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Firm Predicts Holiday Sales to Rise at Slower Pace Than Inflation

BY CSA STAFF

Holiday retail sales will increase 0.5% to 1.0%, which, lagging the core inflation rate of 2.6%, represents a significant contraction in real terms, according to Archstone Consulting.

“Our research and modeling shows that retailers and manufacturers are bracing for the toughest holiday sales period since 2001, and perhaps since the ‘Volcker recession’ of 1981,” stated Todd Lavieri, president and CEO of Archstone Consulting, Stamford, Conn. “Our retail and manufacturing clients are seeing almost an aversion to consumption. Even incremental drivers of holiday spending, like the wave of foreign buyers that we have seen over the past four years driven by a weak U.S. dollar, won’t be there this year.”

In its “2008 Holiday Gift Card Survey,” Archstone found that restaurant/fast-food gift cards will be the most purchased cards this season, followed by pre-paid bank cards that have the flexibility to be used almost universally.

Retailers are already very concerned about the holiday season and are preparing early discounts, pulling back on temporary staff and, in some cases, closing underperforming stores. “Retailers will get hit by lower consumer spending and higher borrowing costs to finance inventory,” said Dave Sievers, leader of Archstone’s Consumer Products and Retail practice. “The pressure for early and aggressive discounting will drive down profitability and cash flow pushing some retailers on the edge closer to bankruptcy.” We may see a restructuring of underperforming retail markets following this holiday season.”

Luxury retailers will also be soft, particularly in New York with Wall Street bonus payouts expected to be 50% to 75% less than last year, coupled with significant layoffs in the financial-services sector.

“Last year New York benefited from the tourist trade,” said Sievers, “however, this year the stronger dollar and economic troubles at home will keep the European and Asian tourists away.”

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Longs investor now supports CVS deal

BY CSA STAFF

CHICAGO Longs Drug Stores’ largest shareholder, Advisory Research, announced that in view of Walgreens’ withdrawal of its offer to purchase all of the outstanding shares of Longs Drug Stores and the turmoil in the markets, Advisory Research has determined to tender into the CVS Caremark tender offer all of its clients’ holdings of Longs representing approximately 9.2% of the outstanding Longs’ shares.

Walgreens withdrew its proposal has to acquire all of the outstanding shares of Longs Drug Stores for $75 per share in cash. The offer was originally proposed on Sept. 12 and declined by the board of directors of Longs in favor of the proposed acquisition by CVS/Caremark announced on Aug. 12.

Walgreens had proposed to acquire all of the outstanding shares of Longs Drug Stores for $75 per share in cash for a total purchase price of approximately $3 billion including the assumption of debt. The offer, which is subject to standard regulatory approvals and the completion of due diligence, represents a $3.50 per share premium over the cash purchase price to be paid to Longs shareholders under the proposed acquisition by CVS/Caremark announced on Aug. 12.

 

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New York & Company lowers EPS outlook

BY CSA STAFF

NEW YORK New York & Company reported that it now expects to realize a loss of $4.5 million to $7 million, or 8 cents to 12 cents per diluted share, for the third quarter of fiscal 2008.

In the third quarter to date period (August and September), comparable-store sales declined by 10.6%, which is significantly lower than the companys expectations.

The company currently believes that the economic environment will continue to be challenging and the levels of promotional activity will accelerate throughout the key holiday selling period. In response, the company will continue to operate in a disciplined manner, focusing on providing compelling fashion and value, while maintaining tight control of expenses and inventory and by limiting capital outflows.

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