The Container Store

The Container Store

This was supposed to be the quarter that showed that the economy had bounced back. Winter snowstorms held back what could have been a potent holiday shopping season. and when many consumer-facing companies shot blanks during the first three months of this year, they blamed the calendar. The shift of the Easter holiday from March last year to April this year disrupted seasonal spending patterns.

However, now that we are ready to discuss the second quarter — with the Easter holiday assist and not a snowflake in sight — corporate America is calling in sick. There were a lot of grim pre-announcements last week, just ahead of the wave of financial reports that will be flooding in over the next couple of weeks.

Warning Signs

The market fell last week, and a major contributor to the tumbling indices was the flurry of companies warning that the second quarter wasn’t so hot. In what should have been an otherwise slow news week dominated by World Cup and NBA free agency news, a lot of familiar companies offered up uninspiring outlooks.

The Container Store (TCS) reported the comparable-store sales slipped 0.8 percent in its latest quarter. The retailer, which specializes in storage solutions, pins the weakness on a “retail funk” that’s coating many chains across the country.

Lumber Liquidators (LL) is the country’s leading discounter of hardwood flooring. This was a booming market during the early stages of the housing recovery, but Lumber Liquidators is telling investors to dial back near-term expectations after a sharp drop in comps.

Rent-a-Center (RCII) would seem to be a natural in this iffy climate as a leader in rent-to-own furniture, TVs, PCs and other home essentials. However, it too is pointing to a material weakness where sales and earnings will fall short of initial forecasts for the quarter. Things are challenging enough where it’s resorting to renting smartphones to help drive more traffic.

Bob Evans (BOBE) prides itself on serving up “homestyle” food at value prices, but that wasn’t enough to help the chain of casual dining restaurants in its latest quarter. Despite selling off its Mimi’s Cafe chain to help focus on its namesake concept, Bob Evans saw its same-store sales slip 4.1 percent in its latest quarter. With an activist investor already stirring up unrest, it’s not the kind of performance that Bob Evans needed to prove that it could bounce back on its own.

Liquidity Services (LQDT) isn’t a consumer-facing company, but it staffs a popular exchange for suppliers looking to unload clearance items. Liquidity Services also hosed down its projections last week, suggesting that there’s distress even in moving distressed merchandise.

Starbucks

Starbucks

On Wednesday, Starbucks (SBUX) is making its much-anticipated debut in the country synonymous with coffee after years of roasting Colombia’s Arabica beans for billions of java lovers the world over.

The three-floor coffee house in Bogota is the first of 50 that the Seattle-based company plans to open here in the next five years. In a nod to the country’s proud coffee-growing tradition, it’s also the only one in the world to serve exclusively locally sourced coffee.

But will Colombians answer Starbucks’ siren call and ditch a popular local chain bearing the bushy-whiskered coffee farmer’s name?

Colombia’s coffee federation, owner of the Juan Valdez chain, is outwardly welcoming the competition. The arrival of Starbucks it says will boost the market for gourmet java even if sales at its nearly 200 stores in Colombia take a hit over the short term

“There’s room in the market for us both,” said Alejandra Londono, head of international sales for the Colombian chain.

Juan Valdez’s social mission promoting Colombian coffee and contributing to producers’ welfare is likely to keep customers loyal, said Londono.

Since its founding 11 years ago, the Colombian chain has funneled more than $20 million to a national fund that supports the country’s 560,000 coffee-growing families, some of whom also own shares in the company.

While Starbucks also has burnished its image for corporate responsibility, offering employees in the U.S. generous health care benefits and now online college courses, it’s stayed clear of Colombia, Latin America’s third largest economy, even as it has opened more than 700 stories in 12 other countries in the region. That may have been because it feared trampling on local sensibilities already hurt by the branding of coffee that leaves growers earning just a few pennies from every $4 venti latte sold.

Indeed, a desire to overcome the commodities curse is what’s been driving the federation’s focus on adding value up the retail chain, a strategy reflected in more sophisticated local coffee-drinking culture.

While known for exporting the world’s finest beans, until recently Colombians’ taste in coffee was quite provincial, relegated to a preference for heavily sweetened, warmed-over black coffee known as tinto, which is sold nearly everywhere.

Across from where Starbucks is opening on a leafy park in north Bogota, office workers at a rival Juan Valdez seemed thrilled with the prospect of having a new option for their late-afternoon caffeine fix. Service at their local coffee house, they said, has been improving ever since Starbucks announced it was coming a year ago.

“I like Juan Valdez but it doesn’t mean I’ll never go to Starbucks just because I want to support our own,” said Marcela Gomez, an architect. “A little healthy competition is good.”

Shark T-shirts

Shark T-shirts

In “Jaws,” the fictional mayor tried to protect the summer tourism season by keeping a lid on reports of the man-eater lurking offshore. As sightings of great white sharks mount off Cape Cod in real life, however, businesses in the Massachusetts town of Chatham are embracing the frenzy.

Shark T-shirts are everywhere, “Jaws” has been playing in local theaters and boat tours are taking more tourists out to see the huge seal population that keeps the sharks coming. Harbormasters have issued warnings but — unlike the sharks in the movies — the great whites generally aren’t seen as a threat to human swimmers.

Among the entrepreneurs is Justin Labdon, owner of the Cape Cod Beach Chair Co., who started selling “Chatham Whites” T-shirts after customers who were renting paddle boards and kayaks began asking whether it was safe to go to sea.

“I mean, truthfully, we’ve probably grown about 500 percent in terms of the sale of our shark apparel,” he said. The T-shirts, hoodies, hats, belts, dog collars and other accessories bear the iconic, torpedo-shaped image of great whites and sell for between $10 and $45.

He said his store brings in thousands of dollars in sales of the shark-themed merchandise.

Tourists peer through coin-operated binoculars in hopes of catching a glimpse of a shark fin from the beaches of Chatham. The posh resort town is on the elbow of the cape that has a large population of gray seals — the massive animals whose blubber is the fuel of choice for great white sharks. Local shops sell jewelry, candy, clothes, stuffed animals and beverages with shark motifs.

A study released last month by scientists at the National Oceanic and Atmospheric Administration found the number of great white sharks off the Eastern U.S. and Canada is surging after decades of decline. Conservation efforts and the greater availability of prey such as Massachusetts’ seals, are credited with the reversal.

Shark sightings have soared from generally fewer than two annually before 2004 to more than 20 in each of the last few years off Cape Cod, where the economy depends heavily on the summer tourism season. Despite notices urging boaters and swimmers to use caution, the official reaction has been nearly the opposite of the panic depicted in “Jaws,” the 1975 film shot mainly on the Massachusetts island of Martha’s Vineyard.

“White sharks are this iconic species in society and it draws amazing amounts of attention,” said Gregory Skomal, a senior marine fisheries biologist who also leads the Massachusetts Shark Research Program, who said people are coming in hopes of witnessing the animals in their splendor. “I have not been approached by anyone who has said to me ‘let’s go kill these sharks.’ ”

Skomal said sharks have been coming closer to shore to feed on the seals, which he said have been coming on shore in greater numbers because of successful conservation efforts.

Confrontations with people are rare, with only 106 unprovoked white shark attacks — 13 of them fatal — in U.S. waters since 1916, according to data provided by the University of Florida.

Still, officials are wary of the damage that could be done to tourism if one of the predators bites a person. Brochures have been distributed to raise awareness of sharks and safe practices in the event of a sighting.

“You have to make sure people understand,” Cape Cod Chamber of Commerce CEO Wendy Northcross said, “if they go to the beach and they see a family of seals there, that’s probably not the best place to hang out.”

Laurie Moss McCandless of Memphis, Tennessee, has vacationed on Cape Cod every summer since she was a little girl and doesn’t remember hearing about sharks back then. But her son is obsessed with sharks, she said, and she’s hoping to hear more about them on their vacation in Chatham.

“He loves all his sharks paraphernalia,” McCandless, 39, said as she bought a shark-themed sweatshirt for one of her three children.

 

Amazon

Amazon

Amazon.com (AMZN) posted a much larger-than-expected loss in the second quarter as it continues its rapid pace of investment in new businesses such as digital content and consumer electronics.

Amazon’s stock price has dropped 10 percent so far in 2014, with investors leery of betting on its long-term growth at the expense of little to no profit.

On Thursday, the shares fell another 10 percent in late trade, after the largest U.S. online retailer posted a loss of 27 cents a share, nearly double Wall Street’s average estimate for a loss of 15 cents.

The company also forecast an operating loss of between $810 million and $410 million for the third quarter ending in September, a sharp increase from a loss of $25 million a year earlier.

Amazon is investing heavily in new businesses and hardware products, as it prepares to take on major tech rivals from Apple (AAPL) and Google (GOOG) to Netflix (NFLX).

Chief Financial Officer Tom Szkutak said Amazon had a “tremendous amount of opportunities” and its investments were “certainly impacting short-term results.”

The company is spending more than $100 million on original video content in the third quarter, a substantial increase compared to last year and the second quarter, Szkutak said.

“We’re going to continue to invest on behalf of customers with the understanding that long-term has to come,” he said during a call with reporters. “We’ll obviously be looking to get great returns on investor capital and high amounts of cash flow.

New products and businesses unveiled this year include a subscription book service, new digital content for its Prime online video service, a TV streaming-box and the upcoming “Fire” smartphone. Amazon is also spending billions of dollars expanding its network of fulfillment centers across the world.

Amazon reported a net loss of $126 million, or 27 cents a share in the second quarter, compared to a loss of $7 million, or 2 cents a share a year earlier. Total operating expenses rose 24 percent to $19.36 billion.

Revenue jumped 23 percent to $19.34 billion, in line with Wall Street’s average prediction of $19.3 billion, according to Thomson Reuters I/B/E/S.

Amazon’s steep price cuts for its cloud computing service made earlier this year limited growth in its “Other” revenue category, which includes its popular Amazon Web Services division, Szkutak told reporters.

The company’s stock fell to $323 in extended trading on the Nasdaq, down from a close of $358.61.

Market Basket supermarket

Market Basket supermarket

It’s been called a David vs. Goliath story, a “Tale of Two Arthurs” and even the “ultimate Greek tragedy,” but the characters in this drama aren’t Biblical or literary figures. They’re grocery store owners.

A workers’ revolt at the Market Basket supermarket chain has led to empty store shelves, angry customers and support for a boycott from more than 100 state legislators and mayors.

Industry analysts say worker revolts at non-union companies are rare, but what’s happening at Market Basket is particularly unusual because the workers aren’t asking for higher pay or better benefits. They are demanding the reinstatement of beloved former CEO Arthur T. Demoulas, who workers credit with keeping prices low, treating employees well and guiding the company’s success.

The New England grocery store chain is embroiled in a family feud featuring two cousins who have been at odds for decades.

While earlier squabbles between Arthur T. Demoulas and Arthur S. Demoulas were fought in courtrooms, this dispute has spilled into Market Basket stores.

For the past week, warehouse workers have refused to make deliveries to Market Basket’s stores, leaving fruit, vegetable, seafood and meat shelves empty. Workers have held huge protest rallies and organized boycott petitions through social media, attracting thousands of supporters.

Customers are defecting to other grocery stores. In some cases, customers have taped receipts from competitors to Market Basket windows.

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View all Courses “We are going to go somewhere else from now on,” said Soraya DeBarros, as she walked through a depleted produce department at the Market Basket in West Bridgewater this week. “I’m sad about it because of course I want to keep the low prices, but I want to support the workers.”

Despite threats by new management to fire any workers who fail to perform their duties, some 300 warehouse workers and 68 drivers have refused to make deliveries. So far, eight supervisors have been fired. Massachusetts Attorney General Martha Coakley, who is running for governor, and New Hampshire Gov. Maggie Hassan have publicly supported the employees.

“If you had told me that workers at a grocery store would walk out to save the job of a CEO, I would say that’s incredible. There is usually such a gulf between the worker and the CEO,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester.

Long-Running Feud

Market Basket stores have long been a fixture in Massachusetts. The late Arthur Demoulas — grandfather of Arthur S. and Arthur T. and a Greek immigrant — opened the first store in Lowell nearly a century ago. Gradually, Market Basket became a regional powerhouse, with 25,000 employees and 71 stores in Massachusetts, New Hampshire and Maine.

The feud dates back to the 1970s, but the most recent round of infighting began last year when Arthur S. Demoulas gained control of the board of directors. Last month, the board fired Arthur T., sparking the current uprising.

Workers are fiercely loyal to Arthur T.

“You know the movie, ‘It’s a Wonderful Life.’ He’s George Bailey,” said Tom Trainor, a district supervisor who worked for the company for 41 years before being fired last weekend over the protests. “He’s just a tremendous human being that puts people above profits. He can walk through a store, and if he’s met you once, he knows our name, he knows your wife, your husband, your kids, where they are going to school.”

Employees said they believe the fight between the family members loyal to Arthur T. and Arthur S. is largely over money and the direction of the company. They say Arthur S. and his supporters have pressed for a greater return to shareholders.

Arthur T. and his supporters have focused on keeping prices low.

Outsiders Brought In

Many employees are distrustful of Arthur S. and two co-chief executives who were brought in from outside the company: Felicia Thornton, a former executive of the grocery chain Albertsons, and Jim Gooch, former president and chief executive at RadioShack (RSH).

“I’m worried about my job,” said Valerie Burke, a worker in the West Bridgewater store. “It’s a great company to work for now, but we are worried it won’t stay that way,” she said as she picketed outside the store Tuesday.

Arthur S. hasn’t spoken publicly, while Gooch and Thornton have communicated only through prepared statements. They assured workers in a statement that they aren’t planning drastic changes in the way the company is operated, and urged employees to return to work.

Arthur T. on Wednesday offered to buy the company for an undisclosed amount.

Gooch and Thornton declined to comment.

Workers have planned another rally Friday in Tewksbury, while the company’s board of directors is scheduled to hold a meeting the same day in Boston.

Steve Paulenka, who started in 1974 as a bag boy and rose to facilities and operations manager before being fired last weekend, said he sees no end to protests unless Arthur T. is reinstated.

“A big part of me doesn’t like what’s going on — it’s like breaking your favorite toy on purpose,” he said. “But we’ll get through this.”

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