Shop Talk
Retailers, consumers and prices
Check Out Line: One view on McDonald’s US sales
Check out a bullish view on McDonald’s June same-store sales.
Janney Montgomery Scott analyst Mark Kalinowski raised his forecast for U.S. same-store sales at the hamburger chain to an increase of 4.6 percent from an increase of 2.4 percent.
His revised forecast is based on his survey of 30 McDonald’s franchisees, representing 215 restaurants.
The survey also led Kalinowski to raise his July same-store sales forecast to a 4.4 percent increase from a 2 percent increase, Kalinowski said in a research note.
McDonald’s has been adding menu items likes coffee drinks, frappes and smoothies and promoting Angus burgers. The coffee drinks, especially, have helped the company perform better than other fast-food restaurants recently.
Kalinowski also noted that McDonald’s comparisons in the United States get easier later this year.
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Check Out Line: Toys R Us’ early Christmas
(Written by our retailer reporter Dhanya Skariachan)
Check Out Toys R Us “Christmas in July”:
For Toys R Us, Christmas comes early this year.
With only 164 shopping days left for Christmas and the back-to-school season almost around the corner, the toy retailer is resurrecting its “Christmas in July” sale, featuring discounts as steep as 50 percent on board games like Monopoly and Scrabble and items like Coby MP3 player.
The operator of Toys R Us, Babies R Us and FAO Schwarz stores held its “Christmas in July” sales event for the first time last year after many U.S. retailers posted 10 straight months of sales declines during the worst of the recession. Even Sears held wintry holiday-themed events last summer ahead of their back-to-school promotions.
This year, the Toys R Us sales event runs from July 18 through July 24. It comes as it takes on industry goliaths like Wal-Mart Stores, Amazon.com and Target, also trying to woo the nation’s youth with the latest gadgets.
“Nobody really knows what the holidays (are) going to bring,” Greg Ahearn, senior vice president of marketing and e-commerce, said in an interview. “People are always looking for a great value.”
Campbell Soup CEO blasts rival Progresso
*Corrects blog post from Tuesday to show General Mills’ “World Recipes” soups are ”ready-to-serve” not “ready-to-drink”.
It is not every day that CEOs truly speak their minds about their rivals in public, so we thought we would share.
During Campbell Soup Co’s annual meeting yesterday with analysts and investors, CEO Douglas Conant fielded a question from an analyst about the company’s marketing messaging. The analyst said rival Progresso Soup owner General Mills Inc had recently said it felt that the entire soup category was over-emphasizing the message of convenience and health in its marketing and under-emphasizing taste.
Being the category leader, of course Conant took it to heart.
“This Progresso thing is a joke, I’m sorry,” Conant said. “If there was such an opportunity to talk about taste, why aren’t they talking about it? Why aren’t they growing? Why aren’t they performing? They haven’t innovated, they haven’t carried a convincing message. They’ve lost share, they’ve lost their way, they’re not relevant with the retailer in a significant way in the category. They ought to follow some of their own advice.”
He said the biggest innovation he’s seen from General Mills is in the area of fiber, noting it “might have worked for cereal. It didn’t particularly work well for soup.”
“They’re a small share player in a big pond,” Conant said.
Check Out Line: A decline in weekly sales numbers
Check out the decline in weekly U.S. same-store sales gains. After two consecutive weeks of strong positive weekly sales gains, retailers saw their sales take a breather with a 1.5 percent decline in the week ending July 10, according to the International Council of Shopping Centers and Goldman Sachs. Sales in the weeks ending July 3 and June 26 rose 1 percent and 2.1 percent, according to the report. On a year-over-year basis, sales also slowed to 3.2 percent, but continued to remain positive. “Sales showed a mixed performance over the past week as the seasonally-adjusted year-over-year pace continued to rise — although the unadjusted pace was much stronger due to the holiday-sales lift from a calendar shift when the Independence Day federal holiday was celebrated in 2010 and 2009,” ICSC chief economist Michael Niemira said in a statement. The ICSC reaffirmed its outlook for July U.S. same-store sales to increase in the range of 3 percent to 4 percent, compared with a 5 percent decline last year. However, U.S. retailers relied heavily on promotions to boost June sales, suggesting profit margins may suffer as they head into the key back-to-school shopping season. The Weekly Chain Store Sales Snapshot is produced by the ICSC and Goldman to measure U.S. same-store sales, excluding restaurant and vehicle demand, and represents about 75 retail chain stores. Meanwhile, Goldman analyst Michelle Tan said in a separate research note that there are few reasons to buy stocks in the apparel retail sector assuming a slow recovery. It cuts its 2010, 2011 and 2012 profit estimates by an average of 7 percent. “In a slow recovery with little sequential improvement in employment, sector sales have averaged less than 2 percent with flattish margins; this implies about 9 percent risk to Street forecasts,” Tan wrote. “History suggests downside risk to estimates in a double-dip scenario is roughly two times the upside in a robust recovery.”
Also in the basket:
Dr Pepper Snapple sets new $1 bln share buyback
Calif Pizza raises Q2 profit veiw, shares up
Borders to sell stationery maker for $31 mln
Nissan says Hitachi delay may hit US, Mexico output
(Reuters photo)
Check Out Line: Avon adds more jewelry to its makeup bag
Check out Avon acquiring Silpada Designs Inc for $650 million plus a potential additional payment.
Avon, the world’s largest direct seller, specializes in makeup and cosmetics, but the acquisition is consistent with it has said in the past: its M&A would be geared to areas that complement its core beauty business.
Silpada, founded in 1997, has annual revenues of about $230 million and generates operating margins that are significantly higher than Avon’s, since its sterling silver jewelry is priced higher than Avon’s core jewelry offerings. In addition, Silpada’s direct selling model is one based on party-plan selling, which is different than Avon’s model, based on a person-to-person relationship.
Avon said it expects the acquisition to add 3 cents to 5 cents per share to its earnings in 2011 and that Silpada’s current management team will continue to lead the company from their headquarters in Lenexa, Kansas.
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Check Out Line: Retailers need to step up the sucking up to consumers
Check out an American Express survey that shows that quality service matters more than ever, suggesting U.S. retailers may want to start sucking up to recession-wary consumers even more. Sixty-one percent of Americans polled said quality customer service is more important in today’s tough economy and that they will spend an average of 9 percent more when they think a company is providing that. Important points when some analysts and investors worry the economy may be at risk of dipping back into recession. In a disconnect, however, many businesses seem to be missing the message as 28 percent of those polled believe that companies are paying less attention to good service and 27 percent have not changed their attitudes, according to the American Express Global Customer Service Barometer (which sounds like a weather vane for customer service). “Customers want and expect superior service,” AmEx executive vice president Jim Bush said in a statement. “Especially in this tight economic environment, consumers are focused on getting good value for their money. ” “Many consumers say companies haven’t done enough to improve their approach to service in this economy, and yet it’s clear they’re willing to spend more with those that deliver excellent service – suggesting substantial growth opportunities for businesses that get customer service right,” he added.
Retailers might want to keep all that in mind given the fact that June same-store sales came in slightly below expectations and some analysts see the sector treading water. The survey was conducted in the United States and 11 other countries. In the United States, nine in 10 of those surveyed consider the level of service important when deciding to do business with a company, the survey said. However, only 24 percent believe companies value their business and will go the extra mile to keep it. Contrary to “conventional wisdom,” the survey showed more are inclined to talk about a positive experience (75 percent) than complain about a negative one (59 percent). And consumers said they are far more likely to give a company offering good service repeat business (81 percent) than they are to never do business with a company again after a poor experience (52 percent), according to the poll. However, negative feedback online weighs more heavily as almost half of consumers gather others’ opinions about a company’s customer service reputation and they put greater credence in negative reviews (57 percent) versus positive ones (48 percent), according to AmEx. “Because consumers can broadcast their views so widely online, each and every service interaction a company has with its customers becomes even more crucial,” Bush said. “Developing relationships with customers, listening to them, anticipating their needs, and resolving any issues quickly and courteously can help make the difference.” In fact, 81 percent of Americans have decided never to do business with a company again because of poor customer service in the past, the poll said. Half of those surveyed said it takes two poor service experiences before they stop doing business with a company. However, 86 percent will give a company a second chance after a bad experience if they have historically had great service before, according to the poll. Woe to those who screw the experience up too, as 52 percent of consumers expect something in return after poor service beyond just resolving the problem. Seventy percent want an apology or some form of reimbursement. So retailers, I expect red carpet treatment and a lot of sucking up this recession or you won’t get any of my limited funds!
Also in the basket:
Chrysler launches money-back guarantee
Hain Celestial to name two Icahn nominees to board
Study: Living Near Restaurants Makes You Fat (Wall Street Journal)
Industry Places Bets on back-to-School (WWD, subscription required)
Check Out Line: Borders launches e-bookstore … finally
Check out Borders Group finally launching its e-bookstore.
The No. 2 U.S. bookstore chain’s electronic bookstore comes nine months after rival Barnes & Noble debuted its Nook e-reader and three months after Apple introduced its popular iPad tablet computer, allowing both companies, and Amazon.com, which sells the Kindle e-reader, to get a head start.
No worries, says Borders, which saw sales at its namesake superstores open at least a year and on its website fall 11.4 percent in the first quarter.
“We’ll take market share just by turning it on,” said Mike Edwards, president of Borders Inc, the company’s main operating business.
Edwards said Borders had data and email addresses for the 38 million customers in its loyalty program and about 700 stores at which to promote its virtual bookstore, which will help it catch up. The company’s goal is to secure a 17 percent share of the e-book market by July 2011.
“A lot of people have said, ‘You’re kind of late to the game,’ and I’m saying, ‘the game actually just started,’” Edwards said.
However, larger rival Barnes & Noble recently said it has already won 20 percent of the U.S. e-books market since launching Nook, exceeding its share of the physical book market.
Check Out Line: Enjoy the higher U.S. retail sales for now
Check out expectations for June sales. They look pretty good. Analysts expect a 3.3 percent increase in June, according to Thomson Reuters data.
Of course, that excludes Walmart, Best Buy and a slew of other major retailers that do not report monthly sales. It also comes off of a 4.9 percent drop a year earlier.
The later point is where things start to get worrisome. Later this year, comparisons turn tougher. That will come just in time for the key holiday selling season.
Recent economic data, like last week’s June employment report, show the economy continues to be sluggish, if not headed for a double dip into recession. So while the sales data are expected to show the 10th consecutive month of rising sales, the data likely mask underlying weakness.
“The fundamentals are just not adding up to a recovery,” Bryan Eshelman, managing director of AlixParners retail practice, said, referring to weakness in key indicators of economic strength like private sector employment.
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Check Out Line: June jobs data disappoint
Check out the latest batch of grim data about the U.S. job market.
U.S. employment fell for the first time this year in June, renewing concerns about the strength of the U.S. economic recovery.
Weaker-than-expected private hiring and the end of thousands of temporary census jobs translated into a decline of 125,000 nonfarm payrolls, their largest fall since last October.
Analysts polled by Reuters had expected employment to fall 110,000 last month.
Private employment, often regarded as a better gauge of labor market health, rose only 83,000 in June, below market expectations for a 112,000 gain.
Retailers, wrestling with high labor costs and cautious American consumers, also seem to be playing safe while seeking new employees. Retail hiring fell 6,600 in June.
Also in the basket: Blockbuster wins debt reprieve, forced to delist
from MediaFile:
Hey Woot, its Amazon. You’re rich.
You gotta figure that every web entrepreneur waits (prays!) for a call or email that goes like this: "Hey dinky but popular outfit with a loyal customer base -- super-huge company here. We want to buy you and make you rich. Have a nice day."
Woot.com got a call like that from Jeff Bezos's Amazon.com. They announced the deal on Wednesday. It's speculated that Amazon paid about $110 million for the company that sells only one item per day at discounted prices, until inventory runs out. The next day, it moves on to another item such as you know, a water gun or a home pedicure kit.
Already, Woot is playing a part in the e-book reader price war between Amazon and its Kindle, and Barnes & Noble and its Nook, by selling Kindles cheap. (But sorry, It sold out before many of you woke up.)
The deal opens up a monstrous growth opportunity for the suburban Dallas outfit. But it doesn't appear to have taken the starch out of the company's irreverant CEO Matt Rutledge, who told employees that they should continue doing what they do best -- whatever that is.
We plan to continue to run Woot the way we have always run Woot – with a wall of ideas and a dartboard. From a practical point of view, it will be as if we are simply adding one person to the organizational hierarchy, except that one person will just happen to be a billion-dollar company that could buy and sell each and every one of you like you were office furniture. Nevertheless, don’t worry that our culture will suddenly take a leap forward and become cutting-edge. We’re still going to be the same old bottom-feeders our customers and readers have come to know and love...
If that doesn't give you an idea about the kind of shop Amazon is picking up, perhaps the video above -- which, ahem, features a rapping monkey puppet -- will. Oddly enough, this crazy-like-a-fox energy reminds us of another clip showing a bunch of wacky young Internet entrepreneurs giggling about their startup's pending acquisition by a super-huge company. That would be when Google bought Youtube. For $1.6 billion. Chad and Steve, yeah they had a nice day.
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