Sitcoms and TV movie plots often hinge on a something for nothing scam of varying deviousness. One oft-used plot device finds a middle-class woman buying an over-the-top-of-the-line gown, leaving the pricetags on with the intention of returning it, only to spill wine on it or tear it or whatever that foils her free rental scheme.
Along comes Hurricane Irene, sparking a frenzy of gas-powered generator sales at Wal-Mart, Lowe's Home Depot, and other stores. That's great for business. However, according to an article in the Wall Street Journal, retailers expect many of these desperate customers to return them now that storm has passed -- a practice called 'weekend rentals.'
Mom-and-pop retailers are mostly prohibiting returns, while many chains accept returns but will charge a cleaning and restocking fee if the generator was used.
On the positive side for retailers, many who did not have generators during the emergency come in to buy them in preparation for the next hurricane, nor'easter, or storm.
Given that climate change is producing wilder weather, customers in the northeastern US may want to look to Floridians -- who know a thing or two about hurricanes -- for advice on generators. Generator maker Generac Holdings, Inc., whose units are sold in Home Depot and Lowe's, asserts 2% of Florida's single family homes have backup power systems -- one of the highest rates in the US.
Wednesday, August 31, 2011
Harry & David Emerging From Chapter 11
The US Bankruptcy Court on August 30, 2011 confirmed Harry & David Holdings' Chapter 11 Plan of Reorganization, with an anticipated emergence from bankruptcy protection on or around September 13, 2011. The plan allows the company to convert all of its approximately $200 million of outstanding public notes into equity of the reorganized company and includes an equity capital raise that will generate $55 million in equity financing upon emergence. A group of the company's existing noteholders have agreed to backstop the equity capital raise. Harry & David will utilize proceeds from the equity capital raise to satisfy obligations arising from its $55 million post-petition term loan. Additionally, the company obtained a $100 million revolving loan commitment to finance operations after exiting Chapter 11.
Consumer Spending Spree In July
The Commerce Department reported US consumer spending was up 0.8% in July 2011 -- or 0.5% when adjusted for inflation -- thanks in large part to 10% drop in gas prices and personal saving rate drop from 5.5% to 5.0%. This is starting the third quarter off to a good start, but a moribund August, recent Federal Reserve surveys of manufacturing activity showing downward numbers, and an East Coast hurricane named Irene combine to offset this initial welcome news. Personal income rose 0.3%, but after adjusting for inflation, actually dropped 0.1% -- the first decline since September 2010.
Tuesday, August 30, 2011
Lowe's Revamp
After a disappointing second quarter 2011, Lowe's is switching to an 'everyday low pricing' formula, more products available on its new website, and small engine and power equipment repair services to bring in more customers and improve the bottom line.
As for inventory, Lowe's is implementing a new strategy called 'integrating planning and execution' (IPE) that creates an 'institutional memory to maintain local assortment decisions when merchants change' -- otherwise known as getting the right product to the right store at the right quantity to reflect national and local tastes. It's hardly revolutionary in retail, but in a test store, Lowe’s removed much of the standard racking and experimented with more open vignettes, expanded endcaps, and 'drop zones.' The idea is to get customers to buy across product lines at once. Lowe's noted that more than 80% of the merchandising teams have product line reviews in process using these IPE techniques.
As for inventory, Lowe's is implementing a new strategy called 'integrating planning and execution' (IPE) that creates an 'institutional memory to maintain local assortment decisions when merchants change' -- otherwise known as getting the right product to the right store at the right quantity to reflect national and local tastes. It's hardly revolutionary in retail, but in a test store, Lowe’s removed much of the standard racking and experimented with more open vignettes, expanded endcaps, and 'drop zones.' The idea is to get customers to buy across product lines at once. Lowe's noted that more than 80% of the merchandising teams have product line reviews in process using these IPE techniques.
Supplier Woes
Manufacturers are always on the search for stable, cost-efficient, and timely suppliers, but 45% of North American product manufacturing companies expressed a need for new suppliers, according to the MFGWatch Quarterly Survey of North American Manufacturers, covering the second quarter of 2011. The survey noted 48% experienced a significant supply chain disruption in the past three months, up from 42% last quarter and 37% from fourth quarter 2010, causing them to investigate or select new suppliers. This is the second highest response percentage since MFGWatch began monitoring supply chain disruptions in the third quarter 2009. It also represents a considerable opportunity for suppliers to gain -- or lose -- customers.
Top supply chain concerns among buyers during the second quarter 2011: Logistics & Shipping Costs: 47% (up from 21% in the first quarter); Availability of Competent Suppliers: 45% (up from 15%); Product Quality Compliance: 37% (up from 12%); Fuel/Oil Prices: 32% (up from 25%); Supplier Financial Health/Stability: 18% (up from 7%); Unstable Labor Costs: 16% ( up from 4%); Intellectual Property Protection: 14% (up from 6%); Separation of Production from Design or R&D: 9% (up from 3%); and Civil Instability: 5% (up from 1%).
That's a considerable amount of nervousness among manufacturers, especially when you consider half are worried about transportation, almost half about competence, and over a third about quality. The latter two directly impact the reputation of a company, and once the notion of waning product quality gathers momentum, it can be difficult to regain the confidence of customers -- and that's an indirect cost on top of a direct cost of replacing/repairing products.
Reshoring
The *idea* of reshoring -- bringing manufacturing back to the US from overseas -- picked up some steam in the second quarter 2011. Of those surveyed, 31% said they were researching the concept, up from 27% last quarter, while those who said they weren't dropped to 47% from 54%. The biggest jump came from those who didn't know -- 30% in the second quarter, up from 19% in the first quarter.
The *reality* of reshoring lagged behind the concept: only 15% relocated production to North America during the second quarter, down from 17% from the first quarter and 25% from the fourth quarter 2010, while 78% of those surveyed did not, up from 76%. This represents a cooling off of the trend, although any increase in supply chain problems will likely trigger a renewal of reshoring.
These numbers represented somewhat of a churn in the supply chain management and stability sectors, and present real opportunity for US and North American supplier manufacturers. However, as the percentage of manufacturers actually reshoring production to North America continues to fall each quarter, it is still uncertain whether returning production is a trend or just a notion. As prices rise, transportation snags increase, and quality decreases, expect more movement back to US shores.
Hiring
The survey found that 32% of manufacturers increased hiring in the second quarter 2011, up from 27% in the first quarter, however 17% laid off employees, up from 9% in the first quarter. Of note, only 3% of manufacturers expected to lay off workers in the second quarter, so 17% represented strong, unexpected economic instability in many companies and markets.
As for the second half of the year, 20% are aggressively investing in new technology and expanding our workforce; 32% are aggressively investing in new technology but not expanding our workforce; 13% are hiring, but not investing in new technology; and 35% are neither hiring, nor investing in new technology.
Bottom Line
Overall manufacturing business conditions continued to improve, although supply chain disruptions increased significantly in North America -- again -- and threatened to derail economic progress.
Top supply chain concerns among buyers during the second quarter 2011: Logistics & Shipping Costs: 47% (up from 21% in the first quarter); Availability of Competent Suppliers: 45% (up from 15%); Product Quality Compliance: 37% (up from 12%); Fuel/Oil Prices: 32% (up from 25%); Supplier Financial Health/Stability: 18% (up from 7%); Unstable Labor Costs: 16% ( up from 4%); Intellectual Property Protection: 14% (up from 6%); Separation of Production from Design or R&D: 9% (up from 3%); and Civil Instability: 5% (up from 1%).
That's a considerable amount of nervousness among manufacturers, especially when you consider half are worried about transportation, almost half about competence, and over a third about quality. The latter two directly impact the reputation of a company, and once the notion of waning product quality gathers momentum, it can be difficult to regain the confidence of customers -- and that's an indirect cost on top of a direct cost of replacing/repairing products.
Reshoring
The *idea* of reshoring -- bringing manufacturing back to the US from overseas -- picked up some steam in the second quarter 2011. Of those surveyed, 31% said they were researching the concept, up from 27% last quarter, while those who said they weren't dropped to 47% from 54%. The biggest jump came from those who didn't know -- 30% in the second quarter, up from 19% in the first quarter.
The *reality* of reshoring lagged behind the concept: only 15% relocated production to North America during the second quarter, down from 17% from the first quarter and 25% from the fourth quarter 2010, while 78% of those surveyed did not, up from 76%. This represents a cooling off of the trend, although any increase in supply chain problems will likely trigger a renewal of reshoring.
These numbers represented somewhat of a churn in the supply chain management and stability sectors, and present real opportunity for US and North American supplier manufacturers. However, as the percentage of manufacturers actually reshoring production to North America continues to fall each quarter, it is still uncertain whether returning production is a trend or just a notion. As prices rise, transportation snags increase, and quality decreases, expect more movement back to US shores.
Hiring
The survey found that 32% of manufacturers increased hiring in the second quarter 2011, up from 27% in the first quarter, however 17% laid off employees, up from 9% in the first quarter. Of note, only 3% of manufacturers expected to lay off workers in the second quarter, so 17% represented strong, unexpected economic instability in many companies and markets.
As for the second half of the year, 20% are aggressively investing in new technology and expanding our workforce; 32% are aggressively investing in new technology but not expanding our workforce; 13% are hiring, but not investing in new technology; and 35% are neither hiring, nor investing in new technology.
Bottom Line
Overall manufacturing business conditions continued to improve, although supply chain disruptions increased significantly in North America -- again -- and threatened to derail economic progress.
Online Sales: Up Or Down?
According to analyst Shawn Milne at Janney Capital Markets, online retailers such as Amazon.com and eBay may see sales growth reduced should the economy dip into another recession -- no surprise there -- but e-commerce sales will drop slower than retail store sales and may increase market share of online companies as consumers look for more bargains online.
Monday, August 29, 2011
Payless: Less Stores But Not Storeless
Collective Brands, Inc. is planning to close about 475 underperforming and low-volume Payless and StrideRite shoe stores by the end of the fiscal year. The company for fiscal second quarter posted a loss of $35 million, worse than profit of $21.1 million year ago, on 4.9% revenue increase to $882.4 million.
Asso. Grocers of Maine: Chapter 11
Food distribution company Associated Grocers of Maine, Inc. filed for Chapter 11 on August 26, 2011 with the US Bankruptcy Court, listing $23.5 million in liabilities and less than $10 million in assets.
NumBytes 54: Sucking Up
According to a study of 303 senior executives at US companies conducted by Georgetown University and research company Penn Schoen Berland, 84% complain favoritism takes place in their companies, 23% said they do it themselves, and 9% admit it was a factor in determining their last promotion. Almost 75% noted their companies had procedures in place to ensure fairness in promotions -- which is often circumvented when executives limit their searches to a single candidate, have one preference before starting the search, and using criteria such as trustworthiness and comfort.
So, sucking up, er, playing well with others, helps career paths, but being 'disagreeable' may make employees wealthier -- see NumBytes 47: Don't Worry, Be Rude.
So, sucking up, er, playing well with others, helps career paths, but being 'disagreeable' may make employees wealthier -- see NumBytes 47: Don't Worry, Be Rude.
Friday, August 26, 2011
Toys R Us: New Stores
Toys 'R' Us, Inc. will open 11 new 'R' Superstores and 10 new Side-by-Side Stores pairing Toys R Us and Babies R Us together for one-stop shopping. In addition, the company is remodeling 23 other stores as Side-by-Side Stores and hiring 1100 employees. By the end of 2011, the company will operate 43 'R' Superstores nationwide.
Jo-Ann Stores Names CEO
Jo-Ann Stores, Inc. promoted Travis Smith to CEO, replacing Darrell Webb, who will remain chairman of the board and become the interim CEO of Sports Authority.
Frederick's LoRe Resigns
Frederick's of Hollywood Group Inc. announced that President Linda LoRe will resign September 2, 2011, but will continue her employment through January 20, 2012, and will assist in the orderly transition of her responsibilities to senior members of the company's current management team.
Ritz Files For Chapter 11
Ritz Interactive Inc., which operates a variety of websites, including those for such retailers as Ritz Camera and Boaters World, filed with the US Bankruptcy Court on August 19, 2011 for Chapter 11 bankruptcy protection. The company listed assets of $809,000 and debts of $7.2 million.
Sbarro KEIP Plan
Sbarro filed with the US Bankruptcy Court on August 25, 2011 a motion for approval of a key employee incentive plan (KEIP), with three key employees classified as 'insiders.' Under the KEIP, total payments can range from $585,000 to $975,000 per measurement period, for a total aggregate cost of $1.17 million to $1.95 million. The Court scheduled a September 7, 2011 hearing to consider the KEIP.
NumBytes 53: Baby, Bathwater, and Congress
If you think you have problems with your boss complaining about your job performance...just be glad you're not a member of Congress. According to an Associated Press-GfK Group poll of 1000 adults conducted Aug. 18-22, approval of Congress dropped to 12% -- the lowest level ever in AP-GfK polling history -- and down from just 21% in June. Among those polled calling themselves Independents, 65% want their own representative tossed out in 2012. Even if you add in Republicans and Democrats, it's still 53% across the board wanting to toss 'em all out.
Thursday, August 25, 2011
Jobs Gone, Cook In
Apple CEO Steve Jobs resigned from Apple, citing what he considers his inability to perform the job. Jobs has battled pancreatic cancer.
From his resignation letter:
'I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.
I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director, and Apple employee.
As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.'
From his resignation letter:
'I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.
I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director, and Apple employee.
As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.'
Duane Reade Ex-CEO Sentenced
Former Duane Reade CEO Anthony Cuti was found guilty of five criminal charges, including conspiracy and securities fraud, and received a three-year sentence to prison. Cuti and former CFO Willam Tennant (also convicted of securities fraud) had been charged with inflating company income with fraudulent real-estate transactions and fictitious credits. Tennant is scheduled for sentencing on August 29, 2011.
US Bank Rollercoaster
The Federal Deposit Insurance Corp reported a 1% increase in borrowing for the second quarter 2011 over the first quarter, the first time in three years that lending expanded. However, banks are still experiencing trouble finding credit-worthy customers, especially under the new lending rules, and their bottom lines are showing rising profits only because of accounting sleight of hand -- they are putting aside less to cover lending losses.
On the positive side, the FDIC closed only 22 banks in the second quarter 2011, the lowest number in any quarter since the beginning of 2009, and about 70 total failures for the year. In addition, the FDIC noted the number of 'problem banks' dropped for the first time in five years to 865 -- although that's still about half of the country's 1700 banks.
A tumbling stock market saw a shift into cash positions, allowing large banks to park an extra $137.3 billion with the Federal Reserve in the second quarter, a 22% increase from the first quarter. The FDIC fund used to pay off depositors if a bank fails also increased to have a positive balance for the first time in two years to $3.9 billion, up from its nadir of negative $20.9 billion at the end of 2009.
The overall effect represents a repetition of turtle-like growth -- just enough to slog forward, but not enough to lift the overall feeling of malaise. Retailers can live with the despair of recessionary sales figures. It's the hope of real growth that drives them mad.
On the positive side, the FDIC closed only 22 banks in the second quarter 2011, the lowest number in any quarter since the beginning of 2009, and about 70 total failures for the year. In addition, the FDIC noted the number of 'problem banks' dropped for the first time in five years to 865 -- although that's still about half of the country's 1700 banks.
A tumbling stock market saw a shift into cash positions, allowing large banks to park an extra $137.3 billion with the Federal Reserve in the second quarter, a 22% increase from the first quarter. The FDIC fund used to pay off depositors if a bank fails also increased to have a positive balance for the first time in two years to $3.9 billion, up from its nadir of negative $20.9 billion at the end of 2009.
The overall effect represents a repetition of turtle-like growth -- just enough to slog forward, but not enough to lift the overall feeling of malaise. Retailers can live with the despair of recessionary sales figures. It's the hope of real growth that drives them mad.
NumBytes 52: 2001: A Patent Odyssey
With companies gobbling up the competition for patents and patent 'troll' law firms suing for all sorts of alleged patent infringement, give some credit to Samsung Electronics' defense against a patent suit by Apple: showing movie clips from 2001: A Space Odyssey.
Apparently, Apple patented the rectangular-ish shape with dominent screen for computing tablets and is suing Samsung for patent infringement over using the same, er, shape and idea. Samsung countered with clips from the 1968 movie showing two astronauts eating and using personal tablet computers, as well as clips from a 1973-1979 British TV show The Tomorrow People also showing a tablet computer.
Arguably, a tricorder from the 1960s TV show Star Trek could have been included, although also arguably not thin enough until the 1980s remake. But if you really want to ultimate 'prior art' defense for a rectangularish high-tech (for the time) device with dominant display, try going back to the ancient era -- wax tablets.
Apparently, Apple patented the rectangular-ish shape with dominent screen for computing tablets and is suing Samsung for patent infringement over using the same, er, shape and idea. Samsung countered with clips from the 1968 movie showing two astronauts eating and using personal tablet computers, as well as clips from a 1973-1979 British TV show The Tomorrow People also showing a tablet computer.
Arguably, a tricorder from the 1960s TV show Star Trek could have been included, although also arguably not thin enough until the 1980s remake. But if you really want to ultimate 'prior art' defense for a rectangularish high-tech (for the time) device with dominant display, try going back to the ancient era -- wax tablets.
Chinese Feeling The Pinch
'Pinch' may be too strong a word while the Chinese economy is expanding at the enviable rate of 9.1%. HSBC's manufacturing index for China showed a preliminary uptick in August 2011 to 49.8 from July's 49.3, but anything below 50 is considered contraction. Small manufacturers in China are starting to take hits on falling orders while also dealing with tighter credit and absorbing rising wages -- central bank pegs labor costs in the second quarter 2011 rising 10% to 30% over last year. An article in the Wall Street Journal noted small businesses are being forced to accept receiveables, a kind of IOU, instead of payment and that payments are being stretched out.
Economy Watch: Sales, Mortgage, Gas
ShopperTrak Retail Sales Data
For the week ended August 22, 2011, ShopperTrak's National Retail Sales Estimate rose 1.2% to $95.863 billion from the week before of $94.760 billion, but was down 4.2% from the same period last year. With only one week left for Back to School, ShopperTrak expects diminishing returns.
ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on August 20, 2011 posted a decline of 1.0% from the previous week, the fourth consecutive week of decline. Year-over-year increase was 3.0%.
Mortgage Rates Drop Again
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.41% from last week's 4.45%, according to its weekly national survey ending August 24, 2011. This is the lowest rate since Bankrate started its weekly mortgage survey in September 1985. It also reported that the average 15-year fixed mortgage rate rose to 3.63% from 3.58% last week. The Mortgage Bankers Association reported mortgage applications were down 2.4% compared to the week earlier, with 79.8% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices
The Energy Department announced that for week ending August 15, 2011, the average price of US gasoline fell to $3.581 a gallon from $3.604 per gallon week earlier.
Diesel prices fell to $3.81 from $3.84 last week.
Of note, US ethanol exports rose as the market for blending ethanol into gasoline reached its saturation point
Nearly all fuel ethanol currently used in the US is consumed as a blend with gasoline in volumes containing up to 10 percent ethanol (E10), and that market is reaching saturation despite a waiver system to push the blend to 15% ethanol (so-called E15) for vehicles produced after 2000. However, concerns over potential mis-fueling, associated liabilities, and other issues continue to pose significant near-term barriers to the marketing of E15, so producers turned to exports. The use of high-ethanol fuels (E85, for example) is limited in the US. According to the EIA, ethanol imports went from a high of about 130 million gallons in autumn 2006 to a current low of near zero, while exports went from near zero in autumn 2006 to current rate of under 80 million gallons after peaking in the spring 2011 at 120 million gallons.
Looking forward, prospects for US ethanol exports will depend in part on the ability of the US market to absorb additional volumes of ethanol in the form of E15 and/or E85. All else equal, E15 is likely to be a more economically attractive market to domestic ethanol producers. Future developments in agricultural markets for corn and sugar will continue to impact the direction and magnitude of ethanol trade flows. Oil market developments will also be a factor, reflecting the fact that Brazil and some other important global markets allow consumers to choose between renewable and non-renewable motor fuels based on economic criteria.
For the week ended August 22, 2011, ShopperTrak's National Retail Sales Estimate rose 1.2% to $95.863 billion from the week before of $94.760 billion, but was down 4.2% from the same period last year. With only one week left for Back to School, ShopperTrak expects diminishing returns.
ICSC Retail Sales Data
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on August 20, 2011 posted a decline of 1.0% from the previous week, the fourth consecutive week of decline. Year-over-year increase was 3.0%.
Mortgage Rates Drop Again
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.41% from last week's 4.45%, according to its weekly national survey ending August 24, 2011. This is the lowest rate since Bankrate started its weekly mortgage survey in September 1985. It also reported that the average 15-year fixed mortgage rate rose to 3.63% from 3.58% last week. The Mortgage Bankers Association reported mortgage applications were down 2.4% compared to the week earlier, with 79.8% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices
The Energy Department announced that for week ending August 15, 2011, the average price of US gasoline fell to $3.581 a gallon from $3.604 per gallon week earlier.
Diesel prices fell to $3.81 from $3.84 last week.
Of note, US ethanol exports rose as the market for blending ethanol into gasoline reached its saturation point
Nearly all fuel ethanol currently used in the US is consumed as a blend with gasoline in volumes containing up to 10 percent ethanol (E10), and that market is reaching saturation despite a waiver system to push the blend to 15% ethanol (so-called E15) for vehicles produced after 2000. However, concerns over potential mis-fueling, associated liabilities, and other issues continue to pose significant near-term barriers to the marketing of E15, so producers turned to exports. The use of high-ethanol fuels (E85, for example) is limited in the US. According to the EIA, ethanol imports went from a high of about 130 million gallons in autumn 2006 to a current low of near zero, while exports went from near zero in autumn 2006 to current rate of under 80 million gallons after peaking in the spring 2011 at 120 million gallons.
Looking forward, prospects for US ethanol exports will depend in part on the ability of the US market to absorb additional volumes of ethanol in the form of E15 and/or E85. All else equal, E15 is likely to be a more economically attractive market to domestic ethanol producers. Future developments in agricultural markets for corn and sugar will continue to impact the direction and magnitude of ethanol trade flows. Oil market developments will also be a factor, reflecting the fact that Brazil and some other important global markets allow consumers to choose between renewable and non-renewable motor fuels based on economic criteria.
Wednesday, August 24, 2011
CVS Hires Cosby
CVS Caremark Corp. hired Mark S. Cosby as the new president of CVS/pharmacy, effective Oct. 1. Cosby, former President of stores at Macy's, Inc., will be responsible for all aspects of the company's retail business including its more than 7,200 retail stores and 19 distribution centers as well as retail merchandising, supply chain, marketing, real estate, front store, and pharmacy operations.
Sports Authority Sports New CEO
Sports Authority CEO David Campisi resigned on August 22, 2011 and the company appointed Darrell Webb as interim president and CEO. The company just acquired naming rights to the Denver Broncos' stadium for the next nine years, changing the name from Invesco Field at Mile High to Sports Authority Field at Mile High. Sports Authority is negotiating an extension of the deal to 2035.
Showtime At The Apollo
Private equity firm Apollo Management is preparing a bid to acquire 99 Cents Only Stores, a 285-store deep-discount chain with $1.4 billion in revenue, little debt and 5.3% rise in profit in the latest quarter, according to an article in the NY Post. The interested following a trend for private equity companies buying stakes in dollar stores. 99 Cents had a $1.3 billion deal earlier this year with Leonard Green & Partners to go private. Last week, Berkshire Hathaway disclosed it had made a $48 million investment in Dollar General and earlier this year, billionaire Nelson Peltz offered to acquire Family Dollar for $7 billion.
Why all the interest? Double dip recession fears and cheap food are pulling in ever more cost-conscious customers. The average 99 Cents transaction rose to $9.70 with more than 50% of revenue from food and grocery, pulling customers away from low cost chains such as Wal-Mart Stores, Inc.
Why all the interest? Double dip recession fears and cheap food are pulling in ever more cost-conscious customers. The average 99 Cents transaction rose to $9.70 with more than 50% of revenue from food and grocery, pulling customers away from low cost chains such as Wal-Mart Stores, Inc.
WorkForce MisManagement
A study from the University of California found that employers are increasing high turnover and absenteeism -- and resultant costs -- among hourly retail workers by adhering too closely to workforce management software. The last-minute shuffling of worker hours to stay under a defined percent of store sales budget creates havoc for low-wage employees who often work two or more jobs and deal with child or elder care constraints. While flexible staffing is a boon to managers, the more this practice persists, the less the employee can deal -- or want to deal -- with such shift adjustments. That leaves managers scrambling to find replacement workers at equally short notice and dealing with unhappy workers with all the implied impact on customer service.
On the bright side, WFM software can be used proactively to allow employees to indicate their preferred hours and hours when they are unavailable. Managers still decide the schedule, but fewer problems result when employees add input -- and the report noted happier employees with as little as 3 hours' difference across a 200-hour work week. When emergencies crop up, WFM software can send an automated text message, phone call, or email to available employees (as determined by tracking their self-reported availability), with a first-come, first-served response -- the first one to claim the shift gets it.
On the bright side, WFM software can be used proactively to allow employees to indicate their preferred hours and hours when they are unavailable. Managers still decide the schedule, but fewer problems result when employees add input -- and the report noted happier employees with as little as 3 hours' difference across a 200-hour work week. When emergencies crop up, WFM software can send an automated text message, phone call, or email to available employees (as determined by tracking their self-reported availability), with a first-come, first-served response -- the first one to claim the shift gets it.
NumBytes 51: Back To School Half Done
The National Retail Federation estimated that total spending for Back to School -- and Back to College -- will be $68 billion. That's a lot of pencils and books for the year -- teachers' dirty looks remain complimentary (unless you consider parents' tax bills).
According to NRF’s 2011 Back-to-School survey of 8,632 consumers conducted from August 2-9, 2011 by BIGresearch, the average family completed 43.0% of shopping for K-12 students at this point in August, similar to last year’s 43.2%. College students and their parents completed 44.3% of their shopping, up slightly from last year’s 43.1%.
The survey noted 56.9% of last-minute shoppers plan to shop in discount retailers, 47.1% will visit department stores (up from last year’s 42.7%), 40.8% plan to visit specialty clothing stores (up from 34.3%), and 21.7% plan to shop online (up from 16.0%).
For K-12 students, 43.4% of parents said they would purchase at least one character item, with Disney’s Cars and Star Wars taking the top slots for boys and Dora the Explorer and Hello Kitty at the top of the list for girls.
According to NRF’s 2011 Back-to-School survey of 8,632 consumers conducted from August 2-9, 2011 by BIGresearch, the average family completed 43.0% of shopping for K-12 students at this point in August, similar to last year’s 43.2%. College students and their parents completed 44.3% of their shopping, up slightly from last year’s 43.1%.
The survey noted 56.9% of last-minute shoppers plan to shop in discount retailers, 47.1% will visit department stores (up from last year’s 42.7%), 40.8% plan to visit specialty clothing stores (up from 34.3%), and 21.7% plan to shop online (up from 16.0%).
For K-12 students, 43.4% of parents said they would purchase at least one character item, with Disney’s Cars and Star Wars taking the top slots for boys and Dora the Explorer and Hello Kitty at the top of the list for girls.
Bankruptcy Updates: Nebraska Book and Borders
Nebraska Book Company Plan Support Agreement
Nebraska Book Company filed with the US Bankruptcy Court on August 23, 2011 a motion for approval of a Plan Support Agreement between the Debtors, the 8.625% Noteholders, the AcqCo Noteholders, and Weston Presidio. Under the agreement, in exchange for Weston Presidio's support of the Plan, the Debtors have agreed to provide an enhanced package of New Warrants. The Court scheduled a September 7, 2011 hearing to consider the motion.
Borders Group July Revenue
Borders Group filed with the US Bankruptcy Court on August 23, 2011 its monthly operating report for July 2011 noting the a net loss of $238 million on $152.2 million in revenue.
Nebraska Book Company filed with the US Bankruptcy Court on August 23, 2011 a motion for approval of a Plan Support Agreement between the Debtors, the 8.625% Noteholders, the AcqCo Noteholders, and Weston Presidio. Under the agreement, in exchange for Weston Presidio's support of the Plan, the Debtors have agreed to provide an enhanced package of New Warrants. The Court scheduled a September 7, 2011 hearing to consider the motion.
Borders Group July Revenue
Borders Group filed with the US Bankruptcy Court on August 23, 2011 its monthly operating report for July 2011 noting the a net loss of $238 million on $152.2 million in revenue.
Tuesday, August 23, 2011
The Rising: Prices
Retailers and other merchants sat on price rises during the downturn for fear of chasing away customers, but they could only continue to do so for so long. According to a quarterly Barlow Research Associates survey of 149 retailers and restaurants with annual sales of $10 million to $500 million, 53% lifted prices during the past 12 months, up from 32% a year ago, and 61% plan more price increases in the next 12 months. The US Labor Department reported inflation at 1.8% -- excluding food and energy -- in July 2011, the biggest jump in more than a year. Meanwhile, the US Bureau of Labor Statistics reported the average hourly earnings of all US private-sector employees rose 2.3% in July from a year ago, the highest level since October 2009.
Need A Raise?
According to a JPMorgan Chase report noted in the Washington Post, US salaries are at a 50-year low relative to company sales and GDP. Average profit margins of major companies rose to almost 13%, highest level since the 1960s, and 75% of boom in corporate profit margins comes from steady shrinkage of wages and benefits. Why? High unemployment drives down wages, unions faded in power, and about 2 billion Chinese, Indians, and other Asians are ready to work for far less than US minimum wage.
It cannot be surprising that 46 million people, about 15% of the US population, used food stamps in May 2011, the highest total ever recorded, according to CNN. The US Bureau of Labor Statistics reported that the US unemployment rate fell from 9.2% in June 2011 to 9.1% in July. The decline was helped by the 117,000 gain in jobs in July along with 127,000 people who just gave up the job search and were no longer counted.
With apologies to Plato and a nod to Aristotle, great disparities in wealth and the perceived limited access to become wealthy often generate resentment such that democracy transcends to anarchy, later giving rise to tyranny. In Europe, with unemployment in some countries up to 40% for teenagers and 20-somethings, rioting in UK cities and torching cars in Germany seem the pasttimes of the day. It hasn't come to that in the US...yet, but the 40% of the US population that controls 0.3% of wealth needs to see some leadership from the 0.1% of the population that controls 40% of the wealth. Capital chases efficiency, but humans chase emotion.
It cannot be surprising that 46 million people, about 15% of the US population, used food stamps in May 2011, the highest total ever recorded, according to CNN. The US Bureau of Labor Statistics reported that the US unemployment rate fell from 9.2% in June 2011 to 9.1% in July. The decline was helped by the 117,000 gain in jobs in July along with 127,000 people who just gave up the job search and were no longer counted.
With apologies to Plato and a nod to Aristotle, great disparities in wealth and the perceived limited access to become wealthy often generate resentment such that democracy transcends to anarchy, later giving rise to tyranny. In Europe, with unemployment in some countries up to 40% for teenagers and 20-somethings, rioting in UK cities and torching cars in Germany seem the pasttimes of the day. It hasn't come to that in the US...yet, but the 40% of the US population that controls 0.3% of wealth needs to see some leadership from the 0.1% of the population that controls 40% of the wealth. Capital chases efficiency, but humans chase emotion.
Online Adverts Back To 2007 Levels
EMarketer forecasted that online advertising spending will increase 20% in 2011 to $31.3 billion, up from its previous estimates of $28.5 billion. The company noted that the internet continues to take advertising dollars and share from traditional print publications and estimates that online spending will reach 20% of advertising budgets, second only to television at 38%. Search engine adverts remain the top type of online advertising with just uner $15 billion, while display adverts will hit $12.3 billion. Video adverts are expected to hit $2.16 billion in spending.
You can't blame the advertisers. According to a survey of over 4000 consumers in the US, Australia, China, Germany, and Spain by media research firm Interpublic Group, 52% search online for wide range of brands and products, and 25% noted it became second nature to spread the word about deals and experiences via the internet.
The old marketing adage was '3 - 33.' For every good product or shopping experience, a customer would tell three friends, while every bad experience was mentioned to 33 people. With the internet, the capability is increased a million fold -- great perils and great rewards.
You can't blame the advertisers. According to a survey of over 4000 consumers in the US, Australia, China, Germany, and Spain by media research firm Interpublic Group, 52% search online for wide range of brands and products, and 25% noted it became second nature to spread the word about deals and experiences via the internet.
The old marketing adage was '3 - 33.' For every good product or shopping experience, a customer would tell three friends, while every bad experience was mentioned to 33 people. With the internet, the capability is increased a million fold -- great perils and great rewards.
Monday, August 22, 2011
Winn-Dixie Converts SaveRite
Winn-Dixie Stores Inc. is discontinuing its SaveRite-branded grocery stores and converting them to Winn-Dixie stores over the next four months, during which time the stores will remain open. All SaveRite employees will continue working for Winn-Dixie.
Walgreens To Debut Nice!
Walgreens, following in the footsteps of other retailers, is introducing its Nice! line of 400 private-label products, mostly grocery and paper items, with the intent to stock all 7,742 Walgreens and Duane Reade drugstores by January 2012. Walgreens is phasing out in-house brands, including Deerfield Farms, W, Cafe W, W Ultra, and Chief Karlin and the Walgreens label will also be removed from food and household products but remain on health and wellness items. Walgreens currently has 50 private-label brands throughout its stores.
Website Launches: Target and Lowes
Target unveiled a revamped website that ties store and online sales closer together as well as breaks from Amazon.com, which used to handle the retailer's web operations. Touted as easier for consumers to use, it is also designed for faster checkout.
Lowe's launched a Spanish-language version of its website to appeal to Hispanic customers. How-to articles and shopping are in Spanish, with video content slated to follow in September.
Lowe's launched a Spanish-language version of its website to appeal to Hispanic customers. How-to articles and shopping are in Spanish, with video content slated to follow in September.
NumBytes 50: Credit Card Holders Pay Up
Credit reporting agency TransUnion reported the national credit card delinquency rate, which measures payments that are 90 days or more past due, was 0.6% at the end of the second quarter 2011, a drop of 19% from the first quarter and a 17-year low.
Part of this comes from charge-offs reducing the amount of delinquent credit. Credit card companies typically write off balances as uncollectible when they're six months past due. While the default rate has declined in recent months, credit card issuers wrote off billions in debts since the start of the recession, according to USA Today.
The New York Federal Reserve noted that consumer debt fell $50 billion in the second quarter 2011 to $11.4 trillion, of which consumers' non-real estate debt dropped by $10 billion (0.4%) to $2.28 trillion, 9.5% below its fourth quarter 2008 peak.
Of note: open credit card accounts jumped by 10 million, to 389 million, in the second quarter, and credit card limits increased for the second consecutive quarter by 2%, or about $60 billion.
The Fed is taking the long view, asserting that the next few quarters will offer a better understanding of whether this is a permanent or temporary reduction in total outstanding consumer debt.
Retailers may have to take a shorter view -- like what's going to happen with the upcoming holiday season 2011. All this summer saving may end up priming the fourth quarter holiday spending pump.
Part of this comes from charge-offs reducing the amount of delinquent credit. Credit card companies typically write off balances as uncollectible when they're six months past due. While the default rate has declined in recent months, credit card issuers wrote off billions in debts since the start of the recession, according to USA Today.
The New York Federal Reserve noted that consumer debt fell $50 billion in the second quarter 2011 to $11.4 trillion, of which consumers' non-real estate debt dropped by $10 billion (0.4%) to $2.28 trillion, 9.5% below its fourth quarter 2008 peak.
Of note: open credit card accounts jumped by 10 million, to 389 million, in the second quarter, and credit card limits increased for the second consecutive quarter by 2%, or about $60 billion.
The Fed is taking the long view, asserting that the next few quarters will offer a better understanding of whether this is a permanent or temporary reduction in total outstanding consumer debt.
Retailers may have to take a shorter view -- like what's going to happen with the upcoming holiday season 2011. All this summer saving may end up priming the fourth quarter holiday spending pump.
Cruel Irony: Fashion And Self-Esteem
A study by researchers at University of British Columbia and the University of Alberta called Social Information in the Retail environment: The Importance of Consumption Alignment, Referent Identity and Self-Esteem can offer tips to retailers seeking to redesign their fitting rooms, according to an article in the Calgary Herald.
The study found that customers with low body esteem who tried on an item and then saw a 'person of above average attractiveness' try on the same or similar item reacted negatively to that item. In other words, good-looking customers can ruin shopping trips -- and sales. Oddly enough, attractive sales staff had no effect, as they were perceived to be different than customers, and photos of models wearing the same clothes also had no effect on sales.
Conclusion: put mirrors in dressing room stalls so customers have options other than parading around in front of the rest of the clientele. Fewer comparisons apparently equal better sales.
The study found that customers with low body esteem who tried on an item and then saw a 'person of above average attractiveness' try on the same or similar item reacted negatively to that item. In other words, good-looking customers can ruin shopping trips -- and sales. Oddly enough, attractive sales staff had no effect, as they were perceived to be different than customers, and photos of models wearing the same clothes also had no effect on sales.
Conclusion: put mirrors in dressing room stalls so customers have options other than parading around in front of the rest of the clientele. Fewer comparisons apparently equal better sales.
Friday, August 19, 2011
Liberty Media Invests In B&N
Liberty Media bought $204 million worth of Barnes & Noble, Inc. preferred stock, convertible into approximately 12 million shares or 16.6% (after giving effect to the issuance) of B&N common stock at a price of $17 per share, and with a dividend rate of 7.75% per annum to be paid quarterly. The investment also ended Liberty's efforts at acquiring B&N. Liberty will be entitled to elect two nominees to the board of directors and B&N agreed to expand its board to eleven members and accept Liberty’s two nominees: Gregory B. Maffei, President and Chief Executive Officer of Liberty and Mark D. Carleton, Senior Vice President of Liberty.
Hhgregg To Open 14 Stores
Appliance and electronics retailer Hhgregg will open 14 stores in the Chicago area on Septmeber 15, 2011, hiring 700 employees in the process. Chicago represents a new market for the company, and with the opening of the stores, will become the company’s largest market.
Inflation Inches Up
The US Bureau of Labor Statistics reported the Consumer Price Index for all items -- less food and energy -- increased by 0.2% increase in July, a smaller increase than in the two previous months. Add in food and energy and the CPI rose 0.5%, with a 12-month increase of 3.6%.
Employment Stable
The US Bureau of Labor Statistics reported the national unemployment rate was little changed at 9.1% in July 2011 but was 0.4 percentage point lower than a year earlier. It noted 28 states and the District of Columbia registered unemployment rate increases, nine states recorded rate decreases, and 13 states had no rate change.
The largest over-the-month increase in employment occurred in New York (+29,400), followed by Texas (+29,300), Michigan (+23,000), and Tennessee (+14,300). The largest over-the-month decrease in employment occurred in Illinois (-24,900), followed by Florida (-22,100), Minnesota (-19,800), and Indiana (-10,100). Nevada continued to register the highest unemployment rate among the states, 12.9% in July. California recorded the next highest rate, 12.0%. North Dakota reported the lowest jobless rate, 3.3%, followed by Nebraska, 4.1%.
The largest over-the-month increase in employment occurred in New York (+29,400), followed by Texas (+29,300), Michigan (+23,000), and Tennessee (+14,300). The largest over-the-month decrease in employment occurred in Illinois (-24,900), followed by Florida (-22,100), Minnesota (-19,800), and Indiana (-10,100). Nevada continued to register the highest unemployment rate among the states, 12.9% in July. California recorded the next highest rate, 12.0%. North Dakota reported the lowest jobless rate, 3.3%, followed by Nebraska, 4.1%.
NumBytes 49: Venus And Mars Brands
Men are from Mars, women from Venus when it comes to interacting and connecting with retailers, noted market research firm Motista as part of its ongoing retail study of 4200 customers. Although the study found overall awareness and familiarity with 10 major retail brands it tracks were high at 90% and 71% respectively, only 18% of consumers indicated an emotional connection to their retailers. Deeper connections with consumers can help drive higher levels of purchase intent, response rates, online engagement, and advocacy.
Motista found men take retail more personally and are 50% more likely to feel that their preferred retailer makes them a more valuable person. Appearing to seek to enhance their identities and sense of self through the retailers they choose, men are also 53% more likely to feel that people will see them differently because they shop at a particular retailer and 30% more likely to feel that their retailer personalizes its relationship with them.
On the Venus side of the solar retail system, women seek fun and style and establish connections with retailers around the perception that the retailers are fun and stylish. Women are 18% more likely to connect with retailers they consider to be fun, and 18% more likely to connect with their retailer if they believe the retailer is stylish.
Bottom line: Appeal to the customer's vanity. The study found that when consumers feel a connection with their retail brand, they are 50% more likely to advocate for the brand and recommend the retailer to others. And most every retailer knows the value of word-of-mouth advertising.
Motista found men take retail more personally and are 50% more likely to feel that their preferred retailer makes them a more valuable person. Appearing to seek to enhance their identities and sense of self through the retailers they choose, men are also 53% more likely to feel that people will see them differently because they shop at a particular retailer and 30% more likely to feel that their retailer personalizes its relationship with them.
On the Venus side of the solar retail system, women seek fun and style and establish connections with retailers around the perception that the retailers are fun and stylish. Women are 18% more likely to connect with retailers they consider to be fun, and 18% more likely to connect with their retailer if they believe the retailer is stylish.
Bottom line: Appeal to the customer's vanity. The study found that when consumers feel a connection with their retail brand, they are 50% more likely to advocate for the brand and recommend the retailer to others. And most every retailer knows the value of word-of-mouth advertising.
BPA Ban In Maine
As of January 1, 2012, Maine will ban reusable food and beverage containers like sippy cups, baby bottles, reusable water bottles, and plastic food storage that contain intentionally-added Bisphenol A (BPA). Maine would be the ninth state with a prohibition on the sales of products with intentionally-added BPA along with Connecticut, Maryland, Massachusetts, Minnesota, New York, Vermont, Washington, and Wisconsin.
Manufacturers and distributors of such products must submit compliance plans identifying their products subject to prohibition, specifying whether compliance would be achieved by discontinuing sale or by the substitution of a safer alternative, and confirming that all personnel who offer the product for sale or distribution in Maine have been notified of the prohibition.
BPA is used primarily to make plastics, such as polycarbonate plastic and epoxy resins -- and epoxy resins containing bisphenol A are used as coatings on the inside of almost all food and beverage cans. BPA protects food from direct contact with a can and will leach from the plastic lining.
From a health standpoint, BPA is an endocrine disruptor, which can mimic the body's own hormones, especially estrogen, and may lead to negative health effects. Early development appears to be the period of greatest sensitivity to its effects, and some studies have linked prenatal exposure to later neurological difficulties. Studies showed exposure to BPA lead to higher rates of breast cancer, prostate cancer rates, heart disease, diabetes, attention deficit disorder, and erectile dysfunction.
In a study conducted by the University of Texas School of Public Health in 2010, BPA was found in 63 of 105 samples of fresh and canned foods, foods sold in plastic packaging, and in cat and dog foods in cans and plastic packaging. This included fresh turkey, canned green beans, and canned infant formula. The chemical is also in certain types of thermal and copy paper.
Penn State College of Medicine released a study in May 2011 that found exposure to BPA during pregnancy — particularly the first trimester — may put babies at a greater risk of developing asthma.
Maine compliance plans were originally due on July 5, 2011, but extended to October 3, but the department has yet to receive any, though staff does not definitively know of any company that will be non-compliant. The state runs an electronic reporting system developed by the department that will make it easier for manufacturers to send in their plans and for the department to receive, review, and retain the data.
Canada and other countries have already banned BPA in baby bottles. Wal-Mart, Toys R Us, and others phased the chemical out of baby bottles, sippy cups, and pacifiers. H.J. Heinz, ConAgra, and Hain Celestial offer BPA-free lining for some of their products.
In February 2011, Maine's newly elected governor, Paul LaPage, said on a local TV news show that he hoped to repeal the ban because, 'There hasn't been any science that identifies that there is a problem.' Evidently, the governor didn't plug the term 'BPA' into an internet search engine.
LaPage continued, 'The only thing that I've heard is if you take a plastic bottle and put it in the microwave and you heat it up, it gives off a chemical similar to estrogen. So the worst case is some women may have little beards.' LaPage ran for cover from the outrage and did not veto or sign the bill, allowing it to become law by default.
In April 2011, General Mills announced it found a BPA-free alternative can liner that apparently works even with tomatoes, a highly acidic product that has long baffled the industry in terms of finding a suitable substitute. General Mills noted with the next tomato harvest, it would use the BPA-free alternative in tomato products sold by its organic foods subsidiary Muir Glen. Thus far, there has been no word on whether General Mills will use BPA-free alternatives on any of its other canned products.
In May, Kroger announced that it was ceasing the selling of baby products with BPA, removing the chemical from its store brand canned foods, and purchasing BPA-free paper for its store register receipts.
Groceries, convenience marts, dollar, and other stores are in the process of complying with Maine's law. At least the ban is limited in scope and does not extend to regular drinks. Imagine what a total ban would do. No Coke or Pepsi or bottled water in stores -- maybe just a lot of bootlegged cases of energy drinks. Well, at least until a switch to BPA-free packaging was done.
In a 2009 study, the Canadian government agency Health Canada found BPA in 85% of 72 soft drinks sold in Canadian stores. All Coca-Cola products tested positive for BPA, among them Coca-Cola, 0.18 ug/L (micrograms per liter); Diet Coke, 0.35 ug/L; grapefruit-flavored Fresca, 1.1 ug/L; cherry-citrus Fresca, 0.75 ug/L; Tab, 0.18 ug/L; Sprite, 0.17 ug/L, and Full Throttle energy drink, 0.60 ug/L. Canada's safe level is 25.0 ug/L and the US EPA safe level is 50.0 ug/L -- so these drinks have only a tiny fraction of BPA.
As Coca-Cola points out on its 'Live Positively' website, 'Health Canada's research states that a 60kg individual would have to consume more than 7400 355ml cans a day on a daily basis for the rest of his or her life in order to exceed the Health Canada's acceptable daily limit.' Nevertheless, in 2011, 26% of Coke's shareholders voted to approve a resolution that would remove BPA from Coke can linings.
Manufacturers and distributors of such products must submit compliance plans identifying their products subject to prohibition, specifying whether compliance would be achieved by discontinuing sale or by the substitution of a safer alternative, and confirming that all personnel who offer the product for sale or distribution in Maine have been notified of the prohibition.
BPA is used primarily to make plastics, such as polycarbonate plastic and epoxy resins -- and epoxy resins containing bisphenol A are used as coatings on the inside of almost all food and beverage cans. BPA protects food from direct contact with a can and will leach from the plastic lining.
From a health standpoint, BPA is an endocrine disruptor, which can mimic the body's own hormones, especially estrogen, and may lead to negative health effects. Early development appears to be the period of greatest sensitivity to its effects, and some studies have linked prenatal exposure to later neurological difficulties. Studies showed exposure to BPA lead to higher rates of breast cancer, prostate cancer rates, heart disease, diabetes, attention deficit disorder, and erectile dysfunction.
In a study conducted by the University of Texas School of Public Health in 2010, BPA was found in 63 of 105 samples of fresh and canned foods, foods sold in plastic packaging, and in cat and dog foods in cans and plastic packaging. This included fresh turkey, canned green beans, and canned infant formula. The chemical is also in certain types of thermal and copy paper.
Penn State College of Medicine released a study in May 2011 that found exposure to BPA during pregnancy — particularly the first trimester — may put babies at a greater risk of developing asthma.
Maine compliance plans were originally due on July 5, 2011, but extended to October 3, but the department has yet to receive any, though staff does not definitively know of any company that will be non-compliant. The state runs an electronic reporting system developed by the department that will make it easier for manufacturers to send in their plans and for the department to receive, review, and retain the data.
Canada and other countries have already banned BPA in baby bottles. Wal-Mart, Toys R Us, and others phased the chemical out of baby bottles, sippy cups, and pacifiers. H.J. Heinz, ConAgra, and Hain Celestial offer BPA-free lining for some of their products.
In February 2011, Maine's newly elected governor, Paul LaPage, said on a local TV news show that he hoped to repeal the ban because, 'There hasn't been any science that identifies that there is a problem.' Evidently, the governor didn't plug the term 'BPA' into an internet search engine.
LaPage continued, 'The only thing that I've heard is if you take a plastic bottle and put it in the microwave and you heat it up, it gives off a chemical similar to estrogen. So the worst case is some women may have little beards.' LaPage ran for cover from the outrage and did not veto or sign the bill, allowing it to become law by default.
In April 2011, General Mills announced it found a BPA-free alternative can liner that apparently works even with tomatoes, a highly acidic product that has long baffled the industry in terms of finding a suitable substitute. General Mills noted with the next tomato harvest, it would use the BPA-free alternative in tomato products sold by its organic foods subsidiary Muir Glen. Thus far, there has been no word on whether General Mills will use BPA-free alternatives on any of its other canned products.
In May, Kroger announced that it was ceasing the selling of baby products with BPA, removing the chemical from its store brand canned foods, and purchasing BPA-free paper for its store register receipts.
Groceries, convenience marts, dollar, and other stores are in the process of complying with Maine's law. At least the ban is limited in scope and does not extend to regular drinks. Imagine what a total ban would do. No Coke or Pepsi or bottled water in stores -- maybe just a lot of bootlegged cases of energy drinks. Well, at least until a switch to BPA-free packaging was done.
In a 2009 study, the Canadian government agency Health Canada found BPA in 85% of 72 soft drinks sold in Canadian stores. All Coca-Cola products tested positive for BPA, among them Coca-Cola, 0.18 ug/L (micrograms per liter); Diet Coke, 0.35 ug/L; grapefruit-flavored Fresca, 1.1 ug/L; cherry-citrus Fresca, 0.75 ug/L; Tab, 0.18 ug/L; Sprite, 0.17 ug/L, and Full Throttle energy drink, 0.60 ug/L. Canada's safe level is 25.0 ug/L and the US EPA safe level is 50.0 ug/L -- so these drinks have only a tiny fraction of BPA.
As Coca-Cola points out on its 'Live Positively' website, 'Health Canada's research states that a 60kg individual would have to consume more than 7400 355ml cans a day on a daily basis for the rest of his or her life in order to exceed the Health Canada's acceptable daily limit.' Nevertheless, in 2011, 26% of Coke's shareholders voted to approve a resolution that would remove BPA from Coke can linings.
Thursday, August 18, 2011
Chico's Buys Boston Proper
Chico's FAS, Inc. acquired women's apparel and accessories retailer Boston Proper, Inc. for $205 million funded from available cash balances. Boston Proper will operate as a stand-alone division within Chico's FAS, with Sheryl Clark as President. Former Boston Proper CEO Michael Tiernan retired. The transaction is expected to close within 45 days.
Lowe's Closes Seven Stores
Although Lowe's Co. second quarter sales rose 1.3% to $14.54 billion, it was lower than analysts' estimate of $14.75 billion and net earnings dropped 0.2% at $830 million. The company, which opened two stores during the quarter and rebuilt one destroyed by a tornado, announced the closing of seven stores nationwide. The company blamed consumer reluctance to perform home improvement projects on the anemic economy and declining home prices. Sales at Lowe's stores open at least a year fell 0.3%. The company expects third quarter sales to rise 2% but earnings to decrease 10 to 20 basis points. For the year, the company expects to open approximately 25 stores in 2011 reflecting average square footage growth of approximately 1.3%.
Producer Price Inflation
If you thought things cost more these days, the US Bureau of Labor Statistics can confirm your suspicions. According to the BLS, on an unadjusted basis, prices for finished goods, including food and energy, moved up 7.2% for the 12 months ended July 2011.
The BLS reported its Producer Price Index for finished goods rose a seasonally adjusted 0.2% in July, reversing a 0.4% decrease in June. The finished goods index, measuring prices for finished goods -- less foods and energy -- rose 0.4%.
In July, the finished consumer foods index rose 0.6% for the second consecutive month. A major contributor to the July increase was beef and veal prices, which moved up 2.7%. Higher prices for fresh fruits and melons also played a significant role in the finished foods advance.
On the positive side, the finished energy goods index moved down 0.6% in July, the second straight decline, as prices for gasoline fell 2.8%.
The Producer Price Index for the net output of transportation and warehousing industries increased 0.2% in July, the smallest advance since December 2010. Over 90% of the July increase is attributable to a 1.1% rise in prices received by the scheduled passenger air transportation companies. Higher prices received by the freight transportation arrangement companies and petroleum pipeline companies also contributed to the advance in the transportation and warehousing industries index.
The BLS reported its Producer Price Index for finished goods rose a seasonally adjusted 0.2% in July, reversing a 0.4% decrease in June. The finished goods index, measuring prices for finished goods -- less foods and energy -- rose 0.4%.
In July, the finished consumer foods index rose 0.6% for the second consecutive month. A major contributor to the July increase was beef and veal prices, which moved up 2.7%. Higher prices for fresh fruits and melons also played a significant role in the finished foods advance.
On the positive side, the finished energy goods index moved down 0.6% in July, the second straight decline, as prices for gasoline fell 2.8%.
The Producer Price Index for the net output of transportation and warehousing industries increased 0.2% in July, the smallest advance since December 2010. Over 90% of the July increase is attributable to a 1.1% rise in prices received by the scheduled passenger air transportation companies. Higher prices received by the freight transportation arrangement companies and petroleum pipeline companies also contributed to the advance in the transportation and warehousing industries index.
NumBytes 48: How Wal-Mart Lost Its Groove
A Morgan Stanley survey of 1100 Wal-Mart shoppers found that 60% no longer viewed Wal-Mart as offering the lowest prices on products, even though a Goldman Sachs Group survey of store prices in Chicgo found Wal-Mart prices about 6.2% less than rival Target. Second quarter 2011 same store sales fell 0.9%, the ninth straight quarter drop at Wal-Mart, although Sam's Club same-store sales surged 5% to allow the company as a whole to say comparable store sales were flat overall.
CEO Mike Duke contended Wal-Mart's core shoppers, many of whom live paycheck to paycheck, were running out of money much faster than a year ago. They changed their buying habits, picking up more groceries and household goods while cutting back on non-essential items such as clothing and home furnishings. Wal-Mart also noted fewer shoppers headed into its stores as overall customer traffic at Wal-Mart stores fell compared to the previous year.
What he didn't say was that a couple years ago, the company abandoned its 'everyday low prices' strategy to focus on a special promotional pricing model that consumers found, to be kind, uninspiring. To the surprise of Wal-Mart executives, consumers then shopped around and found better deals elsewhere -- in rival retail stores and online. The company returned to everyday low pricing, but consumers noted 'once burned, twice spurned.' The company certainly has its marketing work cut out for it to gain back the perception of offering the best value around.
For the third quarter, Wal-Mart expects same-store sales at its US stores to range from a decline of 1% to a gain of 1%.
CEO Mike Duke contended Wal-Mart's core shoppers, many of whom live paycheck to paycheck, were running out of money much faster than a year ago. They changed their buying habits, picking up more groceries and household goods while cutting back on non-essential items such as clothing and home furnishings. Wal-Mart also noted fewer shoppers headed into its stores as overall customer traffic at Wal-Mart stores fell compared to the previous year.
What he didn't say was that a couple years ago, the company abandoned its 'everyday low prices' strategy to focus on a special promotional pricing model that consumers found, to be kind, uninspiring. To the surprise of Wal-Mart executives, consumers then shopped around and found better deals elsewhere -- in rival retail stores and online. The company returned to everyday low pricing, but consumers noted 'once burned, twice spurned.' The company certainly has its marketing work cut out for it to gain back the perception of offering the best value around.
For the third quarter, Wal-Mart expects same-store sales at its US stores to range from a decline of 1% to a gain of 1%.
Employment
The Conference Board Employment Trends Index dropped to 100.6 in July from June's revised figure of 100.9, even as the Labor Department reported job growth of 117,000 in July and initial applications for unemployment fell to 395,000, first time below 400,000 in a long time. The unemployment rate dropped from 9.2% to 9.1%, however, about 137,000 'discouraged' workers dropped out of the labor market entirely. As the economy improves, these workers will jump back in. The Bureau of Labor Statistics noted that state and local governments shed 340,000 workers in the last year (611,000 since 2008).
Wednesday, August 17, 2011
Morphing Malls
Facing lower occupancy rates, malls are getting creative about leasing kiosks, carts, and even vacant storefronts to short-term specialty entrepreneurs who would hawk calendars, stuffed animals, sunglasses, seasonal products, and other knick-knacks, according to a Wall Street Journal article. When times were flush, mall landlords treated these entrepreneurs almost as pests, but now, landlords are willing to take the chance on the clutter. According to real estate researh firm REIS, Inc., second quarter 2011 vacancy rates at malls in the top 80 markets was 9.3%, up from 9./1% in the first quarter 2011.
Specialty Retailing Report notes annual US speciality sales were $2.86 billion in 2010, up 10.6% from 2009, but still a miniscule part of the $1 trillion tradition retail sales of 2010, up roughly 3% from 2009.
And it's not just entrepreneurs with a cart. Top retailers like Toys R Us experimented with pop-up stores for last year's holiday season. They did so well, they will be back for 2011...and that will likely make mall owners happy to see spaces filled not only for the revenue, but for the appearance that the mall is worth visiting.
Specialty Retailing Report notes annual US speciality sales were $2.86 billion in 2010, up 10.6% from 2009, but still a miniscule part of the $1 trillion tradition retail sales of 2010, up roughly 3% from 2009.
And it's not just entrepreneurs with a cart. Top retailers like Toys R Us experimented with pop-up stores for last year's holiday season. They did so well, they will be back for 2011...and that will likely make mall owners happy to see spaces filled not only for the revenue, but for the appearance that the mall is worth visiting.
Industrial Production For July
The Federal Reserve reported its Industrial Production Index inched upwards 0.9% in July 2011 to 94.2 from 93.3 in June, beating the estimate that the index would remain unchanged. July 2011 production is about 3.7% higher than July 2010. Note that an index score of 100 means production is equal to 2007's level, so 94.2 is 94.2% of 2007's production.
Manufacturing output rose 0.6% in July, as the index for motor vehicles and parts jumped 5.2%, and production elsewhere moved up 0.3%. The output of mines advanced 1.1% and the output of utilities increased 2.8%, as the extreme heat during the month boosted air conditioning usage.
The capacity utilization rate for total US industry climbed to 77.5%, up from 76.9% and beating estimates of 77%. July 2011 capacity was 2.2% above July 2010's 75.3%.
In total, the US recorded slow, if unspectacular, gains for July. The largest output gain was for automobile products, up 5.9% over June as supply chain problems from Japan's earthquake and tsunami were sorted out.
Manufacturing output rose 0.6% in July, as the index for motor vehicles and parts jumped 5.2%, and production elsewhere moved up 0.3%. The output of mines advanced 1.1% and the output of utilities increased 2.8%, as the extreme heat during the month boosted air conditioning usage.
The capacity utilization rate for total US industry climbed to 77.5%, up from 76.9% and beating estimates of 77%. July 2011 capacity was 2.2% above July 2010's 75.3%.
In total, the US recorded slow, if unspectacular, gains for July. The largest output gain was for automobile products, up 5.9% over June as supply chain problems from Japan's earthquake and tsunami were sorted out.
Housing Starts And Completions For July
Mixed news greeted July housing: new permits and starts were down from June, but completions were up. The completions add to the supply of houses, likely depressing prices further, but lower prices and lower mortgage rates make owning a home more affordable, which will likely increase sales in the fall.
The US Census Bureau reported privately-owned housing units authorized by building permits in July 2011 were at a seasonally adjusted annual rate of 597,000. This is 3.2% below the revised June rate of 617,000, but 3.82% ahead of 575,000 in July 2010. Single-family authorizations in July were at a rate of 404,000, up 0.59% above the revised June figure of 402,000.
Privately-owned housing starts in July 2011 were at a seasonally adjusted annual rate of 604, 000. This is 1.5% below the revised June estimate of 613,000, but is 9.8% above the July 2010 rate of 550,000. Single-family housing starts in July were at a rate of 425,000, up 4.9% from the revised June figure of 447,000.
Privately-owned housing completions in July 2011 were at a seasonally adjusted annual rate of 636,000, 11.8% above the revised June estimate of 569,000 and 9.5% above the July 2010 rate of 581,000. Single-family housing completions in July were at a rate of 470,000, up 6.1% above the revised June rate of 443,000.
The US Census Bureau reported privately-owned housing units authorized by building permits in July 2011 were at a seasonally adjusted annual rate of 597,000. This is 3.2% below the revised June rate of 617,000, but 3.82% ahead of 575,000 in July 2010. Single-family authorizations in July were at a rate of 404,000, up 0.59% above the revised June figure of 402,000.
Privately-owned housing starts in July 2011 were at a seasonally adjusted annual rate of 604, 000. This is 1.5% below the revised June estimate of 613,000, but is 9.8% above the July 2010 rate of 550,000. Single-family housing starts in July were at a rate of 425,000, up 4.9% from the revised June figure of 447,000.
Privately-owned housing completions in July 2011 were at a seasonally adjusted annual rate of 636,000, 11.8% above the revised June estimate of 569,000 and 9.5% above the July 2010 rate of 581,000. Single-family housing completions in July were at a rate of 470,000, up 6.1% above the revised June rate of 443,000.
Economy Watch: Sales, Mortgage, Gas
ShopperTrak Retail Sales Data
For the week ended August 15, 2011, ShopperTrak's National Retail Sales Estimate rose 0.9% to $95.099 billion from the week before of $94.273 billion, but was down 5.4% from the same period last year. So much for Back-to-School sales....
Mortgage Rates Drop Again
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.46% from last week's 4.54%, according to its weekly national survey ending August 10, 2011. It also reported that the average 15-year fixed mortgage rate fell to 3.61% from 3.68% last week. The Mortgage Bankers Association reported mortgage applications were up a whopping 21.7% compared to one week earlier, with 75.6% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices Drop
The Energy Department announced that for week ending August 15, 2011, the average price of US gasoline fell to $3.600 a gallon from $3.674 per gallon week earlier.
Diesel prices fell to $3.90 from $3.94 last week.
If there was one good thing about the Congression impasse about the US national debt ceiling, it was that pessimism bloomed about economic recovery, which in turn dampened expectations for greater demand of oil, which drove down per barrel prices 20% from May, which dropped the cost of gas at the pump.
For the week ended August 15, 2011, ShopperTrak's National Retail Sales Estimate rose 0.9% to $95.099 billion from the week before of $94.273 billion, but was down 5.4% from the same period last year. So much for Back-to-School sales....
Mortgage Rates Drop Again
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.46% from last week's 4.54%, according to its weekly national survey ending August 10, 2011. It also reported that the average 15-year fixed mortgage rate fell to 3.61% from 3.68% last week. The Mortgage Bankers Association reported mortgage applications were up a whopping 21.7% compared to one week earlier, with 75.6% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices Drop
The Energy Department announced that for week ending August 15, 2011, the average price of US gasoline fell to $3.600 a gallon from $3.674 per gallon week earlier.
Diesel prices fell to $3.90 from $3.94 last week.
If there was one good thing about the Congression impasse about the US national debt ceiling, it was that pessimism bloomed about economic recovery, which in turn dampened expectations for greater demand of oil, which drove down per barrel prices 20% from May, which dropped the cost of gas at the pump.
NumBytes 47: Don't Worry, Be Rude
The office jerk may be called a lot of names, but according to a study of 10,000 workers over 20 years, you can call him wealthier than his peers. The study by by professors at Cornell University, University of Notre Dame, and University of Western Ontario found that 'disagreeable' men earned 18% more, or about $9,772, than 'agreeable' men. Rude women earned about 5% more, or $1,828, than nice peers.
The problem is that organizations don't want uncooperative jerks in the office because it increases employee turnover. However, if company compensation grants employees monetary rewards, jerks rule.
The problem is that organizations don't want uncooperative jerks in the office because it increases employee turnover. However, if company compensation grants employees monetary rewards, jerks rule.
E-Scamming
New York City prosecutors charged Andrew Albert with allegedly duping investors out of $590,000 to build a high-end retail clothing website, but using over half the money to finance a high-end lifestyle instead. The idea was brilliant -- use personalized avatars built to users' measurements to shop Prada, Gap, Ralph Lauren, and other stores. No offense to fashion sites, but most customers do not look like mannikins or fashion models.
Alas, the Wall Street Journal reported he allegedly used $348,360 to pay for groceries, apartment renovations, hair and make-up, dog grooming, health club membership, and other personal items. Worse, he failed to pay income tax in his name of his company's name, Virtual Etail Group LLC, for 2008 and 2009. This case, plus the civil suits filed by the investors, will work their way through the court system.
Alas, the Wall Street Journal reported he allegedly used $348,360 to pay for groceries, apartment renovations, hair and make-up, dog grooming, health club membership, and other personal items. Worse, he failed to pay income tax in his name of his company's name, Virtual Etail Group LLC, for 2008 and 2009. This case, plus the civil suits filed by the investors, will work their way through the court system.
Tuesday, August 16, 2011
Sears Hires Schriesheim
Sears Holdings hired Robert A. Schriesheim will join the company as Executive Vice President and Chief Financial Officer, effective Monday, Aug. 22.
Frederick's of Shanghai?
According to a New York Post article, lingerie chain Frederick's of Hollywood is putting itself up for sale, possibly to a buyer in China. Trounced by rival Victoria's Secret, the company had no comment other than to say it is bringing out new designs and expanding into bath and beauty. Last week, Frederick's disclosed it won a one-year extension to comply with covenants on a $7 million loan from Hilco Trading, which has a brand-licensing division that includes investments in Polaroid, Sharper Image, and Halston.
Made in China: 2.7%
With a wicked trade deficit, you'd expect just about everything to be 'made in China,' but according to the just released San Francisco Federal Reserve report The U.S. Content of Made in China, only 2.7% of all US personal consumption spending was for products made in China while a whopping 88.5% of spending was for American-made items.
Say, what? Everything seems made in China, from Apple iPads to dish towels. The Fed's got it backwards, right?
Not exactly. The kicker is the category called 'services' -- mechanics, hair stylists, accountants, truckers, and so on. They are all US businesses, so when the Fed tallies personal consumption expenditures, these come under 'US' perview...hence the statistical disparity. Of course, statistics exist to be used and abused.
When you buy a $20 toy from China, not all $20 goes overseas -- parts go to the retailer, distributor, trucking company, etc., etc., etc. Services, which make up about two-thirds of spending, are mainly produced locally. On average, of every dollar spent on an item labeled 'Made in China,' 55 cents go for services 'produced' in the United States.
Then there are the other two kickers: gasoline and groceries. Food remains mostly US grown, and although the US imports half its oil from other countries, China is not one of them. About 90% of gasoline used in the US is refined in the US.
Thus, the US produced the vast majority of goods and services sold in the US. In 2010, imports were about 16% of US GDP. Imports from China amounted to 2.5% of GDP. Chinese imported goods consisted mainly of furniture and household equipment; other durables; and clothing and shoes. In the clothing and shoes category, 35.6% of US consumer purchases in 2010 were for items with the “Made in China” label. Over the last 10 years, the overall import content of US consumer goods remained relatively constant while the Chinese share doubled, indicating that Chinese gains have come, in large part, at the expense of other exporting nations.
Cold statistical comfort for shoppers facing shelves full of goods labeled 'Made in China' when they want to buy 'Made in the USA.' As Abraham Lincoln once noted, when you buy goods made overseas, you get the goods and they get the money. When you buy goods made in the USA, we get the goods and the money.
Say, what? Everything seems made in China, from Apple iPads to dish towels. The Fed's got it backwards, right?
Not exactly. The kicker is the category called 'services' -- mechanics, hair stylists, accountants, truckers, and so on. They are all US businesses, so when the Fed tallies personal consumption expenditures, these come under 'US' perview...hence the statistical disparity. Of course, statistics exist to be used and abused.
When you buy a $20 toy from China, not all $20 goes overseas -- parts go to the retailer, distributor, trucking company, etc., etc., etc. Services, which make up about two-thirds of spending, are mainly produced locally. On average, of every dollar spent on an item labeled 'Made in China,' 55 cents go for services 'produced' in the United States.
Then there are the other two kickers: gasoline and groceries. Food remains mostly US grown, and although the US imports half its oil from other countries, China is not one of them. About 90% of gasoline used in the US is refined in the US.
Thus, the US produced the vast majority of goods and services sold in the US. In 2010, imports were about 16% of US GDP. Imports from China amounted to 2.5% of GDP. Chinese imported goods consisted mainly of furniture and household equipment; other durables; and clothing and shoes. In the clothing and shoes category, 35.6% of US consumer purchases in 2010 were for items with the “Made in China” label. Over the last 10 years, the overall import content of US consumer goods remained relatively constant while the Chinese share doubled, indicating that Chinese gains have come, in large part, at the expense of other exporting nations.
Cold statistical comfort for shoppers facing shelves full of goods labeled 'Made in China' when they want to buy 'Made in the USA.' As Abraham Lincoln once noted, when you buy goods made overseas, you get the goods and they get the money. When you buy goods made in the USA, we get the goods and the money.
More Chinese Fakes: 22 Apples
Chinese authorities found another 22 fake Apple stores and Apple China filed complaint with the government and accused the stores of unfair competition and trademark infringement. Reuters noted the Administration for Industry and Commerce ordered the 22 offenders to stop using Apple logo and trademarks, a softer decision than earlier when it suspended the offending stores from doing business.
NumBytes 46: Windwoes for Microsoft
Research firm Canalys, Inc. estimated Microsoft's share of the operating system world via Windows has dropped to 82%, the lowest in 20 years. Blame it on the tablet computers, mostly Apple Inc.'s iPad which sold 28.7 million copies since 2010 (dwarfed by 400 million copies of Window 7 since 2009).
The Windows and Intel combo will not go anywhere soon, and neither will the Apple iPad tablet and the me-too Android-based tablets, although Goldman Sachs predicts tablets will grab 35% of computer sales in 2011 and 33% in 2012. Apple noted that 86% of Fortune 500 companies are deploying or testing iPads this quarter, up from 75% last quarter. Netbooks, those mini-laptop computers that made such a splash a couple years ago, are history, squashed by the tablet steamroller.
One point noted in a Wall Street Journal article: speed to use. Windows takes a few minutes to fire up on the average computer. By comparison, the iPad is almost instantaneous. In our low attention span society, those couple minutes could mean the difference between increasing customer interest by showing something or losing the opportunity to generate customer interest.
The Windows and Intel combo will not go anywhere soon, and neither will the Apple iPad tablet and the me-too Android-based tablets, although Goldman Sachs predicts tablets will grab 35% of computer sales in 2011 and 33% in 2012. Apple noted that 86% of Fortune 500 companies are deploying or testing iPads this quarter, up from 75% last quarter. Netbooks, those mini-laptop computers that made such a splash a couple years ago, are history, squashed by the tablet steamroller.
One point noted in a Wall Street Journal article: speed to use. Windows takes a few minutes to fire up on the average computer. By comparison, the iPad is almost instantaneous. In our low attention span society, those couple minutes could mean the difference between increasing customer interest by showing something or losing the opportunity to generate customer interest.
Monday, August 15, 2011
Wal-Mart Online Shake-Up
Wal-Mart Stores Inc. announced the resignations of its two top online executives, Raul Vazquez and Steve Nave, and also reorganized its e-commerce operations in US, UK, Japan and Canada to better compete with Amazon and other sites. The move is seen as a step in creating closer ties with the core retail business instead of keeping retail and online separate. Interenet Retailer estimates Wal-Mart's online sales at about $4 billion, sixth-largest e-commerce merchant in US and Canada.
Walgreens To Sell Insurance?
According to CNN, drug store chain Walgreens is preparing to sell health insurance this fall, although the company did not confirm or deny the report. Health reform mandates the creation of federal and state-funded public health insurance exchanges by 2014 that will offer subsidized insurance for uninsured and underinsured people -- although with the latest Federal Appeals Court ruling striking down parts of the law, whether the law survives the appeals process remains questionable. Retailers are among firms that are actively looking into starting private health insurance exchanges that are separate from public exchanges. Investment banking firm TripleTree estimated that from 2014 through 2019, as many as 36 million consumers will buy their health insurance from such exchanges. Walgreens already provides health care services that treat minor illnesses and offer seasonal flu shots and vaccinations through more than 350 in-store 'take care clinics.'
Old Navy Gives Ol' College Try
Gap Inc. is teaming up with 70 colleges to sell college-themed sports apparel in over 1000 Old Navy stores. For the colleges, this licensing deal allows them to move products beyond students and alumni and bring in more money. For the Gap, bringing in college goods should increase foot traffic and sales.
Shipments Down
Global Port Tracker reported US ports handled 1.25 million Twenty-foot Equivalent Units (TEU) in June 2011, down 2.6% from May and 5% from June 2010. One TEU is one 20-foot cargo container or its equivalent. June’s volume broke an 18-month streak of year-over-year improvement dating to December 2009. Estimates for July are expected to drop 1.3 million TEU, down 5.7% from July 2010, and August is forecast at 1.4 million TEU, a 1.6% decrease from a year ago. Year-over-year increases are expected to resume in September, which is forecast at 1.48 million TEU, up 10.4% from last year. October is forecast at 1.46 million TEU, up 8% from year ago; November at 1.31 million TEU, up 6.2%, and December at 1.18 million TEU, up 3%.
July Retail Sales Rise
The Commerce Department reported retail sales rose 0.5% in July, the strongest showing since March, as consumers opened up their wallets. July sales of electronics and appliances rose 1.4% from June, furniture was up 0.5%, apparel was also up 0.5%, and auto sales grew 0.4%. On the downside, July sales of sports goods fell 1.5% from June and building materials fell 1.4%.
As gas prices retreat -- oil is flirting with $80 per barrel, down from over $100 scant months ago -- and back-to-school sales increase in August, expect August sales to dribble upwards. A Wall Street Journal survey of 46 economists contend the risk of a double-dip recession is 29%, even as consumer spending increased and initial claims for unemployment dropped below the magic 400,000 level for the first time in months. September may be the make or break month as companies decide whether to use cash on hand to ramp up purchases and employment or continue to sit out the recovery waiting for Godot.
As gas prices retreat -- oil is flirting with $80 per barrel, down from over $100 scant months ago -- and back-to-school sales increase in August, expect August sales to dribble upwards. A Wall Street Journal survey of 46 economists contend the risk of a double-dip recession is 29%, even as consumer spending increased and initial claims for unemployment dropped below the magic 400,000 level for the first time in months. September may be the make or break month as companies decide whether to use cash on hand to ramp up purchases and employment or continue to sit out the recovery waiting for Godot.
Bankruptcy Updates: Harry & David, Borders
Borders Group Bidding Procedures Approved
The U.S. Bankruptcy Court on August 11, 2011 approved bidding procedures in connection with sale of certain of Borders Group's intellectual property assets free and clear of all liens, interests, claims and encumbrances. An auction is scheduled for September 14, 2011. The Court also approved the Debtors' motion for approval of bidding and auction procedures for the sale of unexpired non-residential real property leases. Hearings to consider approval of the sales of the first and second round leases are scheduled for September 8, 2011 and September 20, 2011, respectively.
Harry & David Agreements
Harry & David Holdings reached an agreement with the Pension Benefit Guaranty Corporation (PBGC) on August 12, 2011 relating to the termination of the Company's pension plan and the treatment of the PBGC's claim under the Company's Chapter 11 Plan of Reorganization, which the US Bankruptcy Court confirmed. Harry & David will turn over its pension plan assets to the PBGC, and the PBGC will take over the administration of the pension plan no later than September 12, 2011.
In addition, the plan allows the company to convert all of its approximately $200 million of outstanding public notes into equity of the reorganized company and includes an equity capital raise that will generate $55 million in equity financing upon the company's emergence from Chapter 11 protection. Harry & David will use proceeds from the equity capital raise to satisfy obligations arising from the Company's $55 million post-petition term loan. Additionally, the company has a $100 million revolving loan commitment to finance its normal seasonal working capital needs after it exits Chapter 11.
The U.S. Bankruptcy Court on August 11, 2011 approved bidding procedures in connection with sale of certain of Borders Group's intellectual property assets free and clear of all liens, interests, claims and encumbrances. An auction is scheduled for September 14, 2011. The Court also approved the Debtors' motion for approval of bidding and auction procedures for the sale of unexpired non-residential real property leases. Hearings to consider approval of the sales of the first and second round leases are scheduled for September 8, 2011 and September 20, 2011, respectively.
Harry & David Agreements
Harry & David Holdings reached an agreement with the Pension Benefit Guaranty Corporation (PBGC) on August 12, 2011 relating to the termination of the Company's pension plan and the treatment of the PBGC's claim under the Company's Chapter 11 Plan of Reorganization, which the US Bankruptcy Court confirmed. Harry & David will turn over its pension plan assets to the PBGC, and the PBGC will take over the administration of the pension plan no later than September 12, 2011.
In addition, the plan allows the company to convert all of its approximately $200 million of outstanding public notes into equity of the reorganized company and includes an equity capital raise that will generate $55 million in equity financing upon the company's emergence from Chapter 11 protection. Harry & David will use proceeds from the equity capital raise to satisfy obligations arising from the Company's $55 million post-petition term loan. Additionally, the company has a $100 million revolving loan commitment to finance its normal seasonal working capital needs after it exits Chapter 11.
Friday, August 12, 2011
Wal-Mart Turns To Brazil
Wal-Mart Stores Inc., fresh from gobbling up 51% of South African retailer Massmart, is on the acquisition hunt again, this time looking to buy Carrefour's Brazilian unit of 500 stores, according to the Wall Street Journal. The deal could be worth $6 billion to $8 billion and would double the number of Wal-Mart-owned stores in Brazil.
Labor Turnover And Productivity
The Bureau of Labor Statistics reported 3.1 million jobs were open as of the beginning of July 2011 and noted the hires rate (3.1%) and separations rate (3.1%) changed little over the month of June -- a stable employment situation without much growth. Over the 12 months ending in June 2011, the BLS recorded non-seasonally adjusted data of 47.7 million hires and 46.7 million separations, yielding a net employment gain of 1.0 million. These figures included workers who may have been hired and separated more than once during the year. Nearly half of the hires and nearly half of the separations during these 12 months occurred in three industries: retail trade; professional and business services; and accommodation and food services. The large share of total hires and separations accounted for by these three industries reflects the size of the industries as well as their relatively high hires and separations rates.
The BLS also reported nonfarm business sector labor productivity decreased at a 0.3% annual rate during the second quarter of 2011, with output rising 1.8% and hours worked rising 2.0%. Although the economy continues to grows, albeit feebly, the unpredictability of that growth makes companies cautious about hiring new employees even as sales rise. The labor force may be as productive as it can get for the short term and may not be inclined to do more with less -- a Corporate Executive Board examination of 80 companies' exit surveys found that more than 75% of the 4300 workers surveyed said they would not recommend their company to other workers (See NumBytes 42: Angry Bees). Overall productivity rose 0.8% from the second quarter of 2010 to the second quarter of 2011 as output increased 2.5% while hours rose only 1.6%.
The BLS also reported nonfarm business sector labor productivity decreased at a 0.3% annual rate during the second quarter of 2011, with output rising 1.8% and hours worked rising 2.0%. Although the economy continues to grows, albeit feebly, the unpredictability of that growth makes companies cautious about hiring new employees even as sales rise. The labor force may be as productive as it can get for the short term and may not be inclined to do more with less -- a Corporate Executive Board examination of 80 companies' exit surveys found that more than 75% of the 4300 workers surveyed said they would not recommend their company to other workers (See NumBytes 42: Angry Bees). Overall productivity rose 0.8% from the second quarter of 2010 to the second quarter of 2011 as output increased 2.5% while hours rose only 1.6%.
Made In USA Revival
According to an article on Women's World Daily, New York and Los Angeles are trying to bulk up their declining apparel and textile manufacturing centers as brands start looking to increase control over their supply chains, particularly since price increases in China and increased transportation costs are starting to narrow the savings gap, and also gain the cachet of Made in USA label. NYC efforts include a 'Save the Garment Distict' campaign to encourage new talent to start manufacturing in the city. New York state had 16,000 apparel manufacturing jobs at the end of May, up 0.1% for the month, but down 1.2% year-to-year, according to the NY state labor department. It's a start. Stats showed that NYC lost 64% of its apparel manufacturing jobs from 2000 to 2010, down to 9,850, while textile production fell 75% to 2,920.
NumBytes 45: Apple iPad Rules
Apple sold 28.7 million iPads and iPad2s since debuting the tablets. The rest of the industry supplied a blizzard of me-too tablets with a wide variety of price points and features, but the response has been lackluster at best. As the Wall Street Journal found out, rivals don't even mention sales, just shipments. On that basis, Apple shipped 9.3 million iPads in the second quarter 2011. Motorola shipped 690,000 tablets since February 2011 and Research In Motion shipped 500,000 since April 2011.
Thursday, August 11, 2011
Apple: The Wal-Mart Slayer
Apple Inc., which briefly flitted above ExxonMobil to be come the world's largest company, knocked off mighty Wal-Mart Stores in one small area -- digital music. Wal-Mart announced it was closing its digital music store on August 29, 2011, unable to topple mighty Apple iTunes. Wal-Mart started its online digital music store in 2003, undercut Apple's usual 99 cents per song price by selling songs at 88 cents, and failed to make significant inroads against iTunes. Wal-Mart promised to continue offering support to customers who bought restricted music files through its MP3 store, in the WMA format.
We Got The Beat
In 2010, ticket broker Live Nation Entertainment suffered a 15% decline in ticket sales, and that's when the economy was picking up. Contrary to thinking that a slowing economy would mean even worse ticket sales, Live Nation reported a strong resurgence in sales for the second quarter, with $1.6 billion in revenue, up 23% from the same period in 2010, and net income of $16.6 million, up from a loss of $31.2 million last year. Its operating income also increased by nearly 42%, to $54.7 million.
Live Nation noted it changed pricing policies this year to attract more consumers and the discount plan worked. Attendance for its events in North America, which was hardest hit last year, was up about 13% to 8.9 million; outside North America, attendance dropped slightly, falling about 6% to 4.2 million. Hard to say whether that means the economy is turning around, or that $100 per ticket for a show by aging rockers represents a staycation treat in a time of making do with less.
Live Nation noted it changed pricing policies this year to attract more consumers and the discount plan worked. Attendance for its events in North America, which was hardest hit last year, was up about 13% to 8.9 million; outside North America, attendance dropped slightly, falling about 6% to 4.2 million. Hard to say whether that means the economy is turning around, or that $100 per ticket for a show by aging rockers represents a staycation treat in a time of making do with less.
Economy Watch: Sales, Mortgage, 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 August 6, 2011 posted a decline of 0.5% from the previous week. Analysts asserted exceptionally hot weather limited shopping.
ShopperTrak Retail Sales Data
For the week ended August 8, 2011, ShopperTrak's National Retail Sales Estimate rose 2.0% to $93.419 billion from the week before of $91.567 billion, but was down 2.8% from the same period last year. Back-to-School led the increase, especially since several states held tax-free days. Historically, the week that ends August 15 is the best sales week in the Back to School season.
Mortgage Rates Plummet
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.54% from last week's 4.74%, according to its weekly national survey ending August 4, 2011. It also reported that the average 15-year fixed mortgage rate fell to 3.68% from 3.83% last week. The Mortgage Bankers Association reported mortgage applications were up 7.1% compared to one week earlier, with 70.1% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices Down
The Energy Department announced that for week ending August 8, 2011, the average price of US gasoline fell to $3.674 a gallon from $3.711 per gallon week earlier.
Diesel prices fell to $3.94 from $3.95 last week.
Oil prices plummeted to just over $80 per barrel as nervous speculators dumped oil on fears of a double dip recession in the US and mounting sovereign debt problems in Europe.
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on August 6, 2011 posted a decline of 0.5% from the previous week. Analysts asserted exceptionally hot weather limited shopping.
ShopperTrak Retail Sales Data
For the week ended August 8, 2011, ShopperTrak's National Retail Sales Estimate rose 2.0% to $93.419 billion from the week before of $91.567 billion, but was down 2.8% from the same period last year. Back-to-School led the increase, especially since several states held tax-free days. Historically, the week that ends August 15 is the best sales week in the Back to School season.
Mortgage Rates Plummet
Bankrate.com reported that the average conforming 30-year fixed mortgage rate fell to 4.54% from last week's 4.74%, according to its weekly national survey ending August 4, 2011. It also reported that the average 15-year fixed mortgage rate fell to 3.68% from 3.83% last week. The Mortgage Bankers Association reported mortgage applications were up 7.1% compared to one week earlier, with 70.1% of mortgage loans going toward refinancing rather than home purchases.
Gas Prices Down
The Energy Department announced that for week ending August 8, 2011, the average price of US gasoline fell to $3.674 a gallon from $3.711 per gallon week earlier.
Diesel prices fell to $3.94 from $3.95 last week.
Oil prices plummeted to just over $80 per barrel as nervous speculators dumped oil on fears of a double dip recession in the US and mounting sovereign debt problems in Europe.
NumBytes 44: Best States for Entrepreneurs
Entrepreneurs should be screaming "I Love New York," according to the University of Nebraska-Lincoln Bureau of Business Research's just released 2010 State Entrepreneurship Index, which measures effectiveness of five business components of each state:
* Percent growth in employer establishments
* Percent growth in employer establishments per capita
* Business formation rate (i.e, company births per capita)
* Patents per thousand residents
* Gross receipts of sole
New York continued to hold the top rank with a score of 2.34 thanks to its strong performance in gross receipts per capita and substantial improvement in two other components, growth in employer establishments, and establishments per capita. Washington was second (2.17), Massachusetts third (2.04), and New Jersey (1.93), and Oregon (1.93) tied for fourth. The bottom five states? South Carolina (0.07) was dead last, Arizona (0.11) was 49th, Mississippi (0.32) was 48th, Nevada (0.33) was 47th, and Alabama (0.41) was 46th. A 'median state' was assigned a score of 1.0. In case you're wondering, Nebraska rated 21st (1.17).
* Percent growth in employer establishments
* Percent growth in employer establishments per capita
* Business formation rate (i.e, company births per capita)
* Patents per thousand residents
* Gross receipts of sole
New York continued to hold the top rank with a score of 2.34 thanks to its strong performance in gross receipts per capita and substantial improvement in two other components, growth in employer establishments, and establishments per capita. Washington was second (2.17), Massachusetts third (2.04), and New Jersey (1.93), and Oregon (1.93) tied for fourth. The bottom five states? South Carolina (0.07) was dead last, Arizona (0.11) was 49th, Mississippi (0.32) was 48th, Nevada (0.33) was 47th, and Alabama (0.41) was 46th. A 'median state' was assigned a score of 1.0. In case you're wondering, Nebraska rated 21st (1.17).
Sbarro Files Plan
Sbarro filed with the US Bankruptcy Court on August 10, 2011 a Chapter 11 Plan of Reorganization and related Disclosure Statement, which uses Section 1129 of the Bankruptcy Code to create a separate plan for each of the 28 Debtors.
The Disclosure Statement explains, "...$35 million of loans expected to be outstanding under the DIP Facility will be converted on a dollar-for-dollar basis into a portion of the $110 million Exit Term Loan Facility and issued to the DIP Lenders on the Effective Date; Approximately $75 million of the Prepetition First Lien Credit Facility will be converted into the remainder of the $110 million Exit Term Loan Facility to be issued Pro Rata to the Prepetition First Lien Lenders on the Effective Date; The remaining approximately $100 million in secured indebtedness outstanding under the Prepetition First Lien Credit Facility (excluding amounts related to existing letters of credit, which will be addressed with the New Money Exit Facility) plus any First Lien Adequate Protection Claims that are not otherwise restructured under the Exit Term Loan Facility will be converted into 100% of the common equity of Reorganized Sbarro and distributed Pro Rata to the Prepetition First Lien Lenders on account of the obligations owed to them under the Prepetition First Lien Credit Facility and the First Lien Adequate Protection Claims; The Debtors' obligations under the Prepetition Second Lien Credit Agreement will be canceled and discharged; General Unsecured Claims against the Debtors, including $150 million in outstanding unsecured Senior Notes plus accrued interest, will be canceled and discharged; The general unsecured Claims held by certain trade creditors with whom the Debtors intend to conduct business post-emergence will receive their Pro Rata share of $250,000 in Cash; All Equity Interests in Sbarro Holdings, LLC will be extinguished; and Certain of the Debtors' Prepetition First Lien Lenders have committed to provide the Debtors with a new money term loan facility of $18.6 million to be used for general corporate and working capital needs (as well as to cash Under the Plan, the Debtors' Prepetition First Lien Lenders will own substantially all of the New Common Stock in Reorganized Holdings, subject to dilution only by shares allocated to Reserved Employee Equity and/or issued in connection with the Management Equity Plan." The Court scheduled a September 7, 2011 hearing to consider the Disclosure Statement.
The Disclosure Statement explains, "...$35 million of loans expected to be outstanding under the DIP Facility will be converted on a dollar-for-dollar basis into a portion of the $110 million Exit Term Loan Facility and issued to the DIP Lenders on the Effective Date; Approximately $75 million of the Prepetition First Lien Credit Facility will be converted into the remainder of the $110 million Exit Term Loan Facility to be issued Pro Rata to the Prepetition First Lien Lenders on the Effective Date; The remaining approximately $100 million in secured indebtedness outstanding under the Prepetition First Lien Credit Facility (excluding amounts related to existing letters of credit, which will be addressed with the New Money Exit Facility) plus any First Lien Adequate Protection Claims that are not otherwise restructured under the Exit Term Loan Facility will be converted into 100% of the common equity of Reorganized Sbarro and distributed Pro Rata to the Prepetition First Lien Lenders on account of the obligations owed to them under the Prepetition First Lien Credit Facility and the First Lien Adequate Protection Claims; The Debtors' obligations under the Prepetition Second Lien Credit Agreement will be canceled and discharged; General Unsecured Claims against the Debtors, including $150 million in outstanding unsecured Senior Notes plus accrued interest, will be canceled and discharged; The general unsecured Claims held by certain trade creditors with whom the Debtors intend to conduct business post-emergence will receive their Pro Rata share of $250,000 in Cash; All Equity Interests in Sbarro Holdings, LLC will be extinguished; and Certain of the Debtors' Prepetition First Lien Lenders have committed to provide the Debtors with a new money term loan facility of $18.6 million to be used for general corporate and working capital needs (as well as to cash Under the Plan, the Debtors' Prepetition First Lien Lenders will own substantially all of the New Common Stock in Reorganized Holdings, subject to dilution only by shares allocated to Reserved Employee Equity and/or issued in connection with the Management Equity Plan." The Court scheduled a September 7, 2011 hearing to consider the Disclosure Statement.
Wednesday, August 10, 2011
Best Buy Kiosk Kraze
Best Buy Co. Inc. is adding 100 Best Buy Express self-service kiosks over the next year to the 150 already in existence. The oversized vending machines offer computer accessories, digital cameras, storage devices, and headphones.
Sears Woos Woo and Huber
Sears Holdings Corp. hired former FreshDirect executive Monica Woo to be its Vice President and Chief Marketing Officer, effective August 15. Its Lands' End division named Edgar O. Huber as its new CEO and president.
JC Penney Early Retirement
JC Penney Co. began a voluntary early-retirement program for an undisclosed number of staff in certain parts of the retailer's organization, according to the Wall Street Journal.
Sycamore's 9.9% Stake in Talbots
Private equity firm Sycamore Partners bought a 9.9% stake in women’s clothing retailer The Talbots Inc. for $21.6 million. Talbots previously adopted a 'poison pill' that triggers a stockholder rights agreement to double the voting power of existing shareholders in the event of a takeover bid. The pill activates when a new shareholder acquires 10% more of Talbots stock.
Bankruptcy Updates
Jackson-Hewlett
Jackson-Hewitt Tax Service filed with the US Bankruptcy Court on August 8, 2011 an Amended Joint Prepackaged Chapter 11 Plan of Reorganization. The company also filed Plan Supplements for its Chapter 11 Plan of Reorganization. On August 9, the US Bankruptcy Court signed an order approving Jackson-Hewitt Tax Service's Disclosure Statement and confirmed the company's Amended Joint Prepackaged Plan of Reorganization. Under the Plan, the Debtors current secured lenders will receive their share of a new $100 million term loan and all of the equity in the reorganized company, and existing stockholders will receive nothing. The company anticipates entering into a new $115 million revolving credit facility to fund operations until the new tax season begins.
Harry & David Holdings Pension Plan
The US Bankruptcy Court on August 9, 2011 approved Harry & David Holdings' motion for an order determining that the financial requirements for a distress termination of its defined benefit pension plan are satisfied and approving a distress termination of the pension plan. On July 29, 2011, the Pension Benefit Guaranty Corporation (PBGC) filed with the Court an objection to the company's' Second Amended Chapter 11 Plan of Reorganization. According to PBGC, the Plan should not be confirmed because it is contingent upon the termination of the defined benefit pension plan, which would be-according to the PBGC-improper under the Employee Retirement Income Security Act.
Jackson-Hewitt Tax Service filed with the US Bankruptcy Court on August 8, 2011 an Amended Joint Prepackaged Chapter 11 Plan of Reorganization. The company also filed Plan Supplements for its Chapter 11 Plan of Reorganization. On August 9, the US Bankruptcy Court signed an order approving Jackson-Hewitt Tax Service's Disclosure Statement and confirmed the company's Amended Joint Prepackaged Plan of Reorganization. Under the Plan, the Debtors current secured lenders will receive their share of a new $100 million term loan and all of the equity in the reorganized company, and existing stockholders will receive nothing. The company anticipates entering into a new $115 million revolving credit facility to fund operations until the new tax season begins.
Harry & David Holdings Pension Plan
The US Bankruptcy Court on August 9, 2011 approved Harry & David Holdings' motion for an order determining that the financial requirements for a distress termination of its defined benefit pension plan are satisfied and approving a distress termination of the pension plan. On July 29, 2011, the Pension Benefit Guaranty Corporation (PBGC) filed with the Court an objection to the company's' Second Amended Chapter 11 Plan of Reorganization. According to PBGC, the Plan should not be confirmed because it is contingent upon the termination of the defined benefit pension plan, which would be-according to the PBGC-improper under the Employee Retirement Income Security Act.
NumBytes 44: Flash Robs
Social networking is all the rage, including 'flash mobs' that arrive at a preset time and place to perform silly dances for You Tube videos. But criminal gangs are using flash mob tactics to loot stores. According to a July 2011 National Retail Federation survey of 106 US retail companies, 79% reported being a victim of an organized robbery with multiple thieves in the past 12 months, with 50% being targeted two to five times -- usually smash and grab style heists. These robberies are usually performed by groups or gangs of juveniles who already know each other. Of troubling note, 10% reported these gangs using flash mob tactics where they do not know each other -- criminals learn about a retail hit via text or e-mail and just show up.
The survey found juvenile offenders were involved in 83% of the events and social media or texting was known to be the communication vehicle in 42% of the apprehended cases. The affected retailer or responding police department made apprehensions in 50% of the incidents. In one example, on June 23, 2011 in Philadelphia, a gang of 40 criminals stormed a Sears store stealing thousands of dollars in sneakers, socks, watches, and other items. Police apprehended 15 juveniles and one adult, who were arrested for retail theft and conspiracy.
The NRF suggests increased vigilance on the part of associates to report unusual gatherings in front of the store, whether it is in a mall, plaza, or street shopping district.
The survey found juvenile offenders were involved in 83% of the events and social media or texting was known to be the communication vehicle in 42% of the apprehended cases. The affected retailer or responding police department made apprehensions in 50% of the incidents. In one example, on June 23, 2011 in Philadelphia, a gang of 40 criminals stormed a Sears store stealing thousands of dollars in sneakers, socks, watches, and other items. Police apprehended 15 juveniles and one adult, who were arrested for retail theft and conspiracy.
The NRF suggests increased vigilance on the part of associates to report unusual gatherings in front of the store, whether it is in a mall, plaza, or street shopping district.
Tuesday, August 9, 2011
End of Monthly Comparable Sales Reporting?
Hot Topic becomes the latest retailer to cease reporting monthly comparable sales figures, switching to reporting only quarterly sales numbers starting in the third quarter 2011. Monthly numbers from BJ's Wholesale will also join the exodus once it goes private.
The two retailers are in good company. Wal-Mart, Sears, Home Depot, Lowe's, Ann Taylor, Chico's, Children's Place, American Apparel, Abercrombie & Fitch, Aeropostale, and American Eagle Outfitters ignore the voluntary monthly sales release. Nor can you blame them. The companies spend time and resources to put them out. While same-store sales help companies with good news when times are booming, any drop in same-store sales finds retailers hemming and hawing about shifting holidays, bad hair days, and Mercury retrogrades. Quarterly sales tend to even out the volatility.
According to Customer Growth Partners, comparable sales reports represent about 10% of total US retail sales and remain heavily skewed towards apparel and department stores, leaving out most consumer electronics and home improvement. In addition, some chains report only sales from stores while others include online sales in their figures. While the end of monthly same-sales reporting may be some time off, the trend among retailers certainly points towards its abandonment.
The two retailers are in good company. Wal-Mart, Sears, Home Depot, Lowe's, Ann Taylor, Chico's, Children's Place, American Apparel, Abercrombie & Fitch, Aeropostale, and American Eagle Outfitters ignore the voluntary monthly sales release. Nor can you blame them. The companies spend time and resources to put them out. While same-store sales help companies with good news when times are booming, any drop in same-store sales finds retailers hemming and hawing about shifting holidays, bad hair days, and Mercury retrogrades. Quarterly sales tend to even out the volatility.
According to Customer Growth Partners, comparable sales reports represent about 10% of total US retail sales and remain heavily skewed towards apparel and department stores, leaving out most consumer electronics and home improvement. In addition, some chains report only sales from stores while others include online sales in their figures. While the end of monthly same-sales reporting may be some time off, the trend among retailers certainly points towards its abandonment.
Executive Moves
Rite Aid Names Henderson CCO
Rite Aid named Susan Henderson as its new Chief Communications Officer, replacing retiring communications chief Karen Rugen.
Ashley Stewart Names Clancy CEO
Ashley Stewart announced today that its Board of Directors has appointed Celia Clancy as President and Chief Executive Officer, replacing Laura Weil, who resigned.
Rite Aid named Susan Henderson as its new Chief Communications Officer, replacing retiring communications chief Karen Rugen.
Ashley Stewart Names Clancy CEO
Ashley Stewart announced today that its Board of Directors has appointed Celia Clancy as President and Chief Executive Officer, replacing Laura Weil, who resigned.
Saks Flashes
Saks Fifth Avenue debuted a flash-sale fashion website that will roll out five events a week and build up to multiple daily sales by the end of August. The site competes with Gilt Groupe, HauteLook, Rue La La, and others.
NumBytes 43: Tallest Building
Kingdom Holding Co. is paying Bin Laden Group $1.23 billion to build the world's tallest building at 3281 feet (1000 meters) in Jeddah, Saudi Arabia, surpassing the 2717-foot Burj Khalifa in Dubai. The Jeddah building would house a Four Seasons hotel, offices, luxury condos, and the world's highest observation spot and be the centerpiece of a $20 billion, 57 million square foot development called Kingdom City. The building was supposed to be one mile high (5280 feet), but soil testing in 2008 cast doubt about over suitability for handling such a massive structure. The architect is Adrian Smith of Adrian Smith + Gordon Gill Architecture in Chicago, the same fellow who designed the Burj Khalifa.
Presumably, shopping would be all around the 5,704,873 sq ft buiilding, although you would think one luxury retailer would take space at the top and brag about having the world's highest store. Big buildings often are ego boosting but economic sinkholes -- the Burj Khalifa has an occupancy rate of 44%. But there may be a better reason behind the development than national pride: jobs. With Middle East autocracies and monarchies falling to people fed up with few jobs and much corruption, putting people to work is the best way to keep the Saudi royal family in power. You only have to look at who owns 95% of Kingdom Holding Co. -- Prince Alwaleed bin Talal, nephew of King Abdullah of Saudi Arabia.
Presumably, shopping would be all around the 5,704,873 sq ft buiilding, although you would think one luxury retailer would take space at the top and brag about having the world's highest store. Big buildings often are ego boosting but economic sinkholes -- the Burj Khalifa has an occupancy rate of 44%. But there may be a better reason behind the development than national pride: jobs. With Middle East autocracies and monarchies falling to people fed up with few jobs and much corruption, putting people to work is the best way to keep the Saudi royal family in power. You only have to look at who owns 95% of Kingdom Holding Co. -- Prince Alwaleed bin Talal, nephew of King Abdullah of Saudi Arabia.
Bankruptcy Updates
Nebraska Book Company Committee Amended
The US Trustee assigned to the Nebraska Book Company case appointed a second amended official committee of unsecured creditors on August 8, 2011. Elsevier Inc. resigned from the committee effective July 15, 2011, Pearson Education Inc. resigned effective July 27, 2011, and JanSport, a Division of VF Outdoor, resigned on August 3, 2011.
Borders Group Executive Changes Announced
According to documents filed with the SEC, the employment with Borders Group and its subsidiaries of Michael J. Edwards, Borders Group president, and Scott D. Henry, E.V.P. and chief financial officer of the company were terminated from Borders, according to the SEC. SVP Restructuring Holly Felder Etlin was appointed as president of the company effective July 29, 2011, and Borders VP, chief accounting officer, and controller Glen Tomaszewski was appointed as treasurer of the Company.
The US Trustee assigned to the Nebraska Book Company case appointed a second amended official committee of unsecured creditors on August 8, 2011. Elsevier Inc. resigned from the committee effective July 15, 2011, Pearson Education Inc. resigned effective July 27, 2011, and JanSport, a Division of VF Outdoor, resigned on August 3, 2011.
Borders Group Executive Changes Announced
According to documents filed with the SEC, the employment with Borders Group and its subsidiaries of Michael J. Edwards, Borders Group president, and Scott D. Henry, E.V.P. and chief financial officer of the company were terminated from Borders, according to the SEC. SVP Restructuring Holly Felder Etlin was appointed as president of the company effective July 29, 2011, and Borders VP, chief accounting officer, and controller Glen Tomaszewski was appointed as treasurer of the Company.
Monday, August 8, 2011
KKR Completes Academy Sports Acquisition
Investment company Kohlberg Kravis Roberts & Co LP completed its acquisition of retailer Academy Sports + Outdoors, which has 133 locations throughout 11 states in the Southeast US and generated more than $2.7 billion in revenue in 2010.
Atlantic & Pacific Seeks Extension
The Great Atlantic & Pacific Tea Company filed with the US Bankruptcy Court on August 2, 2011 a second motion to extend the exclusive period during which the Company can file a Chapter 11 plan and solicit acceptances thereof through and including January 16, 2012 and March 16, 2012, respectively. The Court scheduled an August 16, 2011 hearing on the matter.
Atlantic & Pacific Seeks Extension
The Great Atlantic & Pacific Tea Company filed with the US Bankruptcy Court on August 2, 2011 a second motion to extend the exclusive period during which the Company can file a Chapter 11 plan and solicit acceptances thereof through and including January 16, 2012 and March 16, 2012, respectively. The Court scheduled an August 16, 2011 hearing on the matter.
PPR Seeks To Sell RedCats
French luxury group PPR noted it intends to sell its mail-order division Redcats, which encompasses catalogue retailer La Redoute, by the end of 2011, but will delay the sale if global financial markets plummet due to the US or Europe debt crisis. The company posted second quarter sales of 3.51 billion euros ($5.04 billion), up from 2.32 billion euros ($4.24 billion) from year ago. Profits grew 16.1% to 450 million euros ($631.3 million) from 388 million euros ($496.6 million) for the quarter. However, the company noted overall sales growth dropped to 5.4% during the second quarter, down from 9.1% in the first quarter, primarly due to weakness in mail-order and retail businesses. Sales at Redcats fell 3.6% to 821.5 million euros ($1.18 billion) for quarter. Credit Agricole Cheuvreux asserted Redcats carries an enterprise value of 1.4 billion euros ($1.7 billion).
NumBytes 42: Angry Bees
Angry Birds may be a hit game app, but real-life employees are acting like angry worker bees. According to a Corporate Executive Board (CEB) examination of 80 companies' exit surveys, more than 75% of the 4300 workers surveyed said they would not recommend their company to other workers. That's almost double the 42% rate from 2008. CEB noted that the high score likely reflected employees' perceived poor treatment at the hands of the companies during the recession. Since networking generates most job referrals, companies on the receiving end of complaints can often lose out as talented employees head for -- perceived -- better companies.
Tuesday, August 2, 2011
GDP ZZZZZZZ....Inflation Awake
The Commerce Department's Bureau of Economic Analysis reported the US economy on snooze control with only a 1.3% increase in the second quarter 2011 Gross Domestic Product (the output of goods and services produced by US labor and property) -- better than first quarter's 0.4% increase, but small enough to bring the idea of a double-dip recession back into play. The total current-dollar GDP (the market value of the nation's output of goods and services) increased 3.7% ($136.0 billion) in the second quarter to $15.004 trillion.
The price index for gross domestic purchases, which measures prices paid by US residents, increased 3.2% in the second quarter, compared with an increase of 4.0% in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 2.6% in the second quarter, compared with an increase of 2.4% in the first.
Exports, although slowing, proved to be the bright spot. Real exports of goods and services increased 6.0% in the second quarter, compared with an increase of 7.9% in the first. Real imports of goods and services increased 1.3%, compared with an increase of 8.3%, so the US balance of trade improved.
The price index for gross domestic purchases, which measures prices paid by US residents, increased 3.2% in the second quarter, compared with an increase of 4.0% in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 2.6% in the second quarter, compared with an increase of 2.4% in the first.
Exports, although slowing, proved to be the bright spot. Real exports of goods and services increased 6.0% in the second quarter, compared with an increase of 7.9% in the first. Real imports of goods and services increased 1.3%, compared with an increase of 8.3%, so the US balance of trade improved.
Building A Flat Tomorrow
Construction isn't helping to build our way out of the economic doldrums. The Department of Commerce estimated construction spending during June 2011 at a seasonally adjusted annual rate of $772.3 billion, a mere 0.2% above the revised May estimate of $770.5 billion, and 4.7% below the June 2010 estimate of $810.4 billion.
Gladly Pay For a Hamburger Next Tuesday...
These days, paying for a hamburger later means consumers are putting it on their credit cards, but with underwater mortgages and uncertain employment environment, consumers seem to be socking it away rather than spending it. The Commerce Department noted personal outlays increased 3.1% ($83.5 billion) in the second quarter 2011, compared with an increase of 5.8% ($153.5 billion) in the first. It also reported disposable personal income increased 3.9% ($109.9 billion) in the second quarter, compared with an increase of 4.7% ($129.6 billion) in the first. Real disposable personal income increased 0.7%, the same increase as in the first quarter. Yet the personal saving rate -- saving as a percentage of disposable personal income -- was 5.1% in the second quarter, compared with 4.9% in the first. All these numbers translated in personal savings -- disposable personal income less personal outlays -- of $590.6 billion in the second quarter, compared with $564.3 billion in the first. Personal current taxes increased $22.6 billion in the second quarter, compared with an increase of $122.3 billion in the first.
NumBytes 41: Worthless IPO Opinions?
To buy that IPO or not to buy that IPO? That is the question...maybe. A better idea is questioning whether information streaming from analysts about the IPO is worth anything. According to market research firm FactSet Research Systems, Inc., economic analysts issued positive or neutral recommendations on 98.5% of IPOs in 2011.
Economy Watch: Sales, Mortgage, 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 30, 2011 posted a loss of 0.3%, with summer clearances continuing to dominate sales.
Shoppertrak Retail Sales Data
For the week ended July 30, 2011, ShopperTrak's National Retail Sales Estimate fell 0.5% to $93.869 billion from the week before of $94.354 billion, and was up a strong 4.1% from the same period last year. Back-to-School took a back seat to family vacations, but sales are expected to grow over the next several weeks and then fall toward the end of the month. Overall forecasts indicate that Back-to-School 2011 season will realize a gain of 3.8% over Back-to-School 2010.
Mortgage Rates Increase
Bankrate.com reported that the average conforming 30-year fixed mortgage rate rose to 4.74% from last week's 4.68%, according to its weekly national survey ending July 27, 2011. It also reported that the average 15-year fixed mortgage rate rose to 3.83% from 3.82% last week.
Gas Prices Up
The Energy Department announced that for week ending August 1, 2011, the average price of US gasoline rose to $3.711 a gallon from $3.699 per gallon week earlier.
Diesel prices rose to $3.95 from $3.92 last week.
The International Council of Shopping Centers and Goldman Sachs reported its chain-store sales index for the week ending on July 30, 2011 posted a loss of 0.3%, with summer clearances continuing to dominate sales.
Shoppertrak Retail Sales Data
For the week ended July 30, 2011, ShopperTrak's National Retail Sales Estimate fell 0.5% to $93.869 billion from the week before of $94.354 billion, and was up a strong 4.1% from the same period last year. Back-to-School took a back seat to family vacations, but sales are expected to grow over the next several weeks and then fall toward the end of the month. Overall forecasts indicate that Back-to-School 2011 season will realize a gain of 3.8% over Back-to-School 2010.
Mortgage Rates Increase
Bankrate.com reported that the average conforming 30-year fixed mortgage rate rose to 4.74% from last week's 4.68%, according to its weekly national survey ending July 27, 2011. It also reported that the average 15-year fixed mortgage rate rose to 3.83% from 3.82% last week.
Gas Prices Up
The Energy Department announced that for week ending August 1, 2011, the average price of US gasoline rose to $3.711 a gallon from $3.699 per gallon week earlier.
Diesel prices rose to $3.95 from $3.92 last week.
A Rose By Any Other Name
The inability of Congress to act on renewing the Andean Trade Promotion and Drug Eradication trade agreement with Colombia is proving a double edged sword, noted an article in the Wall Street Journal. On the one hand, reapplying up to 8% tariffs to the extensive US flower imports generated $7 million from February to April 2011 versus only $4,000 from the year before. On the other, the boom in cheap Colombia flower production lessened Colombia's dependence on the illegal drug trade and allowed the country to grab 75% of US cut flower market, putting US growers out of business -- the California Cut Flower Commission reported a drop from 450 state growers in 1991 when the tariff-free agreement went into effect to only 250 in 2011.
Horrible, right? The Commmission is hoping the Federal Government will pop $15 million for a new distribution center. But are things as bad as that?
The US Department of Agriculture reported the wholesale value of domestically produced cut flowers was $375 million for 2010, 4% more than 2009. California's value was $286 million, accounting for 76% of the total cut flower value in the 15-State program. In 2010, the number of producers dropped to 316.
In a related category, the USDA noted potted flowering plants for indoor or patio use were valued at $669 million, also up 4% from 2009. California accounted for 36% of the 15-State value in this category, and Florida accounted for 17%. Here, the number of potted flowering plant producers decreased by 10% to 1,133 in 2010.
The numbers indicate a growing flower market, even with Colombian imports. The tariff of up to 8% may have boosted the price of flowers slightly for Valentine's Day, Mother's Day, or weddings, but evidently the lack of a tariff over the last 20 years didn't cause US flower growers to go the way of buggy whip manufacturers.
Horrible, right? The Commmission is hoping the Federal Government will pop $15 million for a new distribution center. But are things as bad as that?
The US Department of Agriculture reported the wholesale value of domestically produced cut flowers was $375 million for 2010, 4% more than 2009. California's value was $286 million, accounting for 76% of the total cut flower value in the 15-State program. In 2010, the number of producers dropped to 316.
In a related category, the USDA noted potted flowering plants for indoor or patio use were valued at $669 million, also up 4% from 2009. California accounted for 36% of the 15-State value in this category, and Florida accounted for 17%. Here, the number of potted flowering plant producers decreased by 10% to 1,133 in 2010.
The numbers indicate a growing flower market, even with Colombian imports. The tariff of up to 8% may have boosted the price of flowers slightly for Valentine's Day, Mother's Day, or weddings, but evidently the lack of a tariff over the last 20 years didn't cause US flower growers to go the way of buggy whip manufacturers.
Monday, August 1, 2011
Back to School Survey
A Deloitte survey conducted between July 5 and July 11 of 1000 parents found that 31% plan to spend more this year than last year on back to school items, 55% will spend about the same, and 14% will spend less. Why spend more? 60% cited that it just costs more while 32% said school budget cuts are causing the extra outlays. What's the top three items to buy? 94% said school supplies, 88% said clothes, and 79% said shoes. And 43% intend to spend at least $250. But they will not just spend blindly -- of the 40% who owned smartphones, 63% noted they will use them to ferret out the best prices and discounts.
Of note, among respondents earning $100,000 or more, 82% contended their financial situation is the same or better than last year and only 31% noted they were likely to purchase more lower-priced items due to economic concerns. For those making under $100,000, 66% said their financial situation is the same or better versus a year ago and 51% will be looking to purchase more lower-priced items due to economic concerns.
Of note, among respondents earning $100,000 or more, 82% contended their financial situation is the same or better than last year and only 31% noted they were likely to purchase more lower-priced items due to economic concerns. For those making under $100,000, 66% said their financial situation is the same or better versus a year ago and 51% will be looking to purchase more lower-priced items due to economic concerns.
Economy Slowing
Back to School sales can't come soon enough for retailers. The Commerce Department reported US second quarter 2011 economic growth at 1.3% -- and revised the first quarter to 0.4% (down from 1.9%). Consumer spending was up only 0.1% while government spending was down 1.1%. Worse, core inflation grew at 2.1% in the second quarter 2011, biggest jump since fourth quarter 2009, and that comes atop a 1.6% increase in the first quarter 2011. The ugly numbers are throwing doubt upon economists' forecasts of 3% growth during the second half 2011.
Luxury Goods Lookin' Good
The luxury goods market continues to grow, according to Bain & Co., which predicts world-wide luxury good sales will increase in 2011 to $265 billion, up 8% from 2010, primarily from surging sales by Asian tourists.
NumBytes 40: Dollar Bills? Go Fish!
Next time you hear someone complain that the government does nothing but print more and more money, you might want to place a big bet that the opposite is true. The US Bureau of Engraving and Printing, established in 1877, is actually printing fewer paper money bills now than 20 years ago. First point of clarification: The US Mint churns out coins. The Bureau churns out bills in $1, $5, $10, $20, $50, and $100 denominations. It also prints $2 bills as well, although none have been printed since 2006. About 95% of the notes printed each year are used to replace notes already in or taken out of circulation -- small denomination bills generally last about six months.
The Bureau printed no $50 bills in 2010 -- odd since that's about what it costs to fill the average gas tank. Then again, it printed no $10 bills in 2010 either. It 'only' printed 1.856 billion $1 bills in 2010, down from 5.145 billion in 2001. The big winner in the currency printing process was the $100 bill -- 1.907 billion bills were printed in 2010, up from 201.6 million in 2001. Still, the number of bills produced is at its lowest clip in two decades.
* 6.381 billion bills printed in 2010
* 9.093 billion bills printed in 2000
* 7.002 billion bills printed in 1990
* 4.167 billion bills printed in 1980
The decline in paper money production can be directly linked to production and material changes that made the bills more durable and to rise of alternative payment options -- credit cards, debit cards, PayPal, etc. The latter offers a bad news - good news development. The bad news: politicians being bribed with a gift card makes for poor television compared to taking an envelope full of cash. The good news: teenage cashiers can avoid being confused over making change.
The Bureau printed no $50 bills in 2010 -- odd since that's about what it costs to fill the average gas tank. Then again, it printed no $10 bills in 2010 either. It 'only' printed 1.856 billion $1 bills in 2010, down from 5.145 billion in 2001. The big winner in the currency printing process was the $100 bill -- 1.907 billion bills were printed in 2010, up from 201.6 million in 2001. Still, the number of bills produced is at its lowest clip in two decades.
* 6.381 billion bills printed in 2010
* 9.093 billion bills printed in 2000
* 7.002 billion bills printed in 1990
* 4.167 billion bills printed in 1980
The decline in paper money production can be directly linked to production and material changes that made the bills more durable and to rise of alternative payment options -- credit cards, debit cards, PayPal, etc. The latter offers a bad news - good news development. The bad news: politicians being bribed with a gift card makes for poor television compared to taking an envelope full of cash. The good news: teenage cashiers can avoid being confused over making change.
Conn's Financial Moves
Conn’s, Inc. completed a $55 million expansion of its revolving credit facility to $430 million and extended the term by 20 months to July 2015. It estimates that diluted earnings per share will benefit by approximately $0.03 per year as a result of the interest rate changes.
The company also paid the entire balance of its $100 million second lien term loan on July 28, 2011. This allows Conn's to reduce its interest expense by approximately $11.9 million annually and record a pretax charge of approximately $11.0 million due to the payoff, related to the write-off of unamortized original issue discount and deferred financing fees, and the payment of the required prepayment premium.
Conn's also completed an $8 million real estate loan to finance three owned store locations. The real estate loan will mature in July 2016, and requires monthly principal payments based on a 15-year amortization schedule. The interest rate on the loan is the Prime rate plus 100 basis points, with a floor on the total rate of 6%.
After completion of the amendment, repayment of the term loan, and funding of a new $8 million real estate loan, the company hads $290.0 million outstanding under the revolving credit facility, excluding $1.8 million of letters of credit, and has immediate borrowing availability under that facility of approximately $82.4 million.
The company also paid the entire balance of its $100 million second lien term loan on July 28, 2011. This allows Conn's to reduce its interest expense by approximately $11.9 million annually and record a pretax charge of approximately $11.0 million due to the payoff, related to the write-off of unamortized original issue discount and deferred financing fees, and the payment of the required prepayment premium.
Conn's also completed an $8 million real estate loan to finance three owned store locations. The real estate loan will mature in July 2016, and requires monthly principal payments based on a 15-year amortization schedule. The interest rate on the loan is the Prime rate plus 100 basis points, with a floor on the total rate of 6%.
After completion of the amendment, repayment of the term loan, and funding of a new $8 million real estate loan, the company hads $290.0 million outstanding under the revolving credit facility, excluding $1.8 million of letters of credit, and has immediate borrowing availability under that facility of approximately $82.4 million.
Harry and David Bankruptcy
The Pension Benefit Guaranty Corporation filed with the US Bankruptcy Court on July 31, 2011 an objection to Harry & David Holdings' Second Amended Chapter 11 Plan of Reorganization. According to PBGC, the Plan should not be confirmed because it is contingent upon the termination of the pension plan, which would be improper under the Employee Retirement Income Security Act. The Internal Revenue Service, State of Michigan, and Department of Treasury also filed objections to the Plan.
Cracker Barrel Execs
Cracker Barrel Old Country Store, Inc. named President and COO Sandra B. Cochran as President, CEO, and a Director effective September 12, 2011 and also named Chairman and CEO Michael A. Woodhouse as Executive Chairman.
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