Friday, July 29, 2011
Apple Seeds
According to IMS Retail University, Apple’s retail sales growth roughly accounted for 20% of all US retail expansion during the quarter. Apple's first quarter revenue was up 82% to $28.57 billion, with profit more than doubling to $7.31 billion, versus a year ago.
Housing Sales Inch Up
The National Association of Realtors Pending Home Sales Index rose 2.4% to 90.9 in June 2011, up from 88.8 in May, and is 19.8% above the 75.9 reading in June 2010. Activity increased in the West and South, but declined in the Midwest and Northeast. Tight credit and economic uncertainty continued to constrict the market. Existing-home sales are expected to total five million in 2011, slightly higher than 2010. Similarly, little change is forecast for aggregate home prices with several indicators, including NAR’s median prices, showing recent signs of stabilization.
Double Dip Retail Recession?
Retail consultantcy Strategic Resource Group Managing Director Burt Flickinger asserted the US retail sector just entered a 500-day retail recession in an article on The Street website. He predicted weaker retail sales, more store closures, and more bankruptcies. He cited that a recent study by Moody's Analytics estimated that almost 20% of all US payments were jobless benefits, food stamps, Social Security, and disability. Moody's noted jobless benefits accounted for about $37 billion in spending -- as long-term unemployed lose the benefits, that money will not be spent. The continuing weak job market offers no quick fix, either. Toss in inflation effects, and Flickinger contended rough retail sailing for the next year and a half.
NumBytes 39: Visa Credit Card Fees
Visa processes about 600,000 transactions per day. Visa reported a profit for its fiscal third quarter, ended June 30, 2011, of $1.01 billion, up 40.4% from year ago, on revenue of $2.32 billion, up 14.4% from year ago. Transactions were up 11% and payment volume was up 13%.
The new regulations governing credit card fees charged by banks do not affect Visa (or Mastercard) directly, but executives were worried about decreased volume. So Visa Chairman and CEO Joseph Saunders announced that Visa is: 'modifying our economics in a way that we expect will result in a reduction in merchant cost in total and on the margin. The modifications include both fixed processing fees and a reduction in variable fees. We expect this will help us win routing decisions and maintain debit volume in the new environment. Specifically, Visa is implementing a new fixed acquirer fee called the network participation fee, which will apply to the acceptance of all Visa products and is based on both the size of the merchant and the number of merchant location.'
Uh-oh.
More From Saunders: "In order to reduce fees in the aggregate, Visa will also lower our variable processing fees for all Visa debit products across all merchant segments. That combination of fixed and variable fees offers merchants an even greater incentive throughout more transactions over our network by providing them an opportunity to lower their per unit transaction costs and take advantage of economies of scale that are now more readily available to them."
Double uh-oh.
To get this straight...Visa intends to aid merchants by lowering fees and presumably make it up on volume? Its generosity knows no bounds...except when it comes to fees because it seems to be tacking on a 'new fixed acquirer fee' for those accepting Visa cards.
Its outlook for the rest of 2011, by the way, asserts annual net revenue growth in the 11% to 15% range, annual free cash flow in excess of $3 billion, and annual operating margin of about 60%. And the Board of Directors just authorized a new $1 billion class A share repurchase program. Can Mastercard be far behind?
The new regulations governing credit card fees charged by banks do not affect Visa (or Mastercard) directly, but executives were worried about decreased volume. So Visa Chairman and CEO Joseph Saunders announced that Visa is: 'modifying our economics in a way that we expect will result in a reduction in merchant cost in total and on the margin. The modifications include both fixed processing fees and a reduction in variable fees. We expect this will help us win routing decisions and maintain debit volume in the new environment. Specifically, Visa is implementing a new fixed acquirer fee called the network participation fee, which will apply to the acceptance of all Visa products and is based on both the size of the merchant and the number of merchant location.'
Uh-oh.
More From Saunders: "In order to reduce fees in the aggregate, Visa will also lower our variable processing fees for all Visa debit products across all merchant segments. That combination of fixed and variable fees offers merchants an even greater incentive throughout more transactions over our network by providing them an opportunity to lower their per unit transaction costs and take advantage of economies of scale that are now more readily available to them."
Double uh-oh.
To get this straight...Visa intends to aid merchants by lowering fees and presumably make it up on volume? Its generosity knows no bounds...except when it comes to fees because it seems to be tacking on a 'new fixed acquirer fee' for those accepting Visa cards.
Its outlook for the rest of 2011, by the way, asserts annual net revenue growth in the 11% to 15% range, annual free cash flow in excess of $3 billion, and annual operating margin of about 60%. And the Board of Directors just authorized a new $1 billion class A share repurchase program. Can Mastercard be far behind?
Borders Group Hiring
Borders Group filed with the US Bankruptcy Court on July 28, 2011 a motion to retain Streambank as an intellectual property disposition consultant for a management fee of $100,000 plus the following commission rates: 3% of the first $2.5 million in aggregate gross proceeds, 5% for up to $7.5 million in aggregate gross proceeds, 7% for up to $10 million in aggregate gross proceeds, and 12% for over $10 million in proceeds.
Nebraska Book Hiring
Nebraska Book Company's official committee of unsecured creditors filed with the US Bankruptcy Court on July 28, 2011 a motion to retain Mesirow Financial Consulting as financial advisor at the following hourly rates: senior managing director, managing director and director at $775 to $825, senior vice president at $665 to $725, vice president at $565 to $625, senior associate at $465 to $525, associate at $285 to $395 and paraprofessional at $145 to $240.
Inflation Up 2.3%
The Chain-Weighted Consumer Price Index (CPI), an alternative measurement for the CPI, was up 2.3% for the second quarter 2011.
National Lasagna Day
OK, so it doesn't take an act of Congress to name a day 'National ______ Day.' Today, July 29, is National Lasagna Day, probably started by Jim Davis' marketing department. Will the frozen foods section of supermarkets experience a run on frozen lasagna?
Thursday, July 28, 2011
Dead Stores Selling
According to investment blogger Jeff Reeves, two big retailers are in zombie mode where it's a matter of time before they head into bankruptcy: drugstore chain Rite Aid and jewelry kingpin Zales. Rite Aid generated only one profitable quarter in four years and its $6 billion in debt is about 25% of its annual revenue. Zales' sales has steadily dropped year after year, from $2.43 billion in 2007 to $1.61 billion in 2010 as the company shed stores, although its debt is a reasonable $300 million.
Amazon Tax Followup
Amazon reported net sales of $9.91 billion for the second quarter 2011, up 51% from $6.57 billion for same period last year. Second quarter net income fell to $191 million, down 8% from $207 million year ago. Most customers pay no sales tax on purchases from the internet sales giant, and Amazon has been shutting down affiliate programs in states that declare an affiliate to be a company 'presense' and demand sales taxes be collected.
The Wall Street Journal noted that Amazon's tax-free sales give it about a 10% pricing advantage in the higher sales tax states, less for lower sales tax states. According to Credit Suisse, Amazon could lose about 2.7% of its North American sales if Congress passed online tax legislation. Retailers would be pleased if the playing field became leveled and Amazon had to collect state sales taxes. States would probably rejoice, too.
But even with collecting state sales taxes, Amazon would not necessarily lose its price advantage. A William Blair & Co. report noted Amazon averaged an 11% price discount compared to its brick-and-mortar rivals. Without adding state sales taxes, Amazon had lower prices on approximately 56% of items. With taxes, it dropped to 48%.
The Wall Street Journal noted that Amazon's tax-free sales give it about a 10% pricing advantage in the higher sales tax states, less for lower sales tax states. According to Credit Suisse, Amazon could lose about 2.7% of its North American sales if Congress passed online tax legislation. Retailers would be pleased if the playing field became leveled and Amazon had to collect state sales taxes. States would probably rejoice, too.
But even with collecting state sales taxes, Amazon would not necessarily lose its price advantage. A William Blair & Co. report noted Amazon averaged an 11% price discount compared to its brick-and-mortar rivals. Without adding state sales taxes, Amazon had lower prices on approximately 56% of items. With taxes, it dropped to 48%.
June Manufacturing And Inventories
The US Census Bureau reported a mixed bag for orders and shipments, with new orders down, but backlogs, inventories, and shipments up. It reported that new orders for manufactured durable goods in June 2011 decreased $4.0 billion (2.1%) to $192.0 billion. However, shipments of manufactured durable goods were up $1 billion (0.5%) in June to $196.0 billion. Unfilled orders for manufactured durable goods increased $2.1 billion (0.2%) to $862.7 billion. Inventories of manufactured durable goods increased by $1.6 billion (0.4%) to $357.2 billion, the 19th consecutive month of increases.
NumBytes 38: Lottery vs. Corporation
Nine states -- Delaware, West Virginia, Rhode Island, Oregon, South Dakota, Georgia, Michigan, Ohio, and South Carolina -- raise more per capita state revenue with lotteries than corporate income taxes, according to the Tax Foundation, as reported by Reuters. Two more states -- Texas and Washington -- also pull in more lottery bucks than corporate tax because these states do not have corporate income taxes.
According to the North American Association of State and Provincial Lotteries, Americans spent $50.4 billion on lottery tickets, video lottery terminals, and the like in 2009. The 44 US states with lotteries, plus the District of Columbia and Puerto Rico, pocketed $17.6 billion of lottery profits. In fiscal 2010, profits rose slightly to $17.9 billion.
It is likely that lotteries will expand, not contract, ensuring a steady revenue stream for the convenience stores that sell most tickets. The big threat to that would come from online sales, which are, so far, illegal, although a handful of states let people go online to buy long-term subscriptions, where customers sign up in advance to play the same numbers week after week. However, even that has been complicated by credit card companies classifying the subscriptions as a gambling purchase instead of a government service, triggering additional fees and red tape for customers.
According to the North American Association of State and Provincial Lotteries, Americans spent $50.4 billion on lottery tickets, video lottery terminals, and the like in 2009. The 44 US states with lotteries, plus the District of Columbia and Puerto Rico, pocketed $17.6 billion of lottery profits. In fiscal 2010, profits rose slightly to $17.9 billion.
It is likely that lotteries will expand, not contract, ensuring a steady revenue stream for the convenience stores that sell most tickets. The big threat to that would come from online sales, which are, so far, illegal, although a handful of states let people go online to buy long-term subscriptions, where customers sign up in advance to play the same numbers week after week. However, even that has been complicated by credit card companies classifying the subscriptions as a gambling purchase instead of a government service, triggering additional fees and red tape for customers.
Food Stamp Stimulus
Grocery stores are seeing a rising number of customers use food stamps as unemployment remains high and the number is likely to increase as unemployment benefits start runnning out for the long-term unemployed.
According to an article in The Economist, approximately 45 million Americans receive food stamps, of which about half are children and 8% are elderly. Only 14% of food-stamp households have incomes above the poverty line, 41% have incomes of half that level or less, and 18% have no income at all. The average benefit is $133 a month and the maximum, for an individual with no income at all, is $200. The cost to the Federal government is $65 billion in 2010, up from $35 billion in 2008, and the Department of Agriculture estimated that only 66% of those eligible apply for the benefit.
When Moody’s Analytics assessed different forms of stimulus, it found that food stamps were the most effective, increasing economic activity by $1.73 for every dollar spent. Unemployment insurance came in second, at $1.62, whereas most tax cuts yielded a dollar or less. The reason? Food stamp funds are spent immediately.
According to an article in The Economist, approximately 45 million Americans receive food stamps, of which about half are children and 8% are elderly. Only 14% of food-stamp households have incomes above the poverty line, 41% have incomes of half that level or less, and 18% have no income at all. The average benefit is $133 a month and the maximum, for an individual with no income at all, is $200. The cost to the Federal government is $65 billion in 2010, up from $35 billion in 2008, and the Department of Agriculture estimated that only 66% of those eligible apply for the benefit.
When Moody’s Analytics assessed different forms of stimulus, it found that food stamps were the most effective, increasing economic activity by $1.73 for every dollar spent. Unemployment insurance came in second, at $1.62, whereas most tax cuts yielded a dollar or less. The reason? Food stamp funds are spent immediately.
Wednesday, July 27, 2011
Sears Canada Hires Goldsmith
Sears Canada, Inc. hired Steven Goldsmith as Executive VP of merchandising, apparel, and accessories.
Scanner Envy
Self-checkout scanners in grocery and other stores are on the rise, even though Albertson's are removing them from all stores so customers can act with cashiers, not display screens. VDC Research Group estimated scanner growth at 84% over the next five years and noted scanners can reduce wait times, save on labor costs, and make maximum use of limited retail floor space -- although upfront costs are $17,000 to $20,000 each versus $2500 to $3000 for a regular cash register. A MSNBC survey of 160,000 users found about 35% found self-checkout lanes handy, 37% hated them, and 28% used them when they had to. Smartphone checkout should be the next technological hurdle for grocery stores, although Europe and other parts of the world are already using it.
Now, if supermarkets can only get their baggers to stop putting the eggs at the bottom of the bag...
Now, if supermarkets can only get their baggers to stop putting the eggs at the bottom of the bag...
Home Prices And Sales
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas increased 1.0% in May 2011 from the month before, with 16 of the 20 areas recording increases: only Detroit, Las Vegas, and Tampa posted losses while Phoenix remained unchanged. Analysts noted some good news as seasonal sales rebounded. Analysts pointed out that existing-home sales stayed flat in June, reportedly because of contract cancellations and tight credit. The S&P/Experian Consumer Credit Default indices showed a continuing decline in mortgage default rates since last winter. As with the rest of the economy, recovery remains slow but steady.
The US Census Bureau and the Department of Housing and Urban Development reported sales of new single-family houses in June 2011 were at a seasonally adjusted annual rate of 312,000, down 1% from revised May rate of 315,000 units. The seasonally adjusted estimate of new houses for sale at the end of June was 164,000, about a 6.3-month supply at the current sales rate.
The US Census Bureau and the Department of Housing and Urban Development reported sales of new single-family houses in June 2011 were at a seasonally adjusted annual rate of 312,000, down 1% from revised May rate of 315,000 units. The seasonally adjusted estimate of new houses for sale at the end of June was 164,000, about a 6.3-month supply at the current sales rate.
Consumer Confidence: Jobs
According to the Conference Board, Consumer Confidence improved in July 2011 to 59.5, up from 57.6 in June 2011. The Board noted consumers’ appraisal of current business and employment conditions remained cautious as concerns about the stagnant labor market continue to weigh on consumers’ attitudes. Overall, consumers remain apprehensive about the future, but some of the concern expressed last month has abated. Consumers’ appraisal of the job market found 44.1% believed jobs are 'hard to get' (up form 43.2% last month), while those stating jobs are 'plentiful' remained unchanged at 5.1%.
Bankrate.com's Financial Security Index for July found an increase in what they term the 'working worried' -- those concerned about their job security. Only 15% considered their jobs secure (down from 20%) while 23% felt less secure about their jobs being around (up from 22% last month).
The US Bureau of Labor Statistics noted its original estimate of 54,000 jobs created in May was overstated and lowered the figure to 25,000. The June job creation estimate was 18,000.
Bankrate.com's Financial Security Index for July found an increase in what they term the 'working worried' -- those concerned about their job security. Only 15% considered their jobs secure (down from 20%) while 23% felt less secure about their jobs being around (up from 22% last month).
The US Bureau of Labor Statistics noted its original estimate of 54,000 jobs created in May was overstated and lowered the figure to 25,000. The June job creation estimate was 18,000.
Economy Watch: Sales, Mortgage, 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 July 23, 2011 rose 2.8% to $94.626 billion from the week before of $92.023 billion, and was up a strong 4.3% from the same period last year. Rretailers were continuing to mark-down summer merchandise, some retailers started their promotions for Back-to-School to drive early sales of these offerings. Although, consumer sentiment is not high due to the continued debt ceiling impasse in Washington, consumers are still purchasing at higher rates than a year ago. Barring a national debt default scenario, analysts expect that retail sales will continue to grow through the next several weeks as consumers enter August and the 'Back-to-School' shopping period.
Shoppertrak Retail Sales Data
For the week ended July 9, 2011, ShopperTrak's National Retail Sales Estimate was $89.149 billion, down 1.9% from last week's $90.887 billion, but up 1.2% from the same week last year. Historically, July 4th is the poorest holiday for general merchandise, apparel, furniture, and other store retail sales and 2011 proved no exception. Sales will bump along the next few weeks until 'back to school' kicks into gear. Note that efforts by several retailers to jump start the season with pre-'back to school' sales flopped.
Mortgage Rates Decrease
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.68%, down from last week's 4.69%, according to its weekly national survey ending July 20, 2011. It also reported that the average 15-year fixed mortgage rate was 3.82%, unchanged from last week.
Gas Prices Up
The Energy Department announced that for week ending July 25, 2011, the average price of US gasoline rose to $3.699 a gallon, up a tad from $3.682 per gallon week earlier. This is the third weeks of rising prices.
Diesel prices rose to $3.92, up from $3.90 last week and the second week of rising prices.
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on July 23, 2011 rose 2.8% to $94.626 billion from the week before of $92.023 billion, and was up a strong 4.3% from the same period last year. Rretailers were continuing to mark-down summer merchandise, some retailers started their promotions for Back-to-School to drive early sales of these offerings. Although, consumer sentiment is not high due to the continued debt ceiling impasse in Washington, consumers are still purchasing at higher rates than a year ago. Barring a national debt default scenario, analysts expect that retail sales will continue to grow through the next several weeks as consumers enter August and the 'Back-to-School' shopping period.
Shoppertrak Retail Sales Data
For the week ended July 9, 2011, ShopperTrak's National Retail Sales Estimate was $89.149 billion, down 1.9% from last week's $90.887 billion, but up 1.2% from the same week last year. Historically, July 4th is the poorest holiday for general merchandise, apparel, furniture, and other store retail sales and 2011 proved no exception. Sales will bump along the next few weeks until 'back to school' kicks into gear. Note that efforts by several retailers to jump start the season with pre-'back to school' sales flopped.
Mortgage Rates Decrease
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.68%, down from last week's 4.69%, according to its weekly national survey ending July 20, 2011. It also reported that the average 15-year fixed mortgage rate was 3.82%, unchanged from last week.
Gas Prices Up
The Energy Department announced that for week ending July 25, 2011, the average price of US gasoline rose to $3.699 a gallon, up a tad from $3.682 per gallon week earlier. This is the third weeks of rising prices.
Diesel prices rose to $3.92, up from $3.90 last week and the second week of rising prices.
NumBytes 37: From Archilochus to Ghadhafi
The Libya Civil War -- artillery, air strikes, tanks, and drone missiles elevated this from protest to civil war long ago -- marched on with rebel advances against loyalist strongholds, war crime indictments, and recognizing the rebel coalition as a legitimate government. Dictator Ghadhafi proclaimed his loyalists would fight to the death for him -- dictators like saying that as they escape to posh exile, a bullet to their heads, or a noose around their necks -- and handed out AK-47 rifles to these steadfast citizen-tribesmen.
But death before surrender seems to be less prevalent with rebels closing in than when they were far, far away. According to a Wall Street Journal article, citizen fervor seems to be weakening, with many selling their AK-47s. How much? About 2000 to 4000 dinars ($1250 to $2500). And the bullets? About 2 dinars each.
Archilochus, the Greek mercenary and poet, recorded much the same sentiment around 650 BC (BCE) or so:
Some Saian mountaineer struts today with my shield.
I threw it down by a bush and ran when the fighting got hot.
Life seemed somehow more precious. It was a beautiful shield.
I know where I can buy another exactly like it, just as round.
But death before surrender seems to be less prevalent with rebels closing in than when they were far, far away. According to a Wall Street Journal article, citizen fervor seems to be weakening, with many selling their AK-47s. How much? About 2000 to 4000 dinars ($1250 to $2500). And the bullets? About 2 dinars each.
Archilochus, the Greek mercenary and poet, recorded much the same sentiment around 650 BC (BCE) or so:
Some Saian mountaineer struts today with my shield.
I threw it down by a bush and ran when the fighting got hot.
Life seemed somehow more precious. It was a beautiful shield.
I know where I can buy another exactly like it, just as round.
Chinese Apple Stores Saga Continues...
China closed two unauthorized Apple, Inc. stores in Kunming, China for operating without business licenses as part of probe into 300 electronics vendors in the city. Apple operates four Apple stores and has more than 900 authorized resellers in China, but copycat stores are springing up across China. China is one of 12 countries on the 'priority watch list' for intellectual property rights violations of the US Trade Representative.
Analysys International estimated that only 53% of the 1.07 million Apple iPads sold in China last quarter were through vendors sanctioned by Apple. Apple's combined revenue for China, Taiwan, and Hong Kong in the quarter ended June 25 rose six times to $3.8 billion from year ago. China's economy grew 9.5% in the second quarter 2011.
Analysys International estimated that only 53% of the 1.07 million Apple iPads sold in China last quarter were through vendors sanctioned by Apple. Apple's combined revenue for China, Taiwan, and Hong Kong in the quarter ended June 25 rose six times to $3.8 billion from year ago. China's economy grew 9.5% in the second quarter 2011.
Bankruptcy Update
Sbarro Extension
The US Bankruptcy Court on July 26, 2011 approved Sbarro's motion to extend the exclusive period during which the Company can file a Chapter 11 plan up to October 31, 2011 (previously November 30, 2011) and solicit responses through December 31, 2011 (previously January 29, 2012).
Jackson-Hewitt Supplement
Jackson-Hewitt Tax Service filed with the US Bankruptcy Court on July 26, 2011 a Third Supplement for its Joint Prepackaged Plan of Reorganization. The Supplement contains the following documents: Supplemental List of Rejected Contracts and Leases and Biographies of the Directors of Reorganized Jackson-Hewitt Tax Service on the Plan effective date.
The US Bankruptcy Court on July 26, 2011 approved Sbarro's motion to extend the exclusive period during which the Company can file a Chapter 11 plan up to October 31, 2011 (previously November 30, 2011) and solicit responses through December 31, 2011 (previously January 29, 2012).
Jackson-Hewitt Supplement
Jackson-Hewitt Tax Service filed with the US Bankruptcy Court on July 26, 2011 a Third Supplement for its Joint Prepackaged Plan of Reorganization. The Supplement contains the following documents: Supplemental List of Rejected Contracts and Leases and Biographies of the Directors of Reorganized Jackson-Hewitt Tax Service on the Plan effective date.
Tuesday, July 26, 2011
Wal-Mart Rejoins Nielsen Ratings
Wal-Mart Stores, Inc. signed an agreement with rating giant Nielsen to share US Wal-Mart, Neighborhood Markets, and Sam's Club sales information collected from most of the nation's food, drug, big-box, convenience, and dollar-store retailers after roughly a 10 year absence. It will take several months before the data can be fully integrated into the Nielsen system. Wal-Mart noted the deal will help identify category growth opportunities sooner and collaborate with manufacturer partners to develop better customer-driven marketing.
Big Lots Credit Facility
Big Lots, Inc. signed a new $700 million five-year unsecured revolving credit facility which includes a C$200 million sub-facility to support the growth of the newly acquired Canadian operations. The new facility replaced its prior $500 million credit facility which was set to expire in April 2012. The new facility will be used to fund working capital needs and for general corporate purposes. Big Lots currently operates 1,412 Big Lots stores in the 48 contiguous United States and 89 Liquidation World and LW stores in Canada.
Apple Retail Clone
According to the Wall Street Journal, that Kumming computer store that duplicated an Apple store (see Retail Bulletin: Another China Knock-Off posted Friday, July 22, 2011) claimed to be a reseller of legitimate Apple products, but not an authorized Apple reseller. The store manager declined to say where the store obtains Apple products. China instituted inspections of retail stores, business licenses, authorized permits of brand use, and purchasing channels.
Considering Apple's recent revenue-booming second quarter and its expansion crosshairs locked on China, inspections are good news for the company. Market research company Gardner forecasted 91 million iPhone sales in 2011 and 124.7 million in 2012, while IDC forecasted 110 million iPhone sales in 2012. The iPhone makes up about half of all Apple sales.
Considering Apple's recent revenue-booming second quarter and its expansion crosshairs locked on China, inspections are good news for the company. Market research company Gardner forecasted 91 million iPhone sales in 2011 and 124.7 million in 2012, while IDC forecasted 110 million iPhone sales in 2012. The iPhone makes up about half of all Apple sales.
Won't Get Fooled Again
The Deloitte 2011 Consumer Food and Product Insight Survey found that 87.7% of shoppers believe prices in food stores are escalating and 74% say the size of some packaged goods is smaller. As a result, 75.3% purchased lower-priced products and 39.6% bought more private label items.
NumBytes 36: Up But Down Charity
People and corporations donate more when times are flush and mailboxes fill with the pitch letters highlighting the plight of one cause or another. Mailing list sharing is rampant among the charities, so while most mailings hit the recycling bin, enough must work because donations are inching up again. According to Giving USA, US charities took in $310.57 billion in 2007, $299.81 billion in 2008, $280.30 billion in 2009, and $290.89 billion in 2010.
Bankruptcy Updates
Books-a-Million Drops Bid
Books-a-Million, Inc. dropped its bid to buy 30 Borders Group stores and their inventory because all involved parties could not agree to terms.
Harry & David Supplement
Harry & David Holdings filed with the US Bankruptcy Court on July 25 a Supplement for the Company's Second Amended Joint Plan of Reorganization. The Supplement contains the following documents: certificate of incorporation of reorganized holdings; by-laws of reorganized Holdings; management services agreement; schedule of executory contracts and unexpired leases anticipated to be assumed; escrow agreement governing the escrow account; exit facility commencement letter; preserved causes of action by the Debtors and reorganized Debtors and obligations to indemnify directors, officers and employees.
Jackson-Hewitt Hirings
The US Bankruptcy Court on July 25 approved Jackson-Hewitt Tax Service's official committee of unsecured creditors' motions to retain Duane Morris as counsel and BDO Consulting as financial advisor.
Books-a-Million, Inc. dropped its bid to buy 30 Borders Group stores and their inventory because all involved parties could not agree to terms.
Harry & David Supplement
Harry & David Holdings filed with the US Bankruptcy Court on July 25 a Supplement for the Company's Second Amended Joint Plan of Reorganization. The Supplement contains the following documents: certificate of incorporation of reorganized holdings; by-laws of reorganized Holdings; management services agreement; schedule of executory contracts and unexpired leases anticipated to be assumed; escrow agreement governing the escrow account; exit facility commencement letter; preserved causes of action by the Debtors and reorganized Debtors and obligations to indemnify directors, officers and employees.
Jackson-Hewitt Hirings
The US Bankruptcy Court on July 25 approved Jackson-Hewitt Tax Service's official committee of unsecured creditors' motions to retain Duane Morris as counsel and BDO Consulting as financial advisor.
Intel Interactive Kiosk
Intel hung a new name -- Retail Interactive Fashion Experience -- on an old theme -- web page catalog based on inventory databases. Its new 'digital out-of-home' touch-screen kiosk, which stands about six feet tall or so, displays a store's apparel wares with e-mail and social network access. Shoppers can scroll through inventory based on price, style, and so on, save interesting items to a 'favorites' area for later review, try on those favorites on a virtual mannequin, e-mail friends an image of the clothes for opinions, and purchase the items. There's even a button to summon a live salesperson, who, in the demo anyway, will bring your selections to you in the dressing room. A swipe of a loyalty card brings up personal shopping history.
One drawback: Jack Sprat, who could eat no fat, and his wife Mrs. Sprat, who could eat no lean, apparently use the same virtual mannequin. One would think that if you could sort by size, the mannequins would enlarge and contract for Mr. and Mrs. Sprat based on that size.
One drawback: Jack Sprat, who could eat no fat, and his wife Mrs. Sprat, who could eat no lean, apparently use the same virtual mannequin. One would think that if you could sort by size, the mannequins would enlarge and contract for Mr. and Mrs. Sprat based on that size.
Monday, July 25, 2011
Borders Liquidation
Hilco Merchant Resources, Gordon Brothers Group, Great American Group, SB Capital Group and Tiger Capital Group started the liquidation of Borders Group's $700 million in assets. They expect the asset sale to be over quickly.
Apple iPhone 5 Mania
The Apple bandwagon continues to roll on. According to a July PriceGrabber survey of 2,852 of its US online consumers, 35% plan to purchase the iPhone 5 upon its anitcipated release in the fall. Of these 35% diehards, 51% indicated that they will buy the smartphone within the first year of release, 30% will purchase it before the end of 2011, 14% will buy it within the first month, and 7% will buy it within the first week.
Dollar General To The Cloud
Dollar General Corp. signed a multi-year contract with Interface to provide cloud computing services, including Wide-area Network Management, PCI Compliance, Wireless Access Management, IP Alarm System Monitoring, IP Video Surveillance, and Interface Digital Voice, for its entire retail network of more than 9,500 stores. Interface asserted the data deal will improve operations, increase the security of customer and employee data, and provide significant reductions in operating expenses.
Bumping Down Sales
According to the Journal of Consumer Research, as noted in the Wall Street Journal, a study found that getting touched, even by accident, by other people makes shoppers less likely to buy product they are considering. All of a sudden, wider aisles seem like a good idea.
NumBytes 35: Get The Lead Out
Remember in 2008 when some toys made in China for high-profile US companies contained unsafe levels of lead? Well, starting August 14, based on a 3-2 vote by the Consumer Product Safety Commission, the acceptable amount of lead in children's products will be reduced from 300 parts per million to 100 parts per million. The 2008 lead debacle was but one of many Chinese product transgressions that included melamine and cyanuric acid in pet food and diethylene glycol in toothpaste.
If the US, China's largest trading partner, wants to put pressure on China on a wide variety of issues, ranging from environmental damage to intellectual property and copyright infringement, children's toys would be an excellent place to start. About 64% of all toys exported in 2010 were made in China, according to Global Trade Information Services. Although businesses complain about the costs of compliance, no politician -- or business executive for that matter -- will stand up and proclaim kids need more lead in their diet...except perhaps, Irwin Mainway, President of Mainway Toys, famous for his line of children's products including Bag o' Glass, Teddy Chainsaw Bear, and Johnny Switchblade: Adventure Punk [SNL skit, 1976].
If the US, China's largest trading partner, wants to put pressure on China on a wide variety of issues, ranging from environmental damage to intellectual property and copyright infringement, children's toys would be an excellent place to start. About 64% of all toys exported in 2010 were made in China, according to Global Trade Information Services. Although businesses complain about the costs of compliance, no politician -- or business executive for that matter -- will stand up and proclaim kids need more lead in their diet...except perhaps, Irwin Mainway, President of Mainway Toys, famous for his line of children's products including Bag o' Glass, Teddy Chainsaw Bear, and Johnny Switchblade: Adventure Punk [SNL skit, 1976].
Baby Food Rise
The Westernization of the Asia-Pacific region is continuing into the baby food market, especially in the milk formula and dried baby food categories, noted the latest report by website Companiesandmarkets. China is expected to account for 84% of market value growth. Core strategies by leading industry players are centered on three pillars: enhancement of scale of operations, expansion and rationalisation of infrastructure, and innovation and development of product portfolios. Nestle-Gerber, for example, has been concentrating on geographic expansion.
Friday, July 22, 2011
Wal-Mart And SuperValu: Food Deserts
Wal-Mart Stores, Inc. and SuperValu Inc. intend to open 275 to 300 stores and 250 stores respectively over the next five years in so-called 'food deserts' -- low-income urban areas where fresh and healthy food is often hard to find.
Bye Bye Borders
US Bankruptcy Court approves sale of Borders Group, Inc. to group of liquidators led by Hilco Merchant Resources, which will sell off all inventory and assets by September. The liquidation will likely bring in between $250 million and $284 million the company can use to pay back creditors. A slim hope remains for about 30 to 35 Borders stores to stay open if Books-a-Million, Inc. can hammer out an agreement to acquire the inventory and merchandise at the included stores, then negotiate with landlords on leases. Books-a-Million operates 231 stores in 23 states and the District of Columbia. Analysts expect Barnes & Noble and Amazon.com to pick up business, although small businesses in shopping centers anchored by Borders are likely to suffer.
Apple's Bumper Crop
Apple, Inc. continues to stockpile cash -- now up to $76.2 billion -- while investors demand dividends, according to a Wall Street Journal story. Apple remains paranoid about running out of cash back in the 1990s, when it almost went under except for a $150 million investment by Microsoft Corp. (which needed Apple as it fought anti-trust charges at the time). By the way, Microsoft has $60.9 billion in cash, and Google, Inc. has stockpiled $39.1 billion.
Another China Knock-Off
Apple operates four stores in China. Little did it know there was a fifth in Kumming. One clever scammer set up a complete Apple store, down to the blue-shirt clad employees and nametags, to sell Apple products, which may or may not be pirated products or just simple knock-offs with an Apple nameplate, noted the blog BirdAbroad.
NumBytes 34: Cash In Hand
According to Standard & Poors, total cash and equivalents held by the 500 largest US companies at the end of the first quarter 2011 was $963 billion, up from $837 billion year ago. According to Moody's Investors Service, most of that cash is overseas. Companies don't want to bring it home due to a 35% tax rate and are pushing for a tax holiday like that in 2005, when the rate dropped to 5%. That one-time holiday didn't produce much economic stimulus, so the odds of a tax holiday are limited.
In 2007, about 57% of company cash was overseas. By 2011, it rose to about 70%. By 2013, Moody's predicted, it will increase to 79%. A JP Morgan report in May found that 519 companies held a combined $1.375 trillion abroad.
The good news: the US created the President’s Council on Jobs and Competitiveness to address the issue of jobs and recruited top corporate America executives to fill its 26 seats. The better news: the companies represented on the council reported $197 billion of what are known as 'permanently reinvested earnings' as of 2010, up from $103 billion in 2006. The bad news: multinational companies with current or former chief executive officers on the Council have, over the past four years, almost doubled the cumulative amounts they’ve reinvested overseas, according to data compiled by Bloomberg.
If US companies representing US job growth initiatives do little more than toss a few billion each into the US economy and continue to invest massive amounts in emerging countries, that 9.2% unemployment rate is starting to look optimistic.
In 2007, about 57% of company cash was overseas. By 2011, it rose to about 70%. By 2013, Moody's predicted, it will increase to 79%. A JP Morgan report in May found that 519 companies held a combined $1.375 trillion abroad.
The good news: the US created the President’s Council on Jobs and Competitiveness to address the issue of jobs and recruited top corporate America executives to fill its 26 seats. The better news: the companies represented on the council reported $197 billion of what are known as 'permanently reinvested earnings' as of 2010, up from $103 billion in 2006. The bad news: multinational companies with current or former chief executive officers on the Council have, over the past four years, almost doubled the cumulative amounts they’ve reinvested overseas, according to data compiled by Bloomberg.
If US companies representing US job growth initiatives do little more than toss a few billion each into the US economy and continue to invest massive amounts in emerging countries, that 9.2% unemployment rate is starting to look optimistic.
Duckwall-ALCO Credit
Duckwall-ALCO Stores, Inc. entered into a $120 million, five-year revolving credit agreement with Wells Fargo Capital Finance, part of Wells Fargo & Company. The new credit facility replaces an existing $120 million credit agreement with Bank of America, N.A. and Wells Fargo Retail Finance, LLC executed in February 2010. The new facility offers a 150 basis point reduction in interest rates, access to more availability through an increase of advance rates on the collateral, a streamlined treasury management process, and an extended term. In conjunction with the closing of the transaction, the Company will record a one-time non-cash after-tax charge of approximately $300,000, or $0.08 per share, in the second quarter ended July 31, 2011. This one-time charge is related to accelerated amortization of certain transaction fees from the February 2010 loan agreement with Bank of America.
Thursday, July 21, 2011
Syms' Real Estate Review
Syms Corp. hired global commercial real estate advisory firm Cushman & Wakefield to work with Rothschild and advise Syms on various potential strategic alternatives. There is no defined timeline for this strategic review and there can be no assurance that the review of strategic alternatives will result in any specific action or transaction.
Liz Claiborne To Sell Mexx?
According to a Bloomberg report, Liz Claiborne Inc. is seeking to sell most of its its money-losing Mexx brand, its largest division that accounts for about a third of its revenue, for about $100 million plus $100 million to cover debt and capital requirements. Leonard Green & Partners, Sun Capital, and Golden Gate Capital expressed interest. Final bids are due in a few weeks with sale completion around early September.
Citi Trends Down
Citi Trends, Inc. reported it expects to report a net loss in a range of $0.60 to $0.70 per diluted share for the second quarter ending July 30, 2011. Citi Trends’ sales continued to be much lower than expected, with comparable store sales down 12% in May and June and expected to be down approximately 11% for the full second quarter. Additionally, the weakness in sales necessitated higher clearance markdowns, further contributing to the quarterly loss. In light of the existing uncertain sales environment, the company will not undertake to estimate results for the full fiscal 2011 year at this time.
Shopping Center Jobs
The US shopping center industry gained 4,300 jobs in June, according to International Council of Shopping Centers' benchmark based on Labor Department statistics. Job gains in this sector proved erratic for 2011, with a hefty 25,000-job jump in January followed by a meager 1,000 jobs in February and then a 6,000-job drop in March. A 52,000-job surge in April gave way to a loss of 17,000 positions in May before the moderate rise of 4300 for June. On average the industry posted some 10,000 jobs per month during the first half, equal to the pace of last year’s comparable half. Note that the industry job base hit a cyclical low in December 2009, when it lost 1 million jobs. Since then, 128,000 shopping center jobs have been created, a recovery of nearly 13% from that low...and 87% left to go.
NumBytes 33: Bringin' Home The Bacon
This little piggy went to market, along with this little piggy, and this one, and seven more piggies as US Department of Agriculture reported an average litter size of 10.03 piglets for March to May 2011 -- a jump from 9.8 and the first time it exceeded 10. More piglets mean farmers need fewer sows to produce the same number of pounds, and as each sow eats eight to 10 pounds of feed every day, the savings can pile up.
Is there a limit to the number of little piggies produced by one sow? Experts guessed about 14 to 16, perhaps sooner than thought. Farmers took 14 years to raise the average litter size from eight to nine, and then only six years to go from nine to 10. With more piggies in play, pork prices at the supermarket should remain stable.
Is there a limit to the number of little piggies produced by one sow? Experts guessed about 14 to 16, perhaps sooner than thought. Farmers took 14 years to raise the average litter size from eight to nine, and then only six years to go from nine to 10. With more piggies in play, pork prices at the supermarket should remain stable.
Economy Watch
ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on July 16, 2011 rose 0.4% from the week before, and was up a strong 4.5% from the same period last year.
Shoppertrak Retail Sales Data
For the week ended July 16, 2011, ShopperTrak's National Retail Sales Estimate was $92.228 billion, up 3.1% from last week's $89.601 billion, and up 3.2% from the same week last year. Summer weather and mark-downs of summer merchandise helped to spur sales of seasonal items. The debt ceiling stalemate remains a concern of consumers worried about the future, which could depress sales in the coming weeks.
Yo-Yo Mortgage Rates
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.69%, down from last week's 4.79%, according to its weekly national survey ending July 13, 2011. It also reported that the average 15-year fixed mortgage rate was 3.82%, down from 3.90% last week.
Gas Prices Creeping Up
The Energy Department announced that for week ending July 18, 2011, the average price of US gasoline rose to $3.682 a gallon, up from $3.641 per gallon week earlier. This is the third straight week of increased prices.
Diesel prices rose to $3.92, up from $3.90 last week.
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on July 16, 2011 rose 0.4% from the week before, and was up a strong 4.5% from the same period last year.
Shoppertrak Retail Sales Data
For the week ended July 16, 2011, ShopperTrak's National Retail Sales Estimate was $92.228 billion, up 3.1% from last week's $89.601 billion, and up 3.2% from the same week last year. Summer weather and mark-downs of summer merchandise helped to spur sales of seasonal items. The debt ceiling stalemate remains a concern of consumers worried about the future, which could depress sales in the coming weeks.
Yo-Yo Mortgage Rates
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.69%, down from last week's 4.79%, according to its weekly national survey ending July 13, 2011. It also reported that the average 15-year fixed mortgage rate was 3.82%, down from 3.90% last week.
Gas Prices Creeping Up
The Energy Department announced that for week ending July 18, 2011, the average price of US gasoline rose to $3.682 a gallon, up from $3.641 per gallon week earlier. This is the third straight week of increased prices.
Diesel prices rose to $3.92, up from $3.90 last week.
Toys Out Of The Attic
Hasbro, Inc. and Mattel, Inc. reported strong international sales of its toys in the second quarter 2011.
Hasbro noted its international segment revenues grew 43% to $374.5 million with growth in every major geographic region while US and Canada revenues were up 14% to $505.0 million. Transformers tie-in toys proved to be the big seller. The company repurchased a total of 2.4 million shares of common stock during the second quarter 2011 at a total cost of $112.0 million and an average price of $45.80 per share. For the first two quarters in 2011, the Company repurchased a total of 3.8 million shares at a total cost of $175.7 million and an average price of $45.69. At quarter-end, $474.5 million remained available under the current share repurchase authorization.
Mattel noted international sales increased 23% while US revenue rose only 7%. Total revenue rose 14% to $1.16 billion. Cars 2 tie-in and revitallized Barbie sales helped boost revenue. The company repurchased approximately 5.8 million shares of its common stock at a cost of approximately $152 million.
Whether this can be sustained remains to be seen. Both companies are dependent on Chinese production -- Global Trade Information Services notes China makes 64% of all toys exported in 2010 -- and costs are rising. US retailers are also proving gunshy when it comes to restocking shelves. The weak US dollar is also helping international sales, and any strengthening may disrupt gains. Finally, the US economy is still struggling and no matter how loud kids scream, toys remain purchases in need of discretionary income.
Hasbro noted its international segment revenues grew 43% to $374.5 million with growth in every major geographic region while US and Canada revenues were up 14% to $505.0 million. Transformers tie-in toys proved to be the big seller. The company repurchased a total of 2.4 million shares of common stock during the second quarter 2011 at a total cost of $112.0 million and an average price of $45.80 per share. For the first two quarters in 2011, the Company repurchased a total of 3.8 million shares at a total cost of $175.7 million and an average price of $45.69. At quarter-end, $474.5 million remained available under the current share repurchase authorization.
Mattel noted international sales increased 23% while US revenue rose only 7%. Total revenue rose 14% to $1.16 billion. Cars 2 tie-in and revitallized Barbie sales helped boost revenue. The company repurchased approximately 5.8 million shares of its common stock at a cost of approximately $152 million.
Whether this can be sustained remains to be seen. Both companies are dependent on Chinese production -- Global Trade Information Services notes China makes 64% of all toys exported in 2010 -- and costs are rising. US retailers are also proving gunshy when it comes to restocking shelves. The weak US dollar is also helping international sales, and any strengthening may disrupt gains. Finally, the US economy is still struggling and no matter how loud kids scream, toys remain purchases in need of discretionary income.
Wednesday, July 20, 2011
Back To School Dirty Looks
According to market research firm NPD Group, retailers hoping for a big back-to-school splurge in the summer may face detention from procrastinating shoppers. NPD's study of 12,000 consumers surveyed between July 1 and July 14 found that only 35% would start back-to-school shopping by August 1, 60% said they would start by September 1, and the remaining 5% would start after September 1. NPD noted this represented an increase in shoppers postponing purchases until the start of school from last year.
NPD noted 40% of consumers plan to spend the same amount, 38% expect spending less, and 22% will spend more than last year. Another market research firm, Customer Growth Partners, previously forecasted a 6.2% increase in 2011 back-to-school spending. NPD noted 82% of shoppers would focus on value, not trends.
A poll in May of 2612 shoppers of online c-commerce website Pricegrabber noted 48% of them plan to spend $250 or more on back-to-school purchases and 25% will spend $500 or more -- a modest decline from 2010, when 56% indicated they'd spend $250 or more and 31% planned to spend $500 or more. The poll also noted 41% of shoppers indicated they will visit retailer websites in 2011 to print out coupons, versus 33% last year.
NPD noted 40% of consumers plan to spend the same amount, 38% expect spending less, and 22% will spend more than last year. Another market research firm, Customer Growth Partners, previously forecasted a 6.2% increase in 2011 back-to-school spending. NPD noted 82% of shoppers would focus on value, not trends.
A poll in May of 2612 shoppers of online c-commerce website Pricegrabber noted 48% of them plan to spend $250 or more on back-to-school purchases and 25% will spend $500 or more -- a modest decline from 2010, when 56% indicated they'd spend $250 or more and 31% planned to spend $500 or more. The poll also noted 41% of shoppers indicated they will visit retailer websites in 2011 to print out coupons, versus 33% last year.
Global E-Commerce
Cisco Systems Inc.'s Economics & Research Practice forecasted global e-commerce, including travel and auto purchases as well as retail sales, will increase 13.5% annually for the next four years to $1.4 trillion in 2015. All that growth is evidently not helping Cisco -- the company just announced plans to lay off 6500 employees in August.
SAP Retail Strategy
At SAP’s Analyst Base Camp gathering of industry analysts, as reported by Retail Systems Research, SAP Retail Industry Business Unit chief Lori Mitchell-Keller asserted no retailer is an island, even if many continue to operate that way. She noted that more attention to supply chain flow -- 'multi-industry value chains' -- would help retail operations gain increased market share, improved average basket size, more sales per sq. ft., and greater customer satisfaction.
Mitchell-Keller outlined key drivers to retail growth as: 'real' real-time data, the mobile revolution, globalization and consolidation, price and margin pressures, and omni-channel retailing. Her product pitch for the retail sector centered on SAP's Retail Planning platform -- an integration of technology into a holistic approach to sales, supply chain operations, customer interactions, and business forecasting.
She contended the retail problem in implementing new technology stems from the common assessment that less than 1% of revenue gets spent on IT, so enterprise resource planning (ERP) remains a challenge. SAP reconfigured its applications into prioritized 'pre-integrated chunks' so retailers can attack the most pressing problem first, knowing that the next problem-solving app integrates into the previous app without a lot of legacy system workarounds. Over time, adding 'chunks' eventually builds an ERP system.
Of course, fixing only one link in the entire chain reduces the benefits of SAP's holistic approach, but sometimes one link is all you can afford -- assuming the new link fits in with all the old links.
Mitchell-Keller outlined key drivers to retail growth as: 'real' real-time data, the mobile revolution, globalization and consolidation, price and margin pressures, and omni-channel retailing. Her product pitch for the retail sector centered on SAP's Retail Planning platform -- an integration of technology into a holistic approach to sales, supply chain operations, customer interactions, and business forecasting.
She contended the retail problem in implementing new technology stems from the common assessment that less than 1% of revenue gets spent on IT, so enterprise resource planning (ERP) remains a challenge. SAP reconfigured its applications into prioritized 'pre-integrated chunks' so retailers can attack the most pressing problem first, knowing that the next problem-solving app integrates into the previous app without a lot of legacy system workarounds. Over time, adding 'chunks' eventually builds an ERP system.
Of course, fixing only one link in the entire chain reduces the benefits of SAP's holistic approach, but sometimes one link is all you can afford -- assuming the new link fits in with all the old links.
NumBytes 32: Oil Reserves
Amazing how $4 per gallon gas can bring out the new oil. According to Organization of Petroleum Exporting Countries (OPEC), Venezuela now has the largest proven crude oil reserves in the world, with 296.5 billion barrels in 2010, surpassing Saudi Arabia's 264.5 billion barrels. Iran also upped its proven reserves to 150 billion barrels -- keeping it in third place just ahead of Iraq's increase to 143 billion barrels. All deny they are inflating totals.
OPEC predicted world oil consumption would rise by 1.36 million barrels per day (bpd) expected in 2011 and 1.32 million bpd in 2012. The US Energy Information Administration predicted a rise of 1.4 million bpd in 2011 and 1.6 million bpd in 2012. The International Energy Agency predicted a rise of 1.2 million bpd in 2011 and 1.5 million bpd in 2012.
Two factions are competing for OPEC pumping policy: the Saudi Arabian-led faction pumped more to bring prices down below $100 per barrel (and to about $3.60 per gallon at the pump), while the Iran- and Venezuelan-led led faction want to restrict pumping to keep prices high. All of OPEC's proven oil reserves were up 12.1% to 1.19 trillion barrels -- 81.3% of world's total (up from 79.6% in 2009).
No matter which faction wins the pumping argument, you can bet consumer pain at the pump will continue. The US Energy Information Administration predicted gas will cost $3.56 per gallon in 2011 and rise to $3.65 per gallon in 2012 and that on-highway diesel fuel retail prices will average $3.86 per gallon in 2011 and $3.95 per gallon in 2012.
OPEC predicted world oil consumption would rise by 1.36 million barrels per day (bpd) expected in 2011 and 1.32 million bpd in 2012. The US Energy Information Administration predicted a rise of 1.4 million bpd in 2011 and 1.6 million bpd in 2012. The International Energy Agency predicted a rise of 1.2 million bpd in 2011 and 1.5 million bpd in 2012.
Two factions are competing for OPEC pumping policy: the Saudi Arabian-led faction pumped more to bring prices down below $100 per barrel (and to about $3.60 per gallon at the pump), while the Iran- and Venezuelan-led led faction want to restrict pumping to keep prices high. All of OPEC's proven oil reserves were up 12.1% to 1.19 trillion barrels -- 81.3% of world's total (up from 79.6% in 2009).
No matter which faction wins the pumping argument, you can bet consumer pain at the pump will continue. The US Energy Information Administration predicted gas will cost $3.56 per gallon in 2011 and rise to $3.65 per gallon in 2012 and that on-highway diesel fuel retail prices will average $3.86 per gallon in 2011 and $3.95 per gallon in 2012.
Nebraska Book Objections
Nebraska Book Company's official committee of unsecured creditors filed with the US Bankruptcy Court on July 19, 2011 an objection to the Debtors' motion to retain Rothschild as investment banker and financial advisor, Rothschild's proposed fees, and effort to obtain $200 million in post-petition financing. The objecttion asserted the $75 million revolving loan and a $125 million term loan from JP Morgan Chase Bank contains certain extraordinary provisions that are unreasonable and inappropriate.
Tuesday, July 19, 2011
Border's End Page
Borders Group reported it will submit to the Bankruptcy Court for approval the previously-announced proposal from Hilco and Gordon Brothers to purchase the store assets of the business and administer the liquidation process. Borders currently operates 399 stores and employs approximately 10,700 employees.
Big Lots Gets Bigger
Big Lots, Inc. completed the $20 million acquisition of Canadian retailer Liquidation World Inc., with each shareholder receiving 6 cents.
2Q Online Sales Jump 17%
According to Mercent Corp.’s eCommerce Performance Index, overall e-retail sales grew 17% during the second quarter 2011 compared with the same quarter 2010. Note the index is only based on sales by 120 clients of Mercent. Of note, Mercent forecasts that the 2011 holiday shopping season will deliver solid double-digit percentage growth that may be slightly weaker than the gains posted last holiday season.
Groceries Play Multiple Game
Annoying as it might be for customers *not* shopping for an army, grocery stores show no inclination to retreat from 'multiple' discounting -- those offers where you need to buy five or 10 of the same item. According to a New York Times article, such offers work to boost revenues. For example, When Supervalu tested 10-for-$10 deals versus five for $5 on the same items and in the same markets, it found that people usually bought two more items when the promotion was 10 for $10. When it tried doing one for $1, it suffered a double-digit decline in sales.
Put some of the blame on the economy, with higher food and gas prices sucking wallets dry, but also on manufacturers, which are offering discounts if stores use the multiples strategy for pricing. In most, but not all, cases, the same price applies even if you purchase fewer of the items than listed on the in-store display.
Put some of the blame on the economy, with higher food and gas prices sucking wallets dry, but also on manufacturers, which are offering discounts if stores use the multiples strategy for pricing. In most, but not all, cases, the same price applies even if you purchase fewer of the items than listed on the in-store display.
NumBytes 31: Grocery Shopping Habits
According to marketing consulting firm Acosta Sales and Marketing, 84% of shoppers make a list, 23% make fewer grocery trips than a year ago, and overall, shoppers spend less per trip now than a year ago.
Moody's Downgrades Sears
Moody's Investors Service lowered Sears Holdings Corp. Corporate Family Rating from Ba2 to Ba3, with a ratings outlook that is negative. This downgrade concluded the review for a possible downgrade that commenced on May 11, 2011. Moody's noted the downgraded rating reflects persistent declines in consolidated revenues over the past few years as well as pressure on operating margins resulted from erosion in market share. Credit metrics have weakened and are expected to remain weak for an extended period. Moody's expects Sears to reduce funded debt over the next 12 to 18 months as it redeems maturing long term debt and continues to make meaningful contributions to its domestic pension plans. The sharp declines in appliance sales in recent quarters reflect timing of stimulus plans in the last year, and Moody's expects appliance sales to gradually recover toward more normalized replacement demand, though weak conditions in the US housing market will remain a drag for sales of higher ticket items like appliances. The rating outlook could be stabilized if operating earnings begin to stabilize and debt/EBITDA is expected to be sustained below 5 times and interest coverage (EBITA/interest) approached 1.5 times.
In view of the persistence of Sears' operating challenges, ratings are unlikely to be upgraded over the near term. Over time ratings could be upgraded if the company demonstrated sustained recovery in sales and operating earnings while also sustaining debt/EBITDA below 4.5 times and interest coverage approached 2.0 times. Ratings could be downgraded further if the company's operating earnings continue to erode over the next few quarters. Quantitatively ratings could be lowered if interest coverage remains near 1.0 times or if debt/EBITDA is expected to be sustained above 5 times.
In view of the persistence of Sears' operating challenges, ratings are unlikely to be upgraded over the near term. Over time ratings could be upgraded if the company demonstrated sustained recovery in sales and operating earnings while also sustaining debt/EBITDA below 4.5 times and interest coverage approached 2.0 times. Ratings could be downgraded further if the company's operating earnings continue to erode over the next few quarters. Quantitatively ratings could be lowered if interest coverage remains near 1.0 times or if debt/EBITDA is expected to be sustained above 5 times.
Monday, July 18, 2011
Brazil Goes Boom, Boom, Boom
According to the 2011 Brazil Employment Outlook study by employment research firm Going Global, hiring for FMCG (Fast Moving Consumer Goods), manufacturing, agribusiness, and heavy construction has driven down the unmployment rate to 6.1%, with annual average salary raises of 6.5%. Brazil especially needs engineers, turning out only 35,000 engineers per year, compared with India’s 250,000 and China’s 400,000.
The need for multilingual human talent extends to the executive branch and the pay is better, too. For example, a CFO with 12 years’ experience or more can earn $400,000 to $530,00 in Sao Paulo, while his CFO counterpart in New York earns approximately $125,000, Going Global noted.
According to the 2010 Talent Shortage Survey Results by Manpower, the top 10 job openings in Brazil were: technicians, skilled trades, production operators, office support staff, laborers, engineers, drivers, accounting and finance staff, IT staff, and sales representatives.
The need for multilingual human talent extends to the executive branch and the pay is better, too. For example, a CFO with 12 years’ experience or more can earn $400,000 to $530,00 in Sao Paulo, while his CFO counterpart in New York earns approximately $125,000, Going Global noted.
According to the 2010 Talent Shortage Survey Results by Manpower, the top 10 job openings in Brazil were: technicians, skilled trades, production operators, office support staff, laborers, engineers, drivers, accounting and finance staff, IT staff, and sales representatives.
Hanes' T-Shirt White Out
Hanesbrands Inc. is trying to eliminate the middleman by designing and selling graphic t-shirts direct to retailers in effort to boost sales from current $100 million to $300 million. The company consolidated manufacturing to three areas (China, Dominican Republic, and El Salvador), opened up design offices, intends to concentrate on women's fashion, and will churn out exclusive deigns for Kohl's, JC Penney's, and other retailers, according to a Wall Street Journal article. All this rejiggering of the supply chain and design process results in faster turnaround times for hot items -- down by half to six-to-10 weeks -- and at a lower cost point.
Retail Trade Sales: June 2011
The Commerce Department reported June 2011 retail trade sales were up 0.2% from May 2011 and 8.5% above last year. For June 2011, motor vehicles and auto parts sales rose 0.8%, furniture sales fell 0.8%, clothing sales climbed 0.7%, health and personal care sales fell 0.2%, and electronics and appliance sales fell 0.2% from May 2011.
Inventories: May 2011
The Commerce Department reported May 2011 manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1.514 trillion, up 1.0% from April 2011 and up 11.6% from May 2010.
Goin' Mobile
A Crossview survey of 25 top e-commerce retailers, including Best Buy, Toys R Us, Coach, and PetSmart, found that all 25 offer mobile commerce sites or apps that include product name, product description, price, the ability to complete a purchase, and store locator. After that, features vary: 88% enable consumers to set up an account, 88% can share product information via social media, 80% enable customers to track orders after a purchase, 80% allow shoppers to create a wish list, 60% offer ratings and reviews, 56% enable customers to access their loyalty program accounts, 52% integrate GPS satellite technology, 44% show product availability online and at store locations, 40% display estimated shipping charges before adding a product to a shopping cart, and 28% feature buy via mobile/pickup in-store, noted Internet Retailer.
NY Area Factory Woes
The Federal Reserve Bank of New York reported its general economic index rose from minus 7.8 in June 2011 to minus 3.8 in in July 2011 -- better, but below analysts' estimate of plus 5. Scores above 0 indicate sales expansion, while those below 0 indicate contracting sales. The area encompasses covers New York, northern New Jersey, and southern Connecticut. Rising inventories and the summer slowdown of consumer spending are starting to show that any increase in manufacturing may hinge more on exports than domestic consumption.
NumBytes 30: Corn Dole
In ancient Rome, the 'Corn Dole' was the Empire's equivalent of welfare for the masses -- subsidized grain to make the daily bread. When the corn ships of Egypt failed to arrive, or supplies ran low, Emperors trembled, because the populace without their corn made those modern Greek riots seem like a garden party.
Fast forward to today and the Chinese. When corn hit record prices of about $8 per bushel back in June 2011, farmers planted corn like crazy and prices dropped down to $6 per bushel. China promptly bought up 540,000 metric tons of US corn futures, the largest single purchase in recent memory, which popped the price back up to $7 a bushel.
Now, the US Department of Agriculture forecasts that China will purchase 2 million metric tons of US corn in the next year. That's a kernal on an ear considering ethanol production requires north of 5 billion bushels and feed is another 5 billion bushels. However, with ethanol production slated to expand, government ethanol subsidies remaining in place, and the Chinese buying up supplies, what will happen to food prices? It might be a heckuva cleanup in aisle 4.
Fast forward to today and the Chinese. When corn hit record prices of about $8 per bushel back in June 2011, farmers planted corn like crazy and prices dropped down to $6 per bushel. China promptly bought up 540,000 metric tons of US corn futures, the largest single purchase in recent memory, which popped the price back up to $7 a bushel.
Now, the US Department of Agriculture forecasts that China will purchase 2 million metric tons of US corn in the next year. That's a kernal on an ear considering ethanol production requires north of 5 billion bushels and feed is another 5 billion bushels. However, with ethanol production slated to expand, government ethanol subsidies remaining in place, and the Chinese buying up supplies, what will happen to food prices? It might be a heckuva cleanup in aisle 4.
Papa Bear Retires
John Haugh will retire as president of Build-A-Bear Workshop Inc. effective July 22, 2011. His responsibilities will be shared by Chief Financial and Operations Officer Tina Klocke, Chief Entertainment Officer Teresa Kroll, and Chief Executive Maxine Clark.
Friday, July 15, 2011
Amazon.com The Tax Dodger
Amazon.com, which shut down affiliate programs in a number of states after the states demanded sales tax be charged on purchased routed through the affiliates, is sponsoring a voter initiative in California that exempts online sales from state sales tax. California is the latest state to demand taxes from affiliates. State officials estimate Amazon will owe $83 million in taxes this year, nearly half of the $200 million the state estimates Internet retailers owe overall.
The company argues that sales tax, even if it raises revenue, ultimately hurts investment and job growth -- although crying poor mouth when revenues in the first quarter 2011 (last quarter reported) rose 38% to $9.86 billion probably makes brick and mortar retailers ask if they want some cheese with that whine. Somehow, no doubt using Potter-like spells and potions, retailers manage to charge sales tax to their customers, and presto-chango, customers actually pay it.
Blame the Supreme Court. Long ago, it ruled that customers do not have to pay sales tax for out-of-state purchases if the merchant did not have a physical presence in the state. Oddly enough, New York changed the law to define affiliate programs as physical presences. Amazon filed a challenge in court, but is, surprise, surprise, collecting NY state sales taxes.
Amazon.com certainly has the resources to collect sales taxes from each state and file the requisite quarterly accounting paperwork and funds. Small mom-and-pop internet retailers would be at a considerable disadvantage to do the same. Yet retailers cannot continue to collect tax while Amazon and other internet sellers skip out.
Of course, there is always a third way: national value added tax (VAT).
The company argues that sales tax, even if it raises revenue, ultimately hurts investment and job growth -- although crying poor mouth when revenues in the first quarter 2011 (last quarter reported) rose 38% to $9.86 billion probably makes brick and mortar retailers ask if they want some cheese with that whine. Somehow, no doubt using Potter-like spells and potions, retailers manage to charge sales tax to their customers, and presto-chango, customers actually pay it.
Blame the Supreme Court. Long ago, it ruled that customers do not have to pay sales tax for out-of-state purchases if the merchant did not have a physical presence in the state. Oddly enough, New York changed the law to define affiliate programs as physical presences. Amazon filed a challenge in court, but is, surprise, surprise, collecting NY state sales taxes.
Amazon.com certainly has the resources to collect sales taxes from each state and file the requisite quarterly accounting paperwork and funds. Small mom-and-pop internet retailers would be at a considerable disadvantage to do the same. Yet retailers cannot continue to collect tax while Amazon and other internet sellers skip out.
Of course, there is always a third way: national value added tax (VAT).
Open Virtual Sesame
Chinese online commerce company Alibaba.com Ltd signed an agreement to accept payments for products listed in its AliExpress wholesale platform via Western Union agents in 160 countries. Alibaba ended its agreement with PayPal after PayPal wanted to increase fees. However, a considerable number of postings across the internet warn about Chinese scams that specifically use Western Union as the payment system due to lack of controls after sending funds. Buyer beware should probably be in force.
Old Navy Swabs The Decks
Old Navy is about to unveil its 300th remodeled store featuring light wood, white shelving, wider aisles, and lowered racks and fixtures along with moving dressing rooms from the back of the store to the center. In addition, thes stores include a play area for children and more workers helping out in dress rooms. The best news: Customers spend $1 to $2 extra per store visit.
Credit Card Use Up
According to First Data Corp.’s SpendTrend report, consumers boosted non-discretionary spending via credit cards in June 2011 by 6.8% over year ago, with dollar volume up 10.7%, which may point to a new round of consumer woes. Signature debt was up 8.8% (dollar volume up 8.5%), Debit use was up 3.8% (dollar volume up 6.0%), and check use was down 12.3% (dollar volume down 12.6%). Inflation drove core prices higher, with June average ticket growth up 2.1% -- the largest increase in more than a year. Most industries posted higher dollar volume growth in June versus May. The exception was the hotel industry, which saw dollar volume growth slow from 11.5% in May to 7.6% in June.
Fed's Mandatory IPP
In the name of government efficiency, the US Treasury Department mandated that all Treasury Bureaus implement the Internet Payment Platform (IPP), an electronic invoice processing solution, by the end of fiscal year 2012. Commercial vendors must submit invoices by IPP, which allows for quicker payment processing for their services, greater assurances that their invoices are received and processed accurately, and immediate online access to their invoice status.
Borders Group Liquidation?
Borders Group filed with the US Bankruptcy Court on July 14 a modified sale procedures order, bid procedures, and agency agreement that includes an auction but will not include any bid protections. In response to a flurry of objections, the Najafi Co. deal ($215 million plus assumption of $220 million in debt, and brick-and-mortar liquidation) is out and the new stalking horse bid by Hilco Merchant Resources (liquidate Borders to generate estimated $252 million and $284 million in cash) is in.
Tengelmann To Dump A&P
German retailer Tengelmann expects to exit its 38% holding in Great Atlantic & Pacific Tea when the US grocery store chain emerges from bankruptcy protection.
NumBytes 29: Internet Downloads
When broadband internet first started appearing in the home, companies offered unlimited downloads. Now they're placing limits, often 250Gb per month, with surcharges if you exceed those limits. The culprit? Movies. The average 3 minute video clip is only about 10Mb, but the average two-hour DVD takes up about 4.7Gb. Still, that means that 250GB limit offers the opportunity to download just over 53 movies -- assuming 53 movies per month are worth watching -- or about 106 hours of video watching.
Right now, Cisco Systems estimates the average household downloaded 31.8Gb per month, and about 12% of US households downloaded more than 100Gb per month. By 2017, the company predicts, 17% of US households will use more than 200Gb per month and 5% using more than 500Gb per month. All these figures exclude mobile use.
As online retailing becomes more sophisticated and interactive, time among the online racks will rise. A 2009 Debenhams study found an average woman shops 13 hours per month and men about five hours per month. Even at full video, that still leaves bandwidth for 35 movies.
Right now, Cisco Systems estimates the average household downloaded 31.8Gb per month, and about 12% of US households downloaded more than 100Gb per month. By 2017, the company predicts, 17% of US households will use more than 200Gb per month and 5% using more than 500Gb per month. All these figures exclude mobile use.
As online retailing becomes more sophisticated and interactive, time among the online racks will rise. A 2009 Debenhams study found an average woman shops 13 hours per month and men about five hours per month. Even at full video, that still leaves bandwidth for 35 movies.
Factory Blues
According to a study by the Federal Reserve Bank of Minneapolis, from 1997 to 2007 the number of US factories employing more than 1000 workers dropped from 1503 to 1014 (in 1977 there were 2061 of them). But they did not all close -- 48% still employ more than 500 workers, 7% still employed between 250 to 500 workers, and the rest *closed*.
The double asterisks around 'closed' need explanation. Only in a government study would 'closed' not be considered shut down. To quote the study: 'Closure includes shrinking to a plant size below 250 employees.'
Nevertheless, automation and technological changes are shrinking the factory workforce. In 1997, said the study, factories employed 13.7% of all private non-government employees. In 2007, that percentage dropped to 9.7%.
Megafactories employing more than 5000 workers also declined, from 97 in 1997 to 49 in 2007. If you want industrial production on a vast scale, look to China. News reports credited the Foxconn complex in Shenzhen -- where iPhones are assembled -- with 300,000 workers. Of course, more than a few are committing suicide. The company recently issued a new regulation banning suicide from the workplace. That must be the new Chinese labor movement: protest by suicide.
Most of the work once done by US factory labor moved to China. In sections of the Southeast US, an amazing 97% of infants’ cut and sew apparel manufacturing headed to China, while 91% of women’s and girls’ cut and sew suit, coat, and skirt manufacturing went there too. Other specific apparel categories lost 70% to 78% of the US jobs and non apparel categories did almost as bad: computers lost 68%, power hand tools down 56%, electric housewares down 54%, and metal household furniture lost 48% of its jobs to China. No need to wonder why unemployment is up to 9.2% and underemployment doubles that figure.
The double asterisks around 'closed' need explanation. Only in a government study would 'closed' not be considered shut down. To quote the study: 'Closure includes shrinking to a plant size below 250 employees.'
Nevertheless, automation and technological changes are shrinking the factory workforce. In 1997, said the study, factories employed 13.7% of all private non-government employees. In 2007, that percentage dropped to 9.7%.
Megafactories employing more than 5000 workers also declined, from 97 in 1997 to 49 in 2007. If you want industrial production on a vast scale, look to China. News reports credited the Foxconn complex in Shenzhen -- where iPhones are assembled -- with 300,000 workers. Of course, more than a few are committing suicide. The company recently issued a new regulation banning suicide from the workplace. That must be the new Chinese labor movement: protest by suicide.
Most of the work once done by US factory labor moved to China. In sections of the Southeast US, an amazing 97% of infants’ cut and sew apparel manufacturing headed to China, while 91% of women’s and girls’ cut and sew suit, coat, and skirt manufacturing went there too. Other specific apparel categories lost 70% to 78% of the US jobs and non apparel categories did almost as bad: computers lost 68%, power hand tools down 56%, electric housewares down 54%, and metal household furniture lost 48% of its jobs to China. No need to wonder why unemployment is up to 9.2% and underemployment doubles that figure.
US Imports Down in June
Trade intelligence firm Zepol reported June import containerized shipment volume into the US decreased 4.57% from May and 7.38% from year ago. Imports from Asia slid 6%, with China accounting for most of the drop. Imports from Central America fell 4.85% and from South America dropped 7.56%, while containerized imports from Europe dipped only 0.14%.
Thursday, July 14, 2011
Dollar Store Declines
Is the economy in that bad a shape that even the dollar stores are hurting? Dollar General Corp., Dollar Tree, Inc., and Family Dollar Stores all missed quarterly expectations, citing rising transportation costs as the major financial drain. However, they also note a shift in spending habits from their price-sensitive customers to more basic grocery-store items from more discretionary items such as home decoration and apparel. The three still posted quarterly same-store sales boosts of 5.4%, 7%, and 4.7% respectively, but since food costs are rising, margin pressure is likely to get worse until the economy improves.
According to a Wall Street Journal article, these cost and margin pressures mimic those faced by Wal-Mart, Target, and other retailers catering to price-sensitive customers. Family Dollar already rejected one takeover bid, but likely will be targeted again.
According to a Wall Street Journal article, these cost and margin pressures mimic those faced by Wal-Mart, Target, and other retailers catering to price-sensitive customers. Family Dollar already rejected one takeover bid, but likely will be targeted again.
China Exports
China reported exports were $162 billion in June 2011, totaling $874 billion for the first half of 2011, a 20% increase from last year. China's trade surplus with the US rose to $22 billion in June, up from $13 billion in May, although first half 2011 trade surplus fell 18.2% from last year to $44.93 billion.
All Ashore...
National Retail Federation and Hackett Associates Global Port Tracker reported US ports handled 1.28 million Twenty-foot Equivalent Units (TEU) in May 2011, up 6% from April and 1% from May 2010, the 18th month in a row to show a year-over-year improvement.
...Less Freight, More Filling
Shipping companies Hyundai Merchant Marine, APL, and MOL (part of New World Alliance) will remove one weekly string of vessels, each averaging 3,960 TEUs, from their Pacific Southwest service in July 2011 due to slowing demand for retail merchandise and reductions in inventory replenishment in the US. Other New World Alliance companies will adjust remaining spaces to meet any increase in demand. The shippers assert reduced demand and soft prices are to blame, even though the late summer to fall period is the busiest time of the year in trans-Pacific trade lanes.
Viva South America
The 2011 A.T. Kearney Global Retail Development Index, which ranks the top 30 developing countries according to their attractiveness to retailers, found South America on the rise. Brazil, Uruguay, and Chile jumped to the top three spots, up from fifth, eighth, and sixth, respectively. Peru came in eighth from the middle of the pack. In 2010, China took first place, with Kuwait in second.
The Index noted continental population growth of 11%, retail space expanded by 225%, retail sales per capita increased almost 100%, and Internet access grew more than 400%. Developing countries now represent 42% of global retail sales.
The Index noted continental population growth of 11%, retail space expanded by 225%, retail sales per capita increased almost 100%, and Internet access grew more than 400%. Developing countries now represent 42% of global retail sales.
NumBytes 28: Summer Bummer
According to the Bureau of Labor Statistics, teenagers 16 to 19 years old suffered a 27.6% unemployment rate in June 2011. It could be worse. In June 2010, the rate was 29%. It could be worse than worse. They could always get a resume-padding, unpaid internship where they go to work for no money.
Sbarro Extension Sought
Sbarro filed a motion in the US Bankruptcy Court on July 13 for a 120-day extension of the exclusive periods during which only the Debtors may file a Chapter 11 plan from August 2, 2011 through and including November 30, 2011 and solicit acceptances from October 1, 2011 through and including January 29, 2012. A hearing has been scheduled for July 26, 2011.
Wednesday, July 13, 2011
Target Exclusive On Google E-reader
Target will get a six-month exclusive on selling Google's new Story HD e-reader, which will compete with Amazon's Kindle, Barnes & Noble's Nook, and the plethora of other e-readers and tablets. One advantage: The Story HD ties directly into Google Library (as opposed to the other e-readers that require multiple steps to do so). One disadvantage: The Story HD lacks a touchscreen.
Small Business Blues
According to a US Chamber of Commerce report of 1409 owners and executives of small businesses with annual revenues of $25 million or less (564 were Chamber of Commerce members), 84% felt the US economy is on the wrong track, but 61% believed their own company was on track. As for hiring, 64% will keep the same number of employees, 19% will hire new employees, and 12% will layoff workers. The biggest obstacle to hiring? Economic uncertainty (55%), followed by lack of sales and uncertainty about what Washington will do next (34% each).
About 80% viewed the ballooning national debt as a threat to their business, 79% noted over-regulation is strangling their business, and 62% are worried more about what government will do next instead of what it has already done. Roughly 79% assert taxation, regulation, and legislation make hiring more workers difficult, with 75% blaming the new healthcare law for restricting hiring.
These owners and executives are a generally gloomy bunch, with 39% contending America's best days are behind us, versus only 20% say our best days are in front of us. Sheesh. One wonders what they would have said during the Depression of the 1930s, or the early 1890s, or mid 1870s. Economies are like sine waves -- they rise and fall and rise.
About 80% viewed the ballooning national debt as a threat to their business, 79% noted over-regulation is strangling their business, and 62% are worried more about what government will do next instead of what it has already done. Roughly 79% assert taxation, regulation, and legislation make hiring more workers difficult, with 75% blaming the new healthcare law for restricting hiring.
These owners and executives are a generally gloomy bunch, with 39% contending America's best days are behind us, versus only 20% say our best days are in front of us. Sheesh. One wonders what they would have said during the Depression of the 1930s, or the early 1890s, or mid 1870s. Economies are like sine waves -- they rise and fall and rise.
Bankruptcy Updates
Borders Group Objections Filed
Multiple Borders Group landlords filed with the US Bankruptcy Court on July 12 objections and related joinders to objections previously filed against the company's motion for an order approving the sale of substantially all of the Debtors' assets free and clear of all liens, claims, encumbrances, and interests and the assumption and assignment of executor contracts and unexpired leases related thereto, approving sale procedures and break-up fee, and granting related relief.
Please Mum Files
Canadian-based children's clothing retailer Please Mum closed 68 stores after filing for protection under the Bankruptcy and Insolvency Act, leaving 21 stores open. The company contended that young mothers are now seeking fast fashion disposable clothing made overseas rather than quality garments made at home. Please Mum is attempting to shift to developing unique, higher-margin brands.
Multiple Borders Group landlords filed with the US Bankruptcy Court on July 12 objections and related joinders to objections previously filed against the company's motion for an order approving the sale of substantially all of the Debtors' assets free and clear of all liens, claims, encumbrances, and interests and the assumption and assignment of executor contracts and unexpired leases related thereto, approving sale procedures and break-up fee, and granting related relief.
Please Mum Files
Canadian-based children's clothing retailer Please Mum closed 68 stores after filing for protection under the Bankruptcy and Insolvency Act, leaving 21 stores open. The company contended that young mothers are now seeking fast fashion disposable clothing made overseas rather than quality garments made at home. Please Mum is attempting to shift to developing unique, higher-margin brands.
June Trends: Conference Board
Help Wanted Online
The Conference Board Employment Help Wanted Online Index decreased in June 2011, with online advertised vacancies falling by 99,700 to 4.372 million, after a decline of 124,00 in April 2011. The Board noted the national trend in labor demand, while still positive, definitely slowed in the last few months as gains in one month are partially offset by a pullback in advertised vacancies in the next -- shades of 2010. The current number of advertised vacancies is close to the monthly 4.5 million posted just prior to the recession, but in May just over three unemployed workers sought jobs for each vacancy -- double the number of 1.5 unemployed for every advertised vacancy just prior to the recession. The optimism expressed in the Employment Trends Index is bringing back people looking for work.
Consumer Confidence
Hence the catch-22 of spending and employment. Employed people buy more, which generates more jobs, which generates more spending. Unemployment reverses that spiral. According to the Conference Board, Consumer Confidence declined in June 2011 to 58.5, down from 61.7 in May 2011. The Board noted consumers consider both current business and labor market conditions in less favorble light than in May, and fewer consumers than last month foresee conditions improving over the next six months. Inflation fears eased considerably in June, but concerns about income prospects increased. Given the combination of uneasiness about the economic outlook and future earnings, consumers are likely to continue weighing their spending decisions quite carefully.
The Conference Board Employment Help Wanted Online Index decreased in June 2011, with online advertised vacancies falling by 99,700 to 4.372 million, after a decline of 124,00 in April 2011. The Board noted the national trend in labor demand, while still positive, definitely slowed in the last few months as gains in one month are partially offset by a pullback in advertised vacancies in the next -- shades of 2010. The current number of advertised vacancies is close to the monthly 4.5 million posted just prior to the recession, but in May just over three unemployed workers sought jobs for each vacancy -- double the number of 1.5 unemployed for every advertised vacancy just prior to the recession. The optimism expressed in the Employment Trends Index is bringing back people looking for work.
Consumer Confidence
Hence the catch-22 of spending and employment. Employed people buy more, which generates more jobs, which generates more spending. Unemployment reverses that spiral. According to the Conference Board, Consumer Confidence declined in June 2011 to 58.5, down from 61.7 in May 2011. The Board noted consumers consider both current business and labor market conditions in less favorble light than in May, and fewer consumers than last month foresee conditions improving over the next six months. Inflation fears eased considerably in June, but concerns about income prospects increased. Given the combination of uneasiness about the economic outlook and future earnings, consumers are likely to continue weighing their spending decisions quite carefully.
Economy Watch
ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on July 9, 2011 rose 0.4% from the week before, and was up a strong 5.5% from the same period last year.
Shoppertrak Retail Sales Data
For the week ended July 9, 2011, ShopperTrak's National Retail Sales Estimate was $89.149 billion, down 1.9% from last week's $90.887 billion, but up 1.2% from the same week last year. Historically, July 4th is the poorest holiday for general merchandise, apparel, furniture, and other store retail sales and 2011 proved no exception. Sales will bump along the next few weeks until 'back to school' kicks into gear. Note that efforts by several retailers to jump start the season with pre-'back to school' sales flopped.
Mortgage Rates Increase
Bankrate.com reported that the average conforming 30-year fixed mortgage rate rose to 4.79%, up from last week's 4.71%, according to its weekly national survey ending July 6, 2011. It also reported that the average 15-year fixed mortgage rate was 3.9%, up from 3.86% last week.
Gas Prices Up
The Energy Department announced that for week ending July 11, 2011, the average price of US gasoline rose to $3.641 a gallon, down from $3.579 per gallon week earlier. This is the first price rise in eight weeks.
Diesel prices fell to $3.85, down from $3.89 last week.
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on July 9, 2011 rose 0.4% from the week before, and was up a strong 5.5% from the same period last year.
Shoppertrak Retail Sales Data
For the week ended July 9, 2011, ShopperTrak's National Retail Sales Estimate was $89.149 billion, down 1.9% from last week's $90.887 billion, but up 1.2% from the same week last year. Historically, July 4th is the poorest holiday for general merchandise, apparel, furniture, and other store retail sales and 2011 proved no exception. Sales will bump along the next few weeks until 'back to school' kicks into gear. Note that efforts by several retailers to jump start the season with pre-'back to school' sales flopped.
Mortgage Rates Increase
Bankrate.com reported that the average conforming 30-year fixed mortgage rate rose to 4.79%, up from last week's 4.71%, according to its weekly national survey ending July 6, 2011. It also reported that the average 15-year fixed mortgage rate was 3.9%, up from 3.86% last week.
Gas Prices Up
The Energy Department announced that for week ending July 11, 2011, the average price of US gasoline rose to $3.641 a gallon, down from $3.579 per gallon week earlier. This is the first price rise in eight weeks.
Diesel prices fell to $3.85, down from $3.89 last week.
NumBytes 27: Toying With US
China makes 64% of all toys exported in 2010 and the country has the largest toy part and toy packaging network in the world, according to Global Trade Information Services. Some manufacturers, troubled by rising costs, are looking elsewhere, for example, Vietnam and India. However, while wages are 10% or lower, that lack of a toy infrastructure means increased costs for moving supplies, not to mention navigating undeveloped transportation infrastructure -- bad roads, substandard ports, and inadequate warehousing facilities -- and rising shipping costs.
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. Imagine what toys will cost if China had environmental and factory safety laws -- something workers are increasingly demanding in addition to better wages.
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. Imagine what toys will cost if China had environmental and factory safety laws -- something workers are increasingly demanding in addition to better wages.
Border Provocations
According to an article in Cargo Business News, companies need to follow the process set up by US Customs and Border Protections to do due diligence for C-TPAT membership in order to receive the benefits. Verifiable processes must be in place, and must be displayed in companies' web portals, which should be monitored at least once per month -- Customs recently suspended companies from C-TPAT membership for not answering e-mails after 90 days.
Tuesday, July 12, 2011
Toys R Us IPO: Next Year
Toys R Us is becoming like my favorite sports team -- halfway through the season and it's 'wait 'til next year.' According to a Reuters news story, the company will file for an IPO in 2012. It originally filed paperwork in 2010, then said 2011, and now...2012. The US Securities and Exchange Commission already approved its application, so technically, it could file for an IPO at any time, but given the lackluster response to IPOs this year -- in the US and even in once hot Hong Kong -- the company is commendably cautious. Given the less than stellar stock prices of those companies that did turn out an IPO this year, that caution is reflected by investors, too.
CT Hourly Sick Leave
Connecticut became the first state in the US to pass a law mandating paid sick leave for hourly employees.*
As usual, there's always an asterisk behind such laws: Hourly employees must work at least 10 hours per week and work at firms with more than 50 employees (excluding manufacturers and some others). They will accrue one hour of paid sick time for every 40 hours worked, with a maximum accumulation of five days.
Proponents of the law contend public health will benefit from sick workers staying home and not passing germs along to customers. Opponents assert the law drives up costs that will be passed along in higher prices to customers. Whether consumers prefer higher costs or germs is another matter.
As usual, there's always an asterisk behind such laws: Hourly employees must work at least 10 hours per week and work at firms with more than 50 employees (excluding manufacturers and some others). They will accrue one hour of paid sick time for every 40 hours worked, with a maximum accumulation of five days.
Proponents of the law contend public health will benefit from sick workers staying home and not passing germs along to customers. Opponents assert the law drives up costs that will be passed along in higher prices to customers. Whether consumers prefer higher costs or germs is another matter.
Udasin Resigns From Syms
Syms Corp. Senior Vice President, Chief Financial, and Chief Accounting Officer Seth Udasin resigned for personal reasons on July 8, 2011. Gary Binkoski will serve as interim Chief Financial Officer and Josephine Geiger will serve as Chief Accounting Officer.
Target Confirms Canadian Food
Target Canada President Tony Fisher confirmed new Target stores opening in Canada will carry food, including fresh fruit, vegetables, and other perishables, but with limited square footage compared to US superstores with full groceries.
Bankruptcy Updates
Nebraska Book Company Hiring Approval Sought
Nebraska Book Company filed with the US Bankruptcy Court on July 7, 2011 a motion to retain Pachulski Stang Ziehl & Jones as co-counsel, Kirkland & Ellis as attorney, AlixPartners as restructuring advisor, and Rothschild as investment banker and financial advisor.
Harry & David Holdings Extension Sought
Harry & David Holdings filed with the US Bankruptcy Court on July 6, 2011 a motion to extend the exclusive period during which only the Company can file a Chapter 11 plan and solicit acceptances thereof through and including September 30, 2011 and November 30, 2011 respectively. The Court scheduled a July 26, 2011 hearing to consider the motion.
Jackson-Hewitt Tax Service Hiring Approvals Sought
Jackson-Hewitt Tax Service's official committee of unsecured creditors filed with the US Bankruptcy Court motions to retain BDO Consulting as financial advisor at the following hourly rates: partner/managing director at $475 to $795, director and senior manager at $375 to $525, manager at $325 to $425, senior at $200 to $350 and staff at $150 to $225 as well as Duane Morris as counsel at hourly rates ranging from $305 to $745.
Nebraska Book Company filed with the US Bankruptcy Court on July 7, 2011 a motion to retain Pachulski Stang Ziehl & Jones as co-counsel, Kirkland & Ellis as attorney, AlixPartners as restructuring advisor, and Rothschild as investment banker and financial advisor.
Harry & David Holdings Extension Sought
Harry & David Holdings filed with the US Bankruptcy Court on July 6, 2011 a motion to extend the exclusive period during which only the Company can file a Chapter 11 plan and solicit acceptances thereof through and including September 30, 2011 and November 30, 2011 respectively. The Court scheduled a July 26, 2011 hearing to consider the motion.
Jackson-Hewitt Tax Service Hiring Approvals Sought
Jackson-Hewitt Tax Service's official committee of unsecured creditors filed with the US Bankruptcy Court motions to retain BDO Consulting as financial advisor at the following hourly rates: partner/managing director at $475 to $795, director and senior manager at $375 to $525, manager at $325 to $425, senior at $200 to $350 and staff at $150 to $225 as well as Duane Morris as counsel at hourly rates ranging from $305 to $745.
NumBytes 26: Jumpin' Jeans
According to market research firm NPD Group, US men's and women's jean sales totaled $13.8 billion for the year ended April 30, 2011. About 99% of the sales were for jeans priced $50 and under. The other 1% were for those priced over $50 -- some retailing for $300 and up. According to a Wall Street Journal article, gross profit margin for private-label jeans made for Wal-Mart Stores Inc., Sears Holdings Corp., and other retailers are less than 20%, whereas the margins for premium jean lines are 40% to 50%. Costs for a True Religion pair of jeans made in the USA are $23.30 spent for a Los Angeles-based seamstress, $10 worth of fabric (1.8 yards a pair, on average), 44 cents for pocket linings, 37 cents for a zipper, and $2 for the embroidery on a back pocket. The equivalent high-end jeans made in China would retail about $40 per pair, noted True Religion, but would likely not offer the same quality.
If consumers balk at the real thing, they can always buy pajama jeans from a late night TV ad.
If consumers balk at the real thing, they can always buy pajama jeans from a late night TV ad.
C'Mon Baby: Statistics Twist
According to a Compete Online Shopper Intelligence survey of 3,269 online purchasers between April 14 and May 5, 2011, 56.2% said they use Facebook to keep up with sales and promotions, 29.2% learned more about a specific retailer, and 13.7% asserted they let others know about a favored retailer. Of course, these results come from people who purchased something, as opposed to a proper poll that would sample all consumers to give retailers a more accurate account of Facebook as marketing tool. Put another way, the survey results show almost half of purchasers do not look at retailer sales and promotions, more than two-thirds don't want to know about the retailer, and almost 90% never tell anyone about their favorite retailer. Half full or half empty?
Monday, July 11, 2011
Bricks Vs Clicks
Shoprunner is about to release a mobile app for the Apple iPhone and iPod Touch to allow customers to use a smartphone to scan bar codes in a store and see if participating retailers in the area stock the item. Presumably, this will keep shoppers from ordering off the internet, or if they do, it will be from the store's internet site. Whether immediacy trumps price is another matter. An Android version is in development.
June Jobs And Unemployment
The US Labor Department reported the June unemployment rate increased to 9.2%, the private sector added 57,000 jobs for the month, and the government sector shed jobs for a net gain of 18,000 jobs for the month. Overall, private payrolls account for 70% of all jobs in the country and while the private sector added 2.1 million jobs since the depth of the recession in 2009, it is still about 6.8 million jobs short of the 2007 peak.
Despite solid results from retailers, the retail sector added only 5,000 jobs as companies turned cautious. Temporary jobs dropped by 12,000, the third straight month of decline, sounding an ominous note for the economy because those temp-style jobs often serve as an early indicator of job growth or loss.
Despite solid results from retailers, the retail sector added only 5,000 jobs as companies turned cautious. Temporary jobs dropped by 12,000, the third straight month of decline, sounding an ominous note for the economy because those temp-style jobs often serve as an early indicator of job growth or loss.
Women's Apparel Group Bankruptcy
On June 29, 2011, four creditors of Women's Apparel Group LLC, which does business as Boston Apparel Group and Chadwick's of Boston and is located in Taunton and Bridgewater MA, filed an involuntary Chapter 7 bankruptcy petition in the US Bankruptcy Court in Boston. According to court records, Women's Apparel Group is in arrears to these creditors in the amount of $52.8 million.
NumBytes 25: NASA Numbers
In about three billion years, give or take a few, the sun should be burning off Earth's atmosphere, so it seems like a good idea for us humans should figure out how to leave this rock for another rock long before that happens. First with satellites and then with manned launches, NASA rocketed us up, up, and away into space, although the current space shuttle mission is slated to be the last for the program.
According to NASA, the entire space shuttle program of 135 launches cost $115 billion in flat dollars and $211 billion in inflation-adjusted dollars. To that, you can add $18 billion to the total from the Defense Department for about 10 of those missions, or at least 10 it 'fesses up to.
Sadly, NASA cannot field the next generation spaceship, but private enterprise may yet field a starship Enterprise, in part thanks to the second round of the Space Act Agreements, part of a plan to create commercial vehicles to transport astronauts to space. In April 2011, Blue Origin, backed by Amazon.com chairman Jeff Bezos, received $22 million out of the $269 million in funding (Boeing grabbed the largest share with $92 million). Blue Origin is already constructing a launch pad and facility in West Texas. Bezos' goal for the next 20 years is to make Amazon as large as Wal-Mart.
But Amazon/Blue Origin has a ways to go. Richard Branson-backed Virgin Galactic is already taking reservations for rides into space (430 already signed up at $200,000 per pop according to its web site) aboard its spaceship, which just completed test flights in May 2011. VG is building its own launch facility, called Spaceport America, in New Mexico.
Like historical explorations, government-funded expeditions came first -- think Spain sponsoring Columbus or the US sponsoring Lewis and Clark -- followed by private enterprise. Star Trek may not yet be upon us, but the end of one era often signals the beginning of another, better one.
According to NASA, the entire space shuttle program of 135 launches cost $115 billion in flat dollars and $211 billion in inflation-adjusted dollars. To that, you can add $18 billion to the total from the Defense Department for about 10 of those missions, or at least 10 it 'fesses up to.
Sadly, NASA cannot field the next generation spaceship, but private enterprise may yet field a starship Enterprise, in part thanks to the second round of the Space Act Agreements, part of a plan to create commercial vehicles to transport astronauts to space. In April 2011, Blue Origin, backed by Amazon.com chairman Jeff Bezos, received $22 million out of the $269 million in funding (Boeing grabbed the largest share with $92 million). Blue Origin is already constructing a launch pad and facility in West Texas. Bezos' goal for the next 20 years is to make Amazon as large as Wal-Mart.
But Amazon/Blue Origin has a ways to go. Richard Branson-backed Virgin Galactic is already taking reservations for rides into space (430 already signed up at $200,000 per pop according to its web site) aboard its spaceship, which just completed test flights in May 2011. VG is building its own launch facility, called Spaceport America, in New Mexico.
Like historical explorations, government-funded expeditions came first -- think Spain sponsoring Columbus or the US sponsoring Lewis and Clark -- followed by private enterprise. Star Trek may not yet be upon us, but the end of one era often signals the beginning of another, better one.
Enough School Already?
Remember when Christmas shopping began the day after Thanksgiving? Now stores run sales before Halloween. Retailers are at it again.
Toys R Us kicked off its 'Pack to School' sale on July 1, Wal-Mart used a giant crayon in stores starting this week to draw attention to back to school items, Target and Office Depot started on July 10, Staples on July 6, Walgreens this week...
At stake, $55 billion in back-to-school sales, according to the National Retail Federation. The irony? The NRF's back-to-school survey isn't due out for another two weeks.
Toys R Us kicked off its 'Pack to School' sale on July 1, Wal-Mart used a giant crayon in stores starting this week to draw attention to back to school items, Target and Office Depot started on July 10, Staples on July 6, Walgreens this week...
At stake, $55 billion in back-to-school sales, according to the National Retail Federation. The irony? The NRF's back-to-school survey isn't due out for another two weeks.
Wednesday, July 6, 2011
China's Luxury Tax Cut?
China is considering cutting its 10% to 30% luxury tax on imported high-end products such as handbags, watches, and cosmetics down to the 2% to 15% range. If implemented, the cuts will be rolled out gradually, starting with cosmetics, tobacco, and alcohol. Since China is the fastest growing luxury market on the planet, this could be a boon to manufacturers and retailers of luxury goods -- and from the Chinese perspective, keep more sales in China rather than out at shopping destinations Hong Kong, Macau, US, and Europe. However, savvy Chinese shoppers may not be swayed because even after all customs, sales, VAT, and other taxes are considered, luxury goods often cost a third less outside of China (especially at duty-free shops), than inside.
Economic Anomalies
Corporate profits jumped 46.6%, exports expanded 20.6%, and GDP is up 5.5% in the two years since the recession said a Wall Street Journal article, but to most people, the economy is just limping along. US unemployment is at 9.1% and US household debt -- in part due to mortgage woes caused by unemployment and an 8.8% drop in home prices -- is at 127% of annual incomes, far higher than the average 84% of the 1990s and the 90% financial line in the sand suitable for economic expansion. In order to get back to the go-go 1990s level, US households need to pay off $3.3 trillion of that debt, raise incomes $3.9 trillion, or some combination of the two.
Worse, the Federal Reserve noted banks are lending less than before the recession. Home equity lines of credit, as you can imagine, dropped 13.0% from pre-recession $1.33 trillion to current $1.15 trillion and credit card lines of credit dropped 11.5% from $3.04 trillion to $2.69 trillion.
Reduced credit is strangling the recovery. According to the Summer 2011 Pepperdine Private Capital Markets Project study of 1221 privately-held businesses, 95% of business owner remain enthusiastic about executing growth strategies, but only 53% said that they have the necessary financial resources to successfully execute their expansion plans. Banks denied approximately 60% of loan applications over the last six months; angel investors funded just one business plan out of 25 reviewed; venture capitalists funded just one business plan of 80 reviewed; and private equity funds invested in just one business plan out of approximately 150 reviewed. Then again, the same study found 61% of bankers said they rejecting loan applications they ordinarily would have approved in order to satisfy federal regulators.
As for the government, the financial stimulus, including Treasury Department purchases of $1.4 trillion in mortgage bonds and $900 billion in Treasury bonds, plus $830 billion stimulus package of 2009, has run its course. It may have stabilized the economy, but the government is running out of sleight of hand financial tricks to prod the economy into high gear and is suffering its own brand of massive debt.
The good news? A Pepperdine Investment Bankers survey found 85% of respondents thought deal flow would increase over the next 12 months, but with a further tightening of due diligence efforts by banks (31.7%) in the face of improving conditions. Over 48% of angel investor respondents expected the quality of companies seeking investment over the next 12 months to increase and nearly 70% expected the demand for business investment to also increase over the next 12 months.
Best guess by economists? A long, slow slog of a summer with some increased activity in the fall and winter. Then again, they said that last year, so it may be years before consumers wean themselves off credit card and home equity splurges.
Worse, the Federal Reserve noted banks are lending less than before the recession. Home equity lines of credit, as you can imagine, dropped 13.0% from pre-recession $1.33 trillion to current $1.15 trillion and credit card lines of credit dropped 11.5% from $3.04 trillion to $2.69 trillion.
Reduced credit is strangling the recovery. According to the Summer 2011 Pepperdine Private Capital Markets Project study of 1221 privately-held businesses, 95% of business owner remain enthusiastic about executing growth strategies, but only 53% said that they have the necessary financial resources to successfully execute their expansion plans. Banks denied approximately 60% of loan applications over the last six months; angel investors funded just one business plan out of 25 reviewed; venture capitalists funded just one business plan of 80 reviewed; and private equity funds invested in just one business plan out of approximately 150 reviewed. Then again, the same study found 61% of bankers said they rejecting loan applications they ordinarily would have approved in order to satisfy federal regulators.
As for the government, the financial stimulus, including Treasury Department purchases of $1.4 trillion in mortgage bonds and $900 billion in Treasury bonds, plus $830 billion stimulus package of 2009, has run its course. It may have stabilized the economy, but the government is running out of sleight of hand financial tricks to prod the economy into high gear and is suffering its own brand of massive debt.
The good news? A Pepperdine Investment Bankers survey found 85% of respondents thought deal flow would increase over the next 12 months, but with a further tightening of due diligence efforts by banks (31.7%) in the face of improving conditions. Over 48% of angel investor respondents expected the quality of companies seeking investment over the next 12 months to increase and nearly 70% expected the demand for business investment to also increase over the next 12 months.
Best guess by economists? A long, slow slog of a summer with some increased activity in the fall and winter. Then again, they said that last year, so it may be years before consumers wean themselves off credit card and home equity splurges.
NumBytes 24: Mmmmm...Mmmmm...Nyet
Campbell Soup Co. admitted defeat in trying to turn a nation of homemade soup makers into a nation of canned soup consumers and is exiting the Russian market after sales never matched expectations. The company intends to concentrate on China, but whether it will find success in that nation of soup preparers remains to be seen. Campbell entered both markets in 2007.
According to Campbell research, Chinese and Russians eat soup an average of five times per week, versus only once a week for Americans. Russians consume 32 billion bowls of soup each year, while Americans consume 14 billion bowls per year. The Chinese, as you might expect, consumer much more -- 320 billion bowls of soup each year.
According to Campbell research, Chinese and Russians eat soup an average of five times per week, versus only once a week for Americans. Russians consume 32 billion bowls of soup each year, while Americans consume 14 billion bowls per year. The Chinese, as you might expect, consumer much more -- 320 billion bowls of soup each year.
Ka-Saks-stan
Oil wealth is a wonderful magnet. Retailer Saks Inc. announced the planned opening of a licensed, 91,000-square-foot Saks Fifth Avenue store in the Esentai Shopping Mall in Almaty, Kazakhstan in August 2012. In addition to being anchored by Saks Fifth Avenue, the Mall will include a large selection of luxury fashion and jewelry brand stores. The store will reflect a modern, streamlined design and feature a three-story high, state-of-the-art digital video screen on the facade of the building.
Family Dollar: Stores and Shares
Family Dollar Stores, Inc. is on track to open 300 stores this year, having already opened 206 through the first three quarters of fiscal year 2011. The chain also closed 48 stores, and is increasing efforts to buy back shares. Through the end of the third quarter, it's bought back 10.9 million shares for $513 million.
Tuesday, July 5, 2011
Retailers Just Say No
Retail executives at the Reuters Retail and Consumer Summit noted they intended to keep inventories lean to avoid a repeat of last year when a flurry of consumer spending led them to boost inventories, only to get stuck when spending tailed off. The International Council of Shopping Centers expects same-store sales to rise about 3.5% for the year.
Yuan Appreciation Decade
According to a Bloomberg TV report, Chinese Central Bank Policy Committee member David Li asserted that the yuan will increase in value by 5% to 6% a year against the dollar as a result of tightened monetary conditions in China, better that current 3.6% increase since 2010. A higher-valued yuan would reduce US trade imbalances with China, helping US exports and potentially helping hiring.
Manufacturing Still Chugging Along
The Institute for Supply Management manufacturing report showed an increase in the overall manufacturing activity index, rising from 53.5 in May 2011 to 55.3 in June, the 23rd consecutive month of expansion. This increase bolstered the argument that the spring slowdown had more to do with high commodity prices than low demand. Overall commodity prices have falled over 10% since April, according to the Dow Jones-UBS index. The ISM employment index also rose, from 58.2 in May to 59.9 in June, indicating hiring increased as well. ISM indicies for New Orders, Production, Supplier Deliveries, Inventories, and Customer Inventories also rose, but the ISM indicies Price, Backlog Order, Imports, and Exports fell.
Consumer Swoon In June
The Thomson Reuters/University of Michigan consumer sentiment index fell from 74.3 in May 2011 to 71.5 in June, indicating lackluster consumer enthusiasm, while the consumer expectations index fell from 69.5 in May to 64.8 in June, indicating they're none too happy about the future, either. The economic conditions index remained essentially flat, nudging up from 81.9 in May to 82.0 in June. This could be a long, hot summer before retailers get a break with back-to-school season.
NumBytes 23: E-Bodice Rippers
Ah, summer, where scholarly prose yields to beach reading. Of all the book titles published in 2009, 13.2% (9089 titles) were romance novels generating $1.36 billion in sales (second only to the movie tie-in genre and about three times the size of the classic literary fiction genre), according to the Romance Writers of America trade group. Like all other book categories, bodice rippers are sailing, hiking, galloping, and otherwise racing onto e-readers. Major trade publishers say e-books now make up about 9% to 10% of overall sales.
The typical reader, women aged 31 to 49 years old, reads about a book a week, according to a NY Times article, and major publishers like Random House are digitizing their backlist as fast as they can. Harlequin Enterprises digitized nearly 10,000 titles, dating back to 2002. Barnes & Noble started a 'romance store' for its Nook Color e-reader, discounting titles to $2.99 to hook new readers.
The only odd part -- the publishers often do not have digital rights to the cover illustrations, so about half the books come with blank covers...shades of mailing items in a plain brown wrapper.
Backlisted e-romance novels: not just a guilty pleasure, but a profitable one, too.
The typical reader, women aged 31 to 49 years old, reads about a book a week, according to a NY Times article, and major publishers like Random House are digitizing their backlist as fast as they can. Harlequin Enterprises digitized nearly 10,000 titles, dating back to 2002. Barnes & Noble started a 'romance store' for its Nook Color e-reader, discounting titles to $2.99 to hook new readers.
The only odd part -- the publishers often do not have digital rights to the cover illustrations, so about half the books come with blank covers...shades of mailing items in a plain brown wrapper.
Backlisted e-romance novels: not just a guilty pleasure, but a profitable one, too.
China Vs US Shoppers
According to a Harris Interactive worldwide poll, 39% of US shoppers said they liked or loved clothes shopping, while 30% were neutral, and 30% disliked the experience. However, 79% of Chinese shoppers said they liked or loved clothes shopping, while 17% were neutral, and only 3% disliked the experience. Furthermore, more than 70% of Chinese shoppers considered brand names important when making a purchase decision, while fewer than 30% of US shoppers needed a brand identity.
Blockbuster Objection Filed
The US Trustee assigned to the Blockbuster case filed with the US Bankruptcy Court an objection to the Debtors' motion to pay certain limited incentive compensation to the Company's sole remaining employee, who is the former treasurer of Blockbuster and current controller and senior vice president of tax. According to the Trustee, the Debtors have failed to meet their evidentiary burden of proof to show that the proposed bonus payments comply with Sections 503(c) and 363 of the Bankruptcy Code.
Friday, July 1, 2011
Swipe Fee Changes
The Federal Reserve voted to cap swipe fees -- the amount banks charge merchants to process debit-card payments -- at 21 cents, down from the current average debit card transaction cost of 44 cents, but up from the original proposal of 12 cents per transaction. If banks and other financial institutions comply with fraud prevention standards, they can charge an extra penny plus an additional 0.05% fee based on the value of the transaction. Thus, on a $100 purchase, the bank can charge 27 cents for card processing.
The Fed also voted to delay implementation of the cap from July 21 to October 1. Overall, banks will see their revenue from these automated transactions decrease by about 45% said the American Bankers Association. Banks generally eliminated free checking, card rewards programs, and other basic banking services in response. The new rule exempted small banks and most credit unions from the cap.
In theory, marchants should be able to pass along these savings to customers in the form of lower prices. In practice, the savings may do more for the retailer's bottom line than for a customer's wallet.
The Fed also voted to delay implementation of the cap from July 21 to October 1. Overall, banks will see their revenue from these automated transactions decrease by about 45% said the American Bankers Association. Banks generally eliminated free checking, card rewards programs, and other basic banking services in response. The new rule exempted small banks and most credit unions from the cap.
In theory, marchants should be able to pass along these savings to customers in the form of lower prices. In practice, the savings may do more for the retailer's bottom line than for a customer's wallet.
NumBytes 22: 4th Facts
National Retail Federation’s annual Independence Day survey, conducted by BIGresearch, found that 20.1% of consumers will buy patriotic merchandise (up from 16.2% in 2010), 64.4% will host or attend a cookout or picnic (up from 61.9% in 2010), and 44.7% plan to watch fireworks or attend a community celebration.
In 2011, nearly 126 million people said they fly a flag, up from 124 million in 2010; 89 million wear US-themed apparel, up from 86 million last year; and 62 million show patriotic decor, up form 56 million last year.
In 2011, nearly 126 million people said they fly a flag, up from 124 million in 2010; 89 million wear US-themed apparel, up from 86 million last year; and 62 million show patriotic decor, up form 56 million last year.
Borders Bought
Direct Brands, a unit of Najafi Companies, tendered a stalking horse bid of $215.1 million plus the assumption of approximately $220 million worth of liabilities to buy Borders. The bankruptcy court will consider the deal on July 21. Najafi operates Book-of-the-Month Club, Doubleday Book Clubs, and Columbia House.
Housing On The Rise
April Home Prices Climb
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas increased 0.7% in April 2011 from the month before, the first increase in eight months, although still down 4% from April 2010. Six of the 20 areas fell to new index lows in April 2011 (Charlotte, Chicago, Detroit, Las Vegas, Miami, and Tampa), one other recorded a loss, and 13 showed improvement. Much of the improvement reflects the beginning of the Spring-Summer home buying season, but it is too early to tell if this is a turning point or simply due to warmer weather. Washington DC remained the city with the biggest increase, up 3.0%, while Detroit suffered the biggest loss, down 2.9%.
Building Permits
The US Commerce Department reported that privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 612,000, up 8.7% above the revised April rate of 563,000 and 5.2% above the May 2010 estimate of 582,000.
Housing Starts
The US Commerce Department reported that privately-owned housing starts in May 2011 were at a seasonally adjusted annual rate of 560,000, 3.5% increase over the revised April estimate of 541,000, but still 3.4% below the May 2010 rate of 580,000. The Department noted single-family housing starts in May were at a rate of 419,000, a 3.7% gain above the revised April figure of 404,000.
The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas increased 0.7% in April 2011 from the month before, the first increase in eight months, although still down 4% from April 2010. Six of the 20 areas fell to new index lows in April 2011 (Charlotte, Chicago, Detroit, Las Vegas, Miami, and Tampa), one other recorded a loss, and 13 showed improvement. Much of the improvement reflects the beginning of the Spring-Summer home buying season, but it is too early to tell if this is a turning point or simply due to warmer weather. Washington DC remained the city with the biggest increase, up 3.0%, while Detroit suffered the biggest loss, down 2.9%.
Building Permits
The US Commerce Department reported that privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 612,000, up 8.7% above the revised April rate of 563,000 and 5.2% above the May 2010 estimate of 582,000.
Housing Starts
The US Commerce Department reported that privately-owned housing starts in May 2011 were at a seasonally adjusted annual rate of 560,000, 3.5% increase over the revised April estimate of 541,000, but still 3.4% below the May 2010 rate of 580,000. The Department noted single-family housing starts in May were at a rate of 419,000, a 3.7% gain above the revised April figure of 404,000.
Bad Mortgages Turn Good
The US Treasury Department's Office of the Comptroller of the Currency and the Office of Thrift Supervision reported that 88.6% of the 32.7 million mortgage loans in the portfolio were current and performing at the end of the first quarter of 2011. While delinquencies and foreclosures remained elevated from historic norms, delinquencies improved across all risk categories and for all investors. Mortgages that were 30-59 days delinquent fell to 2.6% of the portfolio, the lowest level in three years. Mortgages more than 60 days past due and delinquent loans to bankrupt borrowers declined for the fifth consecutive quarter to 4.8% of the portfolio, the lowest level since the first quarter of 2009.
The number of mortgages entering the foreclosure process fell to 312,404—down 11.3% from the previous quarter and 15.6% from a year ago. The number of mortgages in the process of foreclosure fell slightly, but the overall portion of mortgages in the process of foreclosure remained unchanged from the previous quarter at about 4%. The number of mortgages that completed the foreclosure process rose by 26% from the previous quarter but was down 27.7% from a year ago, as servicers lifted voluntary moratoria on foreclosures that were in place during the previous quarters.
The 159,873 mortgage modifications implemented during the first quarter of 2011 reduced principal and interest payments by an average of $333. Modifications made under the Home Affordable Modification Program reduced payments by an average of $562.
The number of mortgages entering the foreclosure process fell to 312,404—down 11.3% from the previous quarter and 15.6% from a year ago. The number of mortgages in the process of foreclosure fell slightly, but the overall portion of mortgages in the process of foreclosure remained unchanged from the previous quarter at about 4%. The number of mortgages that completed the foreclosure process rose by 26% from the previous quarter but was down 27.7% from a year ago, as servicers lifted voluntary moratoria on foreclosures that were in place during the previous quarters.
The 159,873 mortgage modifications implemented during the first quarter of 2011 reduced principal and interest payments by an average of $333. Modifications made under the Home Affordable Modification Program reduced payments by an average of $562.
Groupon Grapple
Online coupon king Groupon may find itself financially dethroned by competitors offering retailers and other merchants better deals. According to a Wall Street Journal article, each time Groupon sells a voucher, it gets paid up front and the merchant's share is paid in installments over 60 days. Rival LivingSocial pays the full amount in 15 days and Google's upcoming daily deal service is supposed to pay most of what the merchant is owed in four days. No doubt other services will pop up and offer better deals to retailers.
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