Some consumers are cutting back on spending but big drugstore and grocery players said on Thursday that they aren’t being hit by a slowdown just yet.
 
Drugstore chain Walgreen Co is concerned about consumer spending slowing down amid high gas prices, the credit crunch and real estate market issues, President and Chief Operating Officer Greg Wasson said at a Goldman Sachs conference.
 
Still, while “we’re not an industry that’s recession-proof,” the sector has been “somewhat recession resistant” in the past, Wasson said.
 
Safeway Chairman and Chief Executive Steven Burd told the Goldman crowd that higher food costs and the credit market squeeze have led to some uncertainty, but Safeway hasn’t seen fundamental shifts in behavior.
 
And Whole Foods Market Inc Co-President and Chief Operating Officer Walter Robb said the natural and organic grocer is keeping an eye on the macro environment. While its shoppers have traditionally been more resilient, the current situation may be a new one, Robb said. He added that he’s not sure it’s totally played out yet.
 
If anything, sales growth could soften for a while but shouldn’t lead to an earnings decline, Safeway’s Burd said. His company is working on keeping costs under control, partly in anticipation of the economic uncertainty, he said. For example, as the price of milk goes up, shoppers buy less of it. Safeway won’t increase the number of hours employees in the dairy department are scheduled to work if the only reason sales are going up in that part of the store is the inflated price, Burd said.
 
At Walgreen, items like over-the-counter drugs and shaving supplies are selling well. If shoppers do decide to spend less, Wasson expects more costly items, like fragrances, could take a hit. Historically, though, shoppers turn to drugstores when they want to cut down on longer trips to big box retailers. Walgreen doesn’t really plan for a consumer slowdown, but it’s certainly ready to react if need be, Wasson said.
 

Safeway Inc’s Blackhawk Network, which distributes gift cards and phone cards, is growing much faster than even Safeway would have predicted a year ago, Chairman and Chief Executive Steven Burd said on Wednesday.

Blackhawk, which Safeway created about five years ago, is the largest distributor of third-party gift cards in North America. It stocks cards at Safeway’s stores and at other chains.

So what’s the deal with the ants?

Burd said the area near the display of gift cards in some Safeway stores looks a bit like an ant farm at Christmastime, with shoppers fighting their way through to get the cards they want. The last eight weeks of the year represent about half of Blackhawk’s annual sales, he told investors at a Lehman Brothers conference.

Gift cards have become a big business, especially when shoppers aren’t sure what to buy as holiday gifts. According to the National Retail Federation, $27.8 billion was spent on gift cards in November and December of 2006, topping its original estimate of $24.8 billion.
 
Safeway’s adding more “endcap” space in some of its stores to make more room for the cards, which should lead to a significant uptick in sales, Burd said.

He also said Safeway wants to create more “growth engines” like Blackhawk related to the supermarket business every two to three years.

Is it finally happening? After six months of talk, is Wild Oats being gobbled up by Whole Foods?

Not yet.

The companies only agreed to wait until noon on Monday before Whole Foods would buy Wild Oats shares, unless the U.S. Federal Trade Commission got a stay.  It did.  Now we’ll have to wait until at least Thursday afternoon to see what happens next.

Oh, and in case you were wondering what the deal’s architect thinks of the latest blow, keep waiting. Whole Foods CEO and co-founder John Mackey still can’t post on his blog.

Whole Foods Market Inc. has felt pressure from chains like Safeway’s Dominick’s that offer more prepared, gourmet-style soups and meals — a mainstay of its strategy.

Now, it’s firing back with a new design that has more of a restaurant feel.  The company’s newest Chicago store takes a cue from on-the-go consumers and is more of a meeting place than its other shops in the city.

Sure, shoppers will find Wi-Fi access and thousands of natural and organic goods, even natural rubber yoga mats and bamboo yoga blocks. But the newest Whole Foods on the city’s South Side has more prepared foods, such as five seafood chowders or soups and five types of chili or other meat soups, 20 flavors of store-made gelato and sorbet, a juice bar and a made-to-order noodle and sushi bar. Or, shoppers can try some turkey jerky, pineapple bratwurst or meats from the in-house smoker on the other side of the 55,000-square foot store.
 
The store, which opens on Aug. 8, will also turn into a bit of a restaurant on some Friday nights. Culinary Coordinator Brette Jackson plans to host “community table” dinners where shoppers come in, drink some wine and beer, and tell her what they’d like to learn to cook. Jackson and the patrons will walk down the aisles to get ingredients and she’ll whip up a five-course meal. The price hasn’t been set yet, but follows a similar plan in place in stores in Milwaukee and St. Louis, Jackson said. A spot at the dinner costs $60 in Milwaukee and $65 in St. Louis.

Whole Foods also hopes the store becomes the first Leadership in Energy and Environmental Design certified grocery store in Chicago. To that end, the store has signs made from bamboo and recycled barn wood, a concrete and fly ash floor, and toilets that let you choose whether to flush with a little water (for liquids) or more water (for solids).
 
Oh, and if your feet get tired while walking around, you can buy a $109 pair of Earth shoes in the Whole Body section of the store, which also has organic baby clothing and bins filled with 42 different types of lip balm.

We’d like to know: would such features push you to change where you shop?

Procter & Gamble reported better-than-expected quarterly sales growth on Friday but two of its high-end businesses were still weak after recent safety issues.
 
In Asia, P&G is working on bringing women back to its luxury – and high-margin — SK-II beauty line. Sales were suspended in China and South Korea last fall after authorities raised safety concerns about chromium and neodymium in some products, though have since resumed.
 
“Every case we lose on SK-II has a margin impact,” Chairman and Chief Executive A.G. Lafley said during a conference call.
 
The fallout from the SK-II issues led to roughly a 1 percent drag on sales growth in the beauty unit in the fiscal fourth quarter, which ran from April to June. Total beauty sales rose 8 percent to $5.9 billion.
 
Meanwhile, the snacks, coffee and pet care segment posted the lowest growth of any part of the company, with sales up just 2 percent to $1.1 billion as pet food sales fell.  Some of the company’s wet Iams and Eukanuba products were among those recalled after melamine was found in the food, which was made by an outside manufacturer.

P&G said its pet food business is still in recovery mode. It is beefing up marketing spending to get consumers to try new products such as Iams Healthy Naturals dry dog food.

Alberto-Culver, whose products range from Nexxus shampoo to Mrs. Dash seasoning, reported third-quarter results on Monday. Sales growth was better-than-expected, driven by the TRESemme and Nexxus brands, but St. Ives lotions struggled.
 
In an interview, President and Chief Executive V. James Marino said the company plans to launch a retooled line of Alberto VO5 styling products this quarter aimed at a younger consumer. He also said that the company will increase advertising spending in the current fiscal fourth quarter, just as it did in the third quarter.

In the following excerpt, Marino comments about consumer trends:
 
Q: Do consumers seem to still be treating themselves to little luxuries like a new hairstyling product or things like that, or are people getting more concerned about gas prices, the housing slump and the market (decline) we saw last week?
    
A: We haven’t really seen that, in these categories at least. What we do know is the consumer is not taking as many trips to the store as they have before and I’m sure that’s a function of gas prices, that kind of thing. But apparently when they’re there … the purchase habits continue to be about the same.

Hair care in the U.S. has never been a big growth category, it’s a big category, and it continues to grow in low single digits, which is not a whole lot different than what it has been for quite some time, so I don’t see a whole lot of change there. Likewise, if you look at the styling sub-segment the same is true, it’s low single digit growth.

When you get into skin care, growth rates tend to be up a little bit more … in hand and body lotion and body wash … as well as facial skin care. So, the trends seem pretty consistent in terms of category growth which tells me what we’ve been saying before … this whole notion of small indulgences for the consumer not being able to afford some of the higher ticket items that they may want.

They’re still going to spend a little bit more on themselves for some personal gratification, and I think our categories fall right into that buying habit.

(Photo from company Web site)

Colgate-Palmolive Co. made headlines recently after some tubes of counterfeit “Colgate” toothpaste was found in some U.S. states, but the incident was ”absolutely negligible” for the company, its chief executive said on Wednesday.

“The impact on the business is vanishingly small,” Chief Executive Ian Cook said on a conference call. The goods had to be pulled from a number of dollar stores, but Colgate hasn’t felt much financial pressure from the issue.

Colgate, whose quarterly sales rose to $3.41 billion in the latest quarter, said it can only trace about $100,000 of lost business due to the incident. It spent less than $500,000 to get the product removed from stores.
 
Colgate kept consumers updated on the issue on its Web site and is still working with U.S. authorities to try to get at the root source of the product and stop it, Cook said.

Meanwhile, the company’s Hill’s pet food business is doing well despite an industry-wide pet food recall in March.  That recall included a couple of Hill’s cat food products made by Menu Foods.

Just because they shop at a store known for its convenient locations rather than low prices doesn’t mean cash-strapped consumers aren’t looking for a bargain.
 
Rite Aid said on Thursday that its customers sought out more general merchandise that was on sale in the latest quarter compared with a year earlier. The company did not change its promotions, customers just bought more items that were on sale.
 
That tidbit from Chairman, President and Chief Executive Mary Sammons during Rite Aid’s fiscal first-quarter conference call sparked interest. The first analyst to ask a question on the company’s conference call asked for more detail on the issue.

“They are just buying more economically and I think it’s undoubtedly related to their economic condition and the cost of fuel, etcetera,” Sammons said.
 
She also said that Rite Aid saw customers buying more products at promotional prices throughout last year.
 
Rite Aid’s sales of general merchandise at stores open at least a year rose just 1.6 percent in the fiscal first quarter after rising 2.1 percent a year earlier and just 1.2 percent in the company’s fiscal fourth quarter.
 
Larger rival Walgreen’s same-store sales of general merchandise rose 5.6 percent in its quarter ended May 31, and such sales rose 6.6 percent in the latest full quarter over at CVS, which ended on March 31.

Barnes & Noble and Borders Group, the top U.S. bookstore chains, reported quarterly results on Thursday.  Borders also announced a slew of changes, such as the possibility of exiting the bulk of its international business and closing down nearly half of its Waldenbooks stores.

Borders CEO George Jones, on the job since July, spoke with Reuters about his company’s plans.

Before we got down to some details on the major changes, here’s what Jones — a self-proclaimed “big, big Harry Potter fan” — had to say about the July launch of “Harry Potter and the Deathly Hallows”

“Presales … have been huge. They’ve surpassed our expectations and I think the publisher’s expectations, everything.”

“This should be the biggest one ever,” said Jones, who has not seen the book yet.

Jones and Robert Gruen, Borders’ executive VP of merchandising and marketing, both used to work at Warner Bros., the studio behind the Harry Potter movies.

“Believe me, whatever relationships we have, they aren’t that good.”

Jones joked about the movie “The Devil Wears Prada,” where Meryl Streep’s character Miranda Priestly asks her assistant Andy, played by Anne Hathaway, to track down an advance copy of the new Harry Potter book.

“Let me tell you, that’s a fictional story.”

Jones declined to discuss details of the partnerships Borders is working on for areas such as music downloads and online relationships. 
 
Why go back into the online business now (Borders linked up with Amazon.com in 2001 after launching its own site in 1998)?

“It’s just much more cost effective now to run it ourselves than it was 6 years ago,” Jones said. Also, now Borders will hold onto its shoppers rather than turning them over to Amazon, and shoppers at its online site can get Borders Rewards points, which they couldn’t do before.

How will items be priced online versus in the stores and versus the competition? 
     
“We realize that ultimately we are never going to win the battle on price, we’re not going to have a competitive advantage based on price,” Jones said. The company has not yet defined how items would be priced on the web site versus in its stores, he added. 
 
Borders will also try to fix its rewards program. Last year, consumers got certificates to redeem starting Nov. 15, which pressured sales during the important holiday season. 
Starting in May, the company will start to issue rewards more frequently, but Jones would not say how often they will be sent.

Jones declined to comment on whether Barnes & Noble changing some terms of its rewards program had any impact on Borders.

The Borders program has nearly 17 million members and counting.

Wal-Mart’s sales are closely watched by Wall Street and considered a bellwether for the retail industry and the health of the overall economy. Now, the International Securities Exchange and Revere Data are trying to bring Wal-Mart’s suppliers to the forefront of investors’ minds.

Several consumer products companies - such as private-label drink maker Cott Corp. and toy maker Hasbro - derive a good chunk of their sales from Wal-Mart. Now, a new index tracks the performance of 30 companies that get 16 percent or more of their sales from the retail giant. The company with the biggest exposure in the list is Handleman Co., a distributor of CDs and movies to stores, which gets 74 percent of its revenue from Wal-Mart.

Reuters subscribers can check out the index by opening a quote screen and entering .WMX. That symbol can also be entered on the investing page of Reuters.com in the section labled Stocks & Mutal Funds. 

These are the ten companies with the greatest revenue exposure to Wal-Mart in the ISE-Revere Wal-Mart Supplier Index: