Shop Talk

Retailers, consumers and prices

Check Out Line: Betting on Borders

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lebowCheck out who’s making a bet on Borders, the struggling bookseller.

Financier Bennett LeBow, chairman of tobacco holding company Vector Group Ltd, is buying 11.1 million Borders shares  through a company he controls — making him Borders’ single largest shareholder.

Borders CEO Mike Edwards praised LeBow’s turnaround prowess- fair enough. If you can help tabacco companies, you can probably help any ailing company.

Borders said it would use some of the money from LeBow to raise its profile in the fast-growing electronic books market. The No. 2 specialty bookstore chain expects to debut its e-bookstore, powered by  Kobo in June. Kobo’s reader which will prominently feature Borders’ ebookstore, faces fierce competition from the likes of Amazon’s Kindle, Apple’s iPad and Sony’s Reader.

LeBow stepped in a few weeks after the bookseller repaid a $42.5 million loan to Bill Ackman’s Pershing Square Capital Management, which owns 10.6 million shares and had been Borders biggest investor prior to LeBow’s invesment. 

Check Out Line: Will Hershey Trust resolve eventually melt?

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Check out Nestle’s waiting game. USA/

It could take years, but analysts in Europe think that Nestle is waiting for the pressure of competing with two confectionery giants on its home turf to eventually melt Hershey’s resolve, letting Nestle buy the Pennsylvania-based chocolate maker.

While Pennsylvania law says the state’s attorney general would have to approve any deal that dilutes the Hershey Trust’s control over the candy maker, analysts think that eventually the trust will have to look at a Nestle bid.

Chocolate purchases on the rise

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CadburyWhile Cadbury’s fate remains foggy, one piece of chocolate news is clear: people continue to satisfy their cravings.

According to Mintel, chocolate sales have risen around the world despite the recession.

Check Out Line: Cadbury a tempting treat

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cadbury1Check out the possible bidding war brewing for British confectioner Cadbury.

U.S. chocolate maker Hershey and Italy’s privately owned Ferrero both said separately they were evaluating their options over a possible bid for Cadbury, the world’s No. 2 confectioner, but analysts still see hostile bidder Kraft’s $16.2 billion offer as the front runner.

Reuters and other media have reported Hershey, known for its namesake chocolates and Reese’s peanut butter cups, and Ferrero were discussing a joint bid and the UK Takeover panel asked the companies to clarify their intentions. They gave no hint whether they may be working together on a joint bid.

Check Out Line: Kraft’s cash cache

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Check out Kraft’s cash hoard. USA/******Kraft had almost $3 billion of cash on its books at the end of the third quarter, roughly four times what it had a year ago.******The world’s second-largest food maker might have disappointed***analysts with its third quarter sales and a profit outlook that implied a weaker-than-expected fourth quarter.  But when it comes to its battle to win Cadbury, at least the company is generating cash – expenses cuts helped Kraft generate $2.7 billion in cash in the first 9 months of 2009.******Also, Reuters Loan Pricing Corp reported on Tuesday that Kraft has arranged $9 billion in financing for a bid.******Sources have told Reuters that Kraft is not likely to raise its initial bid for Cadbury if it makes a formal offer by the Nov. 9 deadline. But analysts do think that shifting the offer to more cash and less Kraft stock — which is down 3 percent on Wednesday after the company posted lackluster third-quarter sales — could be a step in the right direction.******Also in the basket: ******Warnaco beats estimates; Liz Claiborne misses ******Molson Coors higher profit tops view, shares rise ******M&S sees no repeat of blanket pre-Christmas promotions ******Talking shop with Isaac Mizrahi (WWD)******(Reuters photo)

Check Out Line: Crowd at top of Aerospostale

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aeropostale1Check out who’s in charge at Aeropostale
 
No, seriously, who is in charge?
 
The company announced today that Julian Geiger was leaving the teen apparel retailer. (The press release was apparently written under the auspices of the Lawyers Full Employment Act.)
 
But instead of appointing one leader, Aeropostale went with co-CEOs. President and Chief Merchandising Officer Mindy Meads and Chief Operating Officer Thomas Johnson were named to share the top spot.
 
The news release does not detail how Meads and Johnson will divide the CEO duties.
 
What we do know is that the history of corporate America is punctuated with co-CEO arrangements that have gone awry.
 
When Kraft was spun out from Altria in 2001, Roger Deromedi and Betsy Holden were named co-CEOs. The relationship ended with Holden being demoted in late 2003, and eventually leaving the company. Kraft continued to struggle with lackluster innovation and seemingly ever-present restructuring, and Deromedi was out by 2006.
 
John Reed and Sanford Weill ran Citigroup together for a while before falling out. Reed even left the corporate world for a time.
 
A deep executive bench is always a plus, but in the end, one person at the top seems to be the final answer.
 
Also in the basket:
 
Rite Aid cuts view after latest loss; shares skid
 
H&M August sales disappoint as shoppers hunt for bargains
 
Buffett sings praises of a Chinese suit (WSJ)

(Photo/Reuters)

Check Out Line: Suppliers on Kraft chopping block

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Check out Kraft slashing its supplier base.
 
Yes, Kraft is doing more than just trying to buy Cadbury.  The company is still operating its business and part of that is the process of looking to improve its margins.
 
Kraft told Reuters it plans to cut its supplier base to less than half of its 70,000 companies.
 
“We’re essentially taking a white sheet of paper and saying ‘what is the right number of suppliers to support this particular category, who are they, what is the capability we need for now and in the future, and does the current supplier base have that,’ ” Julia Brown, senior vice president of procurement at Kraft, said.
 
Suppliers have been under pressure in recent years as companies look to work with fewer vendors that operate more as partners.
 
The recovery is actually expected to make things worse for some suppliers as they find out they cannot get financing to ramp up operations as their customers start looking to buy from them again.
 
The winners will likely find even more business as they work closer with companies.
 
For the loser, it could be “supply-side wreckonomics.”
 
Also in the basket:
 
McDonald’s same-store sales up 2.2 percent
 
Talbots loss narrower than expected
 
Jewelry retailer Signet profit tops estimates
 
Speedo extends sponsor deal with Michael Phelps

(Reuters photo)

Check Out Line: Kraft wants to consume Cadbury

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cadbury1Check out efforts by Kraft to gobble up confectionary giant Cadbury.

Kraft offered $16.7 billion for the world’s No. 2 candy and chocolate maker on Monday. Cadbury shares soared after it rejected the initial bid as investors bet Kraft or another company will sweeten the offer.

Analysts said Cadbury has few options but to look for a higher bid or more cash after the Kraft offer.  Investors like the logic of the combination and few, if any, counterbids are seen likely to emerge. 

Heading to the dollar store for groceries?

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dollar1Ahead of the recession, dollar stores thought it would be a good idea to try to lure shoppers into their stores more frequently by stocking an increased selection of food. Many of them began installing refrigerated coolers in their stores so they could sell things like eggs, milk and dairy.

More recently Family Dollar added 200 more food products — including a bigger selection of pasta and Kraft salad dressings — to its shelves.

Check Out Line: Stronger dollar = weaker results

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Check out the latest earnings reports, which give a hint of hope that things could be looking up, if it weren’t for that pesky stronger U.S. dollar.
 
Avon‘s revenue fell 13 percent to $2.18 billion as the stronger U.S. dollar decreased the value of overseas sales by 16 percentage points. On a local currency basis, sales rose 3 percent. 
 
WITHERSPOON/“Foreign exchange significantly pressured first-quarter profit, as expected,” Avon Chief Executive Andrea Jung said in a statement. “We are taking aggressive action to lessen the foreign-exchange impact … the benefits of which should be stronger in the second half of 2009.”
 
Kraft Foods posted a higher-than-expected first-quarter profit helped by price increases and cost-cutting.  While profit rose, the maker of Oreo cookies said sales fell 6.5 percent to $9.4 billion, hurt in part by — you guessed it — the stronger dollar, which lessens the dollar-value of sales made overseas. Organic revenue, or sales excluding currency fluctuations, acquisitions and divestitures, rose 2.3 percent. 
    
Over at MillerCoors, the combined U.S. operations of SABMiller Plc and Molson Coors Brewing Co, net sales rose 3.8 percent to $1.72 billion. Sales from wholesalers to retailers, a good gauge of consumer demand, rose 0.4 percent.  Molson Coors said its overall profit rose, as increased prices and cost cuts helped offset steeper commodity costs, lower sales volume and, of course — the stronger U.S. dollar. 

One company that couldn’t put any blame on forex is CVS Caremark, which operates solely in the United States.  Even if people are cutting back, net revenue still jumped 9.7 percent, to $23.4 billion. CVS profit was better than expected. 

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