OPERATIONS

Regulation leads public retailer risks

BY Staff Writer

Chicago – Almost all of the top 100 public retailers (97%) consider federal, state and local regulations as a risk factor, according to a new analysis of 10K filings from the largest 100 U.S. public retailers by BDO, LLP. Only general economic conditions (100%) was cited by more retailers, and this marks the highest percentage of public retailers citing regulations as a risk in the seven years BDO has been performing this analysis.

Other top concerns listed in the “BDO RiskFactor Report for Retail Businesses” include U.S. and foreign vendor/supplier concerns (95%), competition and consolidation in the retail sector (94%), implementation and maintenance of IT systems (89%) and labor (86%).

Doug Hart, partner in the Retail and Consumer Products practice at BDO USA, LLP, said that data protection has become critical considering how much sensitive information retailers collect through numerous touchpoints. “The increasing reliance on cloud computing solutions to process and store this data adds another dimension to this security and privacy risk,” said Hart.

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FINANCE

Best Buy reports net loss

BY Dan Berthiaume

Minneapolis – Best Buy reported a net loss of almost 10% for first quarter fiscal 2014, seeing its revenue drop from roughly $10.34 billion the prior year to $9.38 billion. Increased price competition and the closure of 49 large-format stores contributed to the electronics retailer’s decline in revenue. A shift in the Super Bowl, which typically drives TV sales, to the prior quarter and reduced non-core sales also impacted revenue.

Best Buy CEO Hubert Joly said that the retailer is already seeing benefits from its “Renew Blue” restructuring program, which eliminated $175 million during the most recent quarter in annualized costs through efficiency improvements and removal of management layers. Renew Blue has reduced annualized costs by a total of $350 million since its implementation last year, and Joly expects the savings to continue.

“Looking ahead, we remain focused on making progress on our Renew Blue priorities announced last November and reiterated in March,” said Joly. “During the second quarter, we will, in particular, complete the deployment of the Samsung Experience Shops and make significant progress in our efforts to optimize the allocation of our retail floor space to more attractive product categories, so as to increase revenue and operating profit per square foot.”

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News

Hershey heads to China

BY CSA STAFF

SHANGHAI — Hershey is heading to China to launch a candy brand called Lancaster, marking the first time in its 120-year history that the company has launched a new brand outside of the United States. It’s also the first time in 30 years that Hershey launches a brand that is neither a brand extension nor an acquisition.

The brand will be available in the cities of Wuhan, Hangzhou and Chengdu in June, with wider distribution following next year.

Lancaster products will compete with traditional candies in China’s milk candy confection category that account for one quarter of the total candy market in China and about 7.5 billion RMB, or $1.2 billion. The Lancaster brand will enter the market’s milk candy segment, which is currently showing the strongest growth in the entire category.

“Consumers in China love high-quality, delicious candy that reflects care and craftsmanship and gives them a rich taste experience that is distinct and premium,” said Jane Xu, VP and GM of Greater China for the Hershey Company. “Lancaster was carefully developed with the consumer experience in mind. We believe that quality ingredients and craftsmanship are what make Lancaster extraordinary and making something extraordinary takes time.”

The candy will come in three flavors: Original Pure Nai Bei, Pure Nai Bei filled with Rich Nai Bei and Pure Nai Bei filled with Strawberry.

Hershey considers China a priority market. The country plays a critical role in the company’s long-range growth vision, which includes reaching $10 billion in worldwide net sales by 2017. Hershey has substantially strengthened its brands’ in-store presence in China during the past five years and its products are becoming closely associated with key gifting occasions, including holidays, weddings, Chinese New Year and Chinese Valentine’s day.

“It’s significant that Hershey chose to launch its first new brand in three decades here in China,” said Steven Schiller, SVP of the global sweets and refreshment business unit for Hershey. “This demonstrates the company’s deep commitment to China, as well as the importance of this market in Hershey’s global growth plans.”

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