The Weekly Consensus: Week of April 19, 2010
Hello, Good Buy
Kristen Nill
As a newcomer to this column, I found the best way to pick a topic for discussion was twofold: 1) review all preceding Big Stories for themes and 2) follow the age-old advice to go with what you know. Speaking to my first strategy, loyal Weekly Consensus readers know that the Big Story usually contains analyses of what is happening within the retail and consumer space. It is often a reflection on recent numbers and past trends- the goal, of course, being to prove one's position using assumptions ("we can learn from the past") speculations ("will history repeat itself?") or reflecting on recent news ("have you heard about this?"). My Big Story debut combines this type of approach with my second strategy. Even if I am not a retailer and have not studied the science behind their numbers extensively, I am an expert on being a consumer. To some extent, we all are.
Despite a recent uptick, which appears to correlate directly to a decrease in personal savings, the trend in consumer spending has been down, down, down. Many fear that even as the economy pulls out of recession the numbers will never be what they once were. Certainly, there are a lot of conflicting numbers. For example, this week's Thomas Reuters Consumer Sentiment Index showed a six percent drop from the end of March, noting that while it appears that the overall economy is improving and will continue to improve, individuals are apt to answer negatively, thinking of declining salaries, reduced job prospects, unfamiliar government initiatives and simple economic fatigue. Contradicting this, other recently released data speaks to the biggest payroll gain in three years and a retail sales increase of 1.6 percent in March, the largest gain in four months. But can this be sustained? Will consumers continue to feel bad and still make more and/or larger purchases? Roughly seventy percent of the US economy depends on this important question.
My expert, consumer's-eye-view analysis leads me to answer: I don't think so. As my colleagues have outlined in this space, consumers are dealing with more uncertainty and fewer discretionary dollars than has been seen in several generations. The current economy has given birth to skepticism and hesitancy that should continue to mark the attitude of consumers for years to come. For me, even as the economy recovers and the wave of the need to "cut back" recedes, I don't think I will ever return to my old spending habits. My research indicates I am not alone in that change of behavior: just because we can spend no longer means we will. What's more important than ever, besides need, is value. Where I perceive it is where my money will go.
Importantly, value is not just about finding a competitive cost of a particular product, it is also found in the significance of the good or service purchased. I find value in experiences, in donating to worthy causes, and intangible products or services that better my way of life. While I still love to travel and take vacations, lately my spare time and money have gone into do-it-yourself home improvement projects. Where I have the choice I would rather go to a concert, renew my gym membership or buy content for my Kindle. These are things that have a higher relative worth to me than whatever it was I used to come home with after a day of shopping. Where these spending habits might have resulted from the previous need to cut back, I now have an entirely new definition of what is valuable to me and it's likely not going to change. The challenge to the sellers of retail and consumer products is to reintroduce themselves in ways that make sense in the context of the lives of their customers, a context based more in discipline and self-reliance than the traditional standbys, caprice and avarice.
Apparel/Swimwear/Intimates
Betsy White
K&G is Targeting Discount Luxe Market
K&G - the deep-discount clothing chain owned by Men's Wearhouse - has announced the launch of a strategy to sell pricey designer clothes in about a third of its outlets. Confirming an Oct. 27, 2009 report, the retailer said it will also expand its offerings in women's clothing and accessories from top designers like Gucci, Dolce & Gabbana and Alexander McQueen. K&G's move is a potential threat to rival off-price clothiers Syms and Filene's Basement, which merged last year after Men's Wearhouse was thwarted in a bid to acquire the latter out of bankruptcy. But the strategy is likewise risky, as a host of new competitors are looking to sell discounted luxury goods. While Web sites like Gilt Groupe are cropping up, traditional chains like Saks, Nordstrom and Neiman Marcus are aggressively expanding their own off-price chains.
Levi's Shoots for the High-End Hipster
In the wake of a recession that caused consumers to question the value of $198 jeans, Levi Strauss & Co. is reintroducing consumers to its $198 jeans. The 157-year-old company is trying to reinvent itself as not just a purveyor of basics but as an edgier brand suitable for the fashion cognoscenti. By opening lavish boutiques, like one in London, renaming its high-end labels, and hiring executives from competing designer brands like Ralph Lauren and 7 for All Mankind, the company is seeking to improve its fashion street cred, a move that it hopes will reignite sales, which have stabilized at around $4 billion annually after peaking at $7.1 billion 1996. The company doesn't disclose dollar sales of its expensive jeans, which are a small part of its business. They are important, however, because they cast a halo over the brand name. The latest results look positive: Levi's reported that it earned $56 million in its first fiscal quarter ended Feb. 28, up 17% from a year earlier. Revenue rose 9% to $1.04 billion, on growth of the brand's world-wide footprint and favorable exchange rates. On a constant-currency basis, the company said net revenue rose 4% in the quarter.
Abercrombie Pays CEO More to Fly Less
Abercrombie & Fitch Co. paid its chief executive $4 million to limit his personal use of the corporate jet, according to a securities filing. The high-priced teen retailer amended the employment agreement of Michael Jeffries, long-time chief executive, to limit his company-covered personal use of the corporate jet to $200,000 per year. The CEO would have to reimburse the company for any use over that amount. Previously, Mr. Jeffries was entitled to unlimited personal use. From 2006 to 2008, he booked an average of about $850,000 a year worth of personal travel on the corporate jet. In 2008 alone, he tallied roughly $1.1 million worth of personal travel on the jet. In exchange for agreeing to the limitations, Mr. Jeffries will receive a lump-sum payment of $4 million. The agreement requires Mr. Jeffries to pay back a portion of that money should he choose to leave the company before Feb. 1, 2014.
Athletic & Sporting Goods
Michael O'Hara
How The North Face Became The North Farce
Jimmy Winkelmann thought his classmates at Chaminade College Preparatory School in St. Louis were perversely obsessed with The North Face. In 2007, his sophomore year at the Catholic school, he set out to mock their mindless consumerism and the apparel they wore to invoke status. To do this, he launched his own clothing company, positioning it at the opposite end of The North Face. He called it The South Butt. Winkelmann peddled parody fleeces and T-shirts online and at Williams Pharmacy in suburban St. Louis, an otherwise unremarkable store that sits "between a to-go food shop and an ice cream parlor." His annual sales amounted to a few thousand dollars a year. But that was before The North Face sued him for trademark infringement in a St. Louis federal court late last year. Winkelmann said he suddenly enjoyed sales as high as $100,000 in a single month, a boom he attributed to the butt-joke laced publicity that The North Face's lawsuit generated. After boosting Winkelmann's sales to levels he had never dreamed possible from a gag, The North Face quietly came to a mostly undisclosed settlement with him last week.
West Marine Reports Q1 Comps up 8.4%
West Marine, Inc. said net revenues for its 13-week 2010 fiscal first quarter ended April 3, 2010 rose to $109.6 million, an increase of $8.6 million, or 8.5%, from net revenues of $101.0 million a year ago. The strong gains were due to a $6.9 million, or 8.4%, increase in comparable store sales and $5.0 million in sales from stores opened in 2009 and the first quarter of 2010. However, the impact of stores closed during 2009 and the first quarter of 2010 effectively reduced net revenues by $3.9 million. The majority of these closures occurred in connection with our on-going real estate optimization program.
Catalog & Internet
Christopher Ellis
Twitter Tweets the Launch of Its Paid Search Advertising System
Advertisers including Best Buy Co. Inc., Starbucks Corp. and the airline Virgin America are engaging in a new form of search marketing through Promoted Tweets, the new advertising system Twitter announced. "Twitter is where we're seeing a lot of customers communicate with us-many of them are communicating with our Blue Shirt employees through our Twelpforce service-so when Twitter asked us about participating in Promoted Tweets we saw it as a way to have more control over our brand perception and to elevate our Blue Shirt tweets through Twelpforce," says Tracy Benson, senior director of digital media for Best Buy. Best Buy launched Twelpforce last fall as a way to let consumers get quick answers from its in-store sales associates, or Blue Shirts, on questions related to product recommendations or details on new product releases. Twitter co-founder Biz Stone said in a Twitter blog posting on Tuesday that Promoted Tweet ads by Best Buy and other early advertisers will begin to appear one at a time on the top of some Twitter.com search results pages. Industry experts had mixed views of Twitter's ad program.
M-Commerce Sales to Hit $2.42 Billion this Year-and 1.53% of E-Commerce
U.S. mobile commerce sales hit $1.20 billion in 2009 and will grow to $2.42 billion this year and $23.83 billion in 2015, new research says. M-commerce sales accounted for 0.86% of all e-commerce sales in 2009 and will account for 1.53% this year and 8.58% in 2015, according to forecasts from Coda Research Consultancy, an e-commerce and m-commerce research and consulting firm. More consumers adopting smartphones, along with the corresponding increase in use of the mobile web that comes with use of those sophisticated mobile phones, will be the central drivers of increased mobile commerce sales, Coda Research says. 45 million mobile phone users owned smartphones in 2009, and that number will grow to 78 million this year and 194 million in 2015, the research says. Smartphone owners accounted for 16% of all mobile phone users in 2009; that number will increase to 28% this year and sharply to 65% in 2015.
Consumer Electronics/Video/Audio
Douglas Stebbins
Best Buy, Wal-Mart Win Most of Circuit City's Share
Best Buy and Wal-Mart together have taken away two-thirds of Circuit City's share of the $106 billion U.S. consumer technology market during the March through December 2009 period when Circuit City was no longer in business following its liquidation sales earlier that year, according to Port Washington, New York-based research firm NPD Group, declining to give specific market share figures. That share gain has given both Wal-Mart and Best Buy a further leap over their rivals from Amazon.com Inc. to Target Corp. "They are bigger than everybody else by a pretty substantial amount," said analyst Stephen Baker at NPD.
Blockbuster CEO Jim Keyes Still Sees Movie-Rental Opportunities
Once the dominant renter of videotapes and DVDs with a presence on seemingly every street corner, Blockbuster Inc. is in the throes of closing more than 1,000 stores while its stock trades at 30 cents a share. The reasons are evident in the red envelopes that appear in people's home mailboxes every day and in the ubiquitous red kiosks popping up in grocery stores across the country. But Netflix and Redbox aren't the only challenges faced by Blockbuster Chief Executive Jim Keyes since he joined the Dallas company in 2007. A crushing debt load that the retailer spent much of 2009 renegotiating distracted senior management and constrained the company's ability to invest in inventory and marketing.
Apple Delays iPad International Launch after Strong U.S. Demand
Apple said international customers waiting for the iPad will have to wait another month to the end of May due to strong U.S. demand for the iPad. The company said with 500,000 Wi-Fi-only iPad units sold in the first week, demand is "far higher" than the company predicted. Demand will outstrip supply over the next few weeks. Apple had originally planned on selling the iPad overseas in late April, when it was also planning on shipping 3G iPad units here in the U.S. Now, international customers can pre-order their iPads online on May 10 for delivery in late May. Analyst Gene Munster of Piper Jaffray said this morning in a note that Apple could sell up to 1.8 million iPads through the current quarter ending in June. He is holding his previous estimate at 1.3 million, however, due to supply concerns.
Cosmetics & Pharmacy
Billy Busko
Avon Shares Fall Sharply on Probe
Avon Products Inc.'s shares dropped almost eight percent, the biggest decline since May 4, after disclosures the company has suspended four executives in the wake of an internal investigation into alleged bribery of Chinese government officials. The scope of Avon's internal investigation has widened to include other countries as well. An Avon spokeswoman confirmed four employees have been placed on administrative leave, pending the outcome of the company's internal investigation. The employees are S.K. Kao, general manager, Avon China; Jimmy Beh, the former head of finance in China, who serves in a sales development role in Malaysia; C.Q. Sun, head of corporate affairs, Avon China, and in the U.S., Ian Rossetter, vice president of finance, whose previous roles included head of internal audit and vice president of finance, Asia-Pacific. The suspensions were first reported on Tuesday.
Elizabeth Arden Enters Into License Agreement with John Varvatos
Elizabeth Arden, Inc., a global prestige beauty products company, and John Varvatos Apparel Corp. announced that they have entered into an exclusive global licensing agreement for the development, marketing and distribution of John Varvatos men's and women's fragrances. The John Varvatos fragrance collection currently includes the original John Varvatos classic fragrance, which was launched in 2004, the John Varvatos Vintage fragrance and the recently launched John Varvatos Artisan fragrance. The fragrances are currently sold primarily in U.S. prestige department stores and to select markets internationally.
Department & Discount Stores
Mark Lenz
Retail Discounters Keep Markdowns Coming
Consumer spending is boosting the outlook for the nation's retailers, but some major discounters still are lowering prices to attract bargain-hungry shoppers. Retail giant Wal-Mart Stores Inc. said last week that it was cutting prices on more than 10,000 items, while Kmart has been permanently reducing prices on such merchandise as women's layering shirts and children's T-shirts. "Promotions and things that drive traffic are still critically important," said Mark Snyder, chief marketing officer at Kmart. "I don't think we're out of the woods." The retailers said that despite recent signs of strength in the industry, including a sharp sales increase in March among major chain stores, their customers continue to be strained by economic worries.
Will Nordstrom's Discount Stores Hurt Its Brand?
Luxury retailers are increasing their reliance on outlet stores to meet shoppers' desire for lower price points, but one upscale department store's off-price strategy runs the risk of hurting its brand equity in the long-term, Needham & Co. analyst Christine Chen said. As shoppers actively seek out bargains, the close proximity of Nordstrom's full-price stores to its discount Nordstrom Rack locations-the majority of which are placed outside of traditional outlet centers-could encourage consumers to shift their spending to the lower-priced options, Chen said. "With Rack opening in non-outlet center malls within close driving proximity, your customer definitely will cross-shop," she said. "The lines become a little more blurred."
Executive Suit(e)
Barneys New York is looking for a boss again. The swanky fashion chain—which weathered a luxury slump without a CEO for nearly two years—is renewing its on-again, off-again search for a retail guru to take charge of its turnaround. The move is a signal that Istithmar, the Dubai-based investment firm that shelled out nearly $950 million to purchase Barneys in 2007, plans to keep its grip on the retailer despite expressions of interest from high-profile investors including Los Angeles billionaire Ron Burkle and New York hedge-fund tycoon Richard Perry. After two years, Barneys is renewing its search for a new CEO—a clear signal that it won't cede control to billionaire Ron Burkle or hedge-fund king Richard Perry.
Energy
Christopher Ellis
Cobalt Produces Biobutanol from Beetle-killed Pine
Cobalt Technologies said that it has made a breakthrough in producing biobutanol from beetle-killed lodgepole pine feedstock. Cobalt claims to be the first company to produce a drop-in replacement for petroleum and petrochemicals from beetle-affected lodgepole pine. The fuel testing will be performed at Colorado State University's renowned Engines and Energy Conversion Laboratory under the auspices of the University's Sustainable Bioenergy Development Center. "With this breakthrough, we've been able to turn a problem into an opportunity," said Rick Wilson, Ph.D., chief executive officer of Cobalt Technologies. "Harvesting beetle-killed trees could produce low-carbon fuels and chemicals, establish a foundation for a sustainable biorefinery industry and create jobs, particularly in rural areas. If we use only half of the 2.3 million acres currently affected in Colorado alone, we could produce over two billion gallons of biobutanol - enough to blend into all the gasoline used in Colorado for six years." Cobalt Technologies converts non-food feedstock, such as forest waste and mill residues into n-butanol, a product that can be used as a drop-in biofuel to be blended with gasoline, diesel and ethanol, as well as converted into jet fuel and plastics, or sold as is for use in paints, cleaners, adhesives and flavorings.
Salt Water: The Tangy Taste of Energy Freedom
A visitor to Eastern Europe after the fall of communism would have been awestruck by the massive posters touting Winston cigarettes as "the taste of freedom" that often plastered locations where posters of Chairman Stalin and his ilk has once fluttered. It looked as if Christo had wrapped the Iron Curtain in a project sponsored by R.J. Reynolds. If there were a taste to energy freedom, it would be salt for sure. Our ancestral mother, the ocean, forms an almost unfathomable medium of mystery but for biofuels, there is every urgent reason to look carefully to salt-friendly projects that can utilize brackish water, or marshes, or the abundant three-dimensional world of the oceans. Virtually all biofuels projects, at massive scale, run into problems of land and freshwater. A million gallons of this, or even a billion gallons of that, are generally achievable without material changes in land or water usage. Sandia tells us that 90 billion gallons of fuel in the US is feasible from biomass on a sustainable basis. But a trillion gallons (and global fuel consumption is 1.2 trillion gallons) is another story. Long-term, we must think in massive scale - though hybrids will help much, and in developed countries we can expect lowered energy intensity, global development (especially in non-developed countries) in an ongoing international imperative that imperils resources.
Footwear
Michael O'Hara
Nike Wrings Sales Out of Non-Nike Brands Like Converse
In the world of Nike Inc., success is no longer driven by the swoosh alone. For two straight quarters, the Washington County-based athletic footwear and apparel giant posted double-digit earnings increases from its so-called "other businesses." Third-quarter sales for the division, which includes brands such as Converse, Hurley, Umbro, and Cole Haan, surged 13 percent to $656 million, representing roughly 14 percent of the company's overall revenue. Nike-branded products, in comparison, grew 5.7 percent to $4 billion.
Crocs Revival Afoot?
Crocs has high hopes for a comeback. Three inches high, in fact. A new line of strappy red high heels, casual leather loafers and peep-toe sling backs is part of an ambitious bid for a company that grew quickly but tripped when the fad for its quirky clogs faded and knockoffs stole sales. Love them or hate them—and chances are it's one or the other—Crocs wants people to think past that ugly-but-comfortable clog with the goofy holes and think more of, well, regular shoes. The company's new "Feel the love" advertising campaign pushes more than 20 new styles with clog-like mascots named "Croslite" to play up the shoes' comfort. Crocs' first national TV campaign features the new mascots helping people and their aching feet. The company won't say what it's spending but says it is a significant chunk of its marketing budget.
Gifts/Accessories/Luggage/Pets
Mark Boucher
Nook e-Reader Goes on Sale at Best Buy Sunday
The Barnes & Noble Nook e-reader and accessories will be available at Best Buy retail stores starting Sunday, April 18, the companies jointly announced yesterday. The deal expands distribution of the $260 e-reader to 1,070 Best Buy stores and the retailer's Web site. Barnes & Noble has been selling the Nook at its 723 retail bookstores and 600-plus college bookstores since last December. Analysts said Barnes & Noble needed to find new distribution paths for the e-reader to keep up with a changing market.
Spectrum on Track to Merge with Russell Hobbs
Spectrum Brands Inc., which provides pet products under its United Pet Group division, has a new chief executive officer and plans to move its headquarters from Atlanta, Ga., back to Madison, Wis. The company named David Lumley as chief executive officer, effective immediately. Lumley succeeds Kent Hussey, who is retiring from the position. Hussey will continue to serve as chairman of the board of directors through the close of Spectrum's merger deal with Russell Hobbs Inc., a manufacturer of small home appliances and the LitterMaid brand of pet products. The proposed merger deal with Russell Hobbs, announced in February, is expected to result in a new $3 billion consumer products company. The transaction is slated to close this summer. Hussey has signed a three-year consulting agreement to assist with the ongoing transition and implementation of the merger, according to the company.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
Whole Foods Seeks London Sites
Whole Foods Market, Austin, Texas, said it is actively seeking store sites in London after several years of inactivity in the United Kingdom. In an article in the Financial Times, Walter Robb, co-president, said the chain is looking for locations that would be less than half the size of the 75,000-square-foot flagship store Whole Foods opened in Kensington in 2007. In reporting first-quarter results earlier this year, Whole Foods said the Kensington store has seen double-digit comparable-store sales improvement, although it is still operating at a loss.
Ahold Relocates Some HQ Functions
Ahold USA said it would base its non-perishable and fresh merchandising functions in its Carlisle, Pa., offices as part of an ongoing reorganization first announced last November. In addition, the company said it has put in place a new leadership structure for the Ahold USA retail merchandising and marketing organization. A spokeswoman said the extent of such changes was not yet known. The reorganization is expected to be completed by the end of the year, the company added.
FreshDirect Seeks Capital for Expansion
Internet grocer FreshDirect is seeking up to $100 million in new capital so it can expand to new markets, Richard Braddock, its chairman and chief executive officer, said in a report published Friday. FreshDirect last week began taking orders and making deliveries in Connecticut for the first time. Braddock said he was looking to enter an entirely new market and was seeking expansion capital of $75 million to $100 million to do so.
Ahold CEO Lauds Company's 'Solid' Performance over Past Year
At Ahold's annual general meeting of shareholders yesterday in Amsterdam, CEO John Rishton discussed what he proudly termed the retail conglomerate's "solid results in absolute terms and excellent results in relative terms" over the past year, adding, "Overall, I am pleased with our performance." However, he noted, the company was still able to grow sales by 6 percent at constant exchange rates; boost income from continuing operations by 9.6 percent; deliver an underlying retail operating margin of 5.1 percent; improve operating cash flow and return on capital; achieved higher customer satisfaction ratings at its U.S. banners; increase market share at Giant-Carlisle, Giant-Landover and Stop & Shop; and drive volume increases in all of its operations, among other feats.
Home Improvement/Auto Repair
Billy Busko
Ford 'Encouraged' as U.S. April Sales Top 2009 Level
Ford Motor Co. is "encouraged" by April U.S. sales running ahead of the level from a year earlier, the automaker's Americas chief said. Ford's U.S. deliveries were 133,979 in April 2009, down 32 percent from April 2008 deliveries of 195,665 vehicles, according to the Automotive News data center. Industrywide deliveries rose 24 percent in March, and marked a fifth consecutive monthly advance. Sales during the first quarter improved 16 percent from the same quarter last year. Ford, the only major U.S. automaker to avoid bankruptcy last year, finished the first quarter with 17.4 percent of the domestic market, according to industry researcher Autodata Corp. The increase of 2.7 percentage points was Ford's largest quarterly gain since the last three months of 1977.
CarMax Set to Grow Again at a Slower Pace
CarMax Inc., which halted store openings during the poor economy, said sales are picking up and it is growing again, albeit more slowly. CEO Tom Folliard said the Richmond, Va., company's used-vehicle sales rose 13 percent in its fiscal fourth quarter, which ended Feb. 28, to 87,924 vehicles. Total used-vehicle sales for the recent fiscal year increased 3 percent to 357,129. The publicly traded car retailer specializes in used vehicles and is by far the largest dealership group among used-vehicle retailers. CarMax ranks No. 37 on the Automotive News list of the top 125 dealership groups in the United States, based on retail sales of new vehicles in 2009. But when those same 125 groups are ranked by used sales, CarMax is No. 1 with 345,465 used vehicles sold in 2009. AutoNation Inc., of Fort Lauderdale, Fla., the top seller of new vehicles, was a distant No. 2 in used sales with 135,302 vehicles. CarMax will open one store in Augusta, Ga., in May and one each in Dayton, Ohio, and Cincinnati, in June, Folliard said. The stores have been constructed, but their openings were suspended until market conditions improved. CarMax also will open three to five stores in the fiscal year that starts March 1, 2011, and five to 10 in the fiscal year after that.
Lowe's Companies, Inc. Prices $1.0 Billion Notes Offering
Lowe's Companies, Inc. announced that it has agreed to sell $500 million of 4.625% Notes due 2020 and $500 million of 5.80% Notes due 2040. The company estimates that the net proceeds from this offering will be approximately $990.7 million, after deducting estimated offering expenses and the underwriters' discounts. Lowe's plans to use $500 million of the net proceeds from the sale of the notes to repay its 8.25% Notes due June 1, 2010 at maturity, and to use the balance for general corporate purposes, including capital expenditures and working capital needs, and to fund repurchases of shares of its common stock. Closing is expected to occur on April 15, 2010. Banc of America Securities LLC, J.P. Morgan Securities Inc., and SunTrust Robinson Humphrey, Inc. are acting as joint book-running managers for the notes offering.
Housewares/Furniture
Billy Busko
Pier 1 Turnaround May Run Out of Dock
Pier 1 has won back its most loyal customers, but to keep its momentum going, it has to woo shoppers who no longer care for it very much. The retailer lost goodwill after years of mediocre presentation and wobbly strategy, including fickle pricing and product assortments. Since CEO Alex Smith took over in early 2007, Pier 1 has come scratching back. But there is still a long way to go. In 2009, Smith noted in a conference call, the company focused its marketing specifically on holders of its loyalty/credit card. The result was a nine percent gain in credit card purchases. Charges on the card represented 24 percent of sales up from 22 percent the year before. That helped Pier 1 generate a $87 million profit for fiscal 2010 versus a net loss of $129 million for the previous year. Comparable store sales inched up 1.5 percent. Those results, however welcome, still only represent a bounce off the floor of a very deep hole. Sales per square foot were $152, even after closing some poor performers. Just a few years ago, they were $235.
Evolution Lighting Purchases Catalina Lighting
Evolution Lighting, an affiliate of Boyne Capital Partners, has acquired the assets of Catalina Lighting through a section 363 asset sale under Chapter 11. The company is now Evolution Lighting, doing business as Catalina. Boyne is a private equity firm that acquires companies generating between $2 million and $10 million of cash flow, and focuses on the consumer product, healthcare, niche manufacturing and financial services industries, according to a statement from the company. Catalina Lighting filed for bankruptcy protection in February.
Tuesday Morning Corporation Announces Third Quarter Fiscal 2010 Sales
Tuesday Morning Corporation today reported net sales for the third quarter ended March 31, 2010 were $172.0 million compared to $167.0 million for the quarter ended March 31, 2009, an increase of 3.0%. Comparable store sales for the quarter ended March 31, 2010 increased by 1.6% comprised of a 2.9% increase in traffic and a 1.3% decrease in ticket. For the nine-month period ended March 31, 2010, net sales were $627.5 million compared to $613.1 million for the same time last year. Comparable store sales for the nine-month period ended March 31, 2010 increased 1.0%.
IP Holding Companies & Multi-brand Companies
Douglas Stebbins
Cherokee's Q4 Revenues Climb 17%
Cherokee Inc., the licensor of the Cherokee, Sideout, Carole Little brands, reported revenues for the fourth quarter of Fiscal 2010 totaled $7.6 million, up from $6.1 million a year ago, a 16.9% gain. Selling, general and administrative expenses totaled $2.4 million in the fourth quarter of Fiscal 2010, as compared to $2.3 million in the same period last year. Net earnings were $3.1 million, as compared to $2.4 million a year ago. For the year ended January 30, 2010, net revenues totaled $32.6 million, as compared to $36.2 million in the same period last year. Selling, general and administrative expenses totaled $12.2 million in Fiscal 2010 as compared to $13.3 million in the same period last year. Net earnings totaled $12.6 million, as compared to fiscal 2009 net earnings of $14.3 million.
In Apparel, the Brand Makes a Comeback
With words like "value" and "50% off dominating" so much of apparel marketing in the last two years, there's refreshing news from Brand Keys 10th Annual Fashion Index: Brands, topped by companies like Ralph Lauren, Armani and Banana Republic, matter more to consumers than they have since the 1960s. The importance of a brand of an item of clothing jumped 14% in the survey, with 28% now saying that brands are "more" or "much more" important to them. The brands that zoomed to the top of the list—unaided—are somewhat surprising. For women, Ralph Lauren comes in at No. 1, followed by a favorite sports team, Armani, Chanel, Versace, Donna Karan, Burberry, Banana Republic, Dolce & Gabbana, Levi's and J. Crew. For men, "favorite sports team" takes top honors, followed by Nike, Ralph Lauren, Polo, Brooks Brothers, Armani, Levi's, Tommy Hilfiger, J. Crew and Banana Republic. (Versace, Burberry and Banana Republic are all new to the list; others have placed in the top ten before.)
Jewelry/Mining
Mark Lenz
Signet Appoints Ronald Ristau as Chief Financial Officer
Signet Jewelers Ltd. announced that it has appointed Ronald Ristau as Chief Financial Officer as of June 26, 2010. He will join Signet on April 15, 2010 as Chief Financial Officer Designate and will be based in Akron, Ohio. He succeeds Walker Boyd who retires, as previously announced, on June 25, 2010. Mr. Ristau spent ten years with New York & Company, Inc. and its predecessors, from 1998, most recently as President, CFO and Director. He was responsible for Accounting, Financial Planning, Treasury, Information Technology, Real Estate, Technical Services, General Counsel, Merchandise Planning and Allocation, and Sourcing and Distribution. He was a leader in the private equity and management buy-out of the company from The Limited, Inc. in 2002 and played a leading role in its subsequent IPO on the NYSE in 2004. He has also held posts at Revlon, Inc., Playtex International, United Technologies Corporation and Peat, Marwick Mitchell & Co. Mr. Ristau is a Certified Public Accountant, and earned his MBA from the Fuqua School of Business, Duke University and BBA from Roanoke College.
Zale Among Wave of Jewelers Opposed to Alaska Mine
The nation's second-largest jewelry retailer joined the opposition to a gold and copper mine being developed in southwest Alaska near the world's largest remaining wild sockeye salmon streams. Zale Corp. announced that it not only is boycotting precious metals from the Pebble Mine, but supports permanently protecting the Bristol Bay watershed from large-scale metals mining. The mine is situated near the headwaters of Bristol Bay on state land designated for mining. "We believe gold should be mined and refined in a manner that protects both the environment and its inhabitants," Gil Hollander, Zale's executive vice president, said in a statement.
By Choice or Not, Jewelers Fall Off Brand-Wagon
In a month known for hearts and cupid's arrows, some of the industry's biggest brands weren't showing recession-battered retailers any love. In February, both diamond company Hearts on Fire and the Richemont Group-owned Cartier acknowledged they were severing ties with under-performing retailers, and both cited essentially the same reason: They wanted to maximize their brand's potential by partnering only with those retailers who really know how to push their product. Stories detailing these divorces blew up online at NationalJeweler.com, remaining on the site's top-viewed list for weeks. But was the frenzy whipped up by the jewelers directly impacted or by the love-hate relationship jewelers often harbor when it comes to their favorite brands? Longtime retailers and industry observers suggest the latter.
Signet Needs Acquisition for New Jewelry Chain-CEO
Signet Jewelers Ltd. would have to buy another retailer to build a second U.S. jewelry store chain, the company's chief executive said. Signet, which operates Kay Jewelers in the United States and the H Samuel and Ernest Jones stores in Britain, has tried to build a second nationwide U.S. chain through individual store openings, but it has proven too expensive, said Chief Executive Terry Burman at an industry conference.
U.S. Polished Trade Grows in Feb, But Negative Trend Evident
The U.S. imported 1.26 billion worth of polished diamonds in February, a 62.4 percent year-over-year increase. In terms of volume, imports rose 44.7 percent to 932,877 carats. However, unlike previous years when February imports are larger than January's imports, this year there was an uncharacteristic decline. The average value of imports increased 12.2 percent to $1,347.58 per carat compared to $1,200.57 p/c in February 2009. Israel supplied the U.S. with about half (43.8%) of the total goods by value, $550.22 million worth of diamonds weighing 186,039 carats at an average value of $2,957.55 p/c.
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
Staples Among Lowest Sales Growth in the Specialty Stores Industry
Below are the top five companies in the Specialty Stores industry in terms of poor sales growth.
Staples had sales growth of 5.2% during the last fiscal year. The company has reported $24.3 billion in sales over the past 12 months and is expected to report $26.3 billion in sales in the next fiscal year. Cabela's had sales growth of 3.1% during the last fiscal year. The company has reported $2.6 billion in sales over the past 12 months and is expected to report $2.7 billion in sales in the next fiscal year. Big 5 Sporting Goods had sales growth of 3.6% during the last fiscal year. The company has reported $895.5 million in sales over the past 12 months and is expected to report $956.2 million in sales in the next fiscal year. Jo-Ann Stores had sales growth of 4.7% during the last fiscal year. The company has reported $2 billion in sales over the past 12 months and is expected to report $2.2 billion in sales in the next fiscal year. Hibbett Sports had sales growth of 5.2% during the last fiscal year. The company has reported $593.5 million in sales over the past 12 months and is expected to report $663.9 million in sales in the next fiscal year.
Private Equity Co. Becomes Mud Pie Minority Partner
Gift manufacturer Mud Pie LLC entered into a partnership with Lineage Capital. Lineage acquired a non-controlling equity position in Mud Pie. The existing management team, led by founder and CEO Marcia Miller and CFO Mark Miller, will continue to lead the company and will maintain a controlling ownership interest in the business. Other terms were not disclosed. Lineage is a Boston-based private equity firm which invests in owner-managed and family-controlled consumer-related businesses. Its principals have invested over $600 million of equity capital.
Restaurants/Food Service
Mark Boucher
Roark Buys Wingstop
Cross Wingstop off your list of candidates for the next publicly traded restaurant. The Texas-based chain was sold to Roark Capital Group for an undisclosed sum. The deal was announced this morning at Wingstop's annual franchisee conference in Las Vegas. GE Capital and Wells Fargo financed the deal, and discussions on a sale began four months ago, CEO Jim Flynn told the Monitor. The deal gives Roark its seventh restaurant chain and one of the fastest growing restaurant chains in the country. Wingstop has 650 restaurants in the U.S. and last year generated $300 million in system sales. "We picked a good group of people," said Flynn, who will remain as CEO, along with the rest of Wingstop's senior management. "They have good restaurant experience. Everything we've seen and heard from them has been good."
SoupMan Concept Repositions as Deli
The Original SoupMan, a 24-unit gourmet soup chain made famous years ago in a Seinfeld episode, is repositioning itself to become more of a fast-casual deli-style sandwich concept. The chain has already begun offering a New York-style deli menu at its units in Staten Island, N.Y., and at the Mohegan Sun Casino in Uncasville, Conn. The sandwiches, which are served on a choice of rye, hoagie, sourdough, white and wheat breads, or white and wheat wraps, are priced between $5.95 and $9.85. A menu of 50 soups also is featured, with prices ranging from $4.99 to $7.99 per cup and $7.49 to $11.99 per bowl. SoupMan president and chief financial operator Robert Bertrand said last week that the chain expects to complete the system-wide conversion, which also includes a redesign of the units to feature a New York-themed decor, within about a year.
Landry's Buys Oceanaire Unit for $6.6M
The 12-unit Oceanaire Seafood Room chain will be sold out of bankruptcy, pending court approval, to Landry's Restaurants Inc. in a deal valued at about $23.6 million, according to Oceanaire's chief executive. Terry Ryan, president and chief executive of Oceanaire Inc., said on Friday that the company expected the confirmation hearing in the U.S. Bankruptcy Court for the Northern District of Texas to be held on April 26. The deal included $6.6 million for the restaurant locations and the assumption of $17 million in debt.
Bruegger's to Revamp Its Restaurants
Bruegger's Bagels will begin rolling out a new design this month with a warmer feel aimed at encouraging customers to linger. Jim Greco, president and chief executive of parent company Bruegger's Enterprises, said the redesign debuts April 30 and is expected to take a year to complete. The cost of the project is pegged at around $10 million for the chain's 295-unit system. Columbus, Ohio-based design firm WD Partners created the new design, which incorporates a brick and stone hearth in the bagel display area, a community table, cozier seating and a European flair. The color palette of the redesigned restaurants is inspired by the chain's fresh baked bagels and bread, with warm tones of pumpkin and espresso brown and accents of the cherry red seen in Bruegger's logo.
Yum's 1Q Profit Rises 10%
Yum! Brands Inc. reported a 10-percent increase in first-quarter net income, led by robust profit and sales in its China division, as well as a return to positive same-store sales at its domestic Pizza Hut restaurants, which helped lift struggling U.S. sales. Yum narrowed its same-store sales decline for its U.S. system to a 1-percent decrease in the first quarter ended March 20, reflecting a 4-percent slide at KFC and a 2-percent fall at Taco Bell, offset by a 5-percent jump at Pizza Hut. The nation's largest pizza chain had struggled to improve its sales for some time, but gained traction with its $10 any-size pizza deal promoted aggressively in the first quarter, including during the Super Bowl pregame show. Net income for the multi-concept operator and franchisor totaled $241 million for the quarter ended March 20, compared with earnings of $218 million in the same quarter a year earlier. Latest-quarter total revenue rose 5.8 percent to $2.35 billion, reflecting double-digit gains in system sales for its China division and Yum Restaurants International group, which overcame an 11-percent decrease in U.S. system sales. Yum's U.S. revenues were hurt by the company's ongoing refranchising program.
Banking & Lending
Douglas Stebbins
Goldman Sachs Sued by SEC for Fraud Tied to CDOs
Goldman Sachs Group Inc. was sued by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The firm's shares tumbled as much as 16 percent and financial stocks slumped. Goldman Sachs created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them, the Securities and Exchange Commission said in a statement today. Billionaire John Paulson's firm earned $1 billion on the trade and wasn't accused of wrongdoing. The SEC also sued Fabrice Tourre, a Goldman Sachs vice president who helped create the CDOs.
The Home-Equity Hurt Ahead for Banks
Investors have pushed up the price of financial stocks in the belief that the biggest loan losses are in the past and banks will begin to restore dividend payments and buy back shares. Their party may be premature. Banks are sitting on a problem that won't show up in the current round of earnings reports but has the power to stall the bank rally and economic recovery as well: bad home-equity loans. An analysis by a New York research firm, shows that the four biggest banks by assets-Bank of America, JPMorgan Chase, Citigroup and Wells Fargo-may need to set aside an extra $33.2 billion to cover additional losses on home-equity loans that could begin hitting their balance sheets later this year. That amount is almost equal to what analysts expect the four banks to earn in 2010.
Those are the latest headlines. Thank you for reading.
Sincerely,
The Team at Consensus
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