The Weekly Consensus: Week of February 15, 2010
On the Rebound
Mark Lenz
Last weekend, those of us outside of Indiana were able to cheer for the resilience of New Orleans as the Saints put more than 40 years of frustration aside in winning the Super Bowl and a city rejoiced. City residents interviewed on newscasts over the next few days talked about how the win helped improve their outlook after five years of hard work and perseverance by the team and the citizens of the city since the storm. Yet even with the big win and the euphoria that came with it, the city is still not the same as it was before Katrina. But, there is hope.
Many retailers have themselves been faced with years of frustration due to recent events. Those that have not closed for good are cleaning up damaged balance sheets and trying to get business back to normal. Recent discussion of unemployment trends indicate that the consumer will not be back in the same way as before the economic storm for many years and unemployment will stay high. The resilience of retailers is being severely tested. Successful retailers will have to adapt to the new reality, for the near term at the very least.
There are signs of improvement in retail. Sales have increased over last year's results for several months in a row, although for many retailers sales are still well below the level of two years ago. Most retailers have addressed the unsettled times by cutting back on inventory levels, staffing and capital investment. While these are all valid tactics under the circumstances, companies can only cut so far before there are serious, negative effects.
Times such as these test the resilience of the consumer, of retail employees trying to do more with less and of suppliers concerned with getting paid when they accept orders. It appears that consumers are slowly coming back into the stores, but the question is, how will retailers take advantage of the returning traffic? So far, higher-end retailers are resorting to lower starting price points for their merchandise, moderate brands are basing their advertising around a value message, and low-end stores are making the most of doing business in an environment tailor-made for their offerings.
There will be great opportunity to pick up market share in the coming year as the consumer returns. Some will sit on the sideline due to inability to make a decision to invest. Those that have cut to far may not have the personnel or other resources to take advantage of growth opportunities when the time comes. When many were not willing to believe, Saints owner Tom Benson and others invested in the possibilities found in a rebuilding New Orleans. Businesses that have the human capital, the financial capital and the courage to invest them will drive innovation and top-line growth, building success out of these years of frustration.
Apparel/Swimwear/Intimates
Betsy White
Buy It if It Fits: Star Avenue Buys Denim Co. J Brand
Star Avenue Capital LLC Managing Director Mark Genender came to New York late last year for diligence on his firm's first investment, but he never expected to end up on the set of celebrity photographer Terry Richardson's shoot. The firm was looking at premium denim company J Brand, and Genender found himself behind the scenes of a photo shoot for the company's latest ad campaign, staring at models alternating denim washes in front of the camera. "I never thought I would come to New York for due diligence and get to see Terry Richardson shoot ads," he said. Ad campaigns aside, the firm went through extensive diligence and ended up taking a majority stake in a deal worth over $50 million; seller financing was involved and management retained a stake above 25%, according to Genender. The buyout included a co-investment by Genuity Capital Partners and a "very modest" amount of senior debt from Bank of America. Finding financing was "very difficult" given the sector, Genender said.
Levi Strauss Net Profit Up, Sees 2010 Sales Growth
Levi Strauss & Co posted an 8 percent gain in net income on Tuesday despite a slide in overall sales, helped by new stores that boosted gross margins and improvements in the Levi brand in the United States. The San Francisco-based private company, which discloses quarterly results due to its publicly held debt, sees sales growth in 2010, but anticipates lower operating margins due to recent investments. Fourth-quarter net income was $67 million compared with $62 million a year earlier. Revenue fell nearly 5 percent to $1.21 billion from $1.27 billion, and gross margins rose to 51.5 percent of revenues from 49.2 percent a year earlier. Earlier this summer, Levi Strauss acquired 73 Levi's and Dockers outlet stores from a former licensee. Moreover, the company has been adding to its fleet of full-price Levi's brand stores. The retail expansion has helped to counteract a pervading sales slump in mature markets such as the United States, Europe and Japan, where consumers have pared back purchases and department stores have cut back on inventory.
Uniqlo Parent Fast Retailing Pursues Global Deals
Fast Retailing Co. Chairman and Chief Executive Tadashi Yanai said the operator of Japanese retailer Uniqlo is on the hunt for acquisitions and has set its sights on spending as much as $11 billion to strengthen its global presence. Mr. Yanai, who founded the Yamaguchi-based purveyor of cheap-and-chic clothes in 1984, has made no secret of his ambitions to transform Uniqlo into the world's leading global apparel retailer, leapfrogging the likes of Gap Inc. and H&M operator Hennes & Mauritz AB. He said in an interview Thursday that acquisitions would be necessary, particularly in the U.S. and Europe, to reach that goal. Although Mr. Yanai didn't mention any specific acquisition targets, "the bigger the better," he said. The target company wouldn't have to be similar to Uniqlo in terms of products, but it would have to accept Fast Retailing's management philosophy, he added. "We shouldn't buy a company that we can't control."
Athletic & Sporting Goods
Michael O'Hara
Gordon Brothers to Liquidate Ski Market's Assets
A U.S. bankruptcy court judge approved the sale of ski-and-bike retailer Ski Market to Gordon Brothers. Ski Market filed for bankruptcy in December after reporting a dramatic drop in annual sales. Gordon Brothers plans to liquidate the retailer's remaining assets by the end of March. The liquidation firm outbid five other perspective buyers in an auction that was conducted on February 1. Ski Market expects to net $1.3 million from the sale of its assets, nearly all of which will go to its primary secured lender, South Shore Savings. Consensus served as financial advisor to South Shore Savings Bank.
KEE Action Sports Acquires JT Sports
KEE Action Sports LLC, based in Sewell, NJ, has purchased JT Sports from Jarden Corp. Effective immediately, KEE will be manufacturing and selling the entire line of JT Sports, Brass Eagle, and ViewLoader paintball products. KEE Action Sports is a manufacturer of paintball sporting goods and the exclusive source for RPS, Empire, Invert, Invert MINITM, BT Paintball, HALO, EVIL, Pure Energy, ViewLoader, Brass Eagle, and JT Sports brand products.
Sport Supply Group to Rally on Michelle Obama's 'Let's Move' Initiative
Sport Supply Group Inc. sells sports equipment and apparel to schools. They claim to be the largest player in the industry despite having less than 5% market share in this highly fragmented market dominated by mom & pop / small operators. Market consolidation is where most of their growth will come from and as a not-so-bad backstop they got a $1.5 Billion exclusive contract from the government to be the sole supplier of goods under the Government Purchasing Alliance Consortium which helps institutions group their purchases together to save money. Another possible driver of near term growth is little fat kids: The first lady's top propriety as per the front page of the WSJ Tuesday morning is to implement more athletic/fitness programs into children's lives at school to stop the little fat kid epidemic. At the current pace it is estimated that we will run out of fun dip by the year 2012.
Catalog & Internet
Christopher Ellis
Suitors Reach for Figleaves, the Online Underwear Retailer
Britain's love affair with lingerie could soon bring a big payday for the backers of Figleaves, the online underwear retailer. The company, headed by Julia Reynolds, chief executive, has recently received several bid approaches and has hired GP Bullhound, a corporate-finance firm, to advise it. Any deal is likely to value Figleaves at more than £40m, according to analysts. A sale would provide a windfall for founder Daniel Nabarro, who still owns a big slice of the equity. The largest shareholder is Balderton Capital, the venture-capital firm, with a stake of between 30% and 40%. Reynolds and her team also own a percentage of the shares. The company, founded in 1998, is on the verge of becoming profitable for the first time thanks to a number of changes made by Reynolds, who has been at the retailer for two years after almost a decade at Tesco. Her innovations include starting an own-label range that is sold alongside top brands such as Calvin Klein, Gossard and Sloggi.
The Fight Over Who Sets Prices at the Online Mall
Where's the price? On some pages of e-commerce sites selling products like televisions, digital cameras and jewelry, a critical piece of information is conspicuously missing: the price tag. To see how much these items cost, shoppers must add the merchandise to their shopping carts - in effect, taking it up to the virtual register for a price check. The missing prices are part of a larger battle sweeping the world of e-commerce. Wary of the Internet's tendency to relentlessly drive down prices, major brands and manufacturers - and now, book publishers - are striking back, deploying a variety of tactics and tools to control how their products are presented and priced online. In many cases that freedom stems from a 2007 Supreme Court ruling in the case of Leegin Creative Leather Products v. PSKS. The ruling gave manufacturers considerably more leeway to dictate retail prices, once considered a violation of antitrust law, and it set a high legal hurdle for retailers to prove that this is bad for consumers. Ever since that decision, retailers say manufacturers have become increasingly aggressive with one tool in particular: forbidding retailers from advertising their products for anything less than a certain price.
Consumer Electronics/Video/Audio
Douglas Stebbins
Sears Invigorating Consumer Electronics Biz
Early in her tenure as president of home electronics for Sears Holdings, Karen Austin was shocked to learn that more than 20 percent of consumers were unaware that Sears carried the category. Now one year into her new job, the company's former chief information officer has spent considerable time, effort and resources to remedy that. Austin is taking a multi-pronged approach at updating Sears' CE image and enhancing its consumer benefit. Changes include a cutting-edge technology assortment and impending department redesign, coupled with a fresh marketing campaign and new online and m-commerce initiatives.
Google Feeds Mobile Social Craze with a Little Buzz
A mobile version of Google's new Buzz social networking offering lets the company take advantage of the increasing number of consumers looking to post updates about their daily lives from the grocery store, the local coffee shop, a neighborhood restaurant or anywhere else they go during a day. Google yesterday took the wraps off wired and mobile versions of Google Buzz -- a set of tools designed to make its popular Gmail more of a social networking hub than a simple e-mail service. Bloggers and others are already focusing attention and seeking more information on the mobile version's so-called Nearby feature. The feature is all about location relevancy, Google Buzz Product Manager Todd Jackson, said during the unveiling of the tool set yesterday. Buzz determines the location of users using GPS technology. Buzz sends those coordinates to the Google cloud, which sends the user's location back to the phone.
Cosmetics & Pharmacy
Billy Busko
Drugstore.com Reports Q4 Sales
Drugstore.com noted a near 25% spike in net sales for its fourth quarter, compared with the year-ago period. For the three months ended Jan. 3, 2010, net sales totaled $117 million, up from $94 million in fourth quarter 2008. Drugstore.com also reported that its new customer base increased 48.5% to 603,000. Drugstore.com, however, said its adjusted EBITDA for the quarter totaled $3.5 million, a 36.7% drop from million last year. The online retailer also posted a widened net loss of $3.5 million from $2.4 million in the year-ago period, which includes $1.9 million of transaction related expenses and integration costs expected to be incurred in connection with the acquisition of Salu's Skinstore.com.
De la Renta Said Negotiating Beauty Deal
Oscar de la Renta may be cooking up a new beauty deal. According to sources close to the company, de la Renta is in discussions with a private equity investor who might take a minority stake in a newly established company, Oscar de la Renta Beauty. Sources speculate a deal could be reached within the next few weeks.
Department & Discount Stores
Mark Lenz
Store Closings Could Keep Piling Up Throughout First Half of 2010
With Movie Gallery announcing the first major bankruptcy filing of the year, retail real estate professionals are starting to get a handle on what 2010 will look like in terms of store closings. So far the pace of announced closings has been noticeably slower than in 2009, when a glut of retailers announced mass closures, bankruptcies or liquidations soon after the holiday shopping season concluded. By this time last year, seven major retailers had filed for bankruptcy and about a dozen others announced mass closings. That's not how things have played out so far this year.
Aging Boomers Could Spell Big Trouble for Walmart
Walmart is a Baby Boomer consumer-based business. As Boomers' paychecks grew over the years, so did Walmart's profits. Now, the retailer is facing a daunting challenge and haunting question: As Boomer demand falls and Boomer consumption declines, will WalMart's sales move in the same direction? A January 28, 2010 New York Times headline reads: "Walmart Makes Organizational Moves to Raise Efficiency." Back at its analyst meeting in October 2009, Mike Duke, Walmart's new chief executive, said the company is determined to become more efficient and cut costs, allowing it to offer lower prices to increase sales. Efficiency is good, saves money. So Walmart divided the country up into three separate parts: North, South and West, and has three separate presidents running things. Is this efficiency? In January, Walmart also announced it is cutting 11,200 jobs. Hot off the wire in February, Walmart just announced that it will close ten under-performing Sam's Club Stores and cut 300 support division jobs at its headquarters in Arkansas. From 30,000 feet this all looks like a frantic fire drill. In mid-2009, Walmart announced an ambitious retail strategy called Project Impact that the company hopes will improve customer service and knock all of its more vertical competitors out of business, yes out of business. It is fair warning from Mike Duke to drug stores, toy and craft stores, supermarkets and consumer electronic giants that Walmart is going for your throat. From 30,000 feet, Project Impact appears to be nothing more than an untenable and desperate demonstration of corporate ego. It is not a retail strategy, it is a pipe dream.
Fashion Designers Optimistic as Stores Rebuild Depleted Inventories
Designers showing fall collections at New York Fashion Week are counting on increased orders after retailers got caught short of goods when consumer spending rebounded at the end of the year. "The falloff has stopped," Heather Pech, chief executive officer of Nanette Lepore, said Monday in a telephone interview. "The stores are under-inventoried at this point. They are going to be maintaining and growing their businesses." Apparel sales have picked up in recent months, after plunging last year, said Marshal Cohen, chief industry analyst for market researcher NPD Group Inc. Women are refreshing their wardrobes and returning to department stores, he said.
Energy
Christopher Ellis
SunPower to Acquire SunRay for US $277M
SunPower Corp. has signed a definitive agreement to acquire SunRay Renewable Energy, a European solar power plant developer with offices in Europe and the Middle East. SunPower will acquire SunRay from its shareholders, which includes its management and Denham Capital. SunPower has sufficient cash to close the transaction and does not intend to raise equity capital to finance the acquisition. Upon closing the transaction, SunPower will acquire a project pipeline of solar photovoltaic projects totaling more than 1,200 megawatts in Italy, France, Israel, Spain, the United Kingdom and Greece.
25% US Renewable Electricity Standard Will Create 274,000 Jobs
A new study released by Navigant Consulting finds that a 25% by 2025 national Renewable Electricity Standard (RES) would support hundreds of thousands of new American jobs and prevent a near-term collapse in some industries. Job growth in the wind, solar, biomass, waste-to-energy and hydropower industries would particularly benefit the Southeastern U.S. and manufacturing states whose Congressional delegations have had a history of voting against incentives and other measures designed to support the renewable energy sector. The "Job Impacts of a National Renewable Electricity Standard" study was released by the RES Alliance for Jobs and found that a 25% by 2025 national RES would support an additional 274,000 renewable energy jobs over a no-national policy option. The 25% figure is significantly higher than RES mandate in current legislation and the expected jobs supported in the current House and Senate provisions would be considerably lower.
Footwear
Michael O'Hara
Steve Madden Completes Acquisition of Big Buddha
Steve Madden, a leading designer and marketer of fashion footwear and accessories for women, men and children, today announced that it has completed its acquisition of privately held Big Buddha, Inc., a designer and marketer of fashion-forward handbags. Founded by Jeremy Bassan in 2003, Big Buddha sells its trend-right handbags to specialty retailers, better department stores and online retailers. Big Buddha had net sales in 2009 of approximately $13 million (unaudited). The acquisition was completed for $11 million in cash plus certain earn-out provisions that are based on financial performance through 2013. The transaction is expected to be immediately accretive, contributing approximately $0.05 in diluted EPS in 2010.
Boot Town Western Wearhouse's Chapter 11 Plans Accepted by Dallas Court
U.S. Federal Bankruptcy Chief Judge Barbara J. Houser approved the proposed Chapter 11 liquidation plan for Boot Town Western Wearhouse recently at a court hearing in Dallas. The company filed for Chapter 11 bankruptcy protection on November 3, 2008 in the United States Bankruptcy Court for the Northern District of Texas. The approval of the liquidation plan was the culmination of efforts to sell assets, wind down operations, and negotiate claims that will result in a distribution to general unsecured creditors of approximately 5%. The plan received overwhelming support from creditors with well over 90% voting in favor of the plan.
Gifts/Accessories/Luggage/Pets
Mark Boucher
A Free Kindle to All Amazon Prime Subscribers?
In January Amazon offered select customers a free Kindle of sorts - they had to pay for it, but if they didn't like it they could get a full refund and keep the device. It turns out that was just a test run for a much more ambitious program. A reliable source tells us Amazon wants to give a free Kindle to every Amazon Prime subscriber. Just as soon as they can work out how to do it without losing money. Amazon Prime is a subscription product that gives customers free two day shipping on everything they buy from Amazon. The current fee is $79/year. These are Amazon's very best customers - the ones who tend to make multiple purchases per month. And they are also likely to buy multiple books per month on their Kindle devices. If those users buy enough books, and Amazon gets the production costs of the Kindle down enough, Amazon can get Kindles into "millions" of people's hands without losing their shirt. At least when the goal is to break even or better over the course of a couple of years, the expected lifetime of a Kindle.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
One Bowl = 2 Servings. F.D.A. May Fix That
Seeking a new weapon in the fight against obesity, the Food and Drug Administration wants to encourage manufacturers to post vital nutritional information, including calorie counts, on the front of food packages. The goal is to give people a jolt of reality before they reach for another handful of chips. But the urgency of the message could be muted by a longstanding problem: official serving sizes for many packaged foods are just too small. And that means the calorie counts that go with them are often misleading. So to get ready for front-of-package nutrition labeling, the F.D.A. is now looking at bringing serving sizes for foods like chips, cookies, breakfast cereals and ice cream into line with how Americans really eat. Combined with more prominent labeling, the result could be a greater sense of public caution about unhealthy foods.
Creditors Pull Bi-Lo Reorganization Plan
Creditors in the Bi-Lo bankruptcy case have withdrawn a proposed plan of reorganization after term lenders withdrew their plans to invest in it, court documents filed this week show. The official committee of creditors and an ad-hoc committee of term lenders had collaborated on a plan that would have provided new investment of $79.5 million and new term notes of $164.1 million. Bi-Lo and its owners, Lone Star Funds, had submitted a competing plan.
China Set to Overtake U.S. as Biggest Grocery Market
China is poised to surpass the United States for the first time as the largest grocery market in the world by 2014, according to IGD, a global food and grocery expert providing information, insight and best practice to the food and grocery industry. In its recent "10 for 2010" report, the U.K.-based company predicts that the Chinese grocery market will be worth $1.05 trillion, outpacing that of the United States, which is on track to be worth $1.03 trillion in four years' time.
Chocolate Trends
Despite the gloom of the recession that enveloped the nation last year, with its impact still being felt, U.S. consumers haven't given up on chocolate, even as they cut back on other frills and took steps to curtail spending in virtually every way possible. The "affordable indulgence" factor apparently was an important driver of chocolate sales in 2009, which generally were up in convenience stores, supermarkets and specialty food stores, although unit sales generally declined. According to The Nielsen Company, chocolate bar dollar sales of almost $4.6 billion in the convenience channel represented a 5 percent jump over 2008, but unit sales were off by the same amount.
Home Improvement/Auto Repair
Billy Busko
Sears Reaches Agreement with Schumacher Electric to Sell DieHard Brand Products
Sears Brands Management Corporation announced a trademark license agreement with Schumacher Electric Corporation today which will enable DieHard-branded power accessories to be sold to retailers in the U.S., Puerto Rico and Mexico. The DieHard products to be sold as part of the agreement include battery chargers, jump starters, and power inverters. In a 2009 Battery Brand Tracker Survey, DieHard products were selected by an overwhelming margin as "most trusted," "dependable" and "performs in extreme conditions."
Home Remodeling Holds Potential for Investors
The home improvement and remodeling industry will be the darling of the housing sector in 2010. The plunge by the housing sector took the home improvement industry with it as it fell more than 30 percent from its peak in 2007. It looks like the home improvement industry will bottom in the first quarter of 2010 and then rise from there. As homeowners recover from the devastation of the credit crunch, they are looking to increase their spending on their existing homes. Should existing home sales rise, it will add to the spending by homeowners on up grading their homes. Even the growing number of foreclosures will contribute to the home improvement and remodeling industry as the new owners spend some money to increase the value of their new purchases.
Lowe's Expands Support of the Military with Year-Round Discount
Lowe's Companies, Inc. announced today it will expand its support of the military by offering an all day, every day 10 percent discount to all military personnel who are active, reserve, retired or disabled veterans and their family members, with a valid, government-issued military ID card. All other military veterans will receive the discount on the Memorial Day, Fourth of July and Veterans Day weekends.
Housewares/Furniture
Billy Busko
Ashley Furniture Plans to Open 300 Small Stores
Ashley Furniture hopes to open 300 new small-concept franchise stores this year, the Arcadia-based manufacturer announced this week. The stores will offer furniture at a single price - for example, all sofas for $399, rugs for $99, or five-piece dining room sets for $399. The line will be different from what is offered in Ashley Homestores, and the prices are at the low end of merchandise typically found in the larger Ashley stores. Ashley unveiled its 5,000-square-foot low-price store model at the Furniture Market in Las Vegas this week, and has had a strong response from potential franchisees around the country.
Positive Fourth-Quarter Sales for Appliances Bring Hope for 2010
The pickup in fourth-quarter 2009 sales of large and small appliances offer promise of further growth this year, according to The NPD Group. The market-research firm's consumer tracking service showed that sales of small appliances jumped 14 percent on a dollar basis over the fourth quarter of 2008, and unit sales were up 20 percent. The top categories were upright vacuums, drip coffeemakers and heaters, NPD said. The one negative that emerged from the company's research was a 2 percent drop in average unit selling prices for all small appliances.
Mattress Sales Post Strong December
U.S. sales of mattresses finished 2009 on a positive note, according to the monthly Bedding Barometer from the International Sleep Products Association. Dollar sales of mattresses increased 7.6 percent in December, totaling $200.5 million, while unit sales jumped 10.8 percent to 643,342. For 2009 as a whole, dollar sales were almost $2.5 billion, down 9.2 percent from 2008, and unit sales fell 5.8 percent to nearly 8 million.
Spectrum Makes Deal to Acquire George Foreman, Black & Decker Brands
Spectrum Brands, parent of the Remington brand, has reached an agreement to acquire Russell Hobbs, parent of the small-appliance brands George Foreman, Black & Decker, Russell Hobbs, LitterMaid, Farberware, Juiceman, Breadman and Toastmaster brands. Russell Hobbs was formerly known as Salton Inc., which was formed when Salton and Applica merged in 2007. Salton Inc. changed its name to Russell Hobbs in December 2009.
Select Comfort Profit Hits Black in Fourth Quarter
Select Comfort reported net income of $35.3 million in the fourth quarter, reversing a fourth-quarter net loss of $57.4 million last year. The mattress manufacturer-retailer achieved this result through a gain in net sales and gross margin, plus stringent cost cutting. Net sales rose 4 percent in the quarter to $136.5 million, which included a whopping 23 percent increase in same-store sales, offset by the closure of 72 stores since the beginning of last year. Select Comfort's gross margin jumped 700 basis points to 62.9 percent as well.
Reed & Barton Acquires Lunt Silversmiths
Reed & Barton, marketers of fine tableware and giftware, announced yesterday the acquisition of Lunt Silversmiths following its Chapter 11 filing in December. Established in 1902, Lunt's product range includes sterling and stainless steel flatware, holloware and giftware. The price of the acquisition was not made public. A Reed & Barton spokesperson said none of Lunt Silvermiths' executives will be retained.
IP Holding Companies & Multi-brand Companies
Douglas Stebbins
VF Announces Fourth Quarter and Full Year Results and Declares Dividend
VF Corporation, a global leader in branded lifestyle apparel, today announced results for the fourth quarter and full year 2009. All per share amounts are presented on a diluted basis. Fourth quarter revenues rose to $1,915.4 million from $1,912.2 million in the fourth quarter of 2008. Net income in the current quarter was $66.9 million or $.60 per share, compared with $115.9 million or $1.05 per share in the 2008 quarter. Excluding a $114.4 million after-tax, noncash charge related to the impairment of goodwill and intangible assets as described below, fourth quarter net income increased to $181.3 million and earnings per share increased to $1.62. The current quarter also included a $.12 per share impact from higher pension expense and a $.01 per share benefit from foreign currency translation. In 2008, fourth quarter earnings included a $.30 per share charge related to cost reduction actions. Excluding the 2008 charge and adjusting 2009 earnings for the higher pension, foreign currency and impairment impacts, earnings per share in 2009 would have increased by 28%
A Captive Call Option: Walmart Makes a One-Sided Sourcing Deal with Li & Fung
Walmart's latest sourcing partnership with Li & Fung to "consolidate some of its existing sourcing business with a new unit of L&F, which [will act] as a middle man between factories in China and around the world and European and US retailers and brands,"; Walmart has essentially a call option in its contract with Li & Fung "to take control of the unit in 2016, as it shifts towards more direct relationships with manufacturers -- in effect subcontracting to L&F the creation of what will become part of its own global sourcing operation." Just as Walmart often does in sourcing stateside, it's taking advantage of its sheer buying power to negotiate an agreement with a supplier that no sane vendor would agree to under normal circumstances (e.g., making suppliers pay Walmart for lost revenue if shipments are delayed, even for circumstances outside of their direct control).
Hefner Nixed Deals to Maintain Lifestyle, Suit Says
Hugh Hefner, founder and majority shareholder of Playboy Enterprises Inc., was sued by an investor who said Hefner rejected acquisition suitors during the past six months so he could maintain his lifestyle. David Brown sued yesterday in state court in Los Angeles. He seeks class-action, or group, status for the suit on behalf of other investors. Chicago-based Playboy Enterprises owns the namesake men's magazine. Iconix Brand Group Inc., based in New York, in December decided to break off purchase discussions with the company after determining it would be too complicated to divest, shut down or find partners for Playboy units it didn't want to operate, according to two people familiar with the matter. Hefner also rejected an offer from San Francisco-based Golden Gate Capital Corp., Brown said.
Jewelry/Mining
Mark Lenz
Zale Pines for Shoppers' Love on Valentine's Day
U.S. jewelry chain Zale Corp must win back the love of its shoppers this Valentine's Day to stay afloat, but may not have the resources to do so. Zale, the largest North American jewelry store chain with about 1,900 stores, missed out on the sector's fledgling recovery over the holiday season and has been trying the patience of suppliers and creditors alike. It is heading into the critical Valentine's cycle just after it purged several top executives, including its CEO, and is facing serious concerns about its financial health. "It's more important from a perception standpoint than a cash standpoint that they have a good Valentine's Day," said Michael O'Hara, an expert in jewelry restructurings and founder of Consensus Advisors in Boston. "If they have another negative comp for February, that might really spook the vendors. And if that spooks the vendors, they could tighten up their trade terms or they might walk away from proposed long-term trade credit deals," he said. Zale has posted losses in seven of the last eight quarters and suffered a 12 percent same-store sales drop over the holidays. A liquidity crunch is curbing the Dallas-based chain's ability to put together a proper advertising campaign.
Swiss Watch Export Decline Eases
Foreign sales of Swiss watches are set to recover in 2010 after falling 22.3 percent last year, amid signs demand for luxury goods is returning in the wake of the global economic downturn, the Federation of the Swiss Watch Industry announced. December exports fell 7.2 percent, their lowest decline in 2009, to 1.2 billion Swiss francs, or $1.17 billion. This compares with average monthly declines of 20 percent to 33 percent between January and October. In 2009 as a whole, Swiss watch exports fell to 13.2 billion Swiss francs, or $12.8 billion, their lowest level since 2005, when exports totaled 12.3 billion Swiss francs, or $9.9 billion. Dollar figures are calculated at average exchange rates for the period concerned. "Signals perceived on the markets indicate that 2010 should see a turnaround for Swiss watch exports. It will however be modest and will only really be felt in the second half of the year, when the annualized variation will return to positive rates," the federation said. Among the top 15 markets worldwide, Thailand performed the worst with a 39 percent drop in sales of Swiss watches, closely followed by the United States, which saw sales plummet 37.9 percent, the federation said. South Korea registered the only increase in sales, with a jump of 35.7 percent. China remains a key market for 2010, despite seeing sales slide 15.2 percent for 2009 as a whole. "It is in fact one of the rare markets, with Singapore, to have recorded a second half-year of growth," the federation noted.
U.S. 2009 Jewelry & Watch Sales Fall 1.6% to $59 Billion
Jewelry and watch sales at all retailers in the U.S. market fell to $59 billion in 2009, a 1.6 percent decline from the prior year's sales of $60 billion, based on preliminary figures from the U.S. Department of Commerce. Further, jewelry and watch sales in 2009 were about $2.6 billion below the record level of $61.6 billion in 2007, a 4 percent decline from their peak two years ago. While the 2009 sales figures are preliminary - and will be revised modestly several times between now and mid-2010 - they show that the decline in jewelry and watch sales in 2009 was less than some forecasters had feared.
Hearts on Fire to Cut More Than 120 Retailers
Hearts on Fire announced Tuesday that it would begin closing "underperforming accounts" at more than 120 retail stores and will put its focus on the stronger partners that remain. The Boston-based branded diamond company said in a release issued Tuesday that the goal behind the closings was to consolidate and strengthen its family of independent jewelers, focusing on those retailers that can best represent the complete brand experience in terms of product offering and presentation and "complement the existing 650 locations around the world," which includes 500 U.S. stores.
Diamonds Aren't an Investor's Best Friend
The marketers claim a diamond is forever. And sure, it's a hard stone. It lasts a long time. But what about financially? Is it equally durable? You've just sunk a small fortune into those rocks you're giving on Valentine's Day. Are they likely to hold or gain value over time?I decided to investigate. And the results, alas, aren't sparkling. Even before looking at all the transaction costs, diamonds have proven an absolutely disastrous investment for decades.
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
OfficeMax: CEO Sam Duncan to Retire in 2011
OfficeMax Inc. said Thursday its chairman and chief executive will retire early next year and the office-supply retailer plans to launch a national search for a new CEO. Sam Duncan has been chief executive since 2005. He plans to retire on Feb. 28, 2011 and also will step down from the board at that time. The company said it will consider both internal and outside candidates for his replacement. Duncan has agreed to stay on until a successor is in place.
Staples Kicks Off New Product Eco-Challenge
Staples is launching its first Staples Global EcoEasy Challenge, a bake-off among leading educational institutions around the world to create a green and glorious office product. In conjunction with Rochester Institute of Technology's Golisano Institute for Sustainability, Staples says it is starting the contest to engage engineering students around the world in creating business or home-office products that are better for the planet.
Restaurants/Food Service
Mark Boucher
Heinz Revamps Ketchup Packets
The ketchup packet has been around for more than 40 years, and complaints about it for nearly as long: too messy, too small, too hard to open. Now ketchup giant H.J. Heinz Co. is unveiling the first major packaging change to the to-go condiment. The new design has a base that's more like a cup for dipping and also a tear-off end for squeezing, plus it holds three times as much ketchup than a traditional packet. ''The packet has long been the bane of our consumers,'' said Dave Ciesinski, vice president of Heinz Ketchup. ''The biggest complaint is there is no way to dip and eat it on-the-go.'' Heinz sells more than 11 million cases of its ketchup packets in the U.S. every year and it will continue to sell the traditional packet. The new packet is in test markets in the Midwest and Southeast and will roll out at select fast-food restaurants in the fall. Heinz is still working out prices with customers but said packets will cost a little more than regular packets.
Ben & Jerry's CEO to Quit in March
Walt Freese, Ben & Jerry's CEO and vice president of global brand development, has announced his resignation, parent company Unilever announced Tuesday. The company said Freese is leaving Ben & Jerry's to pursue other values-led business and investment opportunities. At the company's request, he will remain with the company until the end of March. Since joining Ben & Jerry's and Unilever more than eight years ago, Freese and his "management team have been instrumental in returning Ben & Jerry's to its heritage of leadership in progressive social and environmental values," the company said.
Bright Spots in Restaurants' 4Q Results
A few encouraging signs emerged this week as several restaurant companies reported fourth-quarter results that reflected improving sales trends. Buffalo Wild Wings Inc., Chipotle Mexican Grill Inc. and Panera Bread Co., which have performed better than most chains throughout the recession, continued their track records in earnings results unveiled Thursday. All three reported positive same-store sales in the fourth quarter, including a 7.4-percent jump at Panera's company stores. Meanwhile, Cheesecake Factory Inc. and BJ's Restaurants reported fourth-quarter same-stores sales that, while still negative, showed improvement from the steep declines seen over the past year at many casual-dining companies.
McD's U.S. Same-Store Sales Slip in Jan.
McDonald's Corp. reported positive global same-store sales in January as international results offset a slight sales decline in the United States. Global same-store sales for McDonald's rose 2.6 percent in January, reflecting a 0.7-percent decrease in the United States and gains of 4.3 percent in both its Europe and Asia/Pacific, Middle East and Africa divisions. Oak Brook-based McDonald's had closed out 2009 with a 1-percent gain in U.S. same-store sales for December after posting negative comps in October and November. The chain has kept innovating throughout the industry's up-and-down recovery by introducing its Breakfast Dollar Menu and the Mac Snack Wrap and rolling out free Wi-Fi in its restaurants.
Banking & Lending
Douglas Stebbins
Obama's Small Bank Proposal Faces Tough Battle
Small town banker Marc Green in rural Georgia is enthusiastic that the White House proposal to help community banks lend to small businesses could pump tens of thousands of dollars into his bank and enable him to turn that money around to local enterprises. "One of the challenges in the community bank market right now is raising capital," said Green, president of Mountain Valley Community Bank in Cleveland, Ga., a rural bank with $145 million in assets. "The big banks were able to raise additional capital to pay the government back. That same capital is not available to community banks. There are a lot of community banks that can come out of this if they can get a fresh injection of capital," said Green.
The Unequal Credit Crunch
When the banking system imploded in September 2008, commentators immediately feared that the result would be a credit crunch, leading to a major downturn in gross domestic product (GDP) and a rise in unemployment. The US government, however, deployed all its resources to ensure that housing did not suffer the credit crunch it deserved, while taking its own borrowing to unprecedented heights. The result has been a credit crunch, hitting especially hard the sector of the economy that is almost entirely the victim rather than the beneficiary of government programs - small business.
Hudson Capital Partners Launches HCP Asset Advisors
Hudson Capital Partners, LLC, a national firm specializing in retail and consumer products asset dispositions, announced that it is expanding its platform of services with the launch of HCP Asset Advisors, LLC, a new valuations and advisory business. As part of the announcement, the company has appointed Yvonne Kizner as president of the division. Leveraging Hudson Capital Partners' experience underwriting asset disposition transactions, HCP Asset Advisors offers appraisal and advisory products measuring asset values and risks. The division will be led by Kizner, who has over ten years experience valuing consumer product inventories and brings key relationships within the asset-based lending community.
Those are the latest headlines. Thank you for reading.
Sincerely,
The Team at Consensus
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