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Gas price hike could damper retailer-consumer relationship

BY Michael Johnsen

WHAT IT MEANS AND WHY IT’S IMPORTANT — Analysts already are speculating dire outcomes if the price of a gallon of gas eclipses $5 this summer on account of Middle East turmoil today. Any additional strains on the supply chain system, such as increased operational costs as high as 20%, would only make matters worse.

(THE NEWS: Rising gas prices not only factor driving supply chain costs. For the full story, click here)

A Stifel Nicolaus analysis issued last week suggested that consumers on average would have 2% fewer discretionary dollars to spend if gas prices peaked at $5 per gallon. The speculation is even worse for the poorest of Americans — those that are part of the lowest 20% in terms of income would have 6% fewer discretionary dollars.

About the only retailers who truly benefit from high gas prices are those with a bank of gas pumps out front, a line of pharmacists within the store and row after row of food items in between — because it’s those supermarkets that will satisfy that growing need for the “one-stop shop.”

But even those supermarket retailers could feel the pinch if higher gas prices, compounded by increased transportation costs as was suggested by the National Retail Federation, are reflected in escalating pricing of consumer-packaged goods.

“The environment is much more rational today, and competitors are passing on cost inflation in categories, including dairy, perishables, produce and dry grocery,” suggested Ed Kelly, Credit Suisse research analyst, in a recent note regarding Safeway. “The company was able to pass along 0.5% to 0.7% of inflation in [the fourth quarter], and expects to comfortably pass on expected inflation of 1% to 2% during the year,” he noted. “We remain somewhat skeptical, as inflation could easily be higher than management expects.”

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Walmart raises dividend

BY DSN STAFF

BENTONVILLE, Ark. — Walmart said Thursday that it is increasing its annual dividend 21% on the back of strong earnings.

The retailer last month reported a 27% increase in fourth-quarter net income as it benefited from cost-cutting and strong international sales. Walmart said it will pay an annual dividend this year of $1.46, up from $1.21. It will pay quarterly dividends of 36.5 cents in April, June, September and January in fiscal 2012, which ends Jan. 31.

The next dividend will be paid on April 4 to shareholders of record on March 11.

Walmart president and CEO Mike Duke said the company was able to boost its dividend because of its earnings performance in fiscal 2011 and its strong financial position.

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NRF welcomes repeal of tax provision in healthcare law

BY DSN STAFF

WASHINGTON — The National Retail Federation said it welcomed the House of Representatives’ vote to repeal a provision in last year’s healthcare-reform law that would widely expand the number of IRS 1099 tax forms businesses would be required to file.

“This is a commonsense step to keep the business community from being hit with a blizzard of unnecessary paperwork that has nothing to do with health care,” NRF SVP government relations David French said. “The important thing now is for the House and Senate to come together on a final version of repeal and settle this issue as quickly as possible. This provision never should have been in the healthcare bill to begin with, and it’s already taken far too long to get it removed.”

The House voted 314-112 to approve H.R. 4, the Small Business Paperwork Mandate Elimination Act, sponsored by Rep. Dan Lungren, R-Calif. The bill would repeal a provision in the Patient Protection and Affordable Care Act of 2010 that requires businesses to file a Form 1099 with the Internal Revenue Service whenever they make noncredit-card payments totaling $600 or more to a vendor during a single year.

Other organizations that support the repeal include the National Association of Chain Drug Stores and the National Community Pharmacists Association.

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