Without knowing exactly how the judge will issue his final ruling in this case, the JCP/Macy’s trial seems to be headed toward a “split decision.” I expect that JCP will be allowed to sell Martha-branded merchandise in non-exclusive categories like window treatments, but will need to sell Martha-designed products in “contract” categories under the JCP label. If I’m correct, this raises multiple questions:

1. Was the risk of infringing on the MSLO/Macy’s agreement worth it? Was the “juice worth the squeeze” in terms of how the Martha brand resonates with the new customer that Ron Johnson was trying to attract?

2. What does the entire chain of events say about Ron Johnson’s judgment? Clearly his recent firing by JCP reflects on a wide range of bad judgment calls, but this may have been the biggest public embarrassment.

3. If JCPenney ends up filling its new home stores with “JCP” product (instead of Martha Stewart), what did it gain?

On the last point, JCP has managed to develop product for which it is probably paying a rich licensing fee (and pricing it accordingly) after spending the cash to buy an interest in MSLO. “JCP at Home” could have been developed and sourced internally, for lower costs, sharper retails and better margins than this program is likely to produce. To read Dick’s full posting please visit http://retailinginfocus.wordpress.com/.

Dick 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. During his 24 years at Kohl’s, Dick managed the Women’s Accessory, Jewelry, Cosmetics and Intimate Apparel businesses. Prior to Kohl’s, Dick worked for Dayton’s Department Stores (Minneapolis, MN) and his family’s retail business.

Roulston Research recently held their Pharma and Biotech Conference Call on April 22nd with Susan Nemetz and Christof Marré. Susan Nemetz is President of The Nemetz Group LLC, Former Vice President of Commercial Strategy at Millennium Pharmaceuticals, and Former EVP of Cardiovascular at DuPont. Susan provides over 25 years of experience in the healthcare industry. Christof Marré is President of CMH Consulting LLC, Former Vice President for Neurology Marketing at Biogen Idec and Former Marketing Director of Bristol-Myers Squibb. While the pharmaceutical industry is continuing to change and evolving unexpected ways, the presenters remain optimistic about what the future holds, despite some bumps along the way. Some of the majors forces identified to be driving and affecting the healthcare and pharmaceutical industry includes unsustainable growth in spending, healthcare system performance that is poorly correlated with cost, and payments and delivery model that incentives volume over outcome. Their optimism comes from the thinking that issues being addressed, with respects to healthcare would ultimately have been on the table despite changes in the law (i.e. Obamacare). Many of the primary drivers and issues of the healthcare industry are market driven, and not necessary government policy driven, including the integration of healthcare providers through joint ventures and mergers & acquisitions, new models of paying for care and incentive physicians, and new requirements to demonstrate the value of their offerings, which are somewhat outside of what the government is mandating.

Some of the major trends highlighted during the call include the path to generic drugs for manufactures, the current cycle of innovation, reimbursement picture for diabetes/insulin therapies, big pharma newly found interest in niche disease markets where patients are few, and unique pricing model within the generic drug and niche market. Niche markets, explained by the presenters are drug offering to diseases that effect only a minimum number of patients and can range around 10 to 25,000 patients. The growth of rare diseases, primarily in oncology and autoimmune seem to have caught the attention of big pharma partly due to the patent cliff and are pitting them against traditional players, which tend to usually be biotech firms, such as Genzyme. Genzyme was started with a successful business model around rare diseases with the idea that there is a market even if the market only consist of 10 000 patients, charging a price premium above the usual. The presenters makes the argument that 30 to 40% of big pharma revenue are going to narrow in the near future requiring pharmaceutical companies to find new ways to generate revenue; in turn, leading to greater competition in the rare disease market. A good example used is Pfizer new drug that competes directly with Genzyne in the rare disease space. When looking at government policies, the  FDA has in recent years introduced the Pharmaceutical Drug User Fee Act (PDUFA), which include more retime communication with sponsors of various drug packagers to make sure the packages their putting together is designed in the most effective way and only time will tell if this strategy pans out. Companies that are covered and not mentioned above include GlaxoKlineSmith, Biomeridian, Biogen Idec, Allergen, Shire, and more. If you are interested in listening to the podcast from the event or engaging Christof or Susan in a 1 on 1 discussion, please contact info@roulstonresearch.com.

Initial Tesla strategy called for introducing 3 levels of vehicles:

  1. High price/low volume vehicle (initial launch)
  2. Mid price/mid volume vehicle (Tesla S-recent product)
  3. Low price/high volume vehicle (TBD)

Tesla CEO, Elon Musk, has accurately stated that he views increased competition in the Electric Car field as a positive for Tesla.  The sooner electric vehicles become more mainstream, the greater the opportunities become to acquire additional financing/investors and to substantially increase your potential buyer database.

The competition will most likely come from existing auto companies that are capable of re-allocating resources (people and dollars) to developing the electric car.  Start up company Fisker has been the company most equally aligned to Tesla, but they are having serious financial problems and currently attempting to convince a Chinese company to take over the operations.  Fisker CEO has already resigned, workers let go and the company will probably file for bankruptcy any day now.

The battlefield is really going to be in the mid-volume to high volume segment as these companies will need adequate volume to allow them to distribute start up and production costs across a broader range (thereby allowing for lower cost per unit).

Chevy Volt, Nissan Leaf and Toyota RAV-4 are available in limited supplies and a Mercedes B-Class Hatchback is scheduled for a 2014 launch in the US.  Due to the very limited technology advancements available today, these products are low volume and in the compact/sub-compact segments.

The most efficient means for manufacturers to advance the technology needed for mass production, is through a collaboration of efforts.  Tesla did share technology with Mercedes in the development of the B-Class Hatchback and it is common knowledge that Toyota sold its production facility in Fremont, Ca. to Tesla.  Toyota maintains a presence in the Fremont facility and both companies are determining how best to utilize available resources for a win-win scenario.

In the auto industry, competition is always good for the consumer and is truly a motivating factor for manufacturers in future product development.  Elon Musk is absolutely correct in stating increased competition will provide opportunities for Tesla to gain greater awareness in the market and improve their name recognition as they move into higher volume production.  Of course, as competition increases, one has to ensure their products pricing, quality and customer service are equal to or greater than the competition.  Well-established companies like Mercedes, GM, Toyota, Nissan and Ford have access to tremendous resources that could very easily relegate Tesla to a niche product vehicle.

 

Alan DeCarr spent over 37 years at Toyota Motor Sales in a variety positions. Most recently he was Group Vice President of Toyota Logistics Services (TLS), Inc. where he was responsible for all TLS operations in the United States, which include Toyota, Lexus and Scion vehicle delivery to dealers; new vehicle processing and accessory installation; Toyota Transport operations; and the export of North American-produced vehicles to overseas destinations. Previously, Mr. DeCarr held the position of Group Vice President, Sales, for the Toyota Division, where his responsibilities included dealer and field operations for TMS, coordination of private distributors interface, corporate retail dealer development, and public companies. After joining Toyota in 1971, Mr. DeCarr held numerous field-office and corporate-headquarter positions in both the Toyota and Lexus Divisions. Senior field office positions have included assistant general manager at Toyota’s Los Angeles and San Francisco Regions and general manager at the Cincinnati Region. He currently is principal of DeCarr Consulting Group where consults with the automotive industry on a variety of different issues.

Roulston Research recently held their Food Retail Conference Call on April 19th with Lee Armbuster and Robert Anderson. Lee Armbuster is the Former President of Shop ‘N Save, Former Corporate VP of General Merchandise and National Procurement & Distribution at SUPERVALU, and Former President at Laneco with over 25 years of retail executive experience within the formats of Supercenters, Supermarkets, Mass Retail and Drug/Pharmacy. Robert Anderson is the President of Store Brand Consulting and Former Vice President and General Merchandising Manager of Private Label at Wal-Mart. The presenters highlight some key trends including what is happening to the center of the store, areas of inner circles that typically lose money, mergers & acquisitions, and important considerations when looking at companies’ operational and strategic strategies that have effected and changed the food retail industry. Also mentioned are the advantages and disadvantages of some of the traditional food retail channels and a unique take on the definition of value explained in the presenters three tier private label program explanation.

Both speakers had a positive outlook for private labeling. Private labeling has done well in 2 of the previous 3 recessions (minus the last one). Private brands continue to grow year after year as consumers view private brands, such as great value as good as name brand products. The ConAgra acquisition of Ralcorp is viewed positively by the presenters. It positions ConAgra as one of the top CPG companies by diversifying their categories where their competition wasn’t operating. Ralcorp is viewed as a company with great management and strong brands that will help ConAgra sustain market share. When looking at the non traditional channel vs. the traditional channel of food retailing, a good place to start would be the extreme value space. Companies such as Dollar General and Family Dollar are offering a nontraditional strategy to fend off the likes of Wal-Mart and other extreme value players. Family Dollar is place their food items in the back of the store in hope of enticing consumers to buy general merchandise as they make their way to the food segment and Dollar General is rolling out their food market approach, as more and more companies offer move towards offering the same items. However, as general merchandising companies in the extreme value space add more food items, their will be an increase in higher labor cost and higher (SG&A) expense leading to a lower EBIT. Traditional retailers will maintain profitability if they can sustain a differentiation strategy. A good example would be Kroger’s pricing for relationship strategy, which prices items that delights the consumer to a level that eclipses other potential barriers to being a primary customer based on interest, location, and demographic, offering more of a custom based offering from each to store to foster relationships. Companies that are covered and not mentioned above include Kol Foods in the organic market, General Mills, Target, SuperValu, Trader Joes and more. If you are interested in listening to the podcast from the event or engaging Robert or Lee in a 1 on 1 discussion, please contact info@roulstonresearch.com.

Roulston Research held a conference call on April 18th with Steve Lyons, former President of Ford Motor Company and Alan Decarr, former Vice President of Toyota Motor Sales.  Lyons has over 34 years of experience including many positions in Product Development as well as Marketing and Sales and presently remains active in the automobile business through regular contact with dealers of all brands and consulting work with industry and the investment community.  Decarr has over 38 years of experience at Toyota Motor Sales in a variety positions.  He is currently president of DeCarr Consulting Group where he consults the automotive industry on a variety of issues. The discussion began about growth prospects in the domestic and international markets.  Europe is coming off a very difficult first quarter and is definitely a soft spot in the world that currently faces restructuring problems.  Asia is growing significantly and China has tremendous opportunities due to capacity and retail distribution.  Because of the market, cash, and labor base, a Chinese manufacturer is going to have great opportunity to be a world player: the question is who will it be?  Korea has recently made a lot of changes in management structure and continues to come out with improved product.  Japan has had tough times last few years because of the Tsunami but are now back to full production.  Toyota, Hyundai, and Nissan are back into offensive position now and we are going to see a strong push from them in the world market.  The United States is signaling a rally and we are starting to see business increases.  This is mostly because of the growing consumer confidence level.  U.S and China are definitely the bright spots in the world.

Improvement in U.S housing market has lead to better truck sales.  The overcapacity has been dealt with, pricing is very good and we have seen increased prices and margins while lowering incentives.  The truck market is looking up.  As for the dealership challenge, it is not a short term fix.  Turnover in china is an issue because employees tend move around a lot faster so putting dealerships in place is complex problem.  Few Chinese manufacturers have this capacity.  The real movers and shakers will be whoever can get best designers and cheapest engineers. As for used dealerships, there are very good opportunities out there. Exchange rates and tariffs do not seem to be a factor issue when it comes to the automotive industry for they are relatively stable.  As for Hybrids, they have proven to be a great technology and will continue to grow.  The only issue they face right now is the premiums. As for new product launches, Hyundai is entering markets it never has before and Japan and Korea have the right opportunities to continue there product launch.  Volkswagen worldwide product is outstanding.  GM is moving in the right direction but needs to get more exciting cars.  Ford is rationalizing all platforms worldwide, resulting in better products overall.  If you are interested in hearing the podcast of the conference call or engaging Steve or Alan in a 1 on 1 discussion please contact info@roulstonresearch.com.

There have been rumors that IBM is in talks with Chinese PC maker and server partner Lenovo Group to sell off all or a portion of its x86 server business for between $5-6 billion that it could potentially use for dividends and share buybacks. This would be a tough move for the company to make, but with the systems and technology group bleeding red ink they may be tempted to make a change since the System x rack and tower servers are being commodities much like PCs. If IBM wants to focus on Power Systems running Linux for big data, database, and other infrastructure and analytics workloads, it could work out that IBM can generate more cash by walking away from the commodity x86 server business. However, by doing so, IBM loses leverage and volume discounts with chip suppliers Intel and Advanced Micro Devices and operating system suppliers Microsoft, Red Hat, and SUSE Linux. If IBM actually has a plan that gets it into hyperscale data centers – possibly with ARM, Atom, and Power microservers, possibly deploying some of the Power AS and torus interconnect in the BlueGene/Q supercomputers – and if IBM will use at least some of the funds from a Lenovo deal to do the engineering to make modern servers, then dumping System x might be worth it. To read the full article please visit http://www.theregister.co.uk/2013/04/19/ibm_selling_system_x_servers_to_lenovo/.

Tim Morgan is the Systems Editor of the UK based Register and is President and Editor in Chief of IT Jungle. He has been keeping a keen eye on the midrange system and server markets for 15 years, and was one of the founding editors of The Four Hundred, the industry’s first subscription-based monthly newsletter devoted exclusively to the IBM AS/400 minicomputer, established in 1989. For the past decade, Morgan has also performed in-depth market and technical studies on behalf of computer hardware and software vendors that helped them bring their products to the AS/400 market or move them beyond the IBM midrange into the computer market at large.

You only have to look over at HP over the last decade to see that swapping out CEOs rarely fixes a major problem. Intel’s issues with regard to mobile technology are more closely tied to their culture which favors high margin products over things like cell phone processors which are sold on very tight margins. If the problem is cultural then all the new CEO is likely to do is to create turmoil and break what currently isn’t broken. I also wonder if this is a real problem as the Software Defined Network and Moonshot moves suggest Intel remains focuses where the profit is and even Apple isn’t holding margins well in the new Mobile space. To read the full article please visit http://www.tgdaily.com/opinion-features/71062-why-paul-otellini-shouldn-t-step-down-as-intel-ceo.

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.