Check Out this analyst’s view on the toy sector.

Tim Conder, an analyst with Wells Fargo Securities, said toy shares continue to offer the best “risk/reward” as those in his coverage, like Mattel, Hasbro and RC2 Corp, continue to gain relative market share.

“Despite on-going consolidation among retailers and investor concern about growing major retailer ‘clout’  via pricing pressure and private label toys, major toy manufacturers have gained share. Why?” Conder asked in his note.

The answer could be –  ”(1) Financial staying power, (2) Uninterrupted supply chains while 2nd/3rd tier vendors had issues during the peak of the credit freeze, (3) Licensed/owned brands that major retailers need to draw consumers (e.g., Barbie, Transformers, Star Wars, Spiderman, Thomas & Friends, Sesame Street, John Deere), and (4) Dependable consistency to deliver globally as major retailers expand,” Conder said.

Conder’s positive take on toy makers comes ahead of major earnings reports that begin this week with No. 1 toy maker Mattel, followed by rival Hasbro early next week.

Also in the basket:

Vodka maker CEDC to offer 5.5 mln common shares

Philips sees early signs of recovery, boosting shares

Japan’s Suntory considering merger with Kirin

Kellwood continues to negotiate upcoming maturity

Trade group challenges Wal-Mart on health care (WSJ - subscription required)

(Photo/Reuters)

Check out the expected weak May sales in the U.S. retail landscape.

Despite Memorial Day sales, warmer weather and deals such as $1 flip-flops, most U.S. retailers are expected to report declines in same-store sales in May as shoppers kept hunting for bargains in the recession.

Only eight of 30 retailers are expected to post growth in May sales at stores open at least a year when companies report results this week. Walgreen kicked things off with a 1 percent increase, but that was below what analysts had expected due to weaker-than-expected sales at its pharmacy counters.

May same-store sales are expected to fall 3.6 percent from a year earlier, when they rose 1.1 percent, according to Thomson Reuters’ revenue-weighted index of sales.

The data excludes Wal-Mart, as the world’s largest retailer stopped reporting monthly sales data with April results. Wal-Mart, one of the best-performing retailers during the recession, had held about 50 percent of the weighting in the monthly average.

There are signs, however, that the global recession may have bottomed out as an Ipsos/Reuters poll showed global consumer confidence is stabilizing after falling for 18 months.

Also in the basket:

Pepsi Bottling raises Q2, FY ‘09 earnings view

Dollar General profit soars as shoppers seek value

Hhgregg Q4 profit up; FY view misses estimates

Retailers Feel Mixed Impact From Foreclosures (Wall Street Journal)

After the Recession, What Will Execs Do First? (WWD, subscription required)

(Reuters photo)

What happens to sales at existing retailers when a new Wal-Mart store opens its doors?

That’s the question Kusum Ailawadi, professor of marketing at the Tuck School of Business at Dartmouth, addresses in a new research paper.

The professor and her co-authors studied 90 local supermarkets, drug stores and mass merchandise stores in seven regions of the United States, before and after a new Wal-Mart store opened. The team looked at weekly sales data for 46 product categories from these stores over a two-year period.

They said retailers — regardless of size – take a hit when Wal-Mart arrives, but that there are ways to soften the blow. 

The study found that sales declined an average of 17 percent at supermarkets and 40 percent at mass merchants included in the study. Drug stores took a 6 percent sales hit on average. 

But the researchers found that the loss could be minimized with smart marketing strategies. For instance, the study found that sales dropped an average of 20 percent to 25 percent when prices were reduced or when the assortment carried by the store was reduced after the new Wal-Mart opened.  
  
Here is the advice the researchers have for retailers that may find themselves going head-to-head with a Wal-Mart:

–  Supermarkets should not reduce prices; they should offer deeper promotions and begin selling a higher percentage of top-tier national brands and private labels. 
 
–  Drug stores should also not lower prices across the board. Rather, they should offer frequent promotions on a wide assortment of products. They should increase the total variety of products they sell. 
 
– Mass merchandisers are hurt most by Wal-Mart. They have no choice but to reduce prices if they want to mitigate losses, and they should definitely not reduce their product assortment.

(Photo\Reuters)

Check Out unemployment’s strain on consumers’ wallets.

This is not what retailers want to hear on the day before Christmas, but evidence continues to mount that consumers are cutting back spending.

The U.S. Commerce Department said consumer spending contracted 0.6 percent in November, the fifth-straight monthly fall. Incomes shrank 0.2 percent. A separate report showed initial claims for jobless benefits last week reached the highest level in 26 years.

Today, retailers are making a final push to lure last-minute gift hunters but surveys indicate the steep discounts are not inspiring consumers to spend. This year’s U.S. holiday shopping season could be the worst in up to 40 years.

Are you spending more or less this holiday season? Let us know.

Also in the basket:

‘Heritage cocktails’ make a comeback

Cadbury sells drinks unit

More U.S. store closings to come

(Photo: Reuters)

Check Out the tough love consumers are doling out to retailers.

Not only are they thinking twice about shopping, consumers are also losing faith in gift cards, according to the America’s Research Group/UBS 2008 Christmas survey.

While such cards were among the top gifts for holiday 2007, consumers this year are worried that stores could slip into bankruptcy and leave gift card recipients out in the cold.

Of consumers who will not do their regular gift card buying this year, 64.4 percent said they will gift money instead.

And if you got a gift card last year, don’t be too sure you’re going to see a present coming your way this Christmas. More than a third of the people in the group mentioned above said it’s possible they will give nothing at all.

While 22.8 percent of Americans have already seen job cuts at their workplace, 31.8 percent expect the axe to drop in the future, according to the survey, which polled 1,000 adults aged 20 to 59.

And the thought of their debt load is not giving them a warm, fuzzy feeling either. More than half of those surveyed said they are feeling some pressure from their debt, while 21.8 percent said they felt it bearing down on them.

About 57.9 percent of those pressured by debt are going to spend less this Christmas due to credit concerns.

“Consumers have snapped shut their wallets this year and it’s difficult to find a bright spot for the Christmas shopping season,” said Britt Beemer, chairman of ARG.

But if you are a retailer and come out guns blazing with deep discounts, there is a chance you will snag some sales. Nearly 90 percent of surveyed shoppers said they are swayed at some level by discounts and sales, while 84 percent admitted they are more sales-driven now than three to five years ago.

Also in the basket:

PepsiCo stands by outlook, to outline 2009 plans

Debt protection costs on Macy’s, Limited surge

Wal-Mart in wind energy deal with Duke Energy

Kohl’s to offer wider price cuts for holidays

Barnes & Noble loss more than expected, shares fall

US weekly jobless claims surge to 16-year high

(Photo/Reuters)

Circuit City employees say they’re not surprised the struggling retailer is closing 155 stores in an attempt to remain solvent amid deteriorating liquidity and tighter credit conditions from vendors.

Employees interviewed by Reuters correspondent Chelsea Emery at Circuit City’s Paramus Towne Square, New Jersey store seemed resigned to difficut times ahead. The store is not among the 155 slated to close and employees who work there declined to give their last names.

“People thought (this news) was coming with the economy. It’s not a big surprise. They’ve (corporate headquarters) got to do what they’ve got to do. They’re not going to get bailed out like Lehman Brothers,” said television salesman Marko. “People aren’t going to buy plasma TVs when they can’t buy milk … We (employees) are trying to stay positive as we can.”

David, a supervisor for Firedog, said the store had a meeting this morning about the closures. “We’re all nervous,” he said, adding that employees had been told earlier in the year that any store closures would happen much later, even into January. “This (news today about 155 stores) is unexpected.”

Employees “are all nervous. We’re trying to fight to stay open,” computer salesman Anthony said.

(Photo/Reuters)

Check Out more gloomy forecasts for the holiday sales season.

With mall traffic likely weak for the remainder of the year and uncertainty lingering in the financial markets, analysts at CL King say that even with inventory reductions across the board they don’t yet see a light at the end of the tunnel.

“We believe the macro situation has fallen further with worse-than-anticipated negative data points on employment, housing, car sales, investment portfolios, etc.,” CL King wrote in an analyst note.

“The consumer has been cut back with regard to credit availability, as have small businesses. The extreme volatility in financial markets and the subsequent barrage of negative news headlines is probably causing further mall traffic weakness … Such mall traffic weakness is not likely to improve in October, despite very favorable weather comparisons.”

A Reuters/Zogby poll says nearly six times as many shoppers plan to spend the same or less than last year than those who plan to spend more.

Also in the basket:

Family Dollar profit tops Wall St view, shares up (Reuters)

CVS takes issue with Longs shareholder letter (Reuters)

Anheuser-Busch expects 3rd-qtr income up (Reuters)

(Photo/Reuters)