The Weekly Consensus: Week of February 8, 2010
The Big Story: Paperback Writer
Douglas Stebbins
In his book The Tipping Point, Malcolm Gladwell discussed the Law of the Few: the theory that there is a small subset of the population that has an inordinate influence over setting trends. While the Law of the Few applies to individuals it also applies to companies.
Some companies have developed in such a way that they are positioned to influence (dictate?) social trends. When Coca-Cola decided to brand a diet soda with its legendary Coke name it brought credibility and mass appeal to what was until then a niche product. Competitive poker was an unknown concept to the majority of the population when ESPN began televising it. While it is possible that ESPN began broadcasting poker because it had become relevant, it is more likely that it has become relevant because ESPN began broadcasting it.
Today there is no more important corporate influencer than Apple. Over the past decade Apple has positioned itself as the hip "in-the-know" technology company that is able to anticipate consumer needs and sentiments with sleek innovative products. There were plenty of MP3 players in the market before Apple got involved, but it was not until the iPod that the white ear buds became ubiquitous. There were countless smartphones in existence prior to the iPhone, but it was the iPhone that gripped the consumer's imagination and spawned many imitators.
That is why the announcement of the iPad was much more than just a release of new piece of technological hardware. It was a very public acknowledgement that Apple has embraced e-reading. Undoubtedly the transition from paper books to electronic books will be greatly accelerated by the release of the iPad. Depending upon its success the iPad could also lead to increased proliferation of streaming videos, e-magazines/newspapers and downloadable games. The stakes have been raised and the release of the iPad will certainly drive innovation among manufacturers and application developers as they try to harness Apple's momentum.
The iPad could very well push the adoption of e-readers over, as Malcolm Gladwell would say, the tipping point and it would be wise for book publishers, newspapers, magazines and movie/TV studios to embrace rather than resist the move to electronic media. It won't be a seamless transition for many; the folks at Macmillan publishing have had a busy week negotiating how they would participate in this quickly evolving market.
It is critical for companies like Macmillan to find a way to coexist in this new technologically-driven world or they run the risk of being left behind. The Beatles have been in a well-publicized battle with Apple and are one of the few bands not yet available on iTunes. When iTunes was first introduced it was hard to imagine any music technology to be considered sustainable without the participation of the greatest band of all time. While the legal jousting has stretched on for years iTunes growth has continued unabated, with over 6 billion songs downloaded in less than 7 years, and the Beatles are at risk of being irrelevant to an entire generation who will never own a record or a cd.
Apparel/Swimwear/Intimates
Betsy White
Could Martin + Osa's Days Be Numbered?
The president of the Martin + Osa clothing chain left her job with little fanfare in December, giving investors another reason to wonder how much longer parent company American Eagle Outfitters Inc. will be willing to invest in its ongoing experiment in selling to the post-college crowd. Laura Dubin Wander, who had held the job since spring 2007, left to "pursue other opportunities," according to a spokeswoman for the South Side clothing company. Meanwhile, comments at an investment gathering in California last month stirred up chatter that CEO James O'Donnell is ready to shut down the 28-store chain for 25- to 40-year-olds that was launched in the fall of 2006. Many in the investment community seem convinced Martin + Osa's days are numbered. But analysts are not sure management has given up, and opinions seem mixed on what would be the best move.
Is TJ Maxx Poised to Scoop Loehmann's Slice of Designer Pie?
Fashion is not for the faint of heart. Note Heidi Klum's plaintive refrain to the contestants on Project Runway, "One day you're in, the next day, you're OUT." Likewise, fashion retail is a fiercely competitive business. Even for those companies who manage to weather economic downturns, fickle shoppers, and transient trends like Loehmann's. But now, can the venerable discounter of designer duds take another hit below its (ahem) studded belt from a formidable competitor like T.J. Maxx (TJX)? Especially now that TJX is aggressively moving into the upscale market?
Frederick's of Hollywood in Debt Exchange Deal
Intimate apparel retailer Frederick's of Hollywood Group Inc. announced it had reached a deal with a key lender to exchange $22.6 million of debt and preferred stock for common shares. The company, which runs 132 stores nationwide, said it had reached a deal with investor Fursa Alternative Strategies LLC to exchange the debt and preferred share at a 50 percent discount, for $11.3 million in common stock. The retailer has cut about $20 million in annual costs and made strategic decisions to expand into licensing its brand and doing some international and wholesale expansion as part of a turnaround plan. Under the debt exchange deal, the company said it will also issue Fursa warrants to purchase 500,000 shares of common stock over the next three to seven years. All shares issued to Fursa will be subject to a 12-month lock-up agreement.
Abercrombie & Fitch's Style Sense Wears Thin With Some Shoppers
Abercrombie & Fitch, the one-time sales and fashion star of teen retailing, has yet to show signs of recovery, raising questions about its grip on teen style. The New Albany, Ohio, company, seller of $40 T-shirts and $90 jeans, was among the worst performers during the holiday season, even with uncharacteristically high levels of discounting. The retailer posted a 19% decline in December sales at stores open at least a year, with its lowest-priced brand, Hollister, down 25% in December from a year earlier. Retail analysts said Abercrombie's troubles go beyond pricing to its once unerring sense of style, a problem that could be trickier to fix. The logo T-shirt and torn jeans ensemble that Abercrombie made the unofficial school uniform a decade ago has played out, said Kimberly Greenberger, a retail analyst with Citigroup Inc. who tours malls every two weeks to assess trends. That misstep has created an opening for lower-priced competitors such as Aeropostale Inc. and American Eagle Outfitters Inc., which reported December sales gains of 10% and 7%, respectively.
Athletic & Sporting Goods
Michael O'Hara
Amer Sports Q4 Sales Down 3% as Ball Sports Segment Weakens
Amer Sports Corporation said net sales for the fourth quarter fell 3% to $713.1mm, due largely to a 14% decline in sales of ball sports. Winter and outdoor sales rose 1% to $579.3mm, while fitness sales were flat at $87mm, including the effect of currency translation. Amer Sports said its declining sales trend turned slightly positive towards the end of the fourth quarter, although this reflected more the timing of winter sports deliveries and weak comparables in the Fitness segment than a recovery in the market, the Finnish company said. The Amer Sports brand portfolio includes Salomon, Wilson, Preco, Atomic, Suunto, Mavic and Artc"Teryx.
Timberland's Q4 Earnings Soar Despite Flat Sales
The Timberland Company reported fourth-quarter earnings vaulted 69.4% to $22.3 million, or 40 cents a share, from $13.1 million, or 23 cents, a year ago. Revenue eased 0.7% to $387.8 million from $390.6 million a year ago and was down 3.9% on a constant dollar basis, reflecting declines in the boots business partially offset by strong growth in the SmartWool brand and performance footwear. Foreign exchange rate changes increased fourth-quarter 2009 revenue by approximately $12.3 million due to the weakening of the U.S. dollar relative to the Euro, Japanese Yen, and British Pound.
Banking & Lending
Douglas Stebbins
Bank of America Faces Fraud Lawsuit
The New York attorney general yesterday accused Bank of America Corp. and its former chief executive, Kenneth Lewis, of deceiving shareholders and manipulating US officials during the company's $50 billion purchase of Merrill Lynch. Lewis's successor, Brian Moynihan of Wellesley, who was involved in negotiations as the bank's general counsel, was not charged. However, the lawsuit suggests that in December 2008, Moynihan, Lewis, and Joseph Price, the former chief financial officer, strategized how to get federal money to cover Merrill's mounting losses. "Lewis and his lieutenants Moynihan and Price calculated that if they threatened'' to invoke a legal clause to back out of purchasing Merrill, "the federal government would counter with more taxpayer funds out of a concern for the greater economy,'' the lawsuit, filed by Attorney General Andrew Cuomo in New York state court, said.
Alternative Assets: Asset-Based Lenders Boom as Traditional Lending Shrinks
When the University of Alabama booked its trip to the college football national championship last month, Weezabi LLC went into a hurry-up offense. The three-employee company—one of a select few licensed to make "Crimson Tide" merchandise—needed 60,000 t-shirts. Without the time to huddle investors, Weezabi pledged as collateral part of its future revenue to FTRANS, an Atlanta-based lender and credit analyst, and kept rolling. Asset-based lending, once considered a last-resort finance option, has become a popular choice for companies that don't have the credit ratings, track record or the patience to pursue more traditional capital sources. It is also a providing another critical boost to the finance industry: jobs. Because asset-based lenders focus on collateral, rather than credit-worthiness, they do deals that more traditional lenders shy away from. Borrowers put up equipment, inventory, accounts-receivable and other liquid assets in exchange for the money. In 2008, asset-based lending, excluding mortgages, swelled by 8.3% to almost $600 billion, according to the Commercial Finance Association, an industry trade group. Last year, a period when syndicated lending sagged by 39%, according to Dealogic Inc., asset-based lenders were on track to dole out almost $761 billion, or 30% more money than they did in 2008.
Loan Demand Falls as Economic Fears Weigh on Corporate America
US banks made it easier for big companies to borrow money for the first time since the crisis, but loan demand fell as corporate America remained worried about the economy, the Federal Reserve said yesterday in its quarterly loan-officers survey. The Fed report underlined banks' growing desire to lend to companies at a time when politicians are calling on financial institutions to aid the economic recovery by extending credit to companies and consumers. After suffering huge loan losses during the crisis, banks sharply tightened credit standards, sparking a political outcry over their unwillingness to help the recovery in spite of having been bailed out by taxpayers. However, bankers say the low-interest rate environment and the improving economy has increased their appetite for lending to companies.
Catalog & Internet
Christopher Ellis
Using Crowdsourcing to Control Inventory
Susan Gregg Koger is a lot like her customers. The 25-year-old co-founder of ModCloth, a $15 million online clothing retailer based in Pittsburgh, Koger lives and breathes fashion, eschewing mainstream mall taste in favor of offbeat, often vintage-inspired pieces such as floral housedresses and flapper hats. "Our customers are young women in their 20s who live for fashion-forward clothes the same way we do," says Koger. ModCloth has always prided itself on having an open channel of communication with customers, through, for example, frequent contests and an active Twitter feed. Says Koger: "Our internal motto is 'ModCloth is a company you're friends with.' "So she decided to do what any good friend would do: take her customers shopping with her and ask for their advice before making a big purchase.
Catalogs.com Starts New Year with Merchants Rich in Catalog Experience
Catalogs.com starts the first quarter of 2010 with an extremely strong lineup of new catalogs and Web shopping destinations, including The Company Store, Fingerhut, and Potpourri. Catalog retailers recognize the online retail expertise of Catalogs.com as invaluable for business growth. Two catalog retailers founded early in the last century have signed Internet Promotion Agreements with Catalogs.com. The Company Store and Fingerhut began Catalogs.com marketing campaigns in January.
Consumer Electronics/Video/Audio
Douglas Stebbins
Midwest Retailer Seizes Chance to Take on Best Buy in Downturn
Retailer hhgregg Inc., long a Midwest consumer electronics star, is moving aggressively to capitalize on cheaper rents during the economic downturn by building a nation-wide presence to challenge much bigger rival Best Buy Co. The Indianapolis company will open 40 to 45 stores in the Philadelphia, Washington, D.C., and Baltimore areas in coming months as part of a broader plan to expand to 600 stores this decade from 127 currently. In some cases it is getting cut-rate rentals on locations once held by Circuit City Stores Inc., which closed last year. Instrumental to its rapid growth has been a retail formula that focuses on hiring sales staff that work on commissions, and gives them leeway to negotiate prices with customers. A projected $1.53 billion in fiscal 2010 sales would represent a 51% gain from fiscal 2007. Still, some retail experts worry that hhgregg's pace poses a risk of overexpansion.
P.C. Richard Joins hhgregg in Consumer Electronics Expansion
Last year's demise of Circuit City could be interpreted as evidence that the American landscape was over stored by consumer electronics retail locations and discount chains that sell the same goods. But some smaller outfits, and Best Buy, the biggest one of them all, are opening stores. Farmingdale, N.Y.-based P.C. Richard & Son, a chain with 57 stores in the Northeast, plans further expansion into the region. The company is opening a total of seven to 10 new stores this year, while entering the Philadelphia market and will expand further into New England beyond its current one unit in Connecticut. "We're in a good position to take advantage of opportunities," said Gregg Richard, president of the retailer. Overall, it's probably good news that consumer electronics retailers are expanding and taking up spaces vacated by Circuit City. Best Buy's sales results are encouraging as well. The retail industry can only hope that other chains replacing the market share left behind by Circuit City don't eventually share its fate.
When Cloud Computing Falls Short
In a time when office workers e-mail colleagues who sit two feet away, it's not unusual that the four employees at Blank Label run their start-up from three different time zones. While being farflung was never part of the founder's plan, the company's bumpy ride illustrates how technology can help a company manage a team of isolated employees—and the ways it can't. Blank Label, a service that enables customers to design dress shirts online, is the brainchild of Australian former investment banker Fan Bi. He started his company after a year of study at Babson College in Wellesley, Mass., which is known for hatching entrepreneurs. Bi recruited a marketing director and a graphic designer at nearby colleges—young guys willing to work for equity. But finding a Web developer was harder. "I was very keen on having a team locally," Bi says. "That didn't quite happen, mainly because we couldn't find any technical people who wanted to work with us in Boston. Technical people aren't usually into men's dress shirts."
Cosmetics & Pharmacy
Billy Busko
Walgreens' Monthly Sales Up, Same-Store Numbers Drop
Walgreens reported a 2.7% increase in its monthly sales, but noted a drop in same-store sales. The drug store chain said its January sales totaled $5.36 billion, compared with $5.22 billion for the same month in 2009. Despite the overall increase, Walgreens said its sales in comparable stores (those open at least a year) decreased 1.1%, which it attributed to calendar day shifts. Additionally, same-store pharmacy sales were negatively affected by 2.3 percentage points due to generic drug introductions in the last 12 months and a lower incidence of flu compared with January 2009. In its pharmacy sales this month, Walgreens noted a 1.6% increase, while comparable pharmacy sales decreased 1.2%. Prescriptions filled at comparable stores, however, increased 2.7% in January, including 1.7 percentage points due to H1N1 flu shots and 1.4 percentage points due to more patients filling 90-day prescriptions. Calendar day shifts negatively impacted prescriptions filled in comparable stores by 1.9 percentage points, Walgreens said. Pharmacy sales accounted for 66.2% of total sales for the month. Total front-end sales increased 3.9% in January, while comparable store front-end sales decreased 1%. Fiscal 2010 year-to-date sales for the first five months were $28.1 billion, up 6.8% from $26.3 billion.
Pacific World acquires Woodward Labs
Pacific World, a manufacturer of nail products and artificial nails, has acquired Aliso Viejo, Calif.-based Woodward Labs. With the acquisition, Pacific World brings into its fold the Mycocide NS anti-fungal foot care brand, HandClens hand-sanitizing foam and Dr. G's brand of nail and skin treatments. Financial terms of the deal were not disclosed.
Alberto-Culver Reports Q1 Sales
Alberto-Culver, whose brands include TRESemme, St Ives, Nexxus and Noxzema, announced on Monday that net sales rose 2.9% during the first quarter, with particularly strong sales growth in its international segment. Net sales for the quarter rose 2.9% to $363 million. On an organic basis, which excludes the effect of foreign currently fluctuations and acquisitions and divestitures, sales were flat in the quarter. In the United States, despite market share gains and continued growth on TRESemme, sales slipped 2.5% compared with the prior-year when sales rose 8% (including 4% growth from last year's Noxzema acquisition). International sales increased 12.3% (foreign currency fluctuations accounted for 8.5% of the growth) behind double-digit growth on TRESemme and St Ive
Department & Discount Stores
Mark Lenz
No Quick Sale Seen for Barneys
The opportunity to buy Barneys New York at a bargain-basement price, if it ever existed, might be disappearing now as owner Istithmar World stands behind its asset, and valuations in the luxury market improve against a backdrop of stabilizing sales. "Luxury is trending well these days, and things are looking up," said Gary Wassner, president of Hilldun Factors, whose clients include mostly high-end fashion designers. "Our relationship with Barneys is excellent, and we increased our credit line for them recently." According to Wassner, not only are luxury sales better now than three months ago, but also "the sense of gloom and doom is gone....People are feeling that the consumer is getting comfortable with the idea of buying again. The worst of the job losses is over, and now it is a matter of rebuilding."
TJX Move Upscale May Blur Lines in High-End Retail
Off-price retailer TJX Cos. Inc. has capitalized on the woes of its higher-end rivals in the past year by snapping up tons of their unsold merchandise and winning a new contingent of shoppers. But that success to some degree means that TJX relies on the miscalculations of its competitors and could be short-lived if full price chains cut back too far on orders and limit the amount of excess supply, analysts say. The presence of fancier brands at TJX stores, which include the T.J. Maxx and Marshalls chains, is also drawing it into more direct competition with the likes of Saks Inc and Macy's Inc, whose upscale Bloomingdale's chain is set to open its own off-price outlets later in 2010.
Now's the Time to Reset Marketing for Post-Recession
You can learn a lot from a clown. Walmart is running a brutally slapstick and outrageously funny spot showing a dad dressed as a clown at his kid's birthday party. The dad accidentally skewers his foot on a sharp-edged unicorn toy, screaming at the top of his lungs and sending panicked children running for cover. The commercial dovetails nicely with the messaging that enabled it to navigate the downturn so skillfully -- the purchase of the costume was made possible by the savings generated by shopping at the everyday-low-price retailer. But at the same time, it's not aimed solely at the low-income consumers that once comprised much of its consumer base. The spot is also gaining viral traction from the higher-income consumer that "discovered" Walmart during the downturn.
Costco Adds New Management Layer
Costco Wholesale Corp. said it will create a new "office of the president" department, consisting of CEO Jim Sinegal, board chairman Jeff Brotman, and two others. The Issaquah wholesale retailer said Craig Jelinek, who was named president and chief operating officer, as well as a new member of the board of directors, will join the new department.
Wal-Mart, Target Put Squeeze on Redbox
Wal-Mart is boxing out Redbox. Wal-Mart, the world's largest retailer, has imposed strict limits on the number of DVDs any one customer can buy at a time, making it harder for movie-rental kiosks such as Coinstar's Redbox to get their hands on large numbers of newly released discs. The new rules took effect Feb. 1 and include a five-DVD cap on new releases, mirroring limits placed by Target in December. Target's cap remains in effect for one week to several weeks after a movie is released to stores. Redbox and NCR are among the largest U.S. operators of DVD-rental kiosks, which rent movies for about $1 a day and, according to Adams Media Research, are the fastest-growing distributors of movie rentals.
Energy Alternatives
Christopher Ellis
US Government Expected to Increase Geothermal Funding by 25%
The Obama administration 2011 federal budget proposal includes a 25% increase in geothermal technology funding through the Department of Energy, the Geothermal Energy Association (GEA) said this week. The Treasury Department budget proposes an additional $5 billion to expand tax credits for new renewable manufacturing facilities. In addition to the US $55 million requested specifically for geothermal technology development, the President's budget also allocated energy funding that the geothermal industry will have a chance to compete for. This funding includes $300 million for the Advanced Research Projects Agency-Energy to assist in developing technologies such as the Enhanced Geothermal Systems (EGS) that an MIT report says could prove upwards of 800,000 MW of geothermal power across the United States. The budget also gives $500 million in credit subsidy to support $3 billion to $5 billion in loan guarantees for energy efficiency and renewable energy projects and directs DOE to take the lead in federal efforts to double renewable energy generating capacity by 2012, a target that GEA's most recent report says is possible within the industry.
US Renewable Energy Industry Needs the Heat in Biomass
The U.S. biomass thermal industry is poised to offer significant carbon and financial savings for consumers. Biomass for thermal energy is up to 90% efficient; in contrast, using biomass for the production of electricity is up to 40% efficient, and producing transportation fuels from biomass resources uses only 15% of the energy potential in this precious resource. It is vital to our economy - and our planet - to promote energy resources that are efficient and renewable. As part of the broader renewable energy solution, biomass thermal can uniquely address the need for low-cost, locally supported energy sources. In terms of job creation, a German study has tracked the number of jobs created or sustained by various renewable energy sectors, demonstrating that the industry as a whole can provide meaningful and lasting employment: the solar industry employs approximately 75,000 people in Germany; and wind energy sustains 84,000 jobs; but the biomass industry employs more than 96,000 people. From harvest to combustion, biomass energy produces persisting and environmentally responsible employment.
Footwear
Michael O'Hara
Walking Co. Files Reorganization Plan
The Walking Company Holdings, Inc. filed a reorganization plan under which the company intends to keep 207 of its 214 (over 96%) current store locations open and pay off all of its debts and future obligations to trade creditors. It plans to exit Chapter 11 protection "sometime this spring." In a court filing on Monday, the company said it had negotiated new lease agreements with landlords of about 90 of its 210 stores and that the move will generate annual cost savings of about $3 million. The retailer had filed for bankruptcy protection in December, with a plan to close almost half of its stores. The Walking Co said it has obtained a commitment from an investor group led by Richard Kayne of Kayne Anderson Capital Advisors LP to invest $10 million to recapitalize the company. Wells Fargo Retail Finance has agreed to provide $30 million as exit financing.
Wolverine World Wide's Q4 Sales Slide 9.7%
Wolverine World Wide, Inc. reported fourth quarter revenues declined 9.7% to $312.5 million. Net earnings fell 31% to $16.7 million, or 33 cents a share, from $24.1 million, or 49 cents a share, a year earlier. Excluding 12 cents a share in restructuring charges, earnings would have been 45 cents a share. The company, which owns outdoor brands such as Merrell, Chaco and makes Patagonia Footwear through a license, said it expects 2010 adjusted earnings of $1.92 to $2.00 a share. The quarter's reported revenue was minimally impacted by foreign exchange, but the company said the results were also impacted by having one less week in the quarter compared to a year earlier.
Bakers Footwear Comps Inch Up 0.8%
Bakers Footwear Group, Inc. said net sales in January were unchanged at $11.9 million compared to the same period last year. Comparable store sales increased 0.8%, compared to an increase of 4.2% for the four-week period ended January 31, 2009. For the thirteen-weeks ended January 30, 2010, the company's fourth fiscal quarter, net sales were $57.6 million, increasing 3.9% from $55.5 million for the thirteen-weeks ended January 31, 2009. Comparable store sales for the fourth quarter of fiscal 2009 increased 3.9%, compared to a comparable store sales increase of 3.6% for the fourth quarter of fiscal 2008.
Sneaky Small Cap Rally - Footwear is Running
Sometimes lousy stocks are overestimated and overbought, but investors are too enamored by the media's attention given to those companies to notice how weak the opportunity really is. Other times, a handful of off-the-radar stocks with little to no media following are stunning values - in addition to being stocks that actually, you know... go higher. The bulk of the small cap footwear stocks can be found in the second category right now, forming a proverbial 'perfect storm' of technical and fundamental bullishness. Obscure? A little, though it's not like Wolverine World Wide Inc., Skechers USA Inc., Deckers Outdoor Corp., and Iconix Brand Group are completely unheard of. They're just a little boring.... until you look at the numbers. The group as a whole looks about as impressive as any group out there, though there are clear leaders.
Gifts/Accessories/Luggage/Pets
Mark Boucher
Movie Gallery Files Bankruptcy, to Shut 805 Stores
Movie Gallery Inc., the operator of the Hollywood Video rental chain, plans to close 805 poorly performing U.S. stores after falling sales and mounting losses led to its second bankruptcy in three years. The closings affect one-third of the company's 2,415 U.S. stores, and several thousand of the company's roughly 19,100 employees probably will lose their jobs. Movie Gallery said it also operates 184 stores in Canada. Movie Gallery and video retailer rivals such as Blockbuster Inc. have suffered as more consumers switch to services such as Google Inc.'s YouTube, Netflix Inc.'s mail-order service and kiosk operators such as Coinstar Inc.'s Redbox.
Hermes Leads Luxury Pack with Strong Christmas Sales
Hermes on Friday joined the ranks of rival luxury groups including LVMH and Richemont to report surprisingly strong Christmas sales, after suffering the worst industry slump in two decades. Hermes, with a product range spanning silk scarves and 20,000-euro crocodile handbags, reported the strongest fourth-quarter sales growth of all, comfortably beating forecasts, and lifted its own profit expectations for the year. "Christmas was better than expected, we had not foreseen such growth," Finance Director Mireille Maury told Reuters. "We are optimisitc (about 2010)," she added.
Here's to a Long Life, Buddy
Hors d'oeuvres at a Hollywood Golden Globes party typically means canapés, champagne splits, maybe beluga caviar. All-natural doggie treats are not usually on the menu. But at the Buddha Bark Celebrity and Canine Lounge in Los Angeles, WellPet, a Tewksbury, MA purveyor of premium pet food, served up its jerky bites and lamb treats to celebrities' four-legged companions. The Buddha Bark event, part of WellPet's new marketing blitz, highlights how a recession that was the bane of so many businesses has proven to be a boon for companies offering natural pet food, free from artificial preservatives, flavors, and dyes. Americans in tough times may scrimp on themselves, but not on Rover. Since 2005, the natural pet food market has more than doubled, to $1.5 billion. it is projected to hit $2.6 billion by 2014.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
Cadbury Execs Step Down as Kraft Deal Closes
Three top officials at British candymaker Cadbury PLC are departing the company following its shareholders' approval of Kraft Foods, Inc.'s $19.5 billion acquisition. Todd Stitzer, Cadbury's CEO, will leave the company after 27 years, while CFO Andrew Bonfield will do the same after one year with Cadbury. Roger Carr, Cadbury's chairman, will similarly follow suit at an undisclosed date. All three executives initially voiced opposition to the takeover and accepted it only after Kraft increased its offer by 9 percent. On February 2, Kraft revealed that almost 72 percent of Cadbury shareholders voted in favor of the deal to solidify the creation of a global powerhouse in snacks, confectionery and quick meals.
Winn-Dixie to Open First New Store in 6 Years
Winn-Dixie Stores here plans Wednesday to open its first newly built store since 2004 - a 55,000-square-foot unit in Covington, La., that will feature an outdoor farmers' market, fresh sushi, a pharmacy and welless center, a panini grill, a peanut butter machine, an olive cart and a 24-foot tall entranceway. According to the company, the Covington store is the first in Louisiana to receive the Environmental Protection Agency's GreenChill certification, based on its ability to reduce refrigerant emissions and decrease the impact on the ozone layer and climate change. The certification - given to supermarkets that reduce emissions by at least 65% - has been given to only 26 supermarkets in the U.S., Winn-Dixie noted.
Judge Grants Another Extension in Bi-Lo Case
A judge in the bankruptcy case of Bi-Lo here has given the retailer and its creditors until the end of this month to file exclusive plans to reorganize the company. The current period of "co-exclusivity" was to have expired this week, but both parties requested an extension to file amendments to their current plans. The new deadline is Feb. 28. Bi-Lo has been operating under Chapter 11 protection for more than 10 months..
Home Improvement/Auto Repair
Billy Busko
Lowe's Opens Store in Mexico
Lowe's Cos Inc, the No. 2 U.S. home improvement chain, opened its first store in Mexico Friday in the northern industrial city of Monterrey, as it expands from its core market to gain new revenue sources. With an investment of $100 million, Lowe's plans to open five stores in the Monterrey area over the next few years, said Francisco Fernandez, chief executive of the Mexican unit. As in the United States, Lowe's will compete against larger rival Home Depot Inc , which has more than than 70 stores in Mexico. As economic growth in consumption-driven economies like the United States remains sluggish, U.S. retailers are looking abroad for growth opportunities. Lowe's has operations in Canada and recently teamed with the Woolworths Ltd chain in Australia.
Reports: Toyota Decides to Recall Prius in Japan
Toyota has decided to issue a recall for the Prius in Japan, media reports said Sunday, as the company told dealers in the United States it is preparing to repair the brakes on thousands of the hybrid vehicles there. It was unclear whether Toyota planned a formal U.S. recall. The company is already in the middle of a global recall of 4.5 million other vehicles over defective gas pedals and floor mats that could cause unintended acceleration. Those problems and criticism of Toyota's response to them have sullied the stellar reputation for quality long enjoyed by the world's biggest automaker. Toyota decided on a separate recall in Japan on Saturday covering its latest Prius model and has notified dealers, Japan's largest newspaper, the Yomiuri, reported without naming sources. It said Toyota would announce the move early this week after consulting with the Japanese government.
Used-Vehicle Prices Little Changed in Jan. from Dec., Up on Year
Used-vehicle prices were almost unchanged last month from December, but after a year of steady gains, they were up 16 percent from January 2009, the Manheim Used Vehicle Value Index shows. The index for January, released today, stood at 117.6. That is compared with 117.5 in December 2009 and 101.7 in January 2009.
Housewares/Furniture
Billy Busko
Positive Signs for Home Furnishings, Says High Point Market Report
The home-furnishings industry is "back on the road to recovery," according to the conclusions from the just-released "2010 High Point Market Business Outlook and CEO Update." Among the highlights from the report:
- In November, the National Association of Business Economists raised its growth projection for 2010 from the October estimate of 2.6 percent to 2.9 percent.
- In December, the U.S. Department of Commerce said the economy grew at its fastest pace in two years in the third quarter of 2009.
- The unemployment rate of 10 percent for November and December was better than expected. If the trend continues, it may fall to less than 9.5 percent by May.
- Sales of existing homes increased by a surprising 10 percent last October.
- Retail Forward's October 2009 ShopperScape report found that 23 percent of consumers are likely to make a furniture purchase in the next six months, and 7 percent are "very likely" to make such a purchase in that time frame.
Furniture Brands Slims Operating Loss in Fourth Quarter
Furniture Brands International reported a fourth-quarter operating loss of $23.4 million, down from the $40 million operating loss it posted in the fourth quarter of 2008. The company managed this in spite of a 29.2 percent drop in net sales for the quarter, which totaled $285.6 million. Furniture Brands trimmed 29 percent off its selling, general and administrative expenses, and cost of goods sold for the quarter were 28 percent less than in the prior year. For 2009 as a whole, Furniture Brands' operating loss increased from $34.9 million in the previous year to $45.2 million. Net sales fell 30 percent to $1.2 billion.
Sears and the 'Dollars for Dishwashers' Dilemma
Imagine you're the nation's largest seller of appliances and the government rolls out a multi-million dollar rebate program to encourage consumers to trade in their energy-guzzling appliances for more energy efficient ones. Good news, right? Not so fast. Imagine that program, rather than being a one-size-fits-all federal incentive plan is turned into a patchwork of state plans, each with its own start date, rules and requirements. What do you do then? That's the situation Sears Holding found itself in with a $300 million appliance rebate program that was passed as part of the Obama Administration's economic stimulus bill. Instead of being stymied by the confusing tangle of state programs, Sears is seizing an opportunity born out of the confusion. Realizing that about 70 percent of consumers begin their appliance shopping online, Sears has enhanced its Web site to provide users with information to navigate the government's appliance program as well as other rebates that were already also available to consumers. The retailer also is training its employees to assist with the paperwork needed to apply for these incentives so that consumers can pick up their new appliance and know that they are on their way to receiving some cash back.
Intellectual Property & Multi-brand Companies
Douglas Stebbins
The World's Top Sports Brands
In the multibillion-dollar sports industry, the most competitive contests are often fought off the playing field, where athletes, businesses, teams and events jostle for name recognition in hopes of capturing a bigger share of the entertainment dollar. So who's doing it best? Our second Forbes Fab 40, a ranking of the world's top sports brands, reveals that Tiger Woods, Nike, Manchester United and the Super Bowl are the most valuable names in their respective categories.
Comcast Products to be Re-named "Xfinity"
Cable TV and Internet company Comcast isn't going anywhere, Chicago, though you won't be hearing its name as much anymore. That's because Chicago is reported to be one of 11 metropolitan areas around the country where Comcast's offerings will now be under the "Xfinity" label, in a re-branding move. The company will still be known as Comcast. According to Comcast's blog, Chicago, as well as Boston, Philadelphia, Baltimore, Washington, D.C., Portland, Seattle, Hartford, Augusta, Chattanooga, and parts of the Bay Area and San Francisco, will see a new service, dubbed "Xfinity" next week. The new brand will promise faster Internet speeds, new HD channels, more foreign language channels, and the ability to watch shows online. More cities will be added later this year. The re-branded products will be known as Xfinity TV, Xfinity Voice and Xfinity Internet
Jewelry/Mining
Mark Lenz
Cindy Crawford to Sell Jewelry for J.C. Penney
Model Cindy Crawford is extending her brand with a new line of fine jewelry priced from $79 to $299 that will be exclusive to J.C. Penney beginning in April. The One Kiss by Cindy Crawford collection will launch with 45 pieces. Necklaces, bracelets, rings and earrings are made from sterling silver and gold-plated silver featuring a henna symbol that means "to kiss." Some pieces have diamonds, smoky quartz, lemon quartz, garnet-colored rhodolite and deep purple iolite. This is the 44-year-old model turned entrepreneur's second venture with Plano-based Penney. Last year, Penney started selling her Cindy Crawford Style brand of home furnishings and accessories, a line that offers window coverings to recently added outdoor furniture.
U.S. Jewelry Business Failures Less than Expected
While the number of jewelry business failures in the U.S. market jumped in 2009, there were two striking factors to keep in mind: The number of jewelry business failures was not as high as the industry had feared it would be and jewelry wholesalers suffered the highest failure rate. Jewelry wholesalers experienced the highest failure rate, closely followed by jewelry manufacturers. The failure rate of jewelry retailers was much more moderate and almost in line with the average of the past decade.
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
Ackman's Confidence Bolsters Borders Shares
Shares of the Borders Group jumped as much as 50 percent on February 3 after its largest investor, William A. Ackman, said there was little likelihood that the struggling bookseller would file for bankruptcy and that it could even be part of an industry consolidation. Mr. Ackman's hedge fund, Pershing Square Capital Management, owns 17.7 percent of Borders. He told CNBC late Tuesday that the possibility that Borders, the nation's second-largest bookstore chain, would go bankrupt was "a low probability event." In response, Borders shares traded as high as $1.43, up 49 cents, before giving back some gains. Mr. Ackman's remarks reassured investors about Borders' short-term prospects despite dwindling sales, said Michael Souers, an analyst with Standard & Poor's Equity Research. "Having someone come out and publicly make those comments does help soothe fears that the company's going to file for bankruptcy imminently," Mr. Souers told Reuters.
Guitar Hero CEO Leaves; Takes Over as CEO of Online Textbook Rental Start-Up Chegg
Longtime Silicon Valley exec Dan Rosensweig is stepping down as CEO and president of the Guitar Hero division of Activision Blizzard to take a new job as president and CEO of Chegg, the top online textbook rental start-up. Both companies confirmed the move, which is somewhat unexpected given that the former Yahoo COO landed the job running the top gaming franchise in March of last year. It has been an eventful, but also a particularly tough year at Guitar Hero, in the face of yet another withering downturn in the gaming market. While Activision introduced a new version of its flagship Guitar Hero game, as well as a new DJ Hero, Band Hero and a Guitar Hero: Van Halen version, sales were weaker overall, even though DJ Hero was the the No. 1 new game in both the U.S. and Europe.
Nonetheless, according to a recent report from research firm NPD Group, sales in the videogame space were down eight percent in 2009 from 2008. And while Guitar Hero did gain market share as the most popular such game in its genre, most expect its trajectory to be downward. In contrast, Rosensweig-who is probably much more suited to the pure Web space and the Silicon Valley scene-will be taking over a much faster-growing business at Chegg, based in Santa Clara, Calif. It has become the front-runner in the increasingly competitive online textbook rental space.
Restaurants/Food Service
Mark Boucher
Pasta Pomodoro Under New Ownership
The 30-unit Pasta Pomodoro chain has been acquired by two San Francisco Bay Area entrepreneurs who plan to revitalize the Italian casual-dining brand. The new owners, Matthew Janopaul, now chief executive of Pasta Pomodoro, and Girish Satya, chief financial officer, purchased the chain from brand founder and former chief executive Adriano Paganini, a fine-dining chef who opened the first Pasta Pomodoro in San Francisco in 1994. Other stakeholders that sold their respective shares include Wendy's/Arby's Group Inc., which held a position through Wendy's International Inc., and private-equity firm Dorset Capital Management. Janopaul and Satya worked together previously with the recent start up of Beautifull, a retail and meals-to-go food concept with two units in San Francisco. They were both brought in to get that concept off the ground, Janopaul said in an interview with Nation's Restaurant News.
Papa Bello to Acquire Another Concept
Papa Bello Enterprises Inc., the operator or franchisor of about 20 Papa Bello Pizza restaurants, is continuing its buying spree with the planned acquisition of Royal India Express, a fast-casual Indian concept in San Diego. Last October Papa Bello acquired Pastore's of Rosedale Inc., a Baltimore-based restaurant, deli and bakery concept, and Kebab Cafe, a quick-service operation specializing in Middle Eastern food in La Jolla, Calif. Pastore's two outlets generated revenues of about $1.4 million in 2009, the company said. Royal India Express, which was created by brothers Sam and Jag Kambo, the developers of Kebab Cafe, operates one outlet in the Horton Plaza and is exploring additional sites in Southern California. The deal is expected to close later this month.
Morton's Restaurant Group Names New CEO
Morton's Restaurant Group Inc. has named Christopher Artinian president and chief executive, replacing Thomas J. Baldwin, who resigned. Artinian has been with the company since 1995, most recently as vice president of Eastern operations. No reason was given for the departure of Baldwin, a 20-year veteran of the steakhouse chain. Like many upscale concepts, Morton's has struggled with steep sales declines during the past year. In its most recent third quarter, Morton's reported a 16.8-percent drop in same-store sales, which Baldwin at the time attributed to declines in business travel and convention business.
Those are the latest headlines. Thank you for reading.
Sincerely,
The Team at Consensus
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