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Study: 64% of U.S. households own smartphones

BY Marianne Wilson

Arlington, Va. — The dominance of the mobile channel is illustrated in a new survey from the Consumer Electronics Association (CEA), which reveals that two-thirds (64%) of U.S. households now own smartphones, surpassing ownership of basic cell phones 51%) for the first time, according to a new study.

The 16th Annual Household CE Ownership and Market Potential Study also shows that, despite the continued growth of online retail sales, 85% of U.S. households purchasing CE products in the last year did so at brick-and-mortar retail stores. But households that bought CE devices over the past year say they are 49% more likely to make CE purchases online in the year to come.

In other findings:

  • Consumers’ appetite for mobile products remained strong in 2013, and the mobility trend will continue in 2014 with four of the top five planned purchases this year focused on a mobile lifestyle.
  • In 2014, the top consumer electronics (CE) products U.S. households plan to purchase are smartphones (27%) and over- or on-the-ear headphones (27%).
  • Also among the top planned purchases are televisions (20%); laptop, notebook or netbook computers (18%); and tablets (16%).

“Building on consecutive years of strong, mobile device adoption, consumers continue to embrace a connected lifestyle in the home and on the go,” said Kevin Tillmann, senior research analyst, market research at CEA. “Consumers are now turning to many of the emerging connected products entering the market today, such as smart watches, connected fitness devices and smart thermostats.”

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New head of creative at Lands’ End

BY CSA STAFF

Lands’ End has named Becky Gebhardt as SVP, chief creative officer. Gebhardt was actually VP of creative at the company from 2004 to 2007.

The announcement comes a day after the company, which was recently divested by Sears, named Steven Rado as SVP, chief marketing officer.

Gebhardt will be responsible for developing and implementing global creative brand strategies that focus on digital, retail and catalog, a role that will drive and execute the creative vision that supports the merchandising strategy and marketing campaigns across all channels. In this role she will be responsible for overseeing all aspects of the creative organization including concepts, art direction, photography and creative operations.

"We are very excited to welcome Becky back to Lands’ End," said CEO and president Edgar Huber. "Her experience directing brand and creative efforts for multi-channel businesses along with her focus on the customer experience aligns well with our strategy for future growth. She is innovative and brings a proven track record in leading global creative organizations for businesses our size."

Gebhardt comes to Lands’ End from Crocs and Bag Borrow or Steal. She served as VP, global creative director and VP of creative, PR and online experience, respectively. During her tenure she was responsible for the global brand creative vision and execution in more than 90 countries, customer experience and communications.

"Becky’s creative vision, knowledge of the brand’s heritage and her overall experience across the retail industry will be invaluable as she joins the Lands’ End team to help us elevate and evolve the brand," said Huber.

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CVS ‘solid’ in first quarter

BY CSA STAFF

Despite severe weather-related issues during the first quarter, CVS reported “solid results” across the enterprise and executives expressed optimism in achieving 2014 goals.

“It is unusual to hear us talk about the impact of weather on our business. Historically, it has been our practice to not blame the weather when we explain our results, but this quarter the amount of severe weather was so abnormal that, quite frankly, it is hard not to talk about it,” Larry Merlo, president and CEO, told analysts during Friday morning’s conference call to discuss results. “… While disappointed that the severe weather put a damper on an otherwise excellent quarter, we remain very confident in our outlook for the full year.”

Net income during the quarter rose 18.3% to $1.1 billion, compared with approximately $1 billion in the year-ago period. Adjusted earnings per share for the three months ended March 31, 2014 and 2013, was $1.02 and $0.83, respectively, an increase of 22.5%.

Net revenues for the three months ended March 31, 2014, increased 6.3% to $32.7 billion versus the year-ago period.

Revenues in the pharmacy services segment increased 10.3% to $20.2 billion during the quarter, primarily driven by growth in its specialty pharmacy business, including the acquisition of Coram, as well as drug cost inflation, new clients and new products.

Speaking of the specialty pharmacy business, Merlo told analysts that it remains strong, with revenues up about 34% year-over-year. He noted that the integration of Coram is “going well,” as the sales forces are being aligned and integrated products are being developed.

Merlo also said that the rollout of its new Specialty Connect offering is expected to be completed at the end of the quarter. Specialty Connect is analogous to Maintenance Choice as it connects mail and retail capabilities to provide choice and convenience for members.

“We are positioned to continue to gain share in the fast-growing specialty marketplace as we developed innovative offerings that capitalize on our unique ability to optimize cost, quality and access,” Merlo told analysts.

Revenues in the retail business increased 2.7% to $16.5 billion during the quarter. Same-store sales increased 1.4% with pharmacy same-store sales up 3.8% and front store same store sales down 3.8%. Both front store same-store sales and pharmacy same-store sales were negatively impacted by a weaker flu season in the three months ended March 31, 2014 and severe weather across much of the United States, compared with the prior year, the company stated.

Despite the decline in front store same-store sales, front store basket size improved modestly while front store margins improved notably during the quarter. The increase in total same-store sales was primarily driven by the growth of prescription volumes and brand name drug cost inflation. Pharmacy same store sales include a negative impact of approximately 120 basis points from recent generic drug introductions, the company noted.

Merlo stressed the importance of developing a sustainable front-end strategy and said that, as rivals increased promotional activity, CVS/pharmacy reduced its circular ad blocks year-over-year by about 6%.

“As a result of staying true to our targeted promotion strategy, I’m pleased to say that we saw growth in our average basket size, along with notable growth in our front store margin in the quarter. Of course, we would like to see better front store comps but it is important that we have a sustainable front-end strategy.”

For example, through insights from its ExtraCare loyalty program and its predictive modeling for personalized emails, it has experienced email open rates that two times the industry average and response rates that are five times the industry norm. Furthermore, the CVS/pharmacy ExtraCare Beauty Club is enjoying the impact of personalization as it has engaged 13 million of the company’s best beauty customers, and the members are spending more than twice as much as the average beauty customer.

With regard to MinuteClinic, revenues were up 11.4% during the quarter. There are currently 828 clinics in operation with plans to open at least 150 new clinics this year. Of the new openings, about one-third will be in new markets.

Looking ahead, CVS Caremark confirmed its earnings guidance range for the full year 2014 and expects to deliver adjusted EPS of $4.36 to $4.50 and GAAP diluted earnings per share from continuing operations of $4.09 to $4.23 in 2014. The retailer also continues to expect to deliver 2014 free cash flow of $5.5 billion to $5.8 billion, and 2014 cash flow from operations guidance of $7 billion to $7.3 billion.

“All the ongoing changes that we are seeing in the healthcare environment are certainly creating unique opportunities for CVS Caremark. Our unmatched model in innovative solutions makes us well positioned to capitalize on these opportunities and we believe creates a sustainable competitive advantage,” Merlo told analysts.

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