Thursday, August 14, 2008

JDA buys i2

JDA bought i2 Technologies earlier this week for $346mil.
JDA Chief Executive Officer Hamish Brewer expects that this latest move -- supported by its 2006 purchase of Manugistics as well as nine other acquisitions in 10 years -- will further strengthen its position in the global manufacturing market for supply chain planning and optimization solutions.
This is more broadly supply-chain technology than my narrow trade promo focus (though there are obvious overlaps), so I don't have the knowledge to discuss whether it's a good deal or not, but the analysts quoted in this Consumer Goods Technology article are sure doing a great job of controlling their enthusiasm, for example:
"The roll-up of assets in the supply chain planning market will have little effect on options for the consumer products market. Despite a lot of marketing on penetration of the consumer products market by i2, the only application where the company was able to gain traction was transportation planning. We expect that it will have little effect on these IT investments or the use of these technologies." - Lora Cecere, Research Director, Consumer Products, AMR Research

Wednesday, August 13, 2008

Woolworths: possible takeover?

Back in June, I published a short piece here, quoting from a delightfully nasty article making fun of Woolworths, once Britain's retail powerhouse, but in recent years suffering a long, slow decline. I compared them to Sears.

It looks like times are getting even tougher for Woolworths. As here, the economy in the UK is weak, and a poor economy brings the weaknesses of companies to the surface (e.g., Mervyn's, Boscov's, Steve & Barry's). The boss has been canned and sales are down:
Variety store group Woolworths revealed a like-for-like sales decline of 6.7 per cent at its core retail business in the six weeks to July 26.

Group sales for the 25 weeks to July 26 slid 3.1 per cent and sales for Woolworths Retail dropped 3.2 per cent.

A high proportion of sales came from low-margin entertainment products such as CDs and DVDs, which, along with clearance, means that margin in the first half is likely to be down 125 basis points versus last year.

And, inevitably, the word now is that there will be a takeover:

Iranian property investor Ardeshir Naghshineh fuelled the rumour when it was revealed, after the markets closed that he had upped his stake in Woolworths to 9.68 per cent.

He is understood to be trying to put together a bid consortium for the beleagured retailer.

Monday, August 11, 2008

About bankruptcy

The recent bankruptcies of (among others) Steve & Barry's, Mervyn's, and Boscovs has brought to light something of which I was unaware (or at least had given little thought to). The changes in bankruptcy law a few years ago, which at the time were discussed mostly in terms of their effect on consumers, are having an impact on the way retail and other commercial bankruptcies play out. This article in BusinessWeek explains some of the ways in which the law has changed, and how it impacts retailers.

File for bankruptcy, and the pressure now intensifies enormously. Prior to 2005, debtors had 60 days from filing for Chapter 11 to assume or reject a lease. Most of the time, bankruptcy courts would grant repeated extensions that lasted two years or more. Bankruptcy experts argue that gift of time was crucial: They say it takes a minimum of two Christmas cycles before a retailer is ready to put its finances in order and see if its reorganization plan is working.

But mall owners don't like to house bankrupt retailers. An extended, court-run reorganization can hurt the landlord's chance of securing positive financing terms. The real estate industry lobbied successfully for the 210-day cap on how long companies have to assume or reject leases. "Macy's got at least two Christmas seasons, but today if a company files in January, they don't even have until Christmas to decide what they will do," says lawyer Gottlieb.

Other changes require cash deposits to utilities, give priority status to claims from vendors who shipped within twenty days of the filing, and put a limit of 18 months on filing a restructuring plan. These terms will make it more difficult for some of the bankrupt retailers to restructure.
"Stores immediately lose working capital," says Harvey Miller, a partner and bankruptcy specialist at New York law firm Weil Gotschal. He worked with Macy's in the past and has recently worked with several retailers including Goody's Family Clothing, a 355-store chain that operates in 20 states and filed for bankruptcy on June 9. Miller says Macy's reorganization, which took four years, wouldn't have been possible under the new setup.

Sony and BMG parting company

The Sony/BMG merger that four years ago created the #2 record company is ending with a Sony buy-out. Bertelsmann will walk away with a lovely parting gift -- about $1.2bil, plus some European music rights.

My first reaction was that anybody leaving the music business was probably making a good move, but this article indicates that maybe there's more money still to be made there than I (or a great many others) had thought:
For Sony, the split-up is good news. Analysts say they were surprised to learn that the $3.9-billion company was sitting on such a big cash stockpile. In terms of earnings, Sony Music Entertainment won’t boost the numbers much. But it won’t hurt them, either. They’re expected add 2.2% to sales and almost nothing to profits if Sony consolidates the business in the second half of the fiscal year. (Though profit margins are 8%, profits will be offset by a restructuring charge this year, analysts say.)
8% is not fabulous, but it's certainly OK (the oil industry, which some folks think needs a windfall profit tax, makes about 8.5% or so).

The other reasons for the buyout seem to be that it gives Sony more content for its entertainment businesses, and it puts an end to the internal power struggles that plague so many mergers, and appear to have been a big problem within Sony/BMG.

Sunday, August 10, 2008

TV passing newspaper as #1 ad medium

A study says that this year broadcast TV will, for the first time ever, collect more advertising revenue than newspapers. TV's turn as king of the hill will be short, however, since Internet ad revenue will soon exceed TV.
According to VSS, a media private-equity firm, Internet advertising will boast a nearly 19% compound annual growth rate from 2007-12, compared with just over 2.5% growth for broadcast TV and a 2.8% decline for newspapers.

Last year, newspapers took in $51.5 billion in advertising revenue compared with $48 billion for broadcast TV. But this year, with a boost from the presidential race and the Olympics, TV will spike to $51 billion while newspapers sink to slightly less than $47 billion.
Ahem ... none of those figures come close to what is being spent in-store (though I admit nobody has hard numbers, I have no doubt it is more than $50 billion).