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Shareholder Starboard asks Office Depot to revoke poison pill

BY Katherine Boccaccio

Boca Raton, Fla. — In a letter to Office Depot Inc., activist investor Starboard Value asked the office supply retailer to immediately revoke its poison pill provision on the grounds that it would limit the influence of shareholders.

Starboard, Office Depot’s largest shareholder with a 14.8% stake, wrote that it believes “the implementation of the poison pill, with a threshold just above our current ownership, is designed specifically to entrench the current board.”

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Duke gives Obama and Congress fiscal cliff deadline

BY CSA STAFF

For a split second after the presidential election the victor and the vanquished struck a conciliatory tone on finding the balance between raising taxes and cutting spending. Wal-Mart Stores, Inc. president and CEO Mike Duke wants the issue resolved as soon as possible.

Duke was among a group of business leaders in Washington earlier this week meeting with President Barack Obama and following the meeting Walmart released a statement expressing his views on the issue.

"Before the end of the year, Washington needs to find an agreement to avoid the fiscal cliff," Duke said. "We are pleased that the President and the Congressional leadership are coming together to solve this critical issue."

They haven’t solved anything yet and the fact that rhetoric quickly returned to pre-election levels wouldn’t seem to indicate that any sort of deal is imminent. That’s too bad because relentless discussion of a topic as ominous sounding as the fiscal cliff is unsettling to people as they evaluate how much or how little to spend during the holidays.

Duke said Walmart’s customers are at the center of this debate because they are middle class Americans and those aspiring to join the middle class. Walmart customers are working hard to adapt to the ‘new normal,’ but their confidence is still very fragile and as they shop for Christmas don’t need uncertainty over a tax increase, according to Duke.

"The need for certainty is also true for business. Many of us are headed into our new fiscal years and are making decisions on investments that will drive growth," Duke said. "Walmart Moms tell us their confidence in the economy is shaped by whether they believe Washington is working for them. If the White House and Congress can reach agreement, it will show them the nation’s leaders can address big issues, and it will help raise their confidence in their government and their future."

Duke joined the growing chorus of business leaders who are pressing for a resolution to the so-called fiscal cliff by balancing a range of solutions.

"We encourage the White House and Congress to work together on an approach that includes additional revenue, comprehensive tax reform, and spending cuts, including entitlement reforms, to get our fiscal house in order while creating economic growth," Duke said.

 

 

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As inflation subsides sales moderate at Sam’s

BY CSA STAFF

A 2.7% third quarter same store sales increase at Sam’s Club was below expectations for a 3% to 5% increase. President and CEO Rosalind Brewer explained what went wrong yesterday morning during a pre-recorded message.

Total sales increased 4.7% to $13.9 billion as sales volumes from the addition of seven new clubs, the most since the fourth quarter of 2005 contributed to the 2.7% comp increase. Operating profits increased 12.7% to $435 million, well ahead of the mid-single digit rate of operating profit growth reported by the Walmart U.S. and Walmart International divisions.

Brewer said Sam’s was pleased with its positive results, but disappointed that comp sales were below our guidance and blamed the miss on a variety of factors.

"The combination of inflation and deflation across multiple categories affected comp sales," Brewer said. "Inflation in some categories led members to trade down. Deflation in other categories came faster and deeper late in the quarter, with October being the lowest inflation we have seen in some time. Finally, our business members continue to experience economic pressure and uncertainty, which led to slower growth in business member traffic. We anticipate this softening could remain a headwind in the fourth quarter."

Sam’s anticipates a further inflation-related deceleration in same store sales during the fourth quarter as member behavior is impacted. Comps are forecast to increase in a range of 1.5% to 3.5%. Sam’s is up against a prior year gain of 5.4%.

"Inflation is quickly moderating across the club, and the effect was most pronounced later in the (third) quarter," Brewer explained. "In last year’s third quarter, we estimated retail inflation across the club was approximately 325 to 375 basis points, while this year it was only 70 to100 basis points. This was down significantly also from our second quarter estimates of 175 to 225 basis points.

Meanwhile, as inflation occurs in categories like meat it causes members to shift purchases. Because price increases for beef are inflating mid-single digits, members are switching to different proteins, particularly pork, which is deflationary, according to Brewer. This protein-related trade down impacted comp sales and dairy categories such as milk, cheese and eggs are also experiencing deflation.

"Although units are increasing, the deflation has proven to be challenging to overcome in these categories. Sugar and coffee prices are moderating as well," Brewer said.

 

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