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    Published on: November 12, 2009

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    Hi, I’m Kevin Coupe, and this is MorningNewsBeat Radio, available on iTunes and brought to you this week by Webstop, experts in the art of retail website design.

    There was an interesting piece in the Boston Globe recently about generational differences and how they are reflected in the television programs we watch. The simplistic presentations of teenagers, and even teen angst, that ruled when many of us were kids no longer is credible; stereotyping isn’t just inappropriate, but dangerous. Many in this generation see only possibilities, and they don’t want to hear the word “can’t.” I ran into this the other day when my 15-year-old daughter expressed an interest in playing high school football...on the boys’ team. I may not be thrilled about it, but I love the idea that she believes that this option should and will be open to her.

    This perspective is reflected on television, where wide screens and high definition aren’t just technological advances, but metaphors for a complex and multi-layered group of people. It is archaic, the Globe writes, “to define young TV characters at a glance, to merely stamp them with shorthand labels such as ‘popular kid’ or ‘jock.’ Young lead characters such as Finn on ‘Glee’ and Chuck Bass on ‘Gossip Girl’ aren’t any one thing anymore; likewise kids who occupy the peripheries of the action, such as Marshall, the well-adjusted 14-year-old gay son on ‘United States of Tara’ or Damon, the possibly-gay possibly-depressed goth son on ‘Hung’. To know who they are, you have to experience them, plain and simple.”

    Not only are these characters complex, but they reflect a generation that does not want to be hemmed in by traditional labels or rules, and that is far less concerned with the cultural battles of previous generations. If the Globe and the experts with which it spoke are right about this - and I think they are - then that could mean that much of the hullaballoo and debate in Washington on a wide variety of contentious issues could be irrelevant to how many in the Millennial generation live their lives. Wouldn’t that be a kick in the head if the arguments and fights being waged by mostly old guys ended up being trivial or at least inconsequential to the priorities of the next generation?

    That’s something we all have to keep in mind when it comes to the conduct of business. There will be folks who write in saying that e-commerce isn;t a good thing because it detracts from traditional retail. There will be people who will send me emails saying that social networking actually has a depersonalizing influence. Some will suggest that this is a lazy and entitled generation. The debate will go on and on, and the topics will stretch out as far as the eye can see.

    But we have to remember that many of the biases and preconceptions that we bring to these discussions simply don’t matter. Some of them will, of course, but the prize for relevance will go to those companies and executives able to tell the difference...who can cater to a generation unburdened by our prejudices and mistakes, the members of which have their own distinct and complex set of values.

    Not easy to market to these people. Not easy to govern them. But worth it, in the long run.

    Besides, what choice do we have?

    For MNB Radio, I’m Kevin Coupe.
    KC's View:

    Published on: November 12, 2009

    A shareholder activist group is asking the management of Winn-Dixie Stores to either buy back shares in the company so that cash can be returned to investors, or to sell the company outright.

    A letter from George Schultze of Schultze Asset Management to Winn-Dixie CEO Peter Lynch called for the company to stop investing cash in new stores and remodels.

    According to the letter, “We view WINN as an undervalued and underleveraged food and drug retailer. We urge management to close this value gap by implementing a more efficient capital structure as soon as possible. By doing so, the board and management of WINN will send a very clear message to the investing community that they share their shareholders’ valid concerns about the Company’s valuation. WINN has significant sources of excess cash available from its balance sheet and through its capacity for a reasonable amount of additional leverage. We estimate this available excess cash to be approximately $590 million and believe it should entirely be used to repurchase WINN stock so the remaining shareholders may benefit from accretion of future earnings per share and cash flow.

    “We believe this course of action, repurchasing stock with the Company’s available excess cash, is more likely to create shareholder value than management’s current strategy of investing hundreds of millions of dollars on store remodeling. As an example of the lack of success of the current store remodeling effort, the Company has already remodeled 170 stores but WINN’s share price is at nearly the same level as its IPO price1 in November 2006! Similarly, management stated in its October 27, 2009 quarterly conference call that the Company took $3.5 million in impairment charges related to writing down the value of two recently remodeled stores. Clearly, it does not make sense to invest more of our Company’s money in remodeling stores only for such stores to become valuation-impaired right after we make the multi-million dollar investment.”

    The letter goes on: “As you can imagine, we are also of the opinion that the Board must honor its role as a fiduciary for all shareholders and thereby remain open to selling the entire company if market prices exceed your internal calculations of fair value. As such, in the event management and the Board cannot close the obvious valuation disparity between our Company and similarly positioned firms by implementing our requested recapitalization and share repurchases, we would then strongly encourage the Board to hire a reputable investment bank to help explore a sale of the entire enterprise at a fair price.”

    No response yet from Winn-Dixie.
    KC's View:
    If Winn-Dixie does not invest in its fleet, then it might as well sell the whole damn thing. Thought I’m not sure that Winn-Dixie, in the current environment, is going to get what these investors view as a “fair price.”

    What this illustrates to me is that there is a huge gap between the investor class and the retailer class. I can understand investors wanting a fair return, but I’m not sure that handicapping a retailer’s ability to compete is the best way to get it.

    Published on: November 12, 2009

    A story in Northwest Arkansas News suggests that Walmart’s SKU rationalization and reduction efforts are resulting in some level of shopper frustration when they can’t find the flavors and sizes they want.

    There apparently is some degree of supplier frustration, as well. “I’m hearing that the SKU and inventory reductions have made life difficult for all of them, but especially the mid-sized suppliers,” Patricia Edwards, financial analyst with Storehouse Partners, tells the paper. “One particular supplier in the health and wellness area was hoping as of a couple of months ago for flat numbers this year and to ‘just get to the next year.’ ”

    The News writes that “about 24 percent of shoppers reported going to Walmart less this year compared with a year ago, while 14 percent of shoppers reported going to Walmart more often, according to the Wal-Mart World report by Jennifer Halterman, Retail Forward senior consultant.”
    KC's View:
    The tightrope that Walmart has to walk here is reducing its SKUs without having an overall negative impact on shopper perception. The anecdotal evidence suggests that maybe the retailer has taken it too far, but it is hardly beyond the realm of possibility that Walmart is tweaking its selection in a variety of categories in order to get it right. Walmart is good, but it isn’t perfect - it was unlikely that Walmart was going to get it precisely right the first time.

    I’m also hearing that the retailer is tweaking its private brand strategy a bit.

    The worst mistake that Walmart’s competitors can make is to see a story like this and believe that there is some kind of major flaw in the Bentonville Behemoth’s strategy. All this means is that Walmart is willing to undertake major initiatives and do whatever is necessary to get it right.

    Published on: November 12, 2009

    Walmart said this morning that it had a third quarter profit of $3.25 billion, up from $3.14 billion during the same period a year earlier. Q3 net sales increased 1.1% to $98.67 billion and would have risen 3.8% excluding currency changes, according to the company.

    Excluding fuel sales, U.S. same-store sales fell 0.4%, down 0.5% at namesake stores and rising 0.1% at the Sam's Club warehouse chain.
    KC's View:

    Published on: November 12, 2009

    Canada-based Alimentation Couche-Tard said yesterday that it will partner with Shell Oil to operate 100 convenience stores in Chicago, a deal that it said would further its US midwest expansion plans. Couche-Tard already is the second-largest independent convenience store operator in North America.

    The majority of the new stores will be operated by third-parties. Terms of the deal were not disclosed.
    KC's View:

    Published on: November 12, 2009

    Bloomberg reports that KKR & Co., the private-equity firm that bought Dollar General Corp. just before the leverage buyout boom collapsed, is taking the discount retailer public at a higher price than investors pay for Walmart Stores Inc. ... The $784 million sale, which would be the largest initial public offering by a U.S. retailer in at least 17 years, values the discount merchant at as much as 29.5 times earnings, Bloomberg data show. That’s almost twice as expensive as the 15.4 multiple for Walmart, the world’s biggest retailer.”
    KC's View:

    Published on: November 12, 2009

    Reuters reports that Walmart-owned Asda Group in the UK believes that “price competition between retailers this Christmas will be the most intense for a decade.”

    This competition will be reflected in continued price-cutting, especially in nonfood categories, being pursued by the UK’s top three supermarket chains.
    KC's View:

    Published on: November 12, 2009

    • PepsiCo said yesterday that it withdrew paperwork related to its efforts to acquire the shares it does not already own in Pepsi Bottling Group Inc. and PepsiAmericas Inc. The reason: Pepsi said it wants to give the Federal Trade Commission (FTC) more time to review the deals.

    • Caribou Coffee has launched its first television ad campaign, according to Advertising Age, and is using the effort to poke fun at market leader Starbucks.

    According to the story, “This is likely just the beginning of new marketing moves from Caribou, the nation's second-largest coffee chain ... The agency is looking at everything from package design to store experience. The chain is planning a raft of new food items as well, including new bakery options and oatmeal, which has been incredibly successful for Starbucks.”
    KC's View:

    Published on: November 12, 2009

    • Nash Finch said that its third quarter sales were $1.633 billion compared to $1.416 billion in the prior-year quarter, an increase of 15.3%. Q3 earnings were $21.9 million, as compared to net earnings of $7.7 million in the prior year quarter.

    • J. Sainsbury reports that its first half net profit was up 48 percent to the equivalent of $417.6 million (US), on sales that were up 3.7 percent to $18.61 billion (US). Same-store sales - excluding fuel but including VAT, were up 5.7 percent.

    • Anheuser-Busch InBev said that its third quarter revenue was $9.76 billion, down from combined revenue of $10.89 billion for A-B and inBev before they merged last year. Q3 profit was $1.55 billion, but the company said that year-ago comparisons were not being made with pre-merger revenue numbers. (Analysts, however, noted that in the July-September period in 2008, InBev made $690 million and AB $666.1 million.)
    KC's View:

    Published on: November 12, 2009

    We continue to get people weighing in on the sick leave debate, and whether Walmart’s policy of not not paying people for the first sick day taken is actually creating an environment in which people go to work sick..even with the H1N1 flu.

    One MNB user wrote:

    I would be very curious to see what the sick leave policy is for the top retailers in America, full time and part time. I believe we would be surprised to see that one doesn’t really exist. Using vacation days to cover sick days doesn’t constitute as a sick leave policy. As a member of management when an employee calls in sick, I can tell if this is truly a sick situation or just a “mental health day”.  I also do agree with one of your other readers, many employees show up sick because they can’t afford to miss, or they know someone else is getting screwed covering them. The cost of giving sick days would add a lot of cost to doing business, and yes many employees abuse the days. When we “used” to have sick days, many employees would inquire with the secretary how many days they had left then would call in sick that week to get in their days in before the end of the year. One of the reasons they lost them I’m sure.
     
    Another MNB user chimed in:

    A couple of thoughts / points:

    • I once worked for a company that had a wonderful policy on sick leave. It had no sick days at all, but it paid everyone 2% extra, which they were supposed to bank and draw on when they were sick. This encouraged everyone to work, but did allow for people to take sick time as needed.

    That organizations have no sick days, or are not paying part time workers for either sick days or medical benefits, or do not have sufficient staffing to cover when employees are sick are all signs that business has cut beyond the bone. Their costs are being pushed onto society as a whole, while their profits are accruing to the company. They are out of balance and this should be corrected.


    MNB user  Deborah J. Maestu wrote:

    Thinking about how many people in retail might be going to work sick is enough to drive more people to do more of their shopping on line.  A nail in the retail coffin?

    Maybe.

    Still another MNB user wrote:

    In my former life I was a salaried employee of a now defunct Fortune 50 company for 25 years. I won't tell you the name of the company but they had a famous "cow".  I took on average about 1 sick day a year.  Due to a surgical procedure I had to be off for 5 days - but company policy said that anything over 4 days required you to go on short term disability. The kicker was that caused your salary review to be pushed back one month which results in a lower annual salary forever going forward.  So I took 4 sick days and one day vacation. No one ever did my work while I was gone for any reason including vacation time. It was always waiting for me when I got back.  However, being able to tell this story about how my cheap former employer required me to take a vacation day to recover from surgery is, as they say, "priceless.”

    One of the things that occurs to me as I read all these emails is that the problem really isn’t sick leave. The real problem is that the social contract has unraveled.

    I am old enough to remember when companies would hire people, pay them a fair wage, make them feel like they had an emotional investment in the enterprise, and feel a responsibility to them. (Which included, by the way, telling them to stay home when sick and paying them for their sick time.) At the same time, people wanted to believe in the organization for which they worked, to believe in the value of work, and often worked for the same companies for their entire lives.

    Now, I’m not one to yearn for the good old days. But I do believe that both sides of the equation share some fault for a situation in which people simply don’t trust each other. People in management seem to assume that employees want to take advantage, and employees assume that they are getting screwed by exploitive superiors.

    Not everyone, of course, and not every company. But enough so that it is notable. And concerning.

    Not sure about this, but maybe the real problem is a lack of responsibility. Just as many companies don’t feel any sort of broad responsibility for their employees, many workers don’t feel responsible to the people for whom they work (not to mention the investors who own the company, and the people who buy the products they produce).

    If indeed this is the disconnect at the root of this debate, I’m not sure when it happened. But it may be the central issue that needs to be addressed and solved.

    I do know this. I’ve had a bronchial infection since last week. There have been plenty of times when it would have been very easy to take a day off, but I feel responsible to you, and to the terrific sponsors who make MNB possible. So I get the work done.

    If I owned a company, and had actual people working for me, it would be my primary responsibility to run it in such a way that they would feel the same way.

    It is a small example, but my own.
    KC's View: