The Weekly Consensus: Week of January 16, 2012 Vol. 4, No. 3
What's Up?
Mark Lenz
After reporting healthy sales during the first nine months of 2011, the major public jewelry retailers announced their sales results for the holiday season. US comparable store sales increases ranged from a low of 2.0% for Tiffany to 9.2% for Signet, with other companies in the mid-single digits. Both Tiffany and Signet had experienced double digit increases in the previous three quarters at a time when the US Census Bureau reported sales for jewelry stores had increased by over 13%[1]. However, in October and November jewelry store sales dollars only increased by 2.2% (December jewelry store sales have not yet been reported by the Census Bureau).
Why is the sales increase maybe not a sales increase? The retail jewelry industry is a business where inventory costs have increased by over 10% in the past year due to rising commodity prices, principally for diamonds and gold. Most, if not all, jewelry retailers have raised their selling prices to offset their cost increases, increasing dollar sales to maintain gross margin rates. For example, after the third fiscal quarter, Zale announced a comparable store sales increase of 5.8% with selling prices up 14% and unit sales down 6%. Signet reported average sales prices increasing at a higher rate than their comparable store sales increase indicating that unit sales (excluding charms) were lower. The change in unit sales for other public and non-public jewelers is likely also lower than the sales dollar increase unless major mix changes were made to sell lower priced fashion merchandise such as charms.
What on the surface looks like a robust industry with consistently rising sales throughout 2011, looks somewhat different when the vault is opened, especially in recent months. Even when dollar sales were experiencing double-digit increases, unit sales increases were likely in the 3% range, on average.
If December jewelry store sales trend similar to October and November, it would indicate a reduction of unit transactions of up to 8%, depending on timing of inventory purchases, mix changes and retail price increases in the most important selling season of the year. The Tiffany comparable store sales drop is particularly interesting because the luxury retailers that Tiffany had been trending with during the rest of 2011 continued to experience stronger than average sales growth in the holiday period, with mid- to high-single digit increases. Pam Danziger, President of Unity Marketing said in a recent note "I believe the drop in U.S. holiday sales for Tiffany signals a change in shoppers' jewelry preferences. They are not going for the glamour or the glitz, but favoring brands that deliver quality and value without the added cost associated with a prestige brand name." If the other luxury retailers that sell merchandise with prestige names had also experienced marked drops in their sales increases to the low single digits, that would appear to be a more applicable conclusion.
In the meantime, new players like Silpada, Stella & Dot and Gemvara, among others, continue to grow, delivering fashion jewelry product through new channels. Blue Nile has not yet released holiday sales results, so the impact of the continuing commodity price increases on their (mostly) diamond sales is unknown, although their profitability has suffered recently. Charms continue to benefit from the high commodity prices, replacing gold and diamond jewelry as “go to” purchases for jewelry consumers. It is likely that the unit trend will continue in traditional diamond and gold merchandise for the foreseeable future, and there will be a continued shift to alternative, lower-priced choices.
Apparel/Swimwear/Intimates
Glen Senk Out, Richard Hayne In as Urban Outfitters CEO
Glen Senk, the CEO of Urban Outfitters since 2007, is resigning, the company announced. Billionaire Richard Hayne, the 64-year-old co-founder of the clothing retailer, is stepping in to steer the firm. Senk evidently gave notice on Monday, Jan. 9, “to pursue another opportunity,” according to a press release issued by Urban Outfitters, but will stay on for a period of time to help with the transition. Senk is also stepping down from the Board of Directors. The change in leadership comes after net income decreased four quarters in a row.
Liz Claiborne Cuts EBITDA Outlook; Announces CFO Resignation
Apparel company Liz Claiborne Inc. said it expects fiscal 2011 adjusted EBITDA to trail the lower end of its prior guidance due to negative comps and leaner gross margins at its lifestyle brand Juicy Couture. The New York-based company further cut its adjusted EBITDA outlook for 2012, and also announced the resignation of its Chief Financial Officer Andrew Warren. Following the news, the company's stock slipped more than 13 percent in extended trade on the New York Stock Exchange. For 2011, Liz Claiborne now expects pro-forma adjusted EBITDA to be in the lower end of its prior guidance of $80 million to $90 million. For 2012, it now expects adjusted EBITDA of $125 million to $140 million, versus its prior outlook of $130 million to $150 million. The company said the guidance reflects its anxiety in cutting costs versus the full year 2013, along with a lower expectation for the wholesale channel at Juicy Couture and Lucky Brand. Liz Claiborne also provided direct to consumer same-store sales data for November and December for its three lifestyle brands: Kate Spade, Lucky Brand, and Juicy Couture. For November, Kate Spade improved 81 percent, Lucky Brand was up 16 percent, while Juicy Couture slipped 7 percent. For December, Kate Spade increased 39 percent, Lucky Brand rose 21 percent, while Juicy Couture dropped 5 percent. Additionally, the company expects its name change to Fifth & Pacific Companies Inc. under the trade symbol 'FNP' will become effective on or about May 15, 2012.
Jones Group Calls Off Sale of Jeanswear Unit
The Jones Group said on that it had ended efforts to sell its jeanswear unit to another apparel maker, Delta Galil of Israel, terminating a months-long process. Neither company gave a reason for the end of the talks, which began in the fall. Delta Galil estimated at the time that it would pay $350 million to $400 million for the unit, with brands including the Gloria Vanderbilt line of jeans. The Jones Group will instead focus on running the business alongside other lines it currently owns, including Nine West, Jones New York and the shoe maker Stuart Weitzman. Delta Galil, based in Tel Aviv, makes private-label clothing for companies like Target, Walmart and Tommy Hilfiger, according to its Web site.
Athletic & Sporting Goods
Riddell Acquires Gunther's Athletic Service
Riddell has acquired Gunther's Athletic Service, of Anaheim, CA, a West Coast leader in helmet and protective reconditioning, and sales of sporting goods, uniforms and equipment. Riddell will maintain operations at Gunther's facility in Anaheim and deliver the same service offering. In addition, Bob Brown and Craig Drager, previous owners of Gunther's, will remain in key sales and management roles. The terms of the agreement will not be disclosed.
Bauer's Revenues Jump 27 Percent in Q2
Bauer Performance Sports Ltd. announced revenues rose 26.6 percent to $100.3 million. Adjusted net income jumped 76.0 percent to $4.4 million from $2.5 million a year ago. The increase in overall revenues in the second quarter and first half of fiscal 2012 was led by ice hockey equipment sales, with strong performance from the newly launched VAPOR family of skates and composite sticks and a full line of innovative goalie products. The continued revenue and earnings performance has been supported by strong "Back-to-Hockey" orders (April 2011 - September 2011) and "Holiday" (October 2011 - March 2012) booking orders. Revenues from the North American market grew by 29% in the second quarter and 28% in the first half of fiscal 2012 compared to the same periods last year, while sales outside North America grew by 20% and 30%, respectively. Bauer is also seeing solid performance in both its lacrosse and apparel product categories, which have delivered year over year increases of 120% and 27%, respectively, through the first half of fiscal 2012.
Power Balance Receives Court Approval to Exit Bankruptcy
Power Balance Performance Technology, the maker of wristbands made popular by professional athletes, received court approval to emerge from bankruptcy under new ownership. The new owners, which will operate as Power Balance Technologies Inc., plan to aggressively grow the business by introducing new and exciting products to the market in 2012 and beyond. In addition to bringing in a team of experienced advisors and new leadership to drive the next phase of growth for the company, most of the existing staff will continue working under the new ownership structure.
Dyrdek in Talks with Burton to Buy Alien Workshop
Last night at the annual Zumiez 100k event in Keystone, Colorado, Rob Dyrdek announced to a crowd of industry execs, media, and Zumiez’s top sales staff that he is in the final stages of purchasing Alien Workshop from Burton Snowboards.
Catalog & Internet
Rue La La Operator Lays Off Up to Half of Boston Staff, Plans to Shutter SmartBargains
The Boston-based company that operates private sale site Rue La La has undertaken major layoffs, according to current and former employees. Employees told Boston Business Journal Rue La La operator Retail Convergence laid off at least 30, and up to half of its staff of about 200, Thursday, and plans to shutter its SmartBargains.com, a discount shopping site it runs in addition to Rue La La.
Better Prices Online? Not Always
In surveys examining why shoppers choose to shop online, consumers regularly cite their ability to find lower prices on the web. However, an analysis comparing the prices of identical products at bricks-and-mortar stores and online retailers shows that isn’t always the case. The analysis examined products across a range of product categories, including personal care, electronics, grocery, men’s apparel, toys and games, cleaning supplies and office and school supplies. Anthem Marketing Solutions, a consulting firm, found that bricks-and-mortar stores offered the lowest prices on products that cost less than $7, and online retailers offered the best prices for items priced between $7 and $20. “Bricks-and-mortar stores have become more competitive in the electronics category and for items priced higher than $100, categories where online retailers had a definite advantage in fall 2010 and spring 2011,” the report says.
Ritz Interactive Has a New CEO and President
Ritz Interactive has promoted Scott Neamand to president and CEO. Neamand, the former chief operating officer, takes over for Fred H. Lerner, whose resignation took effect Jan. 13. Ritz filed for bankruptcy in August. Lerner, who gave no reason for his departure, founded the company in 1999. It operates RitzCamera.com. Ritz took in $91 million in annual sales in 2010, down from a peak of $111 million in 2007. The company is not connected to camera store retail chain Ritz Camera Centers Inc., which also went bankrupt.
Capital One Leverage Finance Closes $12 Million for Hanover Direct
Capital One Leverage Finance Corp., a subsidiary of Capital One, announced it closed a three-year $12 million revolving credit facility to Hanover Direct, Inc., a direct marketer of quality branded merchandise with a portfolio of consumer-facing catalogs and e-commerce platforms. Proceeds of the facility were used to refinance existing debt and to fund ongoing working capital needs. Based in Weehawken NJ, Hanover Direct, Inc. is comprised of a catalog and e-commerce website portfolio of home fashion, apparel and gift brand including: Domestications, The Company Store, Company Kids, Silhouettes, Undergear and Scandia Down.
Consumer Electronics/Video/Audio
A Miserable Holiday for PC Sales
It was a miserable Christmas for personal computers, after holiday discounts and new ultra-thin laptops failed to win consumers over. Technology consultancy Gartner said U.S. PC shipments fell 6% last quarter from a year earlier, as tablets and smartphones continued to capture more of consumers' interest. One device category that many predict will save the PC -- the super-thin ultrabook laptops -- were quietly introduced into the market during the holiday season and barely made an impact on sales. Instead, the PCs that saw the most sales growth were ones the most unlike mobile devices: all-in-one PCs with large, high-definition screens, Gartner said.
Target Plans Apple Mini-Stores
Target said that it planned to add Apple centers at 25 of its retail locations this year. A Target spokeswoman, Dustee Jenkins, described the tests as “expanded displays” of Apple products, but declined to say how the merchandise would be arranged or whether there would be Apple store-like displays to showcase it. Apple already has mini-stores within Best Buy locations, but enlarging its presence at Target would make the computer, phone and music brand more accessible to everyday shoppers who are not necessarily looking for electronics.
Amazon is First Big Retailer to Back Hollywood Film Format
Hollywood’s effort to sell digital copies of movies got a boost when Amazon.com Inc., the largest online vendor, agreed to use the industry’s common system for storing and streaming films. Amazon is working with an unnamed studio to offer movies in the UltraViolet format, Bill Carr, the Seattle-based company’s executive vice president for digital media, said yesterday at the Consumer Electronics Show in Las Vegas. Amazon is the first major retailer to commit to using the platform.
Cosmetics & Pharmacy
Walgreens Outlines Five Key Strategies
One day before Walgreens hosted its 2012 annual shareholder meeting, the chain showcased its latest flagship store to its hometown crowd. Walgreens identified five key strategies that will help propel the pharmacy forward in a new era of pharmacy retailing: 1) Walgreens must transform the drug store to what it called a "health and living destination,"; 2) Walgreens must advance the role the community pharmacy plays in the role of health care, bringing the pharmacist out from behind the pharmacy counter and front-and-center with the patient; 3) Walgreens must deliver outstanding customer experience through more enhanced employee engagement; 4) Walgreens must expand across channels and become the leading multichannel retailer; and 5) Walgreens must continue to improve cost containment.
PZ Cussons Buys Sabre Group's Fudge Hair Care Brand
PZ Cussons, a consumer products group in Europe, Asia and Africa, is expanding its beauty division with the acquisition of the Fudge hair care brand from Australia-based Sabre Group. The brand and associated inventory are being acquired by PZ Cussons for 25.5 million pounds ($39.5 million). The transaction is expected to close by the end of January, following the satisfaction of certain regulatory obligations. Fudge will join the portfolio of brands within PZ Cussons Beauty, the group’s recently formed beauty division, which currently comprises St. Tropez, Sanctuary and Charles Worthington.
Too Faced Cosmetics Gets Investment
Weston Presidio has acquired a majority stake in Too Faced Cosmetics. Terms of the deal were not disclosed, but industry sources pegged the price for the private equity firm’s stake at roughly $170 million. Founded in 1998 by Jerrod Blandino and Jeremy Johnson as a feminine, flirty and fun antidote to serious makeup artist brands, Too Faced was one of the oldest privately held cosmetics brands of its size that hadn’t been snapped up by a strategic or private equity buyer. Although Too Faced declined to break out its revenue figures, president Lynda Berkowitz revealed they have increased nearly 40 percent year-over-year, which would put the brand’s annual retail volume at close to $100 million, calculating from previously reported approximations of its performance.
Procter & Gamble's Athletic Push
The opening of the Youth Olympic Games in picturesque Innsbruck, Austria, became a backdrop Friday morning as Procter & Gamble underscored its support of the London 2012 Olympic Games this summer through its “Thank You Mom” campaign. It also pledged to raise $5 million to support youth sports programs around the world through the activities of P&G’s collection of mega-brands. In a parallel program, the individual P&G brands will be sponsoring more than 150 athletes — including luminaries like U.S. swimmer Michael Phelps, Swiss tennis champion Roger Federer and British long-distance runner Paula Radcliffe — who will serve as spokespeople for the individual brands and appear in advertising. Sales generated by the brands and donations will provide the $5 million support fund. The effort is an outgrowth of P&G’s highly successful TV advertising program during the Vancouver Winter Olympics, which saluted the mothers of the athletes. During those games, P&G helped families with travel and provided a place for them to stay at the games.
Department & Discount Stores
Sears Falls after Supplier Loans Are Said to Be Halted by CIT
Sears Holdings Corp. declined Jan. 12 after two people familiar with the situation said suppliers will no longer be able to get loans from CIT Group Inc. for their shipments to the retailer. CIT, the largest U.S. company that provides what’s known as factoring, told clients it would no longer approve credit for orders, according to the people, who declined to be identified because the information isn’t public. One risk when a factoring company pulls credit to suppliers is that others may follow suit. Sears has enough liquidity that it will weather the situation, said Matthew McGinley, managing director at International Strategy & Investment Group in New York. “Even with Sears’s deteriorating financial condition, it is pretty unlikely that a vendor shouldn’t ship over the near term,” he said yesterday in a telephone interview.
Kohl's Gives Garment District Big Boost
Department store operator Kohl's Corp. announced that it will double its New York design office in the garment district to more than 100,000 square feet by 2014. Since opening its design office in the Big Apple five years ago, the Wisconsin-based company has grown considerably. Kohl's moved into its current 59,000-square-foot office at 1400 Broadway, at West 38th Street, in 2010. The chain plans to take two additional floors in the 38-story building in the next two years. Kohl's currently occupies floors 19 and 20 and its lease expires in 2026. “To support the growth and incredible success we've experienced with our exclusive brands, it's important our New York design office has a space that can sustain existing brands while allowing for additional growth of our brand portfolio,” said
Department Stores Try to Rekindle a Clothing Love Affair
After getting women hooked on fancy handbags and expensive shoes in recent years, retailers are trying to rekindle a love affair with clothes. Department stores are leading the charge, with Saks, Nordstrom and Macy's improving in-house clothing lines and refurbishing women's departments. The retailers are counting on women to spend more overall and not simply shift their dollars away from higher-margin purses and footwear, said Liz Dunn, a New York-based analyst with Macquarie Group, an Australian investment firm. "Retailers are trying to give women more reasons to buy clothes," said Candace Corlett, the president of WSL Strategic Retail in New York.
Closing of Bloomingdale’s, Other Retailers Give Malls Reason to Worry
In the old days, mall economics were so simple: Plunk down two big department stores as anchors and sandwich smaller shops in between. Open doors. But in the past 20 years, the draw of the major department store has begun to erode, with many sold or shuttered as aging malls struggled to modernize. Remember Dayton’s? Donaldson’s? Powers’s? The news last week that Bloomingdale’s is leaving the Mall of America comes just after Sears’ recent announcement that it was closing 25 of its “full-line” stores nationwide – most of which are in anchor malls, although none in the Twin Cities.
Footwear
Keen Recognized for Creating New Jobs in America
Keen CEO James Curleigh attended the "Insourcing American Jobs" Forum at the White House hosted by President Obama and Vice President Biden. Keen had a seat at "the roundtable," and Curleigh was one of a select group of CEOs across multiple industries attending that represented those that have "brought jobs back or decided to make significant investments in the United States,” according to a White House press release.
Bearpaw Footwear Hires International Business Director
Bearpaw Footwear hired Richard Marten as its vice president of international business development. Marten has over 20 years experience in the sporting goods and outdoor industries and over seven years experience in international product management. He was worked with national brands including: Reebok, And 1 Basketball and Columbia Sportswear. Marten has a Bachelor of Arts in Business Administration degree from the University of Wisconsin.
Gifts/Accessories/Luggage/Pets
Fossil to Buy Skagen for $236.9M
Fossil Inc. has agreed to buy Skagen Designs and its international affiliates for about $236.9 million in cash and stock, giving the retailer a broader range of consumer accessories for its collection. Skagen, based in Reno, NV, makes watches, jewelry, sunglasses and clocks. Its international affiliates operate regional offices in Denmark, Hong Kong, Germany, the UK and Canada. Fossil designs watches, jewelry, handbags, belts and clothing. The deal is made up of $225 million in cash and 150,000 Fossil shares. It is expected to close next month and includes an additional payment of 100,000 in Fossil stock based on sales milestones. Fossil has recently seen big sales jumps outweighed by rising production costs that have slowed its strong earnings growth and weakened margins. Fossil's wholesale customers range from high-end sellers like Neiman Marcus Group Inc. and Nordstrom Inc. to low-price retailers like Target Corp. and Walmart Stores Inc. In November, the company said its third-quarter profit edged up as it posted double-digit same-store sales growth, though rising production costs weakened margins.
Swatch Sales May Reach 8 Billion Francs in 2012
Swatch Group AG Chief Executive Nick Hayek said 2012 sales may reach 7.5 billion Swiss francs ($7.9 billion) to 8 billion francs, Le Temps reported. The company may achieve 10 billion francs of annual revenue in four to five years, the Swiss newspaper said, citing an interview with the CEO.
Target Taps Dog Treat Bakery for New Retail Partnership
The Boston-based Polka Dog Bakery will be one of five U.S. specialty stores that will participate in Minneapolis-based Target Corp.’s new The Shops at Target retail partnership program. The program, which debuts May 6, 2012, at all Target stores and Target.com, features co-created, limited-edition exclusive collections across five different product categories, including dog products.
Grocery/Healthy Foods/Snacks/Confectionery
Twinkie, Wonder Bread Maker Hostess Files for Bankruptcy
Twinkies and Wonder Bread maker Hostess Brands Inc filed for bankruptcy protection for the second time in less than three years, after failing to reach an agreement with workers on pension and health benefits. Hostess' declining financial performance, crippling legacy costs associated with its pension plans and massive debt levels led the company to Chapter 11 bankruptcy, court papers showed. The company, which has about $860 million in debt, said it does not expect disruptions in the manufacturing and delivery of its products during the bankruptcy process. To reorganize itself, the company must withdraw from multiemployer pension plans, address legacy health and welfare costs and secure new capital to modernize its production and distribution operations, Irving, Texas-based Hostess said.
Tesco Shake-Up After £5bn Battering
Tesco is to launch a complete overhaul of its supermarkets, including radical curbs on the opening of giant out-of-town superstores, after suffering its worst Christmas in decades. Nearly £5bn was wiped off the company's stock market value on Thursday after the supermarket juggernaut hit the wall during the peak selling season. The firm has broken 30 years of unchecked financial success with the shock warning that UK profits could fall in the coming year. The humbling of the supermarket leader was blamed on an exodus to rival chains such as Sainsbury's and Asda during the most important trading weeks of the year. Rivals bombarded shoppers with money off coupons and promotions that overshadowed Tesco's £500m "Big Price Drop", now dubbed the "Big Price Flop" by analysts. The upset sent shockwaves through the City with the shares closing down 16% – thought to be its biggest one day tumble ever.
Delhaize Closing 113 Food Lions in Revamp
Delhaize Group here said Thursday it plans to shutter 113 Food Lion stores and eliminate the Bloom banner as part of a broader reorganization. The company also said it would convert 42 of its Bloom stores to the Food Lion banner and shutter the remaining seven locations of the Bloom banner. It will also convert 22 of its Bottom Dollar Food locations in North Carolina, Virginia and Maryland, and shutter the six remaining Bottom Dollar Food stores in those markets. The company will also close a distribution center in the U.S. and 20 stores in Southeastern Europe. In total the company is closing 164 locations in the U.S. and Europe and converting 64 Bloom and Bottom Dollar Food stores to Food Lion.
Supervalu Loss Widens, Shares Skid
Grocery store operator Supervalu Inc. said Wednesday that its fiscal third-quarter net loss widened due to costs related to a turnaround plan, continued high food prices and a cautious consumer. The company, which operates Albertsons, Jewel-Osco and other supermarkets, trimmed its yearly sales guidance for the second quarter in a row and shares fell more than 10 percent in morning trading. For the three months ended Dec. 3, Eden Prairie, Minn.-based Supervalu says its net loss totaled $750 million, or $3.54 per share, in the three months ended Dec. 3. That compares to a loss of $202 million, or 95 cents per share, last year. Revenue fell 4 percent to $8.33 billion from $8.67 billion last year. Analysts expected revenue of $8.22 billion.
Walt Freese Named Stonyfield CEO
The company announced that Walt Freese, CEO at Ben & Jerry's, will join Stonyfield later this month and will be overseeing the organic yogurt company, including such brands and product lines as Stonyfield's core organic yogurts, rapidly growing Organic Oikos Greek Yogurt, and popular product lines including YoBaby, YoToddler and YoKids.
Home Improvement/Auto Repair
Ghosn Warns of Disruptive Shifts in Auto Industry
Carlos Ghosn, CEO of the Renault-Nissan Alliance, warned that global paradigm shifts in energy and demographics threaten to disrupt the auto industry. Exploding populations in developing countries are spurring unprecedented demand for cars and the fossil fuels powering then, he said in a keynote address at the Automotive News World Congress. But instead of preparing, carmakers are passively reacting, he said. By 2050, there may be 2.5 billion vehicles on earth, compared with fewer than 1 billion now, he said. China and India are expected to account for half the growth in energy demand through 2030. "Our world is experiencing several paradigm shifts," Ghosn said. "These trends have the potential to severely disrupt our industry and our planet."
The Home Depot Recruiting 70,000 Spring Season Associates
The Home Depot announced it has begun recruiting to fill more than 70,000 seasonal positions as it prepares for spring, the company's busiest selling and hiring season. In fact, about half of The Home Depot's 2011 seasonal hires stayed on in permanent positions. The Home Depot will also usher in the season with door-buster prices on hundreds of the most sought after spring products, including a variety of live goods and lawn care, outdoor power, eco-friendly gardening products, patio and grills.
Housewares/Furniture
hhgregg Net Down 16 Percent in Third Quarter
Third-quarter net income for hhgregg fell an estimated 16 percent to $22.5 million, according to a preliminary report from the specialty retailer. The decline in the bottom line occurred in spite of a healthy sales gain of 27 percent to $829.5 million in the quarter, which ended on Dec. 31. That increase included a 3.9 percent rise in same-store sales. However, the retailer said lower-than-expected margins in video-products sales and a jump in advertising spending combined to reduce net profit in the quarter.
Tuesday Morning Sales Fall 2.2 Percent in Second Quarter
Tuesday Morning posted net sales of $273.1 million in its fiscal second quarter, down 2.2 percent from the second quarter of last year, according to a preliminary report from the closeout retailer. Same-store sales for the quarter, which ended on Dec. 31, dropped 4.6 percent, comprising a 3.5 percent decrease in traffic and a 1.1 percent decline in average ticket. Based on these results, Tuesday Morning said it now expects total sales for this fiscal year, which will end on June 30, to be from $815 million to $820 million. If so, sales would be flat to down 0.7 percent from last year.
Royal Heritage Purchases Allergy Control Products
Royal Heritage Home has acquired the assets of Allergy Control Products, a manufacturer of allergy-control products. The deal adds Allergy Control Products’ line of allergy mattress protectors, HEPA air-purification systems, sinus-relief products, bed-bug treatments, respirator masks, water filters and asthma products into the Royal Heritage portfolio. The company sells these products both directly to consumers and through wholesale, according to a Royal Heritage statement. This is the second in a number of planned acquisitions in the allergy segment for Royal Heritage.
Williams-Sonoma Cuts Outlook, Stock Falls
Williams-Sonoma Inc. announced its eight-week holiday results and cut its outlook for the quarter, citing a promotional holiday season at its Williams-Sonoma brand. The company stock price dropped $4.76 or 12.16 percent following the news. The San Francisco company now expects fourth quarter earnings per share in the $1.10 to $1.15 range, below the $1.15 to $1.20 it previously forecast and below the $1.19 estimated by analysts. The company restated its revenue target for the quarter to $1.24 billion to $1.26 billion, which is still in line with analyst expectations of $1.26 billion but below the $1.27 billion Williams-Sonoma previously estimated.
IP Holding Companies & Multi-brand Companies
Polaroid Name to be Used for Digital Camera Line
Polaroid, the originator of instant film, said today it has licensed its name to sell digital cameras and camcorders developed by Sakar International Inc. of New Jersey. The terms of the agreement were not disclosed. Sakar is a consumer electronics manufacturer in Edison, N.J., that makes Vivitar camera equipment, Crayola brand cameras for kids and accessories for Apple's iPod and iPad among other gadgets. Polaroid said it expects to launch products from Sakar in North America and parts of Latin America later this year.
What's in a Domain Name? $185,000 for Starters
The nonprofit organization that oversees the Internet’s address system is bracing for a wave of lawsuits as a result of a controversial program that may add hundreds of top-level domains such as .apple and .nyc. The Internet Corporation for Assigned Names and Numbers, a California-based nonprofit that has a contract with the U.S. government to manage the Web’s address system, was due to start accepting applications on Jan. 12 for new extensions to the right of the dot, including brand names, cities, and almost any word in any language. The program may give rise to as many as 2,000 Web suffixes, according to ICANN. Since approving the program in June, ICANN has come under fire from businesses saying the proliferation of suffixes will confuse consumers and increase companies’ costs of protecting their brands.
IBM Keeps Top Patent Spot for 19th Year as Asian Rivals Gain
International Business Machines Corp. won a record number of U.S. patents in 2011, its 19th straight year on top, as some Asian competitors advanced in the rankings at the expense of Microsoft Corp. and Intel Corp. IBM, the world's biggest computer-services provider, gained 6,180 patents last year, researcher IFI Claims Patent Services said in a statement. Samsung Electronics Co. was second, its growth outpacing IBM, and Canon Inc. replaced Microsoft as third. Panasonic Corp. moved up to No. 4 and Toshiba Corp. advanced to fifth spot.
GreenLight has been appointed to represent rights to the name, image and likeness of Dr. Martin Luther King Jr., one of the most recognized and respected leaders of the civil rights movement. This is the first time an external agency has been selected to commercially represent Dr. King. GreenLight, a wholly owned subsidiary of Corbis, represents many recognized personas including Albert Einstein, Steve McQueen, Muhammad Ali, Charlie Chaplin, Thomas Edison, Johnny Cash and the Wright Brothers.
Jewelry/Mining
Tiffany Holiday Sales Weaken; Zale, Signet Rise
Tiffany & Co sales over the holiday season weakened markedly in the United States and Europe, prompting the upscale jeweler to lower its full-year profit forecast and sending its shares down more than 10 percent in early trading. Layoffs and lower bonuses on Wall Street and in London's City as well as a growing debt crisis in the euro zone have cast a pall on high-end jewelry spending in two of Tiffany's most important markets. At the same time, jewelers like Zale Corp and Signet Jewelers Ltd that cater more to Main Street shoppers -- which account for about 30 percent of annual jewelry sales in the United States -- fared better during the Christmas period.
Cadmium-Laced Jewelry Removed From Stores
More than a dozen of the most popular retailers have stopped selling jewelry that contains more than trace levels of a toxic metal called cadmium, accepting a new standard that consumer advocates say is tougher than the one endorsed by Washington. Under the terms of a legal settlement reached in California, the retail chains — including trendy Target, high-end Saks and teen favorites such as Gap, Aeropostale, Wet Seal and Forever 21 — instructed their suppliers to limit the cadmium levels in jewelry. The settlements kicked in Dec. 31, just weeks after the federal Consumer Product Safety Commission said it was satisfied with an alternative voluntary approach that the industry helped craft for jewelry marketed to children using the government’s scientific research. There is no federally endorsed standard for adult jewelry.
Longtime Jewelers of America CEO to Resign
Matthew A. Runci, president and CEO of Jewelers of America, announced that he is retiring from the national trade association for businesses serving the fine jewelry retail marketplace after 17 years at the helm. His resignation becomes effective at the end of the year. Runci informed the association’s executive committee of his decision on January 6. JA has asked Runci to remain during a transition period and to continue to assist the association with its work in the area of responsible business practices in 2013.
David Yurman Taps Glen Senk as CEO
After nearly 18 months without a leader, David Yurman finally has a CEO. Glen Senk, who resigned from his post as CEO of hip apparel chain Urban Outfitters, has signed on at the Manhattan-based jeweler. The appointment is effective Feb. 27 and was announced Wednesday afternoon by David and Sybil Yurman, who founded the company 32 years ago. Mr. Senk is expected to take an ownership stake in the privately-held firm, which sells to big-name celebrities such as Charlize Theron and Brad Pitt. The Yurmans noted that with Mr. Senk at the helm, they will be able to return to designing their iconic jewelry, which is sold at high-end retailers such as Neiman Marcus and Saks Fifth Avenue.
Jewelry Sales Mix Varies by Retail Channel
Specialty jewelers dominate the market for diamond jewelry and fancy watches, but other merchants – typically multi-line discounters – sell more colored gemstone jewelry, pearls, and gold jewelry, according to recently released data from the Census Bureau’s Economic Census. Until the Economic Census was published, most people assumed that specialty jewelers’ sales mix of individual jewelry categories was broadly the same for other retailers who happen to sell jewelry along with a plethora of other merchandise. However, the Economic Census gave a platform upon which to aggregate jewelry sales by category between specialty jewelers and all other merchants who sell jewelry. In the census period, just over half of America’s total jewelry sales were made by specialty jewelers; the balance – just under half of the $62 billion in sales – were generated by multi-line merchants, typically discounters such as Wal-Mart and Costco as well as department store merchants like J.C. Penney.
Certified Polished Diamond Prices Rose 19% in 2011
Certified polished diamond prices rose in 2011 spurred by strong buying in the first half of the year. However, global economic uncertainties and tight liquidity in the cutting centers caused diamond prices to soften in the latter half, the Rapaport Group reported. For 2011, the RapNet Diamond Index (RAPI) for 1.00 ct. polished diamonds rose 19% to 96.96. The 0.30 ct. category fell 1% to 16.11, and 0.50 ct. increased 20% to 34.39. The RAPI for 2.00 ct. diamonds grew 15% to 18.78 and 3.00 ct. rose 18% to 35.19.
Office/Crafts & Hobby/Flowers/Party
Bain Founder: Staples Was 'Microcosm' of Romney Approach
The creation of Staples was a “microcosm” of how Romney’s Bain Capital did business, according to Robert F. White, a friend of Mitt Romney and fellow Bain Capital founder. As Bain Capital has become the focus of controversy in the race for the White House, the company and its partners have declined all requests for interviews by the media. But in a previously unpublished 2006 interview, White told just how Bain Capital operated with Romney as its chief. In 1984, Romney and his colleagues founded Bain Capital as a venture capital firm and raised their first investment fund totaling $37 million. White remembers when Tom Stemberg, the founder of Staples, came to Bain with the idea of revolutionizing the office supply industry by starting a chain of discount office supply stores.
The Craft & Hobby Association (CHA) Board of Directors today announced Andrej Suskavcevic as new President and Chief Executive Officer of CHA. The appointment concludes an eight-month executive search during which Tony Lee, Vice President of Meetings & Expositions, served as CHA's interim leader. Since 2007, Mr. Suskavcevic has served as CEO of the Commercial Finance Association (CFA) in New York City. CFA is the premier trade association for the asset-based lending and factoring industries.
Restaurants/Food Service
Expect More Activists This Year
Restaurants fended off numerous activist investors last year, either through negotiation (Ruby Tuesday) or a proxy win (Cracker Barrel). But don't expect that these investors will simply go away. Indeed, some experts believe activism will be on the upswing this year. Activists poured $20 billion into Schedule 13D filings with the SEC, according to Ken Squire, who tracks such filings, which signal that a large investor is taking an activist role in the company. Squire was speaking at the ICR XChange Investors' conference in Miami this week. Restaurants and other consumer companies are popular targets of activist investors, according to experts on the panel on which Squire spoke, because they're well-known brand names that are usually simple to explain to investors. Panelists expect more activist filings for a simple reason: they work, and because they work investors are pumping more money into activists' investment funds.
Friendly’s Shuts 37 More Eateries, Exits Bankruptcy
Friendly Ice Cream Corp. closed another 37 stores before emerging from bankruptcy protection yesterday. The chain has shuttered about 40 percent of its locations in Massachusetts and 20 percent overall - about 100 restaurants in total - since filing for Chapter 11 protection in October. The most recent closings will result in an estimated 780 people losing their jobs, about 20 at each restaurant, Friendly’s said. Since entering Chapter 11, Friendly’s said, it has tried to implement a turnaround plan, including by enhancing the menu and speed of service. Friendly’s canceled an auction last month because it had not received any bids to compete with the $75 million offer made by the Sun Capital affiliate, Friendly Ice Cream LLC.
Banking & Lending
Credit Card Interest Remains High While Other Rates Stay Low
The interest rates consumers are paying on credits cards remain high, even as rates for other loans scrape along at all-time lows, according to a new report. In its first survey of the new year, CreditCard.com found that national interest rates on new credit card offers averaged 15.14 percent. That’s higher than the average annual percentage rate (APR) of 14.71 percent in the first week of 2011. It’s an even greater increase from the first week of 2010, when rates averaged 12.87 percent. The high rates are even more striking when compared with the interest being charged consumers on loans for cars, homes and other purchases.
Michigan Consumer Sentiment Beats Forecast
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for January rose to 74.0 from 69.9 at the end of December. The gauge was projected to rise to 71.5, according to the median estimate in a Bloomberg News survey. Estimates ranged from 68.5 to 77 in the Bloomberg survey of 68 economists. The measure averaged 89 in the five years leading up to the recession that began in December 2007 and ended in June 2009.
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