Unilever (NYSE: UL) is the world's second-largest maker of food and detergent, so you would expect the company to hurt with rising commodity prices. But Unilever has been proactive and has raised prices 4.8% in the quarter to offset its rising costs. In fact, the company said revenue will beat its forecast for the first time in six years on increased prices and sales of Dove soap, Hellmann's mayonnaise and Lipton tea. First-quarter net income climbed 33%, exceeding analysts' estimates.
As expected, April retail sales have so far indeed been strong, although there are some ares weakness is seen.
Costco (NASDAQ: COST) shares are up 1.2% in premarket trading after the warehouse club retailer said April same-store sales increased 8%, beating analysts' expectations of 6.1%.
Wal-Mart Stores Inc. (NYSE: WMT) shares are also higher in premarket trading, up 1.8%, after the world's largest retailer, said same-store sales climbed 3.2%, beating the 2.1% forecast by analysts. Staying with Wal-Mart for a moment, it said it plans to invest millions in Canada and open more supercenters.
The more luxurious items, though, such as lingerie sold at Limited Brands (NYSE: LTD) have seen a slowdown as the company said that April same-store sales fell 5%, falling short of the 2.3% sales decline analysts had anticipated.
A few years back, The Onion ran a spoof article in which it claimed that Microsoft was trying to copyright ones and zeros, in an attempt to corner the market on binary code. Of course, the problem with satire is, just when you think you've hit the jackpot on ridiculousness, reality trumps you.
Recently, Juicy Couture Inc. filed a lawsuit against Victoria's Secret, claiming that the lingerie giant had stolen many of its marketing gimmicks and design features. Among other things, Juicy stated that Victoria's Secret had copied:
Juicy's packaging, which resembles candy (Lingerie disguised as candy?!? Didn't Spencer's Gifts come up with this idea somewhere around 1978?).
Juicy's most popular color scheme, which revolves around the color pink (Pink? For girls? Clearly, Juicy's designers are underappreciated revolutionaries!).
Juicy's most popular design, in which its logo is emblazoned across the backside of the wearer (I wonder if Juicy's next step will be to go after all the lower-back tattoo wearers out there. Tramp-stampers, beware!).
While Victoria's Secret (a subsidiary of Limited Brands, Inc.: NYSE: LTD) may well be guilty of plundering the ideas of others (in particular, Katerina Plew, whose lawsuit seems to have a little more merit), it seems like Juicy is getting a little ridiculous. Intellectual property is all well and good, but is it legitimate to copyright the color pink?
Still, as a luxury item, lingerie is probably not selling all that well right now. Maybe Juicy needs the dough?
One of our more commented-on stories, We're too sexy ... per Victoria's Secret's CEO, received some very funny ones. The best one, that I thought showed the wildest mis-characterization of the worlds population, was "supermodels only make up 7% of the world."
Obviously a few decimal places were left out, otherwise we would have 500 million supermodels. I'm not sure anyone has an exact count, but the number is likely less than a hundred, perhaps two. However, this might explain the rash of UFO sightings -- beings from other planets surely would be eager to travel from light years away to do 'meet and greets' in a world where better than 1 in 15 people were supermodels!
I don't know how our readers are doing with their investments, but there are some that clearly need to get a grip on percentages. The following gem of a coment was sent to my colleague Zac Bissonnette's after his post: Congress grills overpaid executives:
"I personally do not feel that any CEO of publicly traded company should receive more than 300% of the lowest paid permanent employee. Private companies they should receive what ever they can."
With recession fears, housing market worries and credit concerns, retailers have been facing tough times, especially during the holiday winter season of December and January when sales came with weak numbers. But on the heels of these disappointing results, retailers got a beam of hope as February's sales numbers showed a surprising increase.
Encouraging news for retailers showing a rebound in consumer spending during the past month came after world's largest retailer Wal-Mart Stores Inc. (NYSE: WMT) announced a rise of 2.6% for its February same-store sales. The company said that its same-store sales during the period were helped by strong gains from gas, food and flat-panel TVs. Analysts were expecting the retailer show an increase of 1.1% for its same-store sales, according to Thomson Financial.
Among other retailers that showed a rebound in February sales were Costco Wholesale Corp. (NASDAQ: COST) and Saks Inc. (NYSE: SKS), both of which reported stronger-than-expected gains. Apparel retailers Pacific Sunwear of California Inc. (NASDAQ: PSUN) also reported earnings results exceeding estimates of 6% sales growth last month.
For Limited Brands Inc. (NYSE: LTD), though, February didn't come with positive results. The company stated that higher energy and food prices put pressure on consumers who focused on necessities.
Wal-Mart Stores Inc. (NYSE: WMT) shares are trading over 1.1% higher in premarket trading after the discount retailer reported that same-store sales rose 2.6% in February due growth in grocery, electronics and health items. Analysts expected a 1.1% increase according to Thomson Financials. The overall weak sales trend, however, continued into February and shows no sign of improvement.
While discount retailers and wholesale clubs expected to do better, most retail stores were expected to do worse. For example, specialty retailer Limited Brands Inc. (NYSE: LTD) reported that same-store sales fell 9% in February, a smaller drop than the 11% analysts were expecting. While sales fell 10% at Victoria's Secret, they rose 1% at La Senza. Total sales fell 16% and the company expects March to show much the same results.
Meanwhile, Thornburg Mortgage Inc. (NYSE: TMA) is dropping over 58% in premarket trading after it disclosed Wednesday that it failed to meet a $28 million margin call, causing a series of cross-defaults.
In a short story in the Wall Street Journal [subscription required], Sharen Turney, chief executive of of Victoria's Secret, confided during a conference call that the lingerie chain may have gotten off track at some point and may now be just too sexy.
Can there be such a thing as too sexy? There are times you can be too trashy, or too slutty, but can you be too sexy? I think not!
It may be that some of the advertisements on television are inappropriate for the time-slot. It may be that at times the ads are viewed like soft porn and teenage boys are the first to peruse the monthly mailing. But too sexy? That is a very strange comment coming from a company that has made a reputation for itself and pushed sales growth for years based on a foundation of sex appeal.
The Victoria's Secret chain is a division of the Limited Brands Inc. (NYSE: LTD) and Turney said she wants to bring a more sophisticated image back to the product line - hmm. I wonder if this is just a smoke screen to avoid criticism by conservatives in an election year.
I can just hear the discussion in the board room: "There are some folks that think we have gone too far, and that we present an image that is just too darn sexy. All those in favor of being less sexy raise your hands"
This just does not seem possible, does it? LTD closed yesterday at $17.82 but is down over 9% in midday trading. Maybe Wall Street traders prefer more sexy, not less?
Gallery: Victoria's Secret Fashion Show 2007
UPDATE: LTD closed at $15.85 down $1.87.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of LTD.
"SEXY." The capital letters blared at me from the window of Victoria's Secret in Pioneer Place here in Portland. Next to the clean lovely windows of the Apple store, I felt I almost had to shield my eyes, to protect me from the glare. The mannequin dressed in a red bustier seemed more Elvira than Rebecca Romijn, the sweet face of Victoria's Secret when I was a loyal customer in my early 20s.
I'm not the only one turned off by the company's recent focus on sexy above all else. In rather shocking statements during this morning's Limited Brands Inc. (NYSE: LTD) analyst call, Victoria's Secret CEO Sharen Turney said the company has "gotten too much off our heritage" and was "too sexy," no longer the ideal "ultra-feminine."
With black lacquer and shocking pink decor, the "s" word thrown around like neon signs in a red-light district, and rather unsubtle displays, this isn't my mother's Victoria's Secret.
Bank of America says: "Q4 Beats on shares; Guidance implies a slow start to Q1."
LTD sells intimate apparel, personal care, women's clothes and beauty products through Limited, Limited Express, Victoria Secret & Bath & Body works. LTD reported operating income of $621 million. LTD says: "now expects February comps in the negative low double digit range verses its previous guidance for negative mid to high single digit comps."
LTD March option implied volatility of 48 is above its 26-week average of 42 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Abercrombie & Fitch Co. (NYSE: ANF) recently opened Gilly Hicks, a provider of women's undergarments like no other.
"The shop, which contains upper-end lingerie, loungewear and intimate accessories, is modeled after a British manor, with columns at its doorways, dark wood paneling and close to a dozen rooms, such as a `bra library' featuring more than 40 styles," according to theWall Street Journal (subscription required). The company plans to open as many as 15 other Gilly Hicks outlets this year, the paper said.
Abercrombie & Fitch continues to walk the fine line between sexy and soft core porn with Gilly Hicks. The promotional video for the chain on its Web features half-naked and at times totally naked models of both sexes cavorting on a beach in what appears to be Australia. Gilly Hicks, according to the company's marketing department, emigrated from England to Australia in 1932 and opened an underwear store in her family's British colonial-style manor house in Sydney.
This 40-year-old married guy from New Jersey isn't sure if the message of the commercial is that our underwear is so comfortable that you will run around in it in front of total strangers in the beach. Apparently, the models didn't get the message that prolonged exposure to the sun can damage your skin.
MOST NOTEWORTHY: Level 3 Communications, BT Group and Limited Brands were today's noteworthy downgrades:
Merriman downgraded shares of Level 3 Communications Inc (NASDAQ: LVLT) to Neutral from Buy, as they believe the risks outweigh the rewards until the company can complete its integration and turn FCF positive.
BT Group Plc (NYSE: BT) was downgraded to Equal Weight from Overweight at Lehman to reflect the company's slowing revenue growth.
Bear downgraded Limited Brands Inc (NYSE: LTD) to Peer Perform from Outperform, citing the unfavorable macro backdrop, execution issues and management turnover.
OTHER DOWNGRADES:
Societe Generale lowered its rating on GlaxoSmithKline Plc (NYSE: GSK) to Hold from Buy.
Morgan Stanley downgraded Cox Radio Inc (NYSE: CXR) to Equal Weight from Overweight.
The once-vaunted FICO credit scoring system is now being blamed for failing to flag risky home-loan borrowers. The FICO score, last overhauled in 1989, is based on a complex formula using many variables --and yet it can be manipulated fairly easily by ordinary people. In the past few years a group of "credit doctors" and mortgage brokers began devising tricks, some illegal, to help borrowers juice their FICO scores to qualify for credit cards and mortgages on homes they couldn't afford. Will an overhaul be enough to appease angry lenders? Credit Scores: Not-So-Magic Numbers - BusinessWeek
Making Sense of Your Credit Score
Do you know your credit score? If so, you're probably well aware of how important it is to your finances. Unfortunately 70% of consumers don't know their score. It pays to know your number -- and how to boost it. Test your credit-score savvy with our QUIZ.
Macy's, The Limited and Ann Taylor Loft are out and T.J. Maxx, Marshalls and Ross Dress for Less are in.
The weaker the economy gets, it seems, the more some discounters benefit and the bleaker the outlook for their higher-priced competitors. The trend could carry long-term implications for all the retailers. People who try - and like - stores in shaky economic times are more likely to stick with them after the economy rebounds.
TheStreet.com's Jim Cramer says that next to the consumer, this is the biggest problem facing the otherwise strong companies in this sector.
Doesn't it seem like another day where it is impossible to make money? We have earnings season without any sense that anybody's numbers can be raised. We have an ennui that comes from months of pounding and indecision, and we have stocks that can't seem to go up to save their lives.
Tonight could prove to be one of those rare times when men and women everywhere will not be fighting over what to watch on television as the nation tunes in to the 2007 Victoria's Secret fashion show. What will be slightly different this time around will be the importance that the show places on its Pink line, a collection of clothes aimed at the college and young teen crowd [subscription required].
Sales at Victoria's Secret have been struggling lately as a result of declining mall visitors, as well as a couple of nasty fashion mistakes at its stores. There has been one bright spot, however, the company's Pink line. The retail line includes items such as colorful underwear, pajamas, clothing and accessories, all aimed at a younger-than-traditional Victoria's Secret audience.
The retailer's parent company, Limited Brands Inc. (NYSE: LTD), has already posted a dismal 48% drop in net income for its third quarter, and has warned investors not to expect too much out of its fourth quarter results either.
Limited Brands Inc. (NYSE: LTD), which operates Victoria's Secret and Bath & Body Works, has seen a surge in insider buying. With over 400,000 shares having been purchased by insiders over the last week or so, clearly they believe the stock is trading cheap. For investors looking for a cheap retail stock, Limited may be the play. Chairman and Chief Executive Leslie Wexner bought 280,000 shares between the previous Friday and last Tuesday, his first open-market purchases in over 13 years.
With a PE of 10.25 and a PEG of 1.01, the stock looks cheap, even with lower guidance. I think that international expansion is the key. Not only international sales but outsourcing the production to places like India are sure to keep costs low. With an expected economic slowdown in Q1 and Q2 2008, this may be a play for second half '08, as the economy will rebound and bring the consumer along with it. This is the kind of stock I would rather be a bit early in than late, because once the market starts to move Limited shares will surge.
Finally, it's one thing when a company announces and/or completes a stock buyback. They could do it for a host of reasons. But when insiders dip into their own pockets to buy shares, it usually is a pretty good sign the bottom is near.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/03/07.
Exxon Mobil (NYSE: XOM) was upgraded by UBS from Neutral to Buy and the target upped from $92 to $96.
Starbucks (NASDAQ: SBUX), interestingly, was both upgraded and downgraded today. Friedman Billings upgraded the coffee chain from Market Perform to Outperform and uppded the target price from $22 to $27. CIBC World Markets downgraded the stock from Sector Outperform to Sector Perform and lowered the target price from $27 to $23.
Credit Suisse, which rates Google (NASDAQ: GOOG) shares at Outperform, raised the stock's target price from $800 to $900. GOOG stock up 1.6% in premarket trading.
Friedman Billings, rating Hewlett-Packard (NYSE: HPQ) at Outperform, raised the target price from $54 to $60.
Reporting today also are:
Whole Foods Market Inc. (NASDAQ: WFMI) - forecast to post fourth-quarter earnings of 30 cents a share.
Target Corp. (NYSE: TGT) - forecast to post third-quarter earnings of 62 cents a share.
Limited Brands Inc. (NYSE: LTD) - forecast to post third-quarter earnings of 1 cent a share.
Before the bell: Stocks could bounce back; retail sales, TM, BBY on tap 
A few years back, 
With recession fears, housing market worries and credit concerns, retailers have been facing tough times, especially during the holiday winter season of December and January when sales came with weak numbers. But on the heels of these disappointing results, retailers got a beam of hope as February's sales numbers showed a surprising increase. 
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TheStreet.com's Jim Cramer says that next to the consumer, this is the biggest problem facing the otherwise strong companies in this sector.
Tonight could prove to be one of those rare times when men and women everywhere will not be fighting over what to watch on television as the nation tunes in to the 
Comfort Zone Investing: One thriving area of real estate: Apartments
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
