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Nestle Misses Out – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 09:46:41 +0000

European food companies like Unilever and Cadbury have generally done well out of the second quarter, posting solid sales growth even if the recession threatened to take a bite out of profitability. This made Nestle’s quarterly performance look all the more disappointing on Wednesday, as it failed to turn around a decline in sales and gave itself more headroom in its outlook for the year.
Nestle
blamed the 1% reported drop in quarterly sales, to 2.7 billion Swiss francs , on asset sales made in the past year and a rise in the Swiss franc’s value relative to many currencies. But even when excluding the effect of these items, growth came in at a disappointing 3.3%, dragged down by persistent weakness at Nestle’s bottled water and nutrition divisions.Shares of Nestle slumped 3.9%, or 1.70 Swiss francs , to 42.40 francs , during morning trading in Zurich. Earlier this month, Unilever
reported quarterly sales growth of 1%, while Cadbury
reported six-month sales growth of 13%. Over the past six months, Nestle’s sales have fallen 1.5%, though it has defended profitability better than some competitors.Nestle’s outlook also lacked bite: Nestle said that volumes and recurring sales would accelerate in the second half of the year, but it shelved its previous guidance for a growth rate approaching 5%. The firm also said it expected an “improvement” for its annual pre-tax, pre-interest profit margin this year, even though for the first half its margin was 10 basis points below the 2008 figure, at 14.1%.”Guidance for full-year “improvement” in margins seems a little incongruous given first-half performance,” said Andrew Wood, an analyst with Sanford C. Bernstein, but added that the company’s performance would at least improve in the second half of the year. Wood rated Nestle “outperform,” and has called it “the strongest and most balanced company in the European food group.”Nestle should indeed benefit from the trend of easing commodity costs, and the company plans to plow money back into advertising and promotion to boost growth. It’s a trend seen across the industry, as food companies compete for sales at a time when hard-pressed consumers are tempted to spend less and trade down.
Nestle is one of 14 stocks on Citigroup’s “most favored” list.

Cadburys Gum Sandwich – US-FOREX.US

Forex-Publisher — Wed, 29 Jul 2009 18:45:58 +0000

Before the recession hit, British candy maker Cadbury had to fight to defend its image as consumers became increasingly health-conscious. It launched “99-calorie” candy bars in 2005, acquired organic premium chocolate maker Green & Black’s and even promoted a scheme to allow schoolchildren to trade empty wrappers for sports equipment. Although chocolate sales still grew solidly, chewing gum grew faster.Now on the other hand, hard-pressed consumers are eagerly devouring comfort food and leaving gum behind. The problem isn’t just that health is taking a back seat as economic problems weigh. It’s also that consumers aren’t traveling or shopping as much, leaving fewer opportunities for an impulse purchase of a packet of gum. Cadbury
managed to get only 2% growth out of recurring gum sales in the second quarter, certainly better than the 2% decline in the first quarter, but pretty weak compared with 13% chocolate growth.So what does Cadbury have up its sleeve to turn things around? At a presentation in London on Wednesday, Chief Executive Todd Stitzer brandished a new brand of gum, called “Layers,” due to be released in the U.S. later this year. When asked to describe it, he said: “It’s soft, and quite delicious.” Trying a second time, he said it was essentially a “gum sandwich,” held together with real fruit flavoring.The product is only set for launch in the U.S. so far, and demonstrates how important the American market is for Cadbury’s gum brands. Most of them came from Cadbury’s acquisition of Adams from Pfizer
in 2003, which gave the firm access to American staples like Trident, Chiclets and Halls. The economic climate has hurt Cadbury’s market share in gum, though, which is down 0.8% in the U.S. since the start of the year.Stitzer said there were also new products slated for launch in Britain but wouldn’t give any details.Another reason for boosting gum sales is that chocolate isn’t as profitable. Chief Financial Officer Andrew Bonfield said the gross margin on gum was about 0.4% higher. Already the dominance of chocolate may be feeding through on this level, as Cadbury’s gross margin for the first six months of 2009 fell 0.2% over the year.

Going Cocoa For Cadbury – US-FOREX.US

Forex-Publisher — Wed, 29 Jul 2009 10:45:58 +0000

It used to be all about the gum-now it’s all about the cocoa. Cadbury said Wednesday that its candy bars had led the charge in the second quarter, with chocolate sales hitting double-digit growth, while its chewing-gum brands eked out a 2% sales increase. It’s not hard to work out why, with hard-pressed consumers in Britain-Cadbury’s biggest single market-staying at home and seeking comfort from a sugar rush.As for chewing gum, which not so long ago benefited from its image as a healthier alternative to Cadbury’s Flake and Dairy Milk bars, it’s not growing as fast. Bank Vontobel analyst Claudia Lenz said consumers were not traveling as much, making them less prone to impulse purchases of gum at the supermarket counter. “A lot of people who have to save money, because it’s a short-term indulgence, would maybe rather go for a chocolate tablet which they can enjoy with the family,” said Lenz.But there could be a downside to the dominance of chocolate for Cadbury
. Lenz said that a smaller showing for gum in the product mix might hurt recurring sales growth, because chocolate was comparatively less of a money-spinner. There could be other hurdles in the second half of 2009 as well: Lenz added that Cadbury would not be able to raise product prices as much as before, because input costs were decreasing. Shares of Cadbury rose 0.4%, or 2.50 pence , to 567 pence , during morning trading in London on Wednesday, after the company announced results that roundly beat expectations. Second-quarter recurring sales grew 6.1%, while profits for the first six months of the year jumped to 313 million pounds , from 113 million pounds .Cadbury stuck to a prudent script despite the strong quarter. The company said it would deliver sales growth “around the lower end” of its 4%-6% full-year goal, taking into account the difficult economic circumstances. As for the litmus test of Chief Executive Todd Stitzer-who is aiming to deliver operating margins in the mid-teens by 2011-it is starting to look more realistic, according to analysts.”We currently expect 115 basis points of margin growth for the full year [2009],” said Andrew Wood, an analyst with Sanford C. Bernstein, who rates the stock “overweight.”

Fast Food Fading – US-FOREX.US

Forex-Publisher — Fri, 24 Jul 2009 21:46:00 +0000

In lean times, people are less likely to stop and chew the fat. That’s according to UBS analyst David Palmer, who follows the fast-food industry for the Swiss investment bank. While fast-food chains have earned a reputation for giving customers more grub for their buck, the recession in the U.S. is taking a bite out of sales for reasons investors might not expect.One of those reasons is inflation. The fast-food business competes with supermarkets for the money families spend on dinner. In that department, last year saw food costs soar for supermarkets as commodity prices rose sharply. This year however, those costs have plunged faster than costs for McDonald’s
and other chains. The slowdown in “at-home inflation” is making supermarkets more attractive to families, says Palmer.As the industry gears up to report second-quarter earnings Palmer writes that sales probably fell 2% last month, or 0.5% for the last three months, the first time industry revenues have fallen in a quarter since 2003. He also thinks sales will be hurting for the next six to nine months.Many factors impact the restaurant business-income, employment, consumer sentiment and fuel prices, to name a few. Most of these look negative right now, writes Palmer. With unemployment at its highest in 25 years, there are fewer workers to go out to lunch. That also means fewer commuters stopping in at the drive-through for breakfast and dinner, both of which had been fueling the industry’s growth in recent years. Gas prices are hurting, too. While oil is way, way down from its peak above 150 a barrel in 2008, gas prices have been rising for much of the year. That has Americans driving fewer total miles for the second year in a row, with 2008 being the first year in decades that Americans drove less than the year before.The business’ biggest kahuna, McDonald’s, reported on Thursday that sales at its restaurants grew 4.8% between April and June thanks to its high-end coffee drinks. But investors were concerned enough to knock 3.6% off the firm’s shares following the announcement. McDonald’s said July sales were holding up as well as June’s but didn’t give any forecast for the year.
Despite Palmer’s gloomy outlook for the sector, there is some truth to the conventional wisdom that hamburgers, like toilet paper and lightbulbs, are defensive investments in times of recession. While the Happy Meal competes with the home-cooked meal, people still have to eat one or the other at the end of each day. In the last year the S&P 500 has lost 22%, as of late Friday. McDonald’s shares are down only 4%, Yum! Brands
are down 2%, shares of Wendy’s
are off 19% and Burger King Holdings
is down 39%.Thomson Reuters and the Associated Press contributed to this report.

Danone Milks The Benefits Of Promotions – US-FOREX.US

Forex-Publisher — Fri, 24 Jul 2009 12:46:01 +0000

French dairy company Danone is looking healthier. Following a decline in earnings in the first months of the year, the owner of Evian posted a 6% rise in first-half net profits thanks to an aggressive investment in promotions, and reiterated its 2009 targets of medium-term guidance of an 8-10% increase in recurring earnings per share.Danone, which also makes yogurt drink Actimel, said net profit rose to 932 million euros million from 879 million euros a year ago, also helped by a decline in raw material prices and the sale of some assets in Australia and India. And there are some signs that a slight improvement in consumer confidence is also helping the business. While sales in Spain and Italy remain under pressure, business has picked up in France and in the U.K. “Europe is still a difficult market, but Danone is launching more promotions and doing more to explain the benefits of its products. We are not back to the levels of growth of 2006 and early 2007, but business is gradually picking up,” said Marco Gulpers, an analyst with ING Financial Markets in Amsterdam. Some industry experts say that the figures only reflect a very marginal improvement in consumer confidence and still do not serve as indicators of how demand could pick up in the second half of the year. On its outlook, the company said: “Our scenario for 2009 remains that current consumption patterns in our key emerging and developed markets will continue over the balance of the year, with no significant improvement or dramatic breakdown.” Francis Pretre, an analyst with CM-CIC Securities in Paris, had previously expected overall sales to fall by 1% by the end of the year, but now believes sales will increase by 1%.
Danone
also said its operating margin rose to 16% from 15.3% in the last half year. Volumes in fresh dairy, which contributed 57% of company sales in the first six months of 2009, rose 2.7% for the quarter, after five consecutive quarters of declines.
Same-store sales growth in baby food slowed to 7.4% in the second quarter from 10.5% in the first, held back by Russia, Eastern Europe and China, the dairy firm said. Medical nutrition saw growth slow to 8.8% from 10.8%, but volumes rose 9.2%.“We are pleased that our sales by volume are growing again,” said Chief Financial Officer Pierre-Andre Terisse. Last June, rival Nestle
also reiterated its target for 2009 organic sales growth and an increase in operating margin.Shares of Danone, which have risen 7% over the last 10 days, fell 2.4%, or 92 euro cents , to 36.72 euros , during morning trading in Paris on Friday. Danone’s stock has fallen approximately 10% since the start of the year.

Pizza Entrepreneurs Hooked On Dominos – US-FOREX.US

Forex-Publisher — Mon, 20 Jul 2009 14:46:13 +0000

It’s no secret that the recession in Britain has boosted demand for cheap thrills, whether it’s a night out at the movies or staying in with a pizza, and delivery chain Domino’s Pizza UK on Monday once again wowed market watchers with a set of strong six-month results. The recession has also led to more out-of-work businessmen trying on an apron for size and opening their own Domino’s franchise store, eager to get a slice of the company’s success while the financial sector struggles to find growth.”People being made redundant from management positions are investing in the franchise,” said Paul Hickman, an analyst with KBC Peel Hunt, who upgraded his annual profit forecasts for Domino’s UK
by 3%, to 27 million pounds , on Monday. Franchisees need 260,000 pounds up front to open their own store, and it seems that the white-collar victims of job cuts across the country have not had much trouble getting access to this kind of capital.”The caliber of these new applicants is higher than ever,” said Chris Moore, chief executive of Domino’s UK & Ireland, itself a franchisee of the American Domino’s Pizza
. “They are better capitalized.” Moore said that franchisees had invested 12.1 million pounds in the first six months of the year by opening new stores, buying out other franchisees and refurbishing their outlets.Shares of Domino’s Pizza UK & Ireland rose 4.6%, or 10 pence , to 229.50 pence , during afternoon trading in London. The company reported a rise in six-month profits of 35.0%, to 9.3 million pounds , while sales rose 11.3%, to 73.7 million pounds . The stock is trading at a price-to-earnings multiple of 18.8 times, which Hickman described as fair given Domino’s tendency to surpass market forecasts.According to a spokeswoman for Domino’s, the number of franchise applicants has risen 13% over the past six months, to 2,145. A typical number for the year is around 4,000. The franchise-only model has benefited Domino’s, which is not weighed down by a portfolio of restaurants.Franchisees are expected to be “fanatical about pizza,” according to Domino’s, which has taken to labeling these true champions “Dominoids.” That fanaticism doesn’t come cheap, however: Franchisees pay 5.5% of their annual sales to Domino’s, and add an extra 5.0% to a global advertising and promotion fund.

Wal-Mart Turns To Private-Label Products – US-FOREX.US

Forex-Publisher — Fri, 26 Jun 2009 17:46:11 +0000

As budget-minded shoppers roll through grocery store aisles looking for ways to stretch their cash, grocers are responding to the competitive pricing environment by doing their own share of penny-pinching.For Wal-Mart Stores
-which touted itself as the low-price leader even when other stores tried to lure higher-income shoppers with remodeled stores and improved product mix-private-label products are the key. In March, the retailer said it would expand its Great Value store brand to offer more cheaply priced groceries and consumer staples to its customers. Supermarket operator Kroger
, which has one of the best-developed private-label businesses in the sector, has been able to win market share from rivals because store brands grant retailers more control over costs and pricing. In Kroger’s first quarter, private-label revenue accounted for 35% of the quarter’s sales. Now, Costco Wholesale
is turning a more discriminating eye to its private-label business in hopes of padding profits without losing shoppers. In a recent note, Deutsche Bank analyst Bill Dreher said the discounter is focused on expense control and is targeting its private-label business where the company’s management sees significant profit margin improvement.Another innovative way that Costco is cutting costs, according to Dreher, is packaging. The company redesigned its milk cartons and grape containers to improve shipping efficiencies. “Our only concern is that these initiatives could take some time, possibly three or four years until they are able to more dramatically bear fruit,” Dreher said.
Costco shares were up by 3 cents, or 0.1%, at 46.31 during Friday’s afternoon trading session. Wal-Mart’s stock slumped by 56 cents, or 1.1%, at 48.59. Kroger shares were up by 10 cents, or 0.5%, at 22.44. Supervalu
, which warned earlier this week that aggressive promotions would result in lower-than-expected first-quarter earnings, saw shares up by 41 cents, or 3.1% at 13.70, while Safeway
shares were down by 30 cents, or 1.4% at 20.49. Safeway reports second-quarter earnings on July 23.

Did Someone Order Savings – US-FOREX.US

Forex-Publisher — Thu, 25 Jun 2009 17:48:10 +0000

Quarterly results from ConAgra Foods on Thursday proved that budget-minded consumers will buy brand-name products if they consider them a good value. Convenience and price dictate shoppers’ buying decisions, resulting in double-digit sales growth for the Omaha, Neb.-based company’s frozen meal lines like Healthy Choice, Marie Callender’s and Banquet. On Thursday, ConAgra Foods
said enhanced marketing efforts plus product and pricing improvements helped serve up earnings that met analysts’ expectations for a fourth-quarter profit of 41 cents a share and sales of 3.3 billion. The company also benefited from moderating inflation costs that, according to UBS analyst David Palmer, helped narrow the price gap between private-label and ConAgra products. On Tuesday, he upgraded the company to “buy” from “neutral” based on his belief that the company’s improved execution has been undervalued by the market. ConAgra shares were down by 1.04, or 5.2%, at 18.99 during Thursday’s afternoon trading session. After grocery store operator Kroger
announced a meaty 12.7% boost to first-quarter profits aided by its strong private-label business, which contributed 35% of the quarter’s sales, investors questioned whether popular food lines are getting squeezed by frugal shoppers. ConAgra does some private-label business but is largely driven by its popular brand portfolio that includes Chef Boyardee, Swiss Miss and Hunt’s.The food business has become increasingly competitive as companies fight to convince consumers that they provide the best values on everything from edibles to household basics.
Shares of Supervalu
sunk on Wednesday as the grocer said promotional efforts and aggressive cost-cutting would result in lower-than-expected first-quarter earnings. Its stock was down by 44 cents, or 3.2%, at 13.37, on Thursday afternoon. Citi analyst Deborah Weinswig called the company’s warning “prudent” given the tough pricing and macro environment and advised investors to remain on the sidelines until the company’s fundamental operations improve. Safeway
, which is also trying to lure shoppers with aggressive pricing and promotions, reports second-quarter earnings on July 23. Analysts have been expecting earnings of 57 cents a share on sales of 9.7 billion. Its stock was trading 11 cents lower, or 0.5%, at 20.80 on Thursday. Competitive pricing from generic herbicides uprooted Monsanto’s agricultural productivity segment, where sales fell 39% during its third quarter. Although the company’s robust seed business helped cushion weakness elsewhere, Monsanto
warned that profits from Roundup herbicides would drop to 1 billion from 2 billion in 2009 and announced the elimination of 900 employees as it works to determine the best plan of action for Roundup. Shares were down by 4.0% at Wednesday’s close and were down by 1.93, or 2.5%, at 74.26, during Thursday’s afternoon trading session.
Thomson Reuters contributed to this article.

Food Industry Is Hungry For Profits – US-FOREX.US

Forex-Publisher — Wed, 24 Jun 2009 22:46:06 +0000

ConAgra Foods is preparing to report fourth-quarter earnings on Thursday morning, but analysts warn the popularity of grocery stores’ private-label brands could chew into profits. According to one stockpicker, however, the company’s lower input costs are helping it close the pricing gap. After grocery store operator Kroger announced a meaty 12.7% boost to first-quarter profits aided by its strong private-label business, which contributed 35% of the quarter’s sales, investors questioned whether popular food lines are getting squeezed by bargain-hunting shoppers. UBS analyst David Palmer doesn’t think this will be a problem for Omaha, Neb.-based ConAgra Foods
, which does some private-label business but is largely driven by its popular brand portfolio that includes Chef Boyardee, Swiss Miss and Hunt’s.According to Palmer, moderating input costs have resulted in narrowing price gaps between private-label and ConAgra products. On Tuesday, he upgraded the company to “buy” from “neutral” based on his belief that the company’s improved execution has been undervalued by the market. “We believe ConAgra should benefit from moderating inflation, improved innovation and pricing, a value-oriented portfolio and macro trends benefiting eating at home,” Palmer said. “While we continue to think that additional investments need to be made in ConAgra’s brands, we are encouraged by recent initiatives to do so, and do not believe our call depends on the company immediately becoming ‘best in breed.’ “ConAgra shares closed Wednesday’s trading session up by 25 cents, or 1.3%, at 20.03. Analysts polled by Thomson Reuters have been expecting fourth-quarter earnings of 41 cents a share and sales of 3.3 billion.The food business has become increasingly competitive as companies fight to convince consumers that they provide the best values on everything from edibles to household basics.
Shares of Supervalu
sunk on Wednesday as the grocer said promotional efforts and aggressive cost-cutting would result in lower-than-expected first-quarter earnings. Its stock closed down by 1.88, or 12%, at 13.81. Safeway
shares closed unchanged at 20.91. Competitive pricing from generic herbicides uprooted Monsanto’s agricultural productivity segment, where sales fell 39% during its third quarter. Although the company’s robust seed business helped cushion weakness elsewhere, shares lost 3.14, or 4.0%, to close at 76.16, as it warned that profits from Roundup herbicides would drop to 1 billion from 2 billion in 2009. Monsanto announced the elimination of 900 employees as it works to determine the best plan of action for Roundup.
Thomson Reuters contributed to this article.