Retailers, consumers and prices
Check Out KFC challenging the American people to create a family dinner for under $10, the same price as their Value Meal.
Consumers have been eating at home more often as high food and gas prices and a decline in home values pressure budgets. KFC is trying to win back those customers by convincing families it’s just as cheap to buy its value meal, priced at $9.99, as it is to buy dinner at the supermarket and cook at home.
The meal comes with seven pieces of Original Recipe chicken, one large side and four buttermilk biscuits.
“From gas to grocery bills, everyone is looking for ways to cut costs,” says KFC’s “value expert” Stephanie Nelson. “With a few simple tips you can host everything from a fabulous family dinner to a large gathering on a budget and it can start with something as simple as driving through a KFC.”
99 Cents, which sells a variety of household, food and other items often priced at 99 cents, says it will now focus on its core markets of California, Arizona and Nevada, where it has 230 stores that make up 90 percent of its sales.
Those states are also some of the hardest-hit by the U.S. housing crisis and credit crunch, and consumers pressured by rising gas and food prices are trading down from higher-priced stores to discounters to save money, a positive for 99 Cents.
Frozen seafood is never as tasty as fresh, a problem Red Lobster, whose menu hosts various fried frozen fish dishes, is trying to overcome.
Following a quarter of disappointing sales at its Red Lobster restaurant chain, Darden is trying to change the ”perception that the menu at Red Lobster is primarily comprised of frozen seafood prepared in a fried manner and not having a lot of interesting innovation, flavor profiles, culinary expertise,” said Darden’s CEO Clarence Otis on a call with analysts.
Consumer products and retail executive spoke at conferences hosted by, respectively, Lehman Brothers and Goldman Sachs on Wednesday. Here is some of what they had to say:
“There is no option not to take price,” — David Moran, president and CEO, Heinz North America, said on the the likelihood of more price increases.
“The macroeconomic conditions will be worse than they were 12 months ago. Our expectation is for caution,” — Tim Boyle, chief executive of Columbia Sportswear, when asked how the environment six to 12 months ahead looks to the sportswear and outerwear maker.
“We think that despite what is happening in the environment, to neglect your store base and not keep it competitive is the wrong thing to do,” — Kohl’s Chairman Larry Montgomery on the department store’s is commitment to remodel 36 stores in 2008 and about 60 in 2009, as well as opening 50 new stores next year.
“We don’t think it’s as dire as other people are saying. We’re fairly resistant. Eighty-five percent of our sales are in RX (prescriptions). The remainder are in toothpaste and deodorant and hopefully people will keep buying those.” – Thomas Ryan CVS Caremark chief executive and board president.
Check Out Wal-Mart’s price cuts for eggs, milk, butter and bread in Ontario, Canada.
If you are counting pennies but still want that morning coffee and omelet, you can now buy one- and two-liter milk cartons for $1.77 and $2.97 respectively or a dozen large eggs for $1.97, if you shop at Wal-Mart’s Ontario stores.
Check out the fading influence of tax rebate checks.
Tax rebate checks helped boost June retail sales but their influence appears to have petered out by July, according to data released by the Commerce Department on Wednesday.
The figures showed that total sales at U.S. retailers declined 0.1 percent in July, which was in line with forecasts made by Wall Street economists. A big reason for the drop was a fall off in auto sales. Auto and auto parts sales fell 2.4 percent in the month, their biggest drop since April, and were off a whopping 10.5 percent from year-ago levels.
Second-quarter profit at cosmetics firm Avon Products Inc more than doubled, as demand in Latin America and other overseas markets more than made up for sagging U. S. results.
Supervalu, whose chains include Albertsons and Save-A-Lot, didn’t see any increase in its total quarterly sales. Its food sales were actually down 0.7 percent, but the company saved itself in part with lower expenses, and reported a higher quarterly profit.
The maker of Pepperidge Farm cookies and V8 juice has raised prices to offset soaring commodity costs and announced a $1.2 billion share buyback program that should help boost shares.
Check out a couple more bleak consumer signals.
The Conference Board on Tuesday said that U.S. consumer sentiment fell to its lowest level in 16 years. One analyst, Dresdner Kleinwort Securities’ Dana Saporta, said the sentiment gauge has dropped 55 percent from its peak in July 2007, a bigger decline that seen after the Sept. 11 attacks and Hurricane Katrina.
So even with consumers getting those tax rebate checks, they might not be in much of a mood to ramp up spending in the face of soaring gasoline and higher food prices.
In fact, Citigroup retail analyst Deborah Weinswig lowered her estimates on department stores and several other retailers today.
“While (the second and third quarter) could benefit from the tax stimulus checks, we expect current pressures facing the consumer, including across-the-board inflation, housing and credit concerns, and a deteriorating employment picture, to continue to weigh on consumers for at least the remainder of 2008 into 2009,” she said in a research note.
Consumers are also showing some signs of cutting back at the grocery store.
Kroger said on Tuesday that it has seen an increase in sales of its private-label brands. That could be bad news for makers of brand-name foods. Both brand-name and private-label food prices have gone up as manufacturers try to offset soaring commodity costs.
The branded food companies have argued that as long as the gap between their price and the price of private-label products does not get out of whack, then consumers will still see the value in the branded products.
But if consumers are getting to the point where they just need to save money, even if it means giving up the brands they love, that could squeeze the big food companies.
Also in the basket:
Hollywood Labor strike: Retailers dread impact of walkout by actors (WWD)
Athletic-Wear Firm’s Olympic Dream Fades (Wall Street Journal)