Retailers stand to benefit from Made-in-America wave
Walmart recently announced that it would source $50 billion of the products sold in its stores in the United States over the next 10 years, according to a report in USA Today.
"Be American; buy American" has long been a slogan that makes buying U.S.-made goods sound nothing less than patriotic because it helps create American jobs, much like CVS’ and Walmart’s initiative to create jobs for veterans, and the recent Made-in-USA fervor around the country has more than demonstrated that. But there are practical reasons for sourcing domestically as well, making it high time for retailers to start looking into putting more products with the "Made in USA" label on their shelves.
While USA Today reports on the trend, trade publications in a variety of industries — including Drug Store News and sister magazine Home Channel News — have made a big deal about it too, and for good reasons.
For the last few decades, more and more companies have offshored production to countries like Mexico and China in order to meet American consumers’ demand for cheaper goods. But while this has made a variety of goods easier to buy here, it has also contributed to the country’s yawning trade deficit and contributed to a lack of high-paying manufacturing jobs, and a growing number of economists have said the United States needs to boost exports in order to revive its economy in a meaningful way.
Now, the march of manufacturers out of the country’s front door is reversing itself in a trend that some economists have called "reshoring." A report in November by the Boston Consulting Group found that 80% of American consumers would be willing to pay more for products made here than for those made in China, as would 60% of Chinese consumers.
But it’s not just about patriotism – it also makes economic sense. Fuel costs that drive up the cost of transportation, the weak dollar and increasing labor costs in countries like China are making it more and more affordable to make products here. In fact, the BCG found that "reshoring" could create 2.5-5 million new U.S. jobs in manufacturing and related services by the end of the decade.
Another reason is the widespread perception among consumers in the United States and abroad that US-made goods are of higher quality; according to the BCG, 85% of American consumers share that perception, as do 82% of Chinese consumers. Meanwhile, The Washington Post reported in September 2012 that Costco had seen significant foot traffic at its stores in Mexico due to consumers there who wanted US-made goods, which they saw as having superior quality.
With a growing number of Americans looking to buy American, it only makes sense for retailers to take advantage of their sentiments. In addition to Walmart, online retailer Shop & Buy American Made bases its whole business off of the Made-in-USA concept, as does clothing retailer American Apparel. Retailers of all stripes — including pharmacy retailers — are in a prime position to do the right thing for this country and help spur the creation of more American jobs, and if BCG’s findings are anything to go by, it’s a win for their bottom lines, too.
Beiersdorf ‘on track’ in 2012
HAMBURG, Germany — Global beauty company Beiersdorf — whose brands include Nivea, Eucerin and La Prairie — reported that it saw “consistent growth in 2012.”
The company’s sales rose by 4.7% in organic terms in the past fiscal year, according to preliminary figures. In nominal terms, sales increased by 7.2% to 6.04 billion euros (U.S.$8.05 billion) from 5.63 billion euros. Organic sales in the consumer business segment increased by 4.9%. Its tesa business segment generated an organic sales increase of 3.6%. The EBIT margin guidance of around 12% is confirmed.
“On the whole, we are satisfied with 2012. We can see that we are on the right track with our ‘Blue Agenda’, our strategic compass. We have strengthened our Nivea core brand and gained market share in many countries. Both the consumer and tesa business performed well, in particular in the emerging markets. In addition, we significantly improved our innovative capabilities. These are important first steps on the road to a successful economic future for Beiersdorf. It is important that we hold our course in the coming years and systematically continue the change process we have started,” stated Stefan Heidenreich, CEO of Beiersdorf AG.
The consumer business segment increased organic sales by 4.9%. In nominal terms, sales rose by 7.5% to 5.05 billion euros (previous year: 4.70 billion euros). The company stated that its three core brands — Nivea, Eucerin, and La Prairie — showed an encouraging performance.
P&G posts 2Q results, raises fiscal year outlook
CINCINNATI — Procter & Gamble posted a boost in sales and earnings for the second quarter and raised its outlook for the fiscal year, the company announced on Friday.
“Our second-quarter results were at the high end of our expectations on the top line and well ahead of forecast on operating profit, earnings per share and cash flow,” stated Bob McDonald, chairman, president and CEO. “Global market share trends improved as we continued to implement our growth strategy and made very good progress against our productivity and cost-savings goals. Our strong first-half results have enabled us to raise our sales, earnings and share repurchase outlook for the fiscal year, while we strengthen investments in our innovation and marketing programs.”
Diluted earnings per share were $1.39, an increase of 144% as core earnings rose 12% to $1.22. Noncore items include restructuring charges of 5 cents per share a 21 cent per share holding gain resulting from P&G’s purchase of the balance of the P&G’s baby care and feminine care joint venture in Iberia, which was completed in October.
Net sales totaled $22.2 billion, an increase of 2% compared with the year-ago period, including a negative 1% impact from foreign exchange. Organic sales grew 3%.
P&G increased its core earnings per share guidance for the year to $3.97 to $4.07, up 3% to up 6% versus prior year core EPS of $3.85, behind strong productivity improvement and resulting cost savings. P&G also raised its all-in GAAP earnings per share guidance to a range of $4.04 to $4.14, equating to growth of 10% to 13% versus prior year GAAP EPS of $3.66. The increase reflects higher core earnings and an increase in the noncore holding gain resulting from P&G’s purchase of the balance of our Baby Care and Feminine Care joint venture in Iberia. The all-in EPS range also includes noncore restructuring charges of $0.15.
P&G increased its organic sales growth guidance to a range of 3% to 4% for the fiscal year from a previous range of 2% to 4%. Foreign exchange is expected to reduce sales growth by 2%, resulting in guidance for all-in net sales growth of up 1% to 2% versus the prior year.
The company also increased its outlook for share repurchase to $5 billion to $6 billion, up from a prior range of $4 billion to $6 billion.