Shop Talk
Retailers, consumers and prices
Check Out Line: Beware the ides of rising costs for food companies
Check out fears of rising costs for U.S. food companies.
Rising commodity costs and promotional discounts are pressuring profit margins for food companies and analysts said more may be on the horizon.
General Mills, whose brands include Cheerios, Green Giant and Haagen-Dasz, said on Tuesday that the gross margin in its most recent quarter was flat, excluding higher ad costs and other items.
On Thursday, General Mills said it expects pricing and promotions to look the same over the next six months as they have the prior half year. It also sees some players in the sector moderating their promotional activity as commodity costs rise and sees raising list prices in some categories after that.
The company’s comments were seen as a harbinger of things to come, especially since its 2011 earnings forecast missed Wall Street estimates.
“I think ‘canary in the coal mine’ is a good way to think about it,” Janney Capital Markets analyst Jonathan Feeney said. “This is the first company to talk since Wal-Mart’s rollbacks.”
Earlier this year, Wal-Mart introduced discounts, which it calls rollbacks, on thousands of items, leading other stores and brands to cut prices.
Check Out Line: A basket full of profits
Check out today’s earnings-palooza.
Two retailers topped analysts’ expectations after a strong holiday-season showing, while ConAgra Foods was helped by a makeover of its consumer foods segment.
Best Buy’s better-than-expected profit was helped by demand for devices such as notebook computers. The company’s 12 percent revenue jump came even as Walmart and other chains stepped up their electronics push for the holidays. Of course, this was also the first winter that they didn’t have to compete against the brick and mortar Circuit City stores.
Meanwhile, Signet — the owner of the Kay Jewelers and Jared chains — won some market share in the United States. Its profit came in 10 cents per share higher than analysts had anticipated.
Besides ConAgra, McCormick & Co also posted quarterly results in the food aisle. While the latest quarter came in ahead of expectations, the spice maker’s forecast signals that the current fiscal second quarter will be a weak one.
Also in the basket:
Check Out Line: The Swiss drinks fight
Check out the battle brewing between iced tea and hot cocoa.
ConAgra Foods filed a suit against Dean Foods over the common look of their “Swiss” drink packaging. ConAgra asserts that Dean’s Swiss Premium iced teas infringe its trademark for Swiss Miss hot cocoa products, Reuters’ Jonathan Stempel reports.
The beverages taste different, but they do seem to have some similar looks when it comes to their labels. Perhaps that confuses some shoppers into thinking that the Swiss Premium sugar-sweetened teas come from the same company as those packets of hot cocoa mix.
Take a look for yourself. Do these look like they come from the same manufacturer?
Also in the basket:
Jobless claims hit 17-month low
Two Dowdy Clothing Brands Go for Vogue (Wall Street Journal)
Check Out Line: Better than expected
Check out the trifecta of profits that topped Wall Street views.
Expectations have been pretty low for the consumer and retail sector given the tough economy, cash-strapped consumers and the overall funk in the market keeping shoppers away.
On Thursday, a few companies managed to beat expectations. Is it a signal that things are finally picking up?
Best Buy‘s quarterly profit plunged 23 percent. Still, adjusted results topped Wall Street estimates as the retailer said it got a boost from stronger-than-expected consumer demand.
“We prepared for reduced consumer spending, and we were pleased when the quarter finished stronger than it began,” Best Buy CEO and Vice Chairman Brad Anderson said in a statement.
Over at ConAgra, price increases and cost cuts helped profitability in the consumer foods business.
And Dr Pepper Snapple is riding high with its low-cost drinks, such as Crush. Still, higher-end beverages such as Snapple are feeling a pinch.
Wal-Mart donates food, cash to fight hunger
Wal-Mart is partnering with Feeding America, the largest charitable hunger-relief organization in the United States, to provide 70 million meals annually to families and individuals who are struggling to put food on the table during the toughest economic downturn in decades.
The move from the world’s largest retailer comes as U.S. food banks are seeing donations fall short of demand.
Wal-Mart has committed to providing an estimated 90 million pounds of food annually – the equivalent of 70 million meals – to families in need by the end of 2009. It is also making a $2.5 million cash donation that has been earmarked to upgrade warehouses and to buy 20 new refrigerated trucks to transport food from Wal-Mart stores to food pantries, soup kitchens and other agencies affiliated with Feeding America, formerly named America’s Second Harvest.
“Given the current state of the economy and the increased burden on neighborhood food pantries and soup kitchens, we are enlisting our entire network of stores and clubs to participate in this food donation program to provide relief to communities throughout the country,” said Bill Simon, chief operating officer of Wal-Mart U.S.
“Today, with the help of Wal-Mart, we take a huge step forward in helping feed the millions of Americans who live at risk of hunger,” said Vicki Escarra, president and chief executive officer of Feeding America.
In a recent survey, 99 percent of Feeding America’s food banks said demand for food in communities across the U.S. has risen by 15 to 20 percent over the last year alone. Many food banks have reported even higher increases in demand – some with requests for food growing by 50 percent in the last year.
Feeding America’s major donors include Wal-Mart, Kraft Foods, Campbell’s Soup Co, ConAgra Foods, and Kroger.
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