Shop Talk

Check Out Line: Rite Aid’s June sales

Aarthi Sivaraman — Thu, 03 Jul 2008 14:44:30 +0000

Check out how generic drugs cut into June pharmacy sales at Rite Aid.

The No. 3 U.S. drugstore chain said its pharmacy same-store sales fell 0.5 percent, as generic drugs were introduced and allergy medicine Zyrtec was switched to over-the-counter status.

Generic drug rollouts hurt rival Walgreen as well. That company said a day earlier those drugs cut into its pharmacy same-store sales by 2.1 percentage points.

Drugstores, in general, have been facing more competition from grocery stores and discounters like Wal-Mart, which have been offering discounts on a slew of prescription drugs.

Also in the basket:

Adidas eyes 6,300 stores in China by 2010

Blockbuster may do Circuit City deal later (New York Post)

Circuit City faces tough road but Chapter 11 not near

(Photo: Reuters)

Check out line: Consumer spending shifts

Brad Dorfman — Wed, 02 Jul 2008 14:48:11 +0000

Check out the reallocation of consumer spending.

Pricey coffee? Out. Spending at the dollar store? In.

Family Dollar posted a better-than-expected quarterly profit, helped by tight control of inventory and expenses, and said June sales were better than expected as consumers received their tax rebate checks.

While traffic was down, customers were spending more on each trip.

Meanwhile, as the economy softens, so has Starbucks’ business.

The coffee shop operator now says it will close 600 U.S. stores, six times the number it had targeted in January.

Gone are the days when a Starbucks on every corner worked for the company. Most of the stores to be closed are near other locations, so pruning the underperforming locations might help the others grow.

” ‘Reverse cannibalization’ should be felt in the relatively near future as the bulk of stores are located within close proximity of another unit and will be closed by the first half of 2009,” J.P. Morgan analyst John Ivankoe said.

Also in the basket:

EXCLUSIVE-Kraft reps all over stores to boost sales

ANALYSIS-UK grocers to shun price war as shoppers trade down

Stores look to lure millennial generation (WWD)

(Photo: Reuters)

Check Out Line: Spirited Sales

Karen Jacobs — Tue, 01 Jul 2008 16:28:57 +0000

Check out rising spirits sales at Constellation Brands.

Today’s winner in the consumer products arena is wine, which looks to be a must-have item as higher gasoline prices demand more of consumers’ paychecks.

Constellation Brands, which makes Robert Mondavi wine and Svedka vodka, reported better-than-expected quarterly profit on strong sales, and backed its full-year outlook.

Brands such as Simi and Kim Crawford helped Constellation achieve double-digit growth in the United States.

While consumers are willing to buy finer wines, they are trading down with rental cars. Dollar Thrifty Automotive cut its full-year profit forecast on Tuesday, citing tough operating conditions. Competitor Hertz said in an interview that while consumers were still renting cars, they are opting for smaller ones that are more fuel-efficient.

Also in the basket:

Rhode Island court overturns lead-paint ruling

InBev sticks to Anheuser-Busch offer

Italy’s Barilla plans no more pasta price increases for now

Check Out Line: Souped up

Karen Jacobs — Mon, 30 Jun 2008 16:37:01 +0000

Consumers may be cutting back on restaurant visits and car purchases but they are still buying crackers and juice, as Campbell Soup raised its full-year profit forecast.

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.

In more news on consumer staples, UBS is recommending that investors look to price leaders such as Wal-Mart Stores and Kroger, saying they are poised to gain market share as consumers shop for the best deals. That firm downgraded shares of grocers Safeway and Whole Foods.

Also in the basket:

Spending less at the ballpark

Growth in negative equity pressures homeowners

Check Out Line: Hostile Light?

Karen Jacobs — Fri, 27 Jun 2008 16:07:34 +0000

Check out signs of possible acrimony in InBev’s takeover bid for Anheuser-Busch.

Could InBev be bringing a new flavor — Hostile Light — to the beer wars as it pushes forward with its $46.3 billion takeover bid for the maker of Budweiser?

On Thursday, InBev reiterated its preference for a friendly combination that would create the world’s biggest brewer but filed suit to establish that Anheuser’s shareholders could remove their entire board, possibly setting the state for a more contentious battle.

Anheuser, which rejected InBev’s bid on Thursday, said on Friday that it will challenge its would-be acquirer’s lawsuit over the board removal.

Still, some say the door is open to a friendly deal. Stay tuned.

Also in the basket:

Anheuser-Busch sees year profit above Wall Street views

U.S. consumer confidence falls in June

Lovefest with SUVs is over, thanks to high fuel prices

(Photo: Anheuser-Busch)

Check Out Line: Nike’s U.S. hurdle

Brad Dorfman — Thu, 26 Jun 2008 13:47:10 +0000

Check out Nike just not doing it in the U.S.

The athletic shoe and apparel maker apparently is not immune to the sluggish U.S. economy. The company said Wednesday that U.S. orders for goods through November were flat.

It also said sales in the fourth quarter rose 4 percent in the U.S., compared with a 16 percent increase for the entire company. U.S. apparel sales rose only 2 percent.

Nike said it will focus on more premium merchandise that is better distributed and can stand out. It also stressed that U.S. profit margins are not eroding.

For Nike, getting through the tough U.S. economy might just be an invigorating workout.

“Strong companies who are able to navigate through those tough times can come out even stronger,” Nike CEO Mark Parker said in a conference call.

Ooh, feel the burn!

Also in the basket:

Anheuser-Busch to reject $46.3 billion InBev offer

The road runs out: Streetwear adapts as market implodes (WWD)

Steve & Barry’s Hits Trouble: Hyped clothing retailer hires turnaround help (WSJ)

Check Out Line: Woe be the consumer

Brad Dorfman — Wed, 25 Jun 2008 13:47:57 +0000

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)

(Photo: Reuters)

Bud brewer in a tight spot from Stella bid

David Jones — Wed, 25 Jun 2008 13:27:00 +0000

InBev has timed its $46.3 billion bid for Budweiser brewer Anheuser-Busch well. Anheuser's shares have gone nowhere for five years, Chief Executive August Busch IV is not the leader his father was, while InBev is buoyed by strong revenues from Brazil, where the real is riding high.

That probably explains the wall of silence from the Budweiser brewer's home town of St Louis. What does it do to fight off the $65 a share bid -- sack its chief executive, sell
off its non-core assets or look for a friendly white knight?

The Busch family has had influence over the group well beyond its small 3.5 percent stake. But with hard cash on the table, hedge funds moving in and investment guru Warren Buffett sitting on 5 percent, the family no longer pulls all the strings.

It could move to sell off its SeaWorld entertainment parks and its packaging non-core assets for $4 billion, but the Stella Artois and Beck's Belgian-Brazilian brewer InBev has already said it will do that anyway if its bid is successful.

And finding a friend? Well, SABMiller already owns U.S. No 2 brewer Miller, Diageo doesn't want a massive gamble on the U.S. economy and beer market, and Heineken simply can not afford it so soon after swallowing half of Scottish and Newcastle.

InBev may well have to pay a few dollars more to win, but with half its earnings coming from Brazil and the real on a roll, it is confident it can get the financing -- credit crunch or no credit crunch.

Time for a Bud?

InBev thinks so.

Check Out Line: Kroger Kroger rides lower prices, gas discounts to higher profit

Aarthi Sivaraman — Tue, 24 Jun 2008 14:14:31 +0000

Check Out the quarterly profit at Kroger Co.

The largest U.S. grocery chain posted a higher quarterly profit on Tuesday, thanks to its emphasis on lower prices and gasoline discounts – music to its shoppers’ ears and higher sales for itself.

“Kroger continues to help customers stretch their budgets in a number of ways, including lower prices and our expanded generic drug and gas discount programs,” chief executive David Dillon said in a statement.

The price cuts, he said, were helping Kroger’s customers save $1 billion annually, at a time when shoppers deem every last dollar precious, as they face skyrocketing prices for necessities such as gasoline.

Kroger also raised its outlook for the full year, based on the strength of the results from the reported quarter.

Also in the basket:

ConAgra sees higher than expected fourth quarter profit

Dollar Tree recalls 470,000 China-made glue guns

Williams-Sonoma is trimming its catalog mailings (WSJ - subscription needed)

J.C. Penney Faults Fake Ad on YouTube (WSJ - subscription needed)

(Photo: Reuters)

Check Out Line: Walgreen’s 3rd-quarter results propel stock

Aarthi Sivaraman — Mon, 23 Jun 2008 14:16:51 +0000

Check out the quarterly results at Walgreen, one of the largest U.S. drugstore operators.

The company posted a 2 percent increase in quarterly profit, amid a weak U.S. economy and slowing growth in sales of prescription drugs — in the reported quarter, Zyrtec was switched to over-the-counter status.

And a slower-than-usual flu season — (good for you and me) – wasn’t so good for Walgreen. The company also pointed to the milder flu period for a slowdown in prescription drug sales volume in the quarter.

The company said it is on track to beat its goal of opening 550 new drugstores this year — and perhaps even come to the rescue of cash-strapped shoppers in the process.

“We’re adding neighborhood locations for today’s customer who is searching for value and struggling with high gas prices,” President Greg Wasson said in a statement on Monday.

As of May 31, the company operated 6,727 store locations in 49 states, but will be in all 50 states when it opens its first Alaska stores in 2009.

Also in the basket:

Bunge to buy Corn Products for $4.4 billion

Costco plans Australia foray to challenge duopoly

Busch family member backs ’strong’ Anheuser Busch

Jones Apparel takes stake in Asian partner

(Photo: Reuters)