The Weekly Consensus: Week of January 18, 2010
A Matter of Perspective
Christopher Ellis
Perspective is a funny thing. In its simplest form, as it changes it causes an object or a vista to alter shape or distance. Last week brought a host of significant events to the fore; in our industry, the changing of the guard at Zales and the announcement of the same at Sterling is highly significant; the looming Massachusetts senatorial election will probably determine what happens to healthcare for a generation; in Afghanistan casualties continued to mount; and in the Caribbean one evening this week the earth shook a few times and a hundred thousand people lost their lives.
Those of us involved with retail, and particularly jewelry, can feel the trauma as one of the few remaining duopolies in a category begin to make their adjustments. The resultant shifts - particularly on the Zales side of the ledger - will have far-reaching effects. One can only hope that the very recent lessons in jewelry retail have been learned, and the oft-repeated mistakes are this time avoided as the company and all of its participants work through the challenges. The road ahead is well-lit and warning signs are plentiful, so one hopes the pitfalls can be skirted.
For the people of Haiti there was no such warning, and corporeal survival is their only priority for now, a perspective few of us have ever had to share. I'm sure we will all continue to take a moment from our busy lives to spare a thought for those who lost theirs and to contribute what we can to help alleviate the suffering of those that remain in some small way.
To the extent that a Google news search provides a glimpse of perspective, at the time of writing this Zales produced 187 results and Haiti 108,758, which would suggest media perspective was serving us well were it not for a Leno/O'Brien news search yielding 9,110,000 results. Some more work to do on getting priorities straight, then.
Apparel/Swimwear/Intimates
Betsy White
Urban, Abercrombie: Understanding December Retail Sales Data
So as you probably are aware, a bunch of retailers released their December sales data and comps recently. Generally, most companies' sales sucked less than analysts' consensus-although beating year-over-year comps for December 2008 is a pretty low bar (like being the most beautiful person at bingo night at the retirement home). Two companies in particular that were of interest to me yesterday were Urban Outfitters and good old Abercrombie & Fitch. The two companies reported results that told two stories in this recession. Urban Outfitters saw same-store sales rise 5% in December. Meanwhile, Abercrombie & Fitch continues to struggle to regain its preeminence among specialty retailers in the mall. 2009 saw the closing of the company's two dozen or so Ruehl stores (a costly misadventure resulting in impairment of about $116M) and YoY sales comps have doggedly come in below estimates for months, and December's -19% sales figure looks absolutely bottom-barrel compared to other retailers. Online sales held up better, declining only -4% compared to December 2008--that was just about the only good news reported; tweener brand Hollister reported comp sales of -25%.
Dressed for Success: Talbots
Like any bad marriage, Talbots acquisition of J.Jill left it with a lot of baggage. After purchasing the clothier for $517 million in May 2006, shareholders in the women's retailer suffered increasing losses on the new unit until the chain was mercifully sold to Golden Gate Financial in June 2009 for a fire-sale price of $75 million. But even after being liberated from the J.Jill red ink, Talbots has been burdened by the $380 million dollars of debt that was utilized for the purchase. A lonely, but reshaped Talbots then started working through its own therapy. Management lowered operating expenses, pruned unprofitable concepts and invigorated its design team. Lower inventory levels resulted in a higher portion of revenue generated by full-price sales, with an enormous positive impact on gross margins. And while patient investors would likely have been rewarded eventually, a more immediate catalyst revealed itself in early December. Enter BPW, a special-purpose acquisition company facing a Feb. 26, 2010 deadline to invest the $350 million of cash on its balance sheet. By happy coincidence, AEON, Talbots' largest shareholder and debt holder, was searching for an exit strategy from its Talbots investment. A triangular deal evolved, whereby Talbots and BPW would merge and use BPW's cash and newly issued warrants to buy out AEON's shares and pay off the debt owed it.
New Fit for Vending Machines
You don't think twice about buying a chocolate bar, gum or soft drink from a vending machine. But clothing? Canadian retailer Mark's Work Wearhouse is quietly experimenting with vending machines at two sites. If successful, the clothier intends to roll out more in locations around the country. And while many consumers aren't sure yet what to make of them, Robin Lynas, vice-president of corporate development for Mark's, says both have chalked up some sales. The placements are meant, in part, to raise awareness of the Mark's brand but also to generate sales in new locations. While it's not unusual in Japan or India to see everything from iPods to diamond rings sold this way, Mark's believes it's the first retailer in Canada to sell clothing through vending machines.
Athletic & Sporting Goods
Michael O'Hara
Ski Market Will Honor Gift Cards, but There's a Catch
The Ski Market Ltd. has switched gears and is now proposing to honor its unused gift cards after Connecticut's attorney general blasted its initial decision not to upon its bankruptcy filing. However, there is a catch - the specialty retailer will only honor half a card's value. Attorney General Richard Blumenthal issued a statement Tuesday announcing the deal, which he called a "partial victory." The deal is subject to bankruptcy-court approval.
Big 5 Reports 8% Revenue Gain in Q4
Big 5 Sporting Goods Corporation reported net sales for the fiscal 2009 fourth quarter ended Jan. 3 were $237.6 million compared to net sales of $219.6 million for the fourth quarter of fiscal 2008. Same store sales increased 0.1% for the quarter. The company's merchandise margins increased 88 basis points during the fourth quarter compared to the same period last year.
Collective Brands to Buy Above the Rim
Collective Brands Inc. said Friday that it will buy the Above The Rim brand from Reebok International and will look to build its presence in the U.S. and overseas. Terms of the deal were not disclosed. "We believe Above The Rim has tremendous potential as an authentic basketball brand in the U.S. and other geographic markets that are eager for brands that embody the aspirational basketball lifestyle that Above The Rim represents," Bruce Pettet, CEO of Collective Licensing International, said in a statement. Collective Licensing's other brands include Sims, Hind, Airwalk and Vision Street Wear. Above the Rim includes apparel, accessories and footwear. Collective Brands owns Payless Shoe Source and brands such as Stride Rite, Keds, Sperry Top-Sider and Saucony.
Catalog & Internet
Christopher Ellis
Sears Scrambles Online For A Lifeline
Five years after hedge-fund billionaire Edward S. Lampert brashly merged Sears and Kmart, the storied merchants keep shrinking. So on the fourth floor of its grand Chicago flagship that epitomizes the 20th-century approach to shopping, a team of 180 e-commerce whizzes is searching for fresh ways to sell Kenmore appliances and Craftsman tools in an age of iPhone apps and Twitter. The group-a brain trust that includes veterans from Web stalwarts such as Amazon and Orbitz-is giving a digital makeover to Sears, the 124-year old merchant that rose to prominence on the strength of its eclectic mail-order catalog. Over the past 12 months, Sears Holdings Corp. has launched a flurry of Web sites and mobile-phone applications in an attempt to stretch sales beyond the physical borders of its aging stores. The strategy, dubbed "Shop Your Way," is to market millions of items virtually, as well as in retail outlets, while offering various delivery and pick-up options. As the main Sears Web site now boasts: "Buy online, then go to the store and get your item within five minutes."
P&G Webstore Pits It Against Retailers
The maker of Tide detergent, Pampers diapers and Gillette shavers is taking hundreds of its popular consumer products directly to shoppers through a new Web site. The "eStore" that Procter & Gamble Co., the world's largest consumer products maker, is testing could put it in direct competition with some of its biggest customers, major traditional retailers. But the site's leaders say it is a consumer research "lab" and retailers will benefit because they will get to share its findings on how shoppers respond online and in stores to digital ads, coupons, store promotions and other factors. P&G officials don't expect the eStore to boost the manufacturer's revenue or profit very much very soon. They're more interested in the data it will produce about their shoppers and what works for them: product pairings, social media links, environmentally-friendly pitches, packaging options, even the Web standby of banner ads.
Consumer Electronics/Video/Audio
Douglas Stebbins
In Wake of Circuit City's Demise, Best Buy Rivals Gain Share
Amazon and Walmart are gaining mindshare versus Best Buy in the race to be the first place for consumers to shop for electronic devices, according to a new report. According to a Retrevo Pulse survey of 1,019 randomly selected people, consumers stuck with Best Buy for electronics purchases this holiday season, but consumers' perception of where to buy electronics shifted in Amazon's favor in a year-over-year comparison. Amazon increased its mind share by 30 percent compared to last year, from 11 percent to 15 percent, according to the study. Amazon's gain appears to have been at Best Buy's expense, Retrevo writes.
Bernie's Files Chapter 11
Bernie's, the New England A/V, appliance and furniture chain, has filed for Chapter 11 bankruptcy protection and will begin liquidation sales on Jan. 15. Hilco Merchant Resources will conduct the fire sales, pending approval by the U.S. Bankruptcy Court for the District of Connecticut, which is expected to hear the case today. Bernie's operates 15 big-box stores in Connecticut, Massachusetts and Rhode Island. It sold approximately $63 million in CE in 2008, up 1.6 percent from the prior year, placing it at No. 80 on the CE chart. The chain had $53 million in major appliance sell-through, down nearly 12 percent from 2007. Bernie's did not attend International CES last week and withdrew its membership from the NATM Buying Corp. NATM president Bill Trawick called it a "tragedy" that a company of that size is struggling, and described the situation as an unfortunate sign of the times. "It's very, very tough out there and I hope this trend doesn't continue." Bernie's president/COO Mike Honeyman formally left the company earlier this month, following the departure of marketing and merchandising VP John Schlenner and a number of the chain's buyers. The retailer was founded as a gas station in 1947 by Bernie Rosenberg. The company was bought by Newmark & Lewis in 1985, and was re-acquired six years later by Rosenberg's son Milton, who re-built the business from a two-store operation into a regional chain with plans to expand into Boston and beyond.
Apple, RIM Hit with Kodak Patent Suit
Kodak Thursday became the latest company to file a high-profile patent infringement suit, as the camera giant sued both Apple and Research in Motion (RIM) for allegedly infringing upon its digital imaging technology. Specifically, Kodak alleges that the Apple iPhone and certain BlackBerry smartphones are using a method for previewing camera phone images that has been patented by Kodak. The new Kodak suit is the second major iPhone-related lawsuit that Apple is dealing with right now. Last October, Nokia sued Apple for allegedly infringing on 10 of its patents that covered a wide range of mobile data technologies, including speed encoding and decoding, security and encryption. At the time, the smartphone manufacturer accused Apple of trying to get a "free ride" off of its intellectual property.
Cosmetics & Pharmacy
William Busko
Japan's Shiseido to Buy Bare Escentuals for $1.7 Billion
Shiseido Co Ltd., Japan's largest cosmetics company, has agreed to buy U.S.-based Bare Escentuals for $1.7 billion, as it looks to speed up its expansion and break into a new part of the North American market. The California-based firm, which markets natural-looking cosmetics and runs 800 retail outlets in the United States, will operate as a separate division of Shiseido, and its brands will continue to be run by CEO Leslie Blodgett. Shiseido, which began as far back as 1872 as Japan's first Western-style pharmacy, has been focusing on growth in China to offset a $24 billion home market that is shrinking as Japan's population ages. The company said adding Bare Escentuals, a San Francisco-based cosmetics and skincare firm, would help it move into the fast-growing natural-ingredient cosmetics market. Bare Escentuals would have lifted revenues at Shiseido last year by 8 percent and operating income by 36 percent. Bare Escentuals is known for its skin care and body care products under the bareMinerals, RareMinerals and its eponymous brands.
Parlux Sees Third-Quarter Sales Gain
Parlux Fragrances reported preliminary net sales for the third quarter ended Dec. 31 were up 2.5 percent to about $48.5 million, from $47.3 million during the same period a year ago. Revenues for the nine-month period were estimated to be $128.6 million, up 4.6 percent from $123 million in the prior-year period. The results exclude approximately $3.5 million worth of Guess inventory that was sold at cost during the quarter to Coty Inc., the new Guess fragrance licensee, Parlux noted. Including the sales to Coty, net sales for the third quarter increased by 10 percent to $52 million and, for the nine months, increased 7 percent to $132.1 million.
Crabtree & Evelyn to Exit Bankruptcy
Bath and body soap marketer Crabtree & Evelyn Ltd. plans to emerge from bankruptcy by the end of this month. The Woodstock, CT-based company set the timetable Thursday when a Manhattan bankruptcy court approved its first amended reorganization proposal. After coming out of bankruptcy, the company will close on a $26.3 million exit loan from its parent, Malaysian firm Kuala Lumpur Kepong Berhad. As part of its restructuring, the retailer exited 35 retail sites, leaving 91 locations in operation. It also has a new e-commerce platform, crabtree-evelyn.com.
Department & Discount Stores
Mark Lenz
BJ's is Confident About Its Value Positioning
While people aren't yet storming warehouse clubs for higher-end purchases, the president and CEO of BJ's Wholesale Club says she has "zero worries" that the chain will lose its appeal among value shoppers as the economy recovers. Addressing investors at the Cowen and Company 8th Annual Consumer Conference, Laura J. Sen did concede that she was wrong in her assessments about how quickly consumer spending would recover. "Consumers are still being very careful," she said in her remarks, which were webcast. "But once you're paying $2.29 for chicken, you're not going to go back to paying $2.99."
Bloomingdale's Outlets Said in the Works
Bloomingdale's is pushing forward to launch outlets, according to sources, becoming a Johnny-come-lately into a potentially very lucrative channel of distribution for the department store chain. One real estate executive said Bloomingdale's could be close to a deal with Simon Property Group Inc. to open several outlets around the country, taking a dramatic dive into the Simon-owned Mills properties, which typically comprise over 1 million square feet of gross leasable area and include traditional mall, outlet center and big box retailers and entertainment uses.
Walmart Taking Over the World by Stealth
It hardly shrieks of billion-dollar glamour. The US nerve center of the world's largest retailer, Walmart, consists of a collection of low-slung prefabricated buildings along a four-lane highway in north-western Arkansas. Walmart's head office is hundreds of miles from the nearest big city. It isn't even handy for the state capital, Little Rock, which is three and half hours' drive away. But hopeful merchants beat a path from all corners of the world to hawk their wares here, in a series of bare Perspex rooms along a "supplier corridor". Staff work in spartan cubicles and reminders of the retailer's low-cost culture are constant - in an employee lounge an honesty box invites payment for tea and coffee with a blunt message: "Drinks are not free."
Energy
Christopher Ellis
Solar Market Begins Recovery in 2010
Simply put, 2009 was a very difficult year for the PV (photovoltaic) industry. For the first time, the PV market experienced a major market downturn during which contraction occurred on both a megawatt and revenue basis, with the revenue contraction much more severe due to ASP (average selling price) pressures. According to experts, there are some reports of strengthening market conditions in the latter part of Q4, evidenced by the recent report that financing of $715 million has opened up for a solar PV projects portfolio in France and Italy.
Geothermal Industry Struts Its Stuff for Wall Street, Capitol Hill
The geothermal power industry is maneuvering to escape the shadows of the wind, solar and biofuels sectors and get financiers and lawmakers to take notice. But high up-front project costs and the impatience of investors keeps getting in the way, leaving industry with its hopes pinned on government grants and tax incentives. Hoping to change its luck, the Geothermal Energy Association (GEA) held its largest gathering ever this week, drawing financiers, politicians and project developers to a posh hotel in Lower Manhattan. The gathering featured a lunchtime keynote speech by Senate Majority Leader Harry Reid (D-Nev.). GEA representatives capped the day by ringing the closing bell at NASDAQ. The goal: "to let Wall Street know about the fundamentals of geothermal energy, which has ... been around for more than 100 years," said Arni Magnusson, executive director of sustainable energy at Islandsbanki, a major geothermal player in Iceland. The United States is already far and away the world's largest home for geothermal. Of the roughly 10,000 megawatts of global geothermal capacity, about a third is in the United States, about 3,153 MW, according to GEA. Almost all of that is in California, with Nevada and Utah catching up.
Footwear
Michael O'Hara
No Rebound for Canton's Reebok Under Adidas Owners
It's been four years since Adidas purchased Reebok International, and a promised quick turnaround of the brand has yet to materialize. When Adidas bought struggling Reebok for $3.8 billion in 2006, the German company forecast a fourth-quarter turnaround for its new Canton unit. The marriage of the two athletic footwear companies, CEO Herbert Hainer declared, would allow Adidas to give No. 1 powerhouse Nike a run for its money. That timetable, though, was pushed back to the second half of 2007, then 2008 and then 2009. Now, four years after Adidas closed the purchase, Reebok sales are still headed in the wrong direction. Reebok's 2009 sales are expected to be down from the $3.1 billion in 2006 and far short of the potential $5 billion that Hainer eyed. And Reebok has lost about 45 percent of its U.S. market share.
Tariffs Could Rise for U.S. Apparel and Footwear Makers
Making apparel in the United States may get a little more expensive this year if certain yarns and fibers are imported from abroad. Before breaking for the holidays, Congress failed to renew a temporary duty suspension that went into effect in 2006 and expired on Dec. 31, 2009. The Miscellaneous Tariff Bill covered more than 500 apparel and footwear components that are no longer made in the United States or do not cost more than $500,000 in lost revenues to U.S. companies. Now, manufacturers bringing in components after Jan. 1 are faced with duties that range from 4 percent of the value of carded cashmere yarn to 10 percent for artificial-filament single yarn, other than sewing thread, of viscose rayon. Many footwear components and footwear with certain components are losing tariff exemptions, resulting in a 37.5 percent tariff on women's footwear with outer soles and uppers of rubber or plastic, with the exception of vulcanized rubber and footwear with waterproof molded bottoms. The House introduced a bill in late December to extend the tariff exemptions for three more years but failed to pass it before adjourning for the rest of 2009. The Senate hasn't introduced a bill yet. If Congress does pass a bill later this year, it could make the exemptions retroactive to Jan. 1, allowing importers to be reimbursed for the duties they paid after Jan. 1.
Gifts/Accessories/Luggage/Pets
Mark Boucher
UK Company Buys Segway
Segway Inc. has been sold to a company based in the United Kingdom. The Bedford company made the announcement on its blog Thursday without naming the purchasing company. The merger took place Dec. 24. Segway makes the well-known Personal Transporter, an electronic scooter which gained worldwide fame with its 2001 release. Early on, there was speculation that the self-balancing, two-wheeled device would revolutionize transportation. Sales, however, did not live up to the hype. The acquiring company is backed by Jimi Heselden, a prominent U.K. businessman and the chairman of Hesco Bastion, according to Segway's blog, The Last Mile. Heselden is also an investor in the independently owned Segway U.K. distributorship. Segway said it will use the funding it received to support the continued growth of the company. The company did not name a sale price. The company currently has about 100 employees, mostly in Bedford.
Snuggie Cashes In where Others Failed
If you watch television, you know the Snuggie, a fleece blanket with sleeves that sells for about $20 at CVS, Bed Bath & Beyond, Target and other retailers. The product is advertised heavily enough that it's reached "Kleenex" status in the modern lexicon. To most Americans, "Snuggie" is synonymous with "sleeved blanket." But the market is packed, due, in part, to the fact that pioneers in the field were unable to patent the idea. There's the Snug Mee, the n-a-p Cuddle Blanket, The NFL Huddler and the Doxie CuddleRoo, a sleeved blanket that sports a front pouch meant to hold a wiener dog, along with the embroidered sentiment "My Dachshund's Love Warms My Heart." And at least two sleeved-blanket products preceded the Snuggie: the Freedom Blanket and the Slanket. Each company claims on its Web site that its apparel is "The Original Blanket with Sleeves," although Slanket has trademarked the slogan. With nearly a million Slankets sold to date, it's arguably the second-most successful sleeved blanket on the market. Snuggie sales have reached over 20 million units. Snuggie's parent company, Allstar Products Group, acknowledges that Snuggie wasn't the sleeved-blanket pioneer. "Similar products were on the market," says Anne Flynn, vice president of marketing for Allstar. "However, Allstar Products Group brought the product to the masses as a value point, making the Snuggie affordable for anyone's budget."
Biddees Offers Brand Name Gift Cards at a Discount While Donating to Nonprofit Organizations
Biddees has announced the launch of its website Biddees.com, offering consumers a fast, fun and easy way to save on new prepaid gift cards from top retailers. Biddees is the first auction site that provides consumers an opportunity to buy new brand-name gift cards at a guaranteed discount from face value, with a portion of what they spend automatically donated to a nonprofit cause of their choice. Biddees is a 'win-win-win' -- consumers enjoy guaranteed savings while retailers and nonprofit organizations benefit at no additional cost.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
Hershey to Bid at Least 17.9 Billion Dollars for Cadbury
US chocolate maker Hershey plans to bid at least 17.9 billion dollars next week for British confectioner Cadbury after concluding it can top US food giant Kraft's offer, The Wall Street Journal reported Friday. Hershey was finalizing a financing package that now includes a loan of at least 10 billion dollars from banks, five billion in new Hershey shares and at least three billion from private investors and the Hershey trust, the Journal said, citing people familiar with the matter. The move would be the latest twist in an international chocolate bidding war that has seen the Cadbury board repeatedly reject Kraft's cash and shares hostile offer. The Hershey bid is seen as likely to garner more favor with the British company's chiefs.
Disappointing Q3 Spurs A&P to Rethink Business Strategy
Faced with dismal financial results during a down economy, the Great Atlantic & Pacific Tea Co., Inc. is conferring with one of its top investors, West Coast-based Yucaipa, to help it figure out how to staunch the bleeding. For its third quarter ended Dec. 5, 2009, A&P reported sales of $2.0 billion vs. $2.1 billion last year. Comps declined 5.8 percent. Adjusted loss from operations was $20.1 million compared with adjusted income from operations of $17.4 million in last year's third quarter. Reported loss from continuing operations was $502.4 million, including charges of $412.6 million for goodwill, trademark and long-lived asset impairment and $16 million for mark to market adjustments related to financial liabilities, while loss from continuing operations in the comparable period of the prior year came $3.8 million, including income of $23 million for mark to market adjustments related to financial liabilities.
Tops Submits Bid for Penn Traffic Stores
Putting an end to weeks of speculation in the local and trade press as to its interest in the bankrupt Penn Traffic Co.'s stores, Tops Markets, LLC said last week that a bid to acquire a majority of its fellow Northeast grocer's assets, including its 79 supermarkets, has been accepted by the Syracuse, NY-based company and recommended to the U.S. Bankruptcy Court for approval. Williamsville, N.Y.-based Tops submitted a comprehensive bid that included cash as well as additional value created by substantial reductions in unsecured claims made against Penn Traffic by United Food and Commercial Workers Local One Pension Fund and C&S Wholesale Grocers. Tops offered $85 million in cash, with the elimination of about $100 million in unsecured claims against the company by UFCW Local One Pension Fund and C&S Wholesale Grocers.
Home Improvement/Auto Repair
William Busko
GM Says Saab Closing; No Viable Bid Yet
General Motors Co. sent its clearest signal yet today that none of the bidders for Saab had submitted an offer that would prompt the automaker to reverse a decision to shut down the Swedish luxury brand. "We're closing down Saab," GM Chairman Ed Whitacre told reporters on the sidelines of the Detroit auto show. "We're winding it down." GM Vice Chairman Bob Lutz said that the U.S. automaker would press ahead with closing down Saab unless a new bid emerged that was "financially better for us than the wind-down." GM said last week that it had hired AlixPartners, the restructuring firm that assisted in its U.S.-government backed bankruptcy last year, to handle the wind-down of Saab.
Home Depot, Rivals Brace for End of Canada Tax Break
A last-minute rush to buy home renovation supplies before a special Canadian tax rebate expires at the end of the month may not do very much to bolster results of the country's big home improvement retailers. Big chains Rona Inc., Home Depot Inc., Lowe's Companies and Canadian Tire Corp. have claimed an uptick in business over the past year as homeowners spruced up their homes. The Home Renovation Tax Credit gives Canadians a tax rebate of up to C$1,350 ($1,304) to renovate their houses or vacation homes. The stimulus program was introduced by Prime Minister Stephen Harper's Conservative government in its federal budget last March as a way to jump-start the struggling economy.
Housewares/Furniture
William Busko
Williams-Sonoma, Inc. Announces a 7.4% Increase in 2009 Holiday Revenues
Williams-Sonoma, Inc. announced that net revenues for the 8-week holiday period ended December 27, 2009 increased 7.4% to $783 million versus the 8-week holiday period ended December 28, 2008, including a comparable store sales increase of 6.5%. The company also announced that it was increasing its fourth quarter revenue guidance to a range of $1.060 billion to $1.080 billion and fourth quarter GAAP diluted earnings per share guidance to a range of $0.65 to $0.70. Excluding an estimated $0.04 impact of unusual business events, primarily asset impairment and early lease termination charges for underperforming retail stores, fourth quarter non-GAAP diluted earnings per share is expected to be in the range of $0.69 to $0.74.
Sealy Posts $2.6 Million Net Income in Fourth Quarter
Reversing a $41.4 million loss from the fourth quarter of last year, Sealy ended 2009 on a much more positive note with a bottom-line reading of $2.6 million. The nation's largest mattress manufacturer pushed fourth-quarter net sales up 2 percent to $332.1 million. The company's financials also benefited from a 2.7 percent drop in selling, general and administrative expenses and a 3.3 percent decline in cost of goods sold. In another key item, Sealy reported a goodwill impairment loss of $1.2 million in the 2009 fourth quarter, compared to a loss of $27.5 million in the fourth quarter of 2008.
IP Holding Companies & Multi-brand Companies
Douglas Stebbins
Abboud Restricted on Brand
Clothing designer Joseph Abboud will have to take a low-key approach if he wants to use his name to promote his new fashions. The men's apparel designer, who has waged a lengthy legal battle to use his trademark despite selling it in 2000 for $65.5 million, will be able to use his name in promotional materials for his merchandise—but only on a very limited basis, according to a federal judge's ruling this week. Separately, sources said Abboud was close to being named a creative adviser for Hartmarx, the Chicago-based maker of Hart Schaffner Marx and Hickey Freeman.
Golden Goose Partners with Thomas Crapper
Golden Goose has signed the heritage bathroom brand Thomas Crapper & Co. for an exclusive three-year licensing deal covering the U.K., U.S. and other international territories. The brand, launched by the eponymous plumber at the height of the British Empire in 1861, introduced plumbed bathrooms and luxury bathroom fittings to the world-and opened the first bathroom showroom on King's Road in Chelsea. After making sanitaryware fashionable and aspirational for the Victorians, Thomas Crapper is now set to launch across a range of consumer products from toiletries and gifts to bathroom accessories and paper goods. The deal covers a range of IP assets, including the brand's decorative finishes archive, advertising archive, as well as the iconic logo and registered trademark.
Jewelry/Mining
Mark Lenz
Goldberg Out as Zale Announces Executive Shakeup
Less than a week after posting a same store holiday sales decline of 12 percent, Zale Corp. has announced big changes at the top, including the immediate exit of Neal Goldberg, its chief executive officer. Zale Corp. said its board of directors has appointed Theo Killion, company president, to the additional role of interim CEO, as Goldberg empties both his seat on the board and his CEO chair. Also leaving the company, effective immediately, are William Acevedo, chief stores officer, and Mary Kwan, chief merchandising officer, the release said. In other changes, the company also announced that Gil Hollander, executive vice president and chief sourcing and supply chain officer, has assumed the additional role of chief merchandising officer, a change that will place all aspects of diamond sourcing and merchandising under Hollander's oversight.
Tiffany's Holiday Season Sales Increase 17%
Worldwide sales at Tiffany & Co. increased 17% in the two months ended December 31, 2009 due to growth in all three geographic segments. Management now believes that net sales and earnings for the fiscal year ending January 31st will exceed its previous expectations. Net worldwide sales rose 17% to $799.1 million in the holiday period. On a constant-exchange-rate basis, which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales and comparable store sales increased 13% and 8%. Results are based on unaudited sales.
Signet Reports Holiday Sales and Fiscal 2010 Results Expectations
Signet Jewelers Ltd. announced its Holiday Sales and Fiscal 2010 (year ended January 30, 2010). Terry Burman, Chief Executive, commented: "Reflecting a same store sales performance up 5.6% over the Holiday Season, income before income tax for fiscal 2010 is expected to be between $222.5 million and $232.5 million, with earnings per share anticipated to be between $1.76 and $1.84. For the year as whole we expect to have outperformed our financial targets set out in March 2009 and, in particular, to have very significantly exceeded our free cash flow objective. We believe our long term strategy of focusing on sustainable competitive advantages in the basic retail disciplines has once again proven to be successful. The US division performed well, with same store sales up 7.6% over the Holiday Season. Sales benefitted from the growth of differentiated ranges, a strong value proposition in generic merchandise, national television advertising and superior customer service. The UK division reported a 0.8% same store sales decline. The charm bracelet category performed well in H.Samuel, as did diamonds. The charm bracelet category was also strong in Ernest Jones, as were prestige watches. A further improvement in customer service was achieved due to a focus on staff training throughout the year.
Birks & Mayors Inc. Reports Holiday Sales
Birks & Mayors Inc. announced that net sales during the fiscal 2010 holiday season for the period from November 1, 2009 through December 26, 2009 increased by 6% to $69.7 million compared to net sales of $66.0 million during last year's holiday season for the period from November 2, 2008 through December 27, 2008. The increase in net sales reflects $5.5 million of higher sales related to translating the sales of the Company's Canadian operations into U.S. dollars with a relatively stronger Canadian dollar. The Company also reported that comparable store sales during the holiday season (which include stores open in the same period in both the current and prior year and at constant exchange rates) were flat with last year's sales as a 6% increase in comparable store sales in Canada was offset by a 6% decrease in comparable store sales in the U.S. The stronger Canadian sales results reflect a higher average transaction while the decrease in the U.S. was primarily due to a decline in store traffic resulting from the continued weakness in consumer spending and the challenging market in Florida which included a number of jewelers liquidating inventory in advance of closing stores and going out of business.
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
Target Acquires Smith & Hawken Brand
Target today announced it has acquired the Smith & Hawken brand and other intellectual property from Smith & Hawken, LTD, a subsidiary of The Scotts Company LLC, effective December 30, 2009. Target currently offers its guests high quality and affordable outdoor furniture, gardening and décor solutions through Smith & Hawken for Target, which has been available exclusively at Target stores nationwide and online at Target.com since 2006. Target is excited about the opportunities for this brand and will share plans for expanded offerings in the future.
OfficeMax Goes Optimistic With New Campaign
Is business looking up? Are execs feeling optimistic? OfficeMax is banking that the answer to both questions is yes, and its enlisted Fast Company and BusinessWeek on its optimism crusade. The office supplies retailer is launching a new brand campaign, its first since 2004, under the banner "Good News for Business." The comprehensive effort represents Office Max's biggest marketing investment in four years, said Bob Thacker, senior VP-marketing and advertising.
Restaurants/Food Service
Mark Boucher
Johnny Rockets Plans Three New Concepts
Johnny Rockets, which is known for its 1950s-style diners, is introducing a sports bar, a fast-casual concept and a mobile kitchen variant in an effort to appeal to both upscale and down-market customers. The new Johnny Rockets Sports Lounge concept debuted in 2008 in a Six Flags amusement park in Queensbury, NY. A second unit officially opens Thursday in New York City's Upper East Side and will serve as the model for future locations. The sports lounge features televisions for watching sports, a full bar, alcohol-spiked "fantasy shakes," and a new line of appetizers that include empanadas, macaroni and cheese, nachos, vegetarian spring rolls and what Fuller calls other typical bar food. The fast-casual Johnny Rockets Fast will offer a limited menu and counter service only and can work in spaces as small as 900 square feet, the company said. The new concept, which has not been sold yet, requires an initial investment of $300,000, instead of $750,000 for a traditional space. Johnny Rockets' first mobile kitchen recently opened at the Washington Redskins' FedExField in Landover, MD, and a second is being planned by a franchisee in Saudi Arabia.
Chipotle Optimistic About New Prototype
Chipotle Mexican Grill Inc. has introduced a new prototype that it said costs less to build and operate and uses less energy to maintain, while also providing the opportunity for increased sales volumes. As part of a refresher to the Denver-based company's more than 900-unit chain, Chipotle said Tuesday its new restaurant design has a kitchen that has been reduced in size by 25 percent and a price tag that has been cut by $25,000. It was a three-year project, the company said in its presentation during the Cowen Consumer Conference in New York. With a smaller footprint, the new prototype also can help Chipotle fill in smaller markets because the unit will have lower development costs, but the same return on investment, the company said.
Cosi Completes Offering for $5M
Cosi Inc., parent company to the 145-unit Cosi sandwich and salad chain, completed last week a shareholder rights offering that will raise about $5 million. Cosi said the rights offering, which it announced in September, expired on Jan. 6, and that preliminary results showed it was over-subscribed. Cosi will issue 10 million shares to stockholders that exercised their privileges. Executive officers and outside directors for the company also are expected to purchase about 286,173 shares in a separate private placement. According to terms of the offering, Cosi shareholders were given one-to-one subscription rights to acquire 0.2447 shares of common stock at a subscription price of 50 cents per full share.
Banking & Lending
Douglas Stebbins
More Companies Go Public Soon After Bankruptcy
SuperMedia Inc. Chief Executive Officer Scott Klein stood on a platform at the Nasdaq MarketSite in Times Square to ring the opening bell for trading—and tried not to choke up. It had been a long nine months for Klein and his team at the small business advertising agency. In March, the company, then Idearc, had filed for bankruptcy, sunk by payments on $9 billion in debt and eroding demand for its yellow pages business directories. But just six days before Klein took the Nasdaq stage on Wednesday, the company emerged from bankruptcy with a lighter debt load and a renewed sense of purpose. Such a quick transition from bankruptcy court to stock exchange is not new, but more companies than usual have made the sprint in recent months. Poultry processor Pilgrim's Pride Corp. and small-business financing provider CIT Group Inc. are among the companies that began trading within days of exiting Chapter 11 bankruptcy protection. Investors should see more showing up on their stock-picking screens in coming months as the improving economy has made bondholders more willing to accept equity in lieu of cash repayment.
VCs Eschew Physical Stores, Focus on Retail Tech
Venture capitalists were never very interested in the retail sector, but they are now taking a second look, focusing on a new generation of online retailers and the next wave of technology to help stores optimize how they run their businesses. Despite a history of backing a few big names such as Home Depot Inc. and Staples Inc, U.S. venture capitalists parked less than 1 percent of their money in retail over the past decade, with retail investments totaling $331.7 million in 2009. But now venture capitalists, who typically invest in startups, are backing companies that make retail technology. They seem to be betting that retailers, facing shaky growth prospects and fragile market shares, will seek these technologies.
Those are the latest headlines. Thank you for reading.
Sincerely,
The Team at Consensus
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