Macy's Goes Global

Macy's extended its global reach to 91 countries through its online shopping sites Macys.com and Bloomingdales.com, which automatically calculate checkout costs in the shoppers' home currencies and displays the current exchange rate, shipping costs, and all applicable taxes, duties, and tariffs. Not all consumers, though, will see content in their local languages, as all site communication remains in English. Shipping usually takes from four to 13 days and comes with a 180-day return policy. Macy's move comes not a moment too soon. A Cisco Systems, Inc. survey of 32 e-commerce retailers selling worldwide found that global e-commerce, including travel, auto purchases, and online retail sales, will increase 13.5% annually to reach an estimated $1.4 trillion in 2015.

US Companies Reshoring

It's not quite an exodus, but a number of US companies are moving manufacturing out of China and back to the US in a trend called "reshoring.' The reasons, according to a Fortune article, include reduced price differential as costs rise in China, local financial incentives win back factories, minimized shipping delays, elimination of communications problems, less travel, and above all, exchanging increasingly shoddy Chinese-made products for 'Made in USA' quality. According to a survey by Accenture, some 61% of manufacturing executives said they were considering re-shoring manufacturing and supply. A Boston Consulting Group report noted average Chinese wages were 52 cents per hour in 2000, but will rise to an estimated $4.41 per hour by 2015. IHS Global Insight noted shipping costs rose 71% because of higher oil prices, as well as due to cutbacks in ships and containers. Although labor-intensive manufacturing such as apparel will likely be kept in China or sent to even lower wage countries, the return of factory jobs, even if most of them are automated, bodes well for the US economy.

NumBytes 21: 88% E-Reader Share Left

According to a Pew Internet and American Life Project survey of 2277 US adults, ownership of e-readers such as the Amazon Kindle and Barnes & Noble Nook doubled from 6% in November 2010 to 12% in May 2011. Put another way, there's 88% of the e-reader market share left to be fought over.

Barnes & Noble's Pecking Order

As sales of the printed book plummets, digital content feathers the nest of Barnes & Noble. So what's a bookseller to do to send foot traffic soaring? Bring in the Angry Birds -- not the Hitchcock version, but the Rovio app that plays on the B&N e-reader Nook. Customers who flap over to a brick store will get a digital version of 'Mighty Eagle' for free.

B&N CEO William Lynch noted stores will stock more high-margin games and toys and bust their tailfeathers marketing an upcoming Rovio-published cookbook containing egg recipes.

Jackson-Hewitt Tax Service Objection Filed

Jackson-Hewitt Tax Service's official committee of unsecured creditors filed with the US Bankruptcy Court an objection to the Debtors' motion on two counts. For the first count, they objected to an order scheduling a combined hearing on adequacy of the company's Disclosure Statement and confirmation of the Plan, approving the form and manner of notice of a combined hearing and commencement of the Chapter 11 cases, establishing procedures for objecting to the Disclosure Statement and Plan, and waiving the requirement for a 341-meeting of creditors. On the second count, they objected to an order approving pre-petition solicitation procedures, approving adequacy of the company's Disclosure Statement, and confirming the Plan of Reorganization. According to the committee, the objections hinge on publication notices applying to 'known' creditors.

Mortgage Rates Edge Up

Bankrate.com reported that the average conforming 30-year fixed mortgage rate rose to 4.71%, up from last week's 4.66%, according to its weekly national survey ending June 29, 2011. It also reported that the average 15-year fixed mortgage rate was 3.86%, up from 3.83% last week.

Leonard Green and CVC Acquire BJ's

Leonard Green & Partners and CVC Capital Partners acquired BJ’s Wholesale Club for $2.8 billion in cash -- $51.25 per share, which is a 7% premium to the closing price of BJ’s shares on June 28. Subject to the usual approvals, the transaction is expected to close during the fourth quarter of 2011.

Wal-Mart Woes in China

What is it about China that's driving away top US officials? No sooner does US ambassador Jon Huntsman beat feet for the US and a presidential bid, then Wal-Mart VP of Operations in China Shawn Gray resigns -- completing a trifecta of ex-Wal-Mart executives from China which includes CFO Roland Lawrence and COO Rob Cissell. Maybe there's something in the water.

Or maybe it has something to do with declining fortunes. China Market Research Group estimated the company's market share dropped from 8% to 5.5% over the last three years as e-commerce, rising real estate and labor costs, and evolving consumer preferences bedevil their strategy. Wal-Mart figured big box retailing would take off in China as it did in the US, the same mistake Home Depot and Best Buy made -- and they exited.

One big boo-boo: no free parking. Chinese shoppers are like US shoppers. They hate to pay for parking and Wal-Mart apparently doesn't offer validation. A second no-no China Market Research noted: even Wal-Mart has trouble competing on low prices against cutthroat mom-and-pop stores where the owner and family live comfortably on $300 per month.

In a Wall Street Journal interview, Wal-Mart President and CEO Mike Duke shrugged off any problems in the China unit, noting that growth takes time. Wal-Mart operates 333 stores in China with revenues of $7.5 billion. The company announced plans to build a headquarters in Shanghai to oversee online operations in China. Forrester Research estimated that e-commerce sales in China will reach $159.4 billion by 2015, up from $48.8 billion in 2010.

Walgreens Embraces Clicks

Clicks-to-Bricks shopping -- place an order on the web and pick it up at the local store -- is nothing new, but Walgreens rolled out the service for 300 in its Chicago-area stores, with the the other 180 area stores scheduled to be up and running by August. Walgreens’ WebPickup site can include most non-prescription items and can be ready in as fast as one hour. Some stores will 'deliver' to the curbside.

NumBytes 20: E-Pottermania

US sales of e-books jumped 163% to $313 million for the year ending April 30, 2011, according to the Association of American Publishers, while US sales of hardcover books for grown-ups dropped 19% to $300 million. Come October, look for the e-blowout.

Harry Potter is scheduled to become e-book history in October when JK Rowling releases digital versions of all her titles in multiple languages and on her own. No publishers. No middlemen. Nothing but online 'Pottermore' content, including extra material not found in the books.

You can just hear the bookstores shudder, probably before they shutter. For all the celebrity tell-alls, cookbooks, romance novels, and lots of bad teenage vampire pablam, the one series that shot bookstore sales through the roof was Harry Potter. The only booksellers dancing in the aisles are likely to be Amazon.com, with its Kindle, and Barnes & Noble, with its Nook. Apple had no comment, but it'll likely do a jig, too, after seeing its iPotter sales.

Bookstores can always retaliate and not carry Potter, but the billionairess author likely could care less. The target audience for her novels remain tweeners and teens, and guess which age groups grew up with digital content and likely call bookstores by another name...antique shops?

According to the Wall Street Journal, publishers remain adamant they will not offer contracts without acquiring digital rights. But their average royalties of 25% of net sales leaves many authors looking at digital publishing alternatives where 50% to 75% are more prevalent. With more digital editions, it's not just bookstores that are being herded onto the endangered species list, publishers themselves face increasing pressure of becoming irrelevant.

Imports Rise 5.9% In May

According to the Journal of Commerce, US containerized imports rose 5.9% in May from a year earlier to 1.5 million 20-foot-equivalent units (TEU). The five-month 2011 average was 7.2% and the Journal forecasts 4.7% growth for the rest of the year.

Furniture (down 2%), toys (down 9%), and sheets, towels, and blankets (down 17%) suffered the most declines in May. Auto parts shipments rose 29% over last year as Japanese automobile factories caught up after being disrupted by the earthquake and tsunami. China remained the top source of US containerized imports, with a 47.6% share in May.

Economy Watch: Sales and Gas

ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on June 25, 2011 rose 2.9% from the week before, and was up 3.0% from the same period last year.

Shoppertrak Retail Sales Data
For the week ended June 25, 2011, ShopperTrak's National Retail Sales Estimate was $90.866 billion, down 7.9% from last week's $98.669 billion, and up 1.2% from the same week last year. As expected, post Father's Day (June 19) sales dropped. Sales should pick up in the week before July 4th weekend.

Slowing US Sales in May
The US Commerce Department's Bureau of Economic Analysis reported personal income increased $36.2 billion, or 0.3%, and disposable personal income increased $29.2 billion, or 0.2% in May. Personal consumption expenditures remained essentially flat, rising only $4.6 billion, or less than 0.1%. Although the numbers still trend upwards, the rate of increase flattened, indicating a slowing economy.

Gas Prices Down
The Energy Department announced that for week ending June 27, 2011, the average price of US gasoline fell to $3.574 a gallon, down from $3.652 per gallon week earlier.

Diesel prices remained at $3.95.

Target Squared

The Federal Court of Canada denied Target Corp.'s request for injunction against Fairweather Ltd to stop using the name Target Apparel on its 15 Canadian stores, noting the US company would not suffer irreparable harm waiting for a full trial over the issue scheduled for November 2012.

Jobs Down, But...

On June 24, initial unemployment numbers increased to 429,000, according to the US Labor Department, the 11th straight week over the magic number 400,000 -- below that and employers are adding jobs faster than they shed them, and above that, well, we've been there for the last couple of years.

The bright spot is manufacturing, which ramped up as companies refilled their depleted inventories. Employment in that sector is at 11.7 million jobs in May 2011, up 1.4% from May 2010 according to the US Bureau of Labor Statistics, but only about 9% of the total US non-farm workforce (compared to 31% back in 1950). The decline can be traced to not only better automation technology, but cheaper manufacturing costs -- even including transportation -- overseas.

Oddly enough, the manufacturing industry is about to shrink even more if it can't find more qualified workers. As noted in the VCF Retail Bulletin article: NumBytes 9: Readin', Writin', and Manufacturing, 2.7 million of those 11.7 million manufacturing workers are 55 years old or older -- and that's a big hole to fill over the next 10 to 15 years as they retire. The National Association of Manufacturers' program to goose standards at community colleges may work, but if the suppliers intend to keep supplying, they might consider an older source of new skilled employees -- union apprenticeship programs.

NumBytes 19: Consumer Debt Windfall

JP Morgan Chase & Co wrote off $45.9 billion of consumer credit card debt out of the goodness of its corporate heart. Well, sort of. The company did abandon lawsuits pursuing $45.9 billion of debt collection in New Jersey, New York, California, Florida, and Illinois, according to the Wall Street Journal, but cited 'paperwork' problems that included incomplete documentation and incorrect information. According to one NY state judge who dismissed 150 of the credit recovery lawsuits, paperwork submitted by the bank appeared to be robo-signed -- apparently robo-signing isn't limited to mortgages.

As of March 2011, total US credit card debt is about $780.18 billion, the Federal Reserve reported, on about 610 million credit cards. Fitch Ratings noted that as of January 2011, about 3.2% are in 60-day default. So, writing off $45.9 billion out of $780.18 billion is just under 6%.

The good news is that consumers now have a $45.9 billion windfall to spend (although it is the proverbial drop in a bucket comparerd to the $2.43 trillion in total US consumer debt). The bad news is that the new US Consumer Financial Protection Bureau now has something more to investigate.

Government Intrusion Or Protection?

The new US Consumer Financial Protection Bureau issued six areas for possible oversight: debt collection, consumer reporting, consumer credit, money transmitting, check cashing, prepaid cards, and debt relief services. Car loans and personal loans are high on the agency's agenda as well.

This new agency has the banking industry shaking with fear of regulatory oversight, although given the industry's input into the deregulation of the financial sector and the recent uncovering of fiduciary shananigans with all sorts of esoteric credit, debt, and other fiscal instruments that played havoc with the economy, taking a regulatory baseball bat to the knees of some of the more questionable practices of the banking industry may be a good thing.

And yet, turning banks into risk-averse, cash-hoarding entities does no good for an economy that runs on credit. Suppliers and retailers depend on credit to expand and prosper. Should they overexpand and tumble, bankruptcy exists to correct such excesses via restructuring or liquidation. Working while looking over a shoulder is hard enough. Working while looking over both shoulders is no way to run a business.

Gore In An Anti-Trust Investigation

The Federal Trade Commission and European Commission are investigating complaints against WL Gore & Asso. over alleged anti-trust violations concerning use of waterproof Gore-Tex fabric in apparel. Columbia Sportswear Co filed a complaint that WL Gore's licenses restricted manufacturers -- including Addidas, Nike, Timberland, LL Bean, Patagonia, Rockport, and Bass Pro -- to use only Gore-Tex in their products. WL Gore denied any wrongdoing, but according to the Wall Street Journal, at least one outdoor apparel and gear retailer, Recreational Equipment Inc., said it supported the FTC investigation.

Deb Shops Files For Bankruptcy

Fashion retailer Deb Shops, Inc. filed for Chapter 11 bankruptcy on June 26, 2011. Ableco Finance LLC issued a stalking horse bid to acquire substantially all of the Deb Shops' assets through a Court-supervised auction under Section 363 of the US Bankruptcy Code, with a close date in September 2011. Current owner Lee Equity Partners LLC will receive an undisclosed ownership stake in Deb Shops following the sale on account of its interest in the company's senior credit facility. Ableco committed up to $21.7 million in financing to support Deb Shops' business and liquidity needs, and current CEO Mark Hoffman will remain as CEO.

Nebraska Book Files for Bankruptcy

NBC Acquisition Corp. and its subsidiaries, including book retailer Nebraska Book Company, filed for Chapter 11 bankruptcy on June 27, 2011. The company reached an agreement in principle with more than 95% in principal amount of its 8.625% Senior Subordinated Notes due 2012 and the holders of more than 75% in principal amount of NBC Acquisition's 11% Senior Discount Notes due 2013 that would restructure approximately $450 million of outstanding loans and bonds, including the elimination of up to $77 million of debt at the NBC Acquisition level.

The company's fiscal 2011 financial results reported revenue of $598 million and earnings of $60 million. As of June 26, 2011, the company has more than $20 million in cash on hand and had secured commitments for $200 million in debtor-in-possession financing to support restructuring and operations. NBC Acquisition Corp. reported a loss of $98 million, the majority due to an $89 million write-down of its goodwill intangible assets.

Harry & David Holdings Amends Plan

Harry & David Holdings filed a Second Amended Joint Chapter 11 Plan of Reorganization and related Disclosure Statement with the US Bankruptcy Court on June 27, 2011. The amended plan seeks the elimination of the PBGC Claims and the Debtors' Senior Notes in exchange for the issuance of new stock and a rights offering allowing the PBGC and the certain Noteholders to purchase 74.9% the new stock contingent for $55 million upon emergence from chapter 11. Noteholders participating in backstop agreement requiring $55 million in new equity financing upon emergence from bankruptcy will receive 50,000 shares in Reorganized Holdings.

NumBytes 18: $7.4 Billion For What?

Give Chinese hypermarket retailer Sun Art Retail Group Ltd credit for contrarianism. At a time when the SEC is investigating Chinese companies left and right for stock fraud, accounting fraud, public relations fraud, and just plain fraud fraud, Sun Art is going ahead with its planned $1 billion initial public offering set for July in Hong Kong -- the hot place for IPOs this year, even if overall stock performance has been underwhelming so far. The problem is, according to the Wall Street Journal, recent IPOs raised the money, but mostly tanked in the aftermath of opening day.

If Hong Kong gets a general reputation for easy money and poor performance, what does it say about the reputation for the companies that seek IPOs there and their chance for success? Six firms, including Sun Art and sportswear manufacturer Hosa International Ltd, are seeking more than $7.4 billion in IPO financing over the next few weeks.

Borders Group D.I.P. Amendment Approved

The US Bankruptcy Court approved Borders Group's motion for an order authorizing the Company to enter into a second amendment to its D.I.P. credit agreement. As previously reported, the second amendment will enable the Debtors to commence and consummate a coordinated dual-track sale process for the sale of their businesses by the end of July. The stalking horse bid must be entered on or before July 15, 2011, the auction to be held on July 19, 2011, the sale hearing on or before July 22, 2011, and the closing on or before July 29, 2011.

Sears' Spin: Orchard Supply

Sears Holdings Corp. intends to spin off its Orchard Supply Hardware home improvement unit as a separate publicly traded company via an initial public offering. Orchard Supply Hardware is a San Jose-based chain that operates 89 stores, all of them in California. OSH reported a profit of $8.7 million on $660.7 million in revenue in fiscal 2010. Sears valued the IPO at $82 million, but did not name a target share price, but expected the IPO launch in the fall.

Social Marketing 101

According to a 2011 Retail Systems Research study on leveraging business intelligence, retailers will gain the most by tapping into social media networks for Marketing (90%), followed by Customer Service (80%), Online Sales (33%), Operations (27%), and Store-specific Sales (22%).

But before retailers launch into giant data mining operations and customer support systems, they may want to read Customer Dis-Service from our June 20, 2011 entry. Bodies, not web pages, make a difference.

Vanity Barcodes

Artists are transforming the ugly duckling of the scanning world, the rectangular barcode, into elegant swan of a vanity barcode. The new barcodes work the same as the old ones, just with graphic embellishments, such as making the black and white lines into skyscrapers, vehicles, or any such thing. According to the Wall Street Journal, the new, fancier barcodes are supposed to 'better connect with customers.'

Uh-huh.

Product packaging is indeed an art as much as a science, but can you name anyone who would buy a product based on the look of a barcode? OK, so there's probably one.

The new vanity barcodes are *not* like the new, square QR Codes that you use with your smartphone to grab a coupon, land on a web page, or otherwise send you to some marketing deal. Nope. Vanity barcodes are for looks only.

The real danger is that the vanity versions with the graphical do-hickies don't scan properly. Good luck on convincing retailers to imperil their inventory control. Maybe skipping barcode redesigns and going directly with radio frequency tags would be a better idea.

See the June 13, 2011 entry, Barcodes Squared for a look at Quick Response Code use.

NumBytes 17: Trails To Rails?

A 2008 Rand Corp. study found that in 2005 railroads hauled 10.33 million ton-miles per track mile -- about triple the 3.4 million ton-miles per track mile in 1980. That's a nice gain in productivity consdiering all the miles of track abandoned over the period, but a darker number may put fear into the hearts of shippers and retailers alike.

According to the head of the Federal Railroad Administration Joseph Szabo, the US railroad freight system moves an average of 40 tons of freight per person per year. He expects another 100 million people in the US by 2050, which works out to an additional 4 billion tons of needed freight capacity. Four billion?

Never Fear, HR 2091 is here: the Freight Rail Infrastructure Capacity Expansion Act of 2011 introduced on June 2, 2011. It offers tax credits to buy more locomotives, lay more track, and repair infratructure. Of course, in the first quarter 2011, almost all major railroads in the US and Canada recorded a nice jump in profits: Union Pacific (24%), Norfolk Southern (26%), CSX (30%), and Canadian National (31%). Only Canadian Pacific recorded a drop in profit, blaming bad winter weather.

Good profits and a tax break? John Henry, the US might have a hammer-ready project just for you.

Genesco Acquires Schuh Group

Genesco, Inc. acquired UK casual and athletic footwear retailer Schuh Group Ltd. for 100 million pounds, less 29.5 million pounds outstanding under existing Schuh credit facilities, which remain in place, with a deferred payment plan stretching out to four years. Genesco also agreed to implement a selective management bonus plan, which will pay a total of up to 25 million pounds in 2015 subject to reaching performance targets. Genesco funded the initial payment and associated expenses with borrowings under an existing US credit facility of $89 million and the balance from cash on hand. Schuh currently operates 59 stores in the UK and Ireland, 16 concessions in Ireland, and one of the UK's largest online shoe websites.

A PVH By Any Other Name

Phillips-Van Heusen Corp. formally renamed itself PVH Corp.

New Nordstrom Credit Facility

Nordstrom, Inc. completed a new five-year $600 million senior unsecured revolving credit facility, which replaces a $650 million senior unsecured revolving credit facility that was scheduled to mature in August 2012. The new facility will be used for general corporate purposes and is scheduled to mature in June 2016.

Executives On the Move

Sears Canada's New CEO: McDonald
Sears Canada hired Calvin McDonald as it's new President and CEO, replacing Dene Rogers, in a move seen by many as an attempt to revive the struggling retailer in advance of Target's entry into Canada.

Levi Strauss' New CEO: Bergh
Levi Strauss & Co. hired Charles Bergh to be President and CEO, replacing John Anderson, who is retiring effective September 1, 2011.

Chico's New CEO: Knous
Chico's FAS, Inc. appointed Pamela K. Knous to the position of Executive Vice President - Chief Financial Officer and Chief Accounting Officer, effective June 23, 2011.

Tiffany's New CFO And COO: McGuiness and Fernandez
Tiffany appointed Patrick F. McGuiness as Chief Financial Officer, replacing James Fernandez, who was appointed to the new position of Chief Operating Officer.

Wal-Mart Going...

Wal-Mart Stores, Inc. is testing an online grocery delivery service in San Jose, California, called Wal-Mart To Go that allows customers to go to Walmart.com and order just about anything -- including fresh produce, meat and seafood, frozen, bakery, baby, over-the-counter pharmacy, household supplies, health, and beauty items -- and have them delivered to their home. Wal-mart's US grocery business (excluding Sam's Club) generated about $140.6 billion in sales in fiscal 2011, up 2.1% from the previous year, and was 54% of the company's total US revenue in fiscal 2011, ended January 31, 2011.

Borders Bankruptcy Plan

Borders Group Inc seeks to name a stalking horse bidder by July 1, an auction to be held on July 19, a sale hearing by July 22, and a sale closing on or before July 29. According to the Detroit news, private equity firms Gores Group and Najafi Cos. are two potential bidders, with Gores Group thought to be the stalking horse bidder. Should a sale fall through, Borders would proceed with liquidation.

Economy Watch: Sales, Mortgages, and Gas

ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on June 18, 2011 fell 0.7% from the week before, and was down 0.2% from the same period last year.

Shoppertrak Retail Sales Data
For the week ended June 18, 2011, ShopperTrak's National Retail Sales Estimate was $98.664 billion, up 8.6% from last week's $90.840 billion, and up 1.0% from the same week last year. As expected, Father's Day (June 19) sales provided a boost. Sales should decline this week, then pick up again in the week before July 4th weekend.

Mortgage Rates Flat
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.66%, down from last week's 4.71%, according to its weekly national survey ending June 22, 2011. It also reported that the average 15-year fixed mortgage rate was 3.83%, down from 3.91% last week.

Gas Prices Down
The Energy Department announced that for week ending June 20, 2011, the average price of US gasoline fell to $3.652 a gallon, down from $3.713 per gallon week earlier.

Diesel prices remained at $3.95 last week.

NumBytes 16: An Inconvenient Death

For convenience stores, the US Food and Drug Administration's intensified war on cigarettes will cut into sales, but not until October 2012. That's when the new, improved, and particularly graphic, make that photographic, images of a tracheostomy, lung cancer, and other aspects of death are stuck onto cigarette packaging. About 20% of high-school students smoke, which is close to the 20.6% of adults who smoke, but evidently, they need pictures because they can't read the surgeon general's warning or don't understand that tobacco is linked to 443,000 premature deaths per year among the nation's 46 million smokers. According to FDA projections, the new labels will reduce the number of smokers by 213,000 during the first year of use.

American Eagle Up For Grabs?

American Eagle Outfitters Inc., with $600 million in cash and no debt, may be a takeover target as it continues to struggle. Deutsche Bank named it one of top 50 potential leveraged buyout targets. American Eagle noted it might close 85 to 100 stores over the next two years.

JC Penney Transition

Incoming retail guru and ex-Apple Senior VP Ron Johnson will become JC Penney's CEO on November 1, 2011, sharing duties with outgoing CEO Mike Ullman for three months. On February 1, 2012, Ullman will step aside and Johnson will take over all duties.

A&P Sale Motions Approved

The US Bankruptcy Court approved three Great Atlantic & Pacific Tea Company motions to sell the assets of certain of the company's SuperFresh banner stores located in the Maryland/D.C. area (Southern Stores) to the highest and best bidder. The Court approved the following: (I) the sale of certain prescription drug inventory and pharmacy customer records assets located at the seven Southern Stores to Safeway, Inc., Walgreens Co., and Maryland CVS Pharmacy, L.L.C.; (II) the assumption and assignment of a lease agreement between A&P and landlord Englar Center Limited Partnership; and (III) the sale of the Debtors' leasehold interest, inventory, furnishings, equipment, and pharmacy assets of the SuperFresh Ellicott City, Maryland store location to SuperValu, Inc.

Cloudy, With A Chance for Data

A RBC Capital survey of 1500 people found that 76% of respondents said they were likely to sign up for iCloud, Apple's free e-mail, back-up, and data syncing service; 73% said they were likely to use iMessage, Apple's answer to the BlackBerry's messaging service; and 30% were likely to sign up for Apple's iTunes Match service, which costs $24.99 per year. Those numbers, said RBC, would translate to 150 million subscribers, which would compare favorably with other online giants: Facebook (700 million), Microsoft/Skype (700 million), Twitter (300 million), Yahoo (300 million), and Google/Gmail (200 million).

PC Forecast Down

Research firm Gartner lowered its view on global PC market growth for 2011, from 10.5% growth to 9.3% growth, citing customer preference for tablets like the Apple iPad over small laptops, economic uncertainties, and a lack of compelling PC products.

Rumors of Booksellers' Demise...

As sales of paper books fall at bookstores, online sales increase, and digital books outsell paper ones at Amazon.com, will brick-and-mortar bookstores be around for much longer? Liberty Media is bidding for ailing Barnes & Noble (mostly for its Nook e-reader) and Borders is in Chapter 11 and closing stores as fast as it can to stay alive long enough to be bought.

Maybe, maybe not.

Change is painful in all industries. While buggy and buggywhip shops still exist, auto dealers and auto parts shops are more plentiful, at least for now. We can only wonder when jetpack and aircar shops will predominate.

NumBytes 15: Strangled By Debt

The resurgent US economy is hitting a sales lull and economists -- not to mention us consumers -- are wondering whether a double dip recession is in the offing. Since commerce powers the economy, data from the Federal Reserve shows a bright spot and a dark spot.

The ratio of household debt to disposable income hit 130% in 2007 and you can only play with the credit cards and take equity out of your home for only so long before the party winds down. The good news is that said ratio in the first quarter 2011 fell to 114%. The bad news is that a sustainable ratio is about 90% -- the 1990s saw an average of 89% -- and it could take another five years to drop the ratio to that level.

Carter's Buys Bonnie Togs

US apparel marketer Carter’s, Inc. agreed to acquire Canadian children’s apparel retailer Bonnie Togs for approximately $98 million. Bonnie Togs operates 59 retail stores in Canada and sells products under the Carter’s and OshKosh B’gosh brands, as well as other private label and national brands. Carter asserted it could operate about 160 stores contributing total annual revenues of more than $200 million by 2016.

New Rent-A-Center Credit Facility

Rent-A-Center, Inc. is refinancing its current senior debt by entering into a new $750 million senior credit facility, consisting of $250 million in term loans and a $500 million revolving credit facility. The company’s existing $375 million revolving credit facility expires September 30, 2013. The company expects to complete the transaction in the third quarter of 2011, and intends to repay its existing senior term debt, currently approximately $358 million outstanding, with the proceeds of the new term loans and by drawing approximately $108 million on the revolving credit facility.

EBay Acquisitions and Divestitures

EBay, Inc. completed the acquisition of GSI Commerce, Inc. in a deal worth approximately $2.4 billion ($29.95 per share). GSI Commerce will operate as a separate business unit led by President Chris Saridakis. In addition, eBay will pay settlement amount of 33 cents per share to drive the price of the deal towards $3 billion. EBay also completed the divestiture of 100% of GSI’s licensed sports merchandise business and 70% of ShopRunner and Rue La La to a newly formed holding company led by GSI founder and former CEO Michael Rubin. EBay will hold the other 30%, and loan the new company $467 million while Rubin kicks in $31 million.

Phone Phears

According to IDC, smartphone sales will jump roughly 50% to 450 million units in 2011, up from 303.4 million in 2010. Those sort of numbers scream for mobile sales growth, and according to Forrester Research, consumer purchasing on mobile phones will grow 39% a year from 2011 through 2016, from roughly $6 billion in 2011 to $31 billion in 2016. But all those dollars account for only 2% of online retail sales in 2011 and will rise to only 7% in 2016. So far, only 13% ever bought anything except digital products like ringtones on a mobile phone.

That's good, but not jump on your desk and do a happy dance good. Pity. The industry just started pushing those fancy square barcodes -- Quick Response Codes -- just so smartphones can scan and tune into websites.

The lag stems in part from customers often using smartphones to check on items and pricing, then turning to more traditional retail and web shopping for the actual purchase. However, two major barriers exist in consumers' minds that inhibit mobile phone purchases: fear of not keeping the mobile phone numbers private (45%) and fear that mobile sites lacked security (44%).

From the retailers' perspective, it's not easy figuring out which technology to back. Web sites? OK, that's easy -- a must. But which of the scores of tablets? Apple? Probably. The rest? Crapshoot. Now along comes smartphones. iPhone? Android-based? Other? One app should do for all phones using that operating system, but considering how something as 'stable' as the Microsoft Windows platform often causes crashes between programs, what are the odds that apps will do the same? IDC noted that Android would grab 40% market share by end 2011

Any indecision has plenty of company. According to Forrester: 29% of the retailers surveyed have implemented a mobile strategy that they are now refining, 19% have a strategy that they are beginning to implement, 9% have a strategy, 34% are in the early stages of developing a strategy, and 9% have no strategy.

Indeed, the report noted that the most compelling app for retail is to help store employees find items in the store for customers, and if not, order them to save the sale.

Other Retail Bulletin articles:

Mobile Is As Mobile Does
Smartphones As Virtual Wallets
Smart Retailing With Smartphones
Barcodes Squared

NumBytes 14: The Math Of Merchandising

Of all the products with movie tie-ins, which one should retailers bet on to provide shelf space and promote? Good question. But they should bet on the kid movies because that merchandise moves -- and it's no longer just toys and t-shirts. For example, the movie Cars 2 will offers toy cars front and center, but also include other tie-ins such as shampoo, food, tissues, and guitars. A hot movie generates a generous extra revenue stream for all concerned. According to trade publication Licensing Letter, the average royalty rate for all products licensed from entertainment properties in 2010 was 9.4% -- a couple percentage points for a Disney release, more than a couple points less for a more obscure property.

How much does that generate? According to a Wall Street Journal article, the top six franchises in 2010 were: Mickey Mouse ($9 billion), Winnie the Pooh ($5.7 billion), Disney Princessess ($4.4 billion), Toy Story ($2.8 billion), Barbie ($2.7 billion), and Cars ($2.5 billion). Bet on the kids...because a lot of them are also over 18.

Macy's New Credit

Macy’s, Inc. entered into a $1.5 billion bank credit agreement that will mature on June 20, 2015, replacing a previous $2 billion facility which was set to mature on August 30, 2012. The company expects its interest expense in 2011 will be approximately $442 million, down from approximately $450 million.

CSN Stores Raises $165 Million

Online home goods retailer CSN Stores raised $165 million in first round institutional financing from Battery Ventures, Spark Capital, HarbourVest Partners and Great Hill Partners. The company will use the funds to consolidate its current 200 sites into one (Wayfair.com) during July and August and for potential acquisitions. CSN is also launching a new flash sale site, JossandMain.com, which will remain a separate site.

GNC's Kaplan Resigns

GNC Holdings, Inc. President, Chief Merchandising and Marketing Officer, and Director Beth Kaplan resigned. CEO Joe Fortunato will assume duties of President.

Guess' Marciano To Retire

Guess?, Inc. co-founder and Chairman of its Board of Directors Maurice Marciano has notified the company he will retire on January 28, 2012.

Station Casinos Plan Effective

Station Casinos emerged from Chapter 11 protection on June 20, 2011. All properties remain under its umbrella and as the result of a $200 million re-investment, Frank and Lorenzo Fertitta own 45% of the company, its largest shareholders.

IMF Economic Forecasts 2011-2012

The International Monetary Fund lowered its forecast for US economic growth to an annual rate of 2.5% in 2011 and 2.7% in 2012, down from its previous forecast of 2.8% for 2011 and 2.9% for 2012. The IMF asserted higher commodity prices, bad weather, and supply chain disruptions contributed to a slowing US economy in 2011.

The IMF predicted global economic activity to grow at an annual rate of 4.3% in 2011, which would be down from 5.1% in 2010. In the first quarter of 2011, global activity rose at a 4.3% rate. It predicts China, the world's second largest economy, will grow 9.6% this year, down from 10.3% in 2010, but still the strongest of any emerging economy.

Customer Dis-Service

If you have a miserable experience at a store, chances are, you might never go back. According to Consumer Reports magazine, 64% of US consumers walked out of stores due to poor assistance and 67% hung up on a call before their problems were even addressed. The biggest gripe? Not being able to get a person on the phone. That was followed by rude salespeople.

Wal-Mart and Sam's Club were ranked by the magazine's subscribers among the worst in areas such as buying small appliances, electronics, cell phones and groceries. Wal-mart and Sam's Club also ranked at the bottom when it came to buying computers. After all, it is a warehouse store, not a boutique. The best stores for computer-smart sales people? Apple and Micro Center, said the magazine. See Retail Bulletin: NumBytes 12: Apple of Productivity's Eye (June 17, 2011) for what goes on in the Apple stores. The Wal-Mart CEO might want to take notice, considering Wal-Mart's same store sales have dropped for the past eight quarters.

Does fielding a store full of smart, pleasant staff work? Sure does. According to an American Express survey of 1,018 consumers in February 2011, 70% will spend more time with a company that provides good customer service. And before chains point to all those wonderful web and social media enhancements, know that the survey found that while 67% of respondents would be fine starting with the company website, 90% want their inquiries handled by a live person over the telephone (only 20% wanted automated response systems on the phone). Also know that about 75% were very or somewhat interested in dealing face to face.

NumBytes 13: Lookin' Better, Dad

OK, so the tie, dozen golf balls, and 'World's Greatest Dad' mug were all, ahem, wonderful gifts, but what did Dad really want? Plastic surgery.

According to the American Society of Plastic Surgeons, the number of men who had cosmetic procedures in 2010 rose 2% to 1.1 million.

Oil Prices Falling, But How Far?

Oil for delivery in July closed at $93 per barrel, its lowest price since February 2011, as economic forecasts fell across the globe, Saudi Arabia announced it would pump more crude, and as the dollar regained strength, all of which tend to dampen oil prices. In the US, oil consumption is down 3.2% from year ago, according to the US Energy Information Administration.

Grocery Sales Fall

The average American spent 7% less each month on groceries and $94.60 on a routine trip, compared to $98.70 in 2010, according to Acosta Sales & Marketing's consumer survey. Blame higher oil prices, at least in part. The survey found that the average shopper will make fewer grocery trips when the price of gas reaches $3.70 per gallon -- a price that's only starting to be in reach at the pump.

Households earning less than $75,000 reduced budgets 10% or more, while higher income shoppers spent up to 34% more, since many remain loyal to brands tied to higher premiums this year. About 53% of Americans paid more attention to what they buy at the grocery store, 43% bought less food, 41% took advantage of sales/coupons, and 22% shopped at less expensive stores.

Retail Port-cullis

As consumer sales slowed, retailers kept a sharp eye on inventory and slammed down the portcullis on buying. According to the National Retail Federation and Hackett Associates' Global Port tracker report, traffic at ports nudged up only 0.3% in May 2011 after a 7% increase in April. The report predicts a sluggish summer, with 1% rise in traffic in June, 0.5% rise in July, and 3% rise in August. The fall looks better with forecasts of 12% rise in September and 19% in October.

Warnaco Secures Credit

Warnaco Group, Inc. closed on a $200 million senior secured term loan due 2018 with a floating interest rate of at least 1.0% plus a fixed margin of 2.75%. The loan has been assigned ratings of BBB- by Standard & Poor’s and Ba1 by Moody’s, and both rating companies affirmed Warnaco’s corporate credit ratings at these levels with a stable outlook. Warnaco plans to use the proceeds for general corporate purposes, which include funding internal growth and acquisitions, repaying revolving credit borrowings, and repurchasing common stock. Accordingly, the company intends to accelerate the repurchase of its shares under its previously authorized five million share repurchase program.

Rue21 Store Expansion Plans

Teen reatailer Rue21 noted it expects to open its 700th store at the end June 2011 and its 1000th store by 2014.

Levi's Anderson Retires

Levi Strauss & Co. President and CEO John Anderson is retiring effective September 1, 2011 and will also resign from the company’s Board of Directors. The company hired Charles (Chip) V. Bergh as the new President and CEO effective September 1, 2011 and also appointed him to the Board of Directors.

Neiman Marcus Hires Koryl

Neiman Marcus, Inc. hired John E. Koryl as president of its $715 million Neiman Marcus Direct online division, succeeding Gerald Barnes, who will become Executive VP, Chief Merchant, Neiman Marcus Direct.

Push-Me, Pull-Me Consumers

Consumer schizophrenia continued to be reflected in polls. This time, the Bloomberg gauge of economic expectations fell from -16 in May to to -31 in June, the lowest level since March 2009. Yet Bloomberg's Consumer Comfort Index rose from -45.9 to -44.

What gives?

Bloomberg analysts note consumers are concerned about keeping or getting jobs as well as inflation eating away at their income. As for jobs, the Labor Department reported jobless claims fell from to 414,000 from 440,000 for the week ending June 11. As for inflation, the Consumer Price Index, the government's key inflation measure, rose 0.2% in May and 3.6% over the past 12 months, although core CPI, which deletes food and energy prices, rose 1.5% over the past 12 months, the biggest increase for core CPI since January 2010. According to Bloomberg, that rise in Comfort is a response to the decrease in gas prices.

Moderating gas prices and steady gains in employment should boost the economy, but the Commerce Department reported that May 2011 retail sales fell 0.2%, to $387.1 billion, from April. Most of that drop came from fizzling auto sales -- take out cars and retail sales actually rose 0.3% in May. No worries, shoppers. Retailers will muddle through...because increases are still better than decreases.

NumBytes 12: Apple of Productivity's Eye

According to a Wall Street Journal article on Apple's retail accomplishments, Apple's annual retail sales per square foot soared to $4406 (add online sales and it jumped to $5914). No wonder. Apple can pick the best of the crop because it is inundated with applications, and then the company follows up with extensive training and a semi-mentoring program. No sales commissions. No sales quotas. But if sales staff don't sell enough service contracts, they're retrained or reassigned to another position. Apple also triple books the tech support department. Of course, it helps to have smart, hot products and a store design that includes one-on-one training area, personalized set up area, and kids play area so mom and dad can shop. Staffers even cheer customers when they buy new products on opening day -- kinda like Saturn used to do when you bought a car. No wonder there's an 'Apple Happy Dance' fad making the rounds of the internet.

In contrast, Tiffany & Co retail sales per square foot was $3070, Coach Inc. was $1776, and Best Buy was $880. Apple's success is done with staff paid just a tad more than usual -- between $9 and $15 per hour, and up to $30 per hour for the tech support 'geniuses' (store tech support is located in the 'Genius Bar'). That's management genius.

Revlon Refinancing

Revlon, Inc.'s wholly-owned operating subsidiary, Revlon Consumer Products Corp., completed a new $140 million revolving credit facility, the interest rate spread over the LIBOR base rate was reduced from a 3.00% flat rate under RCPC's prior revolving credit facility to a range of 2.00% to 2.50%, based on availability under the 2011 Revolving Credit Facility, with the initial interest rate expected to be 2.00%. Also, under the 2011 Revolving Credit Facility, the commitment fee on unused revolver availability was reduced from 0.75% to 0.375%. Further, the maturity was extended to June 2016 (it was previously scheduled to mature in March 2014). The new Facility continues to be guaranteed and secured by the same collateral package and guarantees that secured the prior revolving credit facility, including being supported by, among other things, guarantees from Revlon, Inc. and, subject to certain limited exceptions, RCPC’s domestic subsidiaries.

Alibaba Splits Into Three

Alibaba Group divided Taobao — China's growing online e-commerce site — into a consumer marketplace like eBay, an online shopping mall of major retailers and internationally known brands, and an Internet search engine focused on e-commerce. The split eliminated, for now, possibility of an IPO.

Collective Brands CEO Splits

Collective Brands, Inc. director, Chairman of the Board, and CEO Matthew Rubel resigned on June 15, 2011. Michael J. Massey was named the interim CEO and D. Scott Olivet was named the company's Non-Executive Chairman.

Mobile Is As Mobile Does

Life may be like a box of chocolates, but retailers should make sure they wave those chocolates under shoppers' noses to keep purchases in store and not sending them out to the discounted web site for a couple bucks off. The key is pairing smart database mining of a shopper's past purchases and preferences with selected news, reviews, and suggested items. A small discount wouldn't hurt, either. And it all revolves around smartphones.

Of course, there's a certain irony in mining a computer database to make shopping a more personal experience, but customers with smartphones can be changed from 'scan and scram' shoppers -- in which they search online for a cheaper price while in a store and then buy it online -- to engaged shoppers who buy in the store, not online.

Smartphones moved from fad to trend to mainstream. According to IDC, smartphone sales will jump 50% in 2011 to 450 million in 2011, up from 303.4 million in 2010. A Lightspeed Research survey found 56% of respondents believed mobile can make the shopping experience more enjoyable. IDC also found that 30% of consumers ages 25-44 considered a retailer’s mobile competence a major factor when shopping. ABI Research predicts mobile commerce will grow to $110 billion by 2015.

How does it work? Loyalty and card programs provide the data history and expert knowledge systems provide the recommendations. Buy an electronic gizmo or toy? Pop up a suggestion for batteries. Buy some clothing? Pop up a suggestion for some sort of accessory. Consumer can't decide between two products? Offer a review and recommendation -- based on fact, not manufacturer incentives. Consumers possess long memories if you steer them wrong.

Databases are a start, but they only go so far. You still need smart sales staff to offer the true personalized touch. But if customers are on the phone, mobile computing gives you a chance to keep them from walking out the door. Mobile and retail -- they go together like peas and carrots.

NumBytes 11: Tablets Forever Young?

Apple released the iPad tablet computer and all of a sudden, Star Trek (Next Generation) tech became mainstream. The hip twenty-something crowd flocked to the iPad, so much so, that dozens of companies known and obscure are pumping out me-too tablets tablets as fast as Chinese laborers can assemble them. Well, the tablet's gone mainstream and age group for tablets is inching upwards.

According to a May 2011 BIGresearch survey, the average age of a tablet owner is 36 years old -- younger than the average smartphone owner and the average US adult.

Rising Logistics Costs

According to the Council of Supply Chain Management Professionals' State of Logistics Report, business logistics costs rose from 7.7% of US gross domestic product in 2009 to 8.3% in 2011, inventory carrying costs increased 10.5% from 2009 to 2010, and transportation costs rose 10.3% from 2009 to 2010.

Sbarro Employee Retention Plan

Sbarro filed with the US Bankruptcy Court a motion allowing it to create a key employee bonus plan not to exceed $500,000 to a maximum of 100 employees, with the first payment scheduled for July 31, 2011. The Court scheduled a June 28, 2011 hearing on the matter.

JC Penney Hires Apple's Retail Guru

JC Penney Co., Inc. hired Ron Johnson, Apple's senior vice president of retail, to be its next CEO. Johnson, widely regarded as the architect of Apple's highly successful foray into retail, will take the lead on JCP's turnaround starting November 1, 2011. Apple operates 326 stores in 12 countries, and the stores played a major role in boosting sales by allowing customers to to try Apple products. First quarter 2011 sales were $3.2 billion, up 90% from year earlier.

As part of the executive compensation package, JCP gave Johnson $50 million worth of restricted stock to replace the value of the equity award Apple gave him that were due to vest on March 24, 2012. The new JCP restricted stock vests on January 27, 2012. JCP's current CEO, Myron Ullman, will become executive chairman of the board.

NumBytes 10: Googley Eyes

Google unveiled a number of new features to its search engine on June 14, 2011 to keep its tenacious hold over the search engine market. Some seem counterintuitive, like its 'instant' page that's supposed to save time by loading web pages as users type in their search, while others seem futuristic, like dragging and dropping a photo into the search box. But the smartest new feature, at least from the viewpoint of Google serving up local adverts to boost its $29 billion a year ad revenues, seems to be mobile phone searching if your smartphone GPS is activated. As you can imagine, Google measures everything, so it's no surprise that it found mobile searches skyrocket on Fridays and weekends and overall mobile search traffic is up more than 400% in the last two years.

According to ComScore, Inc.'s 2011 survey, Google controls 65.4% of the search engine market, followed by Yahoo at 15.9%, and Bing at 14.1%.

Economy Watch: Sales, Gas, And Mortgages

Retail Sales Down
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on June 11, 2011 fell 0.8% from the week before, but was up 2.4% from the same period last year. The ICSC noted business was noticeably weaker at discounters during the week.

Shoppertrak Retail Sales
For the week ended June 11, 2011, ShopperTrak's National Retail Sales Estimate was $90.838 billion, down 4.6% from last week's $95.191 billion, but up 3.3% from the same week last year. This week, the week before Father's Day (June 19), sales are expected to rise.

Gas Prices Drop
The Energy Department announced that for week ending June 13, 2011, the average price of US gasoline fell to $3.713 a gallon, down from $3.781 per gallon week earlier. The second quarter of the year is typically a seasonal low point in global oil consumption, a pattern reinforced this year by the unusually wide scope of refinery outages and the impact of the earthquake and tsunami in Japan. If anything, the usual third-quarter rebound in oil consumption is likely to be greater than normal this year.

Diesel prices fell to an average $3.94 per gallon, down from $3.95 last week, the fifth consecutive weekly drop.

Mortgage Rates Hit 2011 Low
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.65%, down from last week's 4.69%, according to its weekly national survey ending June 8, 2011. It also reported that the average 15-year fixed mortgage rate was 3.79%, down from 3.88% last week.

May Consumer Confidence Falls

The Conference Board announced Consumer Confidence declined in May 2011 to 60.8, down from 66.0 in April 2011. The Board noted consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects. Inflation concerns, which had eased last month, have picked up once again. On the other hand, consumers’ assessment of current conditions declined only modestly, suggesting no significant pickup or deterioration in the pace of growth.

Small Banks Prosper In Business Rebound

Although pessimism pervades recent economic reports, according to research released by Greenwich Associates, small and mid-sized companies plan to increase capital expenditures and hire more employees. Approximately 72% of small businesses and nearly 80% of mid-sized companies reported that business rebounded and improved since the height of the financial crisis, and approximately 50% of them looked to banks outside the top 20 institutions in the US this past year for their credit needs.

Inflationeering

The Consumer Price Index, the government's key inflation measure, rose 0.2% in May and 3.6% over the past 12 months, although core CPI, which deletes food and energy prices, rose 1.5% over the past 12 months, the biggest increase for core CPI since January 2010.

Amazon Affiliates Gone In CT And AR

Amazon.com terminated its affiliate programs in Connecticut, effective immediately, and Arkansas, effective July 24, 2011, after the two states' new tax laws labelled Amazon affiliates as in-state 'presences,' thus forcing Amazon to charge and pay state sales taxes. Amazon already terminated affiliate programs in Illinois, Colorado, North Carolina, and Rhode Island, and threatened to cancel affiliate programs in all states that adopt this measure. Amazon CEO Jeff Bezos is against such sales tax enforcement and calls for federal legislation to fix the imbalance between online and brick-and-mortar sales tax collection. With states scrmbling for every dollar, maybe the next targets will be eBay auctions and garage sales.

Strike At Macy's?

Workers represented by the Retail, Wholesale and Department Store Union voted to go on strike at Macy's, Inc. stores in Manhattan, Bronx, Queens, and suburban Westchester County, New York, should negotiations fail to generate a new contract by June 15, 2011, when the old contract expires. Issues in dispute include pension benefits and health insurance costs. Macy's has placed adverts in newspapers looking for temporary sales staff 'in anticipation of a possible labor dispute.'

NumBytes 9: Readin', Writin', and Manufacturing

The whirl of job losses overseas may pale in comparison to the erosion of basic skills among high school students, because if Johnny and Janey can't read, write, or do arithmetic, manufacturers are stuck trying to teach them the basics before actually training them to do industrial jobs such as welding or cutting metal and plastic. US 15-year-olds already lag behind China and other Pacific Rim countries in math and science, according to a 2009 Organization for Economic Cooperation and Development report and budgets for community colleges, which manufacturers often tap into for labor, are getting squeezed.

The National Association of Manufacturers became so concerned, it launched a drive to set standardized curricula at community colleges across the US to prep students with certain skills. Well it should: an estimated 2.7 million US manufacturing employees are 55 years old or older. That's almost 25% of your most experienced workers hitting retirement age in an era of ever-increasing product precision.

Hampshire Acquires Rio Garment

Hampshire Group, Ltd. entered into a definitive agreement to acquire Rio Garment S. de R.L., a Honduras-based apparel manufacturer, for up to $23 million: $6.8 million in cash, $10.5 million in Hampshire stock, and repayment in cash at closing of $5.7 million in certain liabilities. The merger is expected to allow Hampshire access into the fast-growing specialty store channel, while giving Rio Garment access into the department and chain store channels.

Station Casinos' Lenders Removed

The US Bankruptcy Court ordered the removal of the second lien lenders -- MFS Investment Management, Panton Capital Group, and Babson Capital Management -- from the Green Valley Ranch Gaming committee. This order follows the May 11, 2011 motion of Station Casinos' Debtor Green Valley Ranch, which accused these three secured lenders of last-minute subterfuge.

Crage Resigns From Cedar Fair

CFO Peter J. Crage resigned from Cedar Fair Entertainment Co., effective June 22, 2011. VP Finances and Corporate Tax David R. Hoffman and VP and Corporate Controller Brian C. Witherow will take over his duties while company searches for a successor. Cedar Fair also noted it is on track to name a new president and CEO-successor in the near future.

Barcodes Squared

In the 1970s, the first magazine for personal computer hobbyists, Creative Computing, printed BASIC programs in its pages, allowing its readers to type them into their TRS-80 and Apple II computers. In the early 1980s, a company hit upon manufacturing a barcode scanner and reproducing programs in barcodes, and so the magazine experimented with these codes -- although the results were less than accurate. Bulletin boards, online services, and web sites eliminated the need for printing programs, relegating the barcode to retail and back office inventory. Fast forward to today where scanners at the cash register -- or self checkout lanes -- record every product purchase.

Yet the advancing digital world marks a comeback for the lowly barcode, albeit in a new, square shape and will a new name: Quick Response Code (QR for short). Manufacturers are sticking them everywhere, in adverts, displays, price tags, and billboards. Smartphone users scan the QR, which pops open a web page, plays a video, or otherwise directs your attention to the particular product. For example, Macy's uses them to offer how-to guides for applying cosmetics and sprucing up your home decor.

US use remains low, but rising. According to Forrester Research, only 5% of smartphone users scanned a QR. As a marketing tool, QR is cheap, portable, and, at least for now, new and mysterious. The trick is to impart some value to the destination of the QR -- if all it becomes is an advert, familiarity will breed contempt, and people will avoid QRs the same way they don't click on web page banner ads.

Feds Nab Fakes

US Customs and Border Protection authorities at the Los Angeles/Long Beach seaport seized three shipments from China from March to May 2011 containing more than 47,000 fake designer clothes worth about $14.3 million. Labels included Chanel, Polo, Gucci, and Dior.

Oddly enough, in May 2011, China’s retail sales grew to 1.36 trillion yuan ($209 billion), up 17.1% from the previous year, according to a Toronto Globe & Mail article. Analysts say the 'fast fashion' industry -- clothing for the average consumer who can’t afford luxury brands -- is among the most promising category in retail, because Chinese consumers are increasingly able to buy what they want, not just what they need.

In general, Chinese brands are struggling to overcome their reputations for poor quality and lack of cachet. While Chinese brands including JNBY, Ochirly, Meters/Bonwe, and Youngor are beginning to challenge their foreign competitors at home, marketing experts note very few of them managed to establish a strong reputation for a distinctive fashion.

No surprise there. It's not that counterfeiters exist in China, they're on this side of the Pacific too, but that China's governmental structure pays less attention to enforcing trademark and intellectual property laws than it does in enforcing consumer safety laws.

NumBytes 8: Drone Attacks In US

Next time you enter your local hobby store, know that you can buy your own deadly Predator drone, maybe even on sale. That's right, the US government is considering regulating all those remote control model airplanes -- propeller and jet models -- as if they were Predator drones. Think about it. They fly by remote control, they can carry cameras, and for the exceedingly clever, can pack some sort of 'warhead.'

Naturally, the Academy of Model Aeronautics, 140,000 members strong, 99% male, and with an average age of 58, opposes any regulation. The 'current' Federal Aviation Administration rules, dated 1981, consist of Advisory Circular 91-57 (ATO-220) Model Aircraft Operating Standards, which suggests flying at 400 foot altitudes or lower and not within 3 miles of an airport.

As for the hobby, it can be fatal. Out of control model aircraft killed four people in the US -- since 1965.

VF Acquires Timberland

VF Corp. is acquiring footwear and apparel company Timberland Co. for $43 per share in a deal worth about $2 billion. The acquisition is expected to close in the third quarter and should add approximately $700 million to VF’s 2011 revenues. It is also expected to add to VF's earnings per share by $0.25 in 2011 and by $0.75 in 2012. Excluding these expenses, EPS accretion would be approximately $.45 in 2011 and $.90 in 2012. Timberland will become part of VF’s Outdoor & Action Sports coalition and will remain headquartered in Stratham, New Hampshire.

PetCo Acquires Complete Petmart

Petco acquires 29-store chain Complete Petmart for undisclosed amount. With purchase, Petco will operate more than 1100 stores across the US.

Welcome to Kohl's International Airport Kiosks

Retailer Kohl's is seeking a one-year contract with five one-year options to install three digital kiosks at General Mitchell International Airport in Milwaukee, WI. The kiosks do not dispense products, but instead allow customers to order products from Kohl's online with free delivery to their homes. The Milwaukee County Transportation, Public Works, and Transit Committee will review the application, which calls for the airport to receive 11% of the gross sales made through the kiosks and allow Kohl's to cancel the contract with 60 days’ notice. No revenue estimates were provided.

Borders To Close 51 More Stores

Borders Group, Inc. filed with US Bankruptcy Court a motion to close 51 stores, including some of them their best locations, after failing to obtain extensions of the September 14, 2011 deadline to assume or reject leases from their landlords at these locations -- in large part because under the terms of a $505 million bankruptcy financing loan from General Electric Co's GE Capital, Borders must initiate closure proceedings now, in case it is unable to work out an extension. If approved and executed, Borders would have about 350 stores remaining.

US Trade Gap Narrows

According to the Commerce Department, imports still outnumbered exports in April 2011 by $43.7 billion, but that is better than the revised $46.8 billion trade deficit in March. Part of this may be due to the Japanese earthquake and tsunami, as imports of automotive vehicles, parts, and engines fell 12.9% in April, about $2.8 billion, from March. Overall, imports fell about 0.4% in April, to $219.2 billion from $220.2 billion in March, as exports rose 1.3% to $175.6 billion. April exports of goods ($126.4 billion, up from $124.5 billion in March) and exports of services ($49.1 billion, up from $48.9 billion in March) were the highest on record. The top five US trading partners were: Canada, China, Mexico, Japan, and Germany.

Also of note, US oil imports dropped by 42 billion barrels in April, in large part due to high oil prices. Petroleum imports totaled $36.005 billion, down from $38.083 billion. The April import average price per barrel of crude oil ($103.18) was the highest since September 2008 ($107.30).

NumBytes 7: Catalog Craze

With all the e-hype about selling via company websites, auction sites, and social networks, you'd think that catalogs sent via snail mail would have gone the way of the buggy whip and pay phone. Not yet. According to US Census statistics, in 2009: mail order catalogs accounted for $121.9 billion in total sales versus $112.8 billion in e-commerce sales. And that was a down year. Last year, merchants mailed out 20 billion -- that's billion with a "B" -- catalogs.

But did you ever notice that if you order from one catalog, you get lots more in the mail? That's because merchants share your name and address and probably bits and bytes of data mined from the internet with each other -- more than 1100 brands share mailing lists. No wonder the United States Postal Service delivers 40% of the world's mail.

Got Goods? Hug A Trucker

According to a study by logistics company C.H. Robinson Worldwide Inc., rig counts in 2011 are down by as much as 15% to 20% from their 2006 peaks, meaning carriers possess greater bargaining leverage over customers due to limited trucking capacity and rebounding orders. The company suggests shippers make the best of the limitations and dampen the rate hikes by thinking about the long-term rather than only about short-term rates. It starts with being truthful about the freight and availability, and continues with spreading shipments over the entire month rather than into a one-week period, relaxing pickup and delivery rules to accommodate drivers if necessary, and implementing a transportation management system. Shippers may find using pool distribution services benefit them with reduced rates as carriers reduce empty miles, or -- gasp -- collaborating with other shippers to create round trips out of one-way hauls and combine freight in 'continuous move' truckloads rather than settling for more costly less-than-truckload movements.

L&R Buys UNF

Non-foods specialty distributor L&R Distributors, Inc. acquired the non-foods and general merchandise business of United Natural Foods, Inc. for an undisclosed price. As part of this acquisition, L&R will become UNF's non-foods distributor of choice. This merger brings together the largest specialty general merchandise distributor (L&R) with the largest distributor of natural, organic, and specialty foods in North America (UNF).

Cole Names Blum As CEO

Kenneth Cole Productions, Inc. appointed Paul Blum as CEO, effective June 20, 2011. Kenneth Cole will continue as Chairman and Chief Creative Officer.

Head West, Young Kate

Women's fashion retailer Kate Spade New York will open its first full-line store in Washington state in August in downtown Seattle’s Pacific Place.

Debt Ceiling Time Bomb

As the Republicans and Democrats play chicken over raising the $14.3 trillion US national debt limit before the August 2 deadline, Fitch Ratings was the first of the big three ratings agencies to warn that it would downgrade all ratings for US Treasury securities into 'junk' status if the US stumbles into technical default. Moody's and Standard and Poor's issued similar warnings about reducing US ratings, but not with such forcefulness. Fitch noted that should the US debt ceiling be raised later, the 'junk' ratings would rise, but probably not to the current AAA level.

If Democrats and Republicans remain at impasse by August 2, Fitch would tag US ratings as 'watch negative.' The first test for ratings will come on August 4, when $30 billion worth of Treasury bills mature. If the government failed to repay them in full, Fitch will lower the rating on those specific securities to B-plus, four notches into junk status.

That would be just the opening the yuan needs...

Global E-Commerce To Skyrocket

According to Cisco Systems Inc.’s Economics & Research Practice study based on interviews with 32 e-retailers that sell internationally, global e-commerce, including travel, auto purchases, and online retail sales, will increase 13.5% annually for the next four years and reach an estimated $1.4 trillion in 2015. Cisco estimated that while the United States, United Kingdom, and Japan will command 53% of e-commerce sales in 2015, e-commerce in countries such as Spain, Brazil, China, Russia, and Mexico each will grow at rates of 26% or more annually through 2015. In moving out into the global market, Cisco asserted the most important consideration is the revenue already coming from that market, followed by evaluating the sophistication of that country's Internet connection capabilities, delivery services, and payment systems.

What To Get Dear Ol' Lazy Dad?

According to a 29-country study by the Organization for Economic Cooperation and Development, people average 3.5 hours per day doing unpaid work like cooking, cleaning, child care, shopping, and other chores. Sad to say, women spend 2.5 *more* hours per day than men doing those chores, especially nearly four times longer in the kitchen cooking meals and washing up. Times varied by country, the average being around 50 minutes, but Americans spent about 30 minutes per day for cooking and washing up, versus about 74 minutes in Turkey -- fast food, microwaves, and other convenience cooking pile up the minutes saved in the US. Of course, they also pile up the pounds, but the US obesity rate of 34% versus 17% OECD average is a story for another day.

Indeed, the survey noted that men in India, Japan, and South Korea spent less than one hour per day on chores around the house, Italians and Portuguese men spent less than two hours per day, and in the US and Poland, about three hours per day.

But what about manly chores like 'construction and repair?' You know, heading out to the hardware store for tools and parts to fix a faucet or put on a two-story addition. Sorry guys...men averaged only 13 minutes per day fixing something.

Shopping of all kinds counted as part of that chore time -- an average of 23 minutes per day, with the French at the top at 32 minutes per day, just edging out the Germans at 31 minutes and the Canadians at 30 minutes, while the South Koreans took the bottom spot with only 13 minutes per day in shops, edging out the Turks at 14 minutes per day and the Portuguese at 17 minutes per day.

By the way, Mexicans do the most unpaid work at 4 hours and 13 minutes per day whlie Koreans do the least at 2 hours and 16 minutes. OECD contended all that unpaid work is worth about 33% of GDP for the 25 OECD countries for which data is available, from a low of 19% in Korea to a high of 53% in Portugal. It also noted that the US led all OECD countries in volunteering time, giving money, and helping strangers with 60% versus the average of 39%.

So, what to get dear ol' dad for Father's Day? If you're mom, maybe a tie isn't such a bad idea...to tie him to the kitchen sink so he won't be a stranger to pots, pans, and soap.

NumBytes 6: Plenty of Oil

As the Saudis try to figure out how much extra oil to pump, much to the dismay of other OPEC countries, rest assured the ground contains plenty of oil to power the earth for the next 100 years. The US Energy Information Administration estimated world-wide oil consumption would hit a record 88 million barrels a day this year and predicted oil prices will average $103 a barrel this year, up 30% from last year, and will be even higher next year. However, according to the US Geological Survey, 3 trillion barrels of heavy oil -- a century's worth of consumption -- are just waiting to be drilled. The bad news: Only about 400 billion barrels (13%) can be extracted using existing technology. The good news: oil companies are researching technologies, like the new steam infusion project in Wafra, Saudi Arabia, to get at that heavy oil, which can be as thick as molassas.

Spring Don't Get No Respect

Like a Rodney Dangerfield joke, the economy in spring don't get no respect. Retailers believe US second quarter sales will be so ugly, they want to put a bag over its head.

Not so fast.

The US economy grew at 1.8% in the first quarter 2011, and predictions for the second quarter are better than that even after various economic analysts lowered their predictions by a half a percentage point or so. Bank of America is predicting a 2% growth rate, down from 2.8%, JP Morgan is forecasting 2.5%, down from 3%, Goldman Sachs is calling for a 3.0% growth rate, down from 3.5%, and Deutsche Bank is predicting 3.2%, down from 3.7%.

Those numbers indicate a recovering economy rather than a booming one, and job growth will be as sluggish as sales, but the arrow is pointing upwards, not downwards.

But it seems retailers are looking forward past the summer to back to school -- the second biggest selling season of the year. Already, Wal-Mart CEO Mike Duke asserted computer tablet sales will be big business this year come August and September, a thought echoed by other major chains.

However, these tech gains may be coming at the expense of traditional apparel. In the last numbers available from the National Retail Federation, US shoppers budgeted an average $225.47 for clothes in the 2010 back-to-school season versus $231.80 in 2007, but their computer budget rose to $181.61 in 2010 from 2007's $129.24.

Station Casinos Plan Confirmed with Respect to GVR

The US Bankruptcy Court confirmed on June 8, 2011 Station Casinos subsidiary Debtors Aliante Holding and Green Valley Ranch (GVR) Gaming's First Amended Prepackaged Joint Chapter 11 Plan of Reorganization, dated May 24, 2011, with respect to GVR. As previously reported, the subsidiary Debtors filed for Chapter 11 protection on April 13, 2011 and subsequently consolidated their cases into Station Casinos lead proceedings. The subsidiary Debtors filed a prepackaged bankruptcy proceeding (concurrently filing a Subsidiary Debtors Joint Plan of Reorganization) in order to implement Station Casinos' asset sale under its own First Amended Joint Plan of Reorganization, dated July 28, 2010. The Court confirmed the parent's Plan on August 27, 2010, and it has not yet become effective.

Harry & David Holdings Objection Filed

Pension Benefit Guaranty Corporation (PBGC) filed with the US Bankruptcy Court on June 8, 2011 an objection to Harry & David Holdings' motion for order determining that the financial requirements for a distress termination of their defined benefit pension plan are satisfied and approving a distress termination of the pension plan. According to the PBGC, unfunded pension promises could be as high as $44 million. The Court scheduled a July 22, 2011 hearing on the distress termination motion.

Economy Watch: Sales, Gas, Jobs, And Mortgages

Retail Sales Up
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on June 4, 2011 rose 0.4%.

Shoppertrak Retail Sales
For the week ended June 4, 2011, ShopperTrak's National Retail Sales Estimate was $95.335 billion, down 1.2% from last week's $96.432 billion, but up 4.4% from the same week last year. As expected, post-Memorial Day shopping tapered off, but sales for the week before Father's Day (June 19) are expected to rise.

Gas Prices Drop
The Energy Department announced that for week ending June 6, 2011, the average price of US gasoline fell to $3.781 a gallon, down from $3.794 per gallon week earlier.

Diesel prices fell to an average $3.95 per gallon, down from $4.00 last week, the fourth consecutive weekly drop.

Shopping Center Jobs Decline
The ICSC benchmark for US shopping center industry jobs -- based on US Labor Department statistics -- showed a decline of 17,900 jobs in May following a large 51,500 increase in April. The average shopping-center industry jobs gain per month durng the five months of 2011 has been 10,600 jobs per month.

Mortgage Rates Drop Yet Again
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.69%, down from last week's 4.75%, according to its weekly national survey ending June 1, 2011. It also reported that the average 15-year fixed mortgage rate was 3.88%, down from 3.93% last week.

Prada's IPO Gateway to China

Fashion house Prada SpA is looking to raise HK$15.5 billion and HK$26.3 billion ($2 billion to $2.6 billion) in an initial public offering in Hong Kong. It is offering 423.3 million shares, or 16.5% of its enlarged share capital, at a price between HK$36.50 and HK$48 per share. The company had failed to get its shares listed four times over the last decade, but is capitalizing on Hong Kong's fascination with international luxury brands and being the first such fashion brand to go public there.

According to Finance Asia, because of an automatic clawback mechanism that increases the size of the retail tranche when there is strong demand from retail investors, the number of shares available for institutional investors actually gets reduced on popular deals. This can result in a scarcity effect and force up valuations as investors scramble to get a piece of the deal. To limit this effect, Prada has sought and received a waiver to cap the size of the retail tranche at 25%, as opposed to the usual 50%. The retail tranche will start out at 10%, but will be increased to 25% if it is more than 100 times covered. Investors may also have to pay Italian capital gains tax if they make a profit when selling the shares.

Prada plans to open 80 self-operated stores this year to existing 319 stores, with 25 of the new stores in the Asia-Pacific region. It also aims to expand into the Middle East, Brazil, and Russia. Prada also sells through 1,400 wholesalers and 33 franchise stores across 70 countries.

In the latest fiscal year, the company derived 32% of its revenues from Asia-Pacific, compared to 41.8% from Italy and the rest of Europe combined. However, Asia-Pacific sales grew at a compound annual growth rate of 51% in the past two years, compared to less than 2% in Europe and 1% in Italy. The shift towards Asian consumers also helped the company to stay profitable throughout the latest financial crisis.

NumByte 5: Credit Cards

When you're digging yourself into a hole, the best initial advice would be to stop digging. For US consumers, that often means cutting up the credit cards -- and they did. No wonder Visa and Mastercard are so interested in getting smartphone virtual wallets apps up and running (see the VCF Retail Bulletin, June 7, 2011, for 'Smartphones As Virtual Wallets'). According to Moody's Analytics, the number of bank and retail credit cards dropped from 600 million to 460 million.

Signature Styles Files for Bankruptcy

Catalog and internet retailer Signature Styles filed for Chapter 11 bankruptcy protection on June 6, 2011. The company listed assets in the $10 million-$50 million range and debts in the $50 million to $100 million range. Signature Styles Gift Cards LLC, an affiliate, was also included in the bankruptcy filing. Signature Styles formed in June 2009 by investment firm Patriarch Partners LLC to acquire Spiegel brands for $21.7 million from Dymus Funding Co.

Station Casinos Objection Filed

Station Casinos subsidiary Debtor Green Valley Ranch Gaming's official committee of unsecured creditors filed on June 7, 2011 with the US Bankruptcy Court an objection to the Debtor's proposed findings of fact and conclusions of law and proposed order removing the second lien lenders from the official creditors' committee.

Sale Closing In On BJ's?

According to the NY Post, equity companies Leonard Green & Partners and CVC Capital Partners may bid to acquire BJ’s Wholesale Club Inc. in a deal worth $2.8 billion after rival suitors Apollo Global Management and Bain Capital withdrew from negotiations.

Loehmann's Names Newman CEO

Loehmann's Holdings Inc. appointed Steven M. Newman as Chief Executive Officer, effective this week. Interim CEO Joe Melvin will remain as COO of the company.

Wal-Mart: The Next Generation Shopper

Wal-Mart Stores, Inc. CEO Mike Duke asserted the company is focusing on the next generation customer by emphasizing global e-commerce, smartphones, and social media to reach emerging market shoppers striving to join the middle class.

Smartphones As Virtual Wallets

With Google, Mastercard, and Visa experimenting with smartphone 'virtual wallet' apps preloaded with a user's credit and delivery details, retailers should be eager to implement the new technology. Such apps would make checkout easier and faster -- just wave the phone at a receiver and all the payment details transfer in an instant. No more swiping and signing, just waving. Automatic coupon deductions, account access, rewards, and receipts all pile into the phone, too.

However, problems are emerging. Connections drop, so consumers don't know if the payment went through, so they try again. And often again. And again. Hence, consumers pay multiple times for the same item. Whatever time and effort retailers saved on the front end is now eaten up at the back end crediting the account or dealing with dreaded chargebacks. That's not only inefficient, but the retailer looks bad, too.

Worse, hackers show cunning in breaking existing security schemes to extract personal information from databases, so smartphone technology would offer another avenue for criminals to collect consumer data. Cyberattacks will continue to increase as we move into interconnected clouds, so caution may be the watchword before rolling out mobile e-commerce technology. Smartphone payment systems will eventually become as ubiquitous as today's debit cards, but early pioneers often take a lot of arrows before reaching the promised land.

NumBytes 4: P-P-P-Pimple Face

Lady Gaga may be singing her pop hit, P-P-P-Poker Face, but many adults are singing the blues about their acne. Procter & Gamble, Clorox, and L'Oreal are launching over-the-counter products designed for adults, especially for women between ages 20 and 40. Better yet, the products incorporate anti-wrinkle ingredients to encourage clear and smooth skin. For drug stores and other retailers, this two-for-one remedy could be big. According to a survey in the Journal of the American Academy of Dermatology, 51% of women reported having acne in their 20s and 35% had it in their 30s.

Borders VP Resigns

Borders Group Inc. Executive Vice President and Chief Merchandising Officer Michele Cloutier resigned June 2.

Hartstrings Files for Chapter 7 Bankruptcy

Children's clothing retailer Hartstrings LLC, owned by American Capital LP, filed for Chapter 7 bankruptcy on June 2, 2011, with plans to dissolve the business. Hartstrings, with 28 stores nationwide and a wholesale business, owed secured and unsecured creditors more than $39 million.

A&P Streamlines Supply

A&P requested approval from US Bankruptcy Court on June 6 to enter into a revised supply and logistics agreement with its principal wholesale supplier C&S Wholesale Grocers to generate estimated $50 million in annual savings, beginning upon emergence from bankruptcy, while gaining access to greater diversity of products.

Sam's Club Exclusives

As part of the trend towards private labeling to bolster margins, Sam's Club unveiled three new product lines: Artisan Fresh, an array of baked goods from baguettes to apple pies; Simply Right, a personal care collection including diapers and pet care; and Daily Chef, which includes groceries such as olive oil. The new brands will be rolled out to all 600-plus stores by the end of October. In many cases the new brands will replace its store label Members Mark. The goal is to boost customers spending on food and consumables at Sam's Club from 12% to 20%. Customers of Sam's Club's have an average household income of about $75,000.

Smart Retailing With Smartphones

From telegraph to telephone and from horse-drawn wagons to jets, the US built it economic superioity upon ever-expanding communications and transportation infrastructure bolstered with ever-improving technology. For the past two decades, you can add e-commerce infratructure in the form of the internet to the evolution of retail.

Smartphones offer the latest twist on retailing, and while many retailers moan about scan and scram shopping using smartphones to find the lowest price, the larger, smarter retailers are adapting using 'hyper-promotions' to get shoppers into their stores. According to a report by Retail Systems Research, 62% of retailers with revenue over $5 billion per year are using promotion pricing instead of using key item pricing, which was the successor to everyday low prices, versus only 23% of retailers with annual revenue under $250 million.

NumByte 3: Ring Up Something Fishy

What are the odds that fish you bought at the supermarket was really the fish advertised? According to a report by Oceana, which compiled data from a variety of sources, about 66% to 75%. That's right, fish fraud seems rampant in supermarkets -- and restaurants -- across the US. Indeed, with 1,700 different species of seafood from all over the world now available for sale in the US, DNA sampling found that up to 70% of some species of fresh and packaged fish were mislabeled. As the US consumer price index for seafood rose more than 27% over the past 10 years, and most of that imported, that's a lot of fraud. Talk about a ticking time bomb for supermarket purchasing managers and marketing departments...only about 2% of imported fish is being inspected by the Food and Drug Administration, and that found about 33% of seafood imports were mislabeled. But here's the kicker, not only do customers often get the wrong fish type, they get shortchanged too.

Investigations in 17 US states found more than 21,000 packages where up to 40% of the seafood product’s weight was ice, leading consumers to be overcharged as much $9 per package.

Target: Cheaper Than China

Target found that China's rising wages are making their goods too expensive, so the retailer is looking for cheaper sources in Bangladesh and India.

Walgreen Online Acquisition

Walgreen Co. completed its acquisition of drugstore.com in a deal worth about $409 million. The transaction includes all websites directly owned and operated by drugstore.com, as well as its corporate, customer service, and distribution center operations. The acquisition provided Walgreen access to more than 3 million online customers and added approximately 60,000 products to the company's online offering, according to Walgreen President and CEO Greg Wasson.

Mixed Bags: Goods And Jobs

The US Census Bureau reported new orders for manufactured goods decreased $5.5 billion, or 1.2%, to $440.4 billion in April. Shipments decreased $0.9 billion, or 0.2%, to $444.5 billion, for the first time after seven consecutive monthly increases. Inventories, up eighteen of the last nineteen months, increased $7.7 billion, or 1.3%, to $587.8 billion. These three numbers indicated that the economy remained in a sluggish recovery as the usual suspects -- 9.1% unemployment, housing mess, rising prices, and a concern for overseas financial markets -- continued to impede the rebound.

The US Labor Department reported non-farm payrolls increased by only 54,000 jobs -- far lower than the 160,000 gain forecasted (itself lower than the original earlier 183,000 gain forecast). Unemployment rose from 9% to 9.1% in May. Worse, the Labor Department revised job gain totals downward from 221,000 to 194,000 in March and from 244,000 to 232,000 in April. Of note, teenagers are suffering the highest unemployment rate, 24.2%, although the coming of summer employment may nudge that number down.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in May at 8.5 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. In May, the number of long-term unemployed (those jobless for 27 weeks and over) increased by 361,000 to 6.2 million; their share of unemployment increased to 45.1%, perhaps indicating an unwillingness by employers to consider hiring the long-term jobless.

Oddly enough, the Conference Board reported that its Help Wanted Online index rose by 148,800 in May to a pre-recession monthly high of 4.5 million advertised job vacancies. Analysts noted that unemployment remains high despite the job gains because of the larger number of unemployed workers that are seeking jobs compared to four years ago. All regions of the US posted more help wanted adverts, with the South leading in new vacancies. Nationally, there are 9.4 million more unemployed workers than advertised vacancies, according to the Conference Board.

Overall, more people are working, but any notions of a sharp economic recovery look premature. The economy is likely to bump along with slow, if unspectacular, progress through the year.

Borders: Half And Half

Private equity company Gores Group may be negotiating to acquire roughly half of Borders Group, Inc.'s 405 stores, says a Wall Street Journal article. Interest picked up after Liberty Media bid for the Barnes & Noble bookchain.

May Gains and Pains: Same Store Sales

If retailers were expecting the brisk sales gains of April 2011 to accelerate in May, they were disappointed. A handful of retailers' comparable store sales beat analyst expectations in May, attracting shoppers with a strong mix of discounts and merchandise during a month that saw gas prices around $4 per gallon, a persistant high unemployment rate of 9%, and a generally sluggish economy tinged with foreclosure woes and tumbling house prices. Most of the rest did well compared to a moribund 2010, but in general, apparel retailers stumbled.

Analysts forecasted a 5.3% gain in same store sales for May 2011, according to Thomson Reuters, a decline from the Easter-fueled 8.9% rise in April 2011, but double the 2.6% gain of May 2010. As usual, dismal weather played a part in dampening sales, more or less depending on what part of the country stores were located.

Saks, Inc. was the big leader of the retail pack, reporting a 20.2% increase in same store sales for May -- far beyond the 6.5% increase forecasted by analysts. The strongest categories at Saks Fifth Avenue stores included women’s designer apparel, shoes, handbags, and accessories; men’s clothing, shoes, and accessories; jewelry; cosmetics; and fragrances. Saks Direct performed well during the month. The company revised its same store sales guidance for the second quarter upwards from high single digit increase to low double digit increase.

Macy's reported a 7.4% increase in same-store sales, better than the 5.6% expected from analysts, primarily due to a led by a 37.7% gain in May online sales. The company also raised its same-store sales guidance for the second quarter from 4% to 5%, and increased its full-year guidance from 4.3% to 4.5%.

Zumiez beat expectations with a 7.8% increase versus a forecasted 7.5% increase. Costco was another big winner, with a 13% gain, better than the 11.2% forecast, in this case aided by higher gas prices. Costco's gas stations proved a draw, allowing shoppers to combine trips for gas and general shopping.

High gas prices remain a drag on the economy, with consumers paying more at the pump and also in the form of higher prices for goods as suppliers raise prices to cover their raw material and transportation costs. Although prices at the pump dropped about 5%, persistant high prices for months on end are taking a toll on shopping habits and spending. Consumer cash going into basics tends to dampen demand for summer clothing and other discretionary items.

Apparel retailers suffered the worst from tepid May 2011 sales. Limited Brands suffered a rare miss, posting a 6% increase, below the analysts' average forecast of 7%. Hot Topic rose 0.4% instead of the 1.4% forecasted. Wet Seal, Inc. posted a 2.9% increase, below the 4% predicted by analysts. Gap, Inc. was down 4%, worse than the 1.1% decline expected.

With apologies to Mom, May is not a big shopping month, and with apologies to Dads and Grads, June is not looking to be much better. The economic recovery continues to bump along, favoring retailers offering high-end goods to those with recovering stock portfolios. Retailers that cater to lower-income consumers are expected to struggle throughout the year, since their customers are affected by unemployment and higher food and fuel prices.

Those latter two -- food and fuel -- make up the biggest increases in inflation, a threat that lurks behind every product. Retailers have been reluctant to pass along all their increases from suppliers for fear of driving away shoppers, but there is a limit. From raising prices to shrinking the size of packages for the same price, higher prices will get passed along. But consumers can revolt in their discretionary spending, and that's likely to affect retailer results through the summer before the next big sales event: back to school.

Seismic Shift In Shoes

Jones Apparel Group, Inc. acquired Kurt Geiger, Europe's largest luxury shoe retailer, from Graphite Capital for approximately $350 million in cash.

Vitamin Nation

A Wakefield Research survey of 1000 US adults found 60% take a vitamin or supplement, with multivitamins the most popular and averaging one vitamin or supplement per day. Of those that take vitamins, 46% began taking them based on the recommendation of an expert, 34% wanted to improve their health, and 9% wanted to feel better about themselves. Of those that do not take vitamins, 43% feel they do not need vitamins with a balanced diet, 22% think they would never remember to take them, and 9% feel vitamins are too expensive.

Of note: 0% (zero percent) took vitamins or supplements based on a celebrity endorsement.

NumByte 2: Everybody In The Pool?

Summer's around the corner and cash-strapped municipalities are closing pools as budget-cutting measures, according to a Wall Street Journal article. Now might be the best time to put in a pool, and some manufacturers are reporting an uptick in sales. It almost couldn't get worse. According to market research company PK Data, sales of new inground pools have fallen nearly 75% from their 2004 peak, and inground pools sales fell 58% in 2009 from 2008. Hence, deals abound for the pool-less. Leslie's Poolmart, Inc., specialty retailer of swimming pool supplies and related products, hopes so. It's opening a new store on June 3 to add to its 660 retail store locations in 35 states.

The National Swimming Pool Foundation noted there are 5.2 million backyard pools in the US in 2009 -- up from 2,500 in 1950.

Wal-Mart Scores MassMart

South Africa's Competition Tribunal approved Wal-Mart Stores, Inc.'s proposed $2.4 billion acquisition of 51% of Massmart Holdings Ltd with some conditions: no job cuts for two years, honor union bargaining agreements for three years, and invest 100 million rand ($14.4 million) in supply-chain training programs to increase competitiveness of local industries. Wal-Mart noted the deal should be completed by the end of June, giving Wal-Mart access to Massmart's 288 stores in 13 African countries -- a foothold from which it will expand.

May Consumer Confidence Ebbs

The Conference Board announced Consumer Confidence decreased in May 2011 to 60.8, down from 66.0 in April 2011. Analysts noted consumers were considerably more apprehensive about future business and labor market conditions as well as their income prospects. Inflation concerns, which eased last month, picked up once again. However, consumers’ assessment of current conditions declined only modestly, suggesting no significant pickup or deterioration in the pace of growth.

March Home Prices Drop

The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas decreased 3.6% in March 2011 from the month before. Washington DC is the only bright spot as home prices rose 1.1% in March 2011 over February, while Seattle's prices inched upwards by 0.1%. The other 18 areas suffered more declines. Overall, the US National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit. Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession. Further, while last year saw signs of an economic recovery, the most recent data do not point to renewed gains.

Analysts noted that 9% unemployment and related job insecurity and the ongoing mortgage foreclosure mess continue to plague the housing industry -- and all the associated retail activity that goes along with new house buying. They expect the market to bump along the bottom through the end of the year, with something akin to a recovery in 2012.

Professionals Talk Logistics

According to a DC Velocity article, the top three technologies providing the biggest impact on logistics and supply chain management are mobile computing, analytics software, and social media. Smartphones, tablets, and other mobile computing devices allow instant access to data, even on the road. Analytics software sift through mountains of data to identify subtle patterns, anomalies, and associations to provide new insight into operations. For example, such software could find hiccups in distribution or offer options on jumps in commodity prices. Social media offers an additional avenue to exchange information within the logistics community, although experts are divided on whether it enhances efficiency or reduces productivity.

NumByte 1: Retailer Taxes

With all the talk about reducing the US deficit by eliminating tax breaks for oil companies, ethanol, corn, appliances, mortgage interest, and an ever expanding list for all sorts of special interests, what's a retailer to do? Hope for more equality when it comes to tax rates in general. According to a NY Times article, retailers pay about 31% of their revenue in taxes, while the financial services sector pays about 20%.

Economy Watch

Retail Sales Up
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on May 28, 2011 rose 0.4% from the prior week, the first week-over-week increase in five weeks.

Gas Prices Drop
The Energy Department announced that for week ending May 30, 2011, the average price of US gasoline fell to $3.794 a gallon, down from $3.849 per gallon week earlier.

Diesel prices fell to an average $4.00 per gallon, down from $4.06 last week.

Of note is a continued decrease in US reliance of imported oil since peaking in 2005. By the broadest standard, US dependence on imported oil fell from 60.3% in 2005 to 49.3% in 2010, a level below 50% not seen since 1997. A narrower measure saw US dependence on imported oil fall from 66.3% in 2005 to 62.0% in 2010. The chief reason for the decline is a significant decrease in consumption, in part due to the recession, as well as greater processing efficiency in turning out more gasoline and other light oil products per barrel, increased US crude production, and greater production of ethanol, biofuelds, and other alternate fuels.

Shoppertrak Retail Sales
For the week ended May 21, 2011, ShopperTrak's National Retail Sales Estimate was $96.432 billion, up 3.0% from last week's $94.377 billion, and up 6.0% from same week last year. Memorial Day sales are credited for the jump, but sales are expected to sag a bit before coming back for Father's Day holiday.

Mortgage Rates Drop Again
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.75%, down from last week's 4.77%, according to its weekly national survey ending May 25, 2011. It also reported that the average 15-year fixed mortgage rate was 3.93%, down from 3.95% last week.