Check out Hershey Co’s plan to team up with Starbucks as it tries to move past a drop in quarterly profit and a bleak near-term forecast. Sluggish sales and rising costs for milk and other ingredients are a bitter reality for Hershey, the maker of Hershey Kisses, Reese’s peanut butter cups and a host of other candies. Hershey’s stock melted, down 28 percent in the last year, as it lost market share to rival Mars Inc. Rivals have tempted consumers with new products, particularly in the premium chocolate segment.

Hershey said it will launch a new line of chocolates with coffee powerhouse Starbucks. It’s also rolling out a sweet new line called Hershey’s Bliss. Both are expected to come to market in March. 

“Our primary goal in 2008 is to stabilize the U.S. business marketplace performance,” Chief Executive David West said in a statement. “New chocolate products within the premium and trade-up segments will help enable us to achieve this goal.”

 Also in the basket:

Kimberly-Clark 4th-quarter net down

Tommy Hilfiger IPO shelved due to market volatility

Wal-Mart outlines vision as “company of the future”

Whole Foods Chain to Stop Use of Plastic Bags (New York Times)

A Growing Empire: L’Oreal Agrees to buy YSL Beaute for $1.68 bln (Women’s Wear Daily)

Wal-Mart Targest Pharmacy Benefits (WSJ)

(Photo Source: Reuters)

John Ortiz isn’t old enough to remember Michael Jordan in his prime playing years with the Chicago Bulls. The Jordan he saw play was 40 years old and in the final stages of his playing days with the Washington Wizards.

But the Jordan Brand is still hot enough that Ortiz is willing to brave two frigid nights outside Champs Sports in New York’s Times Square for a chance to buy a pair of limited edition Air Jordan XX3’s.

“Honestly, I don’t like them that much. I was attracted by the fact they were limited,” said Ortiz, 16.

The sneakers will be released in three installments beginning Friday, starting with the limited edition that’s only being sent to 23 stores to be sold for $230 at retail. There will also be a release during the National Basketball Association’s All-Star Weekend, and a final nationwide rollout Feb. 23. 

The Air Jordan XX3 gains significance from the fact that Jordan wore the number 23 during his playing days. And according to published reports, Nike is considering retiring the shoe at 23.

The limited supply has Ortiz salivating over how much he can charge for the new Jordans.

“That’s my whole motivation for this camp out,” he said.

(Photo Source: Jordan Brand)

Check out the bearish Coach CEO using the “R” word.
 
While some retail executives … we’re talking to you, Pier 1 CFO Cary Turner … blame the media for continuing to talk about recession, Lew Frankfort admitted what many economists are already saying.
 
“My view is that we’re already in a consumer recession,” the Coach chief executive told Reuters. “We do need a tax stimulus package.”
 
Pegging a recession is dicey business. The National Bureau of Economic Research determines when a recession starts — but that finding usually is not made until several months after it starts. (An explanation can be found here.)
 
That is why the U.S. economy could already be in a recession, without us knowing about it. And Frankfort isn’t the only one who thinks this is a recession.
 
For example, on Tuesday, Bill Gross, chief investment officer of PIMCO, who manges the world’s biggest bond fund, also said the economy was probably in a recession that began in December.
 
“It’s simply now a consumer-led mild recession that will show up in the first- and second-quarter GDP numbers in the negative — with a minus sign,” Gross said.
 
Also in the basket:
 
“Comfort foods” to resist U.S. slowdown: PepsiCo CEO
 
Constellation to sell Almaden, Inglenook brands 
 
(Reuters photo: Frankfort in a happier time)

Check out the big Fed rate cut.
 
The Federal Reserve cut the key federal funds rate by a whopping 75 basis points in the face of a global market meltdown. 
 
That should do wonders for consumer spending … in July.
 
“This has to work its way through the financial system and through business before it works its way back to the consumer,” Michael Niemira, chief economist for the International Council of Shopping Centers, said.
 
“Typically, you need a good six months before it starts to filter through,” he added. But Niemira did note that the Fed had already been cutting rates, so some of that impact could be working its way to consumers.
 
A more immediate boost could come from an economic stimulus package, which is being worked on by the White House and Congress. Analysts say that tax rebates in particular could help boost consumer spending until the rate cuts trickle through the economy.
 
Meanwhile, there is also the possibility that the big rate cut could do the opposite of spurring consumer spending and instead cause more panic in financial markets.
 
“There is clearly a panic setting in as more and more investors come around to the thinking that a recession may be likely or, in the least, they are downwardly revising all their estimates of corporate profitability,” Kevin Logan, economist at Dresdner Kleinwort Wasserstein, said.
 
Also in the basket:
Anheuser-Busch pushes the big beers for the Super Bowl (N.Y. Times)
 
Cellphones and virtual worlds morphing shopper ways

(Photo: Reuters)

Did the rising cost of food and fuel cause consumers to eschew beautifying themselves for the holiday’s? Regis Corp’s second-quarter results suggest that just might be the case.

Regis, whose Salon chains include Supercuts, Jean Louis David and Vidal Sassoon,  said its second-quarter profit fell to the low end of a forecast range on a sharp drop in consumer spending over the holiday season.

“Like many retailers, we had a disappointing holiday shopping season and as a result, our quarterly same-store sales came in below expectations,” Chief Executive Paul Finkelstein said.

But the steps Regis plans to take may not help consumers.

“We will continue to focus on increasing our average ticket and, more specifically, implementing price increases,” Finkelstein said.

 (Photo: Reuters)

While many investors have ditched the home decor sector due the crippling effects of the U.S housing crisis, analysts say they’d be wise to take a second look at Bed Bath & Beyond.

Although it may suffer some near-term pain — it warned its fourth-quarter earnings may be weak earlier this month — a strong cash flow, minimal debt and friendly valuation might make it a wise long-term investment.

“Investors have such short-term perspective … When we get a little better environment, Bed Bath & Beyond is in pretty good position,” said Andy Cross, a senior analyst at The Motley Fool, an online community for investors.

Credit Suisse analyst Gary Balter went a little further with his hopeful assessment of the company’s future.

“The weakness in the macro environment should turn out to be a blessing in disguise for Bed Bath,” he wrote in a Jan. 14 research note.

“We would expect that smaller players may also not survive weakness in 2008, which is another good signal for BBBY.”

With fundamentals for the retail sector and macro economic data weakening over the past few months, UBS is lowering its earnings forecasts and price targets for many of retailers consistent with a “2008 recession scenario.”

But it is not all doom and gloom. In fact UBS said at the same time it is “turning more upbeat towards prospects for retail stocks.”

What? Well here is the reasoning UBS listed in its research note:

1. Recession Priced Into Shares. Since early Sept. our UBS Specialty Retail Index is down nearly 30% vs. a decline of about 5% in the S&P 500. At current levels retail stocks trade at valuations consistent with troughs reached in prior economic downturns. We believe that retail stocks now discount for a potential recession in the U.S. and are poised to rebound as the market mindset shifts from “will the economy slip
into recession?” to “who will perform in a recovery?”.

2. An Early Cycle Group. Our research suggests that retail stocks typically begin to rise and outperform the market early in economic cycles and as macro data points such as unemployment and consumerconfidence deteriorate.

3. Retail Stocks Rally Before Company Fundamentals Turn. In prior economic slowdowns the bottom and subsequent rebound in retail stocks has not been marked by an upswing in company fundamentals but rather outside catalysts such as a peak in oil/commodity prices, the introduction of fiscal stimulus packages, and/or more aggressive Fed easing. A rapidly declining macro environment, a potentially “behind the curve” Fed, and an upcoming Presidential election, in our view, help to increase chances for a potential positive catalyst for retail stocks near-term.

So with that, UBS upgraded its ratings to “buy” from “neutral” on Bed Bath & Beyond and Staples. It also reiterated its ”buy” recommendations on the following stocks: Abercrombie & Fitch, Best Buy, Coach, Dick’s Sporting Goods,  Nordstrom, Life Time Fitness, Lowe’s, Macy’s, Nike, Under Armour, Urban Outfitters, and VF Corp.

Check out the new board members at Zale.
 
Richard Breeden, the former SEC chairman turned activist investor, and his partner James Cotter, were named to the board of the struggling jeweler, which saw same-store sales fall 9 percent during the holiday season.
 
Their firm, Breeden Capital Management, has amassed more than an 18 percent stake in Zale, and as the term “activist investor” implies, don’t expect Breeden and Cotter to be patient board members.
 
“We believe that there are major opportunities for Zale to strengthen its profitability and its market value. We are excited to join with the board and the Zale management team in pursuing those opportunities with vigor and immediacy,” Breeden said in a statement released by Zale.
 
Breeden has said in regulatory filings that he believes Zale’s stock is undervalued and that he might initiate a major transaction at the company.
 
The jewelry sector has been pretty cold lately, hit by the slumping U.S. economy. Wonder if the board discussions at Zale are about to get heated.
 
Also in the basket:
 
Retailers sink into the doldrums (WSJ, subscription required)

Retailers go green to cut costs
 
Performance Food to be bought for $1.3 billion

Tiffany sets additional $500 mln stock repurchase

(Photo: Reuters)

Most of us are happy if our washing machine just cleans clothes adequately. But LG Electronics, hoping to innovate its way to higher sales, has come out with a washing machine that it says can cut down on allergies.

The South Korean company’s newest steam washer has a cycle that reduces common allergy triggers such as dust mites and pet dander on fabrics by more than 95 percent. The use of steam allows the wash cycle to reach the appropriate temperature necessary to break down allergens, it said.

The front-load washer (shown in wild cherry finish) was certified asthma and allergy friendly by the non-profit Asthma and Allergy Foundation of America.

“We see it as a very meaningful consumer benefit,” John Weinstock, marketing vice president for the U.S. arm of LG’s appliance division, told Reuters.

LG has been marketing its washers and refrigerators in the United States for about five years, and says high-tech features have helped it gain sales in spite of the nation’s housing slowdown. U.S. appliance unit shipments, a key sales indicator, fell 6.3 percent in 2007, the Association of Home Appliance Manufacturers said this week.

LG captured the No. 1 market share position in front-load laundry in terms of revenues during the second quarter of last year, and Weinstock said it has held on to that spot.

The added convenience of the allergy-fighting machines will cost: the LG steam washer retails from $1,399 to $2,699, depending on features and finishes.

Check out the plunging housing starts in December.
 
The bad news for home goods retailers got worse on Thursday as the Commerce Department announced a sharper-than-expected 14.2-
percent decline in U.S. housing starts, pushing  them to their lowest level in more than 16 years.
 
“Builders are in trouble. They have a lot of inventory. They decided to cut back on their starts and that’s going to crimp the GDP,” said Robert Brusca, chief economist, Fact and Opinion Economics in New York.
 
What is bad for builders is also bad for retailers like Home Depot and Lowe’s, which have been rocked by the housing crises. Other retailers have also felt the pinch as the sluggish U.S. economy has hurt spending.
 
“Demand for merchandise for the home will continue to be negatively impacted by the weak housing market,” Rosalind Wells, chief economist for the National Retail Federation, said earlier this week.
 
Some analysts have argued that the home-related stocks have fallen so far that they are bargains at this point, even if it will take some time for them to recover.
 
Gary Balter, analyst at Credit Suisse, lifted Home Depot, Lowe’s and Bed, Bath & Beyond to “outperform” on Monday.
 
But the numbers today show it could take extra help for the housing crisis to work its way out. Perhaps a construction charity? How about “Habitat for Home Depot?”
 
Also in the basket:
 
Will he hit or Miz? Mizrahi joining Liz sets industry abuzz (WWD) 
 
Brewer S&N enters talks with bidders 

Warnaco expects to meet or beat ‘07 forecast