Friday, April 09, 2010

Shoppers Drug Mart Takes Hostages

Shoppers Drug Mart (SC) upset by the province of Ontario’s attempt to control drug costs started to take hostages. They let it be known that 350 pharmacy students are no longer required and will be out of summer jobs this year. The pharmacy students, many of whom study at the University of Toronto in a state of the art building funded by wealth created through Shoppers Drug Mart, are being told they are no longer needed.

But here is the real disclosure issue Shoppers CEO Jurgen Schreiber let it be known that he already “wasted” nine months negotiating with Ontario in what was essentially “an artificial negotiation.” according to an article in Globe and Mail.

So Jurgen you have been sitting on this one for nine months. You did not prepare investors that this was not looking good and then you got smoked.

Bad Jurgen. Very bad. Now if I were a lawyer, which I am not, I would wonder if there was an attempt to withhold material information. Confidentiality agreement you say. You look a little too frantic by issuing hysterical press releases.

Health care costs keep climbing. Do not be surprised that governments need to do something. Shopper’s management team was asleep. They were seduced by their own retail strategies and lost sight of the core business. Investors were also asleep on this one.

By the way the press release you issued that says “no distribution on US wire services” is widely available on almost any investment information website available to Americans and the whole world. What were you thinking?

Disclosure: No position in this stock

Thursday, April 08, 2010

Nike -- Tiger Woods -- The Masters Risk

Nike (NKE) stood by Tiger Woods when a lot weaker brands ran for the hills. Today Tiger plays the first round of “The Masters” and goes for the “Green Jacket”. What is between Tiger and his wife is their business. But many will take cheap shots at Tiger just for the hell of it. Some may even be conjuring up blackmail and other black op’s. So what has Nike done to protect it’s investment in Tiger.

When your brand is this closely aligned with a personality and you do not drop him under the circumstances you need to ensure there is no possible repeat and you need to ensure no one else manufactures an unfortunate circumstance. This is not something that marketers normally handle. This is something that damage control Public Relations specialists need to orchestrate.

Of course much of this is quiet behind the scenes preparations which we will never learn about. The only time something comes to the surface is when a problem comes up and the media glare lays it bare to the world. By then Nike will be a failure in brand management.

Nike made a bet on an excellent athlete and perhaps the best golfer known to the sport. They backed him because he has undisputed credentials in golf. Has Nike protected themselves and their shareholders? Should Nike get in this deep with an athlete? What happened to diversification? The cost of failure will be very high.

Disclosure: No position in this stock

Wednesday, April 07, 2010

Monsanto Disappoints; Hugh Grant Still Confident

Monsanto (MON) issued a slippery press release but the market still managed to be rightfully disappointed. The short term results were disappointing. Monsanto came out with long term promises of earnings growth in mid teens. A bird in hand is worth two in bush.

The press release was crafted in the third person making it easy for media to cut and paste. Guess which comments were easy to lift. A press release is a REG FD process. The press release utilized this line to help manage perceptions “As part of its earnings results for the quarter ending Feb. 28, 2010, the company discussed performance against projections in both the seeds and traits and agricultural productivity segments during a year of intense competitive pressure for both sides of the business.”

Excuse me the press release is supposed to provide information. The comment that they have discussed something relevant to shareholders is not disclosure. But not to worry; Hugh Grant, chairman, president and CEO for Monsanto offered up this quote for shareholder encouragement “...I am confident that we're a growth company going forward."

Something is wrong with the business plan and previous guidance is fallen apart. What to fix? Well maybe Hugh Grant should not be Chairman and President and CEO. That’s a lot of work Hugh. Besides Hugh you may need someone to blame. Right now you are a little bit naked.

Disclosure: No position in this stock

Tuesday, April 06, 2010

AutoNation Surprises Itself. Not Good

AutoNation (AN) surprised itself. First it announced guidance on Mar 31 for the quarter ending Mar 31. Six days later it raises EPS by about three cents a share. The good news is business should be better. The bad news is management cannot tell things are better as they run the business on a day to day basis.

They say that new and used vehicle sales are still in line with original expectations. So it must be on the expense side or a special provision.

The six day differential includes the three day Easter weekend. Need to hear the whole story. Stock has jumped as profits are 10% better than expected. Concerned about management who surprised themselves.

Monday, April 05, 2010

Apple iPad Game Changer Will Publishers Be Honest About Transition Costs? Probably Not Read Anyway

Apple (AAPL) tops the charts in media buzz. iPad sold some 300,000 units on Saturday. 250,000 eBooksadds to the wow factor. Apps developers are scrambling to get the new stuff out.

The big winners are supposed to be book publishers, magazine and newspaper publishers. The problem with the periodical publishers is that their stocks have already moved because we think advertising is coming back.

Will their stocks continue to move as circulation is saved and print costs decline. It’s all so confusing. The big guys such as Wall St Journal, Conde Nast, NY Times will all have compelling apps. The real litmus test will be what advertisers want to be on. The advertising experience should be superior on the iPad.

Can big media shift gears fast enough and capitalize on the potential of iPad and shed hard printing costs in lockstep. Probably not. Watch for cost control problems at News Corp (NEWS) New York Times (NYT) and others.

Watch for those executives to not talk much about this problem.