Business Trends

Archive for May, 2009|Monthly archive page

Prospects for the jewelery industry

In Uncategorized on May 28, 2009 at 9:53 pm

High-end jewelry retailers, like Tiffany & Co. and Zales, are declining much faster than the jewerly industry as whole, according to industry research firm IBISWorld.  Although it is definitely a lacklustre year for these companies, Tiffany has a strong management team and therefore will likely perform better than its high-end competitors.

“There are definitely more declines for Tiffany and the jewelry industry ahead, but it’s likely that Tiffany will not perform as badly as Zales, whose yearly losses are nearing $100 million,” explained Toon van Beeck, senior analyst with IBISWorld.  “Tiffany might just turn in a profit this quarter; relatively small, but at least a profit.” 

Both jewelers are performing poorly in this economic environment, with sales and profits slumping dramatically in most recent quarterly fillings.  However, Tiffany’s last quarterly filing (fourth quarter 2008) indicated that the company still managed to make a profit ($31 million), while Zales experienced a net loss (about $23.6 million) for the same three month period.  Operating declines continue for Zales as the company announced a $23.2 million net loss in its latest quarterly filings, released May 27. 

Holding 4.1 percent market share in both jewelry manufacturing and retailing, two high-risk industries, Tiffany is facing difficult conditions in 2009.  Industry growth rates will not be strong until 2011, but there should be a significant boost in the fourth quarter of 2009, compared to the tough Christmas trading period of 2008.


Worldwide demand for products produced in Alaska increasing industrial employment in the state

In Uncategorized on May 28, 2009 at 6:00 pm

Petroleum refineryIndustrial employment in Alaska increased 3.1% over the past twelve months according to the 2009 Alaska Manufacturers Directory. MNI reports Alaska gained 1,016 industrial jobs from March 2008 to March 2009 — contrary to the steep industrial employment losses experienced by the rest of the U.S.

“Steady worldwide demand for products produced in Alaska, particularly petroleum and coal products, is helping Alaska weather the recession,” says Tom Dubin, President of the Evanston, IL-based publisher, which has been surveying industry since 1912.

The industrial directory reports Alaska is home to 944 manufacturers employing 33,968 workers. MNI profiles manufacturers of all sizes including small, start up companies.

According to MNI, food manufacturing accounts for 31% of the state’s industrial jobs or 10,529 jobs, down 1.2% over the past twelve months. Fish processing/canning accounts for 92% of the state’s food manufacturing jobs, down 163 jobs or 1.7% over the year.

Another 19% of Alaska’s industrial jobs are in oil & gas extraction, with the sector accounting for the majority of the state’s employment gain, up 15.8% over the year. Employment in petroleum and coal products processing represents 3,781 of the state’s industrial jobs, with no significant change reported over the year. The industrial machinery and
equipment sector accounts for 4,762 of Alaska’s manufacturing jobs, up 1.7% since March 2008.

Other sectors gaining jobs include transportation equipment, up 82 jobs or 12% and fabricated metals, up 51 jobs or 4.4%. Losses were seen in lumber/wood products, down 3.4% and printing/publishing, down 1.2%. Employment remained stable in most other sectors, according to MNI.

The Directory reports over half of the state’s industrial jobs are located in South Central Alaska. Jobs in Anchorage, the Kenai Peninsula and Kodiak Island represent 19,666 jobs, up 402 jobs or 2.1% in the past 12 months.

The Aleutian Islands represent 4,193 of the state’s industrial jobs, down 2.5% since March 2008 while Fairbanks North Star is home to 1,904 jobs, up 1.4% over the year. The oil-rich North Slope region is home to 1,483 jobs, up 45% over the year.

Most companies aren’t tying business ethics with compensation, survey finds

In Uncategorized on May 28, 2009 at 5:33 pm

Despite public outcry and disdain from government leaders on executive compensation and employee bonuses, a survey conducted by the Society of Corporate Compliance reveals  relatively little connection between business ethics and corporate compensation found in the business environment. This new research among compliance and ethics professionals reveals that when it comes to compliance and ethics metrics, very little has been done to incent ethical behavior.

“The survey found that only a minority of companies have made ethics and compliance a process for determining how employees are compensated and only about one company in six ties employee bonuses and incentives to ethical performance,” said Roy Snell, Chief Executive Officer, SCCE.

The majority of survey respondents indicated that compliance and ethics are not strongly tied to how executives and line employees are compensated. When it comes to bonuses, ethics and compliance plays an even smaller role. According to the survey numbers, only 34% of survey respondents reported that compliance and ethics had some impact on the compensation process for executives and in the highly sensitive area of bonuses, compliance and ethics does not appear to be a factor for 76% of companies.

“The net result is that there is more work to be done in aligning business practices with stated commitment to compliant, ethical behavior,” said Snell.

To review the complete survey results, click here.

Current Global Oil & Gas Company Market Trends

In Uncategorized on May 28, 2009 at 4:24 pm


North America leads the inventory with over $9 billion (or roughly 45% of value); followed by Africa (22%) with the North Sea, Rest of Europe, South America, Asia, Australia and Middle East rounding out the pack with deals valued at between $500 million to $1.5 billion.

In North America, the most prized deal is the multi-billion dollar interest Devon Energy is offering in its four discoveries (Kaskida, Cascade, Jack and St. Malo) in the emerging Lower tertiary trend in the deepwater Gulf of Mexico. Onshore resource style plays (shale gas and oilsands) remain quite active. Notably, Shell and EnCana are looking for a partner to develop 30,000 acres of exploration leases in the Haynesville shale gas play of north Louisiana and east Texas. In Canada, UTS Energy rejected the revised $677 million cash bid by Total E&P Canada in April as inadequate and continues working with its financial advisors, RBC Capital and TD Securities, to maximize shareholder value. UTS Energy has 1.7 billion barrels of net contingent bitumen resources in the Athabasca Oil Sands area of Alberta.

Internationally, Africa is exciting with numerous deals. West Africa now offers “unparalleled opportunities” for major and independent oil and gas companies, writes Patrick Morris, CEO of Vancouver-based Gold Star Resources Corp. Changing geopolitics, reduced security and political risks, the recent 1.8 billion barrel discovery in West Africa’s largest oilfield, and a new African foreign policy by recently elected U.S. President Barack Obama have all helped in making West Africa a “desirable destination for oil and gas exploration and production.” In Ghana, two partners have put interests on the market in the world class offshore Jubilee field (estimated 1.2 billion barrels equivalent of gross recoverable reserves). Other deals are available in Uganda, Angola, Kenya, Egypt, Cote D’Ivoire, Nigeria, Gabon, Cameroon and Namibia. In other parts of the world, significant deals in play include development projects in the Kurdistan region of Iraq, which now has an improving political and security environment.

In Indonesia, BP is seeking to harvest its 46% interest in the prolific Offshore North West Java block, which includes 670 producing wells, 170 platforms and 1,600 km of subsea pipelines.

Chevron has retained Scotia Waterous to sell its interest in 13 separate concessions in the Austral and Nequen basins of Argentina which were producing nearly 4,500 b/d of gross oil and 54 MMcf/d of gross gas in late 2008.

In Australia, Woodside Petroleum has put its Otway project, offshore Victoria, on the market. “Due primarily to the whipsaw in oil and gas prices over the past 12 months, our analysis highlights an unusually high quality and diverse set of world class opportunities, particularly for well-heeled buyers seeking long term assets in early stage development,” according to Yashodeep Deodhar, CEO of Derrick Petroleum Services. “These are not distressed assets put on the market by distressed companies. Quite the contrary, we have identified numerous opportunities by first class operators who are simply managing their forward risk profiles and laying off a portion of development capital. We foresee the recent trend of national oil companies (NOCs) and government backed oil companies dominating the buy side to continue.” In completing the study, Derrick also reviewed past M&A activity and trends. “In contrast to the first half of 2008 where seven of the top ten buyers were western companies; so far this year, only three of ten buyers are western. Buyers of significant deals have recently been mostly NOCs and government-backed companies such as IPIC (Abu Dhabi), CNPC (China), KNOC (Korea) and Ecopetrol (Colombia),” according to Deodhar. “In addition to tracking deal activity, value trends regionally and globally, and deals in play, we also continuously monitor companies with financial dry powder and a desire to do more deals. Currently, notables on this list include Norway’s StatoilHydro, Colombia’s Ecopetrol, China’s Sinopec, France’s Total, United States’ Apache Corporation and Canada’s Talisman Energy. These companies alone have over $20 billion of capability,” concludes Deodhar.

“The role of junior exploration companies is to set the trend,” said Patrick Morris of Gold Star Resources Corp.  For example, Gold Star Resources is the first and only junior company to go after onshore oil and gas opportunities in Cote d’ Ivoire and Liberia since the 1970s. Larger players are competing for offshore blocks all along the coast – but with no plans for any onshore exploration.

Market research firm IBISWorld forecasts that industry revenue for oil will grow at an average annualized rate of 9.8% over the five years to 2014, where new capacity is expected to come on stream in several oil producing countries, which will help to moderate the upward price pressure, which is expected to emerge as demand starts to revive.

Consumers at all income levels shopping more at Dollar Stores

In Uncategorized on May 26, 2009 at 4:51 pm

The recession has been a boon to dollar stores, which attracted increased consumer spending in 2008, including spending among high and middle income shoppers, according to The Nielsen Company. Nielsen’s analysis of consumer shopping habits shows consumers at all income levels shopping more at dollar stores, with high income shoppers spending 18 percent more at dollar stores in the second half of 2008 compared to the prior year. Dollar stores are outpacing major consumer packaged goods (CPG) channels among both low and high income shoppers.

The analysis was presented today at Nielsen’s Consumer 360 conference, the CPG industry’s premier educational and networking event, attended by more than 700 industry professionals.

Dollar stores are small to mid-size stores that sell an assortment of CPG products, ranging from household cleaning products to food, usually at low prices. Originally taking their name from the fact that most products were priced at or below one dollar, today’s dollar stores offer products at a variety of price ranges, with an average of only 23 percent of products at or below the one dollar price point. Even so, the continued focus on comparatively low prices and value is drawing shoppers from all income levels. According to Nielsen, an estimated 65 million U.S. consumers shopped at dollar stores in 2008.

“The troubled economy and rising costs in healthcare, education, and food have caused everyone — even those with high incomes — to rethink where they purchase basic household goods,” said Jeff Gregori, vice president, Retail Services, The Nielsen Company. “Five years ago, shoppers weren’t sure what they would find in a dollar store. Today, dollar stores are delivering more consistent selection and value, and consumers are shopping dollar stores more regularly to fulfill their basic CPG needs.”

Despite the increase in spending among high and middle income shoppers, low income shoppers are still the primary dollar store customer. According to Nielsen’s research, 45 percent of dollar store sales are from low annual household incomes (below $30K), 47 percent from middle incomes (between $30K and $99.9K), and only eight percent from high incomes (greater than $100K).

The most loyal dollar store customers tend to have low incomes and live in small towns and rural areas or in urban centers. Senior couples, senior singles (particularly widows) and younger families with children are more likely to shop in dollar stores only occasionally, relying on other retail channels to meet the rest of their household needs.

In terms of products, dollar stores have become a regular shopping destination for everyday household staples. Among those who regularly shop at dollar stores, the most commonly purchased household items include paper goods, such as napkins and paper towels, detergent, trash bags, and cleaning and laundry supplies. The most common edible items are candy, snacks and cookies.

“With more shoppers having positive experiences at dollar stores, there is a significant opportunity for dollar stores and CPG manufacturers to build loyalty and expand into new product categories, such as food and beverages and select health and beauty care,” said Gregori. “There is also a potential growth opportunity in exploring dollar store private label offerings in both edible and non-edible products. The challenge for dollar stores and CPG manufacturers is to get the product mix right to meet the needs of their traditional customers as well as new customers with higher incomes.”

Frugality an ongoing financial strategy with Americans

In Uncategorized on May 26, 2009 at 4:37 pm

Amid reports that retail spending is picking up and the economy may be stabilizing, American families say they are looking beyond the eventual recovery to a more frugal future that embraces pinching pennies and saving money as a desirable and permanent financial strategy.

The First Command Financial Behaviors Index indicates that the majority of April respondents are embracing a more fiscally conservative philosophy in their personal finances. Three quarters of respondents believe the United States was “too wasteful” before the recession. They now say that “when I save and invest my money instead of spending it, I feel like I’m doing the right thing” and “a disciplined saving mentality brings me peace of mind.” More than half (58 percent) agree that “the current economic situation will have a long-term effect on my spending behavior.” And perhaps most promising, half say they have embraced frugality as a way of life.

“Americans are showing encouraging signs of a fundamental, long-term shift in their approach to personal finances,” said Scott Spiker, CEO of First Command Financial Services, Inc. “After years of living in a consumption-fueled economy, consumers are rediscovering the time-tested values of prudence and self-reliance. This change signals a slower but healthier recovery. And that should be celebrated. What we don’t need are encouragements from government or Wall Street to spend, spend, spend. Rather, the time has come for Americans to embrace a new frugality.”

This new attitude is emerging at a time when the American outlook on personal finance is improving. More than one-third (38 percent) of April respondents indicate that their personal financial situation is stable, a 17-point increase from October 2008. Almost half (46 percent) of respondents say they are still “cutting back even though I do not need to.” Only 34 percent say they are looking forward to “the economy rebounding so my spending habits can go back to normal” and just 10 percent feel that living paycheck to paycheck “is a perfectly acceptable way to live.”

Americans continue to cut back by reducing leisure activities (53 percent), attempting to reduce utility bills (49 percent), reducing clothing purchases (48 percent), shopping at discount stores (48 percent), increasing their use of coupons (46 percent), reducing holiday spending (45 percent), reducing travel (43 percent) and bringing their lunch to work (40 percent). Among those who are cutting back, 26 percent said that it is out of necessity and two-thirds (66 percent) said that it is “preparatory.”

Signs of a new frugality can be gleaned from the way Americans are handling their federal tax refunds. Out of those respondents who have received a refund, 45 percent say they will put the money into savings and investments and 40 percent say they are using their refund dollars to pay off debt. First Command’s ongoing research reveals that a disciplined approach to savings and paying down debt tends to increase feelings of optimism and financial security.

“As the ratio of savings to debt increases, so do feelings of financial security,” Spiker said. “The savings-to-debt ratio is perhaps the most significant contributor to feelings of financial optimism, for as one’s savings-to-debt ratio increases—meaning more savings, less debt—feelings of financial security increase, and feelings of being financially stretched decrease. The numbers make it clear that having a reasonable savings-to-debt ratio makes a person feel better about the present and more optimistic about the future.”

Relatively few consumers who have received a tax refund say they will spend it on such non-essential items as consumer purchases (16 percent), vacations (9 percent) and dining out (3 percent). Look for more of this type of frugal spending behavior in the months ahead. Less than one quarter (23 percent) say they “will stop cutting back once the economy is back on track.” The percentage of Americans who have cut back for good is on the rise, from 14 percent in February to 16 percent in March and to 18 percent in April. An additional 16 percent of Americans in April said that they will continue to cut back for 2 to 10 years.

“These results suggest that those who think spending levels will return to past highs anytime soon are living in a dream world,” Spiker said. “The average American has regained fiscal sanity, and that’s a good thing. We’re not likely to see a genuinely healthy economy unless Americans are spending and saving wisely.”

Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence.

Stainless steel imports from China showing substantial growth

In Uncategorized on May 26, 2009 at 4:25 pm

U.S. producers comprising the Stainless Steel Tube Trade Advancement Committee (SSTTAC) noted that, despite the significant recession in the United States, imports of stainless steel pipe and tube showed substantial growth in early 2009 over 2008.
According to David A. Hartquist, the SSTTAC’s legal counsel, “Despite the substantial economic downturn globally and in the United States, imports from China increased almost 20 percent in the first two months of 2009 compared to the same period in 2008. China remains by far the largest foreign supplier of the material produced by our member companies, accounting for nearly half of total imports. Chinese producers are also moving into high-nickel seamless tubing.”
Hartquist added, “Chinese pricing remains substantially below that of other significant foreign and domestic producers. With an average unit value of $8,000 a ton for small diameter seamless stainless tubing, Chinese producers may well be dumping their product in our market. The Chinese government provides a wide range of subsidies to Chinese steel producers, including undervaluation of their currency, the yuan, at roughly 35 percent.

This is unfair competition,” he said.
David A. Hartquist is senior partner and chairman of the International Trade and Customs practice group in the Washington, D.C. office of Kelley Drye & Warren LLP. Mr. Hartquist has over 30 years of experience on international trade issues and has filed many successful trade cases against Chinese producers. The Stainless Steel Tube Trade Advancement Committee, formerly known as the Seamless Stainless Tube Trade Action Committee, comprises U.S. producers of seamless stainless steel pipe and tubing.

Consumers Save Big On Memorial Day Groceries

In holiday spending, Uncategorized on May 21, 2009 at 5:23 pm

This Memorial Day it’s all about savings, as consumers look to cut costs while still maintaining a fun three-day weekend. Fortunately savvy shoppers, who purchase store brands over brand-name products, stand to save 16.3 percent on their total holiday grocery bill, according to IBISWorld research:

memorial spending

“In essence, store brands turn the clock back two to three years,” said Toon van Beeck, senior analyst with IBISWorld. “Without inflation, store-brand groceries this Memorial Day weekend are comparable in price to brand-name groceries during the 2007 holiday.”

Based on the average holiday shopping cart above, the 16.3 percent savings puts about $10 back into consumers’ pockets. That means with approximately 117,641,000 households in the U.S., the nation could save about $1.18 billion if everyone celebrated Memorial Day in the same fashion and went the store-brand route as opposed to the brand name route.

The Big Business Of Bugs-consumers are doing it themselves

In Uncategorized on May 20, 2009 at 5:25 pm
Do-it-yourself (DIY) pest control is a growing trend as consumers go to great measures to save a buck. Although this trend is eating into industry revenue, businesses that survive will be snug as a bug when growth rebounds in 2010. According to industry research firm IBISWorld, the same elements depleting revenue in 2009 might actually drive profit the following year, resulting in a projected growth of 3.1 percent.

“Although do-it-yourself pest control is damaging in the short term, improper extermination may actually cause the spread of pests to increase, especially bed bugs,” explained Toon van Beeck, senior analyst with IBISWorld. “This will create more work, becoming a positive for the industry in the long term.”

There has been a 70 percent rise in bed bugs infestation since 2001, due to the increased travel, immigration, insecticide resistance and changes in pest control practices. Although businesses are seeing a softening in residential pest control sales – it can cost as much as $300-$600 to treat an apartment for bed bugs – some are experiencing gains in commercial pest control as well as termite control.

Firms with broad business structures are more resistant to losses, as they can generate revenue in many areas; meaning those that have the ability to provide an array of services (from termites, to cockroaches, rodents, ants, birds, etc.) to all customer bases (building construction, residential, commercial, and governments) will not observe as much of a decline as those that specialize.

“For businesses to survive the current economical climate, they must have the ability to quickly adopt new pest control technologies, minimize focus on construction sectors and manage seasonal peaks and troughs,” said van Beeck. “Word-of-mouth marketing is ever more important, so exterminators must also strive for higher quality of service at this time.”

Like many service industries, the pest control industry enjoyed consistent, stable growth through 2007 with annual real revenues expanding at a rate of 2.6 percent a year. While the sector’s sensitivity to construction has made 2008 and 2009 years to forget, stabilization in consumer budgets and employment will likely lead to another period of sustainable growth through 2014.







Recession-weary consumers still likely to make travel plans this summer

In Uncategorized on May 20, 2009 at 5:15 pm

Despite the recession, 85 percent of travelers plan to stay in a hotel this summer, according to a recent survey conducted by TravelPost, the most comprehensive hotel information site on the Web.

“TravelPost users say they’re going to travel in spite of the recession, but 79 percent said they’re working harder to get more for their money,” said Brian Harniman, EVP of Marketing. “People will put more time into finding the best option, comparing hotels and reading reviews. TravelPost makes their research easier by aggregating hotel information from over 4,000 travel sites and providing filtering tools so people can quickly find the perfect hotel at the right price.”