Spots N Dots
The Daily News Of TV Sales
October 30, 2017

2018 RETAIL OUTLOOK: MORE DEFAULTS COMING

DEFAULT RATE COULD HIT 10%

Fitch Ratings’ outlook for retail defaults next year is generally more of what we’ve seen this year, and perhaps even worse. Fitch’s 12-month trailing retail default rate right after the Toys ‘R’ Us bankruptcy stood at 7.3%, a large increase over the 5% rate seen in the preceding two months. The retail sector accounted for 30% of all the defaults that have taken place during the year, with just six issuers defaulting on debt that totals $5 billion. And Fitch sees those numbers becoming worse next year with defaults amounting to $7 billion, about a 10% default rate.

“Default volume will continue to be concentrated in retail and a couple of energy companies in 2018,” Fitch analyst Eric Rosenthal wrote. “Excluding these two sectors, the 2018 default rate forecast is 1.5%.” That’s below the average default rate of a non-recessionary period which is 1.7%.

The reasons for the trauma in the retail sector are of course well-known, starting with many chains such as Toys ‘R’ Us being saddled with overwhelming debt when being restructured after having been bought. The e-commerce revolution caught many of them unaware, and those that reacted slowly and are now playing “catch up” are falling farther behind. E-commerce has led to dwindling mall traffic and chains that are entirely or primarily mall based have needed to close thousands of stores in the past couple of years, and there’s been a noticeable shift in how people spend their money, generally away from apparel and “things” to “experiential” activities.

CNBC reports there have been at least twenty retail bankruptcies so far this year, some of them large chains including The Limited, hhgregg, RadioShack (for the second time), Gordman’s, and Gander Mountain. Some of them have managed to stay in business after closing much of their physical store footprint while some others have ceased operations entirely. Fitch has a “primary list of concern” and there’s no surprise that Sears Holdings Corp. is on that list. Other retailers of primary concern include Nine West Holdings, 99 Cents Only Stores, NYDJ Apparel, and Vince LLC.

Marketwatch reports Fitch is now keeping a list of secondary loans of concern, identifying likely default candidates. The list includes Neiman Marcus, J. Crew, Talbot’s, Lands’ End, and Cole Haan. It’s also currently monitoring some other debt issuers including PetSmart, Belk, Ascena Retail Group, Tailored Brands (Men’s Wearhouse and Jos. A. Bank), and J. Jill.

Wall Street has not taken kindly to the retail sector’s prospects. Marketwatch reports an exchange-traded fund of retailers has fallen 9% so far this year, in a year where the overall S&P 500 stocks have risen by 14% and the Dow Jones industrial average is up 17%.

ADVERTISER NEWS

J.C. Penney lowered its guidance for full year comp sales, now saying business will be flat at best. It reported heavy discounting during the third quarter to help clear out stagnant inventory in women’s apparel……Burger King joined arch-enemy McDonald’s with strong gains in the third quarter, as new sandwiches were credited with helping to produce a 4% same-store sales gain. But the quarter was tougher for its siblings under Restaurant Brands International—Tim Horton’s was down in its U.S. comps and newly-acquired Popeye’s Louisiana Kitchen fell by 2.6%. Facing increased competition on price, Popeye’s introduced a new $5 meal last month…… Dunkin’ Donuts, trying to transition to a “beverage-led, om-the-go brand” according to QSR, posted same-store growth of 0.6%, claiming the hurricanes held back growth. Its CEO is encouraged that morning sales are growing faster than other dayparts—about 60% of business takes place before 11AM at Dunkin’……Net income fell 10.7% in the third quarter for Buffalo Wild Wings, less of a decline than had been expected. Along with a 2.3% same-store sales drop at company-owned stores and a 3.2% drop at franchises, the chain is battling high raw materials costs: it had to pay $2.16 a pound for wings, a 44-cent increase over last year……Ethan Allen’s retail segment sales were down 7%, although orders written were up 1.7%. It says the hurricanes not only impacted retail stores, but also caused inventory problems for railway shipping and ocean freight arrivals into Houston……Texas-based Conn’s also had big troubles with the storms, losing about 100 store selling days. There’s good news from replacement sales, though, and Conn’s says October comps look to be up about 15% in Harvey-impacted markets……GNC, which had made a slew of changes in its operations earlier this year, returned to positive same-store sales in the third quarter with a 1.3% increase, the third quarter of transaction growth. It also launched a GNC Storefront on Amazon.com and says results are running ahead of expectations……Mattel quarterly sales fell by 13%, prompting the CEO (the third in three years) to announce accelerated cost-cutting and scaled back new product launches. It did claim some of the weakness was unique to the quarter, including the Toys ‘R’ Us bankruptcy and generally tighter inventories from retailers……Lending Tree is enjoying the hot housing market. Revenue from mortgage-related products was up 38% in the third quarter and revenue from non-mortgage activities (such as home-equity loans, personal loans and credit cards) grew by 138%...... Stein Mart announced cost-cutting measures including layoffs and inventory reductions. After seeing negative comps earlier in the fiscal quarter, the CEO said there’s been some recent improvement after starting new marketing initiatives.

NETWORK NEWS

Simon Cowell missed the first live show of this year’s X Factor after being treated in hospital. Cowell was taken to hospital Friday after he reportedly took the tumble in his home, but was photographed giving a “thumbs up” when he returned hours later. “I’m feeling okay. I fainted,” he said.……ABC has given a put pilot commitment to Neighbors of North Sycamore from producer Aaron Kaplan. The project is from Ryan Raddatz (The Crazy Ones) and the show follows a millennial couple who buy their first home only to find out they are living on a block where privacy is a myth, and everyone’s drama plays out 24/7 on the street’s Facebook page. Raddatz has Mr. Erdman, a multi-camera comedy in development at CBS……Jennifer Lopez, fresh off the success of her dance competition series World of Dance on NBC, has teamed up with the network on a scripted series. A Step Away will be a comedy centering on a ragtag group of misfits who find empowerment by joining a dance troupe……Chasers, a new police drama based on Lorenzo Carcaterra’s bestselling novel is being developed as a series by CBS. The project is from Shane Brennan (NCIS: Los Angeles) and Jerry Bruckheimer Television in association with CBS TV Studios. Chasers centers on a renegade vigilante law enforcement unit made up of “broken badge” ex-cops. They unite to bring down the most vicious criminals in New York City……The Fox freshman series The Orville delivered its best rating performance since its second episode of the season. Thursday night’s show averaged a 1.2 Nielsen rating in the adult 18-49 demo and 4.2 million viewers. The delivery was up over 20 percent in both measures compared to its last original episode.….. Televisa CEO Emilio Azcarrage Jean will be stepping down from that post at the end of the year. His decision comes as the network’s programming staple, telenovelas, are no longer drawing massive viewership, rating shares, and ad revenues. In an interview with the Mexican paper El Universal, Azcarrage denied that his decision had anything to do with his health and it has been in planning for a year and a half. Televisa is a major programming provider to Spanish-language network Univision.

COMPETITIVE INFO

Radio and out-of-home advertising owner iHeartMedia has offered creditors a new restructuring deal — but the two sides remain far apart, according to a story in the New York Post. iHeart owes $20 billion, and is trying to avoid bankruptcy through restructuring debt. But the Post says the company could run out of cash in the first half of 2018, and one person close to the talks said, with the current proposal not being well received by creditors, there’s a 75% chance of a court-supervised restructuring.

Another report from the Post over the weekend says iHeartMedia CEO Bob Pittman has been missing from many of the debt meetings. Representative from owner Bain & Lee are taking the lead.

iHeart owns 855 radio stations and countless outdoor products in many markets, including 43 of the top 50.

ACCOUNT ACTIONS

It’s not often a $2 billion media account goes into review, but that’s what McDonald’s spends worldwide and the company is starting its first global media review in 14 years. OMD has had the account since 2003, but the client expects to move from a single global media agency ‘to a small roster of preferred agency brands,” and Adweek says that means OMD will almost certainly lose at least some of the business. Adweek also notes after moving all U.S. media and creative work to Omnicom last summer, McDonald’s is now reviewing relationships with regional creative agencies with an eye towards consolidation.

ECONOMIC NEWS

Gross Domestic Product rose more than had been expected in the third quarter, despite the impact of hurricanes Harvey and Irma. GDP rose 3% after a 3.1% increase in the second quarter, creating the best six-month period in three years and offering continued optimism about the fourth quarter and the start of 2018. The Commerce Department report said it’s likely the storms cut into oil and gas output in Texas and agriculture in Florida but added “it is not possible to estimate the overall impact of Hurricanes Harvey and Irma on 2017 third-quarter GDP.”

BUSINESS BYTES

Nike is planning on doing something unusual—firing most of its retailers. According to the Portland Business Journal, CEO Mark Parker told investors the company will cut back the number of retailers it works with from about 30,000 globally to just 40 (without identifying the selected 40 chains). Chain Store Age says Nike is betting on its “Triple Double Strategy” for future growth, increasing the speed of product creation, manufacturing, and delivery for all areas of the business. CSA also notes the key to the strategy is a renewed focus on direct-to-consumer retail, either online or in its own retail stores.

POWER: OCTOBER AUTO RETAIL STRONG

Final October retail automotive sales will be strong according to the monthly projection from J.D. Power and LMC Automotive, which calls for dealer sales of 1.071 million units and total industry sales of 1.320 million. Replacement sales brought about by the two hurricanes played a large part in bringing about the numbers—sales is the Southeast region which includes Florida are up 5% while the South Central region that includes Texas has started to slow down in replacement sales but still grew by 3%.

Estimates from Kelley Blue Book and Edmunds suggest share gains for Ford, Toyota, Volkswagen and Honda with share losses coming for Fiat Chrysler, Hyundai-Kia and Nissan. KBB estimates General Motors will gain a half point of market share, but Edmunds says GM will lose 0.7 share points.

THIS AND THAT

Sears is bringing back its holiday Wish Book catalog, first issued in 1933 but not published since 2011. There will be no mass mailing as had been done in the past— instead the 120-page catalog will have mobile and online versions and be accessible through the Sears app. Some Shop Your Way members will receive a limited edition in the mail, while others will receive an email inviting them to pick up a copy at the store.

AVAILS

New Media Digital Advertising Specialist - Raleigh, NC: The Digital Advertising Specialist will manage the media buying and execution for a number of different clients and campaigns within multiple divisions of Capitol Broadcasting Company. The ideal candidate will have 1-2 years of digital ad operations experience, preferably in an agency setting. All candidates must CLICK HERE to get details or apply. EOE M/F. All Capitol Broadcasting Company properties are tobacco free. Capitol Broadcasting Company participates in E-Verify.

WNCN, Nexstar’s CBS affiliate in one of the fastest growing DMA’s in the country, Raleigh-Durham-Fayetteville has an opening for a digital sales manager. This person directly oversees the daily operations of the station’s internet advertising business and interacts with clients and advertising agencies to maximize website revenue. The Digital Sales Manager also assists in hiring, training and developing AEs. Minimum three years’ experience in sales, preferably in the digital field, required. Get more details or apply now at http://www.nexstar.tv/careers/. EOE M/F/V/D Background check required.

Small privately-held broadcast company is looking for a progressive and hands-on Director of Sales who is not afraid of change and is willing to roll up his/her sleeves to get the job done. Our right candidate will be an experienced sales manager who likes to be actively involved in all facets of the sales operation. GSM experience preferred however experienced LSMs looking to move into the DOS role are also welcome to apply. Send resume, cover letter and salary requirements to . All inquiries will be held in the strictest confidence. EOE.

WDIV-TV/ClickOnDetroit the Graham Holdings owned NBC affiliate in Detroit, MI seeks a dynamic, enthusiastic and results oriented Account Executive. The AE must maintain and grow a core account list and develop new station business. The ideal candidate must be able to develop new revenue for our properties through projects and special promotions from broadcast, online, mobile, and cross platform campaigns. Experience with Wide Orbit, and a college degree preferred. To apply, please send resume to Gary Macko VP Sales/General Sales Manager: . EOE.