The Weekly Consensus: Week of March 12, 2012 Vol. 4, No. 11
The Next Great Consumer Brands Showcase
March 14, 2012 - The NASDAQ MarketSite, Times Square
ABOUT THE CONFERENCE:
Consensus and the NASDAQ OMX Group are proud to announce the 2012 edition of The Next Great Consumer Brands Showcase.
The day-long conference on March 14th, 2012 at the NASDAQ MarketSite in Times Square, will feature presentations by some of the fastest-growing, most exciting privately held consumer brand companies. Presenting companies will describe their businesses and present their products to an audience of private equity investors, venture capital firms and commercial lenders who invest in, lend to or otherwise finance the consumer product space. In addition to the presenting companies, several up-and-coming specialty food and beverage brands will share their products with attendees. The program will also include two keynote addresses, a luncheon and a networking cocktail session.
Keynote addresses will be delivered by Kathleen Elsesser , co-head of the Global Consumer Retail Group in the Investment Banking Division (IBD) at Goldman Sachs, and Lucy Danziger, Editor-in-Chief of SELF magazine for the past ten years.
9:30 AM Registration
10:10 AM Welcoming Remarks: Michael O'Hara, CEO of Consensus Advisors and Bob
McCooey, SVP of New Listings and the Capital Markets Group of
Nasdaq OMX Group
10:30 - 10:45 AM Charming Charlie
10:45 - 11:00 AM Xenith
11:00 - 11:15 AM Tremont Electric
11:15 - 11:45 AM Snack Break
11:45 - 12:00 PM Rebecca Minkoff
12:00 - 12:15 PM Jewelry.com
12:15 - 12:30 PM BECCA
12:30 - 1:00 PM Automoblox
12:45 - 1:00 PM 4moms
1:00 - 1:30 PM Lunch
1:30 - 1:45 PM Keynote Speaker: Kathy Elsesser
"How the financing markets value growing consumer brands"
1:45 - 2:00 PM Neff Headwear
2:00 - 2:15 PM BUMP Network, Inc.
2:15 - 2:30 PM 2b.Rych
2:30 - 2:45 PM Journelle
2:45 - 3:00 PM Nathan
3:00 - 3:15 PM Trigger Point Performance
3:15 - 3:30 PM Keynote Speaker: Lucy Danziger
"How brands can maximize today's changing media model"
3:30-5:30 PM Exhibition and Cocktail Reception
Food and beverage brands distributing their products at the conference include: Way Better Snacks, Brooklyn Brewery, Cabana Cachaca, SNAP Infusion Candy, Praim Group, Spindrift Soda, Pretzel Crisps, KIND Bars and Rick's Picks.
Click HERE for more information.
Today Spanx is to slimming undergarments what Kleenex is to tissues: a brand that stands for the category. It nets an estimated 20% on revenue just south of $250 million. In recent months four Wall Street investment banks separately valued Spanx at an average $1 billion, a sum Forbes corroborated with the help of industry analysts. Blakely owns 100% of the private company, has zero debt, has never taken outside investment and hasn’t spent a nickel on advertising. At 41 she’s the youngest woman to join this year’s World’s Billionaires list without help from a husband or an inheritance. She is part of a tiny, elite club of American women worth ten figures on their own, including Oprah Winfrey and Meg Whitman. Spanx started as a one-woman show. In her first year Blakely shilled her new invention from a folding table in the foyer of Neiman Marcus, with a giant before-and-after photo of her derriere in cream slacks and bikini briefs underneath in one shot (an embarrassingly obvious Maginot Line) and $30 Spanx Power Panties (et voilà! no more line) in the other. Over the last couple of years Spanx has depended less on Blakely’s face—and other body parts—to shift its shapers and stay ahead of a handful of copycats. The company is now run by a team of 125, only 16 of them men. It sells 200 products in 11,500 department stores, boutiques and online shops in 40 countries. Distributors worldwide clamor to get on the stockist list. “With international, we’re just warming up,” says Goldman.
From electronic information kiosks to full-service menus, the iPad is increasingly ingratiating itself with in-store retail experiences. The latest of these comes from designer Joseph Abboud, who released an iPad app this week that enables shoppers to order made-to-measure suits from Joseph Abboud stores at Nordstrom. Beginning this week, sales associates at major U.S. Nordstrom locations will be on hand with pre-loaded iPads to walk clientele through the 30-minute process. Associates will take and record measurements, and collaborate with customers on cut, fabric and design details. Orders will be sent to a tailoring facility in New Bedford, Mass., and shipped to customers within two weeks. (By comparison, online retailer Indochino takes three weeks to deliver custom-made suits, and custom shirtmaker Blank Label takes three to four weeks to deliver its merchandise.)
Retailer of branded fashion basic apparel, American Apparel Inc reported a 13 percent increase in total net sales for February 2012 at $42.1 million compared to the same month last year. The company stated that comparable store sales for the month increased 10 percent and wholesale net sales increased by 24 percent over the same period last year.
PEI Licensing, Inc. a wholly owned subsidiary of Perry Ellis International announced that it has entered into new license agreements with Sugar Plum NY Inc., S. Rothschild and Company and Nolan Glove Co., to design, manufacture, and distribute girl’s dresses, outerwear and accessories respectively. Product under all three agreements will launch for the Fall 2012 season and will be available within current Laundry by Shelli Segal channels of distribution as well as children’s specialty boutiques throughout the United States.
Adidas Group revenues grew 11 percent on a currency-neutral basis in the fourth quarter of 2011, with currency-neutral sales in the combined Adidas/Reebok Wholesale and Retail segments increasing 9 percent and 18 percent, respectively. Sales for Other Businesses, which includes TaylorMade-Adidas Golf, Rockport and Reebok Hockey/CCM, grew 12 percent on a currency-neutral basis. The company reported that currency-neutral revenues in Western Europe increased 13 percent in the fourth quarter, supported by high-teens growth at Adidas. In European Emerging Markets, currency-neutral sales were up 20 percent as a result of double-digit revenue growth at both Adidas and Reebok. Group sales in North America grew 19 percent on a currency-neutral basis, driven by increases at all brands, with particular strength at Adidas as well as TaylorMade-Adidas Golf. In Greater China, Group sales were up 13 percent on a currency-neutral basis, driven by strong double-digit sales gains at Adidas Sport Performance. Currency-neutral revenues in Other Asian Markets grew 2 percent, due to increases at all brands except Reebok. In Latin America, Adidas Group sales declined 1 percent on a currency-neutral basis as growth at Adidas was more than offset by sales declines at Reebok. In contrast to the previous quarter, currency translation effects had no material impact on sales in euro terms. Group revenues grew 11 percent to €3.26 billion ($4.40 bn) in the fourth quarter of 2011 from €2.93 billion ($3.99 bn) in 2010.
Hibbett Sports, Inc. reported earnings rose 27.0 percent in the fourth quarter ended Jan. 28, to $15.8 million, or 59 cents a share, from $12.5 million, or 44 cents, a year ago. Revenues increased 10.1 percent to $190.7 million compared with $173.2 million. Comparable store sales increased 7.2 percent. Net sales for the 52-week fiscal year ended January 28, 2012, increased 10.2 percent to $732.6 million compared with $665.0 million for the 52-week period ended January 29, 2011. Comparable store sales increased 6.8 percent. Net income for Fiscal 2012, increased 27.3 percent to $59.1 million compared with $46.4 million for Fiscal 2011. Earnings per diluted share increased 34.4 percent to $2.15 compared with $1.60 for the 52-week period ended January 29, 2011.
Scandinavian-based Casall, a premium European fitness apparel line for more than 30 years and one of the world's first companies to design fashionable fitness apparel specifically for women, is launching in the U.S., with an online presence. Inspired by Scandinavian simplicity, fresh design, sustainability and beauty, almost 90 percent of Casall's products are manufactured in Europe, where great care is taken in creating quality fabrics and functional designs. Casall's seasonal collections include yoga, pilates, activewear, running, tennis, and underwear. Unlike traditional activewear brands, Casall has customized fits – slim, regular and loose, to support all types of training. In addition to women's apparel, a select but expanding collection of men's apparel will also be sold online.
Higher front-end sales for the month of February helped counter-balance lost revenue from Express Scripts prescriptions, Walgreeens reported. Overall, the drug store chain reported a 1.5% sales increase to $5.9 billion. This year’s total February sales benefited from one extra day because of leap year, the company noted. Prescriptions filled at comparable stores decreased 9.5% in February (comp sales do not include that extra day). In addition to Express Scripts, lower incidence of flu negatively impacted comparable store prescriptions filled by 1.2 percentage points. February pharmacy sales decreased 1.4%, while comparable-store pharmacy sales decreased 8.6%. Comparable-store pharmacy sales were negatively impacted by 2.2 percentage points due to generic drug introductions in the last 12 months, by 2.4 percentage points due to lower incidence of cough, cold and flu and by 10.6 percentage points due to no longer being part of the Express Scripts network.
Zumba Fitness, the global multimedia fitness leader and creator of the acclaimed Zumba dance-fitness party workout, announced today that The Raine Group and Insight Venture Partners made a minority investment in the company. The strategic partnership will further grow and optimize the company's digital and media footprint, generating even more mass awareness for the global brand. The partnership will bring new benefits to all members of the Zumba community including class participants, instructors, fitness facilities and the health and fitness industry.
Rite Aid same-store sales increased by 3.1% in February, including a 1.9% increase in front-end comps and a 3.7% increase in pharmacy comps, the company said. Total sales for the 4,667-store chain were $2.55 billion, a 2.3% increase over February 2011's $2.5 billion. For the 14-week period that ended Saturday, comps were up 3%, including a 1.6% increase in front-end comps and a 3.8% increase in pharmacy comps. For the 53-week period ending March 3rd, comps increased by 2%, including a 1.1% increase in front-end comps and a 2.4% increase in pharmacy comps. The latest sales figures come on the heels of an announcement made last month that Rite Aid had issued $481 million in 9.25% senior notes to refinance its debt, the first time it had been able to tap the unsecured debt market in five years.
It's been a long time since Manhattan's Pier 57 has seen this much action. Once home to ocean liners, the decaying structure is filled with headset-wearing workers toting ladders and stage lights. The mottled walls have been hidden by bright white fabric. Neon squares with a lowercase "jcp" bring to mind a postmodern art show. It's night but it feels like day has broken as puffy white clouds move on a blue sky projected against the walls. Or perhaps it's just the relentless optimism of Ron Johnson, J.C. Penney's new CEO. To hear him tell it, it's morning again at the company. "Love the clouds!" exults Johnson, who is inspecting the preparations. In just 36 hours he will host 1,200 reporters, analysts, vendors, and retail celebrities such as Calvin Klein and Martha Stewart as he unveils his radical reinvention of the century-old department store company, which has $17.3 billion in annual revenue. "Wow! This is going to be great," Johnson says, sounding simultaneously giddy and calm. He's like a chipper, empathetic version of his old boss Steve Jobs, as he checks detail after detail. He ponders the speed of the clouds, re-pins the clothes on a mannequin, inquires about the food, vetoes a Q&A for the vendors ("We're here to present a vision"), and even admires the porta-potties. This is his coming-out party, and he wants it to be perfect.
Stein Mart Inc. executives say they are going back to what made them popular in the first place - lower everyday pricing - and they’re doing it by lowering prices on select merchandise while reducing coupon usage. In a conference call this morning relating the retailer’s fourth quarter and fiscal year results interim President and CEO Jay Stein said Stein Mart had become too reliant on couponing in the last year and a half. As a result, some of the prices got too high. “It got so out of hand that we had to reign it back in,” Stein said of the couponing.
Stage Stores Inc.'s fourth-quarter net income rose 2 percent as revenue improved and online sales strengthened. President and CEO Andy Hall said in a statement that the company missed its earnings expectations because of the heavy promotional climate that occurred during the period, which included the holiday season. Hall said the department store operator stepped up its promotional efforts to meet customers' needs, but that the promotional efforts and its inability to pass on most of its rising costs in the fall hurt its merchandise margins and lowered its gross profit rate. Houston-based Stage Stores reported that its net income rose to $32.7 million, or $1.05 per share, for the period ended Jan. 28 from $32 million, or 86 cents per share, a year earlier. There were fewer shares outstanding in the current quarter. Revenue increased 6 percent to $479.1 million from $453.7 million, beating Wall Street's $468.2 million forecast. For the year, Stage Stores reported net income of $31 million, or 92 cents per share, down from $37.6 million, or 99 cents per share, in the prior year. Annual revenue climbed 3 percent to $1.51 billion from $1.47 billion, with online sales totaling $8.6 million.
Coca-Cola Co and PepsiCo Inc are making changes to the production of an ingredient in their namesake colas to avoid the need to label the packages with a cancer warning. The change will not be noticeable to consumers, according to statements from both companies. Coke and Pepsi said on Friday that they had asked their suppliers of the caramel coloring in their colas to alter their manufacturing process to meet the requirements of a California ballot initiative aiming to limit people's exposure to toxic chemicals. The change is meant to reduce the amount of a chemical called 4-methylimidazole, or 4-MI, which in January was added to the list of chemicals covered by California's Safe Drinking Water and Toxic Enforcement Act of 1986, also known as Proposition 65. High levels of that chemical have been linked to cancer in animals.
Wal-Mart Stores Inc. has launched a big push into the highly competitive Southern California grocery business, which could spell further trouble for the region's major supermarket chains. The nation's largest retailer, which announced plans last week for a grocery store in downtown Los Angeles, has two more of its smaller-format grocery-focused stores called Neighborhood Markets in the works in Orange County, one more in Ventura County and another in San Diego. So far, the Bentonville, Ark., company has announced plans for 13 Neighborhood Markets in California, said Steven Restivo, Wal-Mart's senior director of community affairs. All will have pharmacies, he said. More Neighborhood Markets in California could be announced in the future, Restivo added.
Loblaw Cos. said it expects net income for fiscal 2012 to be lower than 2011 as it undertakes several investments and focuses on improving its store base. The company said it planned to invest about $1.1 billion (U.S.) in capital expenditures in 2012, including 40% on IT and supply chain and 60% on store renovations and new stores. Loblaw said it expects that “operations will not cover the incremental costs related to the investments in IT and supply chain and its customer proposition,” putting downward pressure on earnings. The company also reported a 5.5% gain in net income for the 12-week fourth quarter, which ended Dec. 31, to $174 million. Revenues increased 3.6%, to $7.4 billion. For the full year, net income rose 13.9%, to $769 million, on a 1.3% gain in revenues, to $31.3 billion.
Delhaize Group has announced that Pierre Bouchut will join the Company on March 19, 2012 as its new Chief Financial Officer responsible for Finance, Strategy and M&A. He will be a member of the Group's Executive Committee. Pierre Bouchut comes to Delhaize Group with an impressive track record in general management and finance positions with prominent international companies such as Carrefour, Schneider and Casino. Pierre Bouchut, 56, was most recently Executive Director Growth Markets of Carrefour, overlooking operations in Latin America (Brazil, Columbia and Argentina) and in Turkey, India, Indonesia and Malaysia. Pierre Bouchut was also overlooking Carrefour Personal Financial Services operations worldwide. He joined Carrefour in 2009 as Chief Financial Officer, in charge of Finance, IT, Legal affairs and Personal Financial Services operations.
Sprouts Farmers Market and Sunflower Farmers Market have agreed to merge, a move that will bring together 139 stores and 10,000 employees under the Sprouts banner by the end of the year. Expected to be finalized during the second quarter of 2012, the merger of the Phoenix-based independent natural food store chains expands Sprouts’ geographic footprint to Nevada, Utah, New Mexico and Oklahoma with Sunflower’s 35 stores and further extends its presence in California, Arizona, Colorado and Texas. Overall, the combined company – which plans to open up to 13 new stores this year – will be a prominent player in the Western U.S. grocery market, with projected 2012 annual revenues approaching $2 billion. Majority-owned by investment funds affiliated with Apollo Global Management LLC, Sprouts is operated by the Boney family and an executive team with many years of collective experience in the grocery business. Sunflower, co-founded in 2002 by Libby Cook and Randy Clapp, is privately owned by the co-founders, management and KMCP Advisors, a provider of private expansion capital. The combined company will continue to be majority-owned and controlled by Apollo.
The board of directors for AutoZone Inc. gave the go-ahead to repurchase an additional $750 million of common stock, the auto parts retailer announced in a statement. The announcement is the second $750 million repurchase authorized by the company since September 2011. The company’s board of directors has authorized $11.9 billion in stock repurchases since it began its buyback program in 1998. As of Feb. 11, AutoZone operated more than 4,800 retail locations throughout the U.S., Mexico and Puerto Rico. It has 22 locations in the Albuquerque area.
Does home center retailing need a new business model? One DIY pioneer thinks so. Manfred Maus, who in 1970 founded OBI, which grew to become Germany’s largest DIY home center, spoke to Home Channel News at the 2012 International Hardware Fair in Cologne, Germany. “My children and my grandchildren will buy completely differently than we buy,” he said. “I think the home center concept is old. We need a new business model.” Maus, now retired from OBI but keeping a close watch of the industry through various advisory positions, said technology advances will almost certainly have an impact on the development and transformation of a physical home center. The person shopping for a lawn mower in a store has probably already shopped online and probably knows more about lawn mowers than any salesperson in the store, he said. “That means the future is multichannel -- you need both,” Maus said. “The customer comes with mobile Internet in your store and takes a little picture and asks his wife, ‘Do we buy it?’ And the price can be checked. This means the world is changing, and we have to sit down to find out what has to be done to have a home center for the future.” Another discussion point: store size. “The question is: is or 160,000 sq. ft. still the right size for a home center?” Maus said. “Or can we use a smaller store and work with the Internet?” Asked for his thoughts on products and opportunities for retailers, Maus mentioned security systems and security-related products as a can’t miss category if home improvement retailers do it right. There’s even an opportunity to partner in creative ways with law-enforcement authorities, he said.
Diamond prices could fall about 10% to 13% in 2012 as the supply and demand fundamentals are roughly in balance and diamond recycling starts to finally impact the market, said a diamond-industry consultant. Chaim Even-Zohar, managing director for Tacy Ltd, an Israeli-based diamond consultancy, said based on research his firm does with Indian firm Pharos Beam Consulting in Mumbai, about $15.2 billion in rough diamond production was done in 2011, which was about $22 billion in polished value. Retail sales globally were about $70.8 billion. He spoke Monday at PDAC2012, the Prospectors & Developers Association of Canada’s annual convention in Toronto. He said the $15.2 billion equates to production of about 125 million to about 130 million carats in 2011, with an average price per carat of USD$121.60 for global rough prices. That figure includes smuggling and underreporting. Based on the 2011 price per carat, he expects 2012′s prices to be 10% to 13% below that level.
Among celebrities and fashion editors alike, arguably the most ubiquitous jewelry trend at the moment is Shamballa Jewels’ multifaceted diamond-ball beads, strung together on macramé. From Jay Z, Mary-Kate Olsen and Gwyneth Paltrow to Karl Lagerfeld and Carine Roitfeld, who has not been photographed wearing the bracelets, which can cost anywhere from £1,575 to £475,000? The story of Shamballa Jewels goes something like this. In 1995, Mads Kornerup, a photographer who collected beads, opened a store called Shamballa in New York’s Soho, where he peddled yoga-inspired wares. In 2001, he was introduced to musician Jay Z. Kornerup made him a bracelet, as well as one he kept himself. Then 9/11 happened, and sales of pretty much everything dried up in New York. Shutting the store, Kornerup returned to Copenhagen, where he tried business in a yoga studio and a Japanese tea barn. In 2005, he decided to try his hand at jewelry again. Since then it has been a whirlwind of celebrity customers and posh stockists, such as Frost of London and Barney’s of New York. Kornerup had finally had the right product at the right moment.
The idea of an exchange-traded fund to track diamonds is here. IndexIQ just asked regulators’ permission for what would be the market’s first such ETF, the IQ Physical Diamond Trust, which would hold Gemological Institute of America-approved stones. Talk about a niche: There’s no futures market for the ETF to track, and DeBeers’ Diamond Trading Company is estimated to sort and value half the world’s supply, according to the filing. Read the whole thing here. How volatile would a diamond fund be? Probably very. That could end up being especially true if a widely available trading product, like this one, were ever to cram its way into this clubby market. But a diamond ETF also might have outperformed stocks over the last decade.
An instrumental piece of rock and roll history is going public. Fender Musical Instruments Corp., the maker of legendary guitars strummed by the likes of Buddy Holly, Jimi Hendrix and Eric Clapton, filed papers for a $200 million initial public offering. Fender has been through several owners before its push to the public markets. In 1965, Leo Fender sold the company to broadcaster CBS Inc., which sold it to an investor group 20 years later. Private equity firm Weston Presidio now owns 43 percent of Fender. Its distributor in Japan, Yamano Music, holds the No. 2 stake with 14 percent of the company. Fender said it plans to use about $100 million of the IPO's proceeds to repay debt, with money left over for working capital.
To make a small dent in Apple, the Department of Justice will need to take a big swing. The danger is it will inadvertently whack Barnes & Noble. The Justice Department is considering a suit on antitrust grounds against Apple and five big book publishers for allegedly colluding to raise prices on electronic books. The gripe is that Apple and the publishers made books more expensive for consumers by altering the way retail prices are set. With physical books, retailers purchase them from publishers and then control the price. But as Apple launched its first iPad, the tech giant made an agreement with publishers that changed the formula. It allowed publishers to set retail prices, with Apple taking a 30% cut. The publishers then replicated the deal with Amazon.com and B&N, agreeing to keep retail prices the same for all three platforms.
Recently, Office Depot Inc. came up with a private offering of $250 million senior secured notes due 2019. The proceeds of the same will be used for the redemption of its outstanding 6.25% Senior Notes due 2013. According to the company, the offering will be made to the qualified institutional buyers and will have the guarantee of Office Depot’s existing and future domestic subsidiaries. Last week, Moody's Investors Service, a division of Moody’s Corporation, raised its outlook for two of Office Depot’s key credit ratings on the back of its recent cost-cutting efforts.
Apple Inc. introduced a new version of the iPad, beefing up the two-year-old mobile computer with a sharper screen and faster chip to widen its lead over Amazon.com Inc., Microsoft Corp. and Google Inc. in the tablet market. The device will be called iPad, carry a price tag of $499 to $829 and include a chip that enables better graphics, Apple said today at an event in San Francisco. It will also boast a 9.7-inch screen that has more pixels than traditional high- definition televisions and run on so-called long-term evolution, or LTE, wireless networks, which deliver data faster.
Batteries Plus, a 500-store franchised chain specializing in batteries and light bulbs, is looking to expand its footprint in the Northeast. Already a presence in 46 states, the company is holding road shows this month through October for potential franchisees in the Boston, Hartford, Conn., Providence, R.I., Long Island, N.Y., Newark, N.J., Philadelphia and Timonium, Md., markets to backfill the region. John Twist, the company's franchise and business development VP, said the nation's obsession with portable devices and an eventual mandated shift to energy-efficient light bulbs has created a perfect environment for a local, single-source battery and light bulb dealer.
In addition to giving up camera hardware, licensing off its digital patents, and dumping Kodachrome film, Eastman Kodak said it will now abandoned the remainder of its slide film business, ceding the category to rival Fujifilm. Kodak, which ditched the legendary Kodachrome slide film in 2009, said it will stop the production of its other color reversal films once inventories of Ektachrome E100G, E100VS and Elite Chrome Extra Color are depleted. That is expected to take six to nine months, the company said. Kodak will, however, continue to produce E-6 processing chemicals. Kodak cited declining demand and complex manufacturing issues as reasons for its decision. Kodak has been jettisoning portions of its iconic photographic businesses in recent months as it attempts to restructure under federal bankruptcy protection. It has already announced the discontinuation of its consumer camera hardware business, and recently sold its Kodak Gallery online photo-products business to rival Shutterfly.
The American consumer appears to be levering-up again. But the big debate among economists is whether borrowing signals economic growth or economic strain. "For the first time since the recession, we're starting to see bank credit increase. That historically has been the catalyst for strong economic growth," said Paul Kasriel, chief economist at Northern Trust. Others are not so certain, and expect credit growth to taper off given two persistent drags on the economy: housing and unemployment.
More than 1 in 4 borrowers are likely delinquent in repaying their student loan debts -- much higher than the 14.6% delinquency rate suggested by previous calculations, according to a new federal report. The 14.6% delinquency rate comes from comparing the total number of people with student loans (about 37 million) to the number of people with at least one past-due student loan account (about 5.4 million), the Federal Reserve Bank of New York said in its report.