The Weekly Consensus: Week of April 26, 2010
Swan Song
Steven Bowles
In addition to being the home of fashion-forward chanteuse Bjork, Iceland is home to scenic fjords, mountains, geysers and, as the world has recently been reminded, active volcanoes. The eruption of the Eyjafjallajokull volcano was the cause of chaos on a tremendous scale -- somewhere in the neighborhood of 100,000 flights were canceled due to the ash clouds the eruption produced.
When the air travel system is interrupted, it provides a reminder of just how much the modern world relies on air travel to narrow the gap between distant points on the globe. It is also a reminder of how few effective contingency plans there seem to be in the "modern" world.
It is easy to identify the eruption in Iceland as what Nassim Nicholas Taleb calls a "Black Swan Event:" a large, disruptive, unlikely event that was outside any normal set of expectations. Since Taleb feels that Black Swans are nearly impossible to predict, he places great weight on building robust systems that are resistant to abrupt, radical change, as well as being prepared to take advantage of the negative consequences of such an event, when possible. But, even if it is true that trying to come up with answers to specific questions like, "What if a volcano on Iceland erupts?," would consume an amount of time out of proportion to the risks involved, there are issues that are worth considering, and general sets of circumstances that should be addressed. For example, the question for business travelers to have asked before last week was, "What if air travel becomes impossible?"
More generally, the central question is: in what areas are Black Swan Events apt to arise? And, what are you doing to identify them, to forecast when they may occur, and to limit your vulnerability to them? Are your contingency plans more workable than those the airlines had on display last week?
Meanwhile, back in Iceland... It is clear now that there is no reason to be surprised by volcanic activity now, and the eruption of mid-April has tapered off. But the last time Eyjafjallajokull became active, in 1821, eruptions and ash clouds lasted for close to two years. In fact, the three times in recorded history that Eyjafjallajokull has erupted, in A.D. 920, 1612, and 1821, neighboring volcano Katla has also subsequently erupted, and more forcefully than Eyjafjallajokull. So, there may be more news coming in from Iceland, and it may not be good. Here's hoping Bjork has tried to think it through.
Apparel/Swimwear/Intimates
Betsy White
Vera Wang and Mass Market Bridal Chain David's: A Match Made in Retail Heaven
There seems to be no end to the number of ways Vera Wang can capitalize on her bridal clout. As designer of dream dresses to the rich and famous, Wang has swathed the likes of Jennifer Lopez, Jessica Simpson, Uma Thurman and Mariah Carey in yards of tulle and lace since 1990. Since then Wang’s put her name on everything from fine china to mattresses (yes, really, Wang’s got a “Signature Bridal Bed“) all in the name of “creating a lifestyle that goes beyond core bridal.” But the designer’s gowns — ranging from $2000 to $13000 — are priced out of reach for most brides, especially during the recession. Enter David’s Bridal, the 300+ store Prince Charming. The two just launched an exclusive partnership for a new, more affordable, bridal collection. How sweet it is. And smart. By signing on the dotted line, privately-held David’s Bridal marries into Wang’s designer cachet. It’s unmatched, even by David’s owner Leonard Green & Partners’ other venerable bridal brand Priscilla of Boston. Wang’s not only headed up a successful house for twenty years but she’s got rich fashion blood having served for 16 years as an editor at Vogue, followed by a stint at Ralph Lauren, that other designer of an aspirational yet attainable lifestyle.
Fast Retailing Signs Deal for 2nd New York Uniqlo Store
Fast Retailing Co. said it has signed a rental contract for a second Uniqlo store in New York, to be the world's largest, underscoring the company's ambition to expand its global presence. The company said it signed a lease for space of 8,300 square meters on Fifth Avenue in Midtown Manhattan. This will include sales, offices and storage, and the sales area will likely be larger than the 3,300 square meters of the first New York Uniqlo store in SoHo that opened in November 2006. Fast Retailing, Japan's biggest apparel retailer, has been growing quickly, attracting frugal consumers to its Uniqlo stores worldwide with its affordable clothes. But domestic same-store March sales at its Uniqlo casual clothing chain dropped 16% from a year earlier. It was the second fall in three months and the biggest monthly decline in seven years. The company has aggressively pursued overseas expansion, including opening flagship stores in other major cities, such as Paris, London and Moscow.
Rock & Republic Redo
Rock & Republic may be stuck between a rock and a hard head. The edgy denim brand cited "pressures on its balance sheet" as it filed for Chapter 11 earlier this month. But industry sources say the company's biggest liability may be its founder and designer Michael Ball, who refuses to give up his CEO title despite a string of ill-fated business decisions. Under one possible scenario, sources said Koral might take over the business in a partnership with Windsong Brands, whose investments include Ellen Tracy, Sharper Image and Joe's Jeans. Apparel conglomerate VF Corp., which acquired Seven For All Mankind in 2007, is also "sniffing around," according to one person familiar with the matter. But "they're only interested in the intellectual property," the person said. Other potential bidders have included Kellwood and Jones Apparel. Today, a judge is expected to decide whether to move the bankruptcy case to Los Angeles from New York. A move to the West Coast would give Koral the upper hand over Ball, given LA's more creditor-friendly bankruptcy courts, sources said.
BCBG Dresses Itself Up, Seeking Partners
BCBG Max Azria has put itself on the block. The Los Angeles-based fashion empire -- whose slinky dresses have hugged stars like Beyoncé and Victoria Beckham -- is "looking for a partner" as it digs out from hundreds of millions of dollars in debt, according to sources close to the company. UBS has been retained to assist on the process, which is being led by BCBG creditor Guggenheim Corporate Funding, sources said. With no obvious strategic partner for the brand, private-equity shops are the most likely bidders, sources said.
Athletic & Sporting Goods
Michael O'Hara
Retail's Rising Star
If you like sports, it's hard not to like Dick's. Stores like the one near Dulles Airport, a brightly lit, two-level, 80,000-square-foot emporium, are staffed by jocks and packed with about 27,000 different items, everything from beach toys to casual cotton shirts to guns and ammo. Sports enthusiasts helped Dick's tally $4.4 billion in sales in 2009, up 6.2% from a year earlier -- enough to break into the Fortune 500 for the first time, at No. 466. While same-store sales dipped slightly, the company kept a lid on costs and produced earnings of $135 million, compared with a loss of $40 million the year before, when the economy tanked. That was the only year Dick's has lost money since going public in 2002. Although Americans are getting older, fatter, and more sedentary, sporting goods remains a big business. According to the National Sporting Goods Association, consumers spent $52.3 billion last year on equipment, footwear, and apparel. But selling sneakers and golf clubs is harder than it looks, which is why previous efforts to build a big-box category killer in sports have generally failed. Herman's went bankrupt. A big French retailer known as Decathlon flopped in the U.S. And Sports Authority, the second-biggest chain after Dick's, went private after its stock performed poorly.
Sears to Set Up 12 In-Store Edwin Watts Golf Shops
Sears Holdings Corp. plans to open 12 Edwin Watts golf shops within its stores to add to its sporting-goods business. The first Edwin Watts Golf Shop will open at Sears’s store in Murray, Utah, on May 31, the two companies said in an e- mailed statement today. That will be followed by openings in New York, Virginia, Maryland, Texas, Illinois, Florida and Kentucky. Sales at stores open at least a year have declined each year since Chairman Edward Lampert combined the Sears and Kmart chains in 2005. Sears, the Hoffman Estates, Illinois-based seller of Craftsman power tools and NordicTrack treadmills, suffered during the economic slump as consumers spent less on their homes.
Cybex Posts Q1 Loss as Sales Dip 10%
Cybex International, Inc., the manufacturer of exercise equipment, reported sales for the first quarter of 2010 decreased by 10% to $26.1 million compared to $28.9 million for the corresponding 2009 period. The company reported a net loss for the first quarter of 2010 of $0.8 million, compared to a net loss for the first quarter of 2009 of $1.4 million.
Catalog & Internet
Christopher Ellis
Retailers Plan Expansions Mostly Online in 2010
The nation's retailers are planning modest store expansions this year, but the main focus will be on dramatically updating and personalizing their Web presence to expand customer bases. It's a far cry from last year, when the nation's retailers held on to their dwindling revenues and simply focused on primary business improvements. With the economy showing some signs of health, and consumers wiping the cobwebs off their wallets, many companies are eager to invest in targeted growth opportunities again. Specifically, the key areas include some store expansion, social media, targeted marketing and advertising, adoption of handheld technology devices, and kiosks and website personalization options. The next step is for retailers to make that online shopping experience a little more personal, and somehow connect with the customers. This includes looking at customer shopping habits and industry trends to keep their brands relevant.
Squeeze Play: The Off-Price Luxury Market Hits the Wall
There has been an explosion in growth in off-price luxury channels as new models such as Gilt, RueLaLa and HauteLook have emerged upon the scene and industry incumbents such as Neiman Marcus, Saks and Nordstrom have accelerated their own efforts. But as consumer demand grows and the supply of authentic clearance merchandise shrinks dramatic change is inevitable. During the past 18 months luxury retail consumers have come to enjoy wide-scale deep discounts. Many of the deals came from established players such as Neiman Marcus, Saks, Barneys, who–stuck with inventory they could not sell when consumer demand dried up–resorted to extensive promotions to turn merchandise into cash. The real sizzle to the story, however, came from the so-called “sample sale” or “flash-sale” sites such as Gilt, Rue La La and Haute Look. These new companies came to market in a perfect storm setting.
Amazon Sues North Carolina Over State’s Demand for Customer Names
Citing its First Amendment rights, Amazon.com Inc. filed a complaint in federal court yesterday seeking to block the North Carolina Department of Revenue’s demand for the names and addresses of the several hundred thousand customers who have purchased a total of more than 50 million products from Amazon.com since 2003. Amazon also contends in its complaint filed in the U.S. District Court for the Western District of Washington at Seattle, that North Carolina’s demand could hurt the retailer’s business. “Customers who fear that their purchases will not be private are less likely to purchase books, movies, music or other items that might be personal, sensitive or controversial,” Amazon says in its complaint. The action by North Carolina is part of an ongoing audit of Amazon.com’s compliance with the state’s sales and use tax laws.
25% of Consumers Plan to Shop Online for Mother’s Day Gifts
Shoppers are more likely to use the web to shop for Mother’s Day than Father’s Day, according to a new report. The report found that a quarter of consumers say they plan to shop online for a Mother’s Day gift this year and 15% say they plan to spend more on the web than they did a year ago. 21% of consumers say they plan to shop online for a Father’s Day gift and 10% say they’ll spend more on the web than they did a year ago.
Consumer Electronics/Video/Audio
Douglas Stebbins
Best Buy Plans up to 1,000 Mobile Stores
Best Buy reiterated its plans to open as many as 1,000 freestanding Mobile stores across the U.S. Best Buy CEO Brian Dunn told the Financial Times that it will eventually have "a number somewhere between here and 1,000" of the stand-alone stores, which will largely be located in shopping malls. The company currently operates 77 Best Buy Mobile stores and plans to add between 75 and 100 this year. The chain also operates new mobile departments in each of its flagship stores. Both were co-developed with Best Buy's British partner Carphone Warehouse.
Google Buys Mysterious Startup Agnilux, Founded By Former Apple Employees
Google has acquired San Jose, Calif.-based startup Agnilux, a little-known tech firm founded by former Apple employees, according to PEHUB. Agnilux got its start from disenchanted former P.A. Semi employees, who departed after Apple bought the chip design firm for about $278 million two years ago. It's unclear what Google intends to do with its recent purchase. However, the company seemed to be popular with some of the industry giants, as the firm reportedly held strategic investment talks with Cisco, Microsoft and Texas Instruments. Agnilux technology also seems to be shrouded in mystery, while its minimalist Website was taken offline last week.
How Best Buy Beat Walmart in Round One of the Tech Wars
Beginning late last year, Walmart and Best Buy banged away at each other over consumer electronics sales. And Best Buy won. Count on Walmart to come out strong in subsequent rematches, however. Besides pure competitive fever, the aggressiveness of the struggle between the two retailers arose from the recognition that they both had a one-time chance to grab the customers who no longer could shop at the defunct Circuit City chain. Both retailers snagged former Circuit City customers, according to market research firm NPD Group, grabbing two-thirds of them. Employee expertise, customer service and a technologically-advanced product line still meant something to core electronics shoppers, and Best Buy made greater gains in the key categories tracked.
Ultimate Opening In Pennsylvania
Ultimate Electronics, which opened its first East Coast store last month in Massachusetts, will enter the Pennsylvania market this summer. According to a report in the York Daily Record, the Rocky Mountain-based chain will occupy a former Circuit City store in nearby Springettsbury Township. In its new digs, Ultimate will go head-to-head with hhgregg, which opens its first stores in both York and Lancaster, Pa., this month. hhgregg will open six locations in the Keystone State in total this month, as well as new stores in Maryland and Virginia.
Cosmetics & Pharmacy
Billy Busko
L’Occitane Said to Target Up to $707 Million in IPO
L’Occitane Ltd., a French natural- ingredients beauty company, and its parent may raise as much as HK$5.49 billion ($707 million) in an initial public offering in Hong Kong, said three people with knowledge of the sale. L’Occitane and L’Occitane Groupe SA plan to sell 364.12 million shares, or a 25 percent stake in the company, at HK$12.88 to HK$15.08 each. Half the shares are new and half are on offer from the parent. The IPO is scheduled to be priced on April 30. The shares will start trading May 7, according to one of the people with knowledge of the sale.
L’Oreal Sales Rise Most Since 2007 on Luxury Perfume
L’Oreal SA, the world’s largest cosmetics maker, said sales growth accelerated to the fastest pace in almost three years as shoppers spent more on luxury perfume and distributors stopped cutting inventories. Revenue rose 8 percent to 4.72 billion euros ($6.3 billion) in the first quarter from 4.37 billion euros a year earlier, Paris-based L’Oreal said yesterday in a statement after the market closed. The average estimate of five analysts surveyed by Bloomberg was 4.69 billion euros. Excluding currency swings and acquisitions, sales gained 7.4 percent. L’Oreal sales declined last year as retailers reduced inventories and some consumers pared spending on luxury products like Yves Saint-Laurent mascara and Lancome fragrances. Chief Executive Officer Jean-Paul Agon said in February he expected so-called organic sales to start growing again from the first quarter and gain momentum over the rest of 2010, boosted by investments in advertising and research.
Avon Buys Tiny Tillia, Children's Bath and Body Line
Avon Products Inc. is targeting a new consumer group, babies and tots, with the acquisition of Tiny Tillia. Avon told representatives of the acquisition at the company’s annual Leadership Conference in Las Vegas last week, according to Wall Street analysts in attendance. London-born designer Tiffany Lerman, known for her floral-printed Chester handbags, created the eco-conscious, paraben-free line of bath and body items for children in 2006. The whimsical collection ranges from bath mitts and diaper cream to hair detangler and hand sanitizer, and is carried at retailers like Fred Segal and The Right Start.
L’Oréal USA Signs Deal to Acquire Essie Cosmetics Brand
Essie Cosmetics has met its Sugar Daddy, so to speak. L’Oréal USA announced Wednesday afternoon it made a deal to acquire Essie Cosmetics, one of the largest independent nail polish companies in the beauty industry, for an undisclosed amount. Essie is best known for its wide array of nail polish colors and its quirky names, such as No Prenup, Limo-Scene and the aforementioned Sugar Daddy, a light, sheer pink. Industry watchers said Essie, which had $28 million in wholesale sales for the latest 12 months, presents its new parent with several growth opportunities.
Schwan-Stabilo Cosmetics Acquires Cosmolab
German color cosmetics firm Schwan-Stabilo Cosmetics has taken over Cosmolab Inc. Lewisburg, Tenn.-based Cosmolab will continue to make cosmetics pencils from its current headquarters and it is expected to have total revenues of $40 million this year, according to Schwan-Stabilo. Cosmolab, which was in bankruptcy proceedings, was acquired by Schwan-Stabilo through its All4 Cosmetics Inc. subsidiary.
Department & Discount Stores
Mark Lenz
The Biggest Retailers You've Never Heard Of
How do you rake in billions without being Macy's, Best Buy or Staples (let alone Target or Home Depot)? Try getting in on the rest-stop space along America's highways. Or building out a supermarket chain that's big enough to dominate a small region, while not worrying about a large scale toe-to-toe match with Wal-Mart or Kroger. The list of largest retailers in America includes plenty of chains that aren't household names, at least not everywhere. Yet some of these non-household names--from regional grocery chains to kings of the nation's rest stops--pull in as much revenue as Kohl's, Gap and Starbucks. Among the top 60, according to annual sales figures compiled by the National Retail Federation, are a trio of gas station-food operators--Pilot Travel Centers of Knoxville, Tenn., QuikTrip of Tulsa, Okla., and RaceTrak Petroleum of Atlanta, Ga.--all of which supply the refueling and feeding for families and bleary-eyed truckers. Other multibillion-dollar retailers you don't know unless you live in their provinces: Giant Eagle, a regional supermarket power in Pennsylvania, West Virginia and Ohio and Menards, an Eau Claire, Wis.-based home improvement chain that's held its own against Home Depot and Lowe's in Big Ten country (Wisconsin, Illinois and Indiana, primarily).
Penney's Fashion Emphasis, Revitalized Home Department Aim to Reverse Sales Slide
J.C. Penney Co. plans to reverse its three-year sales decline and increase revenue by $5 billion by 2014, management said at the Plano-based retailer's annual analyst and investor meeting. Penney projects annual sales will reach $23 billion in five years from a number of initiatives that include continuing to add exclusive apparel brands such as Liz Claiborne and MNG Mango, mending its home business and updating its jewelry selection. It plans to add 75 Sephora shops a year in its existing stores to reach 600 by 2015. It's introducing high fashion into shoe and accessories departments, taking confusion out of promotional pricing and launching a mobile-ready website within 18 months. It's also building on a loyalty rewards program that had 5 million customers signed up in the first year and a potential draw from 16 million Penney credit card holders.
Neiman Marcus Tests Lower Priced Shop
Neiman Marcus is testing a new retail concept that is set to fall somewhere between its signature stores and its Last Call outlet stores. The test location, in the University Park section of Dallas, has brand name merchandise not unlike that carried at a Neiman Marcus department store, but is set up in a less posh environment with fewer salespeople available to assist shoppers. The focus of this shop is on contemporary sportswear, bags and shoes with prices ranging from $45 to $300.
Compensation Down For Wal-Mart CEO
Michael Duke, president and chief executive officer of Wal-Mart Stores here, received about $9 million less in total compensation for the recently ended fiscal year, or about 32% less than a year ago, largely because of a lower stock award. Duke received about $19.2 million in the fiscal year that ended Jan. 31, 2010, compared with about $28.4 million in the preceding year, according to the company proxy statement, which was filed Monday with the Securities and Exchange Commission. His base salary rose slightly, to $1.2 million, but stock awards totaled $12.7 million, vs. about $23.7 million in the preceding year, his first as CEO.
‘Get-It-Cheap Party’ for Luxury Goods Ends at Saks
Lisa Hagen bought a $395 Diane von Furstenberg sundress at Barneys New York last week, paying 58 percent more than she did for a similar dress two years ago. “A lot of the high-end designers are at remarkably high prices,” said Hagen, 51, a marketing consultant in New York. Still, she said, “I am willing to pay higher prices and full prices if I like it, it fits my need and I know I will use it.” Luxury chains including Barney’s and Saks Inc. are selling costlier goods after scaling back discounts and promotions they offered to attract shoppers in the recession.
Energy
Christopher Ellis
Size Matters in Wind, but Only So Much
The wind turbine – standing tall, sleek and uniquely modern – is arguably the most powerful symbol of the technological advancement of renewables. And although size is typically the metric for such progress, it's the less visible improvements that have allowed the industry to grow. Wind technologies have come a long way over the last 30 years, starting as custom-made amalgamations of farm machinery in Denmark and lab experiments in the U.S., and evolving to become the giant sentries of today's energy transition. As the turbines have gotten larger and more sophisticated, wind power has become the fastest-growing energy source in the world, with 37.5 gigawatts (GW) of capacity added last year. The Global Wind Energy Council expects wind to grow by 160% globally over the next five years, driven largely by bigger machines. Any side-by-side comparison between “large” turbines of the past and present is astonishing. Take the Vestas 33-kW turbine released in 1979: With a rotor diameter of 10 meters, the machine looks like a toy compared with the company's new 3-MW, 112-meter rotor diameter turbine. And these newer 2 and 3-MW turbines are now being outdone by offshore machines in the 5-10 MW range produced by companies like Clipper, Enercon and REpower.
iSuppli Predicts Doubling of Solar PV Installs in 2010
A big uptick in the demand in the German solar market, combined with plunging prices are expected to boost solar demand in 2010, leading iSuppli Corp. to upgrade its forecast of installations of solar photovoltaic (PV) systems in 2010. iSuppli predicts solar installations will rise to 13.6 gigawatts (GW) in 2010, up 92.9 percent from 7 GW in 2009. The previous forecast, released in February, called for 8.3 GW worth of installations in 2010, up 64 percent from 2009. Looking ahead to 2011, there could be even more supply constraints. The strong rise in PV installations in 2010 will be driven by robust market conditions in the second and fourth quarters, which will more than compensate for slower performances in the first and third quarters, iSuppli predicts.
Footwear
Michael O'Hara
Puma Ditches the Shoe Box for a Greener 'Clever Little Bag'
For decades, cardboard shoe boxes have been mini-depositories for love letters, bric-a-brac and photographs. But in a bid by the shoe-maker to cut waste and become more eco-friendly, shoe boxes are heading the same way as the checkbook stubs that they house – to the dustbin of history. Puma will roll out its new packaging in the second half of next year. It will sell its shoes in cardboard frames wrapped in reusable shoe bags – called the 'Clever Little Bag’. In doing so the company says that it will use 65% less paper and save 20m megajoules of electricity, 1m liters of water, and 500,000 liters of diesel and 8,500 tons of paper a year. The concept was dreamed up by designer Yves Behar. Puma said that it has spent 21 months developing the concept and went through over 2,000 ideas and 40-plus packaging prototypes.
Wolverine World Wide's Q1 Revenues Jump 11%, Hikes FY10 Guidance
Wolverine World Wide, Inc. reported revenue for the first quarter was $284.9 million, an increase of 11.6% versus the prior year. Foreign exchange had a positive impact of 3.6% on revenue growth in the quarter. During the quarter, all four of the company's branded operating groups posted mid-single to double-digit revenue increases, balanced across all market segments and geographies. Excluding $1.5 million of charges in the quarter related to the company's nearly-completed strategic restructuring plan, fully diluted earnings were a record 56 cents per share, compared to 2009 adjusted fully diluted earnings of 41 cents per share, an increase of 36.6%. Reported fully diluted earnings in the quarter were 54 cents per share compared to 21 cents per share in the first quarter of 2009.
Decker's Profits Soar 45% in Q1
Deckers Outdoor Corp. reported sales rose 16.2% in the first quarter to $155.9 million versus $134.2 million last year. Earnings jumped 45% to $18 million, or $1.37 a share, from $12.3 million, or 93 cents, a year ago. UGG brand sales increased 14.2% to $104.4 million versus $91.4 million last year. Teva brand sales increased 21.4% to $43.2 million compared to $35.6 million last year. Retail sales increased 66.1% to $23.1 million compared to $13.9 million last year; same store sales rose 28.2%.
Gifts/Accessories/Luggage/Pets
Mark Boucher
High Court to Hear Case on Costco Resale of Watches
The U.S. Supreme Court agreed Monday to decide if Costco Wholesale Corp. can be held liable for copyright infringement for reselling luxury Swiss watches it obtained through third-party sources. The case could have considerable implications for discount stores and companies like eBay Inc. and Amazon.com Inc. that facilitate the resale of cds, books, movies and a host of other goods. At issue is a lawsuit filed by Omega SA, a unit of Swatch Group Ltd., alleging that Costco violated U.S. copyright law in 2004 by selling Omega Seamaster watches it obtained from third parties that had imported them into the U.S. Costco sold the watches for $1,299, well below Omega's suggested retail price of $1,999. Costco argued that Omega could not impose any limits on how its watches are re-sold once the watchmaker made its first sale of the goods. In this case, Omega sold the watches to overseas distributors and the products eventually were re-sold to a New York company that sold them to Costco. A federal judge in California sided with Costco, but an appeals court overturned that decision and sided with Omega in 2008, saying the watchmaker retained rights to products that it made and sold abroad that were later imported into the U.S.
LVMH to Develop Luxury Properties in Oman, Egypt
LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, plans to open two luxury property developments on islands in Oman and Egypt under the Cheval Blanc brand. The projects, developed in collaboration with Orascom Hotels and Development, will cost $100 million, with Orascom providing $40 million and the rest coming from other investors and banks, Orascom Chairman and founder Samih Sawiris said in a text message. They are expected to open in 2012, Paris-based LVMH said in an e-mailed statement. LVMH also said it created a hotel management unit to retain control of its hospitality businesses while minimizing its capital commitment.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
7-Eleven to Revisit Private Label Beer
The cooler wars are about to heat up in 7-Eleven convenience stores, as the Dallas-based retailer is planning to launch a new private label beer brand, reportedly called "Game Day." City Brewing in LaCrosse, Wis., will brew the convenience store chain's new suds, according to the report. The product is reportedly a premium beer with a budget price. 7-Eleven has visited private label brews more than once in its history. The chain launched Santiago beer in 2003 to catch the import beer wave, but struggled to get a foothold, according to the Web site. And in 1969 7-Eleven offered its own brand beer in 12-ounce pop-top cans, according to Convenience Store News reports at the time.
Bi-Lo Trims Monthly Loss
Bi-Lo increased its sales and cut its losses during the month of March, the retailer said in a monthly operating report filed in U.S. Bankruptcy Court. Bi-Lo said sales for the four-week period that ended March 27 totaled $197.3 million, up 0.4% from the same period last year. A loss of $406,000 was down from a $4.7 million loss last year, posted shortly after the company filed for bankruptcy protection. For the three months to date, Bi-Lo posted a loss of $9.5 million on sales of $600.3 million. Sales were up by 3.9% from the same period last year.
SEC Charges Grocery Reseller in Ponzi Scheme
A Miami Beach, Fla.-based grocery reseller surrendered to federal authorities amid charges that his business, Capitol Investments USA, was a Ponzi scheme used to enrich himself and unrelated business ventures. Nevin K. Shapiro, founder and president of Capitol, ran a grocery diverting business which purchased low-priced groceries in one region and resold them in another where prices were higher. According to the Securities and Exchange Commission, Shapiro violated antifraud provisions by promising investors returns as high as 26% annually, even though the company operated at a loss. Shapiro used funds from new investors to pay principal and interest to older investors, the SEC added. When questioned by investors, Shapiro showed them fabricated invoices and purchase orders for nonexistent sales. The SEC said Sharpiro used at least $38 million of investor money to fund a lavish lifestyle, including a $5 million home and $1 million boat.
Home Improvement/Auto Repair
Billy Busko
Tractor Supply Company Reports First Quarter 2010 Results
Tractor Supply Company, the largest retail farm and ranch store chain in the United States, announced financial results for its first fiscal quarter ended March 27, 2010. Net sales increased 9.3% to $710.9 million from $650.2 million in the prior year's first quarter. Same-store sales increased 2.8%, compared with a 4.2% increase in the prior-year period. This same-store sales increase was primarily driven by the Company's core consumable categories, including animal and pet-related products, as well as heating products and insulated outerwear. Gross margin increased 13.9% to $228.9 million, or 32.2% of sales, compared to $201.0 million, or 30.9% of sales, in the prior year's first quarter.
AutoNation 1Q Profit Jumps as Car Buyers Return
AutoNation Inc., the country's largest auto dealership chain, said that a recovery in auto sales lifted its profit 60 percent during the first quarter. Sales of both new and used vehicles logged double-digit growth during the quarter, said AutoNation, which owns about 245 vehicle franchises in 15 states. CEO Mike Jackson said he expects car and truck sales will continue to improve. Revenue spiked 29 percent in Florida, a state that was among the hardest hit by the implosion of the housing market. Although the recovery is significant, any comparison to auto sales a year ago is bound to show improvement. Sales were at their worst level in decades last spring, when the financial crisis was at its peak and automakers General Motors Co. and Chrysler Group LLC were stumbling toward bankruptcy. During the first three months of the year, AutoNation made $55.2 million, or 32 cents per share. That's up from $34.6 million in the same period last year.
Housewares/Furniture
Billy Busko
Supply Chain Triggers Concern
A strong and unexpected spike in first-quarter sales has some importers, manufacturers and suppliers concerned about whether the supply chain will be able to keep up with demand. Suppliers interviewed at the ongoing High Point Market say a confluence of issues has come together that could challenge a supply chain already struggling to adjust to the realities of post-recession demand. They point to key drivers such as rising costs for raw materials and ocean freight, a shrinking base of Chinese furniture factories, a smaller number of workers in those factories and rising labor costs in China. However, many say the biggest challenge could come from China's increasingly affluent base of consumers, who are buying record quantities of cars, homes and furniture.
Barcalounger's U.S. Plant Closes
The future of motion upholstery resource Barcalounger Home remained unclear this week after the closing of the American of Martinsville factory here, where Barcalounger's domestic product line has been produced. The company also imports some of its product. The factory has been closed since April 19, and it is uncertain when, or if it will reopen. American of Martinsville and Barcalounger are both owned by Hancock Park Associates, a Los Angeles-based investment firm. Barcalounger's domestic production was shifted to the Martinsville factory about a year ago after Barcalounger's Rocky Mount, N.C., factory was closed.
Tempur-Pedic Net More Than Doubles in First Quarter
First-quarter net income for Tempur-Pedic totaled $33.1 million, 149 percent ahead of its net for the first quarter of last year. The mattress manufacturer achieved this largely on a sales increase for the quarter of 43 percent, to $253.9 million. Tempur-Pedic also boosted its gross margin by 300 basis points to 49.2 percent. These gains counteracted increases of 36.5 percent and 18.9 percent in selling expenses and general and administrative expenses, respectively.
Williams-Sonoma Shares Move Up on Takeover Rumors
Williams-Sonoma Inc shares rose as much as 8% and its option volume surged on renewed speculation that the home goods chain might be acquired, but one analyst said the rumor was baseless. The speculation sparked bullish activity in Williams-Sonoma's call options, which grant investors the right to buy its shares at a fixed price by a certain date. "On a day when takeover rumors are relatively quiet, Williams-Sonoma is trading higher and its May call options are very active on some speculation that it may be a takeover candidate," said William Lefkowitz, an options strategist with brokerage firm vFinance Investments in New York. "No potential acquirers have been mentioned," Lefkowitz said. The company's spokeswoman, Leigh Oshirak, said it does not comment on rumors or speculation.
Cost Plus, Inc. Announces Termination of Shareholder Rights Plan
Cost Plus, Inc. announced that its Board of Directors has voted to accelerate the termination of the Company’s Shareholder Rights Plan. “The Board regularly evaluates the effectiveness of and the need for a rights plan, and is always striving to improve our corporate governance in an effort to improve long-term shareholder value. The Board has determined that the plan is unnecessary at this time.” The action of the Board of Directors accelerated the expiration date of the Company’s current Shareholder Rights Plan to April 14, 2010. The plan had been originally due to expire on June 30, 2013. In taking this action, the Board reserved the right to take any future action that it determines in the exercise of its fiduciary duties to be necessary or advisable in order to protect the interests of shareholders.
IP Holding Companies & Multi-brand Companies
Douglas Stebbins
Endless and Hilco in the Frame to Acquire Faith
Hilco and Endless have emerged as two of three front-runners to acquire Faith, the women's footwear chain that is up for sale. A third unnamed bidder is also in the frame to acquire the 78-store retailer, in addition to the restructuring specialist Hilco and the Leeds-based private equity firm Endless. Faith, which has debts of £14m, is expected to announce a deal within days. But the private equity firm Epic is out of the running. The accountancy firm Grant Thornton is running the sale process and Clearwater Corporate Finance is advising Faith, which also has 120 concessions, on the right investor to choose.
Schwinn to Ring in Brand Relaunch
Schwinn, the iconic American bicycle brand, is inviting the nation to "go for a ride" as part of a major brand relaunch and integrated national advertising/marketing program. The multimillion dollar campaign, which launches nationwide this week, includes national television and print advertising, and support programs at retail as well as user-friendly online and mobile touch points that simplify the bike-buying and bike-riding experience for consumers. The campaign's thematic centerpiece is the wholesome, nostalgic appeal of the Schwinn bicycle bell, providing what Schwinn believes is a call to action to reconnect with what's important in life. The multi-faceted campaign will also utilize a wide range of digital strategies, all of which will direct consumers to a website www.rideschwinn.com, which provides simple tips on finding the right bike, as well as "where to buy" details.
New Teen Gothic Imprint for Simon & Schuster
Simon & Schuster Children's Books will launch a new imprint, Simon Pulse, this June 2010, following the success of the publisher's young adult paranormal romance and urban fantasy area. Since last autumn, Simon & Schuster's hardcover edition of Becca Fitzpatrick's "Hush, Hush" sold in excess of 100,000 copies and L.J. Smith's "Dark Visions" sold 75,000 copies within three months of publication. Simon Pulse, a paperback-only imprint, will publish teen gothic literature and represent works by contemporary supernatural authors, such as L.J. Smith, Elizabeth Chandler and Nancy Holder. The new imprint will also launch debut authors.
Jewelry/Mining
Mark Lenz
First Ever Mayors by Birks Opens Its Doors
Mayors, a luxury destination for fine jewelry, timepieces and gifts since 1910, announced the opening of the first ever Mayors by Birks store and the return to The Gardens Mall in Palm Beach Gardens, Florida. The new concept, Mayors by Birks, links the Mayors store with the Birks brand, which is carried exclusively by Mayors in the United States. This was a natural development on two levels. Firstly, Mayors locations in the area saw increased interest in Birks premier luxury jewelry, timepieces, and gifts as well as pieces from the Birks living collection. Secondly, the time was right to return to The Gardens Mall where Mayors once had a retail location. Mayors by Birks will carry a wide array of Birks brand products, as well as a wide selection of world renowned brands including Damiani jewelry and Roberto Coin jewelry.
Will Affordable Still Sell When Recession Fades?
One look at Bill Levine Diamond Jewelry's booth at the recent JA New York Winter Show told attendees nearly all they needed to know about the state of the fine jewelry market. Beside scores of charm necklaces containing tiny diamonds and wholesaling for $100 to $300 sat a lone high-end dazzler: a 5-carat, bezel-set diamond necklace wholesaling for $4,900. "It's not that [retailers] don't want this," Levine, the company's namesake and owner said, gesturing toward the pricier piece. "It's that they don't have the customer that will buy this."
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
In Staples’ Ledger, Hints of Recovery
A year ago, the inexpensive stick pens were in demand as businesses sought to cut costs any way they could. Today, the more expensive rollerball pen is the item of choice, as penny-pinching gives way to, if not extravagance, at least a return to prerecession tastes. It is a small signal, but a well placed one. Staples is something of an economic bellwether. More than most companies, the Framingham office supplies chain is positioned to quickly notice the ups and downs of spending because it sells to the entire economic food chain — from consumers to small businesses to large corporations. Two years ago, sliding sales and tough cost-cutting at Staples proved to be a precursor of the recession. As Staples went, so went the country. Now, Staples’ deliveries are being upgraded, and customers are more willing to splurge on discretionary items. And Staples reported last month that sales at stores open at least a year rose 3 percent, the first increase in 10 quarters.
JPMorgan Chase Amends Credit Facility for 1-800-FLOWERS.COM
1-800-FLOWERS.COM, Inc. announced that on April 16, 2010, it entered into an amended and restated credit agreement with a syndicate of banks and other financial institutions led by JPMorgan Chase Bank, N.A. The new credit facility includes a prepayment of $12 million, which reduces the company's outstanding term loan debt to $60 million. In addition, the amended and restated agreement reduces the company's revolving credit line from a previous commitment of $125 million (seasonally adjusted to $75 million) to a commitment of $75 million (seasonally adjusted to $40). The company currently has zero borrowings under the revolving credit line and believes that the credit line, together with cash flows from operations, will be more than sufficient to fund its working capital requirements going forward.
Barnes & Noble Updates E-Reader to Fix Frozen Screen
Barnes & Noble Inc. plans to release a software update to its Nook e-reader this week to stop the screen from freezing, increase its speed and offer a Web browser and games for the first time, a company executive said. “We’re fixing the problem,” Anthony Astarita, vice president of digital products, said in an interview in his New York office on April 16. “Like any consumer product, you have issues that do come up. No product is 100 percent perfect.” Barnes & Noble released the Nook in November, entering a growing market led by Amazon.com Inc.’s Kindle and Sony Corp.’s Reader.
An Unusual Battle Between Amazon and Publishers
The New Yorker has a fascinating piece about the future of publishing as the book world goes digital. Highly recommended if you a Kindle lover, an iPad enthusiast, or a Google watcher. The article also describes an unusual battle between book publishers and Amazon about the pricing of electronic books: Amazon had been buying many e-books from publishers for about thirteen dollars and selling them for $9.99, taking a loss on each book in order to gain market share and encourage sales of its electronic reading device, the Kindle. By the end of last year, Amazon accounted for an estimated eighty per cent of all electronic-book sales, and $9.99 seemed to be established as the price of an e-book. Publishers were panicked. David Young, the chairman and C.E.O. of Hachette Book Group USA, said, “The big concern—and it’s a massive concern—is the $9.99 pricing point. If it’s allowed to take hold in the consumer’s mind that a book is worth ten bucks, to my mind it’s game over for this business.” As an alternative, several publishers decided to push for an “agency model” for e-books. Under such a model, the publisher would be considered the seller, and an online vender like Amazon would act as an “agent,” in exchange for a thirty-per-cent fee. That way, the publishers would be able to set the retail price themselves, presumably at a higher level that the $9.99 favored by Amazon.
Restaurants/Food Service
Mark Boucher
Chipotle 1Q Profit, Stock Price Soar
Chipotle Mexican Grill Inc. saw its stock surge on Thursday, following the company’s first-quarter report late Wednesday that included a nearly 50-percent jump in net income from higher same-store sales and positive labor cost trends. Chipotle’s stock price increased 14 percent to close at $144.72 on Thursday, after hitting a high of $145.11 during trading, the highest price for the stock in more than two years. Securities analysts were mostly pleased that Chipotle, which typically posts large earnings jumps, was able to finally report on positive guest traffic trends, which had eluded the chain during the worst parts of the domestic recession. Growth in guest counts in 2010’s first quarter marked the first time in seven quarters, or since the second quarter of 2008, that Chipotle has reported anything but flat or lower customer traffic.
Restaurant Results Show Consumers Dining Out Again
First-quarter reports from public restaurant companies rolled in this week and have highlighted a long-awaited return of guest traffic after nearly two years of eateries losing customers who have been reluctant to spend. Restaurant executives from McDonald’s, Chipotle, The Cheesecake Factory and Brinker International all said they have begun to see increased traffic trends, leading to same-store sales improvements and increased bottom lines.
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.
Tavistock to Buy Fuddruckers, Koo Koo Roo Parent from Ch. 11
Magic Brands LLC, parent of the Fuddruckers and Koo Koo Roo brands, said on Wednesday it had agreed to sell substantially all of its assets to Tavistock Group in a $40 million deal that included filing for Chapter 11 bankruptcy protection. Magic Brands, which filed the Ch. 11 petition in U.S. Bankruptcy Court in Delaware, said it would close 24 of its 85 corporate Fuddruckers units by the end of the month, and evaluate the 13 Koo Koo Roo units, which are based in California. The company said none of its 135 franchised Fuddruckers units are included in the bankruptcy filing.
Starbucks' 2Q Profit Up on Improved Sales
In a continuation of a turnaround that began earlier this year, Starbucks Corp. reported increased sales for the second quarter and upgraded its forecast for the year. For the quarter ended March 28, Starbucks reported net income of $217.3 million, or 28 cents per share, compared with $25 million, or 3 cents per share for the year-ago quarter. Latest quarter revenue grew 9 percent to $2.5 billion for the 16,664-unit global coffeehouse chain. Same-store sale jumped 7 percent at the company's U.S. stores, reflecting a 3-percent increase in traffic and a 5-percent increase in ticket averages. The company has 11,121 stores in the United States, 6,736 of which are company-owned. International same-store sales also increased 7 percent, which is based on a 6-percent jump in traffic and a 1-percent increase in average ticket.
Banking & Lending
Douglas Stebbins
Target Snubs Visa in Shift to Store-Branded Cards
Target Corp., the second-largest U.S. discount chain, will stop issuing Visa Inc. credit cards to new applicants and spur use of its own plastic. The decision may pull revenue from San Francisco-based Visa, the world’s biggest payments network. Last month, Macy’s Inc. said American Express Co., based in New York, would replace Visa as the processor for Macy’s and Bloomingdale’s credit cards. New qualified applicants will receive the proprietary Target Credit Card, a product that may be used only at Target stores and Target.com, the retailer said. Existing Target Visa cardholders will not be affected. Target is the third-biggest issuer of Visa credit cards, with 23.9 million cards outstanding, and the 15th-biggest issuer overall by purchases, according to the Nilson Report, an industry newsletter based in Carpinteria, California.
Regional Banks Bemoan Lack of Lending
For large regional banks, the bread-and-butter business of lending remains challenging. The loan books at a string of regional banks reporting first-quarter results continued to shrink. The banks' earnings from the lending business hardly fared any better. Bankers continue to bemoan the lack of what they consider credit-worthy borrowers taking out loans that would lift lending income and brighten the revenue outlook for future quarters. Borrowers aren't even doing much to tap their existing lines of credit. The irony for regional banks is that their loans are drying up just as the potential profit from lending is high, mainly because banks can borrow cheaply. Customers deposited more money in deposit and savings accounts in the first quarter, and banks paid less interest on those deposits, improving the profit margins of regional banks' lending business.
Those are the latest headlines. Thank you for reading.
Sincerely,
The Team at Consensus
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