Reuters Shop Talk

     Mattel Inc. , the largest U.S. toy company, launched a national advertising campaign today in the hopes of assuring its customers it is on top of product safety. Of course, the ad ran the same day Mattel announced the recall of millions more toys.

The full-page ad appears in Tuesday’s Wall Street Journal,  New York Times and USA Today and includes a letter from Mattel Chief Executive Bob Eckert.
    
Here is the full text of the ad:     
     

Dear Fellow Parents, 
    
Nothing is more important than the safety of our children. As a father of four, I share your focus on providing only what’s best for them. As you may know, we’ve voluntarily recalled some toys for two different reasons: the impermissible use of lead paint and risks associated with small high-powered magnets.
    
I want to be sure that every parent hears about these issues quickly, returns affected toys to us, and knows that we have already taken steps to further ensure the safety of our toys. Please visit mattel.com/safety/ where you can learn about the affected toys, what we’ve done, and to find answers to your questions.
    
Our long record of safety at Mattel is why we’re one of the most trusted names with parents. And I am confident that the actions we are taking now will maintain that trust.
    
You have my personal commitment that we are working extremely hard to address your concerns and continue creating safe, entertaining toys for you and your children.
     
     Sincerely,
    Bob Eckert
    Chairman & Chief Executive Officer
    Mattel, Inc.

  Earlier this month, Mattel’s Fisher-Price unit recalled about 1.5 million preschool toys made by China-based contract manufacturer Lida Toy Co. that included products based on popular preschool characters from “Sesame Street” and “Dora the Explorer.” 

The recall was Mattel’s largest since 1998, when it recalled some 10 million Power Wheels vehicles made by Fisher-Price.

(Post updated after Mattel’sd latest recall.)

Seems like Wal-Mart attracts controversy all over the place — even on social networking web sites.
 
Last week, the world’s largest retailer set up the “Roommate Style Match” group on Facebook, a social networking site that has millions of college age users.
 
Wal-Mart hoped the group would help it attract a larger chunk of back-to-school shopping dollars.  (Click here for a Reuters story. For a take by a Forrester blogger, click here.)

But the group has also attracted a share of Wal-Mart detractors.  (The names of the posters are the ones they use on Facebook and the excerpts were copied directly from Facebook.)
 
“Small business was hurting our economy for too long!” wrote Daniel Waddington. “I only wish I could super-size the trade deficit along with my fries! No Job? De-valued dollar can’t cover my rising interest rates? At least I saved a nickel on a picture frame!!”
 
A post by Dave Haack said, “Unionize Wal Mart Give wal mart workers a Union and save america. Then every one can shop there and people who work there can earn enough to live !”

Wal-Mart did have some defenders on the site. For example,  Connie Bensen lauded Wal-Mart for its charitable contributions. 
“Wal-Mart just opened a store last week in my community. They donated $33,000 to community organizations. $5,000 of that came to my library for literacy! We welcome the new store & the shopping opportunities!”
 
A Wal-Mart spokeswoman said the company was happy so many of its customers were visiting the Facebook site. 
 
“We recognize that we are facilitating a live conversation, and we know that in any conversation, especially one happening online, there will be both supporters and detractors,” spokeswoman Jami Arms said in an email message to Reuters.

– Reuters photo from Wal-Mart 2007 annual shareholder meeting

Home Depot Inc.’s auction of HD Supply seemed troubled from the start. Now the deal may be renegotiated as the private equity buyers balk at the $10.3 billion price tag amid the floundering housing market and tight credit conditions.  

“This clearly is not a near term positive to (Home Depot) nor to a market nervous over credit,” said Credit Suisse analyst Gary Balter.  “The deal was not contingent on financing, though the material adverse change (MAC) clause may be broad enough to push for renegotiation.”

Balter said it was likely that HD Supply, which sells building materials, waste water and utility products to municipalities and contractors, would be sold for “materially less” than the current agreement.

“We would not be surprised if (Home Depot) ends up with a piece of the equity similar to Daimler’s retained interest in Chrysler—maybe up to 20 percent as that would create a better equity floor for the debt financing. Over time, this would not be the worst thing for HD as we believe there is value in HD Supply.”

Shares of Home Depot shed $1.71, or 4.5 percent, in midday trading after it said it may reprice the HD Supply deal and cut the price of a planned share buyback. 

“This is clearly a negative near-term for (Home Depot) … and may have broader implications for other pending capital markets transactions.”

Okay, so maybe kids and their parents weren’t ready to buy clothes for school yet.

Many apparel retailers felt the heat in July, literally, with hot weather delaying the purchase of back-to-school clothes. Delays in sales-tax holidays in some states into August also cut into sales.

But discounters like Wal-Mart were able to lure shoppers with promotions, helping those retailers post better-than-expected sales.

The following table lists select U.S. retail companies that have reported July sales at stores open at least a year, a key retail measure also known as same-store sales.

The table has the range of analysts’ estimates*. The consensus estimate# is
the average of analysts’ mean estimate. Data is compiled by Reuters Estimates.

All figures expressed in percentage change over the same period last year except number of estimates.

##For U.S. stores, excluding fuel

^Bon-Ton Stores estimate is for Bon-Ton and Carson’s combined

^^Reported on Wednesday

 Students are thinking about fun in the sun — and not about their school wardrobes, apparently. That, at least, is the word from American Eagle Outfitters which posted a surprising 6 percent drop in same-store sales during July on Wednesday 
The teen retailer blamed the weak results on schools across the nation starting later and tax-free days in Florida and Texas shifting to August from July. 
It’s hard to say what kind of effect these shifts will have on other chains that cater to students. Smaller rival Hot Topic, which is struggling to turn around sliding sales, posted a 7.4 percent decline in July same-store sales, saying that 3 percent of that decline was due to the changes in Florida and Texas. 
But unlike at American Eagle, the miss at Hot Topic, which sells music-inspired apparel, accessories, CDs and novelties, was expected, and the chain made no mention of any negative impact from later school start dates. 
Stay tuned for Thursday, when most apparel retailers report July same-store sales figures…

Hot weather might have been just the excuse for kids and parents to put off back to school shopping, at least in some parts of the country.
 
And that could bode ill for some retailers when they report July sales this week, analysts said.
 
Traffic patterns during the five weeks ended August 4 “showed substantial weakness in the South where hot weather pushed the lucrative back-to-school bounce further into August,” Richard Hastings, senior retail analyst at Bernard Sands, said.

Traffic in the Northeast and Midwest regions was better, but still down year over year.

Hastings said he will be watching Kohl’s, the off-mall, moderate priced department store retailer, to see if the middle-market consumer is still “in the game” and said he would need to see same-store sales up at least 2 percent there to feel comfortable.

Meanwhile, Planalytics, which monitors weather for businesses, said July actually was one of less extreme temperatures than last year, when the U.S. saw record heat.

Still, there were strong regional differences, with the interior West and Northern Plains seeing abnormally hot weather. Much of the Northeast and Upper Midwest was cooler and California, while seasonably warm, was cooler than last year, Planalytics said.

Gift cards. They’re not just for Christmas anymore.

Back-to-school time, the second-busiest shopping season of the year, is upon us, and companies such as American Express are turning to promotions to entice bargain-seeking parents and their offspring.

From now until Sept. 30, anyone who buys two American Express Gift Cards will receive a free back-to-school card worth $25, which can be used at Banana Republic, Old Navy, Gap and Linens ‘n Things. The card can only be used for three months after the date of issue.

The promotion is part of an effort by American Express to tap into increasing  gift card use at other times of the year, said Robert Sherman,  American Express spokesman.

To receive the card, shoppers who buy any two American Express gift cards at participating locations must complete a rebate form and send it in. Participating retailers include A&P, Albertsons, Carrs Food Store, CVS, Dominick’s, Duane Reade, Eagle, Genuardi’s, Kings, Pak N Save, Pavilions, Randalls, Rite Aid, Safeway, Simon David, Tom Thumb, Vons, Wawa and Winn-Dixie.

American Express gift cards are available in denominations from $25 to $500 and can be redeemed at U.S. retailers and restaurants that accept American Express Cards.

– Written by Regan E. Doherty

Whole Foods Market Inc. has felt pressure from chains like Safeway’s Dominick’s that offer more prepared, gourmet-style soups and meals — a mainstay of its strategy.

Now, it’s firing back with a new design that has more of a restaurant feel.  The company’s newest Chicago store takes a cue from on-the-go consumers and is more of a meeting place than its other shops in the city.

Sure, shoppers will find Wi-Fi access and thousands of natural and organic goods, even natural rubber yoga mats and bamboo yoga blocks. But the newest Whole Foods on the city’s South Side has more prepared foods, such as five seafood chowders or soups and five types of chili or other meat soups, 20 flavors of store-made gelato and sorbet, a juice bar and a made-to-order noodle and sushi bar. Or, shoppers can try some turkey jerky, pineapple bratwurst or meats from the in-house smoker on the other side of the 55,000-square foot store.
 
The store, which opens on Aug. 8, will also turn into a bit of a restaurant on some Friday nights. Culinary Coordinator Brette Jackson plans to host “community table” dinners where shoppers come in, drink some wine and beer, and tell her what they’d like to learn to cook. Jackson and the patrons will walk down the aisles to get ingredients and she’ll whip up a five-course meal. The price hasn’t been set yet, but follows a similar plan in place in stores in Milwaukee and St. Louis, Jackson said. A spot at the dinner costs $60 in Milwaukee and $65 in St. Louis.

Whole Foods also hopes the store becomes the first Leadership in Energy and Environmental Design certified grocery store in Chicago. To that end, the store has signs made from bamboo and recycled barn wood, a concrete and fly ash floor, and toilets that let you choose whether to flush with a little water (for liquids) or more water (for solids).
 
Oh, and if your feet get tired while walking around, you can buy a $109 pair of Earth shoes in the Whole Body section of the store, which also has organic baby clothing and bins filled with 42 different types of lip balm.

We’d like to know: would such features push you to change where you shop?

Got organic milk?

An oversupply of fancy organic milk means it’s being priced less than the regular stuff in some parts of the country.

Companies such as Dean Foods, the largest U.S. dairy processor and distributor, are being forced to lower prices on organic milk brands.

A regulatory change and favorable prices led more farmers to produce the organic milk and caused an industry-wide oversupply.
 
“There are some parts of the country right now where there is deep discounting of organic milk, where the price of organic milk may indeed by lower than the price of branded conventional milk,” Chief Financial Officer Jack Callahan said during a conference call.

Organic milk is typically more expensive for consumers, but the glut in the market has forced retailers to not only lower prices but expand marketing and distribution, thus increasing costs, to unload the oversupply.    
At the same time, rising regular milk prices are putting a pinch on Dean’s earnings.

“It’s sort of a unique confluence of two different issues happening at the same time with commodity prices rising to all-time highs and this glut of organic milk,” Callahan said.

July marked the start of the back-to-school shopping season (sorry kids!) and on Thursday investors will get a chance if this important season got off to a strong start when major U.S. retailers like Wal-Mart, Target, Gap and J.C. Penney report their July same-store sales results.

Investors and analysts are watching to see if higher gasoline prices and the deteriorating housing market will crimp back-to-school spending, or if student demand for electronics, like cell phones, laptops and MP3 players, means shoppers are spending less on clothing this year.

They will also have to navigate calendar changes that have made gauging monthly sales results more difficult this year. An extra week on last year’s retail calendar has created monthly periods this year that are not exactly comparable to year-ago results.

Here are excerpts from research notes with a round up of what analysts are expecting:

Brean Murray, Carret & Co. analyst Eric Beder: (See full note here)

• July, especially with the shift in the calendar to a week ahead of last year, marks the full start of the back-to-school selling season and the initial stages of fall; as such, the month is an important signpost for the rest of the year.
• While we believe there have been a number of key fashion positives, including continued strong demand for dresses and a shift to more flaired denim, there has been a continued lack of traffic in the mall; we believe the current low-growth,
  Darwinian environment will remain, at least for the near term.
• Given the relatively weak economic and mall traffic picture, we believe there is limited upside to our comp projections; we would not be surprised if bebe provided a dismal outlook for the remainder of the fall season.

Cowen and Co. analyst Lauren Cooks Levitan: (See full note here)

• While total July sales are expected to benefit from the calendar shift (high volume week shifts into Q2), particularly for BTS (back-to-school) focused retailers, we look for generally lackluster July comp store sales following another month of weak mall traffic trends coupled with the negative impact of later school start dates and tax holidays (FL and TX most importantly).
• We continue to expect that the calendar-related issues will produce uncertainty
  regarding how to interpret early BTS trends. However, given lean inventory levels and conservative assumptions following the slow start to Q2 sales, we do not expect significant changes to our Q2 estimates for most specialty retailers. As the specialty retail group has significantly underperformed the market since reporting June comps, we think we could see some relief on indications that Q2 EPS estimates are achievable regardless of July sales results.

JP Morgan analyst Charles Grom: (See full note here)

• Recall that expectations for June comps were dire heading into SSS 4 weeks ago and the group enjoyed a massive short squeeze run (up 3.0% vs. S&P 500 +1.9%) after SSS came in more/less on plan. However, the rally was short-lived with the group (and market) under severe pressure - down 11.9% (S&P 500 –7.4%). Will we see a similar trade this Thursday? We think it’s possible although the unfavorable calendar shift in both August and September is going to make comps look cosmetically softer and likely keep sentiment from improving much. All in, we feel most comfortable long COST, TGT, and WMT and would tread lightly with the rest of our coverage group. 

Goldman Sachs analyst Adrianne Shapira: (See full note here)

• This coming month will carry two key guideposts for investors to grade: 1) July same-store sales and 2) Q2 EPS season. While July same-store sales tend to be less significant due to heavy clearance activity, this year’s results will carry important clues as to customer spending appetite in early back-to-school period.
• While we suspect there has been a clear softening in trends even beyond the home category into apparel, we do not expect sales to be as disappointing as the stocks are anticipating. In fact, we would expect there to be some clear positive surprises, notably at Costco and Nordstrom. Both stocks are BUY-rated and have been recently placed on the GS Conviction List. We believe both should benefit from a decidedly affluent customer and a merchandise mix less exposed to home category.