Craig Herkert, the former Wal-Mart executive hired by Supervalu in 2009 to reshape the company as a low price retailer, has been fired, effective immediately. He will be replaced for the time being by Wayne Sales, the Supervalu chairman, who will now take on the additional titles of President/CEO. Sales has been non-executive chairman of the company since 2010 and on the board since 2006. The change comes after underwhelming quarterly sales and profit numbers, the announcement that all or part of the company was for sale, and last week’s revelation that Herkert and three other senior executives were being given retention bonuses and stock options. Bob Anderson believes this may not be the end of the shakeup at the company stating, “Well, with all that has been going on at Supervalu (or not), it’s not a surprise that something or someone had to go, and Mr. Herkert is it. What will be next? Will other former Wal-Mart executives that Mr. Herkert brought in, be going as well? Is it too late to save SUPERVALU, or will it be a takeover company for someone like a C&S wholesaler?” It will be interesting to see how the company responds over the rest of the year as they struggle to stay afloat.

Bob Anderson is President of Store Brand Consulting, which advises packaged goods companies on buying, merchandising, retail and manufacturing strategies. During his time at Wal-Mart he was the Vice President of Dry Grocery which included dairy, frozen, dry, DSD, snacks, beverages and liquor. He was asked to start up Wal-Mart’s store brand private label division, Great Value, and to oversee the Sam’s Choice program as well. Bob was responsible for the sourcing, procurement, label design and testing for both labels while at Wal-Mart. His team was credited with building Great Value into the leading store brand program in the United States. In addition, his team was honored with the Retailer of the Year award twice for their work.

The election is now 100 days away and the economy is clearly waiting for direction. We are increasingly convinced we should not compensate politicians in an election year. The country needs guidance and there is no leadership in Washington. There is plenty of blame to go around.

The Tatum survey this month reflected the sentiment of complacency that comes from no ability to forecast the future. As we have stated before our discussions with managements of all types and sizes of companies reflects the fact that not only is the economic environment more unpredictable but the regulatory environment is a wild card not seen in recent history. Unfortunately this uncertainty in the corporate world appears to now be contagious to the consumer. Although housing has stabilized spending is now trending downward.

Finally a new trend has also developed with states and municipalities as they try to digest increasing debt brought about by past commitment to Medicare, Medicaid and their own employee and retiree benefit costs. Although only a few incidents have occurred to date, it is troubling to see the option of bankruptcy as an option to address costs that have gotten out of control. This is only an early symptom at this point but one worth watching.

The Tatum Survey itself is troubling as business conditions, capital availability and employment all trended downward. Maybe more concerning is the outlook for employment, backlogs and capital ability worsening amongst an increasing proportion of respondents. This would tend to indicate that Fed encouragement and support for the economy is not having a positive influence. So although we know there is no political stimulus of leadership, there is no monetary momentum right now either. The Fed may and is probably now likely to respond to this before the election.

With so many not expecting much market movement or activity until the election, we would not be surprised to see the opposite. Between European debt issues, the continuing Middle East turmoil and an election that the world is watching there could be many more factors causing concerns and optimism coming sooner rather than later.

To read the whole article plaese visit July_2012_Tatum_Survey

Our July 25th roundtable featuring Eric Brown, Former Senior Vice President and General Counsel at Transocean, and Steve Jacobs, COO at Decision Strategies, focused on the energy sector, specifically oil services and exploration.  The two provided insight regarding the outlook for onshore and offshore capex, new technologies and prospects acceptance in the industry, the future of shale production and the outlook for exploration and drilling growth across the world.  The roundtable began by focusing on the offshore drilling sector, stating there has been an explosion in conventional exploration along with increasing demand for new technologies with greater capabilities.  They pointed out that the new demand seen in today’s market is driven primarily by the functionality and efficiency of equipment along with dynamic situational needs.  There has been a lot of success in exploration as of late, primarily in deep water areas approximately 200+ miles offshore.  The roundtable touched on deep water intervention vessels and the developing market niche they see for this area as well as the growing prominence of the jack up market.  Eric and Steve then and discussed in detail specific examples and situations regarding many players in the industry such as  Schlumberger, Halliburton, Transocean, Diamond Offshore Drilling, Noble Corporation, Narbors Industries, Baker Hughes, BP, Chevron, Exxon, Total, Cameron, Weatherford, National Oilwell Varco, FMC, Seadrill and Ensco as well as a few others. 

Continuing with examples throughout, the roundtable conversation looked to the future and concerns the market faces going forward.  A growing issue in the industry is the decommissioning of platforms and wells that are no longer operating, there are many regulations that ensure that they are environmentally sound but there is an overabundance of “dead” platforms that need to be decommissioned. Regulations throughout the industry will always be a main issue for companies but emerging technologies and equipment are making compliance issues bearable. Both identified the major players going forward were the companies that had international and deepwater exposure and capabilities (Halliburton, Weatherford and Schlumberger). These two factors are important because as demand for oil and gas increases with a growing population, the big resource finds are in deepwater areas. To conclude, the roundtable discussed multiple locations for drilling and exploration growth around the world, emphasizing opportunities available in Brazil in the near future.

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

JC Penney Update

July 25, 2012

The Roulston Research model is to listen to industry thinkers and investors and provide a collaborative insight to research and investment ideas. When hearing the Bulls and the Bears together with veterans of industry share decades of experience, we inherit due diligence unmatched by the bias of sell side research or many independent resources. Networking with today’s technology gathers more and higher quality information. 

For those who don’t subscribe to our blog (you should), we are all about change. We don’t recommend stocks. We sponsor multiple monthly industry roundtables and idea forums to identify the best ideas and forward thinking. We blog about it. Can it all be executed? Not always. Managements that are changing paradigms historically provide the greatest investment opportunities. Execution becomes the exercise we monitor to judge success. Rarely it is accomplished without adjustments and mistakes.

Our views on JC Penney: 

Ron Johnson is changing the retail paradigm. He did it at Apple. Can he execute at JC Penney? We don’t know. Much will change. But 5 things are happening that together are happening nowhere else. It will take 3 years to implement. There will be mistakes. 

1)      Technology

2)      Store Experience

3)      Branding

4)      Simple Pricing

5)      Personalization

Technology   Some companies invest in technology. Apple redefined the checkout in their stores. JC Penney with RFID technology will revolutionize this for much of retail. Surely, others will also follow this lead. By 2014 inventory will be measured in stores daily, items on racks will be measured automatically, stockers will be guided to misplaced items, shrink will be identified immediately. Checkout will be self induced, customers will put items into a bag and scanners will calculate payment. Pricing will be centrally controlled. Employees will focus on the customer experience. With everyday low pricing and clearance sale simplicity turns will improve dramatically. The new Levi’s denim bar will have IPADS directly interfacing with Levi’s inventory. Denim experts will help fit and assist the educational experience and whether you walk out of the store with the item or it is shipped to your home the sale is captured through the experience. Like Best Buy or Apple, you could go and buy it elsewhere and maybe cheaper. Ron is betting that knowledgeable sales people (experts) are more valuable than the traditional retail experience of your interaction is at check out. This sounds genius bar “ish” not like Best Buy.

Store Experience:  The store experience is going to change in not just technology. The Town Square concept is going to draw a broader family and demographic into the store. It is not just a broader income demographic. The core customer does not change. But the experience that a customer enjoys will simplify buying and create a longer stay and tour of the store. Everything from everyday needs like haircuts and make up to employees focused on partnering with customers will change the stodgy department store. Town Square will bring community, entertainment and unique programming and experiences to the store that has not been applied in retail EVER before. The malls brought you Santa and play areas, now JCP is going to expand on the experience. With lots of parking 10,000 square feet offers a lot of opportunities. The creativeness applied to this space can be a game changer. Combine it with a new breed of employees armed with technology to cloud inventory educated to product knowledge and this is not the same JCP

Branding: One of our sharpest merchandise experts we know told us that one of the best ways to maximize price is to present product by brand, not with just comparable product. This emphasizes the value in the brand and the quality of merchandise. It is not marketing purely on pricing comparables, as you are able to differentiate product. Nordstrom, Apple, Selfridges, Lululemon are all examples of brands where product is clearly differentiated and margins well above peers. Creating 100 stores (or brands) is a novel undertaking. The premise is that each vendor must provide either an exclusive product not able to be bought elsewhere or a unique purchasing experience (ex. The Levi’s Denim Bar). Combined with an easy pricing formula, vendors will RFID all product, supply unique fixturing and input fashion and inventory controls. Through technology this can virtualize inventory and maximize presentation and experience. Where this formula has strict adherence it has been successful. Can JC Penney attract the right vendors in its target demographic? Almost 30 of these companies have been discussed. So far it appears there are no shortages of vendors. This displaces many traditional suppliers. They are not happy. Surveys and opinions of those vendors today are irrelevant.

Simple Pricing: Mike Francis got the word out about what JC Penney was doing. The advertising had an impact and Ellen DeGeneres brought a lot of publicity. We think she will help. The problem was in the store was the pricing methodology was lost. The three price points at this time are one to many. In August they drop the monthly specials. There will be an everyday low price and clearance. Two levels of pricing and that is all. Everyday low price is interesting and attractive. It simplifies the vendor relationship with the 100 store concept and the new RFID technology. It’s questionable if either could have been done to the scale they will be successful without the new pricing. Here is the first place Ron Johnson learned from a mistake. Mike Francis is gone and a price point eliminated. The value is there. Recent store visits reflect that the customer is starting to get it. The value pricing will be understood. The pricing will really be enhanced with the 100 store concept and the technology.


Personalization: There was a lot of pain to employees with headquarters and store layoffs. A lot of vendors are being eliminated. There is a lot of whining. Johnson had to change the culture. The company was top heavy and was not thinking like a growing company. Lots of laziness and staleness. Employees are energized. Maybe not in Texas, but they are elsewhere. The removal of commissions is not an issue. Employees make more than a year ago. We have heard NO complaints other than specifically in Dallas store visits. The employees are engaging the technology, and are bubbling about the new stores now well under construction. A lot of vendors have been cut in size and breadth. They don’t like losing business, but JC Penney needs a new type of vendor that is a partner. The vendors have to pick up the ball and run with it. The Levi store looks good. The technology is catchy and very valuable, so is merchandising, check out and efficiency. There will be a lot of personalization, as the employees and vendors shift to educate and interact with customers not just check out people. The employee will spend less time stocking and more time servicing. Customers will not see the same store in value, service or products. The atmosphere brought by Town Square will be engaging. More on that to come.


Where do you buy the stock? Not many bought Apple when the IPOD came out and the Walkman dominated mobile music. OK it’s not Apple. The point is when does an investor buy a changing paradigm in execution.

A recent global survey by Euro RSCG Worldwide stated that with the Boomer generation aging and Millennials (18-34) range reaching the mid-30’s that the obsession with youth is over. According to a survey of 7,213 adults across 19 countries, around three-quarters expressed the belief that society has grown much too youth obsessed. The opinion was shared not just by the older set but also by six in 10 Millennials (18-34). The findings come with people  living longer along with modern lifestyle changes — including a tendency to stay in school longer, start careers later, and marry and procreate later — pushing back the onset of old age. Dick Seesel believes that this trend will have an affect on retailers stating, “Retailers’ focus on the young customer will never wane completely, but smart apparel companies are trying to broaden their appeal. (The “fast fashion” retailers like H&M, Zara and Uniqlo are probably doing a better job than their U.S.-based counterparts like Aeropostale and Abercrombie.) There will still be a place for junior trend retail: After all, “Millenials” will be the parents of teenagers someday too.” To read the full article please visit

Richard Seesel is the Manager and owner of Retailing In Focus, LLC. He was most recently a Senior Vice President and Divisional Merchandise Manager at Kohl’s Department Stores. Dick is proud to have helped Kohl’s grow from 18 stores to a national retail powerhouse, during an era of change and consolidation throughout the retail industry.

There have been several rumors recently about Amazon creating its own Android-based smartphone after the success of the Kindle Fire tablet. In addition to being an eReader friendly handset, the new Amazon phone is expected to be a complete device for making calls, sending texts, surfing web and others. It looks like that Amazon wishes to become a strong player in hardware sector similar to Google, the world’s leading web search engine, who is also known for its Nexus smartphones and tablet.  Rob Enderle states, “Amazon doesn’t use generic Android. Their software group is mostly old disenchanted Microsoft guys who used to run and work on Windows. The company is to take Android as a starting point and turn it into what they think the market really wants, which is a much more Apple-like experience where the system is both more refined and more closed.” Amazon’s entry into this space will be a major story moving forward as they look to duplicate their success in the tablet market. To read the full article please visit

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.

Last week Supervalu announced that the company is exploring the sale of all or parts of the company after a disappointing quarter where earnings declined 45 percent. The company will also suspend their dividend and is planning and additional $275 million in operational cuts on top of the $75 million previously announced. CEO Craig Herkert stated, “From administration to retail stores to distribution centers, we are identifying opportunities to become leaner and more efficient. It is essential that we move even more aggressively to lower prices, and anticipate and respond to competitor actions. We expect our business transformation to meet our customers’ demands for great quality at lower prices.” Dick Seesel isn’t sold on their plan explaining, “I don’t see Supervalu surviving simply by lowering prices in its midtier stores. From my experience shopping in stores like Jewel or Star Market, there are stronger grocery operators out there (Kroger, for example) who would be smart to look at selected acquisition targets in the Supervalu store portfolio. Meanwhile, the best breakup value for investors might lie in a spinoff of Supervalu’s original supply chain business.” To read the full article please visit

Richard Seesel is the Manager and owner of Retailing In Focus, LLC. He was most recently a Senior Vice President and Divisional Merchandise Manager at Kohl’s Department Stores. Dick is proud to have helped Kohl’s grow from 18 stores to a national retail powerhouse, during an era of change and consolidation throughout the retail industry.