24/7 Wall St. » RAD

Top Ten CEOs Sent to Prison

Mike Sauter — Thu, 17 May 2012 21:44:50 +0000

Earlier this week, Rebekah Brooks, former CEO of the now-defunct British tabloid News of the World, was arrested on conspiracy to pervert the court of justice. The case against Brooks and the phone hacking scandal is an exception to the usual story of CEOs that end up in prison. Most of their corporate wrongdoings generally involve corruption, insider trading and fraud. Given the difference, 24/7 Wall St. identified the top 10 CEOs that went to prison.

The kinds of crimes these executives commit generally fall into one of two categories. In the first case, CEOs mean to profit directly from their actions, including offenses such as insider trading and embezzlement. Examples of this include Tyco’s CEO Dennis Kozlowski and Adelphia’s CEO Jonathan Rigas, who each stole millions of dollars from their companies.

In most other cases of executive white-collar crime, however, CEOs are not stealing directly from their companies. Instead, they are trying to ensure the safety of their jobs by promoting the appearance of success of their companies through fraud, false accounting and bribery, among others. In seven of the 10 cases, executives inflated company profits or failed to represent gains or liabilities. In nearly every case, the CEO was in league with other executives, many of whom also charged and convicted.

The irony is that while these corporate leaders were trying to make their companies look better, they usually succeeded only in putting them through a period of severe financial hardship, as was the case with Rite Aid. In several cases, such as Adelphia and Enron, the financial revelations were so severe, causing total bankruptcy. In a few cases, Tyco for example, the company continued to perform well, despite the crimes.

24/7 Wall St. examined the CEOs who have been arrested while heading Fortune 500 corporations.

Filed under: Special Report Tagged: featured, HLS, MSO, RAD, S, TYC

24/7 Wall St. Closing Bell (T, AMZN, NOK, GOOG, CMG, FAST, RAD, MSW, CBSH, JBHT, CHKE, JPM, WFC, OAK, MIPS, EGO, AVID)

Paul Ausick — Thu, 12 Apr 2012 20:05:52 +0000

Markets opened slightly higher this morning and about an hour before the markets close all three major indexes are more than 1% higher. The report on new unemployment claims was weaker than expected (our coverage here), but better news from Europe, especially lower Italian bond yields, gave the market a lift. There is also some expectation that China’s GDP report tonight will be strong, indicating that the world’s second-largest economy is still growing. The US dollar index fell today, now down -0.64% at 79.288. The GSCI commodity index is up about 0.7% at 679.53, with virtually all commodities higher on the lower greenback. WTI crude oil closed up 0.9% at $103.64/barrel, and Brent crude trades up 1.22% at $121.65/barrel. Gold settled up 1.2% today, at $1,680.60/ounce.

The unofficial closing bells put the DJIA up more than 181 points to 12,986.43 (1.41%), the NASDAQ rose more than 39 points (1.3%) to 3,055.55, and the S&P 500 rose 1.38% or nearly 19 points to 1,387.57.

There were several analyst upgrades and downgrades today, including AT&T Inc. (NYSE: T) raised to ‘overweight’ at JPMorgan; Amazon.com Inc. (NASDAQ: AMZN) started as ‘neutral’ at SunTrust Robinson Humphreys; Nokia Corp. (NYSE: NOK) cut to ‘hold’ at SocGen; Google Inc. (NASDAQ: GOOG) started as ‘buy’ at SunTrust Robinson Humphreys; and Chipotle Mexican Grill Inc. (NYSE: CMG) reiterated as ‘buy’ and target price raised to $480 at Argus.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Fastenal Corp. (NASDAQ: FAST) is down -1.8% at $48.73; Rite Aid Corp. (NYSE: RAD) is up 0.03% at $1.71; Mission West Properties Inc. (NASDAQ: MSW) is down -0.06% at $9.55; and Commerce Bancshares Inc. (NASDAQ: CBSH) is up 2.2% at $40.00. After the markets close today we will hear from Google (earnings preview here), J.B. Hunt Transport Services Inc. (NASDAQ: JBHT), and Cherokee Inc. (NASDAQ: CHKE) among others. Before the markets open tomorrow morning we get earnings from JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) (more coverage here).

Other standouts from today include the following stocks:

Oaktree Capital Group LLC (NYSE: OAK) is down about -1.3% at $42.43. The investment management firm held its IPO today. More coverage here.

MIPS Technologies Inc. (NASDAQ: MIPS) is up about 27.5% at $6.64. The chip maker is reportedly seeking a buyer. More coverage here.

Eldorado Gold Corp. (NYSE: EGO) is up about 12.5% at $14.45. The junior gold miner announced plans to double production in five years.

Avid Technology Inc. (NASDAQ: AVID) is down more than -17% at $8.51. The media tools company announced that it would have an operating loss in the first quarter.

Stay tuned for Friday. New York Fed President William Dudley and Federal Reserve chairman Ben Bernanke are giving speeches. We have noted the following events on the schedule (all times Eastern):

8:30 a.m. – Consumer price index
8:55 a.m. – University of Michigan/Reuters consumer sentiment index

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AMZN, AVID, CBSH, CHKE, CMG, EGO, FAST, GOOG, JBHT, JPM, MIPS, MSW, NOK, OAK, RAD, T, WFC

24/7 Wall St. Closing Bell (JCP, AMSC, EGO, NVDA, M, HCSG, PGR, ADTN, MSW, FAST, RAD, MFRM, TITN, DVR, NOK)

Paul Ausick — Wed, 11 Apr 2012 20:03:36 +0000

Markets opened higher this morning following the pleasant surprise earnings report from Alcoa Inc. (NYSE: AA) after markets closed yesterday (our coverage here). The report on US crude oil inventories showed a relatively modest gain this week, boosting crude prices (our coverage here). Based on better expectations for quarterly earnings and mildly better news on the global economy, investors took on more risk today, driving up Treasury yields in the bargain. The US dollar index fell slightly today, now down -0.09% at 79.788. The GSCI commodity index is down about -1.5% at 674.42, with orange juice again leading the decliners. WTI crude oil closed up 1.7% at $102.70/barrel, and Brent crude trades up 0.12% at $120.02/barrel. Gold settled down just -$0.40 today, at $1,660.30/ounce.

The unofficial closing bells put the DJIA up more than 90 points to 12,806.15 (0.71%), the NASDAQ rose more than 25 points (0.84%) to 3,016.46, and the S&P 500 rose 0.75% or more than 10 points to 1,368.79.

There were several analyst upgrades and downgrades today, including J.C. Penney & Co. (NYSE: JCP) started as ‘neutral’ at UBS; American Superconductor Corp. (NASDAQ: AMSC) started as ‘buy’ at Maxim Group; Eldorado Gold Corp. (NYSE: EGO) raised to ‘buy’ at Canaccord Genuity; Nvidia Corp. (NASDAQ: NVDA) started as ‘outperform’ at RBC; and Macy’s Inc. (NYSE: M) started as ‘neutral’ at UBS.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Alcoa is up 6.2% at $9.90; Health Care Services Group Inc. (NASDAQ: HCSG) is up 7.2% at $21.47; Progressive Corp. (NYSE: PGR) is down -0.6% at $22.61; and Adtran Inc. (NASDAQ: ADTN) is up 7.5% at $30.61. After the markets close today we will hear from Mission West Properties Inc. (NASDAQ: MSW) among others. Before the markets open tomorrow morning we get earnings from Fastenal Corp. (NASDAQ: FAST) and Rite Aid Corp. (NYSE: RAD).

Other standouts from today include the following stocks:

Mattress Firm Holding Co. (NASDAQ: MFRM) is up more than 17% at $43.89 after posting a new 52-week high of $45.42 earlier today. The retailing company posted good earnings and announced an acquisition. More coverage here.

Titan Machinery Inc. (NASDAQ: TITN) is up more than 17% at $32.20 after posting a new 52-week high of $33.35. The farm machinery company shattered earnings expectations.

Cal Div International Inc. (NYSE: DVR) is up more than 13% at 3.71. The offshore oil field services firm has announced that it will be a 40% partner in the Cape Wind project offshore of Massachusetts.

Nokia Corp. (NYSE: NOK) is down more than -16% at $4.21, a new 52-week low. The cell phone maker warned on earnings this morning and is fixing a glitch in its new Lumia 900 phone. Even more coverage here.

Stay tuned for Wednesday. New York Fed President William Dudley, Philadelphia Fed President Charles Plosser, Minneapolis Fed President Naryana Kocherlakota, and Federal Reserve governor Sarah Bloom Raskin are all giving speeches. We have noted the following events on the schedule (all times Eastern):

8:30 a.m. – International trade statistics
8:30 a.m. – New claims for unemployment benefits
8:30 a.m. – Producer price index
10.30 a.m. – EIA weekly natural gas storage report
1:00 p.m. – 30-year bond auction
4:30 p.m. – Fed balance sheet and money supply

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ADTN, AMSC, DVR, EGO, FAST, HCSG, JCP, M, MFRM, MSW, NOK, NVDA, PGR, RAD, TITN

Twelve Retailers Flunking Customer Service

247wallst — Tue, 21 Feb 2012 11:36:24 +0000

As recently as 2009, Netflix was the most beloved retailer on the Internet. By the end of 2011, following the failed separation of its streaming and DVD by mail service and sharp price increases, the company had the sixth-worst customer satisfaction rating among all e-commerce companies, and one of the worst among all retailers including brick-and-mortar outfits, according to the American Customer Satisfaction Index.

Read The Twelve Retailers Flunking Customer Service

24/7 Wall St. examined ACSI’s annual retail and e-commerce satisfaction report and identified the 12 companies whose customer satisfaction decreased in 2011.

Many of the companies whose customer satisfaction scores dropped the past year have simply cemented their already terrible service reputations.

Walmart, which debuted strong on the Index in 1994, dropped to among the lowest ranked companies by 1996, where it has remained since. Winn-Dixie, a supermarket chain which does business in the southeast, is an example of a company that has never managed to break free of the lowest rungs of customer service. CVS Caremark and Staples, both on this list, have seen occasional improvements in customer service, but are among the worst.

For other companies, however, losing customer satisfaction is in conflict with their reputations. Amazon.com had a 1.1% decrease in its customer service score this past year, even though it still maintained the highest customer satisfaction score among retailers. Charles Schwab’s customer satisfaction also dipped slightly, despite the fact that customers are more satisfied with the company than with any other online brokerage firm.

These are the American retailers with customer satisfaction scores fell in 2011.

Filed under: 24/7 Wall St. Wire, General, Special Report Tagged: AMZN, BKS, CVS, DG, ESRX, ETFC, EXPE, NFLX, ODP, OMX, OWW, PCLN, RAD, SCHW, SPLS, WAG, WINN, WMT

Rite Aid Shaves Loss in Half, Increasing 2012 Outlook (RAD)

Administrator — Thu, 15 Dec 2011 12:40:30 +0000

Rite Aid Corporation (NYSE: RAD) may be set for a decent day as the perpetually troubled drug store chain managed to post a loss that was about half of expectations: revenues were $6.3 billion and that generated a loss of $52.0 million for its third quarter. The company reported a loss at -$0.06 EPS versus expectations of -$0.13 EPS and versus -$0.09 EPS the prior quarter.

The company is still in a grossly different position versus rivals Walgreen Co. (NYSE: WAG) and CVS Caremark Corporation (NYSE: CVS).

It is not a forecast of earnings yet, but the company is also narrowing its loss expectations for 2012. The new forecast is -$0.50 EPS to -$0.37 EPS versus a prior target of -$0.56 EPS to -$0.40 EPS.

Revenues are also now put in a range of $25.85 billion to $26.0 billion for the year, but the prior target given was $25.8 billion to $26.1 billion in revenues. The consensus estimates are -$0.45 EPS and $25.86 billion for the year. Keep in mid that the annual 2012 is for the year ending on February 29, 2012.

The results were credited with a “well-planned and executed flu immunization program and continued favorable customer response to our wellness+ loyalty program.” Rite Aid also said that it has already provided over twice the number of flu shots from 2010 and is on pace to achieve its goal of administering 1.5 million immunizations for this season. It also claims that it now has more than 47 million enrolled members in its wellness+ program.

Rite Aid shares closed at $1.14 on Wednesday and the 52-week trading range is $0.85 to $1.47.
JON C. OGG

Filed under: Consumer Goods, Earnings, Retail Tagged: RAD

24/7 Wall St. Closing Bell (DWA, HRB, PCLN, RAD, WAG, ADSK, GM, AONE, IL, NILE, HNR, NP, ENER, PRTS, ORLY, AMSC, NOR, C, BZH)

Paul Ausick — Wed, 09 Nov 2011 21:07:49 +0000

Pre-market signals were weak today, and once trading opened, the signals got stronger. The DJIA has traded down more than -200 points for most of the day, with financial and energy stocks the hardest hit. Rates on Italian bonds topped 7% this morning, sending traders running away from equities and commodities alike. The only gainer for the day appears to be the dollar, which is stronger against the euro and the yen in the mid-afternoon. Crude prices fell below $95/barrel before recovering to near $98/barrel, and gold is down at $1,789.30. About an hour before closing, nearly 99% of the S&P 500 stocks were down on the day.

The unofficial closing bells put the DJIA down more than -389 points to 11,780.94 (-3.2%), the NASDAQ fell nearly -106 points (-3.88%) to 2,621.65, and the S&P 500 fell -3.67% or nearly -47 points to 1,229.10.

There were several analyst upgrades and downgrades today, including DreamWorks Animation SKG Inc. (NYSE: DWA) cut to ‘sell’ at Janney; H&R Block, Inc. (NYSE: HRB) raised to ‘outperform’ at Oppenheimer; Priceline.com Inc. (NASDAQ: PCLN) cut to ‘hold’ at S&P Capital IQ; Rite Aid Corporation (NYSE: RAD) raised to ‘outperform’ at Credit Suisse; Walgreen Co. (NYSE: WAG) cut to ‘neutral’ at Credit Suisse; and Autodesk Inc. (NASDAQ: ADSK) cut to ‘neutral’ at BofA/ML.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: General Motors Co. (NYSE: GM) is up down about -10%, at $22.48; A123 Systems Inc. (NASDAQ: AONE) is down less than -1%, at $3.09; IntraLinks Holdings, Inc. (NYSE: IL) is down more than -37%, at $5.50, after posting a new 52-week low of $5.44 earlier today; Blue Nile Inc. (NASDAQ: NILE) is down nearly -16%, at $33.24; Harvest Natural Resources Inc. (NYSE: HNR) is down more than -19%, at $8.80; and Neenah Paper, Inc. (NYSE: NP) is up more than 12%, at $18.84.

Several other standouts from today are as follows…

Energy Conversion Devices, Inc. (NASDAQ: ENER) is down more than -32%, to $0.41. The company has said that it will suspend manufacturing and cut 500 jobs. Excess inventory of solar panels gets the blame.

U.S. Auto Parts Network, Inc. (NASDAQ: PRTS) is down more than -22%, at $3.94, after posting a new 52-week low of $3.66 earlier in the day. The company received a waiver from one of its lenders for failing to meet coverage ratio requirements.

O’Reilly Automotive, Inc. (NASDAQ: ORLY) is down about -1.1%, at $76.44, after posting a new 52-week high of $77.95 earlier today. We noted the company’s performance earlier today in an article on auto sector implied gains.

American Superconductor Corp. (NASDAQ: AMSC)) is up nearly 10%, to $4.49. The company reported earnings today, and its growing order backlog indicates a possible turnaround following the loss of its biggest customer earlier this year.

Noranda Aluminum Holding Corp. (NYSE: NOR) is down more than -16%, at $8.51. The company will pay a special dividend of $1/share to shareholders of record as of yesterday’s close. That pushed the shares down a buck this morning, and the rest is due to the overall market decline today.

Citigroup (NYSE: C) is down more than -8%, at $28.78. The bank claimed the largest decline among the big US banks today.

Beazer Homes USA Inc. (NYSE: BZH) is down nearly -8%, at $2.17. There was no special news from Beazer today, but the threatened burst of new foreclosures soon to hit the housing market have had a nasty effect on this lower-priced builder.

Stay tuned for Thursday. Atlanta Federal Reserve Bank president Dennis Lockhart is giving a speech in the morning and Federal Reserve chairman Ben Bernanke will hold a town hall meeting with soldiers and their families at Fort Bliss, Texas, at 11:45 a.m. We have noted the following events (all times Eastern):

8:30 a.m. – International trade balance report
8:30 a.m. – Initial unemployment benefits claims
8:30 a.m. – Monthly import/export price report
9:45 a.m. – Bloomberg consumer comfort index
10:30 a.m. – EIA natural gas inventory report
2:00 p.m. – Monthly US Treasury budget report
4:30 p.m. – Federal Reserve balance sheet and money supply report

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ADSK, AMSC, AONE, BZH, C, DWA, ENER, GM, HNR, HRB, IL, NILE, NOR, NP, ORLY, PCLN, PRTS, RAD, WAG

Top Analyst Upgrades & Downgrades (ALSK, ADSK, AVP, NILE, CAAS, DWA, EQR, HRB, PCLN, RAD, ROVI, SPPI, TGH, WAG, WPO)

Administrator — Wed, 09 Nov 2011 13:06:16 +0000

These are some of Wednesday’s top analyst upgrades, downgrades, and initiations seen from Wall Street research calls.

Alaska Communications Systems Group Inc. (NASDAQ: ALSK) Cut to Underperform at BofA/ML.
Autodesk Inc. (NASDAQ: ADSK) Cut to Neutral at BofA/ML.
Avon Products, Inc. (NYSE: AVP) cut to Underperform as Bear of the Day at Zacks.
Blue Nile Inc. (NASDAQ: NILE) Cut to Sell at Deutsche Bank.
China Automotive Systems Inc. (NASDAQ: CAAS) Cut to Neutral at Piper Jaffray.
DreamWorks Animation SKG Inc. (NYSE: DWA) Cut to Sell at Janney.
Equity Residential (NYSE: EQR) Raised to Buy at Argus.
H&R Block, Inc. (NYSE: HRB) Raised to Outperform at Oppenheimer.
Priceline.com Inc. (NASDAQ: PCLN) Cut to Hold at S&P Capital IQ (late-Tuesday).
Rite Aid Corporation (NYSE: RAD) Raised to Outperform at Credit Suisse.
Rovi Corporation (NASDAQ: ROVI) has seen at least three downgrades: Collins Stewart, CLSA, Brean Murray.
Spectrum Pharmaceuticals, Inc. (NASDAQ: SPPI) named Momentum stock of the day at Zacks.
Textainer Group Holdings Limited (NYSE: TGH) named Value stock of the day at Zacks.
Walgreen Co. (NYSE: WAG) Cut to Neutral at Credit Suisse.
The Washington Post Co. (NYSE: WPO) named Bull of the Day at Zacks.

JON C. OGG

Filed under: Analyst Calls Tagged: ADSK, ALSK, AVP, CAAS, DWA, EQR, HRB, NILE, PCLN, RAD, ROVI, SPPI, TGH, WAG, WPO

Shorts Exit Weak Shares (EK, AMR, BP, LVLT)

247wallst — Wed, 26 Oct 2011 10:28:03 +0000

Short sellers moved out of stocks that have fallen recently. Perhaps they believe there will be a large rally in the market. There is little else to make the shares of companies with poor earnings and poor prospects rise.

Among NYSE stocks, the short interest in AMD (NYSE: AMD) fell 15% to 80.4 million shares. Shares sold short in embattled airline stock AMR (NYSE: AMR), the parent of American Airlines, dropped by 19% to 48.8 million. Rumors suggest the company may declare Chapter 11. Eastman Kodak (NYSE: EK) may also face bankruptcy. Shares short in the company fell 11% to 70.2 million.

Shares short in BP (NYSE: BP) were down 49% to 7 million. The short interest in struggling drug retailer Rite Aide (NYSE: RAD) dropped 11% to 61.1 million. Shares short in its competitor CVS Caremark (NYSE: CVS) were off 21% to 27.3 million.

In the medical sector, shares short in Boston Scientific (NYSE: BSX) were down 19% to 39 million. The short interest in Pfizer (NYSE: PFE) fell 10% to 79.3 million.

The same pattern of abandonment of stocks in weak companies held true for Nasdaq-traded shares. The short interest in Dell (NASDAQ: DELL) dropped 23% to 60.6 million. The short interest in Level 3 (NASDAQ: LVLT) fell 8% to 168.6 million. Shares short in News Corp. (NASDAQ: NWSA) dropped 9% to 51.8 million. The short interest in Cisco (NASDAQ: CSCO) dropped 6% to 80.7 million. Shares short in Affymetrix (NASDAQ: AFFX) fell 32% to 6.0 million.

Notable increases in short interest included troubled wireless broadband company Clearwire (NASDAQ: CLWR). Shares sold short in the company rose 15% to 47.8 million. The short interest in Southwest Air (NYSE: LUV) was higher by 15% to 25.2 million.

Short interest as of October 14. Data from NYSE and Nasdaq.

Douglas A. McIntyre

Filed under: Short Interest Tagged: AFFX, AMD, AMR, BP, BSX, CLWR, CSCO, CVS, DELL, EK, LUV, LVLT, NWSA, PFE, RAD

Top Earnings Previews For The Week Ahead (LEN, ADBE, CCL, CAG, JEF, ORCL, BBBY, GIS, RHT, KMX, DFS, FDX, NKE, UA, RAD)

Administrator — Fri, 16 Sep 2011 18:07:52 +0000

The coming week is going to feel like a mini earnings season. We have many sector leaders reporting earnings and the fallout (or benefits) could be widespread. On deck are key earnings from the following: Lennar Corporation (NYSE: LEN); Adobe Systems Inc. (NASDAQ: ADBE); Carnival Corporation (NYSE: CCL); ConAgra Foods Inc. (NYSE: CAG); Jefferies Group Inc. (NYSE: JEF); Oracle Corporation (NASDAQ: ORCL); Bed Bath & Beyond Inc. (NASDAQ: BBBY); General Mills Inc. (NYSE: GIS); Red Hat Inc. (NYSE: RHT); CarMax Inc. (NYSE: KMX); Discover Financial Services (NYSE: DFS); FedEx Corporation (NYSE: FDX); Nike Inc. (NYSE: NKE); and Rite Aid Corporation (NYSE: RAD).

We have broken these out by day and included consensus earnings and revenue estimates from Thomson Reuters. We have also added in a price and recent trading activity and even added in the consensus analyst price targets. Many of these also have some added color for traders to consider about the earnings reports.

Monday

Lennar Corporation (NYSE: LEN) has estimates of $0.10 EPS and $810.2 million in revenues; next quarter estimates are $0.19 EPS and $908.35 million in revenues. Shares are trading around $13.90, the 52-week trading range is $12.39 to $21.54. Wait a minute… EARNINGS rather than losses? Go figure.

Tuesday

Adobe Systems Inc. (NASDAQ: ADBE) has estimates of $0.54 EPS and $1.03 billion in revenues; next quarter estimates are $0.59 EPS and $1.07 billion in revenues. Shares are trading around $25.50, the 52-week trading range is $22.67 to $35.99. Analysts still have a consensus target above $34.00, which seems a bit optimistic in the new normal where Apple’s mobility service is still crimping Flash.

Carnival Corporation (NYSE: CCL) will show the cruise industry who is boss, maybe. The estimates are $1.63 EPS and $4.91 billion in revenues; next quarter estimates are $0.36 EPS and $3.89 billion in revenues. Shares are trading around $33.50, the 52-week trading range is $28.96 to $48.14. Keep in mind that this report is the King-Maker quarter that dictates the earnings for the full year due to the summer travel months. With an estimate of $1.63 EPS for the quarter, the full year is expected to be $2.46 EPS. Analysts have a consensus target of $almost $44.75.

ConAgra Foods Inc. (NYSE: CAG) has estimates of $0.31 EPS and $2.96 billion in revenues; next quarter estimates are $0.46 EPS and $3.3 billion in revenues. Shares are trading around $24.00, the 52-week trading range is $21.02 to $26.60, and the consensus analyst target is $28.13.

Jefferies Group Inc. (NYSE: JEF) has estimates of $0.26 EPS and $665.6 million in revenues; next quarter estimates are $0.36 EPS and $746.1 million in revenues. Shares are trading around $14.65, the 52-week trading range is $13.85 to $27.12, and the consensus target is $22.22. Jefferies has not been immune from the market’s pounding of banks and brokerage firms, but this is one broker and i-banker expected to grow.

Filed under: Calendar, Earnings Tagged: ADBE, BBBY, CAG, CCL, DFS, FDX, GIS, JEF, KMX, LEN, NKE, ORCL, RAD, RHT, UA

Reality Check: Walgreen’s Nice! Challenges Grocery & Convenience Stores (WAG, CVS, RAD, KR, SWY, WMT, TGT)

Administrator — Thu, 18 Aug 2011 20:33:04 +0000

Walgreen Co. (NYSE: WAG) is just a drugstore… Right? Maybe not any longer in entirety. As of last year, the company operated 7,650 drugstores and it owned 37 strip shopping malls. It turns out that the company wants to migrate away from just being a drugstore. With the launch of Nice!, Walgreen is setting itself up to differentiate itself from CVS Caremark Corporation (NYSE: CVS) and Rite Aid Corp. (NYSE: RAD).

The new company is going to eventually look perhaps more like a Kroger Co. (NYSE: KR) or a Safeway Inc. (NYSE: SWY), but perhaps the real targets are Wal-Mart Stores Inc. (NYSE: WMT) and even Target Corporation (NYSE: TGT). Yes, Walgreen is going after more and more of the lower-end grocery and consumer products market.

Walgreens is now planning to open some 400 Nice! stores that sell its private label products in grocery and household product categories. The company is claiming that it will offer its grocery and household products at prices which are up to 30% below other national brands. The company plans to have most of the Nice! product on its shelves by early 2012.

Walgreen has always been a place to get a flu shot or to get your medical prescriptions or consumer health and body products. While it carries some basics in food and consumer products, this really sounds like it is going a step farther. The company said its Nice! label will be on soups, sauces and bakery items, and it will add more and more Nice! brand products over the next few years.

The current store brands include Café W, Deerfield Farms, W and others, but these will be phased out and transitioned to Nice! brand products. The company has already had its private label brands under dry grocery items like tea, dried fruit, rice and even macaroni and cheese.

The drugstore chain is also going to launch a national marketing campaign in 2012 to drive awareness and generate trial and it is going to have employees promote Nice! products. This sounds a bit ambitious on the surface, except that it does have some solid data behind its news. The company noted, “Nielsen consumer research shows that 75 percent of Walgreens shoppers purchase store brands in Walgreens.” It also noted that the total private label sales market segment has grown from about $64.9 billion in 2005 to $88.5 billion in 2010 and the fastest growing private label segment is actually households with incomes of more than $100,000.00. The company also backed it up by consumer testing and new design packaging with strong reviews.

Frankly, this seems a bit of a stretch on the surface. Perhaps there is room for yet one more brand in shopping for grocery and consumer product goods. The question is whether or not this will cannibalize sales and just create another small format grocery and consumer products store.

If you ever saw the cult film “Repo Man” in the 1980s you may remember a shoot-up scene in the convenience store. The movie was such a low-budget and undesired production that all of the white-box products on the shelves had no labels and just had a physical name like “Soap” and “Cereal” and on and on. Walgreen is highly unlikely to fall into that category, but it would be easy to argue that there is a big risk here even if the launch is only 400 stores.

Maybe the real target is just 7-Eleven. This may turn out to be a profitable move for the company, but it is far from being a riskless move.

JON C. OGG

Filed under: Consumer Goods, Corporate Governance, Economy, Food, Product Review, Retail, Shareholder Issues Tagged: CVS, KR, RAD, SWY, TGT, WAG, WMT