Shop Talk
Retailers, consumers and prices
Check Out Line: Retailers don’t see yuan move as all bad
Check out what retailers are thinking about China’s revaluation of the yuan.
Western retailers may pay more for goods they import from China as the yuan appreciates, but the flip side is that the move may create significant selling opportunities by putting more money in the pockets of consumers in the world’s biggest market.
Executives at the Reuters Consumer and Retail Summit took solace in the idea that any appreciation following China’s weekend statement it would let the yuan appreciate against the dollar would likely be gradual. They also see room to move more manufacturing out of China and into other countries with lower labor and other costs. “I don’t think that there is any sense that there is going to be any immediate impact … The open question is how quickly and how far they’ll actually let the currency revalue,” said Matthew Shay, president and CEO of the U.S. National Retail Federation, a retail trade group. Some retailers will see margins hit because their goods manufactured in China will be more expensive in dollars or euros. Retail stocks dropped more than the broad market on Monday in the wake of the yuan announcement. Beyond the retail industry, the yuan’s move is expected to help companies that supply commodities or heavy equipment to China’s fast-growing economy, like Caterpillar, and other foreign brands that source and sell goods locally, such as fast-food operator Yum Brands, the parent of KFC.
Also in China, a new strike at an auto supplier plant forced Toyota to suspend production at its Chinese assembly plant, the latest in a string of labor-related disruptions at foreign-owned manufacturers across the country.
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from Summit Notebook:
Barbie does Beijing: The adventures of a Malibu girl in China
Modern day national influence, some smart people like to argue, spreads through the "soft power" of brand appeal and attraction rather than the "hard power" of coercion. In China, one avatar of U.S. soft power tends to be trim and busty, and come with blue eyes and a long mane of blonde hair. Her name is Barbie, she is made of plastic, she was born in Malibu and Chinese girls want to be like her.
Barbie comes in all sorts of versions, according to the man who introduces her to her foreign friends, Mattel's international president, Bryan Stockton. Still, in China, the No. 1-selling Barbie doll is the sunny surfer girl who cruised across the Pacific from southern California to bring millions of young Chinese girls a new vision of the world, not to mention themselves.
"The challenge (in China) is to have toys become a part of the culture," Stockton said at the Reuters Consumer and Retail Summit on Monday. "We're trying to get our toys to be a part of a child's development. ... In Chinese culture it's very important to help girls think they can aspire to be something. ... Barbie is a western icon and she's an American icon, and Barbie is from Malibu, California."
"Now," Stockton said, "Barbie is a part of Chinese educational culture and Chinese pop culture."
It's important to remember, however, that it's not about seeing yourself in Barbie's physical manifestation here on earth. As Stockton said:
"In reality, Barbie is a toy. Barbie is for aspiration. ... Barbie doesn't represent anything concrete. Barbie is a plastic doll, so what we try to concentrate on is all the things Barbie provides for girls... She's a great thing for girls. She's done a lot of wonderful things for girls, and so we're going to continue to emphasize the positive."
Wish they all could be California girls? Wish no longer.
Check Out Line: End of “cheap” labor in China?
Check out workers in China angling for a bigger slice of the economic pie.
The labor unrest that began in China’s richer areas among foreign firms is now spreading to poorer, interior regions, as a new generation of workers seek a bigger portion of the nation’s growing wealth. What impact could that have on companies that have flocked over the decades to China, drawn by the low manufacturing and labor costs, as well as one of the world’s biggest and fastest growing economies?
Japanese automaker Honda and iPhone maker Foxconn International have dealt with high-profile strikes recently, and now a Taiwanese sports goods supplier and a Japanese sewing machine maker, both some distance from China’s wealthier regions around Hong Kong and Shanghai, have seen worker strikes. Resolutions of strikes at Honda and Foxxconn resulted in pay raises of 66 percent and 20 percent, respectively.
The burst of strikes and work actions is a worry for China’s ruling Communist Party, which has long discouraged worker action and punished protesters. However, a senior China trade official said the country’s rising labor costs would not deter foreign investors because policies to boost domestic consumption offer a new reason for them to seek profits.
Honda wants to restart its auto production in China, while Foxconn hopes to raise prices to offset higher wages. That could affect the consumer if prices of the final products rise in step.
Foreign investors have been lulled into a false sense of security about China’s labor force and is learning otherwise now, some analysts have said. Others argue labor unrest is good for China and ultimately the world.
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Check Out Line: What’s significant?
Check out Avon’s dose of disclosure.
The world’s top direct seller of cosmetics (led by Chairman and CEO Andrea Jung, shown here) topped analysts’ expectations with its quarterly profit.
It also gave a little more insight into its ongoing investigation about possible bribery in China — which is by far its smallest market, but one with great potential. The company said fees paid to professionals working on the probe were “significant” in the latest quarter.
The ongoing probe has been expanded to additional countries in Avon’s other international regions — Latin America; Central & Eastern Europe; Western Europe, Middle East & Africa; and Asia Pacific.
Avon also had some trouble recruiting sales representatives in China as it moves to more of a direct sales model from the boutiques it runs there. The number of active representatives in China fell 25 percent during the quarter. In 2009, the number of active representatives in China rose 32 percent. In 2008, that figure popped 79 percent.
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Check Out Line: McDonald’s February sales rise
Check out McDonald’s overseas boost.
February sales at McDonald’s restaurants open at least 13 months rose 4.8 percent, even though such sales rose just 0.6 percent in the United States.
The world’s biggest hamburger chain attributed some of the gain to Chinese New Year celebrations. Same-store sales jumped 10.5 percent in the Asia/Pacific, Middle East and Africa (APMEA) region.
Meanwhile, Subway President Fred DeLuca said his sandwich chain hopes to match McDonald’s China store count in 10 years. Right now it has 150 stores in China. McDonald’s has more than 2,000.
David Keir, Subway’s development agent in Shanghai, said Subway was testing sandwiches such as Beijing roast duck and local sauces like hot spicy Szechuan sauce as it expands into different provinces.
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Check Out Line: A truly depressing forecast
Check out this cheerful forecast form Societe Generale. The French bank’s cross asset strategist, Albert Edwards, said the U.S. economy is likely to enter a depression. Oh, and look out for a global trade war with China. For retailers reeling from the worst holiday season in four decades, the forecast cannot be welcome. Edwards predicts the S&P 500 is set to fall another 40 percent from recent levels. But there could be another problem looming, he wrote in a research note.
“It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a rerun of the Great Depression,” he said. There you have it. Happy New Year. Also in the basket: Black Angus Steakhouse parent files for bankruptcy Circuit City still in talks over potential sale Deal-form-hell award to Landry’s (New York Times DealBook)
(Photo: Reuters)
Mattel launches My Meebas as Barbie stumbles
What would Mattel wish for if it had one wish to make? The launch of the toy giant’s “My Meebas” points to one possibility — better fortunes for its girl’s toy business, as Barbie sales continue to face trouble.
Mattel launched “My Meebas” — a toy for girls aged 6 to 12 that houses a plush “Meeba” in a plastic tube, which serves as a gaming device with a movable LCD screen.
The toy is aimed at the latest generation of girls, who like plush toys but are also into electronic games, Mattel said. The launch comes at a time when Mattel is struggling to revive sales in its girl’s division, best known for its iconic Barbie dolls. Sales of Barbie have suffered in past quarters, as other toys such as “Hannah Montana” and Bratz steal market share.
The “Meebas”, also made in China like many other toys, will retail for $19.99, while a Barbie “Top Model” doll can be bought for $14.97 at Wal-Mart. The toys have gone through extensive checks, Mattel said, following the spate of recalls last year.
With a “Meeba,” the idea is for a user to buy the toy as they make a wish, and then go through seven levels of game play, or over 20 activities, which could take anywhere from seven to 12 hours, according to Mattel.
The LCD screen can be moved up and down the side of the tube, showing how the “Meeba” grows as game progresses.
Once all activities are completed, the tube pops open, and the user can pull out their ”Meeba” — in a sign meant to signify that the user’s wish has finally been granted.
My younger sister found a tube with the twins in it. They were fuzzy pink and one had pink lips with its tongue hanging out and the other had blue lips and showing it’s teeth.
Check Out Line: Tiffany still sparkles overseas
Check out how Tiffany sparkles overseas. Forget the United States (where Tiffany does not expect sales to improve until later this year). They are still buying baubles in Europe. Sales in Europe rose 30 percent in the first quarter. And that was on a CONSTANT CURRENCY basis. No help from the weak dollar in that number. The company added four more stores, which helped, as did the 12 percent increase in same store sales. Asia also saw a 10 percent increase in sales on a constant currency basis. The U.S. consumer may be under pressure. But apparently there are still sales and profits to be mined overseas. Also in the basket: April personal spending up, flat after inflation J Crew cuts year earnings outlook, shares drop 15 pct
NexCen cuts 25 pct of New York workforce, mulls options
Coach’s gateway to growth in China (WWD)
(Photo: Reuters)
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