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Advertiser Tidbits for the week of 8/30/04

Automotive:

• General Motors pulled the Corvette spot it had been running during the Olympics, after receiving complaints about having an underage boy driving the car.
• Certified used car sales remained strong in July, up 4.1% from a year ago. General Motors’ certified program is the most successful, selling 11.5% more vehicles than in July 2003. By the way, GM denies that it is having any trouble with declining dealer orders for its 2005 models. CEO Rick Wagoner says “I don’t really think we had a lot of problems with ‘05 orders at all.” But he did acknowledge that inventories of 2004 models were higher than normal.
• Toyota is ramping up production of the Prius, which has been a big hit here in the U.S. While the fact that it is a hybrid is part of the reason for its popularity, it also looks unlike other cars. So, it’s become a “fashion statement,” an indication that the owner cares about the environment. The Honda Civic, also a hybrid, has not sold as well, say analysts, because it looks just like the regular Civic.
• Just as Ford has cut back on its Blue Oval program, Lincoln plans to reduce dealer bonuses by about one third, according to Automotive News. The average bonus per car drops from $1200 to $800.
• General Motors has told the supplier that makes the new Hummer2 SUV to cut back on production because of slowing sales.
• Toro says it’s on track to deliver the best yearly profit ever. Sales in its residential segment were up 11.8% over last year. And since that’s based on sales to the trade, not sell-through to consumers, snow throwers were a big part of that growth.
• Analysts says that August auto sales have slipped because of the effects of Hurricane Charley and the growing ineffectiveness of incentives. “Certainly a lot of the Florida consumers who were in the market to buy vehicles are now on hold,” says Mark McCready of CarsDirect.com. Some are saying that production cutbacks are in the works but an analyst for JP Morgan Chase speculates that “Automakers will opt to raise incentives in the near-term and postpone any painful production cuts.”
• The Detroit News reports Honda is considering another hybrid model, this one a gas-electric light truck.

Retailing:

• Wal-Mart has cut its estimates for August same store sales to flat to +2%. Damage to some stores from Hurricane Charley was a factor in the move.
• No one doubts major changes will come at the spun-off Mervyn’s chain, but a retail consultant in California says any decisions about store closings will likely be held off until after the holiday season. “They should have a much better grasp of changes that need to be made” by then, the president of Retail Management Consultants said.
• S&K changed agencies earlier this month, and this may be why: after a 12.9% same-store increase in the first quarter, comps were down 4.3% in the second quarter. Zimmerman’s first campaign for the chain is expected to start in October.
• Ultimate Electronics is having a really bad year. Comp store sales for its latest quarter were down 9%. The company had hoped its turnaround strategy would lead to break-even results by the end of the year, but now says that’s not achievable.
• PetMed Express, the online supplier of pet supplies and medications, reported an 18% decline in new customers during the most recent quarter, a fact it blamed on buying less television advertising because of rising costs of the medium.
• Mercury hopes to change its image with a new round of TV spots that define the brand as attractive to smart women. The new tagline, “News Doors Opened,” is the 12th slogan the nameplate has used over the last 25 years. Mercury sales fell 23% last year, and are down 1% through July.
• Gottschalks says it improved its financial results in the second quarter, but same store sales were still off 1.3% and total sales down 2.8%. Inventory is in better control, says the company, putting it in a better situation for the holiday season.
• Mattress retailers had a good 2003; industry revenues rose 11.7%. Select Comfort was the largest seller, followed by Houston-based Mattress Firm. Third place went to New York’s Sleepy’s, but in fourth place, Sam’s Club edged by Federated Dept. Stores which held that place last year.

Drug Store & Supermarket Chains:

• Supermarket chain Penn Traffic expects to emerge from bankruptcy this fall. It has been in Chapter 11 since May, 2003.

Fast Food & Restaurant Chains:

• Sonic Corp., with over 2,800 owned and franchised restaurants around the country, plans to boost its ad spending to $120 million in 2005, up from this year’s $110 million. Cable network spending will double to $60 million, according to the company. The chain says same store sales have remained above the projected +2% to +4% increases this quarter. Approximately 185 to 190 drive-ins are expected to open this quarter.
• Brinker International admits that its Chilli’s Grill and Bar chain is not performing up to its expectations. While same store sales are still positive, up 1.7% in the latest quarter, competitor Applebee’s reported a 6.3% increase in the same period. According to Brinker, the differences between the “customer experiences at our brands and our competitors have narrowed over time. We will spend most of the fiscal year instituting a number of initiatives with the sole intent of getting closer to the customer and driving traffic.” Still, the company says the turnaround will take time, and it expects same store sales to be up only 1% to 3% in fiscal 2005.
• Applebee’s says that August same store sales have slowed to a +1.6% rate. The company says Hurricane Charley, the Olympics and one fewer week of advertising have eaten into their comps. Same store sales for the quarter are still up 3.5%.
• Quiznos is switching from Coke to Pepsi after 23 years with the former.

Telecommunications:

• AT&T, AT&T Wireless, and Cingular have reached an agreement they hope will “minimize customer confusion” when Cingular absorbs AT&T Wireless later this year. Cingular will retain certain licensee rights to the AT&T brand for six months following the takeover. At that point, it’s expected it will have changed all AT&T Wireless customers and assets to the new brand, and will give up rights to any AT&T brand usage. And then, what’s left of AT&T will be free to re-enter the wireless business as has been speculated it’s likely to do.
• In other telecom news, companies wanting to be in the VoIP business are looking for alliances. Vonage has teamed with Staples, which will sell the necessary devices to get started, and Best Buy will sell AT&T’s CallVantage service.
• In the latest deal regarding the exploding VoIP telecom segment, AT&T has made a deal with Amazon.com to sell its CallVantage plan.

Other Categories:

• Heinz quarterly profit was down year-to-year, but that’s mostly from the spin-off of several brands to Del Monte last year. New products, especially from its Ore-Ida brand, drove good sales growth.
• Wise Foods is introducing Wise Choice, an all-natural, reduced fat line of snacks. Wise is distributed in 20 states on the Eastern seaboard.
• Miller Brewing’s new quasi-political ads aren’t everyone’s favorites, but they have resulted in a 15% increase in sales for Miller Lite and a stabilization of sales for Miller Genuine Draft.
• The International Council of Shopping Centers cut back its estimate for August growth from the previous 4% to about 2.5%.
• Boston Beer told analysts it’s cutting back on profit estimates for the year, but that’s because it wants to fund expanded TV advertising that “will have a positive impact on our long-term results.” Samuel Adams Lager and Sam Adams Light will be the brands to see bigger spending.
• The National Diary Council is getting together with WebMD Weight Loss Clinic to promote a diet that includes 3 servings of dairy products a day. TV spots supporting the diet launch this week.
• Holiday Inn is returning to TV advertising for the first time in two years, with a campaign created by Fallon.

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