Consumers, Stores Face Off Over Depth of Holiday Discounts

Shoppers Inside A Target Corp. Store Ahead Of Black Friday SalesNEW YORK and CHICAGO — Target’s (TGT) 10 percent discount on a $30.49 pair of embroidered curtains wasn’t nearly enough to entice Valerie Jenkins, shopping in Chicago the weekend before Thanksgiving.

She expects the 60 to 70 percent off she got during the last holidays. “There were some very good deals this time last year,” she said.

Jenkins represents a problem for retailers going into what traditionally has been the peak shopping day of the holiday season, Black Friday. Big retailers are keeping discounts for the weekend following Thanksgiving at around the same level as last year, according to data supplied to Reuters by MarketTrak.

But polls by Reuters/Ipsos and some others show shoppers, who got even bigger discounts closer to Christmas last year, are cautious with their spending and willing to wait for deals.

The Reuters/Ipsos survey found more people planned to cut holiday spending than increase in every category surveyed: clothing, jewelry, electronics, food and toys, and that 46 percent felt they could wait longer in the season to buy because of faster shipping.

Black Friday shopping will help set the tone for the rest of the holiday season, signaling to retailers whether they need to drop prices or change promotions. While Black Friday isn’t always a strong forecaster of holiday spending, last year reports of poor Black Friday spending were followed by deeper discounting and a rush of buying in the week before Christmas.

J.C. Penney (JCP) offered an average 58 percent off in Black Friday ads this year, down from 59 percent last year, according to MarketTrak, which looks at circulars from top retailers. Kohl’s (KSS) is offering 54 percent off, up from 51 percent in 2014, and discounts from Staples (SPLS) and Office Depot (ODP) are both a touch less than last year, at 45 and 50 percent, respectively.

Appliances, entertainment items, infant products and hardware showed narrowing discounts, MarketTrak reported, while promotions for apparel, toys and electronics were getting bigger.

Kurt Jetta, head of retail industry researcher TABS Group, found the discounts underwhelming.

“The fact that retail has been so weak coming in to the season would suggest they may need to ramp up efforts to make up for this later,” Jetta said.

Consumers were cautious going into the holidays, with sales at Macy’s, Nordstrom Inc and Best Buy missing expectations in recent quarterly results. Target’s online sales fell due to a drop in demand for electronics.

Looking for Discounts

The Reuters/Ipsos survey of 4,639 adults from Nov. 12-23 found 28 percent of consumers expected discounts of 50 percent or more on most items, 36 percent hoped to see promotions of at least 33 percent while 49 percent expect a minimum discount of 20 percent on most products.

A survey for Boston Consulting Group found 70 percent of consumers would spend the same or less as last year, describing the consumer outlook as “tepid.”

Still, spending intentions are difficult to gauge and Gallup reported Americans plan to spend $830 on gifts this season, up from $720 a year ago at this time.

The National Retail Federation expects holiday sales to rise 3.7 percent, slower than last year’s 4.1 percent growth rate, due to stagnant wages and sluggish job creation.

Many retailers including Macy’s (M) came into the season with high winter clothing inventory after warm weather in September and October, which also will increase discounting pressure.

“Consumers have been trained to know that they can wait, and they will wait and that will force the retailers to continue to be promotional,” said Joel Bines, managing director at AlixPartners.

Will Santa Claus Deliver a Year-End Rally for Investors?

Santa Peeking Over Money FanIt turns out Santa Claus doesn’t just deliver gifts under the Christmas tree. Traditionally, November and December are positive months for the U.S. stock market as well.

Chalk it up to year-end catch-up buying or positive seasonal holiday cheer, but history shows that investors can expect stock market gains into year-end, particularly because of the trend known as the Santa Claus rally. But this year’s wild card is the Federal Reserve, which is considering an interest rate hike in December. Let’s take a look at what could lie ahead for Wall Street as well as opportunities for investors now.

What is the Santa Claus rally? The Santa Claus rally phenomenon is a short but respectable upward move in stock prices over the last five trading days of the year and the first two days of the new year — a trend identified and popularized by Stock Trader’s Almanac publisher Yale Hirsch in 1972.

Over this seven-day trading period since 1969, the Standard & Poor’s 500 index (^GSPC) has averaged a 1.4 percent gain in the Santa Claus rally. One of the factors driving stocks higher is buying action by portfolio managers who are chasing stock winners and gains in an attempt to “window dress” their portfolios for year-end statements, says Jeffrey Hirsch, Yale Hirsch’s son and the current editor at Stock Trader’s Almanac.

Significantly, the Santa Claus gains can be used as a warning signal for stock market action ahead. “The significance of the Santa Claus rally is really when it does not occur. If Santa Claus should fail to call, bears may come to Broad and Wall,” Hirsch says, referring to the streets. Over the last 21 years, the Santa Claus rally has failed to emerge only four times, which preceded flat overall performance years in 1994 and 2005 and down markets in 2000 and 2008, he says.

October’s gains may keep Santa away. Looking at the bigger picture, there is a general seasonal tendency for positive stock market performance in November and December. “Over the last 10 years, on average, the S&P 500 has gained 0.38 percent in November and 1.29 percent in December,” says John Canally, investment strategist and economist for Boston-based LPL Financial.

However, Santa Claus and his reindeer may run into some trouble, as this year offers conflicting headwinds for the seasonal bullish performance period. “We had an extraordinarily strong October, and that likely ate into a little of the gains that we normally see in November and December,” says Hank Smith, chief investment officer, at Philadelphia area-based Haverford Trust.

Analysts point to the Federal Reserve as a potential spoiler for the traditional Santa Claus rally action. Smith highlighted the widespread uncertainty over how the stock market might react to a Federal Revere rate hike. “Assuming we get a rate hike in December, we might be looking at markets that trade relatively flat between now and year-end,” Smith says.

The Fed is widely expected to raise interest rates at its December meeting, which would mark the first increase since before the global financial crisis began in 2008. Analysts will be watching closely for clues on how far and how fast the central bank might raise rates in 2016, and this could be the key to the stock market’s reaction, Canally says. “If the Fed raises rates in December and says we will only do three or four more hikes next year — in that environment, we will get the Santa Claus rally,” Canally says.

For active investors looking to jump on seasonal trends, another well-documented phenomenon is the January effect, in which small-capitalization stocks tend to outperform large-cap stocks. But investors should take note: The January effect has been occurring earlier in recent years. “Nowadays, most of this so-called January effect takes place in the last two weeks of December. This is likely due to the anticipators trying to take advantage of this trend and getting in earlier,” Hirsch says.

“Small caps and beaten-down bargain stocks should be positioned to rally again this year in late December. If the market reacts positively to whatever the Fed does on Dec. 16, that would be a bullish sign for the small-cap effect and the Santa Claus rally,” Hirsch says. There are several exchange-traded funds that track small-cap stocks, including iShares Russell 2000 (IWM).

Week’s Winners and Losers: Pandora Jams, Costco Slammed

Inside A Costco Wholesale Co. Store Ahead of Earnings FiguresThere were plenty of winners and losers this week, with a struggling music app getting a boost from a record-breaking album and another cult fave experiencing an E. coli scare.

Pandora (P) — Winner

Adele’s “25” is a hit, and unlike streaming music rivals Spotify or Apple’s (AAPL) new Apple Music, all of the tracks of the record-breaking album are available on Pandora. It’s a big score for Pandora, and it can certainly use it. Its stock has shed two-thirds of its value since hitting an all-time high early last year.

It’s not a perfect situation. The reason that Adele’s available on Pandora is because the app doesn’t let listeners select the actual songs that they want to hear. It’s a music-discovery site that delivers customized playlists. However, with Adele’s album shattering the record for its first week of sales, it’s not going to hurt to draw attention to Pandora’s platform at a time when usage has stalled.

GameStop (GME) — Loser

We’re not playing video games the way we used to, and GameStop is feeling the pinch. The leading video game retailer took a hit after posting sales, earnings, and comparable-store sales that all fell in its latest quarter when pitted against the same pre-holiday quarter a year earlier.

This wouldn’t be such a big deal — many retailers are struggling these days — but GameStop was forecasting positive comps for the quarter just three months ago. New software and hardware sales continue to eat away at growth in the sale of collectible items and pre-owned games and gear.

Disney (DIS) — Winner

Disney-Pixar’s “The Good Dinosaur” hit theaters on Wednesday. Movie critics have given mixed reviews on the computer-rendered movie, something that doesn’t happen often when Pixar is telling the story.

However, there’s no point in denying the property’s fate. It will be a big box office winner. It has dinosaurs. It’s Disney-Pixar. It came out on Thanksgiving Eve, likely making the most of the extended holiday break that drives a family to the corner multiplex.

Costco (COST) — Loser

It’s not just Chipotle (CMG) dealing with an E. coli scare. Costco came under fire on accusations that its chicken salad may have disseminated the bacteria that causes an unpleasant gastrointestinal disease.

There aren’t many cases that have been announced so far, but burned Chipotle investors over the past few weeks will be the first to tell Costco shareholders that it’s not over until it’s over.

Holiday Travelers — Winners

Thanksgiving finds many people hitting the road to visit family members, and it should be cheaper than usual this year with less pain at the pump. Gasoline prices over the holidays haven’t been this low on Thanksgiving since 2008, and that will come as a welcome surprise to the 42 million drivers that AAA sees on the road this holiday weekend.

It’s not just drivers that will be grateful. Jet fuel is also cheap, and that’s factored into lower airfares than in previous holiday travel seasons.

E. coli Outbreak Linked to Chipotle Restaurants Expands

Customers leave a Chipotle restaurant with food in Portland, Ore., Wednesday, Nov. 11, 2015. Chipotle started reopening its restaurants in the Pacific Northwest on Wednesday after an E. coli outbreak sickened about 45 people, a high-profile example of foodborne illnesses that are more common than the public realizes, health experts say. Forty-three outposts of the Mexican food chain in Washington state and the Portland, Oregon, area were closed at the end of October because of the outbreak that hospitalized more than a dozen people. The first restaurants opened for lunch Wednesday. (AP Photo/Don Ryan)An outbreak of E. coli linked to Chipotle has expanded to nine states, with a total of 52 reported illnesses.

The Centers for Disease Control and Prevention said Friday seven additional people were sickened, including in three more states: Illinois, Maryland and Pennsylvania. The most recent illness started on Nov. 13, it said.

The majority of the illnesses have been in Oregon and Washington, where cases were initially reported at the end of October. Additional cases were later reported in California, Minnesota, New York and Ohio.

Of the 52 people infected, the CDC says 47 reported eating at a Chipotle restaurant the week before the illness started. The agency hasn’t yet determined the ingredient that made people sick.

The CDC also said illnesses that started after Nov. 11 may not be reported yet.

People usually get sick from Shiga toxin-producing E. coli, the bacteria commonly associated with foodborne outbreaks, for two to eight days after swallowing the germ, according to the CDC. Most infected people get diarrhea and abdominal cramps.

Earlier Friday, Chipotle said it was tightening its food safety standards.

The Denver-based chain known for touting the quality of its ingredients said it hired IEH Laboratories in Seattle to help improve its procedures. It said it will implement testing of all produce before it is shipped to restaurants and enhance employee training for food safety and handling.

Chipotle hasn’t yet said how sales have been affected by the bad publicity from the outbreak, but plans to provide a financial update before a presentation for analysts and investors Tuesday. In October, the company had forecast sales at established locations would be up in the low- to mid-single digit percentages for 2015.

The company’s shares fell 2.7 percent to $550.25 in trading Friday afternoon.

Chipotle said it tested ingredients before, but that it is moving to testing smaller batches and a larger number of samples.

“In testing for pathogens, in many ways you’re looking for needles in haystacks. Through this high resolution testing program, we are making the haystacks smaller by working with smaller lots,” the company said.

It said that no ingredients that are likely to have been connected to the incident remain in its restaurants or supply system.

Chris Arnold, a spokesman for Chipotle Mexican Grill (CMG), said the company’s local produce suppliers may not all be able to meet the new standards. The company noted that its local produce program accounts for a “relatively small percentage” of the produce it uses, and only runs from around June through October in most parts of the country.

8 Things That Are Cheaper at Target

Target Store exteriorThere’s no arguing that Target has a loyal following among many shoppers. While the retail giant may not always have the lowest prices, it certainly attracts consumers happily willing to pay a little extra to avoid the crowded aisles of some other discounters.

But there are certain items which are almost always cheaper at Target (TGT) compared to other retailers. Here are eight such items that’ll save you money on your next Target shopping trip.

1. ‘Green’ Cleaning Products

Not only has Target led the natural cleaning trend over the past few years, but they often do it at a price lower than the competition. For example, Target sells the 28-ounce bottle of Method All-Surface Cleaner for an affordable $2.99, while Walmart sells the same product for $5.49 and Amazon sells it for $8.
Another great example is Green Works laundry detergent in the 90-ounce size; at Target you’ll pay $11.99, while you’ll pay $23.27 at Walmart and $19.21 at Amazon. You’ll also find similar savings at Target on other popular natural cleaning brands, including J.R. Watkins, Honest and Seventh Generation.

2. Kids’ Bedding and Decor

When buying bedding for your child’s room, your wallet will likely benefit greatly from shopping at Target. You’ll find steep savings on sheet and comforter sets, throw blankets and even decorative pillows. This is especially true when buying “character” bedding from Star Wars, Disney and Sesame Street. For example, you can purchase the popular Star Wars Classic Twin Sheet Set from Target for $19.79, while you’ll have to pay $26.07 on Amazon. If you’re shopping for a girl, you’ll also save at Target, as you can buy the four-piece Disney Frozen bed set for $31.49 where you’ll have to pay $36.97 at Walmart.

3. Photo Frames

When compared to the competition, Target is a great place to shop for picture frames and save money. While they easily beat the price at specialty stores like Michaels and Jo-Ann Fabric, they surprisingly also undercut the likes of Walmart and Amazon. For example, at Target you can buy 8×10 inch frames (set of two for $13.99, while you’ll have to pay $19.97 at Walmart and $18.99 at Amazon.

The savings you’ll find at Target aren’t limited to the popular 8×10 size — it’s seen across all picture frame sizes and designs. Plus, they often have coupons available via their Cartwheel app on home items and decor that will bring the price down even further.

4. Beauty Items

Target is where you’ll get the most bang for your buck when buying cosmetics and makeup. While prices are generally better at Target when compared to Amazon, Walmart and Macy’s, the real savings comes in the gift card deals they offer. A current example is a free $5 Target gift card when you buy three L’Oreal products. When the gift card is factored into the price, Target easily beats the competition.

Other examples include a free $5 Target gift card with the purchase of three Aveeno items and buy one, get one for 50 percent off with all fragrances. Also, be sure to always check for printable Target coupons before you visit to ensure you get the lowest price on beauty items.

5. Name-Brand Baby Gear

Brands like Graco, Britax and Evenflo are often cheapest at Target. For example, Target currently sells the Graco Pack ‘N Play Playardfor $59.99 (color: Pasadena), while the cheapest color currently on Amazon is $69.97. The same can be said for the Evenflo High-Back Booster seat; you’ll find it for $33.99 at Target and have to pay $39.98 at Amazon,$35.98 at Walmart and $39.99 at Babies R Us. It’s always a smart idea to check pricing at Target before buying baby products, as you’ll often find the lowest price.

6. Men’s Deodorant

Target is a great place to save money on deodorant and anti-perspirant for men. For example, Target sells the two-pack of men’s Old Spice High Endurance Deodorant for $3.97, while Walmart sells the same product for $5.97. Also, you can find a two-pack of Axe Phoenix Anti-Perspirant at Target for $6.29, compared to $7.37 at Walmart. I found similar savings on other popular brands like Gillette, Degree and Dove Men’s Care as well.

For whatever reason, women’s deodorant is cheaper across the board at Walmart and Amazon. But if you’re a guy, or buying for one, purchase from Target and take advantage of the lower prices.

7. Tall Kitchen Bags

This one might seem a bit random, but kitchen trash bags — the tall variety — are 25 percent cheaper at Target compared to Walmart. Specifically, I’m talking about the store brand at each store. At Target, you can get the Up & Up brand in a 110 count box for $9.99, while you’ll pay $12.52 for a box of only 100 bags of the Walmart brand. Both bags received strong customer reviews, making the Target brand a solid buy.

8. Wedding Registry Gifts

Because of the exclusive discounts they offer, wedding registry gifts are simply cheaper at Target. If the wedding couple registered at several stores and Target is one of them, always choose to shop with them and you’ll save. For example, they currently have a discount code (WEDDING20) that is good for 20 percent off your $100 or more regular-priced wedding registry gift. So if you’re buying the couple the KitchenAid Mixer they registered for, you’ll only pay $200 instead of $250 — a price that beats all of the major competition.

By the way, having been married for 15 years, I can honestly say that this mixer is the only gift we received that we still use today. It clearly falls under the category of quality items worth the price.

By knowing the items at Target that provide the most savings, you can plan your next trip accordingly and save money. Also, it’s worth noting that most of the products listed above provide the same savings in-store as they do online. Happy savings.

Keurig Green Mountain to Be Taken Private for $13.9 Billion

Non-Recyclable Keurig Coffee Pods Come Under Fire--And Continue To SellKeurig Green Mountain, the maker of K-Cup single-serve coffee pods, said Monday it would be bought by an investor group led by Germany’s JAB Holding Co. for about $13.9 billion, creating a global coffee giant.

The deal, pitched at a 78 percent premium to Keurig’s Friday close, is the latest by JAB as it seeks to become a formidable competitor to world coffee market leader Nestle.

JAB formed a joint venture in July called Jacobs Douwe Egberts — now the largest coffee company — by combining its D.E. Master Blenders 1753 business with the coffee business of Mondelez International (MDLZ).

JAB, the investment vehicle of the billionaire Reimann family of Germany, bought U.S. coffee companies Caribou Coffee Co. and Peet’s Coffee & Tea in 2012.

Keurig’s (GMCR) shares were trading at $90.05 in early trading Monday, short of the $92 a share offer.

The stock last traded at $92 in May. Nearly 13 percent of the company’s total float is held by short sellers.

“The 78 percent premium should keep other bidders at bay,” SunTrust (STI) Robinson Humphrey analyst William Chappell wrote in a client note.

Keurig, which had lost more than 60 percent of its market value this year up to Friday’s close, has struggled with declining sales of its single-serve coffee pods and brewers due to intense competition.

The company’s latest countertop device, a cold drink brewer called Keurig Koldlaunched in September, failed to excite buyers.

Coca-Cola Co. (KO), Keurig’s biggest single shareholder, said it would receive cash for its 17.4 percent stake in the Vermont-based company. The stake is valued at about $2.4 billion at the offer price. Coke’s shares were little changed.

JAB is acquiring Keurig in partnership with investors who are already shareholders in Jacobs Douwe Egberts, including Mondelez and entities affiliated with BDT Capital Partners.

JAB’s other holdings include controlling stakes in cosmetics company Coty (COTY) and luxury goods-makers Jimmy Choo (CHOO).

The deal is expected to close in the first quarter of 2016.

Bank of America Merrill Lynch (BAC) and Credit Suisse (CS) provided fairness opinions to Keurig Green Mountain.