Roulston Research Partner Rob Enderle recently created a blog post about how Meg Whitman is planning on running Hewlett-Packard. Her quarterly conference call earlier this month showed that she is more interested in HP’s long-term survival which breaks from the company’s historical tendency to cripple the firm in exchange for quarterly results. This is a major contrast from Mark Hurd who managed for the short term and ran the divisions more like umbrella companies where each operated almost autonomously under the corporate umbrella. Meg plans to bring the company back to its roots of managing its divisions like an intricate portfolio where decisions are made by creating synergies while considering opportunity costs that focus investments on increasing earnings per share, cash-flow, and long-term survival. This was showcased in the decision to retain the PC division, there will be a major effort to base decisions on research and facts rather than fire-from-the-hip decisions like those that surrounded Palm and those that have done so much damage to HP in the past. To read Rob’s full article please visit http://www.itbusinessedge.com/cm/blogs/enderle/whitmans-hp-back-to-financial-basics/?cs=49143.

Rob Enderle is President and Principal Analyst of the Enderle Group, a forward looking emerging technology advisory firm. He specializes in providing rapid perspectives and suggested tactics and strategies to a large number of clients dealing with rapidly changing global events. You can visit his website at http://www.enderlegroup.com/.

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Roulston Research Retail Partner Craig Johnson recently commented on the reported 6.6% increase in Black Friday sales despite 9% unemployment. This is the largest year-over-year Black Friday gain since the 8.3% increase in 2007 as foot traffic rose 5.1%. Before Black Friday arrived consumer sentiment was at levels that are typically reserved at recessions. Craig said, “Even with low confidence, shoppers paid more for goods and unleashed some pent-up demand.” Many firms opened at midnight and these chains that include Macy’s, Target, and Kohl’s likely took revenue from stores that opened early that morning. It will be interesting to see if the Black Friday results will be representative of the entire holiday season. Craig still holds by his prediction that Holiday sales will rise 6.5% in 2011. He will be releasing his holiday forecast that that is updated to include black Friday results and if you are interested in learning more about it please contact Michael Igelnik at migelnik@roulstoresearch.com. To read the full article please visit http://www.bloomberg.com/news/2011-11-26/consumers-in-u-s-release-pent-up-demand-amid-brisk-black-friday-traffic.html.

To obtain Customer Growth Partners 2011 40 page Holiday Forecast please contact Michael Igelnik at (216)765-0519 or migelnik@roulstonresearch.com. The report discusses the retail environment from a macroeconomic perspective and provides aggregate, and detailed sectoral and company specific forecasts for the November-December season, across all major retail categories, including eCommerce/Direct to Consumer. He also reviews 30 of the nation’s top retailers and gives a detailed company analysis, providing insight into who will be the winners and the losers during the holiday season.

This week we did two mall tours with Arnie Cohen. Companies in both New York and Boston looking the strongest going into holidays include Forever 21, Express, Victoria Secret, White Horse / Black Market, Bath and Body, and Lucky. Disappointments included Aeropostale, Pottery Barn, William Sonoma, JCrew (although some signs of change going on), Ann Taylor, Coach (now focusing on down Parkas?) Talbots, Coldwater, Kate Spade and Jones New York. Abercrombie looks further off their game with a lot of convaluted focus. Style plain and not much appeal in merchandise. American Eagle is looking new and different (will it work?). A lot of players have a lot of inventory with some already discounting. The kids space at Gymboree had boxes at both stores in the aisles with seemingly no place to put it while Justice was inventoried to a point the whole store was 40% off (on their way to 70%?). We still have another week until Black Friday but a lot of stores seemed to have a lot of inventory on the floor. A couple takeaways: Anthropologie looks different and customer might not like it. Abercrombie will have a bad Christmas (but look for a big international build out in 2012). Urban losing their differentiating look. Bath and Body and Victoria Secret look great. Express knows their customer. Chico’s has no strategy, lots of inventory and confusing direction. Talbots just confusing in makeover. Is Steve Madden leaving? Bob Hanson new CEO at Eagle from Levi’s….. hmmmm.

Mid to high end consumer knows their budget and its bigger than last year. It could be a good Christmas for some but others could really look different when we do our next tour in two weeks.

 

If you would like to follow-up with Arnie Cohen for a 1 on 1 consultation please contact Tom Roulston at tom@roulstonresearch.com.

New York-based portfolio manager believes Clearwater Paper (NYSE: CLW, $32.45) is a good buy at $30.  The company had its second consecutive miss when it released Q3 results in late October.  He thinks investors are getting impatient and given the bad quarter, heavy leverage [and unfunded pension], and lack of any FCF for another year due to the heavy capex, the stock could sell off.  This portfolio manager would get back in around $30, and would likely establish a large position at $25, if CLW sells off with the market, as opposed to company-specific issues.  Pulp prices have continued to fall over the last couple months, which is a nice tailwind for the company given they buy 40% of their pulp needs.

At our recent roundtable Daryl Brewster and Patrick Obrien discussed in detail the recent split up of Kraft and the impact on the industry. Both made separate points as to how the split would be beneficial. Daryl felt management focus would benefit in both companies with a chance to focus resources and time to brands. Patrick talked of the ability to grow both businesses thru focusing on brands in the snack business and recognizing that the grocery business was inherently a different business. He went on to emphasize how the grocery business had learned from their suppliers over the last few years how to merchandise much better. Data usage like their suppliers has become a game changer with loyalty cards and other methods allowing them to fight back against the big boxes and with the entry of dollar stores (fewer SKU’s).

The two discussed the consolidation going on in the $100 billion private label business and expect more avtivity where the top 4 now control about 35-40% of the market with a lot of regional players. Look for more consolidation and more focus like in foods. A lot of competitors will watch the Kraft Plan accordingly. Campbell Soup just announced moving out of East Europe and this was used as a example to discuss “best practices” and the value in foreign markets. Its not just growth but learning from foreign cultures the acceptance of certain concepts and transfering those to other markets. Throughout the discussion the speakers both cited examples from Crystal Light to Pringles to V8 and how companies have expanded, product lines, mergers and divestitures. Unilever, Proctor and Gamble, Clorox, Pepsi, Conagra, Ralcorp were all companies discussed in detail.

If you would like to follow-up with either presenter for a 1 on 1 consultation please contact Tom Roulston at tom@roulstonresearch.com.

Abudi Zein and Kevin Lindemer addressed Gas Growth, Peak Demand and flow change of services and products in their overview. More products being exported together with increased domestic supplies are going to quickly change the landscape. Existing distribution in some cases including reallocation of existing pipelines for alternative use was discussed. Distribution was a primary discussion from the TransCanada Pipeline product to the changes happening at Cushing to Bakken pipeline needs. The two talked about the drillers in detail and all distribution from railroads to current pipelins and the reaction by the players to regulation and changing demand for exports and the repositioning with domestic supplies of oil and natural gas.  There were no companies up and down the supply chain that the two did not reference and even some properties outside the industry that might be impacted. In particular players in the infrastructure were the focus like Black and Veatch, Kerr McGeee and other engineering companies.

In this environmet although there is quite a lot of opportunities with the drillers, pipelines and service companies they both felt the infrastructure, design and build play rather than the transporters or commodity play were the most attractive spaces. The “guy building the shovel” not the guy using the shovel.  The stars are lining up for Natural Gas to liquid.  Also watching conventional agriculture was mentioned as technology in biofuels and food are expanding and those sustaining themselves outside of government support are proving to be viable opportunities.

 

If you would like to follow-up with either presenter for a 1 on 1 consultation please contact Tom Roulston at tom@roulstonresearch.com.

Roulston Research Media Partners Jeff Marcus and Robert Rose discussed the state of the Media industry and who they thought were the winners and losers as far as companies goes. Here were some of the highlights of their conversation:

· Focus was primarily on Omnicom, Facebook, and Google, but the discussion was broad and trend-focused.

· All noted Omnicom uses many outside resources vs. a vertical integration approach. 

· Jeff agreed this was the only way to go, tech, trends are changing too quickly.  Rob added  Omnicom has no tech ‘secret sauce’, their differentiator is their creative side. 

·All the classic agencies are still trying to figure out Digital; some are “buying their way in” by acquiring small, digital outfits who “get it.”  Customers are tending to buy traditional advertising (radio, print, TV) from the old guard, and the digital social from the new. 

· Jeff noted that the paradigm is shifting from frequency-based advertising to relationship-based. 

· TV/Radio made a natural and understandable transition to the Web initially (still all about eyeballs) but the next phase is to social, and that is crowded with too many small players and no scale, making it difficult for advertisers to run integrated campaigns. 

· Rob and Jeff both agreed digital is still very small.  Rob said it still pretty much “has to be on TV” to get real traction on brand.  Online is more about engagement and participation by people who are already aware of the brand and are seeking it out. 

· Both derided Facebook’s emphasis on demographics, instead of on intent towards action/purchase.  Rob noted that to “dislike” a brand on Facebook and say negative things on it, you first have to “like” their page–which greatly skews FB’s data.  Many people “like” things because friends/relatives tell them to, not because they really like them. 

· Both agreed that an emerging success tactic is to identify real influencers–through such tools as Klout score–then target them and have them spread word thru their social graph. 

· Lots of discussion on broadband pipes and how the owners (e.g. Comcast) have a great deal of control over how users will see content.  Sony’s new idea to create their own set of channels over broadband seems D.O.A. for this reason.  Netflix is in trouble domestically due to high content costs.  Jeff noted their real competition is Video on Demand, not cable; so they are expanding globally where competition in this area is  lower. 

· DirectTV is fighting off attrition in its sub base by content exclusivity, as they have no internet pipe to speak of.  And it seems to be working pretty well for now–sub base increasing, and ARPUs are not dropping as one would expect.  They are also growing well internationally, where cable is less of a factor. 

· Google continues to try new initiatives, but often in a clumsy way.  Rob was quite unimpressed with their new music offering, as well as with their continuing efforts with Google+.  All agreed that while Google giving some preference to ads for its own offerings may ultimately hurt them some (essentially replacing revenue with their own non-paying ads), their goal of keeping “naked search” sacrosanct was the right move. 

· Finally, Jeff noted that “retargeting” was getting very big now and was expected to continue growing.