The Weekly Consensus: Week of January 23, 2012 Vol. 4, No. 4
January 2012
Billy Busko
Although the news networks began coverage long before the first of the year, the presidential election year has officially begun. The Democratic Party has their candidate. After three primaries in Iowa, New Hampshire and South Carolina and three different winners, the Republican Party has many debates and votes ahead before selecting their candidate. Will the 1992 catch phrase, “It’s the economy, stupid,” be the deciding factor in 2012?
What economic variables have done the best job in explaining the results of past presidential elections? Although something as complex as a presidential election can’t be reduced to just one or two fundamental variables, both Democrats and Republicans will use such analysis to help focus their crystal ball and strategize accordingly.
Surprisingly and in spite of its headlines grabbing attention, studies show that the unemployment rate is often not atop the list of leading variables. It has a couple of flaws. One, it tends to be more a lagging than a leading indicator. Two, it affects a relatively small number of voters (although underemployment may be different consideration).
Apart from the unemployment rate, the economic measures most frequently discussed are typically gross domestic product growth and inflation. A recently published study by Nate Silver looked at all elections since World War II, which included sixteen presidential elections from 1948 through 2008. The study concluded that 33% of election results are explained by GDP (either good news or bad news for the incumbent), leaving two-thirds of the results unexplained. It’s important to note that, while this might sound underwhelming, the relationship has increased over time. When the analysis goes further back to 1880, the relationship is significantly weaker at only 23%. This likely reflects voters being better educated and informed today.
In a similar comparison, the relationship between problematic inflation and the incumbent remaining in the White House was equally as indicative as GDP. Low (but positive) inflation helps the incumbent president, while either deflation or high inflation hurts.
When GDP and inflation are taken into consideration jointly, the relationship to the incumbent president winning the election approaches 50%. This combination would have correctly predicted the winner in six of the past twenty-five elections.
Apparel/Swimwear/Intimates
Gap Advances after Former Merchandising Head Gardner Returns
Gap Inc., the largest U.S. specialty apparel chain, rose the most in more than three months after bringing back former executive Tracy Gardner as an adviser to help develop the company’s women’s merchandise. The shares climbed after earlier increasing as much as 5.5 percent for the biggest intraday gain since Sept. 26. San Francisco-based Gap dropped 16 percent last year. Gardner, who left Gap in 2004 for J. Crew Group, will be working as an adviser at the company’s creative center in New York in an attempt to turn around its women’s business. Gap’s December same-store sales declined 4 percent, more than the average estimate for a 1.3 percent drop from analysts surveyed by researcher Retail Metrics Inc.
Retail Apparel Prices Down Slightly in December
Retail apparel prices fell a seasonally adjusted 0.1 percent in December compared with November, as merchants engaged in heavy discounting to attract cautious consumers, the U.S. Labor Department’s Consumer Price Index showed. Women’s apparel prices declined 0.5 percent in December, while men’s apparel prices were down 0.6 percent. However, on a year-over-year basis, prices were up. All retail apparel prices were 4.6 percent higher last month compared with December 2010, as women’s prices increased 4 percent and men’s prices gained 5.6 percent in the period.
Apparel Retailers Dominate in Customer Service Survey
Consumers have spoken: Amazon.com has the best customer service among U.S. retailers, according to a survey of thousands of shoppers. In a survey of 9,374 shoppers, Amazon.com took top honors in the seventh annual NRF Foundation/American Express Customers’ Choice survey, conducted by BIGinsight. Barring a few who switched spots, the top 10 retailers remain the same as last year. Continuing to rank high with savvy online shoppers, Amazon.com came in at number one, up from second place last year. L.L.Bean (#2), Zappos.com (#3), Overstock.com (#4), QVC (#5), Kohl’s (#6), Lands’ End (#7), JCPenney (#8), Newegg (#9) and Nordstrom (#10) round out the remainder of the list. Consumers were asked which retailer they thought delivers the best customer service overall.
There's Big Opportunity for New Apparel Brands, Say Brand Experts
The fashion industry may be filled with brands; however, there's still plenty of opportunity for new entrants. While consumers trust and value "names they know," there's also a desire for something new. "[When it comes to fashion] everybody is looking for what is new and different. So, there are a lot more opportunities in apparel or fashion than there are in [other] categories," said brand expert Al Ries, who co-authored "Positioning: The Battle for Your Mind." "The risks for new brands are greater, but so are the opportunities," points out Alan Fairnington, managing partner at Duxton Consulting, and former CEO of Batey. The game isn't over for legacy brands either. For established brands the challenge is to reinvent themselves in order to stay relevant to the market. An example of this is traditional British brand Burberry that did a masterful job of going from stodgy to stellar. Similarly, in the 1990's Tom Ford transformed Gucci from a quiet classic into a trendy designer brand. While newness plays an important role in a brand's success, "credibility" and "trust" are also vital, especially in higher priced, value-add categories. Experts agree that using branded ingredients is one way to help consumers identify brand and product value.
The American fast-fashion chain plans to open in Beijing and Shanghai this year. Executive Vice President Larry Meyer said the brand could open many more stores in the country over the next decade. This is Forever 21’s second attempt at China, where it briefly operated a single store.
Athletic & Sporting Goods
K2 Plots 2013 Launch of Expansive Outerwear and Softgoods Collection
K2 Sports executives publicly confirmed plans to launch an expansive outerwear program. The company, celebrating its 50th anniversary in 2012, will introduce a men's and women's winter sports outerwear program a year from now that will complement its current all-mountain, park, and backcountry focused hard goods offering.
Moosejaw to Unveil Massachusetts Store March 3
Moosejaw, the outdoor retailer based in Detroit, has announced the grand opening date of March 3rd , 2012 for their 8th retail location, which will be located in Natick, MA. The Natick Collection location will be the first to embody Moosejaw’s new retail concept and design. Moosejaw is planning on opening more retail locations in the next 36 months using their new retail model concept. With three locations leased and two in negotiation, Moosejaw is also planning to open another store in Boulder, CO.
Sierra Trading Post Grew Q4 Paid Search Revenue 36 Percent
Sierra Trading Post, an outdoor apparel and accessories retailer, increased its search revenue by 36 percent year-over year in the fourth quarter of 2011 with ChannelAdvisor’s Paid Search solution. Sierra Trading Post relies on ChannelAdvisor for continual winning results from its pay-per-click campaigns. ChannelAdvisor’s expert technology helps manage all aspects of paid search campaigns including ads, keywords and ad groups, allowing Sierra Trading Post to further broaden its online exposure and increase online sales.
Specialized Bicycle Hires Kirk Richardson to Head U.S.
Specialized Bicycle has hired Kirk Richardson, former president of Keen, as its new general manager for the U.S. market. Richardson will move into the position in January. He replaces Mike Abbot, who has been promoted to global chief operating officer, according to a report from Bicycle Retailer. Richardson spent 27 years at Nike, including two years in Tokyo at Nike Japan, three years in Frankfurt at Nike Europe and Germany, plus two years as merchandising director of international footwear.
Catalog & Internet
LL Bean Celebrates 100th with a Boot on Wheels
Back in the days before retailers like Gap, J. Crew or American Eagle Outfitters, there were guys like L.L. Bean, Eddie Bauer, David Abercrombie and Ezra Fitch. In Maine, L.L. Bean found success without consumer research, focus groups or fashionistas to tell him what to sell. He sold only products that he personally used and tested. He backed them with a money-back satisfaction guarantee. And his larger-than-life personality was projected in his catalogs, where he came across as someone customers could trust. The retailer that celebrates the outdoors with Leon Leonwood Bean’s Yankee sense of value is kicking off its 100th birthday celebration this week with the unveiling of a giant version of its iconic hunting boot set on four wheels. It’ll be rolling into New York City on Wednesday. A century later, the family-owned retailer that started with Bean’s hunting shoe in 1912 has grown into a business with $1.5 billion in projected sales in its 2011 fiscal year.
EBay Results Top Estimates but Outlook is Cautious
EBay Inc reported a higher-than-expected quarterly profit on solid growth in its online marketplaces and an increase in transactions processed through its PayPal electronic payments business. The e-commerce company's shares were up nearly 2 percent in after-hours trading, even though eBay gave a cautious outlook for first-quarter profit and revenue. The company reported fourth-quarter net income of $2 billion, or $1.51 a share, compared with $559 million, or 42 cents a share, a year earlier. Revenue rose 35 percent to $3.38 billion. EBay is riding an e-commerce growth wave as shoppers buy more items online and through smart phones and tablet computers.
Charming Shoppes Hires a New Marketing Head
Charming Shoppes Inc. said it had hired Elizabeth A. Crystal as senior vice president and chief marketing officer for the women’s apparel retailer’s Lane Bryant brand. Charming Shoppes owns such brands as Cacique, Catherines and Fashion Bug. Crystal will oversee the branding, marketing and advertising for Lane Bryant and Cacique, including via social media. She reports to Brian Woolf, group president for Lane Bryant, Lane Bryant Outlet and Cacique. Crystal comes from cosmetics company Revlon, where she was senior vice president, worldwide marketing, from 2006 to 2009. She also held senior marketing jobs at Buena Vista Home Entertainment—now called Walt Disney Studios Home Entertainment—and at Radio Disney.
Penney Names Its Next Top Technology Manager
J. C. Penney has appointed Kristen Blum as chief technology officer and an executive vice president. She will report to chief operating officer Mike Kramer and oversee all technology programs and JCP.com. Most recently Blum served as CIO and a senior vice president at PepsiCo Inc. Prior to PepsiCo she also worked as the top technology executive at Abercrombie & Fitch Co. and as director of supply chain solutions and international retail at Apple Inc.
Farfetch.com Gets $18 Million Investment
Farfetch.com, the UK-based marketplace for independent fashion boutiques, has received $18 million in new venture capital investment from Index Ventures, eVenture Capital Partners and existing investors Advent Venture Partners. The company brings online boutiques from Europe and North America under one roof, with designer brands including Fendi, Gucci, and Chloé, as well as emerging designers. The site offers clothing for both men and women, and claims to have more than 56,000 customers in 100 countries.
Consumer Electronics/Video/Audio
Apple Unveils Digital Textbooks App for iPad
Apple unveiled a free iBooks 2 application for the iPad that brings interactive textbooks to the popular tablet computer. “Education is deep in Apple’s DNA,” said Philip Schiller, Apple’s senior vice president of marketing at a press conference. “With iBooks 2 for iPad, students have a more dynamic, engaging and truly interactive way to read and learn.” He said the iPad is “rapidly being adopted by schools across the US and around the world” and 1.5 million iPads are already being used in educational institutions.
Kodak Bankruptcy May Bet on Printing
As Eastman Kodak Co. investors bet the 131-year-old photographic pioneer was headed for bankruptcy, the company decided Chapter 11 was the simplest way to become the leaner digital printing specialist it aspires to be. Bankruptcy allows sales of the photography divisions and patents Chief Executive Officer Antonio Perez wants to jettison to pay off legacy employee benefits and creditors, as he focuses Kodak on faster, flexible commercial and consumer digital printers and the company’s superior ink. Its trove of 11,000 patents could fund expansion by allowing the company to sue for more licensing fees -- a move it has pursued more aggressively in recent weeks.
HMV Enjoys New Year Cheer as It Strikes Deal with SuppliersCrisis-stricken HMV has forged an alliance with Universial Music and other suppliers which the company believes will help it to return to financial health over the next three years. The retailer plans to hand 2.5% of its equity to major suppliers in the form of warrants. Other terms of the alliance are to remain confidential but they are believed to formalise a switch of risks to suppliers at the store chain. As the last remaining nationwide music and DVD specialist, a collapse of HMV could be more financially damaging for film companies and record labels than for the group's shareholders.
Cosmetics & Pharmacy
Beauty brands rapidly are moving ahead with their social and mobile strategies to allow viral campaigns and create new consumer relations opportunities. But there’s no cookie-cutter approach, and brands are experimenting with what approaches work best for their business, according to a new report by consulting and research firm Kline. The “Beauty Marketing 2011: U.S. Promotional Activities and Strategies Assessment” report found that during the recent holiday season, marketers ramped up their viral campaigns to attract consumers who turned to social media platforms for the best deals on their personal care products. However, social media is not the only tool marketers are experimenting with to connect with consumers; couponing and price promotions are experiencing a comeback, strengthened by consumer desire for special offers and free or discounted items. Yet, Kline noted, even traditional couponing is being challenged by the growing trend of mobile marketing, where marketers are finding that mobile couponing offers significant advantages over paper-based forerunners in delivering higher redemption rates and encouraging impulse purchases.
Survey Asserts NRT Ineffective
Nicotine replacement therapies designed to help people stop smoking, specifically nicotine patches and nicotine gum, do not appear to be effective in helping smokers quit long-term, even when combined with smoking-cessation counseling, according to a new survey by researchers at Harvard School of Public Health and the University of Massachusetts Boston.
Analysts Provide Outlook for 2012
A wide range of factors and "moving parts" will likely make 2012 a challenging year for pharmacy retailers as the economy, generic drugs and the dispute between Walgreens and Express Scripts figure prominently, analysts say. Still, they say, various factors may serve to benefit drug stores and other retailers that operate pharmacies. Economic factors, such as the payroll tax cut, likely will play a significant role in consumers' spending habits as they find themselves with less disposable income. According to recent published reports, Congress soon may extend the tax cut for the whole year, but Heinbockel said the cycling of the payroll tax holiday means less money in consumers' pockets this year than last year, while inflation in food and fuel costs, expenses and low savings could also create pressure.
SkinMedica Inc. Buys Colorescience
SkinMedica Inc. is expanding its presence at doctors’ offices with the acquisition of mineral makeup brand Colorescience. The deal marks SkinMedica’s first acquisition of a branded commercial business, although the company has built infrastructure by taking over its formerly outsourced manufacturing facilities in 2007 and chemistry lab last year. SkinMedica, which is known for its TNS skin care line that, like Colorescience, is sold through the physicians channel, purchased Colorescience from private equity firm VMG Partners for an undisclosed sum.
Dessange Acquires Fantastic Sams
Dessange International said it is further broadening its reach in the U.S. with the acquisition of the Fantastic Sams hair salon franchise. Terms of the deal were not disclosed. The buy doubles Dessange International’s franchise network to more than 2,000 salons, 1,500 of which are outside of France. Dessange International plans first to introduce and develop its Camille Albane brand in North America.
Avril Lavigne Inks Deal With Sally Hansen
While Avril Lavigne is perhaps best known as a singer and songwriter, she is quickly building brands in both the fashion and beauty worlds. The latest: a deal with Coty division Sally Hansen, which had the 27-year-old create a nail collection for its Salon Effects brand. Launching globally in April, the limited edition collection includes 12 designs of nail polish strips — including tiny skulls and leopard prints, Lavigne’s favorites.
Department & Discount Stores
Moody's Raises Saks' Rating as Luxury Sector Shows Strength
Moody's Investors Service upgraded its junk-level rating on Saks Inc., citing the high-end retailer's strong operating results and the luxury sector's resiliency despite a shaky economy. The credit-rating firm Thursday raised Saks' rating to Ba3 from B1, putting it three levels below investment-grade territory. The outlook is stable. The upscale department-store chain has cautiously rebalanced inventory toward its most expensive goods as its core customers return to buying full-price merchandise. Saks and its peers aggressively broadened their products during the financial crisis to add more entry-level prices as shoppers curbed spending.
Move Over, 'American Idol': Walmart's the Next Reality Giant
Having dabbled in everything from financial services to video streaming, Walmart Stores is now trying its hand at producing a reality show -- turning the intense competition to get products on its shelves into an online contest with videos and voting. The retailer's @WalmartLabs e-commerce and social-media R&D unit is today formally launching a "Get on the Shelf" program, inviting companies small and large to submit product ideas along with supporting videos. Consumers will vote on which products they'd like to see make it to Walmart.com or their local Walmart store. The top three vote-getters will be sold on Walmart.com, and a grand prize winner will be featured on the home page for its 50 million monthly unique visitors and in select Walmart stores. That Walmart is launching the program the day "American Idol" begins its 2012 season is just a happy coincidence, a spokeswoman said. Thanks to a soft launch to work out kinks, and publicity that included mentions on Walmart’s blogs for New York City and Washington, the marketers behind some 60 products are singing for their supper at the website GetontheShelf.com.
Target to Suspend Efforts to Sell Credit-Card Receivables
Target Corp. said that it would again suspend its efforts to sell its credit-card-receivables portfolio until later this year and outlined plans to pay J.P. Morgan Chase & Co. about $2.8 billion, along with a make-whole premium, to retire financing it received in 2008. "We believe a pause in discussions until later in 2012, combined with repayment of the Chase Card Services financing, will enable Target to reach an agreement with a high-quality financial partner on acceptable terms," Chief Financial Officer Doug Scovanner said. The company had unveiled plans to pursue a sale of the credit-card receivables last January, and had expected a sale last year or early this year. The company now see the sale coming late this year or early next year.
Zellers Reviews Options for Outlets Left Behind
They are the unloved Zellers stores. While cheap-chic U.S. discounter Target Corp. snapped up most of the Canadian chain’s outlets to convert them to its namesake banner by next year, 86 Zellers Inc. stores didn’t make the cut. Those stores, which were rejected by Target and other major retailers because they’re mostly in smaller towns or marginal neighbourhoods, represent a challenge and an opportunity for their landlords. The mall owners anticipate Zellers won’t operate much longer as it struggles to keep up with stronger rivals. The landlords are eager to replace Zellers with savvier retailers, which can generate more rent and entice more customers to their shopping centres.
What's the Allure of Dollar Stores?
While your mind was elsewhere -- fretting over the lousy economy, perhaps -- chances are a Family Dollar store opened in your neighborhood. Or a Dollar General. Or a Dollar Tree. And it's probably packed with folks stocking up on value-brand paper towels, discount greeting cards and dollar portions of frozen fried chicken. As economic indicators go, this is not a good sign. It's been a rough sled for retail, but the dollar-store business is growing like crazy. The national chains are drawing higher-income shoppers, reporting record profits and opening new stores on a daily basis. Dollar General, with more than 9,800 locations, is now the nation's largest retailer by store count. Middle-class shopping centers used to shun the discounters, says John Tomlinson, an analyst at ITG Investment Research. Today, they're courted as one of the few options for filling vacancies.
In its midcentury heyday, Sears, Roebuck & Co. was the Wal-Mart of its era—the largest retailer in the world with more than 350,000 employees. But it is in an epic freefall. After decades of decline, the Sears ended up in the hands of investment manager Edward Lampert, who purchased the company in 2004 and merged it with Kmart. The new combined entity, known as Sears Holdings Corporation, was consistently losing money even before the recession. The Sears Tower, the company’s iconic skyscraper, no longer houses any Sears’ employees and—the ultimate indignity—had its name changed to the Willis Tower in 2009. On Dec. 27, it announced that in light of poor holiday sales, 100-120 Sears and Kmart stores would have to close. An even bigger blow came last Friday when CIT Group said it would no longer provide loans to Sears vendors.
Footwear
Zappos Says Hackers Accessed 24 Million Customers' Account Details
Twenty-four million Zappos customers got an unpleasant surprise. The Amazon-owned e-commerce firm has revealed that it was the target of a cyber-attack that gained access to its internal network, including the accounts of 24 million of its users. Though the company says that no complete credit card numbers were revealed in the breach, the intruders may have accessed customers’ names, e-mail addresses, phone numbers, addresses, the last four digits of their credit card numbers, and encrypted passwords. Zappos says it’s taken the precaution of resetting the passwords of all its customers and directing them to set a new password upon visiting the site.
Steve Madden to Acquire Canadian Licensee
Steve Madden, a leading designer and marketer of fashion footwear and accessories for women, men and children, announced that it has signed a definitive agreement to acquire substantially all the assets of privately held Steve Madden Canada Inc., Steve Madden Retail Canada Inc., Pasa Agency Inc. and Gelati Imports Inc. (together, "SM Canada"). As Steve Madden's Canadian licensee, SM Canada markets Steve Madden products in Canada on a wholesale basis as well as in Steve Madden-branded retail stores. The purchase is a cash transaction for approximately $29 million, subject to a working capital adjustment, plus certain earn-out provisions based on financial performance through March 31, 2017.
Hi-Tec Sports Names Gebhard as U.S. CEO
Hi-Tec Sports appointed Brad Gebhard as CEO of U.S. subsidiary. He will be leading the Amsterdam, Netherlands-based company’s two brands in the US market, Hi-Tec Sports USA and Magnum USA. His appointment is effective immediately. Gebhard will set the US strategic vision by working with existing customers and attracting new channels of distribution with the help of compelling new product designs. He will also be responsible for directing the business' strategic marketing campaigns, reporting to van Wezel. He will be based at the Portland, Oregon Hi-Tec Sports USA headquarters.
Gifts/Accessories/Luggage/Pets
Samsonite Says Tumi Makes Sense as Target in $1 Billion M&A Hunt
Samsonite International SA, the world’s largest branded-luggage maker, said an acquisition of bag maker Tumi Holdings Inc. is a “natural fit” as it readies to spend at least $1 billion on buying rivals. “One way we’d like to accelerate our growth is via the route of acquisitions,” said Ramesh Tainwala, Samsonite’s president for Asia Pacific and Middle East. Buying smaller rival Tumi would “make sense,” he said.
Richemont Third-Quarter Sales Rise on Asia
Cie. Financiere Richemont SA, the world’s second-largest luxury-goods maker, reported 24 percent growth in third-quarter revenue, boosted by sales of Vacheron Constantin timepieces and Cartier jewelry in Asia. Revenue rose to 2.62 billion euros ($3.31 billion) in the three months through December from 2.12 billion euros a year earlier, the Geneva-based company said today in a statement. That beat the 2.54 billion-euro average estimate of 13 analysts surveyed by Bloomberg. Sales gained 21 percent in December, excluding currency shifts. Richemont gets about 40 percent of revenue from the Asia-Pacific region, where sales climbed 36 percent in the quarter. The market’s growth, particularly in China, is fueling demand for luxury watches. Cartier is the second-most favored brand inChina for gift-giving, according to Hurun Report Inc., a research group. Sales also grew in Europe and the Americas.
Swiss Watchmakers Brace for Tougher 2012
Swiss watchmakers expect slower growth this year after a record 2011 as strong demand from Asia is unlikely to make up for weakness in America and Europe, executives at the Geneva watch fair warned. Demand might not have softened yet for some but many watch brands predict that worries about euro zone debt and unemployment in America will weigh on discretionary spending. "Brands are worried about Europe," Jean-Daniel Pasche, head of the Swiss Watch Federation, told Reuters. "It's not like buying milk. If things are bad, people stop buying watches." Pasche confirmed expectations expressed by Hublot and Swatch Group earlier this month that the Swiss watch industry's growth would slow down in 2012 after a 22 percent rise last year to record levels.
Industry Veterans Launch Gift and Gourmet Online Deals
Stock The Shop, an online marketplace for retailers, debuted at the Atlanta International Gift & Home Furnishings Market. Stock The Shop requires that all members be approved resellers. (Approval usually takes less than 24 hours.) No consumers may purchase through the site. The site offers retailers new products at a discounted price to test their markets. Once retailers purchase a voucher from Stock The Shop, they receive an email with sales codes and then call the wholesaler directly to place an order.
Home, Housewares, Gifts Top Shopatron Growth Chart
Shopatron, which provides retail-integrated eCommerce for over 1,000 brands, announced that existing Shopatron brands finished the year with an average 24 percent increase in same-store sales. Industries that did particularly well include Home and Housewares and Gift and Novelty. Brands in home and housewares saw same-store sales growth of 99 percent in the fourth quarter. Gift & Novelty saw a 34 percent Q4 increase.
Grocery/Healthy Foods/Snacks/Confectionery
Kraft to Cut 1,600 Jobs Ahead of Split
Kraft Foods Inc., the food company planning to split in two this year, said it would eliminate 1,600 jobs and reported preliminary profit for 2011 that trailed some analysts’ estimates. The job cuts will take place in North America through this year and about 40 percent are a result of reorganizing U.S. sales. About 40 percent of the cuts will come from corporate staff and 20 percent are vacancies that will remain unfilled, the company said. The reductions move Kraft, the world’s second-largest food manufacturer, a step closer toward splitting the company into its snack foods business and the grocery business. Kraft has been working to make the future companies leaner as it moves toward the separation, which is scheduled to happen this year.
Yuengling is Now America's Largest Brewer
Did Yuengling suddenly get bigger than Miller or Bud? Nope. Both are now foreign-owned. According to AdAge, Yuengling has recently surpassed Sam Adams' Boston Beer Company as the largest U.S.-owned brewer that manufactures all its beer in the U.S. The company's growth is especially noteworthy considering that beer is in a multi-year sales slump. The LA Times reported that U.S. beer shipments are at their lowest levels since 2003 as major brewers such as Anheuser-Busch and Heineken USA took sales hits.
Beam Completes Acquisition of Cooley Distillery
Beam Inc., a leading global premium spirits company, completed the acquisition of Cooley Distillery, the award-winning Irish whiskey producer. The acquisition includes the Kilbeggan, Connemara, Tyrconnell and Greenore brands, as well as aging inventory and Cooley’s malt and grain distilleries in Dundalk and Kilbeggan, Ireland. Cooley is one of only three sources for Irish whiskey and was the category’s only remaining independent producer. The purchase price was approximately $95 million on a debt-free basis. Beam expects the acquisition to be earnings neutral in 2012 reflecting substantial initial brand investment, and increasingly accretive in future years.
ConAgra Foods Agrees to Acquire Del Monte Canada from an Affiliate of Sun Capital Partners
ConAgra Foods, Inc. announced that it has agreed to acquire Toronto-based Del Monte Canada Inc., a leading provider and marketer of packaged fruits, fruit snacks and vegetables in Canada, from an affiliate of Sun Capital Partners. The agreement includes the acquisition of all Del Monte branded packaged fruit, fruit snacks and vegetable products in Canada, as well as Aylmer tomato products. Del Monte fresh produce, juices, and Aylmer soups will remain under separate ownership. The agreement also includes a manufacturing facility in Dresden, Ontario, and headquarters offices in Toronto, Ontario. Del Monte Canada has 190 employees and fiscal 2011 revenue of approximately $150 million. Financial terms were not disclosed.
Home Improvement/Auto Repair
Mercifully, it ended. 2011, that is. It was another very subpar year for sales of new cars and light trucks in the United States, the fourth such year in succession. Sales of 12,778,885 were 20 percent below the 16-million standard established in 1999-2007, the nine good years. Actually, they were 24 percent below the average for those nine years. Some "experts" now are hedging their bets, saying that 16 million should not be used as the standard because sales are not going to return to that level. They suggest 14 million to 15 million. I disagree. I'm sticking with 16 million as the norm. We last reached that total in 2007 with 16.2 million. So last year's sales were 21 percent below par. That's great for Tiger Woods; it ain't so great for cars and trucks.
PPG Industries Inc. turned in record quarter and annual earnings per share despite an uneven economy, the Pittsburgh-based coatings manufacturer said. Net income was $216 million, or $1.39 a share, in the fourth quarter, up 5 percent from $205 million, or $1.26 a share, in the same period a year ago. Sales were $3.5 billion in the fourth quarter, up 4 percent from $3.4 billion a year ago. For the full year, PPG earned $1.1 billion, or $6.87 a share, in 2011 compared to $769 million, or $4.63 a share, in 2010. Revenues in 2011 were $14.9 billion, up 11 percent from $13.4 billion in 2010.
The Home Depot said it has agreed to acquire the Redbeacon home service referral business. Financial terms were not disclosed. San Mateo, CA-based Redbeacon hosts a website that connects consumers with contractors for their home maintenance, repair and remodeling needs. The company was launched in 2009 by a trio of Google Inc. veterans: Yaron Binur, Aaron Lee and Ethan Anderson.
Advance Auto Parts Announces Closing of Senior Notes Offering
Advance Auto Parts, Inc. announced the closing of its Senior Unsecured Notes offering. The Company completed the offering of $300 million in principal amount of 4.50% Senior Unsecured Notes due 2022 at an issue price of 99.968%. The Company will use the proceeds of the offering to pay off borrowings under its revolving credit facility, pay transaction fees and expenses and for general corporate purposes.
Housewares/Furniture
Sealy Net Loss Grows to $15.2 Million in Fourth Quarter
In what retiring President and CEO Larry Rogers called a disappointing performance, Sealy’s fourth-quarter net loss climbed from $4.5 million to $15.2 million from fiscal years 2010 to 2011. Significant drops in both sales and gross margin were the primary culprits. Net sales in the quarter, which ended on Nov. 27, were off 9.2 percent to $269.3 million, as sales in the company’s lower-price-point products lost volume due to increased competition. That sales decline, along with higher raw-materials cost, combined to reduce gross margin by 500 basis points, to 36.4 percent. Selling, general and administrative expenses on a dollar basis were flat in comparison with the prior year’s fourth quarter, but increased 336 basis points as a percentage of sales to 36.7 percent.
Havertys Named “Furniture Retailer of the Year”
Haverty Furniture Companies, Inc. was recently named “Furniture Retailer of the Year” by leading trade publication, Furniture/Today. The award was presented at the Furniture/Today Leadership Conference in Naples, Florida. Furniture/Today’s Editor in Chief, Ray Allegrezza commented that Havertys was chosen because of its distinctive product, community involvement, engaging advertisement, and the Bright Inspirations store visual merchandising program.
TruBamboo Hires Foot Locker Exec as EVP, Sales and Marketing /a>
IP Holding Companies & Multi-brand Companies
PPR Said to Consider Bankruptcy Sale of Redcats’ Avenue Chain
PPR SA, the French owner of the Gucci luxury brand, is considering selling Redcats’ Avenue clothing business in the U.S. as part of a bankruptcy filing for the brand, according to a person with knowledge of the plan. Two private-equity funds are interested in as much as 60 percent of the chain’s stores, while a third fund would consider buying all of them, said the person, who declined to be identified because the plans are private. Avenue sells women’s clothing in sizes 14 and up in more than 500 stores. No decision has been made, and continuing the business is another option PPR is considering, the person said.
UK Apparel Brand Howies Returns to Independent Status
Howies, the Welsh clothing brand that makes T-shirts, sweatshirts and jeans using organic cotton, has become an independent entity after its management bought out the firm from its owners VF Corporation. In 2006, Howies was sold to Timberland. Subsequently, Timberland was acquired by VF Corporation, which owns over 30 brands including North Face and Wrangler. Last month, the management of Howies showed interest in buying the brand and an agreement was reached this month. Howies said it was one of the smallest of VF’s brands and the management felt that returning back to independent status would be good for its business.
Disney: Mickey's Next Store is in China
Mickey Mouse and Winnie the Pooh are setting up shop in China. Walt Disney Co plans to open 25 to 40 stores in China over the next three years, with its first shop on track to open in the world's most populous country this fall, a top company executive told Reuters. The news comes as the world's largest media conglomerate, home to iconic brands that also include Donald Duck and Snow White, looks beyond mature markets such as the United States and Europe for new sources of revenue.
Jewelry/Mining
Diamond Sector May See a Slow First Half
The diamond industry could see a slow and challenging first half this year with rough and polished prices remaining fragile as well as volatile, and dependent upon growth from consumers in Asia and the U.S., RBC Capital Markets said in its 2012 Diamond Sector Outlook report. The report noted that sales figures of the major jewelry retailers at the end of 2011 showed that Asia remains a relatively bright star in the diamond firmament, but in the U.S., the largest global market for diamond jewelry, sales were "somewhat disappointing," though not in all parts of the country.
Jewelers Seek Out Red Carpet Exposure
It comes by Brink's truck and is hand-delivered by security guards. It is served up on silver platters and in lighted glass vitrines at chi-chi cocktail parties. The finest jewelry in the world is in Hollywood during the weeks leading up to the Golden Globes and Oscars. Because no matter how valuable a diamond may be, a photo of a celebrity wearing one on the red carpet is priceless. Awards show season is the Super Bowl of celebrity placement. The world's biggest jewelry brands (Harry Winston, Cartier, Chopard, Tiffany & Co., Bulgari, Van Cleef & Arpels, Fred Leighton, Pomellato) are competing with hometown favorites (Neil Lane, Martin Katz, Loree Rodkin), brash newcomers (Kimberly McDonald, Stephen Webster, Solange Azagury-Partridge) and mass-market players (Kwiat, Le Vian) for the chance to bejewel Hollywood's beauties and dazzle armchair fashion fans watching around the globe. One sparkling moment in the celebrity spotlight can be worth millions in advertising for a jewelry brand.
Tiffany Looks to the United Emirates for Growth
Dubai-based Damas has signed a memorandum of understanding to establish a joint venture with Tiffany & Co, one of the world's premier jewelers. The deal will see Damas operating Tiffany & Co retail stores in the UAE and is the first partnership venture signed by the US-based luxury retailer anywhere in the world. The proposed joint venture will be governed by a board of directors representing both Damas and Tiffany & Co and will be initially headed by the Ibrahim Belselah, chairman of Damas International.
Office/Crafts & Hobby/Flowers/Party
Office Depot Tests PayPal's New Point-of-Sale System
Office Depot Inc, the second-largest U.S. office supply retailer, is testing PayPal's new point-of-sale system in a few stores, a top executive said. The news came just days after eBay Inc's PayPal unit said it had started testing in-store payments in 51 Home Depot stores, as the online payments provider moves to expand into the physical world of brick and mortar. PayPal has talked about its plans to offer the service at 20 major retailers by the end of the year, but not named other chains participating in the initiative. PayPal's "wallet in the cloud" initiative lets shoppers who have a PayPal account pay by simply typing their mobile numbers and PINs at checkout counters. They can also pay by swiping a PayPal card and entering a PIN.
Kiwi Crate Delivers Crafts Projects to Your Door, Secures $5M in Funding
Kiwi Crate, a subscription service that delivers hands-on crafts to your door, has secured $5 million in its first round of funding the company announced. The company, which launched in October 2011 with $2 million in seed funding, delivers crates of craft supplies every month for kids ages three to six. Kiwi Crate puts together themed crates that encompass a specific theme – safari, gardening, dinosaurs, and tropical island to name a few — and delivers them to parents each month. Each crate includes enough materials for two projects, plus bonus ideas for additional projects. A subscription will set you back $20 per month or $220 per year. Three month, six month, and one year gift subscriptions are available as well. What makes Kiwi Crate unique is the process used to put together the crates. Each crate is designed by parents, reviewed by experts, and vetted by kids to make sure it will be a hit with Kiwi Crate’s subscribers. There is also an obvious convenience factor with Kiwi Crate; there’s no need for trips to the craft store for any of the projects.
Restaurants/Food Service
Buffets, Inc. Reaches Restructuring Agreement
Buffets, Inc. announced a restructuring agreement that it has reached with senior lenders holding 83% of its senior debt, which will recapitalize the Company while eliminating virtually all of the Company’s approximately $245 million of outstanding debt. The recapitalization will provide the Company with resources to invest in its proven re-concepting program, as well as other restaurant and profitability improvement initiatives. The Company has negotiated a $50 million Debtor-in-Possession loan from its existing lender base, which in addition to cash on hand and ongoing cash flow from operations, is expected to provide the Company with ample liquidity to meet normal operating costs during the restructuring process. Under the proposed plan, the Company will eliminate its outstanding debt of approximately $245 million, as well as annual interest payments of more than $30 million. The pre-negotiated plan of reorganization anticipates the Company’s existing lenders will receive 100 percent of the Company’s new common stock upon emergence. As part of the restructuring plan, the Company expects to promptly close 81 underperforming restaurants, representing approximately 16 percent of its nearly 500 restaurants nationally.
Danny Evins, Restaurant Founder and Focus of Controversy, Dies at 76
Danny Evins, who created Cracker Barrel Old Country Store, a restaurant heavy on grits and nostalgia, expanded it into a $2 billion chain and then fought a losing battle to discriminate against gay employees, died on Saturday in Lebanon, Tenn. He was 76. In 1969, Mr. Evins was an oil jobber, as the middlemen between gasoline refiners and retailers are known, when he was hit by an idea that was to change his life and the American highway: a down-home restaurant with rocking chairs on the front porch, a potbellied stove and fireplace inside, and a checkerboard on every table. The food — including catfish, biscuits and gravy and pineapple upside-down cake — would be ample, reasonably priced and swiftly delivered. The concept was carried out by more than 600 company-owned restaurants in 42 states, with annual sales of more than $2.4 billion. Cracker Barrel year after year won polls for excellence as a family restaurant in magazines like Nation’s Restaurant News and Destinations. After going public in 1981 so it could expand beyond the Southeast, it was a stock market darling.
Banking & Lending
American Express Profit Rises 12% as Credit-Card Spending Reaches a Record
American Express Co., the largest credit-card issuer by purchases, capped a record year for profit and beat analysts’ estimates as fourth-quarter net income climbed 12 percent and customer spending surged. Net income was $1.19 billion, or $1.01 a share, up from $1.06 billion, or 88 cents, a year earlier, the New York-based lender said in a statement. The average estimate of 23 analysts surveyed by Bloomberg was for earnings per share of 99 cents. Net revenue for the quarter rose 6.9 percent to $7.74 billion.
Sears Shares Soar as Retailer Said to Reach Accord with Factors
Sears Holdings Corp. shares soared Friday as the retailer was said to be making the rounds to reassure its financing partners that it has the wherewithal and the desire to meet its obligations. Shares are up, and have now gained 57% this month as positives from new financial plans with vendors mixed with talk the company could be taken over by its majority owner, Edward Lampert. The retailer on Friday was said to have talked with a number of its larger factors about a new financial approach after talking first with CIT Group Inc., a factor that pulled its funding amid uncertainties about Sears's financial condition. Factors are financing firms that buy receivables from suppliers and collect the money from retailers once the goods are sold.
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