For newspapers, the hits just keep on coming

Unfortunately, not the kind of hits they'd like.

The latest circulation reports say that the big papers continue their accelerating collapse:

This is the fourth consecutive semi-annual report to register a severe drop in daily circulation and -- perhaps more troubling to the industry -- Sunday copies. While the estimated decline 2.8% for daily circulation for all reporting papers may seem negligible, consider that in years past that decrease averaged around 1%. Sunday, considered the industry's bread-and-butter, showed even steeper losses, with a decline of about 3.4%.

Some papers (we're looking at you, LA Times) are doing even worse:

The Los Angeles Times reported that daily circulation fell 8% to 775,766. Sunday dropped 6% to 1,172,005.

The San Francisco Chronicle was down. Daily dropped 5.3% to 373,805 and Sunday fell 7.3% to 432,957.

The New York Times lost 3.5% daily to 1,086,798 and 3.5% on Sunday to 1,623,697. Its sister publication, The Boston Globe, reported decreases in daily circulation, down 6.7% to 386,415 and Sunday, down 9.9% to 587,292.

The Washington Post lost daily circulation, which was down 3.3% to 656,297 while Sunday declined 3.6% to 930,619.

I looked around on the web and found a circulation report from 1999, showing the LAT has dropped 28% (300,000) in the past seven years, from 1,078,000 to today's 776,000.

It becomes increasingly difficult for marketers to use newspapers as their primary trade promotion medium -- leaving little choice but to rely ever more heavily on in-store promotion.

Cool commie stuff

There is a popular retro movement in eastern Europe that makes old brands from the communist era cool, according to the International Herald Tribune.

Nostalgia has led East Europeans to embrace the products they shunned in the 1990s, when the collapse of the Iron Curtain opened borders to goods from the West.

From Traubi (grape soda) in Hungary to Inka coffee substitute in Poland and Jar dish soap in the Czech Republic, brands created to replace capitalist products are now attracting consumers with disposable cash and credit cards.

Most of the old brands, though, now belong to western marketers -- Jar, for example, being a P&G product.

The soap was the only dishwashing product available at the time and has stuck in people's minds, Norbert Racsko, an assistant brand manager at the Cincinnati-based company, said in an e- mail.

"It's a memory from childhood, and I even sometimes buy it," said Daria Spackova, 31, a film production manager.

Similar memories led Ildiko Nagy to teach her daughter the Traubi ad tune. "We love nothing but Traubi. We want Traubi," she sings, mimicking the ad broadcast on Hungarian state television 20 years ago.

"Traubi reminds me of my childhood, and I hope my daughter will remember it with her children one day too," Nagy said.

Ethnic targeting at the C-store

Circle K is launching a program to carry a range of Hispanic items in their convenience stores.

The Authentic Hispanic program offers various planograms including complete 4-foot and 3-foot dry grocery food and HBA displays of over 70 SKUs along with 10 beverage SKUs in the refrigerated section. The program features the most popular Hispanic brands such as Jumex, La Costena, Hershey Lorena, Nestle, El Azteca and more.

It sounds like a great idea. The logistics seem iffy, though. The whole idea of a c-store is to have a very small range of very high-volume items at high margins. To add into their distribution chains another sub-set of items that either go into only some stores or, alternatively, go into stores where they won't sell, will present difficulties.

It will be worth watching.

Top 10 retailers/suppliers

Cannondale Associates has released their annual survey of the top retailers and suppliers, with Procter & Gamble and Wal-Mart winning the top spots.

Manufacturers are rated by retailers on:

• Clearest company strategy
• Most important consumer brands for retailers
• Best combination of growth and profitability
• Best sales force/customer teams
• Most innovative marketing programs
• Most helpful consumer/shopper insights and category management
• Best supply chain management
• Best shopper marketing programs

The top ten are:

1. P&G
2. Kraft
3. PepsiCo
4. General Mills
5. Unilever
6. Nestle
7. Kellogg
8. Coca-Cola
9. ConAgra
10. Kimberley-Clark

Retailers are rated by their suppliers on:

• Clearest company strategy
• Best at store branding
• Projected power retailers
• Best retailers with which to do business
• Best category management/buying teams
• Most innovative consumer marketing/merchandising
• Best supply chain management
• Best practice category management/CMAR

The top ten:

1. Wal-Mart
2. Target
3. Kroger
4. Costco
5. Publix
6. Wegmans
7. HEB
8. Safeway
9. CVS
10. Whole Foods

Private-label music

Last year, one of the surprise best-selling CDs was by country singer Garth Brooks. The surprise was two-fold -- Brooks' popularity had declined a bit, and the CD was available only at Wal-Mart.

Wal-Mart is back at it, this time with another once-popular act with a still-big name -- the Eagles.

The Eagles and Wal-Mart Stores, Inc. today announced an exciting long-term strategic marketing agreement that will encompass sponsorship, exclusive audio and video releases, and product visibility.

You'll pardon me, I hope, if I snickered a bit as I read this part of the press release:

The Eagles were attracted to a Wal-Mart partnership because of the retailer’s drive to take a lead in sustainability and make a difference for future generations.

Without questioning the Eagles' commitment to the environment, one suspects that Wal-Mart's ability to move a ton of CDs might have played a role in their decision as well.

In any case, this is (yet another) nail in the labels' coffin.

Coach drops Target suit

Coach has withdrawn their suit against Target (referenced beow), and admitted that the Coach merchandise Target sells is genuine. Target says they got it from a department store liquidation.

In its lawsuit filed in a New York federal court, Coach alleged Target sold knock-offs of the Coach Python Signature Striped Demi purse, which typically retails for about $280. Some Target stores have been selling Coach bags for about $135.

Interesting. Does this mean that Coach can't tell the difference between their own stuff and a knock-off?

Hershey says trade promo works ...

... but investment analysts (and Ad Age) disagree.

At least that's what I got from this article.

Wall Street be damned, Hershey Co. is sticking by its theory that in-store marketing and promotion works better than advertising.

Despite a slew of questions from analysts suggesting a link between the chocolate giant's recent decrease in ad spending and its lower-than-expected third-quarter sales, Hershey President-CEO Rick Lenny was adamant that Hershey's increase in consumer marketing next year will happen "closest to the point of consumption." Translation: in store.

The analysts are concerned about a quarter in which Hershey grew less than expected. However, their results have been consistently good over the past several years, as even the critics concede, saying that it's "hard to overly criticize Hershey given they've had such a good 3- to 4-year record."

Hershey's boss told the analysts:

"Marketing-mix modeling still reinforces that trade [spending] has the highest level of return on investment and then within consumer support ... those [efforts] closer to the point of consumption and point-of-sale tend to have the higher return," Mr. Lenny said in a conference call with analysts. In general, he said, Hershey uses advertising to create awareness for new brands and new platforms, but views in-store support -- whether through sampling or through activities tied in with retailers' own strategies -- as the best way to capitalize on those high-return investments.

Music to my ears.

Tribune Company on the block

This is an update, I guess, of the media fragmentation round-up I did over the weekend -- it is being reported today that Tribune Company (owners of the Chicago Tribune, LA Times, Hartford Courant, Newsday, and a bunch of other papers, as well as a slew of TV stations*) is taking bids.

Tribune ... has asked bidders to submit nonbinding indications of interest by the end of the month ...

So far, three contenders have emerged: one group consisting of Madison Dearborn Partners, Providence Equity Partners, and Apollo Management; a second group consisting of Thomas H. Lee Partners and Texas Pacific Group; and Carlyle Group. It is unclear whether the latter will bid alone or join a consortium of buyers.

It's interesting that it is private equity firms, not media companies, lining up. Though I know little about investing (take a look at my portfolio if you doubt me), this seems to indicate that people might think the company could be worth more broken up, and therefore they'll buy it and sell off the pieces. Newspapers and TV stations, for all their pain these days, are still very profitable enterprises -- operating them as cash cows could work very nicely.

It will be interesting to see.


*Note: They also own the Chicago Cubs, but they'd rather not be reminded of that.

Price-fixing in the memory biz

In the latest development into a long-running Department of Justice investigation into price-fixing in the memory chip trade, three more executives have been indicted:

A federal grand jury in San Francisco handed down indictments Wednesday against two executives from Samsung and one from a Hynix U.S. subsidiary, the Department of Justice said in a statement.

The indictment charges that Samsung executives Il Ung Kim and Young Bae Rha and Hynix's Gary Swanson participated in the conspiracy during 2001 and 2002, the government said.

Eight other execs from the two companies have already entered guilty pleas.

In all, four companies and 16 individuals have been charged as a result of the long-running memory chip investigation. The probe also has resulted in fines totaling more that $731 million.

More on media fragmentation

Editor & Publisher reports that the upcoming newspaper circulation report will confirm that the blood continues to flow:

Industry sources who have seen the numbers tell E&P they anticipate that for the six months ending September 2006, top-line daily circulation will fall roughly 2.5% while Sunday will drop approximately 3%.

The declines keep coming, even after several periods of losses -- and easier comparisons that were supposed to ease the slide.

Yet again, major metros are expected to shoulder most of the blame for the decline in numbers. Sources suggest that some major papers that got hit hard in the recent past will take it on the chin again. They also point to a decline in single-copy sales and the continuing impact of many papers reducing other-paid and third-party copies.

And it's no better in the broadcast biz, where NBC has just announced $750mil in budget cuts.

NBC Universal plans to cut US$750 million in operating expenses by the end of 2007 by eliminating employees, cutting back on scripted shows, and slashing its news budget, according to a report Thursday in the Wall Street Journal.

The moves come as more and more viewers and advertisers gravitate toward new media, NBC Universal chairman Bob Wright told the newspaper. He said the moves would restore the company to double-digit growth next year.

International quick notes

Canada: Wal-Mart's new Canadian superstore format has impressed at least one analyst who has seen it, according to Morningstar:

"The first supercenter is a serious, impressive effort by Wal-Mart, unlike anything it has attempted (except experimentally) in the U.S.," Caicco wrote in a research report. "It is working hard to develop a hybrid discount shopping experience that will match up well with the needs of Canadians, and is also introducing products to support its position."

He believes that Wal-Mart Canada will adopt a regional (as opposed to national) pricing strategy, matching discount stores on at least 200-400 core items, while making aggressive pricing "statements" on a few important categories. All other items should be priced at least 10% below conventional players, he added.

The analyst thinks Loblaw's, Canada's leading supermarket chain, will be hurt:

... a key difference between the two companies is that, as Wal-Mart has pushed its core general merchandise business forward while methodically expanding into food, Loblaw has let its core food business "stagnate" in its effort to broaden its general merchandise assortment ...

India: Forbes reports more on the battle among Tesco, Wal-Mart, and Carrefour to partner with Bharti in India. We reported on it here last week.

In addition, the International Herald-Tribune reports on the effect of the coming superstore invasion on the 12,000,000 mom & pop stores who currently hold 95% of the Indian grocery market.

I was fascinated by the fact that 40% of Indian produce currently goes to waste and never reaches the consumer, because of the inefficiency of the supply chain. What could lowering that percentage significantly mean in terms of alleviating hunger, and lowering prices to India's poor?

Small shops are chronically wasteful, lifting prices 20 percent higher than they are in big stores. They buy in small quantities. They have no expertise in inventory control and category management, so they fail to buy the most profitable mix of products: At Nutan Stores on Carmichael Road in Mumbai, a typical operation, the offerings include such slow-moving items as dipping ink, birthday candles and oil pastels.

Of course, those millions of mom & pops are going to feel some pain.

Devraj Damji Pasad, a 63-year-old co- owner of the store, said the arrival of a single supermarket a few miles away had cut his store's sales by 60 percent, forcing the dismissal of 7 out of 11 workers. He used to sell 36 bottles of ketchup a month, he now sells fewer than six.

It will be a period of tremendous gain and pain:

But small stores are still indispensable to Indians. They provide credit. They deliver 20 cents worth of medicine to a home at midnight.

So a war is gathering between the efficient but sterile supermarket and the neighborly but wasteful mom-and-pop store.

Australia: Coles Meyer has turned down another takeover offer, and this time it appears to be final.

Australia's second-largest retailer knocked back a revised takeover bid from the syndicate headed by Kohlberg Kravis Roberts (KKR), saying the $18.2 billion offer still substantially undervalued the business.

The group, which had been chopped down to five members from the original nine, gave the board a deadline of 9am on Monday to decide on the $15.25 a share offer.

However, after again being rejected by the Coles Myer board, the KKR-led syndicate announced after the market closed on Thursday that it had withdrawn its proposal.

Last month, we reported on rumors that Wal-Mart and Tesco might be interested in buying CM.

Sneakers cheap chic

Is it necessary to spend $100-$150 for sneakrs? A great many parents (including this one) have tried hard to convince their teenagers that "expensive = cool" is not a wise attitude. Now it appears we might be getting some help from a few retailers, according to the Wall Street Journal:

Sneaker shoppers accustomed to ever-escalating prices may be facing another kind of sticker shock this fall, with the launch of some inexpensive sneakers that make controversial claims to rival expensive shoes in quality.

Payless ShoeSource Inc. last month unveiled a running shoe called "The Amp" that sells for about $35. Payless says that the shoe performs like running shoes that cost nearly three times as much, and that it can even be used to run a marathon -- a rare claim for an under-$40 shoe.

Another company trying to challenge the dominance of $100-plus sneakers is Steve & Barry's University Sportswear, a retailer of low-price shoes and apparel that recently released a shoe under the name of NBA star Stephon Marbury that it says integrates "the same performance attributes found in sneakers sold for $100 or more." The price: $14.98, a fraction of the $125 Nike Zoom LeBron III.

As the quote implies, these shoes are being marketed as being not only stylish, but equal in performance quality to the high-priced brands. Nike seems to be trying to match the upstarts, using its Starter brand:

Nike itself has a foot in the low-price game: Two years ago, it created a unit devoted to selling low-price footwear and apparel under the Starter brand it had acquired. The first line of sneakers, endorsed by Green Bay Packers quarterback Brett Favre, started selling in 400 Wal-Mart stores last year for under $40, though they aren't pitched as rivals to its higher-price lines.

On a trip to Wal-Mart today, I checked their shoe section, having just read this article, and saw that they have several Starter SKUs in the $18-$25 price point.

Athletes, however, don't seem to be buying into the low-price gambit:

Competitive runners, in particular, are finicky about their shoes and often swear by the fit, cushioning and special features of more-expensive brands. Chris Demetra, a 26-year-old Nashville, Tenn.-based financial analyst who runs about 70 miles a week, says that while he might consider a $35 shoe, he would be concerned about injuring himself. Runners, he says, are "always looking for the perfect running shoe. Once they have a shoe they're comfortable with, they're not that concerned with price."

Those of us who run significantly less than 70 miles a week might look at things differently, however.

The under-$50 category makes up over half the sneaker market, while over-$90 is only 8%, according to NPD. What NPD doesn't tell us is how much of the shoe companies' margins are delivered by the high-priced shoes.

New marketing bosses

Two major companies have announced high-level marketing appointments:

Motorola went CPG -- appointing a former Heinz and P&G exec, Casey Keller, as CMO.

Mr. Keller, a P&G veteran, joined the H. J. Heinz Co. in 1998 and rose in late 2002 to chief growth officer. In that role, he oversaw a $200 million marketing budget for Heinz's lineup of ketchup, frozen foods and sauces. Subsequently, Mr. Keller was advanced to chairman-CEO, Heinz Italy, and president of Heinz Southern Europe. At P&G, he served as marketing director for U.S. Snacks and on global development for Pringles.

The Bon-Ton, meanwhile, grabbed a consultant, Michael Hayes, to be svp-marketing:

Hayes most recently served as senior manager in the retail practice of Accenture, a management, technology and outsourcing consulting firm, where he led projects for Best Buy, J.C. Penney, Home Shopping Network, Sara Lee Branded Apparel, Saks and Walgreens.

Wal-Mart: #1 in China

Faced with problems in many of their foreign ventures (Germany, Korea, Japan, UK), Wal-Mart has apparently decided to buy their way to the top in China.

Retail behemoth Wal-Mart Stores is set to buy a Chinese hypermarket group for about one billion dollars in a deal that would make it the leading chain in China, the Wall Street Journal said.

Citing people familiar with the transaction, the business daily said the US giant had agreed to purchase the Chinese hypermarkets of Taiwanese-owned group Trust-Mart.

If approved by Chinese regulators, the deal would take Wal-Mart past its French rival Carrefour in the number of hypermarkets in China. Carrefour had also tried to buy Trust-Mart, according to the newspaper.

Wal-Mart has 61 stores in China, Trust-Mart has 100. The plan is to take over the Trust-Mart stores in chunks over the next three years.

Affirmation

A good essay here on cancelling the daily paper:

After 37 years of subscribing to the daily newspaper, I wrote "cancel" on the last bill and sent it back.

Since I've been subscribing for nearly four decades, it's obvious I am not a member of the young demographic that newspapers haven't been able to attract. Print journalism is a) low tech and b) costs money. Neither is appealing to young people who grew up with the Internet and can customize their information intake and get it without a subscription fee. I'm in the age group that is still reading a daily newspaper out of long habit.

The points she makes are very similar to those I posted when I cancelled my subscription last year. The continuing collapse of newspaper circulation, as I noted in my post, presents serious concerns to trade marketers.

Target expanding private-label food

Target is reported to be increasing the square footage devoted to food and expanding its private label food offerings. They've introduced their own meat brand (Sutton & Dodge), increased their premium private label line, and are giving more displays to food.

However, asks the article:

How can a retailer differentiate from Wal-Mart, create a strong brand image, compete on price and be everything to all of its consumers at once? Some say Target doesn’t know the answer quite yet, some say it’s on its way and others banter about whether or not Target knows the right strategy at all. Is the $52.6-million retailer on target?

It's a good article, that attempts to answer these questions (it's lengthy, and excepting it wouldn't do it justice).

Weekend quick notes

Woolworths is the latest retailer to show an interest in India. The Australian giant is developing a deal with India's Tata Group to supply the group's retail outlets -- an opportunity for Woolies to study the market up-close. More on India here.

Home Depot has had a shake-up in its marketing ranks. Roger Adams is the new CMO -- the position has been vacant for a year. The exec-vp of merchanding & marketing is gone, as are a couple of other top folks.

Ahold's former marketing director has gone on trial for fraud. According to the government, he "booked whatever amount in income that they needed to make their targets."

Winn-Dixie looks like it will be out of bankruptcy soon. The question, as noted in the article, is whether they've figured out a way to compete with Wal-Mart. If not, how long before the next filing?

Catching up on management changes

A couple marketing management changes:

CompUSA is doing a "back to the future" bit -- bring back a former CMO

The company, privately owned by Grupo Carso, named Ellen Miller its acting chief marketing officer. Miller, who is currently president of Insider Marketing, worked at CompUSA from 1990 to 1994.

... and, with her, an old campaign.

On Oct. 22, the company will launch a new radio ad campaign based on the "PC Modem and Bob" campaign it used in the early 1990s, ditching the PC Modem character for a female character named Meg Pixels. The company, which said it believes there is still "tremendous equity" in the old campaign, would only describe spending as being in the "multi-million dollar range."

Good luck, CompUSA. To reiterate one of my favorite points, I'm afraid their problem is that they are #3 in a two-horse race.

Meanwhile, Hyundai's VP-Marketing is gone after only a year on the job:

Her departure comes after Hyundai reported September sales fell 13 percent to 33,384 vehicles compared to the same month a year ago.

A bit of hypocrisy from Target

We reported Monday about Target (and Wal-Mart) being unhappy with Hollywood because the studios are giving terms that allow downloading movies at lower prices than the stores can sell DVDs. We're reasonably sympathetic -- channel conflict can be frustrating to the aggrieved party (and difficult for the vendor to resolve).

But we came across a quote from Target that caused a regrettably loud snort:

'Target does not object to competition, but we do expect a level playing field upon which to compete with the online services,' the company said.

So, let me ask, Target: Do you also believe in a level playing field for small retailers when it comes to trade promotion allowances?

My, aren't the crickets noisy tonight?

A couple items from India

India is the next China, or so goes the common wisdom, with retail poised for a huge take-off as soon as the regulatory hurdles are fully removed. Here are a couple recent items:

Bharti Enterprises is talking with several international retailers -- Tesco, Carrefour, Wal-Mart, Metro -- for a partnership. The idea would be to gain market experience and be ready when the expected legal changes take effect in a few years.

Disney, meanwhile, has found its partner, the Jaipuria Group:

Walt Disney Co. has partnered with an Indian company to sell its products in India as part of efforts to expand its presence in one of the world's fastest growing markets, a company official said Monday.

Disney also recently bought a children's cable channel in India.

Song sung blue

It's the end of the line for Tower Records. We've reported on their troubles here and here, and on the general sad state of music retailing here.

The company was sold off to a liquidator, who outbid rival music retailer Trans World Entertainment, which had planned to continue to operate the stores.

The sell-off of Tower's inventory, valuations of which run as high as $200 million, could have a wide-ranging impact on the music business at large. The company's West Sacramento, Calif., warehouse is filled with product from the vendors of its independent distribution company, Bayside Distribution, and its accessories suppliers. Companies with a high degree of exposure could be dealt a serious blow when their product is returned for full wholesale cost.

The closure of Tower further narrows the retail marketplace, especially as it relates to "genre" music and non-hits in general.

Channel conflict: Target warns Hollywood on DVDs

Reportedly, Target has warned movie producers that if they give better terms on downloadable movies, Target will respond by cutting shelf space and promotion.

Target sent a letter to large film producers last month stating that it wants "a level playing field" when it comes to movie pricing, according to the report. The Minneapolis-based discount retailer said it might reduce DVD shelf space and marketing efforts if online services get better deals.

Wal-Mart and Target (who between them account for more than half the DVDs sold in the US) are apparently upset about a deal between Apple and Disney (the Steve Jobs connection) giving iTunes the right to sell Disney films for $12.99.

Could get interesting.

Cisco wants consumer awareness

Cisco Systems thinks, not unreasonably, that a $28 billion company should be well-known. Consequently they are launching a $100m ad campaign to familiarize consumers with the Cisco brand.

The question is whether there's a lot of value to building consumer awareness of a brand that markets its products primarily to businesses (Cisco's major consumer line is under the Linksys brand name).

Bostrom argues that more of Cisco's corporate products--such as voice over Internet Protocol phones, Wi-Fi handsets and unified communications software--are finding their way into the hands of consumers by way of their corporate IT departments. And she believes that these people, who purchase a lot of gadgets for personal use, have a big impact on which technologies their employers choose to buy.

"Technology that we use in the office is seeping into our everyday lives," she said. "And technology decisions that used to be made by the enterprises are now being driven by end-user demands. It's these end users who are encouraging the technology decisions at work."

Impressive retail sales figures

I saw an article entitled "Federated's September sales beat expectations" and thought it was a good omen for that company (one I didn't expect), since September was the first month of the name-change of Federated stores.

If you read the article, though, and others (noted below) on other stores, Federated sales increases were poorer than almost all others major retailers -- retail generally had a great month.

Federated +6.2%
Target +6.7%
JC Penney +10.2%
Limited +12.0%
Wal-Mart +1.2%
Bon-Ton +9.1%
Nordstrom +13.0%
Saks +10.0%

Only Wal-Mart, in this grouping, did poorer than Federated. My observation (I don't have numbers to support it), is that the department store sector does reasonably well when the economy is strong, but sinks during weak economies -- and each down cycle over the past few decades has seen them sink to ever-lower levels.

So, although Federated may be looking like it's doing reasonably well at present, it needs to do better than this while the economy stays strong. (I admit to being a skeptic about department stores generally, and Federated in particular, so take my opinions with a grain of salt).

By the way, if those Wal-Mart numbers aren't an aberration, and if Wal-Mart US starts looking like Germany, Korea, Japan, and UK, then things could get ugly in Bentonville.

Private-label software

Tesco will introduce later this month a line of private-label software, marking another foray into non-grocery categories, and also a further extension of the private-label domain.

Tesco said it would offer six packages, including office software, security systems and a photo editing tool.

Britain's biggest retailer said each title would cost less than £20, challenging what it described as the current "high" price of PC software.

In other Tesco news, the company is planning to vastly expand its overseas operations -- most notably in China and, of course, the US.

By February Tesco, which launched overseas ten years ago, will have 60 per cent of its store space abroad — and that is before it opens a store in America, a country in which Tesco has committed to spending £250 million of capital.

Coty wants to be #1

Coty announced a five-year plan that is intended to make it the largest fragrance company in the world, with sales of over $5b -- sales for fiscal 2006 are $2.9b.

The boost will come via innovations in the beauty and color cosmetics category, skin and suncare products and by building three brands—Calvin Klein, adidas and Rimmel—to the billion-dollar mark. The growth strategy also includes increasing its presence in Asia.

The plans, while ambitious, don't appear unrealistic. Coty has doubled in sales in the past five years.

Kohl's opened 65 stores today

That's a lot of stores, folks. And this is a company that is doing very well.

The company’s financial picture is the envy of the retailing industry, analysts said. Revenue is up, to $13.4 billion last year, from $6.2 billion in 2000, during which time profits rose to $842 million, from $372 million. Shares of Kohl’s rose $1.61, to $69.14 on Wednesday.

And on Thursday, when the nation’s retailers report September sales for stores open at least a year, a closely watched industry measure, Kohl’s is expected to report a 16 percent increase, above the industry average, which is in the single digits.

Kohl's has done this well by being determinedly mid-market:

The no-frills, no-mall, no-full-price retailing model of the Kohl’s department store has turned the once-quiet Wisconsin company into a clothing industry powerhouse ...

So why am I reading this:

So the chain’s once-steadfast focus on the classic, traditional consumer — who had a family and bought snowflake mock turtleneck sweaters and plaid button-down shirts — has expanded to include clothing like white fur vests from Daisy Fuentes, a brand exclusive to Kohl’s.

And this:

In a coup, Kohl’s wooed the designer Vera Wang — a name associated more with Sak’s and Bloomingdale’s than discount retailers — to design a line of contemporary clothing, handbags, shoes and home goods. The products will reach stores in autumn 2007.

And this:

The company has said it will make women without children, who typically have more disposable income and crave more fashionable merchandise than the average Kohl’s shopper, a priority in its merchandise and marketing.

Why is it that stores have this craving to move "up-market"? I have always suspected that it's because the execs are embarrassed to be running a store where they and their friends wouldn't be caught dead shopping.

But then I'm a cynic.

Obviously, the people who are running Kohl's are successful merchants who presumably know their market a whole lot better than I do, but every time I read about a store moving up-market, I hear a voice whispering "sell that stock."

Best Buy partners with SanDisk and Real

Best Buy will be marketing a new line of SanDisk MP3 players together with subscriptions to Real Networks' download service.

The company said it would use Real's Rhapsody subscription service, hand-in-hand with a new line of SanDisk Sansa digital music players, much in the way that iPods work with iTunes.

"The customer expects everything to work together," said Jennifer Schaidler, vice president of music for Best Buy.

The service and players will both be available starting October 15 and will be heavily supported in its more than 840 nationwide stores.

The article doesn't say so, but it sounds like an exclusive deal.

Best Buy said it will throw its promotional weight behind the new service, offering buyers of the Sansa a free two-month subscription with up to 30 hours of preloaded music already on the player.

It will be interesting to see if this three-way partnership can cut into iTunes' 88% market share or iPod's 60%.

The end of the insert?

Probably not. But Media Daily News offers up something worth thinking about:

Verklin, who heads up Carat's Americas and Asia units, dropped the bombshell that a major retailer has told agencies that future media plans would eliminate FSIs--the colorful supplements used to distribute coupons and promote retail sales--from its advertising plan by 2007.

That's about all the already-punchdrunk newspaper industry needs to hear.

I very much doubt that the FSI is going away anytime soon. But a significant decrease in frequency and/or size would affect not only the newspapers, but vendors. Where will all those trade promo dollars go? What leaps to mind is in-store, but as a shopper I'm wondering how many more ad impressions I can handle as I traverse the aisles.

More trouble at Penn Traffic

I commented a week or so ago about Deloitte & Touche resigning as auditors for Penn Traffic. The company has failed to issue any financial reports for about a year and a half, and I concluded that, "You gotta wonder what's in those reports."

There's more reason to wonder now. Yesterday , the CEO quit very suddenly.

The company didn't say why Chapman decided to retire. Chapman could not be reached for comment.

Not a good sign, especially when combined with the collection of bad news packed in this paragraph:

Penn Traffic's biggest investors, the private equity firms that invested in the company, are firing salvos. The company has not released any financial statements since it reorganized in 2005. Its reasons include ongoing internal and external audits and investigations by the Justice Department and the Securities and Exchange Commission over promotional allowance practices.

Coach suing Target over fakes

Coach has filed suit against Target to stop them from selling fake Coach hanfbags:

Coach Inc., which markets luxury handbags and leather products, sued discount retailer Target Corp., asking that Target "immediately cease and desist from selling" counterfeit handbags that claim to be the real deal. In addition to seeking any profits on its sales of the alleged Coach knock-offs, "we'd also like them to make all records of these sales available to us," including suppliers, said a Coach spokesperson. Target did not return phone calls.

If the allegations are correct (we have no way of knowing), it's a poor idea on Target's part, since word of something like this can undermine shoppers' confidence in everything they carry. We'll wait to hear Target's side of the story.

The biggest turkey ...

... company.

Sorry -- I couldn't resist the headline.

Carolina Turkey has gobbled up (oops, there I go again) Butterball, buying it for $325 million from ConAgra, making them the biggest company in the field.

The expanded company expects production to reach 1.4 billion pounds of turkey in 2006, or 20 percent of total turkey production in the United States.

Another retailer fiddles with allowances

Ahold, Kmart, Office Max, Saks, Home Depot, Penn Traffic … I’ve probably missed a few, but that’s the list that comes to mind of retailers who have recently been accused of playing around with vendor allowances in one way or another. Now CSK Auto joins the list.

You may not know CSK if you live in the eastern half of the country, but in the west, the component parts of their name (Checker, Schucks, Kragen) are among the leading names in auto parts – they have almost 1300 stores and sales of about $1.6 billion – a good-sized outfit.

But apparently some of the top managers didn’t feel that profits were quite as good as they could be, and so they “improved” things. Here’s the press release CSK put out Thursday:

CSK Auto Corporation announced today that the Audit Committee of its Board of Directors has substantially completed its previously announced internal investigation (commenced in March 2006), which was conducted with the assistance of independent counsel and a separate accounting firm. The scope of the investigation focused primarily on the Company's accounting for inventory and vendor allowances associated with the Company's merchandising programs, but was not limited in any way by the Audit Committee. The investigation identified accounting errors and irregularities that materially and improperly impacted various inventory accounts, vendor allowances, other accrual accounts and related expense accounts.

Several people, including a couple top execs, got the axe:

The Company announced that Martin Fraser (President and Chief Operating Officer), Don Watson (Chief Administrative Officer and former Chief Financial Officer), as well as several other individuals in the Company's finance organization are no longer employed by the Company.

The restatements are tentatively expected to come to $82 million, most of it being related to inventory, but $12 million from vendor allowances.

As we’ve said previously, we don’t expect this to be the last such case. There simply is too much money available in allowances, and it is too easy for an executive under pressure to meet quarterly expectations to fudge those numbers.