Gift cards may provide after-Christmas boost

Gift cards have become very important to retailers business. Card sales are a key way for stores to drive traffic in the first quarter, a typically slow time of the year, and consumers typically spend more than the card's value. But the recession has been difficult for the gift card business for three reasons

• Reduced consumer spending has extended to cards
• Frugal shoppers are buying discounted gifts so they can stretch their budgets
• Card recipients will likely focus on deeply discounted items when they redeem them

To add to retailers problems, more shoppers are giving cash this season, because they couldn't get to the stores or they also want to be even more practical. It's estimated that about 75 percent of those dollars go towards paying bills or to restaurants rather than to stores.

Despite these headwinds, according to a consumer survey conducted for the National Retail Federation, gift cards still remain the most requested holiday item.

"Gift cards' popularity hasn't died, but the recession has changed the way that people give gifts," said Craig R. Johnson, president of Customer Growth Partners and Chair of Roulston Research's Consumer community.

Best Buy reported that gift card sales rose 40 percent in November, following a big drop last year as consumers cut their spending as the financial crisis escalated. Wal-Mart is extending holiday deals such as a selection of top Blu-ray movies for under $20. It's also offering a $50 gift card with an Xbox 360 purchase.

Craig Johnson Says U.S. Blizzard May Have Benefited Retailers

Craig Johnson president of Consumer Growth Partners and Roulston Research's Consumer Chair, says "The effect of the storm is neutral, not negative." He also believes that while many stores in the mid-Atlantic region, particularly Virginia and Washington, D.C., closed halfway through Saturday, the storm shifted trips among weekend days but did not halt shopping.

Check out a video of his comments

Despite this activity it seems that most retail analysts still expect sales industry-wide to be relatively flat this holiday but profits to climb on increasing margins.

Oracle's 2010 - 2011 Outlook From Roulston Technology Chair

Bart Perkins, Roulston Research's Technology Chair shared his thoughts on Oracle's 2010 - 2011 outlook:


"I check with several of my consulting colleagues regarding Oracle ERP installations. None of my colleagues' clients (mostly F500) are planning big ERP installations over the next few years.


The government situation is different. I am on the Board of a DC based company that installs Federal Financial Systems. At the board meeting last Wed, we discussed the outlook for Oracle in the Federal government. To remain compliant with current regulations, agencies have to move to Oracle R12. Assuming the agency is paying Oracle maintenance, there are no additional licensing fees to Oracle. However, Oracle has made Hyperion, Projects, and Budgeting complaint with Federal accounting. A number of agencies will install these as part of the R12 migration resulting in some additional revenue for Oracle.




Bottom line - Even with the additional Federal revenue, I don't see a lot of growth in Oracle's ERP business."

Earnings from Fedex and General Mills

Craig Johnson of Customer Growth Partners and the Roulston Research Consumer Chair breaks down the latest corporate earnings from Fedex and General Mills on Fox Business. Watch it here.


http://news.yahoo.com/video/business-15749628/fedex-general-mills-report-earnings-17190082

CMTL: Attractively Priced

Our Boston presenter continues to be bullish on Comtech's prospects (Nasdaq:CMTL, $34.12). Last week the company raised its earnings and revenue guidance for fiscal 2010. Comtech is seeing solid demand from the US government and international customers. Management anticipates sizable increases in government orders for its MTS and Blue Force Tracking Systems in the near term. The stock has gained 3% since the presentation in early October. Based on the current valuation, the presenter believes the company is a likely acquisition target for major defense players.

Tatum/Roulston Report

We mentioned last month that we were seeing signs in the Tatum Survey and in our corporate conversations that were concerning to us in regard to the corporate outlook for 2010. Issues ranging from carbon emission standards to health care reform to taxation not to mention the whole regulatory environment and access to capital are weighing heavily on corporate decision making. Rarely have businesses had so much uncertainty in their outlook. It has labored companies coming out of the credit squeeze as to how to allocate their assets. This month the survey reflected an unusual and sudden downturn in the outlook for capital access, capital spending, backlogs and the strength of the dollar. Employment although maintaining current stability seems to be stable due to current conditions. There is little in the corporate outlook to reflect confidence or predictability.

It is hard during the Christmas season to side with the bears. But with a strong market recovery after the fall 2008 credit meltdown, reality is starting to be influenced by an activist government policy that is clearly causing concern in the corporate outlook for 2010. It is our belief at Roulston that we continue to be in an “L” curve with very little visibility and credit access. Without those features we find any significant economic upside to be very dependent on relatively new economic factors from foreign demand to government stimulus to see growth beyond 1-2%. These factors will contribute to some growth no doubt. But it still means strong headwinds for the economy over the next 12 months.

To read the full survey click here.

Johnson Sees Sales Growth at Non-Mall, Value Retailers

Craig Johnson, our Consumer Chair and President of Customer Growth Partners, was on Bloomberg TV Friday morning with his opinion of the propsects of Non-Mall, Value Retailers. Check it out here.

Cloud computing

Cloud computing.

Over the last several years, Amazon, Google, Microsoft, AT&T and many others have started offering cloud capabilities. There is lots of discussion about the merits of the cloud with individual IT professionals on both sides. Small and mid-sized companies have been quick to embrace it. Start-ups in particular find it a great way to ramp up quickly and cheaply. F500 companies are not so sure. They have a huge investment in their existing IT infrastructure that the cloud has the potential to render obsolete.

Nicholas Carr, who is not the most popular person in the IT community, makes a compelling case that the computing cloud will make the traditional IT infrastructure obsolete. In his new book, The Big Switch: Rewiring the World, from Edison to Google (W. W. Norton, 2008), he states, "In the end, the savings offered by utilities become too compelling to resist, even for the largest enterprises. The grid wins."

If Carr is correct, and I believe he will be, IT companies that embrace the cloud will be winners while those that cling to the older models will lose. This will this include companies that supply servers, storage, communications, middle-ware, and other infrastructure components. In addition, it will also include companies that supply applications. It will no longer be enough to sell software that can be installed an operated on a corporate server. Successful companies need to sell the software as a service either directly or through a partner.

Natick Mall tour with Arnie Cohen

From Mall tour yesterday winners –JCrew, Chico’s, Nordstom, Amer Eagle, Metro, Guess, Limited 2, Losers Aero, Hollister, Abercrombie,TAlbots, Ann Taylor, Pier One, Macy’s, Gymboree, Victoria Secret,Under Armour, Coldwater Creek

This is not traffic driven but look of the store, Merchandise, appealing to target customer and trends Arnie is seeing in other malls and what he is hearing from his contacts. Yesterday became a three hour tour and very worthwhile as Natick Mall is rallyexpansive. So we got to see other concepts like Justice, Jack and Jill, and all the Liz concepts like Juicy and Lucky and others that Arnie got to talk about how the model have drifted or been institutionalized causing a lot of niche players to lose their luster or get off course like Justice who should not be in the malls but back in strips. We talked a lot about the concepts that are authorities or clubs to their constituency versus a commodity covering space. I would be happy to shed more light if you wish.

United Air Lines learns the power of viral revenge

Bart Perkins, Chair of our Technology group, wrote an article about an incident involving a rock band travel experience aboard United Air Lines. It's an interesting take on companies and their PR issues in this age of social media.

This article was originally published in Computerworld
------------------------------------------------------
Have you seen the YouTube video "United Breaks Guitars"? Besides being genuinely funny, it's a great example of viral revenge, the flip side of viral marketing. The video accompanies a song by the band Sons of Maxwell that describes how United Air Lines' baggage handlers carelessly treated band members' checked instruments. A valuable guitar belonging to band leader Dave Carroll was broken. For over a year, United repeatedly declined his requests for compensation.

That's when the band turned to social media for revenge, posting its complaint on YouTube. United Breaks Guitars has a catchy tune, clever lyrics and memorable images. The video has gone viral and broken the band out of relative anonymity. After only three days, it had almost 1.5 million views and 10,000 comments, virtually all siding with the band. The story was picked up by CNN, NPR and CBS.

Faced with this social media juggernaut, United dropped the ball. It issued a single tweet stating, "This has struck a chord w/us and we've contacted him directly to make it right." So far, the company hasn't posted a response on YouTube or its own Web site. Dave Carroll knows how to take full advantage of the power of social media. United doesn't, and the cost is a PR nightmare. Lessons abound. For starters, corporations that long have monitored the media to understand public perception can't ignore social media, everything from blogs to video sites. And responses have to be in the appropriate channel. In this case, United needed to do a YouTube posting. Even something stiffly corporate like an apology from a contrite executive would have been helpful (provided it was sincere). But to be truly effective, United needed to try to match Carroll's creativity and good humor.

Companies probably fear giving things like the Sons of Maxwell video any extra attention, but by choosing not to engage, they are letting the opponent win all the debate points. And in this case, a lot of points are being scored.

Every PR professional knows how in 1982, Johnson & Johnson addressed the Tylenol scare in a way that actually improved public perception of the company and increased product sales. But United didn't apply that lesson to the new media and clearly lost this confrontation. It ultimately agreed to pay (Dave donated the money to charity), but the whole affair tarnished rather than burnished United's public image.
-----------------------------------------------

Bart Perkins is managing partner at Louisville, Ky.-based Leverage Partners Inc., which helps organizations invest well in IT. Contact him at BartPerkins@LeveragePartners.com.

San Francisco Mall Tour

Went thru the Westfield Downtown Mall with Arnie Cohen and after doing these now for the last few weeks some things definitely becoming clear. The traffic in malls is just not happening other than weekends. This is historically the lull but like we saw in NY at Westchester there is not "normal" traffic happening like past years right now. The spend will be smaller and trend line is flat in general with last year's lower numbers as of right now. That being said there are some above trend and some under. Here's Arnie's take:
Winners
Nordstrom's, American Eagle, JCrew, Chico's, Black/White, Guess, Metro
Tough Season
Aeropostale, Talbots,Ann Taylor, Pir One, Macy's Gymboree, Victoria Secret, Abercrombie
Inventories, store presentation, product mix, recognition of target customer and appeal are all issues we discussed in detail on our walk thru. Lots of details on all of these companies and more we can discuss in more detail. The bottum line is it will be a selective Christmas.

Energy Roundtable in San Francisco

with our chair Steve Percy former CEO of BP America and Peter Robertson former Vice Chair of Chevron we discussed the stat of oil and natural gas. Refining business is vey bleak as CAFE, margin pressure and ethanol growth has taken out any industry growth.Globally gas trades differently than the self sufficient USA and both experts just dont see natural gas prices changing much. Majors will see reserves drop by 30 million barrels by 2030 so even if demand stays flat the industry has to find 3x Saudi production to make up the shortfall. Much of the new deep well and other new finds are in the $60-$70 production cost category and other 3rd world production has other costs. For example security numbers 20,000 for Chevron in Indonesia to protect their workers. They need four security people there for every worker. Although OECD demand down 2 milllion barrels this year the increased demand of 1.6 million barrels in developing countries will continue to put pressure on oil prices. Carbon plans can change everything but in general oil prices in $70-80 range looks to be very applicable and stable to support current demand.

Electronics reign supreme

Craig Johnson believes that "despite the media hype surrounding Black Friday, the weekend is critical to the holiday season only for one major merchandise category -- consumer electronics -- which will see some 20% of Christmas sales over the three-day weekend,".

As expected, flat-panel televisions and other electronics were the most popular purchases last weekend.

Initial reports show 25% of overall shoppers who purchased a TV buy it at a Best Buy. This compares to half of overall TV buyers purchasing their TV at Wal-Mart. This shows a big win for Best Buy, given that the chain has far fewer stores than Wal-Mart.

Craig also notes that Best Buy proved strong in the home appliances category, a sector starting to show signs of a recovery.