Shop Talk
Retailers, consumers and prices
Starbucks drive thru menu getting makeover
Starbucks’ drive thru menus are getting a facelift — as the cafe chain takes a page from the fast-food industry’s playbook.
At the end of August, the menu boards at Starbucks’ 2,600-plus drive thrus in the United States and Canada will have more pictures and fewer words. Fast-food chains like McDonald’s, which has been going after the Seattle coffee company’s core business with espresso drinks, frappes and smoothies, commonly use simple, photo-based menus to tempt diners.
“People eat with their eyes,” said Clarice Turner, Starbucks’ senior vice president in charge of the menu makeover.
To make room for the additional photos and larger print, the number of items featured on the new menus will be cut from about 75 to around 25. Despite that, everything available inside the cafe will still be available in the drive thru lane, Turner said.
Starbucks has turned the spotlight on quality and its premium market position since the U.S. economy went south and McDonald’s and other chains jumped into coffee and beverage business with me-too products.
To that end, it is planning an autumn launch for Starbucks Reserve – a line of “ultra-premium”, single-orgin coffees that will be sold in its top U.S. coffee markets.
While coffee costs have been soaring, Starbucks told Reuters that price hikes currently are not on the menu. Picture that.
Diners say Olive Garden, Papa John’s are tops
Papa John’s and Olive Garden got top marks in their respective restaurant categories in the University of Michigan’s 2010 American Customer Satisfaction Index, while McDonald’s and Chili’s Grill & Bar were laggards.
Papa John’s took the lead in the limited-service category from Domino’s Pizza. Notably, this year’s win for Papa John’s came as Domino’s was getting a sales bump from its reformulated pizza recipe and crowing about how its new pies were beating rivals in taste tests.
Papa John’s earned an ACSI score of 80 (out of 100), up from 75 last year. Little Caesar, Pizza Hut and Starbucks each made gains versus 2009 and were close behind with scores of 78. Domino’s score of 77 was flat from a year ago.
McDonald’s, which has outperformed most other quick-service restaurants, was the only major fast-food company to post a decline. Its score fell to 67 from 70 last year.
“Price was behind much of the improvement, but new products also contributed,” said Claes Fornell, a professor at the University of Michigan’s Stephen M. Ross School of Business.
Pizza Hut offered any pizza for $10, while Papa John’s combined similar pricing promotions with what customers perceive as high quality products.
“As increasingly frugal consumers have made price more salient, McDonald’s has acquired more customers. These newcomers seem less satisfied, and were it not for the economy some of them would rather eat somewhere else,” Fornell said.
from Dhanya Skariachan:
Check Out Line: A mixed bag of consumer news
Check out a mixed bag of results from the consumer world.
Investors looking for yet another clue to gauge the strength of the U.S. consumer spending recovery might find some solace in online retailer Overstock's results and women's apparel retailer Ann Taylor's strong first-quarter outlook.
Overstock, which sells excess inventories of clothing, accessories, furniture and other items, recorded a 42 percent rise in quarterly sales, while Ann Taylor forecast a same-store sales rise of 11 percent in its latest first quarter.
"Consumers are back in the malls and outlet centers...They are being lured to spend on nonessential goods by pre-planned promotions from retailers and greater confidence in their economic well-being," Wall Street Strategies' Brian Sozzi summed it up.
The U.S. consumer is certainly warming up to spending on more than essentials and maybe a tad more comfortable replenishing their wardrobes with news of an improving economy floating around. But just how far will they go? Will we see a simultaneous improvement in all sectors of retail?
Judging by the latest crop of results from the restaurant world, maybe not.
Check Out Line: Consumers spending again?
Check Out home-related retailers Sears Holdings and Williams-Sonoma reporting better-than-expected quarterly results. Does this mean consumers are feathering their nests again?
Somewhat, according to Barclays analyst Michael Lasser, who said Williams-Sonoma’s results were “an indication that upper-income consumers are spending a bit more, which is not surprising given the rally in the stock market and the stabilization in the housing market.”
Williams-Sonoma, which also operates Pottery Barn and West Elm, has updated its styles and slashed prices on some items to woo shoppers, despite worries that the move might tarnish its image as a high-end retailer.
But it’s not only high-end chains showing signs of life. Kmart, the value-priced retailer that sells everything from appliances to clothing, posted its first increase in same-store sales since 2005, and only its second since 2001. The chain, which is owned by Sears, took back its shoe operations this year from Footstar, which had operated within Kmart stores.
Even Sears, which depends more heavily on the housing market due to its Craftsman tools and Kenmore appliances, posted its best performance since the fourth quarter of 2007, and outperformed competing home improvement chains like Home Depot and Lowe’s.
Also in the basket:
Check Out Line: Frugal fatigue?
Check out what women buy when they get tired of being a frugalista: boots, plaid and outerwear.
Those were some of the products that helped October U.S. retail sales improve from a year ago, when the unfolding financial meltdown had shoppers fearing a second Great Depression.
“Frugal fatigue is setting in,” said NPD Group analyst Marshal Cohen. After a year of scrimping, he added, the numbers suggest that some women are going in for a little retail fix.
“Women (not only moms) are shopping their closets, discovering new and fresh looks and filling in with some key updates,” he said.
But selective shopping is not enough to ease worries about the all-important holiday sales.
Thomson Reuters research shows that while October sales rebounded, results from individual retailers were mixed.
Also in the basket:
The U.S. recession ends, but not for you
Experts say U.S. economic growth has returned, signaling the end of the longest and deepest recession since the Great Depression.
But the good news for Wall Street — where shares have been running up — is showing no signs of trickling down to Main Street, where unemployment is flirting with 10 percent, foreclosures continue to rise and record numbers of families now depend on government-issued food stamps to make ends meet.
“For every person out of work, for every family facing foreclosure, for every small business facing a credit crunch, the recession remains alive and acute,” U.S. Treasury Secretary Timothy Geithner said in testimony to a congressional committee.
“Many people you might have called middle class or working class before have been ground down toward poverty or even destitution,” said author Barbara Ehrenreich, who has chronicled America’s working poor during her career.
While most Americans either fret about a job loss or deal with the financial devastation of joblessness, the income gap between the super rich in the United States and the average Joe is the largest since the 1920s. Nearly one-sixth of the U.S. population is uninsured. And, contrary to popular belief, Americans are less likely to move to a higher financial status than people who live in “socialist” countries like Germany, Canada, France or Sweden.
Many economists, who warn that the U.S. economy is in for a “jobless recovery,” caution that the turnaround is on fragile ground.
The recession is not over, as a matter of fact it’s just getting into full swing. This is merely a publicity stunt by the government to attempt to sway public opinion. They are intent on making as many people dependent on the government as possible, thereby creating a government run state. Some call it socialism. The sad thing is that it’s working because too many people continue to do nothing about the run away policies of the current admininstration. It’s simply a matter of not reelecting any current politicians, from the local good old boys, to the congress, and not electing anyone who’s held office in the past. Email your representatives and tell them that you’re fed up with this. It works in other countries. If we don’t get a handle on this, it’s going to be very bad for the people of this country.
Check Out Line: Retail profits surprise, but still down
Check out the Retail Metrics earnings snapshot.
About two-thirds of the way through the second-quarter earnings season, retailers are beating earnings expectations by 5.1 percent on average, the research firm said.
But those were pretty low expectations and earnings are still down 6.4 percent compared with a year earlier. It is even worse when Wal-Mart is excluded. Then earnings are down 9.8 percent, Retail Metrics said.
Revenue is also down 2 percent.
With 83 retailers reporting, 41 percent had year-over-year earnings gains and 57 percent had declines.
Auto parts, drug and apparel retailers were among the groups seeing earnings gains, while teen apparel, department stores and home building supply stores were among the worst performers, Retail Metrics said.
Also in the basket:
Check Out Supervalu’s shopper woes
Check Out Supervalu’s troubles from consumer thrift.
The third-largest U.S. supermarket operator, with about 2,500 stores, said that its earnings in the first quarter, which ended on June 20, were hurt by a “tougher than expected business environment.” Its results would be much below analysts’ expectations, the grocer said.
“Since providing guidance on our fourth quarter earnings call, consumers have become more value focused and cautious in their spending, which has pressured sales and margins greater than anticipated,” Supervalu’s CEO Craig Herkert said in a statement.
The pressure on Supervalu underscores how consumers have become highly conscious of how they spend their money in the long recession — shopping mainly for essential items, and seeking low prices even on those products.
Herkert recently took over the top job at Supervalu, after having worked as the president and CEO for discount giant Wal-Mart’s America’s region, which includes Canada, Puerto Rico and parts of South and Central America.
Also in the basket:
Consumer bankruptcy filings jump in May
More Americans filed for bankruptcy in May, slammed by job losses and home forclosures, according to the latest data from the American Bankruptcy Institute.
More than 124,800 people sought protection from their creditors in bankruptcy court, up 37 percent from last year.
Business bankruptcies also soared 40 percent in May, according to bankruptcy data provider AACER.
According to AACER’s Mike Bickford, personal and business bankruptcies will continue to rise, even if the economy gets better.
“Bankruptcy always has a lag effect,” said Bickford. “People start filing months after they start having credit problems.”
What do you see in your community?
Thanks for introducing this, but now every company and individual is opting for filing bankruptcy. for individual its good to file online bankruptcy.
Check Out Line: No discounts? no customers
Check out Abercrombie & Fitch’s falling profits.
The company played a remix of “Cold as Ice” as hold music for its conference call with analysts. It’s hard to tell if it is supposed to be ironic, or if the company is just tone deaf. The latter could be possible, as Abercrombie has decided to tune out consumer’s expectations that retailers will offer discounts to try to get them in the door. In November, CEO Mike Jeffries said the short-term relief provided by promotions would have the affect of damaging the brand in the long term. He defended the strategy again on Friday, though the company has cut some prices at its Hollister and abercrombie chains. But if people stop going to your store, do they eventually forget about your brand? Abercrombie’s same-store sales fell 25 percent in the key fourth quarter. Of course, refusing to discount (other than on clearance items) protects profits. Or maybe not. Net income fell 68 percent, though some of the decline was related to a new employment agreement for the CEO. Also in the basket: PepsiCo Q4 profit falls, but matches Wall St view Sears launching online service to connect clients, contractors (Chicago Tribune) Starbucks to sell instant coffee Microsoft to open own stores, take on Apple
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