The Weekly Consensus: Week of March 29, 2010
Battle of the Brands
Douglas Stebbins
It is difficult to gauge precisely the importance of a retailer's brand. Historically, retailer brands were regional. Shoppers went into Robinsons-May or Burdines or Marshall Field's, and, apart from hearing about Macy's and Gimbels in Miracle on 34th Street, didn't think much more about it.
Currently, e-commerce is transforming shopping, making trademarks more important than ever. Rather than choosing among a handful of retailers within driving distance, consumers are increasingly relying on the web as a shopping alternative. With the advent of ever more nuanced search engines, it takes a fraction of a second to confront the consumer with hundreds or thousands (or hundreds of thousands) of choices. For example, a Google search for "socks" generates 214,434 results from entities such as Macy's, Kmart, Kohl's, Walmart, JC Penney, as well as absolutesocks.com and footsmart.com. How is a web shopper expected to sort through nearly limitless results?
Searching for a known and trusted retailer brand name is a quick way to start making sense of overwhelming choices. It is comparable to filling out picks in an NCAA basketball bracket. Unless one has spent more hours than most of us have available "researching" college games at "bars," it does not take long before the realization hits that you know very little about very many of the teams. Faced with the endless uncertainty you retreat back to your general feeling about each school and the strength of their "basketball brand." Given their season it should not have been difficult to reason that Butler, which went undefeated in its league this year and entered the tournament with a 20-game winning streak, could very easily have a great tournament run. However when it came to making my picks, I retreated back to my gut feeling about each school's basketball reputation, and I just could not envision Butler knocking off a basketball powerhouse like Syracuse. Sometimes, brand trumps common sense, and therein lies their value.
When Systemax bought the Circuit City brand name for $14 million, it assumed that overwhelmed e-shoppers would react similarly as the shopped the web. Systemax assumed that the over $400 million in annual marketing expense that the Circuit City had historically spent had created enough awareness and brand recognition that even with its well publicized collapse, the Circuit City brand still had value as an e-commerce platform. They have had enough success with circuitcity.com over the past six months that Systemax is actually beginning to re-launch Circuit City's brick and mortar operation. Also this week, the European Union's highest court has ruled that Google does not infringe company trademark rights when it allows companies to buy a competitor's brand name as a key word. To establish an identity on the web many e-tailers are trying to use search engine key words to leverage the value of competitor's brands. On a web search page there are no glitzy stores, well-trained employees or creative product displays to help differentiate you from your competitors. A well known brand name can set you apart, and the battle for brands will be heating up as retailers look to break through the clutter of e-commerce and capture the attention, and the wallets, of consumers.
Apparel/Swimwear/Intimates
Betsy White
Emanuel Ungaro Abandons Boutique; Eyes Buyer
Lindsay Lohan may have been the straw that broke Emanuel Ungaro's bank. The fashion house, which disastrously hired Lohan as an artistic adviser last fall, is looking for a buyer. The 45-year-old French label has scrambled this year to slash expenses—including the lease on its massive Madison Avenue boutique—as it searches for an investor willing to take on its debts and tattered image, sources said. Asim Abdullah, a Silicon Valley venture capitalist who bought the label in 2005 from fashion group Salvatore Ferragamo, was approached by an investment group about a sale. But the source said "all bets are off" after an October fashion show of Lohan's designs, which included pasties and microskirts that bared models' buttocks. Ungaro—whose namesake designer built his legend with bright floral prints on drapey dresses—is now a company with "no real estate and the brand has been mismanaged for years," said one industry insider, noting that Ungaro's licensees "mostly sell cheap stuff in Asia." While Ungaro's finances haven't been disclosed, in 2004 when the label was under Salvatore Ferragamo, it lost $26.5 million on revenues of about $38 million. Debts totaled about $25 million at the time, and the losses haven't stopped.
Hot Topic CEO Betsy McLaughlin Lives in Two Worlds
Hot Topic CEO Betsy McLaughlin practiced rapidly saying George Carlin's famous "Seven Dirty Words" for days to hone her closing act for one of the teen retailer's annual store manager meetings a few years ago. The crowd roared. At meetings since, she's played Guitar Hero at "expert" level, used an eerie electronic instrument called the Theremin and sung covers of the Ramones as she "opened" for heavy metal singer Rob Zombie. Hot Topic may still raise eyebrows with Gap-loving moms at the mall, but the 21-year-old retailer has gone more mainstream - even if its CEO has not. Built on selling to the alternative, often-Gothic culture, the tattoos, multiple piercings, spiked hair and all-black clothing seen on some shoppers seldom make people stop and stare anymore, a phenomenon for which Hot Topic can probably take some credit. The 830-store chain, including 150 Torrid plus-size fashion stores, appeals to a broader swath of teen society than ever - by necessity. That means it has to be both cutting-edge and cross-culture cool. Hot Topic now specializes more in music-themed T-shirts, skinny jeans and hoodies, along with the "nose jewelry," bullet bracelets and "tapers" (ear piercing stretchers) that fill its accessory offerings. It's been a hard label to shake, but you won't find "Gothic" garb on Hot Topic's racks anymore.
Athletic & Sporting Goods
Michael O'Hara
Lululemon atheltica Posts 29% Comp Growth in Q4
Lululemon athletica inc. resumed its meteoric sales growth in the fourth quarter ended Jan. 31, posting comp store gains of 29%, the Canadian purveyor of yoga inspired clothing said. The company said it expected comps to grow in the 20% range in the current quarter. The company reported net revenue for the fourth quarter ended Jan. 31 increased 54.5% to $160.6 million from $103.9 million in the fourth quarter of fiscal 2008. Net revenue from corporate-owned stores was $137.4 million for the quarter, an increase of 52.2% from $90.3 million in the fourth quarter of fiscal 2008, and comparable-store sales increased by 29% on a constant-dollar basis. Gross profit for the quarter increased by 67.6% to $86.6 million, and as a percentage of net revenue gross profit increased to 53.9% for the quarter from 49.7% in the fourth quarter of fiscal 2008.
Report: Tiger Films New Nike Commercial
Tiger Woods shot a new commercial for Nike Thursday, TMZ reported. The embattled golf star shot the commercial at the Isleworth Country Club golf course in Windermere, Fla., where he resides, according to the entertainment website. Sources said that Tiger was wearing his trademark black and red outfit during the shoot. Nike was one of the few sponsors to stick with Woods during his infidelity scandal. He was dropped by other big sponsors such as Accenture and AT&T.
Hat World Re-Brands to Lids
Hat World, Inc., a subsidiary of Genesco Inc., plans a re-branding campaign designed to leverage its LIDS retail brand across the three major divisions of its business. The move includes renaming its Sports Fan-Attic and Impact Sports businesses. Hat World operates more than 900 mall-based, airport, street level and factory outlet stores nationwide and in Canada and Puerto Rico, primarily under the LIDS retail brand, and sells headwear and related accessories through its websites. The 37 Sports Fan-Attic stores, featuring licensed sports headwear, apparel, accessories, and novelties acquired by Hat World in 2009, will be converted to LIDS Locker Room stores. Hat World currently operates seven LIDS Locker Room stores. In addition, the rebranding campaign includes the Impact Sports business, which will be known as LIDS Team Sports. Hat World acquired Impact Sports, a full service team dealer, custom screen printer, embroidery and sporting goods distributor, in 2008.
Catalog & Internet
Christopher Ellis
Chegg Inc. Hires First CFO
Textbook rental company Chegg Inc. hired Gregory Stanger as its first chief financial officer. Before the Santa Clara business hired him, Stanger was a venture partner at Technology Crossover Ventures. He was also CFO of Expedia Inc. and he's been on the board of directors at Drugstore.com, Netflix Inc. and NexTag. Stanger got his undergraduate degree from Williams College and his M.B.A. from the University of California, Berkeley. Before Stanger was hired, Omer Regev was handling the financial and accounting work at Chegg, though he wasn't formally CFO. The company has now grown large enough to need a full-time CFO, a spokeswoman said.
iBooks' Free Books Catalog from Project Gutenberg
A ton of the bestselling books in the Kindle Store are free, just like free and cheap apps are the most downloaded in the iTunes App Store. So it does not come as a surprise that Apple is baking in a catalog of free books from Project Gutenberg right into the iBooks store. As has been mentioned, and as Steve Jobs has written, the iPad will read any DRM-free book in the epub format, so even if Gutenberg's books weren't in the iBooks store, you'd able to stick them on there anyway, but this arrangement removes a layer of difficulty.
Consumer Electronics/Video/Audio
Douglas Stebbins
Best Buy Posts Strong Q4 Sales, Profits
Best Buy reported strong double-digit sales and profit gains in its global and U.S. businesses for its fiscal fourth quarter ended Feb. 27. Net earnings increased 38 percent to $810 million and net revenue rose 12 percent to $16.6 billion for the three-month period, reflecting a 7-percent gain in comparable store sales, the addition of new stores and the favorable impact of currency fluctuations. Within the U.S., net revenue rose 11 percent to $12.6 billion and comp store sales increased 7.4 percent due to an increase in the average purchase. The quarter's strongest product performers included notebook computers and mobile phones, which both saw low double-digit increases in comp store sales, and flat panel TVs, whose comp sales grew by the high single digits. Weakest performers included music and movie software, which declined by the low double digits. The chain estimates its market share grew about 2.6 percent for the three months ended Jan. 31, with the most pronounced increases coming in the critical flat panel, notebook, mobile phone and digital imaging categories.
Systemax Looking to Revive CompUSA, Circuit City by Opening Stores as the Economy Slowly Recovers
Systemax Inc. bought the rights to the names of both CompUSA, for $30 billion in 2008, and Circuit City, for $14 million in 2009, and is now looking to open stores using the names as the economy slowly recovers. The company is opening CompUSA stores in Houston, Chicago and other major markets after testing the concept in Florida and has already revived Circuit City as an Internet retailer last June. CEO Richard Leeds said, "Recession hurts, but it also creates opportunities that would not have existed otherwise." Leeds added, "We have a tremendous amount of excitement around our company now because of these acquisitions. We picked up two iconic retail brands for well under $50 million. That to me is the bargain of the century."
Perseus Signs an EBooks Deal for the iPad
Apple's iBookstore on the forthcoming iPad is set to get larger. The company has just signed a deal with the largest distributor of independent publishers to sell electronic versions of it books on the new device. Perseus Books Group, a large independent publisher that also distributes works from 330 other smaller presses including Grove Atlantic, Harvard Business School Press, Zagat and City Lights Books, signed a deal last week with Apple, following five of the six biggest publishers that have already signed agreements with Apple. Perseus's deal comes as Amazon.com, the largest online seller of printed books and the biggest e-book seller in the United States, has put pressure on publishers who have not yet signed deals with Apple to refrain from doing so. Amazon, which makes the Kindle e-reader, holds about 90 percent of the e-book market. With Apple's iPad coming on the scene, Amazon is fighting to keep as much of its market lead as possible. Publishers have provisionally welcomed Apple's entry into the market because Apple's deals allow publishers to set consumer prices, within limits. Publishers have had no control over consumer prices at Amazon, which has generally sold new releases and best sellers for $9.99, a price that publishers feared would erode profits in the long term.
Cosmetics & Pharmacy
Billy Busko
Health-Reform Bill Passes in the House, Pharmacy Groups Express Support for Pharmacy Provisions
The healthcare-reform bill advanced on Sunday by the U.S. House of Representatives contains several pro-pharmacy provisions, two pharmacy groups said Monday. The National Association of Chain Drug Stores and the National Community Pharmacists Association commended pro-pharmacy provisions that were included in the healthcare-reform bill that passed late Sunday. The provisions included improvements to medication therapy management; scaling back cuts to Medicaid pharmacy reimbursement rates under the average manufacturer price (ensuring federal upper limits are set using a multiplier of "no less than" 175% -- much higher than the levels set under the Deficit Reduction Act of 2005); and exemption of pharmacies from durable medical equipment accreditation requirements. Additionally, the NCPA commended the bill's requirement of limited disclosure from pharmacy benefit managers operating in the new exchanges to hold down costs. These provisions, which have been heavily lobbied by NACDS and NCPA, were part of the healthcare-reform measure passed by the Senate in December 2009. Earlier this month, NACDS advocated these changes to the healthcare system (specifically, AMP, MTM and DME accreditation) at its annual RxImpact Day on Capitol Hill, during which more than 250 NACDS members, pharmacy school students and faculty, state pharmacy association representatives and other pharmacy advocates conducted more than 220 meetings with their elected officials.
Tacking Against Rough Economic Winds, Walgreens Ups Second-Quarter Earnings
A still-moribund economy, weak consumer demand at the front end of the store and an easing of the flu epidemic all combined to put the brakes on same-store sales momentum at Walgreens in the second quarter. But tight cost controls and a more disciplined approach to purchasing and promotions at the front end helped propel a 4.6% gain in net earnings for the period ended Feb. 28, Walgreens reported. The nation's top drug chain earned $669 million on sales of $17 billion for the quarter. That marked a 3.1% rise in total sales over the same period a year ago, but sales in comparable stores—those open at least a year—actually declined 0.2% in the second quarter, Walgreens reported. Comparable-store sales at the front end fell by 1.6% from year-ago levels. Walgreens blamed the front-end same-store sales decline on "continued weak demand for discretionary goods and by lower demand for cough, cold and flu-related products, compared with the year-ago quarter." Also troubling for the company—which reported a 4.9% year-over-year gain in same-store sales in the previous quarter—was a flattening of sales trends at the pharmacy counter. Total prescription sales rose 3.2% in the second quarter and accounted for 63.3% of sales, but comp-store prescription sales were up just 0.6%, versus the same period a year ago.
Apparel Retailers Dive Deeper Into Beauty
Clothing collections aren't the only thing that are retro this spring, as a host of apparel retailers clear racks to make room for proprietary beauty brands. Their interest in beauty marks the revival of a trend from the late Nineties, when cosmetics began popping up in retailers such as Gap, Club Monaco and Ann Taylor, only to disappear several years later. The product-intensive category is notoriously difficult to manage, but as shoppers continue to defect from department stores, specialty apparel retailers see beauty as a way to grow sales within their stores by meeting more of their shoppers' needs—or interests—under one roof. Fast-fashion retailers—Topshop, H&M and Forever 21 included—are taking the biggest stance in beauty by introducing comprehensive cosmetics collections under their own nameplates. Others, such as Anthropologie, Old Navy and Urban Outfitters, are dabbling in the category by offering a smattering of proprietary items. For instance, in November, Urban Outfitters expanded its Kimchi Blue label by introducing a range of lip balms and a fragrance.
Department & Discount Stores
Mark Lenz
Macy's Buying Clout Drives Supplier Consolidation
Macy's push for more localized merchandise is being aided by industry consolidation. New York shoppers crowd a Macy's store earlier this month. Before apparel maker Phillips-Van Heusen Corp. agreed to buy preppy American brand Tommy Hilfiger Corp. the chief executives of both companies talked with their biggest U.S. customer: Macy's Inc. The deal underscores how Macy's is refashioning the U.S. apparel industry. By leveraging its size to obtain exclusive deals with vendors from Hilfiger to Martha Stewart Living Omnimedia, and consolidating its regional buying offices, Macy's has been able to distinguish its offerings from its competitors. The strategy favors vendors with the scale to supply the chain and the inventory-management technology to keep up with its whims. That has forced apparel vendors to consolidate. "Macy's may not be a monarch, but they are an oligarch," said Michael O'Hara, founder of Consensus Advisors, a boutique investment bank that focuses on retail. "If you are doing business with them, you better be big and nimble."
Recession Chic: Saks Invests in Discount Stores
Here's another sign of the times. Saks Inc. is closing some of its premium department stores, and opening more discount stores. An unspecified number of Fifth Avenue stores will close when their leases expire, and two Saks in Portland, Oregon are scheduled to shut their doors, said CEO Stephen Sadove. Meanwhile, the retailer will expand its Off 5th chain, which sells high-end goods at a discount. It could open as many as five of those locations this year, bringing its total to 60. The move makes sense. Though Saks' department stores are showing some signs of recovery, they're not performing as well as some peers.
Saks Debt Soars with High-End Spending Revival
Saks Inc. and Neiman Marcus Group Inc.'s high-yield, high-risk debt is soaring as demand for upscale goods in the U.S. returns following the worst economic recession since the 1930s. Saks's $230 million of 2 percent convertible bonds due in 2024 climbed as much as 13.5 cents this month to 97.3 cents on the dollar, the highest level since before the bankruptcy of Lehman Brothers Holdings Inc. in September 2008 led to a collapse in debt markets, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Neiman Marcus bonds have more than tripled in price in the past year.
Tesco Leads Retail Effort to Woo Hispanic Shoppers
Hispanic consumers are more optimistic about the economy than the general U.S. population - and they prove it by spending their money. As a consequence, retailers who can cater to Latinos may be at an advantage in the recovery. Britain's Tesco is showing the way, and Walmart, Aldi and Supervalu are also making concerted bids for the growing market. According to a study by BIGResearch, the proportion of Latino consumers expressing confidence about the economy has hovered about 10 percentage points higher than that of the general population over the past half-year. In January, for example, about 41 percent of Hispanic consumers said they were confident the economy would strengthen versus 30 percent of the general population.
Energy
Christopher Ellis
Sungevity Enters Solar Lease Space
As the solar-as-a-service space grows rapidly in the U.S., another company has announced the creation of a lease program for California-based homeowners. Sungevity, an online solar provider is teaming up with U.S. Bancorp to finance 10-year solar leases in the state. Sungevity started offering the solar leases earlier this month, selling 250-kW worth of systems. U.S. Bancorp has been very active in the solar-service sector, investing hundreds of millions of dollars over the last 18 months in solar lease companies SolarCity and SunRun. By creating a new tax equity fund to finance solar leases, Sungevity hopes to compete with these industry-leading companies.
Who Holds the Power?
Last year a new ruling came down from the Massachusetts State Board of Electrical Examiners that stated only Massachusetts licensed electricians and registered apprentices can install solar projects. Seasoned solar installation veterans, some of whom have been putting solar energy on homes and businesses for 20 years, have recently been forced off the roof. Now a battle is brewing in Boston over who should be allowed to perform solar installations. In the past solar integrators and electricians shared installation jobs, with electricians pulling the wire permits and completing all of the hard wiring on solar jobs. Wiring represents about 10-20% of a solar installation, according to estimates. Under the new ruling, electricians must be on the job from start to finish and must perform (or help to perform) all aspects of the install, including pouring concrete for ground-mounted systems or putting up racking on the roof.
Footwear
Michael O'Hara
Walking Co. to Exit Bankruptcy
U.S. shoe retailer Walking Co. Holdings Inc. announced it is ready to emerge from bankruptcy protection as soon as April. The company, which filed for bankruptcy protection in December facing high rents and a difficult retail environment, said it has submitted a reorganization plan that will keep 207 of its 214 current store locations open and pay off all of its debts and future obligations to trade creditors. The company had earlier sought to close about half of its stores, but was able to work out deals with its landlords, banks, and vendors to restructure its balance sheet and long-term financial obligations during the bankruptcy, it said. The court is expected to hold a hearing on the company's Chapter 11 bankruptcy reorganization plan on April 23.
Finish Line's Q4 Profits Rise On 10% Comp Gain
The Finish Line, Inc. reported sales increased 8.9% in its fourth quarter ended Feb 27, to $374.5 million from $344.1 million a year ago. Comps increased 10.0% compared to a 2.3% increase a year ago. For the period, the company reported income from continuing operations of $30.8 million, compared to $19.7 million a year ago. Consolidated merchandise inventories decreased 20.3% to $190.9 million as of February 27, 2010 compared to $239.4 million a year ago. Finish Line inventory declined 18.2% overall and 14.7% on a per-square-foot basis.
Gifts/Accessories/Luggage/Pets
Mark Boucher
Brandwise: Orders Up at Every Show
According to the Gift and Home Index for the 2010 winter markets, the average order size increased across the board compared to the 2009 markets. Atlanta saw a $17 average increase; LA, $25, Chicago, $12 and Dallas, $58. Software provider Brandwise and the Gift & Home Trade Association jointly released the encouraging results, which also showed that not only was each order bigger, but more orders were written at each market. The data, derived anonymously from hundreds of suppliers, also showed that the increase in total dollars ranged from a 3.5 percent growth in Atlanta to a 13 percent growth in L.A. compared to 2008 market data, and that Chicago saw its in-territory average order size increase by over 12 percent.
Warmer Weather Brings Fun Gadgets for Pets and Owners on the Go
Spring has arrived! And the rays of sunshine and higher temperatures mean that it's the perfect time to start
planning some fun activities for you and your pet. Here are a few gadgets that should help keep you both on the go throughout the spring and summer: Waterproof Pentax Optio W90 Digital Camera—the first camera designed for pets; Godoggo Ball Launcher—an automatic ball launcher that tosses tennis balls 15 to 30 feet for dogs to retrieve; Solvit Tagalong Pet Bicycle Basket - a bike basket is made specifically for your pet, like a little pet chariot that affixes right to the front a bike; Pet Umbrella Leash—part leash, part umbrella and stylish enough for even discerning pets; and, Doggles—the first and only eyewear for dogs.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
Kosher Coke is Once Again Here for Passover
Passover might not be starting until next week, but Coca Cola has already begun distributing 2-liter bottles of its kosher formula, which replaces high fructose corn syrup with sugar, to stores around the country. If you're unfamiliar with the kosher coke and want to find it on the shelves of your grocery store, look for 2-liter bottles with yellow caps stamped like the one in the picture here. You can also double check the ingredients label. If you see "sucrose" instead of HFCS, then you're probably on the right track. Kosher Coke is very popular among lovers of real-sugar sodas, who will occasionally stock up on bottles to save for the rest of the year. If you are a fan of non-HFCS Coke, you might be able to find Mexican Coca Cola, which is available all year long and comes in glass bottles, in case that matters to you.
Optimism Up in the Foodservice Packaging Industry
According to the Foodservice Packaging Institute Industry Surveys, optimism in the foodservice packaging industry has risen this year from last year. The Falls Church, Va.-based organization's surveys examine the state of the industry among top manufacturers and their suppliers in North America and Europe, as well as operators and distributors. One of the surveys found that 82 percent of foodservice packaging manufacturers in North America thought their sales volumes would be better this year than last, an increase of 40 percent from 2009. The surveys further found that 55 percent of North American manufacturers expect their profits to be better than last year, which comparable with last year's expectations. Although a worldwide economic recession is only gradually beginning to lift, survey respondents said that they think-quick service restaurants will experience solid growth in single-use packaging usage over the next five years, followed by supermarket/grocery stores.
Bi-Lo Reorganization Hearing Set
A confirmation hearing for the reorganization of retailer Bi-Lo is set for April 29 at Federal Bankruptcy Court in Columbia, S.C. The Greenville, S.C.-based company, which filed for Chapter 11 protection a year ago, said it intends to emerge from Chapter 11 behind a new equity infusion from its owners, a renegotiated supply agreement with C&S Wholesale Grocers, and with at least 29 fewer leased locations than when it filed.
Tops to Close 5 Stores, Names COO
Tops Friendly Markets announced it planned to close five more of the stores it acquired from Penn Traffic, including three P&C Foods locations and two Quality Markets, according to reports. In addition, the company said it has named given Kevin Darrington, currently chief financial officer, the additional role of chief operating officer. A report said Tops would close one P&C Foods location each in Ithaca and Cortland, N.Y., and another in White River, Vt. The Quality Markets slated for closure are in Lakewood, N.Y., and Erie, Pa. Closings are scheduled for April 18, the report said. Tops had acquired the stores through the bankruptcy of Penn Traffic.
Banga to Leave Unilever; Polk, Lewis Promoted
Unilever PLC announced that Vindi Banga, president of the company's Global Foods, Home and Personal Care division, has decided to leave Unilever at the end of May after 33 years with the company. Banga will be succeeded in his current role by Michael B. Polk, who is currently president, Americas. Polk in turn will be succeeded by Dave Lewis, currently executive vice president of Unilever U.K. and Ireland.
Home Improvement/Auto Repair
Billy Busko
Monro Muffler Brake, Inc. Announces Acquisition of Import Export Tire, Co. Stores, Provides Business Update
Monro Muffler Brake, Inc. a leading provider of automotive undercar repair and tire services, announced that it has signed a definitive agreement to acquire the retail store assets of Import Export Tire, Co., and provided a business update for the fourth quarter of fiscal 2010. The Company will purchase all five Import Export Tire stores, which focus solely on tires and automotive related services and generated annual net sales of approximately $10 million in 2009. The addition of the Import Export Tire stores will increase the Company's number of tire stores in the Pittsburgh market to 12. The acquisition is expected to close at the end of March and to be funded through the Company's existing line of credit. It is management's intention to retain the store employees of the acquired business. For the fourth quarter of fiscal 2010, the Company expects a comparable store sales increase of approximately 7.5%, which is above the high-end of the Company's previously anticipated range. This estimate is on top of an 11.2% comparable store sales increase in the prior year quarter. Additionally, the Company now expects diluted earnings per share for the fourth quarter to be in the range of $.23 to $.25, increased from its previously expected range of $.20 to $.23.
Lowe's Companies, Inc. Declares Cash Dividend
The Board of Directors for Lowe's Companies, Inc. has declared a quarterly cash dividend of nine cents per share, payable May 5, 2010, to shareholders of record as of April 21, 2010. With fiscal year 2009 sales of $47.2 billion, Lowe's Companies, Inc. is a FORTUNE 50 company that serves approximately 15 million customers a week at more than 1,700 home improvement stores in the United States, Canada and Mexico.
Housewares/Furniture
Billy Busko
Williams-Sonoma Sees Growth as Customers Return
Williams-Sonoma Inc beat quarterly profit estimates and forecast strong results for the current fiscal year on signs that consumers are ready to spend more on home decorating, and its shares rose 10 percent. The operator of the Pottery Barn, West Elm and Williams-Sonoma chains also raised its quarterly dividend by 8.3 percent to 13 cents a share and expects same-store sales to rise 8 percent to 11 percent in the current quarter. The upscale retailer forecast net revenue growth of 3 percent to 6 percent for this year, with earnings per share up 22 percent to 33 percent before special items.
Cost Plus, Inc. Reports Fourth Quarter Net Income and Fiscal 2009 Results
Cost Plus, Inc. announced financial results for its fourth quarter and fiscal year ended January 30, 2010 and provided financial guidance for the first quarter of fiscal 2010. Net sales for the fourth quarter ended January 30, 2010 were $320.0 million, a 4.6% decrease from the $335.4 million in net sales for the fourth quarter ended January 31, 2009. Same store sales for the fourth quarter decreased 2.5% compared to a 6.1% decrease last year. As previously announced, same store sales for the nine week holiday period increased 0.3%. Customer count for the fourth quarter increased 2.7%, offset by a 5.1% reduction in the average ticket per customer. Net sales for fiscal 2009 were $869.5 million, an 8.6% decrease from $950.9 million in fiscal 2008. For fiscal 2009, same store sales decreased 7.1% driven by a reduction in the average ticket. Customer count for fiscal 2009 was flat compared to last year.
IP Holding Companies & Multi-brand Companies
Douglas Stebbins
Filching a Good Name for Internet Use?
A search for "Louis Vuitton" on Google's British Web site turns up an advertisement for "Designer Handbags 70% off" - to the fury of LVMH, the French conglomerate that owns the brand. Not only are the handbags fake, but when unauthorized parties buy its trademarks as keywords to generate search ads, its own cost of using those brand names on Google soars. LVMH and a number of other companies want Google to stop the practice, and a European court ruling expected Tuesday is shaping up to be the biggest test of its legality. Analysts say millions of euros are at stake, in a case with significant implications for the use of the Internet as a marketing tool for brand owners and as a moneymaker for Google. Google says AdWords, its search advertising system, complies with trademark law because it blocks advertisers in Europe from using others' brand names in the actual texts of sponsored links. Google also removes links to counterfeiters' sites, like the one advertising discounted handbags, when brand owners or consumers complain.
Starlight Licenses Polaroid Brand For CE
IP Holdings, LLC, the owner of the Polaroid brand, said Thursday it has reached a five-year licensing agreement with Starlight Marketing Limited to manufacture and sell Polaroid branded consumer electronics products in the United States and Canada. Starlight, which is a wholly owned subsidiary of Starlight International Holdings Limited, said it will develop a wide range of Polaroid-branded consumer electronics including standalone DVD and Blu-ray players, portable DVD players, e-book readers, iPod docking stations and home theater systems. Polaroid products from Starlight are initially expected to contribute an estimated $500 million in sales in the next six years, IP Holdings said.
DreamWorks CEO Sees Direct Retail Tie-In Part of Future
These aren't your average Oreos. Instead of the usual white vanilla creme that's sandwiched between the chocolate wafers, this filling is red, symbolic of the fiery exhalations from the title character in "How to Train Your Dragon," due for release Friday. "I can't believe it," Katzenberg said of the cookies. "I love it." Different from past movie tie-ins that usually are carried at a wide swath of retailers, the Oreos won't be found anywhere else in the U.S. outside of Wal-Mart Stores Inc.'s 3,600 namesake locations. The same goes for dragon toys, towels, pajamas, tennis shoes and even granola bars. The dragon's share, or 95% of the movie's merchandise, will be exclusive to Wal-Mart, not just the crimson cookies. And Katzenberg considers this type of pact essential as DreamWorks faces an increasingly competitive future in animated features.
Jewelry/Mining
Mark Lenz
Signet Reports Flat Annual Sales, Share Increase
Worldwide same-store sales fell only slightly for Signet Jewelers Ltd. in fiscal 2010 as the chain exceeded expectations following a strong fourth quarter in the U.S. market, further boosting its steadily increasing competitive position among rivals. Signet, which operates Kay Jewelers and Jared the Galleria of Jewelry, reported that same-store sales for fiscal year 2010, ended Jan. 30, 2010, dipped 0.4 percent while total sales fell 1.6 percent to $3.29 billion. Same-store sales for the fourth quarter fiscal 2010 rose 5.2 percent, including a 7.4 percent hike in U.S. same-store sales, while total sales were up 7.1 percent to $1.20 billion.
Zale Looking to Plan B for Cash Infusion
Zale Corp.'s plea for cash has attracted "at least a dozen serious proposals," and the board is reviewing a handful of offers, with plans to select one by late April, according to sources close to the situation. The Irving, TX-based jewelry retailer's board has rejected a proposal from Apollo Management LP that included the sale of its 679 Piercing Pagoda mall-based jewelry kiosks and its 212 Canadian stores. That proposal, led by former Zale chief executive Robert DiNicola, had the support of founding family member Donald Zale. "Apollo has told me they've closed the book on this thing," Zale said in an interview Tuesday. "My understanding is that it's been rejected."
Tiffany Sees Margins, Store Count Rising
Tiffany & Co aims to increase its store count by as much as 8 percent per year for the "foreseeable future," and the upscale jeweler's operating margins could again hit all-time highs reached in 2007, Chief Executive Michael Kowalski said. Tiffany, which reported strong holiday results, can "ultimately double its stores in the U.S. and Europe," Kowalski said at an investor conference that was broadcast over the Internet. The company operated 220 stores worldwide as of Jan. 31, 2010 and said it planned to open another 17 locations this year. While Tiffany reported a fourth-quarter profit that was nearly five times greater than a year earlier, the company's margins took a slight hit because of higher diamond and precious metals costs.
Specialty Jewelers' Market Share Declines to Record Low
In the recessionary environment over the past two years, U.S. specialty jewelers have lost significant market share in the competitive battle with multi-line discounters and other merchants who are also vying for consumers' jewelry expenditures. The latest data shows that specialty jewelers held a 46.2 percent market share in 2009, based on their sales of $27.2 billion versus total jewelry sales of $58.8 billion. In other words, specialty jewelers sold less than half of all jewelry consumed by American consumers. This is nearly a one percent decline from specialty jewelers' 47.1 percent market share which they held in 2008. As recently as 2005, specialty jewelers sold just over half of all jewelry purchased by U.S. consumers. These figures come as no surprise. In almost every recession over the past four decades, specialty jewelers have lost market share, and never seem to be able to regain it.
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
A.C. Moore's Sorry Picture: No Gain, More Pain
Knitting, scrap-booking and floral supplies might not seem like a cut-throat business proposition, but don't tell that to A.C. Moore. The New Jersey-based retailer, which has 135 arts-and-crafts stores in the eastern U.S., is fighting to hold its own against two bigger rivals. And right now, it's losing ground. The company turned in a rough fourth quarter, with a $500,000 net loss; sales at stores open at least a year fell 8.8 percent. And that was an improvement over the entire fiscal year, during which A.C. Moore lost $25.9 million and recorded a 10.8 percent same-store sales plunge. Meanwhile, 756-unit competitor Jo-Ann Stores had a great fourth quarter, with net income rising 72 percent, to $37.1 million and a 4.4 percent same-store sales gain. Michaels Stores, the privately-held leader in the category with just over 1,000 stores, showed a marked improvement, bouncing back from a net loss and recording a same-store sales gain. So what's wrong at A.C. Moore? Management said during its fourth-quarter conference call that competition in the sale of seasonal goods accounted for most of its same-store sales declines. Holiday spending is key in the arts and crafts sector. If consumers are curbing their shopping at A.C. Moore during those periods, the company is in for more pain.
Michaels 4Q Profit Rises 32 Percent
Arts and crafts retailer Michaels Stores Inc. reported a 32 percent increase in fourth-quarter profit and swung to a full-year profit as shoppers opened their wallets more during the holiday season. Newly designed jewelry-making departments and more in-store baking and general craft classes are boosting sales. The Irving, Texas-based retailer is planning to add more exclusive merchandise after last year's American Girl products performed better than expected. In May, Michaels is adding another exclusive—merchandise from the Food Network's Ace of Cakes chef, Duff Goldman. Still lagging, though, are scrapbooking sales.
DIY Dresses Popular for Prom This Spring
When Karynn Johnson steps onto the dance floor at her senior prom, she won't have to worry that any of her classmates will be wearing the same dress. She knows her hot pink tulle and satin dress will be unique because she's designing and making it herself. Johnson, like some other fashion-conscious teens, makes clothes as a creative outlet. Television shows featuring fashion designers, and a growing number of celebrities launching their own clothing lines, have helped build interest in do-it-yourself wardrobes. "Fashion design is very hot right now," said Fern Bass, owner of Bass Arts Studios in Montclair, N.J. Jo-Ann Fabric and Craft Stores, of Hudson, Ohio, has held a prom dress sewing competition since 2008.
Restaurants/Food Service
Mark Boucher
A Look at the Fastest-Growing Restaurant Chains
The annual Technomic Top 500 report found that 2009 was a brutal year for the industry's largest concepts, with aggregate systemwide sales for the largest chains falling 0.8 percent. Upstarts, however, including Five Guys, Noodles & Company and Potbelly Sandwich Works, were able to post double-digit increases in sales. Data compiled by the Chicago-based consulting firm revealed that the 500 largest restaurant chains posted aggregate annual sales of $230 billion, down almost $2 billion from a year earlier. In 2008, aggregate systemwide sales for the group had increased 3.4 percent. Many concepts halted expansion plans and closed underperforming locations, resulting in an anemic 0.3-percent increase in unit growth, compared with 1.8 percent growth in 2008. The 10 fastest growing chains with 2009 sales over $200 million (sales/% sales increase): Five Guys Burgers and Fries ($453 million; 50%), Tim Hortons ($446 million; 23%), Buffalo Wild Wings Grill & Bar ($1,496 million; 22%), Jimmy John's Gourmet Sandwich Shop ($602 million; 21%), Wingstop ($307 million; 20%), Noodles & Company ($230 million; 15%), BJ's Restaurants & Brewhouse ($430 million; 14%), Chipotle Mexican Grill ($1,517 million; 14%), Firehouse Subs ($206 million; 10%), Potbelly Sandwich Works ($246 million; 10%).
Brinker Sells On the Border
Brinker International Inc. said last week it is selling its 160-unit On The Border Mexican Grill & Cantina casual-dining chain to Golden Gate Capital, a private-equity firm based in San Francisco. Brinker also upped its annual earnings guidance and agreed to a larger share repurchase authorization. Dallas-based Brinker, parent to the Chili's Grill & Bar chain, among others, did not disclosed terms of the deal with the Golden Gate Capital affiliate, OTB Acquisition LLC. The company did say the deal was expected to close by the end of fiscal 2010. Golden Gate purchased Romano's Macaroni Grill from Brinker in December 2008, although Brinker holds 19.9-percent ownership in the 189-unit Italian chain.
Peltz Out of the CKE Buyout Mix
Nelson Peltz, a well known activist investor and the non-executive chairman of Wendy's/Arby's Group, has reportedly decided not to pursue an acquisition of CKE Restaurants Inc. Peltz was reportedly considering a rival bid for CKE, the parent of the Carl's Jr. and Hardee's quick-serve brands, which last month agreed to an acquisition agreement with private-equity firm Thomas H. Lee Partners for $928 million. The deal included the assumption of $309 million in debt and a per-share cash price of $11.05 per CKE share. Under the terms of the deal, CKE had the right to shop around for better offers until April 6, and Peltz's name quickly rose to the top of the list among industry observers. The New York Post, using an unnamed source, reported that Peltz passed on the acquisition opportunity after conducting due diligence on CKE, which operates or franchises 1,224 Carl's Jr. restaurants and 1,905 Hardee's stores. Earlier this week, CKE reported its fourth quarter and full year results, which showed an increase in profit despite still-negative sales trends.
Darden Says No to Discounting
The era of discounting in casual dining showed more signs of ending as executives at Darden Restaurants Inc. said this week they would be using price-driven promotions even more judiciously. Darden reported that profit in the third quarter ended Feb. 28 rose 25 percent as sales improved at each of its restaurant chains, including Olive Garden, Red Lobster and Longhorn Steakhouse. Profit rose to $134.3 million, or 94 cents per share, from $107.5 million, or 78 cents per share, in the same year-ago quarter. Latest-quarter revenue rose 4 percent to $1.87 billion. As the gap between sales trends at Red Lobster and Olive Garden widens with other casual-dining competitors, who are still suffering declines, Darden said it was becoming even more selective about offering discount promotions, which in 2009 swept many casual-dining chains such as Applebee's "2 for $20" and Chili's "3 for $20."
Banking & Lending
Douglas Stebbins
Another Advantage for the Biggest Banks'
No wonder banks like being too big to fail. The certainty of a bailout, should their bets go wrong, isn't just reassuring to risk-taking employees. Customers also value infallibility. Measured by the interest rates that banks of different sizes pay on deposits, America's 10 biggest banks benefit from this subsidy to the tune of some $30 billion annually. Legislators tussling over the details of bank reform might consider the math of deposit funding. Customer deposits are regarded as the cheapest and most stable source of funds for banks. That's because all banks' deposits are insured up to $250,000 for each account by the Federal Deposit Insurance Corporation. The interest rates paid on those deposits vary widely. In the fourth quarter of 2009, institutions with more than $100 billion of assets paid an average of 0.77 percent annual interest on deposits, according to F.D.I.C. data. By comparison, institutions with less than $10 billion of assets paid an average of 1.73 percent. That difference - nearly 1 percentage point - is one measure of the benefit that big banks enjoy from implicit government backing. They can pay less for deposits to customers happy with this assurance.
U.S. Take if It Sells its Citi Stake to Settle Cost of Bailout: $8 Billion
Among the banks that rule Wall Street, Citigroup got a bailout that was bigger than the rest. Now the company is about to pay a king's ransom for its federal rescue. The Obama administration is making final preparations to sell its stake in the New York bank, according to industry and federal sources. At today's prices, the sale would net more than $8 billion, by far the largest profit returned from any firm that accepted bailout funds, and the transaction would be the second-largest stock sale in history. On paper, the government's 27 percent stake has grown in value to $33 billion. The size of the deal in the works has Wall Street buzzing. Only the stock offering by Japan's Nippon Telegraph and Telephone, which raised $36.8 billion in 1987, was larger, according to Thomson Reuters. Leading financial firms are vying to be chosen as the deal's underwriters to gain the prestige of managing a historic stock sale as well as the fees from investors who buy the shares.
Those are the latest headlines. Thank you for reading.
Sincerely,
The Team at Consensus
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