Archive for October, 2006

‘Cause they’ve got … high hopes

October 31st, 2006, filed by Emily Kaiser

santa.jpgOkay, so their jobs really do depend on it, but two-thirds of the retail chief marketing officers surveyed by consulting firm BDO Seidman LLP think U.S. holiday sales will be higher this year.

The inaugural “Retail Compass” survey of 114 chief marketing officers at retailers with more than $100 million in annual revenues found that only two percent expected holiday sales to fall from a year earlier. Overall, the marketing execs, on average, expect a holiday sales increase of 7.8 percent, which is more ambitious than the 5 percent gain forecast by the National Retail Federation trade group.

Among the top 100 largest retailers, some 80 percent of marketing executives predicted higher holiday sales, with an average growth rate of 9.3 percent.

The survey, conducted in the last week of October, found that marketing executives’ biggest concern was energy costs, followed by rising interest rates and the slowing housing market:

“Despite several forecasts to the contrary, the senior marketing leaders of US retailers have high hopes for the holidays,” Douglas Hart, a partner in BDO Seidman’s Retail and Consumer Products practice, said in a statement. “However, given their concern about the impact of energy costs on consumer buying, a spike in oil and gas prices in the near term could adversely affect these lofty expectations.”

Big dividends from a small retailer

October 31st, 2006, filed by Marc Gerstein

This being Halloween, it seems appropriate to ask, who’s afraid of big, bad Wal-Mart? If you were thinking women’s apparel retailer Cato Corp. (CTR), think again. This microcap has consistently stood its ground.

In todays investment column, I introduced nine good-yielding strip-mall REITs that may benefit from Wal-Mart’s struggles. Cato is another such outfit.

You’d never know it given Cato’s skimpy research coverage; two analysts follow it now, both from small firms, and for most of the past few years, there was only one analyst, Marc Bettinger of Stanford Group Company, who regularly reported on CTR. So it’s not surprising to see low share-price valuation metrics.

Table A


Company Indy. Avg.
P/E (TTM) 15.30 21.99
Price/Sales (TTM) 0.86 1.52

Note: TTM = Trailing 12 months

He has a Buy rating on the stock now, as lower gas prices are especially beneficial to this discounter’s largely blue-collar clientele, helping the company post strong results. However his rating has bounced around over time as Cato’s comparable-store sales trends ebbed and flowed and as broader macroeconomic data influenced attitudes toward the spending prowess of low-end consumers.

But through it all, Cato hung in and managed to deliver for customers - it aims to price just a little above Wal-Mart but to offer fashions and services that far exceed what can be obtained from the mega-merchant -and for shareholders.

Growth, what Wall Street usually demands, has not been Cato’s stock in trade.

Table B


Company Indy. Avg.
Sales growth rate (%)
last 5 yrs.
4.77 10.80
Sales growth rate (%)
last 5 yrs.
6.66 19.24

Note: TTM = Trailing 12 months

But there’s more to life than growth. This debt-free company features solid fundamentals.

Table C


Company Indy. Avg.
% Operating Margin (TTM) 8.93 10.61
Inventory Turnover (TTM) 6.29 4.66
% Return on Investment (TTM) 17.17 16.62
% Return on Investment (5 Yr.) 15.47 13.96

Note: TTM = Trailing 12 months

Most significantly, rather than investing heavily to try to grow more quickly than it really could, Cato has historically given greater emphasis to returning cash to shareholders through dividends.

Table D


Company Indy. Avg.
Yield (%) 2.63 1.26
Dividend growth rate (%)
last 5 yrs.
12.34 17.36
Payout ratio (TTM) 34.02 16.85

Note: TTM = Trailing 12 months

The above-average yield is not the result of a depressed stock price but of the merchant’s deliberate decision to make generous payments to shareholders. Despite the relatively high payout ratio, Cato’s liquidity has enabled the dividend to grow more quickly over the past five years than has its sales or earnings per share.

Cato seems liquid enough to remain at least worthwhile as a total-return (yield plus growth) play since cash from operations is typically five times as great as annual dividend payments. If Cato can boost its EPS growth rate to 10 percent over the long term, as analysts project, so much the better.

When Santa can’t ho ho hold it…

October 31st, 2006, filed by Robert Basler

“When out on the lawn there arose such a clatter, Santa making a pit stop to empty his…. “

NO! That’s not how the poem goes! That’s just wrong! I’m not sure why we have a newsphoto of multiple Santas taking a bathroom break, but if you use your imagination you can probably come up with funny captions.  Send them via Post a Comment.
santas360.jpg

 

Santas take a break during a day of training in London, October 30, 2006.   REUTERS/Toby Melville

“Rambo IV: Can’t We All Be Friends?”

October 31st, 2006, filed by Robert Basler

It seems they’re about to start shooting the latest in Sylvester Stallone’s Rambo saga, this time in Thailand, but there may be a slight hitch. Thai officials have told the movie folks to avoid excessive violence for fear of corrupting youth or damaging the environment.

In “Rambo IV: In the Serpent’s Eye”, the renegade Vietnam veteran played by Stallone comes out of retirement to track down…  well, heck,if you’ve seen any of the others, you know the story.

So as you can imagine the screenwriters are now hard at work on rewrites, adding such lengthy new scenes as “Rambo makes an origami butterfly,” “Rambo takes the Hummer in for a safety check” and “Rambo flosses after a big meal.” Here’s the story:rambo2001.jpg

Sylvester Stallone looks on as Bruce Willis receives a star on the Hollywood Walk of Fame in Los Angeles October 16, 2006. REUTERS/Chris Pizzello

“Can I please have two Carters and a Truman for change?”

October 31st, 2006, filed by Robert Basler

We haven’t had a really good dumb criminal story for a few days, but this one makes up for the lack. Police in Arkansas say a guy used a $100 bill with no president’s face but with the name of former President Bill Clinton, to buy cigarettes, according to the local newspaper.

Yes, that’s right, the little-known Clinton Hundred Dollar Bill.

Said one lieutenant with the sheriff’s office, “Of all the cases I’ve worked with phoney money, this is the sorriest bill I’ve ever seen.”  Here’s the story, courtesy of the Batesville Daily Guard:
clinton300.jpg

 

Former President Bill Clinton salutes at a fundraising dinner in honor of Senator Hillary Rodham Clinton’s 59th birthday in New York October 26, 2006. REUTERS/Jeff Zelevansky

Probable cause doesn’t get any more probable than this…

October 31st, 2006, filed by Robert Basler

A burglar in Germany gave police a helpful clue at a break-in, when he accidentally left his fingertip behind.

“We usually find fingerprints at the crime scene, but it’s not every day that thieves leave the original there too,” said a police spokesman.

You do have to give the guy some credit for nerve, though.  When police matched the fingerprint and confronted him, he denied it…  Here is the story:

Free video ride over? Not quite

October 31st, 2006, filed by Kenneth Li

Viacom last week asked YouTube to purge its site of some of its clips from MTV to Comedy Central, according to a Viacom source. A post from YouTube user and NewsCloud founder Jeff Reifman sent the blogosphere a twitter, declaring the end of pirated video clips on the Internet.

But a quick glance on YouTube on Monday revealed thousands of files yet from Viacom yet to be deleted. A search for “Stephen Colbert” turns up more than 1,000 video clips, most copied from Comedy Central. Then again, the confusion viewers encounter trying to find the same videos on Comedy Central’s own site makes one understand the nearly universal appeal of YouTube.

Are YouTube’s moves merely part of elaborate negotiating tactics leading to an eventual advertising and promotion deal? If so, this would be in line with the music industry’s recent round of agreements with YouTube and Google.

Here Business 2.0’s editor-at-large Erick Schonfeld asks Chad Hurley about Comedy Central clips. Hurley does not address the Comedy Central clips directly, but speaks generally about its policy.
Hurley via Schonfeld:

I think people are reporting take downs because they have just noticed them, but this is nothing new to us. We have been doing it for months … We are not operating any differently.

Enjoy a Jon Stewart clip on YouTube, about YouTube, while it lasts.

Another look at Wrigley

October 30th, 2006, filed by Marc Gerstein

It hasn’t been an easy year for Wm. Wrigley Jr. Co. (WWY), given difficulties integrating the June 2005 Life Savers/Altoids acquisition and increased aggressiveness of confectionary rival Cadbury Schweppes Plc (CBRY.L). Both issues appear to have helped take a toll on what had been traditionally high returns on capital. Table A shows how in this area, Wrigley slowed more than an already-lackluster industry.

Table A — Trailing 12 month Return on Investment


10/06 10/05 10/04
Return on Invest. WWY 12.76 20.10 23.29
Return on Invest. Indy. 8.34 9.01 9.51

This has cut into the stock’s valuation.

Table B


10/06 10/05 10/04
P/E based on estimated EPS for current fiscal yr. 23.21 28.89 28.71
P/E based on estimated EPS for next fiscal yr. 21.00 25.83 25.78

Last week, though, the stock jumped when Wrigley announced that William Perez, formerly with Nike, would become President and C.E.O. Former leader William Wrigley is staying on as executive chairman.

Today, Cadbury Schweppes Plc (CBRY.L) reiterated its revenue target but lowered its margin target. Wrigley stock is down about 1 percent currently. Investors may be concerned that without the yoke of its former margin target, Cadbury will feel be bolder, in terms of pricing, as it introduces its Trident brand into the U.K. market, where Wrigley holds a 98 percent share.

While analysts are hardly bearish on Wrigley, they are less bullish than they were a year ago, as we see in Table C.

Table C


Now Yr. Ago
Buy 4 4
Outperform 3 3
Hold 5 2
Underperfom 1 1
Sell 0 0
Avg. score (1=best, 5=worst) 2.23 2.00

These aren’t the boldest developments investors have ever seen. But if Wrigley is able to get beyond its acquisition integration problems, as some see as possible — on October 23, George Askew of Steifel Nicholas suggested that “the worst is behind Wrigley” — then perhaps enough little things will add up.

Death, where is they sting? It’s going door-to-door…

October 30th, 2006, filed by Robert Basler

On Saturday evening some friends stopped by to show off their Halloween costumes. He was going as the late “Crockodile Hunter,” Steve Irwin, and she was going as the stingray that killed him.  ”Crikey” was the only word he would utter.

Dressing as a popular outdoorsman who died just a couple of months ago might have shocked me a bit, except I already knew my own college student son was dressing as a zombie version of the same guy. It turns out, lots and lots of people had the same idea this Halloween, and you can find Steve Irwin costumes all over the place.

Is it too soon for this kind of behavior? Check out the Salt Lake City Tribune’s story on the subject, and drop us your opinions via Post a Comment:                                                      

irwin300.jpg 

 

Australian adventurer Steve Irwin pretends being choked by an albino Burmese  python as he poses with his wife Terri in a 2002 photo. REUTERS/Jim Ruymen

 

Working for Reuters as an Iraqi in Baghdad

October 30th, 2006, filed by Paul Holmes

Reuters, like the few other foreign news organizations still present in Baghdad, could not operate without Iraqi journalists to report, film and photograph life and death on the streets of Iraq. So I came to Baghdad to meet them and see how our operation works.

Our compound, protectBaghdad-image.jpged by blast walls, razor wire, searchlights, armed Iraqi guards and British security advisers, is on the east bank of the Tigris across the river from the fortified Green Zone. It’s the workplace for about 40 journalists. Only seven of them are non-Iraqis – our British bureau chief, four correspondents who are Basque, British, Lebanese and South African, a Filipino chief photographer and a television producer who is Jordanian.

We have Iraqi Shi’ites, Sunnis and Kurds in our newsroom and all are aware of the Reuters reputation for fairness and accuracy and how they must help maintain it. Like Reuters journalists anywhere in the world, they leave their politics, ethnic roots and religion at home.

Several of our staff have been with Reuters since before the 2003 invasion when working for a foreign news agency meant the risk of falling foul of Saddam Hussein’s security men. Others joined us after the invasion. As in so many places where conflict convulses a country, some of our more recent colleagues are “accidents of history” who have switched to journalism when their world was turned upside down.

One of our reporters, a man with excellent English, is a lawyer. Another colleague is a bookseller who monitors Iraqi TV networks for news Reuters reporters can then check independently. Others used to be commercial photographers or videographers. Until three years ago they filmed weddings. Now they chronicle the carnage of everyday Iraq.

We train all our staff, regardless of nationality, both inside and outside Iraq. They all understand the Reuters principles of independence, integrity and freedom from bias. A team spirit means that, as they did on Saturday evening, they can sit and talk together while sharing a smoke from a hookah pipe without regarding each other as rivals across the deadly sectarian and ethnic divides that prevail in the world outside the compound.

All of them have tales of personal tragedy to tell — stories of the killings of loved ones and other sufferings that have afflicted Iraq since 2003. I’m not going to name them because so many Iraqi journalists fear that divulging their identity amounts to a death sentence at the hands of insurgents or militias. As I am writing this on Sunday, an Iraqi woman who presents a sports show on Iraqi state television has just been found killed with her driver in their car.

One of our cameramen had to flee his home, postpone his wedding and move his extended family abroad after a sectarian militia ran him out of his neighborhood. Another of our journalists had to move to Baghdad, where he now lives in the Reuters compound, after insurgents shot dead his brother as part of a campaign to intimidate journalists into leaving the town of Mosul. Yet another got a phone call at work one day from his wife to tell him she was laying seriously wounded outside their home after a bomb went off. Two of his male relatives have been kidnapped and remain missing. One man is the brother of a Reuters TV soundman who was shot dead by U.S. forces on his way to report a story last year.

These are typical stories in today’s Iraq. What is uncommon is the dedication that these journalists bring to covering the news for Reuters.

The foreigners rarely leave our compound, other than for a brief ride in an armored car to a news conference or interview in the Green Zone or to travel to and from the airport for their rotations in and out of Baghdad. They also make use of facilities such as U.S. military embeds and trips by Iraqi or foreign officials to get around the country when they can.

It’s the same story for most foreign news services. The kidnapping of foreigners in Iraq may have gone down over the past year but that may in part be because far fewer of them brave the streets. By contrast, our Iraqi staff are out every day, rushing to the scene of attacks, recording the hardships of daily life and interviewing the Iraqi civilians on the receiving end of this conflict whose voice is never heard enough.

“Every day when I come to Reuters, I feel proud to be here. It’s important to help the world understand what is happening in my country,” one of them told me. Reuters, I told him, was just as proud of him.

Paul Holmes is Reuters Global Editor for Political and General News. He’ll take reader comments to this post until 3 p.m. Eastern on Wednesday and plans to post a response at 3 p.m. Eastern on Thursday. 

Picture credit: A man walks past a vehicle damaged by a roadside bomb attack in Baghdad, Oct 28, 2006. REUTERS/Thaier Al-Sudani