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Industry News - August 13th 2010



CVS to Roll Out Cost-Saving Customer Personalization Chainwide

CVS will expand a personalized recommendations program that is based on both customers' multi-channel interactions and their personal and health data to all its retail stores by the end of this year. The retailer's Pharmacy Advisor program is powered by its Consumer Engagement Engine, which pulls data from all customer touchpoints across CVS' channels to create a complete portrait of each customer's prescription purchases and usage behavior. It then generates recommendations using a clinical rules engine to support decisions on what is best for patient care.

CVS executives say the Pharmacy Advisor program has already generated cost savings for customers through its use in CVS' mail facilities and call centers, in place since the program's introduction last year. Now, the program is moving into the retail arena at full speed. The retail component has been in a pilot phase, but CVS executives announced in a conference call on July 28 that it would be expanded to CVS stores chainwide by the end of 2010.

During the call, CVS Caremark CEO Tom Ryan said the Pharmacy Advisor program is "generating clinical messaging and cost savings for clients and members. We are excited about the rollout to retail and it has certainly generated a fair amount of enthusiasm from our clients."


Macy's Boosts Same-Store Sales Nearly 5% in Q2; Online Sales Climb 28%

Crediting factors including more localized merchandise assortments, disciplined inventory management and development of its private label brands, Macy's Inc. reported strong financial results for the quarter ending July 31. Sales of $5.537 billion were 7.2% higher than the $5.164 billion in sales for the same period last year.

The crucial same-store sales metric was also positive for the retailer, which operates 850 department stores in 45 states under a number of banners. Same-store sales rose 4.9% in the second quarter; year-to-date, they are up 5.2%.

Macy's forecasts same-store sales will be up in the range of 3% to 3.5% for the second half of its fiscal year, resulting in same-store sales increases of between 4% and 4.2% for the full fiscal year. The company's initial guidance for fiscal 2010 same-store sales increases had been 1% to 2%; that forecast was raised to 3% to 3.5% at the end of the first quarter, reflecting improvement in business trends.

Higher online sales, which are included in same-store sales calculations, also contributed to the retailer's strong quarter. Sales at macys.com and bloomingdales.com were up 28.1% for the quarter and 31.0% for the first half of the year.

"Our performance reflects a number of strategic initiatives that are working successfully and complementing each other," said Terry J. Lundgren, Macy's chairman, president and CEO. "This includes My Macy's localization of merchandise assortments, centralization of key Macy's organizational functions, customer centricity activity, continued development of private brands, introduction of new exclusive market brands, improvement in associate selling and service skills, and integration of stores and online channels at Macy's and Bloomingdale's."

The company opened no new stores in the first half of the year, but it plans to open two in California in the second half of 2010, as well as a new Bloomingdale's store in Santa Monica, CA as well as four new Bloomingdale's Outlet stores, as previously announced.


Target Boycott Campaign Goes Viral, Quickly Hits 52,000 on Facebook

In a stunning display of the power of social media and the perils of political donations in today's social media-saturated world, Target became the object of a "Boycott Target" campaign that has attracted more than 52,000 Facebook supporters in a little over a week.

The retailer had donated $150,000 to Minnesota Forward, a pro-business political group that supports Republican Tom Emmer, an opponent of same-sex marriage, for governor. This year's Citizens United decision by the U.S. Supreme Court has loosened previous restrictions on political donations by corporations.

An article about the donation appeared on the web site Gayrights.change.org on June 25, but the protests really picked up steam when progressive advocacy group Moveon.org drew attention to Target's donation with an email to members on August 2nd. Moveon.org placed a note on the retailer's Facebook page that said "Boycott Target Until They Cease Funding Anti-Gay Politics."

The reaction has been swift in both cyberspace and the physical world. By August 10, the "Boycott Target" Facebook page had gathered 52,632 supporters. Protests took place at Target stores, and more are planned for Saturday, August 14.

Another Minnesota-based retailer, Best Buy, also contributed to Minnesota Forward. By August 10, a "Boycott Best Buy" Facebook page had attracted 5,781 supporters.

The speed and size of the protests reflect the growing power of social media. In August 2009, Whole Foods CEO John Mackey came out against the then-pending health care overhaul in a Wall Street Journal op-ed piece. At that time, it took nearly three weeks for the "Boycott Whole Foods" page on Facebook to attract 33,000-plus supporters.

Gregg Steinhafel, Target's chairman, president and CEO, posted an apology letter on the retailer's web site on August 5 that read in part: "The intent of our political contribution to MN Forward was to support economic growth and job creation. While I firmly believe that a business climate conducive to growth is critical to our future, I realize our decision affected many of you in a way I did not anticipate, and for that I am genuinely sorry."

The letter also promised a review of the company's decision-making process for financial contributions in the public policy arena. The company has been known for its support of the LGBT community, including providing domestic partner benefits and support for Twin Cities Pride.


Target to Roll Out 'Bullseye Mobile' Wireless Kiosks

Wireless kiosks offering cell phone service will begin rolling out to selected Target stores beginning August 15, with plans to have kiosks in the majority of Target stores by mid-2011. The rollout follows a pilot program in 100 Target stores that was conducted this summer by Radio Shack, but the "Bullseye Mobile" kiosks will not carry any branding from Radio Shack.

The Target kiosks expand a business model that Radio Shack had developed with Walmart's Sam's Club warehouse stores, where it has operated more than 400 in-store wireless kiosks since 2004.


Is Anyone Good Enough for HP?

To whom much is given much is expected. This Biblical phrase comes to mind when thinking about the sudden departure last week of Mark Hurd as CEO of HP. According to widely published reports about his departure it came about NOT because of a sexual harassment suit, which has been settled by Hurd, but because of improperly filled out expense reports.
OK. Fudging financial reports can be a serious corporate offense, even a criminal offense. But HP states the dollar amount was somewhere in the $20,000 range. With money like that Hurd could have gone out and almost bought a Mini Cooper.
Hurd has called the experience "surreal." He built HP in five short years into the largest technology company in the world, surpassing IBM, which had been number one since IT was invented. His compensation is in the tens of millions of dollars, and his severance is estimated to be around $35 million.
Getting forced out for improperly reporting $20,000 is not only surreal but it is damaging to HP's stock valuation, which has been battered since Hurd resigned.
Hurd brought a steady hand to HP after years of turmoil with it's last two CEOs -- Carly Fiorina, who was forced to resign in 2005 after leading HP through a merger with Compaq and years of constant upheaval, and Patricia Dunn, who was forced to resign in 2006 after using improper methods to investigate board leaks.
But even though $20,000 is a small amount to Hurd and HP, the truth is the dollar figure is not the issue. Trust was broken between Hurd and the board, and the HP board has proven to be tough on its CEOs. Something Hurd was aware of when he accepted the job.
Even more importantly, during Hurd's tenure he carried out a board mandate to restore the company's reputation for corporate governance. As a result many HP employees were dismissed for violating company policies that would have been dealt with more leniently prior to Hurd's arrival.
So, the big question now for HP is who will be the next CEO? The Wall Street Journal reports HP is looking to external candidates, but I know of an excellent internal candidate the HP board would be smart to consider -- Randy Mott, HP's EVP and CIO. Mott is a superstar in the IT world, having done groundbreaking work at Walmart and Dell prior to joining HP. Over the last few year's Mott has undertaken a massive transformation of HP's IT infrastructure, reducing data centers, legacy applications and IT staffers devoted to keeping the lights running, a philosophy he is synonymous with.
But would Mott really want to change his current position for the top job at HP? It all depends on when he is planning to retire. If it's just a few years from now then it could be a perfect solution for what has become a short-term job.


CVS to Install 700 DVD Rental Kiosks in Stores this Year

Beginning this quarter, CVS customers will be able to pick up a DVD with their Rx. The drugstore retailer will begin a national rollout of the redbox self-service DVD rental kiosks this quarter, with 700 installations at CVS/pharmacy stores expected by the end of the year.

The chainwide rollout, which will include CVS stores in Puerto Rico and Longs Drug locations in Hawaii, is expected to be complete by the end of 2011. This is the first time CVS will offer DVD rental services, and it represents a significant expansion into the drug channel for the redbox kiosks.

Redbox Automated Retail, a subsidiary of Coinstar, will operate the self-service kiosks, each of which holds 630 discs representing up to 200 titles. Customers use a touchscreen to select a movie and pay with a credit or debit card. They can also visit www.redbox.com to select their movie online or via the iPhone app from redbox. Discs can be returned to any redbox kiosk.


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