

In a survey the association released in January, more contractors reported they expect the dollar volume of projects available to bid on to expand than to shrink in 2019 in each of 13 project categories. In addition, 79 percent of construction firms reported that they expect to add employees in 2019. However, nearly as many—78 percent—reported they were having trouble filling some positions and 68 percent said they expected that hiring would remain difficult or become harder. Association officials cautioned, however, that contractors’ expansion plans could be thwarted if Washington officials fail to fund more career and technical education to prepare more individuals for construction careers and to allow firms that document a shortage of qualified workers to bring in workers from outside the U.S.

“The pool of unemployed workers with construction experience has virtually evaporated, and everyone in the industry is working longer hours than ever,” said Stephen E. Sandherr, the association’s CEO. “The only way to satisfy the demand is to provide more people with the skills needed to work in construction and to expand the nation’s labor force with qualified workers from outside our borders.”