The Weekly Consensus: Week of August 23, 2010
The Value of Nothing
Steven Bowles
W. Somerset Maugham wrote, "It is an illusion that youth is happy, an illusion of those who have lost it." For the youth of today, unemployment is anything but illusory. The latest global numbers for unemployment among the young have reached the highest levels on record, and the International Labor Organization (ILO) expects it to worsen as 2010 rolls into 2011. A report released by the ILO counts 81 million out of 630 million 15-24 year olds as unemployed as of the end of 2009, up from about 73 million as of the end of 2007. As for the youth of the United States, the Bureau of Labor Statistics listed unemployment among teenagers at 26.1 percent for July, while the rate for all those under 25 has hovered somewhere in the upper teens for many months. Unemployment rates for younger workers are more directly correlated to the health of the overall economy, the young are more likely to be let go when times are tough and are at a disadvantage against more experienced adults when the economy recovers and rehiring starts in earnest.
It seems logical that young workers are most often the first to lose employment in a down economy. But unemployment in one's youth has consequences that can last a lifetime. Experience at work increases long-term earnings, and there is no replacement for time. As entry-level opportunities have disappeared, and manufacturing jobs have dried up, it has forced even overqualified younger workers to seek less-skilled, lower-wage work like food service and retail, pushing expectations and outcomes further downward.
The impact of the current economic crisis on younger workers is being reported on not only in terms of high (and seemingly ever higher) unemployment numbers and the danger to society that comes with being discouraged and shut out of the workforce, but also as a reflection of the character of the young workers themselves. The cultural moment has been captured in places such as the New York Times Magazine, which last week ran a cover story called What Is It About 20-Somethings? There is a chance that, it has been suggested, the entire generation may be "lost." It is early on to "lose" an entire generation, but it has happened before. If the dire predictions are borne out, what might be learned from the experience of the original Lost Generation, and what might their experience indicate as to who the latest generation at risk may become?
The original Lost, born in the years around the beginning of the 20th century, came of age in an era dominated by war and economic upheaval, and were characterized as alienated and cynical in their youth. For them, it was the Great Depression that robbed them of what should have been their peak earning years, and took away their confidence in established norms. Older generations accused them of being shallow, pleasure seekers, who were in fact more prone to engage in criminal behaviors than the prior generation. But, while the upheaval of their formative years left a generation with fewer reformers than critics and artists, their cynicism matured into a pragmatism that found definition as leaders in American efforts of the World War II era. What began with the notoriety of the John Dillingers of the generation matured into "men in gray flannel" by midcentury.
Members of the Lost generation, then, found their way to make a mark on America's history in a way that would have been hard to predict when they were 20-somethings. Between the crucible of their experience and the inevitable transfer of wealth that will occur when their Baby Boomer parents pass into history, today's youth will have a chance to define themselves. In 2040 or so, the reports on the collective identity of this generation of in danger of being "lost" today will likely have very different findings than those being written today.
Apparel/Swimwear/Intimates
Betsy White
Talbots Debuts New Hybrid Outlet Concept
The Talbots outlet store in Hingham, MA got a fashion makeover when it moved down the street to the former Hingham Shipyard. Julie Lorigan, a senior vice president at the apparel chain, said the outlet store will be the company's first hybrid outlet store that will feature clearance inventory as well as clothing made specifically for sale in the company's upscale outlet stores. For most of Talbots' history, the company's outlet stores served as a way to clear out excess inventory at reduced prices. But in the past two years, Talbots has been rolling out a more upscale concept for its outlet stores where the items are manufactured specifically for the outlets. The clothing is similar to items found in the prior season's full-price Talbots catalog, with a few tweaks that enable the company to sell the clothes at a lower price. The new Talbots store will be a slimmed down version of the one that is closing at Anchor Plaza on Route 3A. Lorigan said Talbots is leasing 12,000 square feet at The Launch at Hingham Shipyard. That compares to 16,000 square feet at the Anchor Plaza location, which has been home to the Talbots outlet store since 1985.
Abercrombie to Close 110 Stores within Two Years
Abercrombie & Fitch announced plans to close about 110 of its 1,067 U.S. stores. Sixty of the stores marked for closure are traditional Abercrombie and Fitch stores or Abercrombie Kids stores that are reaching the end of their leases this year, said CFO Jonathan Ramsden on the retailer's quarterly conference call with investors. An additional 60 stores will shutter in 2011 as their leases expire, he added. "The total number of closure could increase if we are able to negotiate additional buyouts on underperforming stores with later lease expirations," Ramsden said. The closings come in spite of the chain's recent slight turnaround in fortunes. In the second quarter, the firm's net sales increased 17 percent to $745.8 million compared to the same period last year. Same-store sales increased 5 percent compared to the second quarter of 2009. The company is still expanding as well. In the U.S., Abercrombie will open three Abercrombie & Fitch stores; three Abercrombie Kids stores; three Hollister stores; two Gilly Hicks stores; and five outlet stores. Internationally, the company plans to open namesake stores in Copenhagen, Denmark, and Fukuoka, Japan. It also plans to open 20 international mall-based Hollister stores, down from prior guidance of 25 stores. And in the fourth quarter, it will open a new namesake store in Canada and its first international Gilly Hicks store in the U.K.
American Apparel Shares Fall as Woes Rise
The troubles facing American Apparel grew as the retailer said that it had received a federal subpoena over its change in accounting firms. The company, a seller of T-shirts and casual clothing, has gained popularity among urban cognoscenti for its racy ad campaigns - and acclaim for its "Made in America" manufacturing commitments. Its chief executive and promoter, Dov Charney, is known for controversial antics like personally photographing models in risqué photo shoots. But the company has had several problems since going public in 2006. Analysts and investors have asserted that the company needs a more professional management team. Now the company's troubles appear to have taken a legal turn. American Apparel said in a regulatory filing that it had received a subpoena from the United States attorney's office for the Southern District of New York and inquiries from the Securities and Exchange Commission over the resignation of Deloitte & Touche as the company's independent auditor.
Wal-Mart, Gap Turn to India for Denim
Retailers Wal-Mart Stores and Gap and clothing manufacturers Levi Strauss and VF Corp. are looking increasingly to India for denim, which could make the nation the global hub for denim production. China, once the powerhouse of denim production and supplier of close to 3.0 billion meters of denim annually, is facing production declines as a result of stagnant cotton supplies caused by flooding. The country has had to tap into its cotton reserves, which have declined to 1.3 million metric tons from an optimal reserve of 2 million metric tons. This scenario presents a great opportunity for Indian denim producers to increase production from current annual levels of 650 million meters. In addition, during the last couple of months Bangladesh has been plagued by labor unrest and riots, prompting Wal-Mart and other retailers to shift denim production to India.
Athletic & Sporting Goods
Michael O'Hara
Dick's SG's Q2 Profit Jumps 32%, Raises Guidance
Dick's Sporting Goods, Inc. reported second-quarter earnings jumped 32.3% to $51.5 million, or 43 cents per diluted share. Results exceeded estimated earnings expectations provided on May 18 of 37 to 39 cents per diluted share. The 5.7% consolidated same store sales increase consisted of a 5.6% increase in Dick's Sporting Goods stores, a 2.9% increase in Golf Galaxy stores and a 28.0% increase in e-commerce. For the second quarter ended August 1, 2009, the Company reported consolidated non-GAAP net income of $42.4 million, or 36 cents per diluted share, excluding merger and integration costs. On a GAAP basis, consolidated earnings per diluted share for the second quarter ended August 1, 2009 were 33 cents a share. Net sales for the second quarter of 2010 increased by 8.8% from the second quarter of 2009 to $1.23 billion due primarily to a 5.7% increase in consolidated same store sales and the opening of new stores. The 5.7% consolidated same store sales increase consisted of a 5.6% increase in Dick's Sporting Goods stores, a 2.9% increase in Golf Galaxy stores and a 28.0% increase in e-commerce.
Hibbett Sports Continues Double-Digit Comps Roll in Q2
Hibbett Sports, Inc. net sales for the 13-week period ended July 31, 2010, increased 13.6% to $139.8 million compared with $123.1 million for the 13-week period ended August 1, 2009. Comparable store sales increased 11.9%, making it the second straight quarter the company has produced double digit comparable store sales growth. Net income for the second quarter of Fiscal 2011 increased 261.9% to $4.0 million compared with $1.1 million for the second quarter of Fiscal 2010. Earnings per diluted share increased 257% to 14 cents compared with 4 cents for the second quarter of Fiscal 2010. Net sales for the 26-week period ended July 31, 2010, increased 15.5% to $324.3 million compared with $280.8 million for the 26-week period ended August 1, 2009. Comparable store sales increased 13.4%. Net income for the 26-week period ended July 31, 2010, was $21.4 million compared with $12.0 million for the 26-week period ended August 1, 2009. Earnings per diluted share increased 75% to $0.73 compared with $0.41 for the 26-week period ended August 1, 2009.
New York Lender Acquires Stake in Quiksilver
Quiksilver has made a bold move by exchanging $140 million in debt with a New York-based lender for a large share of the clothing maker. On Aug. 9, Quiksilver announced that the debt swap with Rhone Group LLC now makes Rhone the owner of nearly one-third of the company. Rhone was given 31.1 million shares of Quiksilver common stock at an exchange rate of $4.50 a share. Shareholders approved the exchange in an Aug. 6 meeting, Quiksilver said in an announcement. The debt reduction will immediately help Quiksilver's earnings because the loan carried a hefty 15 percent interest rate. But the Huntington Beach, Calif.-based surfwear company-whose labels include Roxy, DC, Lib Tech and Hawk-still owes Rhone another $25 million, which it will pay off when it reworks its credit lines.
Catalog & Internet
Christopher Ellis
EBay Hires an Apparel Veteran to Run eBay Fashion
Miriam Lahage joins eBay Inc. as general manager of eBay Fashion, a newly created role. She is responsible for growing and driving innovation across the fashion category. Based upon her experience, Lahage knows how to put together a value-added outfit. She spent more than 20 years with TJX Companies Inc., operator of discount retailers TJ Maxx and Marshalls, where she rose from store manager to senior executive roles in merchandising and management. In e-commerce, she launched Koodos.com in the United Kingdom and also worked as a consultant at Net-A-Porter. EBay launched a dedicated fashion section on its home page in April. An eBay Fashion iPhone application debuted in July.
Rue La La Fashions a Niche in Tough Online Sales Market
An umbrella flash fills the room with light every few seconds as the lanky model Abba Binns stands in front of a stark white background. A mellow loop of music by the British DJ Aim plays from an iPod in the background as the photographer gives a few gentle suggestions to Binns: "Maybe just throw one side of your hair back so we can see the detail at the top of the dress.'' Welcome to the daily grind at Rue La La, the wildly successful online retailer headquartered in Boston's Fort Point Channel neighborhood. Photographers, models, and stylists toil eight hours a day in 10 different photo studios to capture beautiful images of the dresses, shoes, kitchen appliances, and watches that will be offered to the site's 2.2 million members. (Membership is free.) The first e-mail notifying Rue La La members about time-limited discounts on high-end merchandise went out April 9, 2008, and just 18 months later, the site was acquired for $180 million. (If the company hits certain profit targets, the total pur chase price could rise to $350 million.) And since last fall's acquisition by Pennsylvania-based GSI Commerce Inc., Rue has continued on its incredible recession-defying growth trajectory: This year, the company plans to hire about 180 new employees, bringing its total headcount to 350. But competition in Rue's business is becoming as intense as the hunt for a mall parking spot on Black Friday. Its biggest rival, Manhattan-based Gilt Groupe Inc., has raised $83 million in funding, some of it from Waltham-based Matrix Partners, and says it has attracted 300,000 more members than Rue. This summer, the two companies are simultaneously diving into local commerce, offering members in Boston and several other cities special deals. In doing that, the two companies are chasing Groupon, a Chicago-based site that offers a "deal of the day'' at local businesses.
How Old-School Catalogs Help Drive Up Online Sales
I recently received an email from Internet Retailer promoting a piece of research which suggests that online shoppers that received a catalog in the mail spent on average 163 percent more than those that didn't. One hundred sixty-three percent? That's a big difference.This prompted me to go back to the research, which revealed that 9 out of 10 of the top converting websites in the U.S. also have catalogs. These companies have visitor-to-sale conversion rates averaging 23 percent, compared with an industry average of 2-3 percent. However, this cannot be attributed solely to having a catalog. The mainstay in driving quality traffic to websites for many years has been email, and increasingly for many ecommerce sites, traffic referred from their other website on Facebook. But catalogs? How very 1980's. Yet all the evidence suggests that customers love to browse offline and purchase online. In fact, research conducted by the USPS and Comscore found that catalogs doubled sales and increased website traffic for both existing and new customers.
Consumer Electronics/Video/Audio
Douglas Stebbins
CEA Opposes Proposal to Mandate FM in Portables
The Consumer Electronics Association (CEA) is opposing discussions by the broadcast and music industries to tie an agreement over radio station royalties to a mandate that all portable electronics incorporate an FM radio tuner. "The backroom scheme of the NAB (National Association of Broadcasters) and RIAA (Recording Industry Association of America) to have Congress mandate broadcast radios in portable devices, including mobile phones, is the height of absurdity," said CEA president/CEO Gary Shapiro. "Forced inclusion of an additional antenna, processor and radio receiver will compromise features that consumers truly desire, such as long battery life and light weight," he contended. "Reducing product performance, mandating inclusion of features consumers don't want, and replacing product innovation by companies like Amazon, Apple, Motorola and HP-Palm with government design mandates are not in our national interest."
iPad Competitors Struggling to Catch Up
Some of the world's biggest electronics companies are readying an assault on the tablet market. But before they even begin, they find themselves at an early disadvantage. Though Samsung, LG Electronics, Acer, Hewlett-Packard, Asus, Research In Motion, and Dell have announced or hinted at touchscreen tablets that will arrive between now and March 2011, they're way late to the party. Since the iPad's debut in April, Apple has built a huge lead in this category -- in terms of actual devices sold but also in many consumers' minds. The category is new -- a large touch-screen device bigger than a smartphone and running a lightweight operating system wasn't widely available to consumers prior to the iPad's introduction -- but Apple got out of the gate and hasn't looked back. The company is selling about 1 million iPads per month and has not noticeably slackened its pace since.
Intel's McAfee Acquisition a Mobile Play
Intel's acquisition of security company McAfee could help the chip maker make a splash in the handheld and embedded markets, in which the company has struggled to establish a presence, according to analysts. Intel on Thursday announced plans to acquire McAfee for US$7.68 billion, saying this will help the chip maker blend advanced hardware and software security to protect devices from internal and external threats. Hardware and software changes will improve both Intel and McAfee products, and lead to improved security for products ranging from servers to mobile devices, Intel said. But some analysts were baffled by the acquisition as there was little connection between the companies, and raised questions on how Intel would implement McAfee's software. Intel is primarily a chip maker and does not sell PCs or mobile phones directly to customers, while McAfee is known for its malware products.
Cosmetics & Pharmacy
Billy Busko
NPD Report Shows Decline in Makeup Usage
Makeup usage by women 18 to 64 years old has declined by 5 percent compared with levels seen in 2008, according to an NPD Group Inc. survey completed in the spring and released last week. Karen Grant, vice president and global beauty industry analyst at The NPD Group, did not attribute the decrease in usage directly to the recession, but instead said, "Potentially, with the increase in unemployment and resulting decline in the number of women going to work, more women did not have a need to wear makeup. The recession, and unemployment, may have exacerbated the trend, but we began to see declines in usage prior to the recession. "For some women," she said, "with the emergence, acceptance and popularity of a more casual and natural look, makeup becomes more optional." Grant added, "Staple products tended to perform better, such as foundation, particularly mineral foundation, in prestige, and in the mass arena, mascara was a strong performer."
Court Forces P&G to Sweeten 2004 Payout for Wella
Procter & Gamble, the world's largest household products maker, will appeal a court ruling forcing it to sweeten its payout to minority shareholders of German haircare company Wella six years after the takeover. Although the takeover battle between Procter and Wella had been decided in the boardroom back in 2003, it continues to dog the Cincinatti-based consumer goods company thanks to a legal campaign waged in Germany by a small band of rebellious shareholders. In March 2003, P&G originally offered stockholders in Wella to tender their ordinary shares at 92.25 euros per share, creating a storm of outrage since preferred shareholders were only offered 61.5 euros for their non-voting preferred shares. Last week, a Frankfurt court ruled Wella's former minority shareholders are entitled to a higher payout as part of a so-called domination agreement struck 11 months later.
P&G Chief Wages Offensive Against Rivals, Risks Profits
As a U.S. Army paratrooper, Robert McDonald trained to fight enemies in jungles, deserts and the Arctic. Now, going into his second year as chief executive of Procter & Gamble Co., the former military man is mounting a two-pronged attack on a very different battlefield-the global consumer-products industry. His missions: to win back ground lost as frugal shoppers have opted for cheaper alternatives to P&G's goods, and to conquer countries now dominated by rivals like Unilever PLC and Colgate-Palmolive Co. Marching down the aisles of a giant discounter in Brazil recently, Mr. McDonald assessed the competition-powdered detergent from Unilever-and described his liquid-detergent counterattack: "Every market in the world converts to liquid. It's just a matter of time." World domination wasn't always a priority at P&G. For generations, the company focused more on boosting U.S. and European sales by rolling out new versions of old products. Armed with a massive advertising budget, the company persuaded consumers to pay more for products like Tide with "stainscrubbers," "clinical strength" Secret deodorant and Charmin "ultra strong." But the long recession and creaking recovery have undermined that strategy. Consumers might be willing to shell out for iPads, but their day-to-day spending reflects an entrenched frugality that often means leaving P&G's relatively expensive products on the shelf. Nearly two-thirds of U.S. consumers said they switched to a cheaper substitute for at least one basic household product, food or beverage in the past year, according to a Sanford Bernstein survey of 834 consumers. More than three-quarters said they believe less expensive products were as good as or better than those they replaced.
Rite Aid Completes Refinancing Transactions
Rite Aid Corporation announced that it has successfully completed its previously announced refinancing transactions that include a new $1.175 billion revolving credit facility due 2015 and the issuance of $650 million aggregate principal amount of 8.00% senior secured notes due 2020. Rite Aid has also entered into the previously announced amendments to its senior credit facility. The new $1.175 billion revolving credit facility due 2015 replaces Rite Aid's existing $1.175 billion revolving credit facility due 2012. The new revolving credit facility has reduced pricing and a five-year maturity, although the maturity shall be April 18, 2014 in the event that Rite Aid does not repay, refinance or otherwise extend the remaining term loans under its senior credit facility prior to that time and meets certain other conditions. The amendments to its senior credit facility loosen the fixed charge coverage ratio test and permit the mandatory repurchase of Rite Aid's existing 8.5% convertible notes due 2015, subject to the satisfaction of certain conditions.
Department & Discount Stores
Mark Lenz
Macy's to Sell Glee-Inspired Clothes
The hit musical television show Glee will offer up an exclusive line of music-inspired apparel in Macy's 800 department stores beginning this month. Priced between $19.99 and $34.99, the line includes T-shirts, tops and hoodies geared toward female Gleeks, a nickname for fans of the show. Glee, developed by Ryan Murphy Television and 20th Century Fox, has developed a cult following since first airing in 2009. It recently received 19 Emmy nominations. The line was designed by Awake, Inc., which makes super-soft collections for women of all ages.
Saks Quarterly Loss Narrows
Upscale department store chain Saks Inc. narrowed its second-quarter loss by selling more products at full price, which helped boost its profit margins, but it announced two more store closings. Saks said it lost $32.2-million, or 21 cents per share, in the quarter that ended July 31. A year earlier, the chain lost $54.5-million or 39 cents per share. The results include after-tax charges of eight cents per share for the announced closings and severance at three stores closed last month.
Target: No Donations Planned for Gay Groups
Target Corp. said it won't give money to gay-friendly causes to quiet the uproar over a $150,000 donation that helped support a Minnesota governor candidate who opposes gay marriage. The discount retailing giant said it was "best to wait" given the controversy stirred by its donation, which prompted Facebook calls for a boycott and scattered protests outside stores. An anti-boycott site also popped up on Facebook from conservatives supporting Target. "We believe that it is impossible to avoid turning any further actions into a political issue and will use the benefit of time to make thoughtful, careful decisions on how best to move forward," the company said in a statement.
Pent-Up Capital Generates 'Ferocious' Competition for Distressed Shopping Centers
While still a far cry from the avalanche some predicted would hit the market a year ago, distressed shopping malls and strip centers have contributed to a marked increase in retail sale activity this year. At the same time, a rush by institutional investors to pick up quality core properties at the other end of the retail property spectrum has also led to an increase in retail property sales in a number of large metro markets, according to CoStar Group data. Houston, Tampa/St. Petersburg, South Florida, Long Island, Boston, Detroit, Philadelphia, Los Angeles, Denver and Phoenix all reported double-digit increases in retail property sales volume in the second quarter. Distressed transactions as a percentage of overall retail property sales activity continues to rise, albeit as more of a trickle than a flood. Such deals account for as many as one in five sales, which are easily snapped up by opportunistic capital.
Footwear
Michael O'Hara
Foot Locker Q2 Profitability Improves on 2.3% Comp Gain
Foot Locker, Inc. earned $6 million, or 4 cents per share, in the second-quarter ended July 31, compared with break-even performance last year. Second quarter sales decreased 0.3%, to $1.1 billion. Second quarter comparable-store sales increased 2.5%. Excluding the effect of foreign currency fluctuations, total sales for the second quarter increased 1.3%. Net income for the company's first six months of the year increased 94% to $60 million, or 38 cents per share, compared with net income of $31 million, or 20 cents per share, for the corresponding period last year. Year-to-date sales increased 2.7%, to $2,377 million, compared with sales of $2,315 million last year. Year-to-date comparable-store sales increased 3.7%. Excluding the effect of foreign currency fluctuations, total sales year-to-date increased 2.2%.
Giro to Launch High-End Cycling Shoes
Giro, a division of Easton Bell Sports, plans to launch a a line of men's and women's cycling shoes this fall. The collection of high end cycling footwear includes road and mountain shoes from men and women. Prices will range from $199 to $349. Paul Harrington, CEO of Easton Bell Sports, spoke about the launch on his company's second-quarter conference call. He said the line represents two years of design and development work. The collection will debut at Eurobike. "Highlights include Easton engineered carbon fiber outsoles, premium materials and adjustable footbeds," Harrington said. "At 195 grams, the Prolite model will be lightest product shoe on the market and was worn by Levi Leipheimer in the recent Tour de France. Key retailers in both U.S. and Europe have already committed to carrying this line for next year's cycling season." Giro shoes will launch in about 500 U.S. retailers.
Aetrex Launches GPS-Tracking Shoes
Aetrex Worldwide, Inc. debuted its GPS tracking smart shoe Ambulator collection. The shoe is designed to provide a solution for those afflicted with Alzheimer's disease or dementia. GTX Corp, the maker of two-way GPS Tracking Personal Location Services (PLS) solutions that partnered with Aetrex on the shoe, said. The collection brings a reliable solution for monitoring the location of the 5.3 million seniors in the U.S. afflicted with Alzheimer's disease or dementia. Aetrex plans to launch the shoes to coincide with the National Alzheimer Association memory walks this fall.
Gifts/Accessories/Luggage/Pets
Mark Boucher
Yankee Candle Q2 Sales Up, Loss Down Slightly
Yankee Holding Corp. and The Yankee Candle Co. reported a 5.5 percent increase in sales for the second quarter of 2010, to $125.4 million. Sales in the company's wholesale business were $53.7 million, an increase of $3 million or 5.8 percent versus the prior year second quarter. However the wholesale growth was driven primarily by an increase in sales in the company's international business, not domestic. Retail sales were $71.7 million, an increase of $3.6 million or 5.2 percent from the second quarter of fiscal 2009. However most of that was from new stores: Comparable sales in stores that have been open for more than one year decreased by 3.1 percent. The Consumer Direct business increased by 12.6 percent. The company saw a net loss of $10.2 million for the second quarter, compared to a net loss of $12.5 million for the second quarter of 2009.
Spectrum's Q3 Net Loss Widens
Spectrum Brands Holdings Inc., a Madison, Wis.-based manufacturer of pet supplies, lawn care products and consumer goods, reported a net loss of $86.5 million on net sales of $653.5 million for the third quarter ended July 4, compared to a net loss of $36.5 million on net sales of $589.4 million in the year-ago period. Earnings were hurt by $99 million in expenses related to the Russell Hobbs acquisition, which closed June 16. As part of the deal, Russell Hobbs' LitterMaid brand has joined Spectrum's United Pet Group business unit, which includes Tetra, Marineland and 8-in-1 branded pet products. The company attributed the 10.9 percent quarterly sales growth to added sales from Russell Hobbs, a strong home and garden season and a double-digit increase in shaving and grooming sales. Following an early pond season that materialized during the fiscal second quarter and a generally soft pet category due to macroeconomic factors, the global pet supplies segment reported a profit of $17.2 million on net sales of $135.2 million for the third quarter, compared to a profit of $19.2 million on net sales of $144.6 million for the same period last year.
Grocery/Healthy Foods/Snacks/Confectionery
Mark Boucher
Vitacost.com's CEO Departs
Vitamin and health supplements web retailer Vitacost.com has lost its CEO. The company says it and Ira Kerker have mutually agreed that he would leave. He also has resigned as a company director. The company today also reported that net sales increased 14% in the second quarter but came in under company expectations. Jeffrey Horowitz will take over as interim CEO. Vitacost hired Horowitz earlier this year as a special consultant and member of the board of directors. Horowitz was CEO and founder of Vitamin Shoppe Inc. Vitacost has hired executive recruitment firm Spencer Stuart to find a new CEO and up to four new directors.
Couche-Tard Nominates Board Slate for Casey's
Alimentation Couche-Tard said it has mailed proxy materials to shareholders of its takeover target Casey's General Stores, pushing for acceptance of its offer to acquire the convenience store chain and to elect a slate of eight board members at Casey's annual meeting in September. The letter to shareholders argued that Casey's recapitalization plan was an attempt to "distract" shareholders from its offer, and that the private debt placement used to finance that offer was coercive and designed to "entrench management." Its offer to buy Casey's, a convenience store operator based in Ankeny, Iowa, expires Aug. 30 if not extended.
Dollar Tree Sees Potential for 7,000 Locations
Dollar Tree, which operates 3,925 stores, sees the potential to expand its base to up to 7,000 locations, Bob Sasser, president and chief executive officer, told analysts Thursday in a conference call discussing second-quarter results. The company will end the year with 230 more new stores, for a total of 4,155, he said. For the second quarter, which ended July 31, Dollar Tree said its net income rose 37.1% to $78 million, while sales increased 12.7% to $1.4 billion and comparable-store sales jumped 6.7%. For the half, net income was up 20.7% to $141.6 million, while sales grew 12.7% to $2.7 billion and comps rose 6.6%.
Kramer Out at A&P: Sources
Mark Kramer, hired only months ago to lead operations at A&P here, has left the organization, sources said. Kramer's departure follows that of Ron Marshall, the chief executive officer hired in February who abruptly left last month when Sam Martin was hired in Marshall's place. Sources speaking on the condition of anonymity said that Kramer was leaving so that Martin could hire his own executive team. Observers in April lauded the hiring of Kramer, who was expected to be a key figure between A&P's headquarters and store teams at Pathmark struggling amid procedural changes enacted after A&P took over.
Bashas' Set to Emerge From Chapter 11 on Aug. 28
Bashas' here expects to formally emerge from bankruptcy on Aug. 28, Michael McGrath, the chain's bankruptcy attorney, said. That date will be 15 days after the U.S. Bankruptcy Court judge in Phoenix confirmed Bashas' reorganization plan and one day after a 14-day appeals period ends.
Home Improvement/Auto Repair
Billy Busko
Lowe's Sees Sales Growth but no Recovery Till 2011
Lowe's Cos. posted weaker-than-expected quarterly results, but kept its forecast for same-store sales growth this year, assuring investors it will benefit once U.S. consumer demand picks up. Lowe's, the second-largest home improvement chain behind Home Depot, said it still expects sales at stores open at least a year to rise about 2 percent for the fiscal year, which some analysts viewed positively given soft consumer sentiment. Net income rose to $832 million, or 58 cents a share, in the second quarter ended on July 30, from $759 million, or 51 cents a share, a year earlier.
Home Depot Sees Profit Growth Though Demand Lags
Home Depot Inc still sees room for profit growth this year as consumers take up long-delayed maintenance and repair projects for their homes, even if a return to bigger renovations will have to wait. The company posted a higher-than-expected quarterly profit and raised its full-year earnings forecast, helped by cost controls. While sales missed expectations in a weak economy, investors were relieved that the top home improvement chain still expects an increase for the rest of the year. Sales rose 1.8 percent to $19.41 billion, missing the average estimate of $19.59 billion. Home Depot forecast earnings of $1.90 a share from continuing operations for the current fiscal year, up 2 cents from its prior outlook. For the prior year, it reported profit of $1.66 a share from continuing operations, before charges. The company expects sales growth of about 2.6 percent, down from a prior view of 3.5 percent.
Housewares/Furniture
Billy Busko
Harbinger Group Proposes Stock Trade with Spectrum
Harbinger Group proposed a stock swap with Spectrum Brands Holdings Inc., the maker of George Foreman grills, Black & Decker tools and Ray-O-Vac batteries that would make Harbinger its majority shareholder. The deal was proposed by Harbinger Capital Partners LLC, which owns a majority of stock in Harbinger Group, a holding company that seeks out investment opportunities through acquisitions. A majority of Spectrum's outstanding common stock is currently owned by investment funds affiliated with Harbinger Capital Partners. The proposal would trade Spectrum Brands stock shares for an equivalent amount of newly issued Harbinger shares. New York's Harbinger Group Inc. said in a statement that it plans to hold a majority ownership of Spectrum Brands as a long-term investment. Spectrum would remain a stand-alone, publicly traded company. The proposed transaction would have no impact on Spectrum's credit profile or financial position, Harbinger said.
Gracious Home Files for Bankruptcy
Gracious Home, a fixture in Manhattan for home furnishings for 47 years, filed for bankruptcy August 20. Jordan Smilowitz, the president and chief operating officer of the three-store chain, said the company will continue operating through the bankruptcy. "We intend to emerge from these proceedings with a significantly improved balance sheet and, consequently, greater operating flexibility," Smilowitz said in a statement. "I am confident in Gracious Home's future." The company listed between $10 million and $50 million of both assets and liabilities in papers filed with the U.S. Bankruptcy Court in New York.
Williams-Sonoma Blows Past Estimates and Raises Outlook
Williams-Sonoma Inc. posted a far stronger-than-expected quarterly profit as it used mailers and exclusive merchandise to lure more shoppers, and the upscale chain boosted its full-year outlook. Williams-Sonoma has risked its high-end image and lowered prices on some items to attract post-recession American shoppers. This in turn helped it win over middle-income consumers who buy pricey goods to convey a wealthier lifestyle. The company has also been ramping up its email marketing efforts and stepping up its focus on new product lines and exclusive merchandise in a bid to draw new shoppers. The operator of Williams-Sonoma cookware stores and the Pottery Barn furnishings chain said net profit rose to $30.8 million, or 28 cents a share, in the second quarter ended on August 1, from $399,000, or break-even a share, a year earlier. Excluding items, the company earned 31 cents a share. Net sales rose 15.4 percent to $776 million, beating analysts' estimates of $757.9 million.
Former Elder Beerman Exec Starts New Venture from Scratch
No novice when it comes to retail, Fred Mershad says he has found a welcome challenge with the launch of Linens & More For Less!, the start-up venture he leads. "Starting from the ground up, that was quite an endeavor," said Mershad, former chief executive of Elder-Beerman Stores Corp. "I learned a lot. I thought I knew a lot, but I learned a lot more." On Sept. 24, the retail chain, near Youngstown, will open a store at the Dayton Mall in the former Linens & Things location that closed in 2008. A major difference in Mershad's latest gig was he found himself needing to hire consultants for marketing, visual merchandising, human resources and information systems to get the company off the ground, instead of changing an existing company. Mershad said the strategy calls for focusing on the bedroom, bathroom and kitchen, stocking bedding, candles, towels and linens, frames and gifts. The company also has kept its corporate staff lean with 16 people, which has helped keep prices low, he said.
Intellectual Property & Multi-brand Companies
Douglas Stebbins
Saban Brands Acquires Paul Frank IP
Saban Brands has acquired all company assets and intellectual property of Paul Frank Industries. It will also manage its global licensing program, which includes more than 150 characters. PFI's chief creative officer Ryan Heuser will maintain his role and will report directly to Elie Dekel, president of Saban Brands. Creative operations will continue to be handled at PFI's current headquarters in Costa Mesa, Calif. In addition, Mossimo Giannulli, a previous owner of PFI, will continue to advise and support the brand on a strategic level. John Oswald, chief executive officer and co-founder, is leaving the company. PFI is the second acquisition for Saban Brands, which added the Power Rangers franchise in May.
Levis Launches New Global Brand, Aimed at China
Jeans maker Levi Strauss & Co. launched a new global brand in China on Wednesday, joining a growing list of companies that hope to crack this fast-growing and youthful market by tailoring their products to Chinese tastes. Models at the launch were wearing sneakers and high-heeled sandals: not a cowboy hat or boot in sight. The new brand is aimed at young consumers in emerging markets, starting with China, Singapore and South Korea. The newest incarnation of Levis will aim at a broader segment of Chinese consumers than traditional Levis, which sell for over $100 in the upscale malls along Shanghai's tony Nanjing Rd. shopping strip.
Hilton Can't Use Its Trade Name in India
A single-judge bench of the Rajasthan High Court on Wednesday upheld a recent order of a Sirohi city civil court, restraining US-based hospitality chain Hilton from using its trade name in India as it sounds strikingly similar to that of a local hotel group, Hilltone. Hilltone, which was founded in 1973, had alleged in its petition that the global hospitality major was trying to "misuse" its brand and trade name in the locality and this will adversely affect its business.
Jewelry/Mining
Mark Lenz
Circa to Launch Jewelry Dictionary on Elle.com
Estate jewelry-buying business Circa is lending its expertise to Elle.com via the launch of a "Jewelry Dictionary," an online resource that contains more than 250 jewelry-related entries and definitions. Dubbed the "Jewelry Dictionary, Luxury Defined," and found on the Elle.com Accessories Channel, the dictionary lists and defines everything from gemstone types and diamond cuts to jewelry styles and metal finishes, all written in a language that can be easily understood by those with little or no prior jewelry knowledge. The dictionary launch is part of a larger partnership between Circa and Elle magazine's Web site in which Circa will serve as Elle.com's expert in the estate jewelry market.
Rapaport Bans Trade in Zimbabwe Diamonds
The Rapaport Group, the primary source for diamond pricing, has upheld its ban on trade in diamonds from Zimbabwe's Marange region, despite the stones being Kimberley Process (KP) certified. The group said it "strongly advises all diamond buyers not to trade in KP-certified Marange diamonds and to request written assurance from their suppliers that their diamonds have not been sourced from Marange". It said that while the KP had certified 900,000ct of diamonds from Marange, KP does not have a mandate to deny its certification for diamonds involved in human rights violations and there is no guarantee that the diamonds are free of human rights violations.
De Beers' 2010 Holiday Campaign: Everlon Diamond Knot
De Beers' will have a major fourth quarter holiday marketing campaign in the U.S. this year, continuing to promote the Everlon Diamond Knot Collection introduced last year. De Beers said it had very positive feedback from participating retailers, saying Everlon met or exceeded expectations and, without exception, they are all signed up for year two. Everlon comprises of a background story and a design. It is based on the proposition that the only thing stronger than a diamond is love. The Everlon Diamond Knot is based on the Hercules knot, secured by a diamond at its centre. "It is a tribute to the enduring strength of love - without the diamond, the knot would unravel," De Beers said.
Office/Crafts & Hobby/Flowers/Party
Mark Lenz
Staples Sales Miss, Sees Tax Hit on Earnings
Staples Inc. reported weaker-than-expected quarterly sales and described a very slow route to economic recovery in the coming months, sending its shares down nearly 4 percent. The top U.S. office products retailer also lowered the high end of its full-year earnings forecast to account for a higher tax rate. "Our view of the business for the back half of 2010 remains unchanged," Chief Executive Officer Ron Sargent said on a conference call with analysts. "We expect to see a modest recovery in the economy and unemployment to remain high.
Office Depot to Sell Postal Service Products
Despite widespread opposition to closing post offices, the U.S. Postal Service is moving ahead with plans to move its retail footprint beyond the post office, announcing a deal Monday with Office Depot. The nation's second-largest office supply retailer has started selling postal products and services at 97 percent of its stores, offering Priority Mail and Express Mail services, Priority Mail Flat Rate boxes and postage stamps at almost 1,100 of its stores. The deal, in the works for more than a year, is the Postal Service's first attempt to sell more than postage stamps under someone else's roof. Susan Plonkey, a USPS senior vice president, said the deal will allow customers to do side-by-side price comparisons between USPS, FedEx and UPS at locations beyond a post office.
Restaurants/Food Service
Mark Boucher
Starbucks Acquires Brazilian Operations
Starbucks Corp. has taken ownership of its coffeehouse operations in Brazil in a move to gain access to the largest consumer market in South America, the company said. The Seattle-based company has assumed 100 percent ownership of Cafés Sereia do Brasil Participações S.A., which operates more than 20 stores throughout Brazil. Starbucks said the group's current management team will remain in place. "We have been an active member of local communities throughout Brazil since 2006," Ricardo Carvalheira, managing director of Starbucks Brazil, said in a statement. "As a result of all our dedicated partners, we made strong inroads that position us perfectly for continued growth in the market and we are deeply committed to the potential that it offers."
Friendly's New CEO Highlights Plans for Growth
Harsha V. Agadi is so confident the 75-year-old Friendly Ice Cream Corp. still holds substantial growth opportunities, the new chairman and chief executive acquired a stake in the family-dining company from its private-equity owner upon his recent appointment of leadership. Agadi, who was named CEO of Friendly's last week, stepped down last year as president and chief executive of Church's Chicken, though he retains a stake in the Atlanta-based quick-service chain. Agadi said he expects to grow Friendly's on all fronts - particularly through the brand's new fast-casual concept, Friendly's Express. "I spent five years at Church's and expanded it into a $1 billion company," said Agadi, who succeeds president and chief executive Ned Lidvall at the Wilbraham, Mass.-based Friendly's. "I wouldn't have invested in [Friendly's] if there wasn't a lot of opportunity for growth." Agadi declined to divulge the size of his share in the company, characterizing it only as "decent sized."
Winning Bid for Max & Erma's Hits $28M
A federal judge approved the sale of the bankrupt Max & Erma's casual-dining chain to the parent of the Village Inn and Bakers Square family-dining restaurant brands for $28 million. The winning bankruptcy auction bid from Denver-based Newport Fidelity Holdings LLC included essentially all assets of Max & Erma's Restaurants Inc., which filed for Chapter 11 bankruptcy protection last October. Those assets included leases for at least 51 corporate restaurants as well as 26 franchised units and eight area developer agreements, according to court documents.
Banking & Lending
Douglas Stebbins
Lease Accounting Proposals May Restrict Bank Lending
There may have been few surprises in this week's new lease accounting proposal by the International Accounting Standards Board (IASB), but that didn't stop alarm bells ringing in the finance departments of some of the nation's largest companies. And while the affect for major supermarkets and airlines attracted most attention, it may be its impact on the troubled banking sector that threatens to reap the most damage on the UK's fragile economy. The leasing industry is big business. US estimates put the value of global leased assets at £765.8bn, which equates to about 21 times the UK's annual defence budget. The current operating lease commitments of the top 50 FTSE 100 companies alone comes to about £94bn, according to a high level study by one major accounting firm. But it's in the troubled financial sector where the proposals may cut deepest. Banks are major lessees, holding thousands of properties in shopping malls and high streets where they operate retail outlets. Many of these leases are currently hidden off balance sheet, according to the IASB, which wants to bring them back on in the form of a "right-of-use" asset and a liability to pay rentals. Banks are also significant lessors and under the proposals if a bank still holds the risks associated with a leased asset, it must report an associated liability. Increased liabilities are bad new for banks which are bound by capital requirements set by regulators. If a bank's balance sheet lists towards the liability side its ability to lend shrinks.
A World without Overdraft: New Rules Take Effect
Say goodbye to those nasty surprise overdraft fees. Federal Reserve rules that took effect on Sun., Aug. 15, prevent banks from automatically enrolling customers in overdraft protection when making debit purchases or withdrawing money from ATMs. While banks worried about losing revenue have been aggressively promoting "opt-in" overdraft plans, many customers are choosing to risk having their card declined rather than face a $35 overdraft fee. But being unable to pay for your purchases can not only be embarrassing, it can sometimes deprive you of basic needs.
Comments
Post new comment