Archive for August 23rd, 2007

Christmas Projections Already?

by David Bodamer August 23rd, 2007

The back-to-school shopping season isn’t quite over yet, but some retailers are already warning that the second half of the year is going to be a rough stretch. Some are even preaching caution for the Christmas shopping season.

Numerous retailers, from Wal-Mart Stores Inc to Target Corp to Ross Stores, have warned that the second half of the year will be more difficult than the first as the deteriorating housing market, higher fuel and food costs, and an undulating stock market take a toll on shoppers.

Wal-Mart cut its full-year earnings forecast last week, saying its customers are running out of cash by the end of the month, while Staples Inc’s Chief Executive Ron Sargent said on Tuesday that he was “worried” about the current state of consumer spending.

Clothing chain Tween Brands Inc on Wednesday reduced its full-year earnings outlook, while Ross Stores joined the chorus, cutting its full-year earnings forecast because of “macro economic factors, recent results and projections from other retailers, and our own sales trend that slowed versus plan beginning in mid-July.”

Retailers are preparing cautiously for the second half of the year, reducing inventory plans now to try to avoid costly markdowns or price wars later on.

“There’s caution in the air,” said Marie Driscoll, retail analyst at Standard & Poor’s.

More here.

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FTC Ruling Says Whole Foods’ Rivals Are Other Supermarkets

by David Bodamer August 23rd, 2007

I’m a little late on this, but the ruling handed down on the Whole Foods/Wild Oats merger seems extremely significant. The judge ruled to approve the merger on the grounds that Whole Foods is not just competing with other organic grocers, but with the entire supermarket industry. That means it’s not creating a monopoly situation by acquiring its presumptive rival.

The ruling is being appealed.

You can download a pdf of the judge’s ruling here. The Federal Trade Commission has a whole page dedicated to the case where you can download all the motions and decisions.

The Denver Post summed up the ruling nicely in a story on Tuesday:

Acquiring Boulder-based Wild Oats Markets Inc. would not eliminate competition for Whole Foods Market Inc. because the natural- and organic-foods chain also faces competition from traditional supermarkets, a federal judge said in a ruling released Tuesday.

In his 93-page decision, U.S. District Judge Paul L. Friedman explained why he denied a request by the Federal Trade Commission to block the proposed $760 million merger of the two companies.

Friedman issued his decision Thursday, but it wasn’t made public until the companies redacted trade secrets. The FTC has appealed the ruling and is seeking an injunction pending the appeal. The deal remains on hold while an appeals court gathers information from both sides.

The judge’s ruling meshes with what we found in our August cover story.

Here’s a little excerpt:

Across the country, similar stories are playing out. Conventional grocers, including the three biggest players, Kroger Inc., Safeway Inc. and Supervalu Inc., are increasingly going back to older stores and renovating and expanding them rather than building new stores. They are bringing in more prepared foods, wine selections and other new departments. The mainstream grocers are finding the moves help them compete with the proliferation of chains like Wild Oats and Whole Foods. It also helps distinguish them from Wal-Mart, Costco and Target, who in the past decade have gobbled up huge shares of the grocery market.

“All the major chains are reinvesting in their existing infrastructure,” says Joe Bona, president of the retail division of Colemanbrandworx, a global branding agency. The firm has created new prototypes for several grocery chains including Pathmark, Stop & Shop, Shaw’s, Safeway Canada and Japan’s Jusco.

For their part, Swearingen says, Casto and Kroger are looking to emulate what they’ve done at Dublin Plaza at other centers. “Over the last couple of years, we’ve spent more time with Kroger on renovations and expansions versus new development,” she says.

Here are some other posts on Whole Foods.

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Consumers Take Another Punch

by David Bodamer August 23rd, 2007

New York Post columnist John Crudele has a column in today’s paper describing how credit card companies that also dabbled in mortgages, like Capitol One with its Greenpoint Mortgage unit, are quietly cranking up interest rates on consumers’ credit cards to help make up for money lost in mortgages.

There’s no sense how widespread this practice is, but it is troubling. If consumers are hit with higher credit card rates, that will most assuredly cut into spending as they will have to allocate more funds to pay the higher interest rates.

I first found out about this because a reader sent me an e-mail complaining about the increase.

He was a long-time Capital One customer with excellent credit and he resented the bank treating him like a bum.

When I called Capital One, which is among the largest credit-card issuers in the nation, the company said it was raising rates because it could and because of unspecified economic conditions.

I pressed and a bank spokesperson basically said that the economic reasons were none of my business.

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