In The Headlines

Small Toy Makers Struggle to Adjust to the Toys R Us Bankruptcy

Retail ApocalypseRoger Dreyer almost had the chance of a lifetime. His Fantasma toy company’s Nuclear Neon Slime was going to get the sweet spot of being in the checkout lane of Toys R Us stores across America. Then word came that the toy store chain was on the verge of going out of business. And “that chance ended as quickly as it started,” Dreyer said. The Toys R Us announcement that it intends to liquidate and potentially close its remaining 735 U.S. stores is a blow to major toy makers. But it’s the small companies, like Dreyer’s, that will get hurt the most.

Toy making giants Mattel and Hasbro counted on Toys R Us for a sizable chunk of their sales. But smaller brands often got a game-changing amount of exposure when they were featured on the shelves of the chain, which had the space and year-round focus to promote lesser-known playthings. “They were the one bastion where you could show the full line of your products at bricks and mortar and it’s going to be a shame to see them go,”’ says Neil Friedman, CEO of Alex Brands, a toy company based in Fairfield, NJ.

While Toys R Us is one of several retailers to carry his products, Friedman says that chain’s disappearance will take a much heavier toll on many of his peers. “There are many small companies that have gotten their start from Toys R Us and a very big part of their business was there. It will be very difficult.”

Walmart and Target, the other key players in the toys space, along with Amazon, are more likely to stock up on top-selling gadgets and action figures than to take a chance on new products, says Ray Wimer, a retail professor at Syracuse University. “They’re only going to carry the best-selling toys and games,” he says. “They’re not going to experiment. So losing Toys R Us for the small toy manufacturer is a big hit for them.”

Fantasma Toys, a 17-year-old New York City-based company that specializes in magic products along with remote control spiders and various slime concoctions, sells its play items in a range of stores including Target, Kmart, and Learning Express. But Dreyer, the company’s head, says Toys R Us gave him a wider berth, featuring seven of his products as compared to other retailers that just sold two or three.

“We’ve all supported them with the hope they’d be able to pull out of their bankruptcy,” Dreyer says of his fellow toy makers. Now that Toys R Us is not likely to survive, some of his peers are looking to smaller, independent retailers to step into the void. “But the problem with the independents is that they are very demanding,”’ he says, “and are sometimes slow to pay the bills. So it will take a lot of these independent stores to make up for an 800-store chain.”

But there may be good news for some. Dreyer says that in recent days, he’s been approached by two large retailers that are now looking to expand their selection of toys and are interested in featuring Fantasma products. “Toy companies like us are going to be hurt for a short period,” he says. “But there are a lot of retailers that are now looking to capitalize on Toys R Us’ demise.”

Citations                     

  1. https://usat.ly/2DvXmd7 – USA Today
  2. http://cnb.cx/2pfVtNeCNBC

Are Batteries Now on a Trajectory to Replace Fossil Fuels?

Casinos and MillenialsThree weeks ago, a U.S. agency sent the clearest signal yet that fossil fuels’ days are numbered. It is true enough that the carbon-burning economy has been declared to be on its death bed many times before, but this came with a time frame related to the ultimate killer: the battery. The Federal Energy Regulatory Commission ruled that so-called energy-storage companies such as Tesla Inc. and AES Corp. can compete against traditional power plants in U.S. wholesale markets by the end of 2020. “This is a watershed event,” said Joel Eisen, an energy law professor at the University of Richmond, not unlike the time when regulators opened up the telecommunications market in the 1970s with rulings that ushered in the digital age by giving computers fair access to phone lines.

Batteries, once relegated to powering small devices like remote controls and watches, are now poised to energize the things most central to daily life, from smartphones to cars to entire homes and offices—and Big Oil’s taken notice. At CERAWeek by IHS Markit—an annual conference that has drawn some of the largest names in the world of fossil fuels to Houston this week—executives met to talk batteries, not once, but twice. “The question is no longer if batteries will disrupt the power sector,” IHS wrote in a description of one of the discussions, “but rather how much and how fast?”

It has long been discussed that the ascent of lithium-ion batteries—which are durable, energy-dense and easy to recharge—would mark the beginning of the end of the fossil-fuel age. As it is, electric cars being made by the likes of Tesla, General Motors Co. and Warren Buffett-backed BYD Co. have replaced gasoline tanks in more than 3 million cars on the road globally. Predictions are that battery-fueled electric cars will outsell those that run on gasoline by 2040. Based on one estimate from Bloomberg New Energy Finance, that will wipe out 8.5 million barrels of transportation fuel demand a day.

Now the advance of batteries into power markets threatens the reign of natural gas, which at the moment generates about a third of U.S. electricity. In California and Arizona, utilities including PG&E Corp. and Pinnacle West Capital Corp. are abandoning gas plants in favor of renewable energy projects. These solar and wind farms can now use energy storage systems to stash their power and unleash it as needed. “Batteries are like bacon,” Vibhu Kaushik, director of grid technology and modernization at utility Southern California Edison, said at CERAWeek. “They just make everything better.” The Brattle Group has estimated that the energy commission’s recent ruling could help unleash as much as 50 gigawatts of battery-stored power into U.S. markets, enough to light up 6 million homes. Over the next five years, growth in energy storage will be “more exponential, than linear,” said Alexandra Goodson, who works for the battery maker Saft.

The battery-storage revolution is not just around the corner. Lithium-ion pack costs will need to halve again from today’s levels for electric cars to fully compete with gasoline-burning ones, said Albert Cheung, head of analysis for Bloomberg New Energy Finance. Manufacturing will need to ramp up, as well as the production of raw materials needed for the batteries. The technology also still relies on policy mandates and incentives in most markets. That said, prices are a fifth of what they were eight years ago. And they are projected to keep falling. Battery costs are expected to drop below $100 per kilowatt-hour, making electric cars competitive on price by 2025.

Oil and gas companies and utilities alike are already forecasting exactly when energy storage will take hold in cars and on the grid. BP Plc sees oil demand peaking in the 2030s as hundreds of millions of electric cars hit the road. The chief executive officer of oil and natural gas giant Total SA said at CERAWeek that he’s already driving an electric car.

“We’re reaching an inflection point,” said Steve Westly, founder of sustainability venture-capital firm Westly Group and former controller and chief fiscal officer for the state of California. “In the future, people will talk about energy in terms of kilowatts per hour instead of oil per barrels.” Scott Prochazka, the chief executive officer of CenterPoint Energy Inc., is less certain. “I don’t see it becoming a replacement,” Prochazka said. “I see it as a great technology—I don’t see it as a solution.”

Citations                     

  1. https://bloom.bg/2FDJFxK – Bloomberg
  2. http://bit.ly/2CCupMa – The Brattle Group

The Good News Is . . .

Good NewsThe Consumer Price Index (CPI) and the core CPI both managed only 0.2% increases with the year-on-year rates at 2.2% overall. The year-on-year increase for core CPI was only 1.8%. Transportation costs held down prices in February with the component unchanged following a strong gain in January. New vehicle prices fell 0.5% in the month with used car prices down 0.3%, both echoing flat consumer demand for vehicles. Communication costs were also weak with wireless telephone services down 0.5% in the month. Medical care fell 0.1% and recreation remained flat. Apparel and housing rose in the month. Consumer prices are not risking extra vigilance from the Federal Reserve.

Williams-Sonoma Inc., a specialty retailer of high-quality products for the home, reported earnings of $1.68 per share, an increase of 8.4% over year-earlier earnings of $1.55 per share. The firm’s earnings topped the consensus estimate of analysts by $0.07. The company reported revenues of $1.68 billion, an increase of 6.2%. Management attributed the results to positive comparable brand revenue growth in all brands, including Pottery Barn and Williams Sonoma, and accelerated e-commerce revenue growth.

Encompass Health Corp., a national leader in post-acute care, announced it entered into a definitive agreement to acquire privately owned Camellia Healthcare and affiliated entities. Camellia Healthcare operates a portfolio of home health, hospice and private duty locations in Mississippi, Alabama, Louisiana and Tennessee. The Camellia Healthcare acquisition enables Encompass Health to leverage its home health and hospice operating platform across key certificate of need states and to strengthen its geographic presence in the Southeastern United States. Upon completion of this transaction, Encompass Health, the fourth largest provider of Medicare-certified skilled services in the country, expects to become one of the top 25 largest hospice providers in the country as its hospice service line continues to exhibit strong growth.

Citations

  1. https://bloom.bg/2eVhfSb – Bloomberg Economic Calendar
  2. http://cnb.cx/2lwnm3s – CNBC
  3. http://bit.ly/2FUCzFh – Williams-Sonoma Inc.
  4. http://reut.rs/2pkTHe7 – Reuters

Planning Tips

Financial Strategies to Prepare for Retirement

Estate PlanningTime seems to move quickly when you are saving for retirement. In your 30s retirement felt like a lifetime away, but when you celebrate your 50th birthday you need a healthy nest egg to retire comfortably in the coming 15 to 20 years. But what if your balance is a little lean? What if your dream is to travel or spend time with grandchildren instead of work? There is still plenty of time to save. It is not too late to retire with enough money to make you feel comfortable as you exit the workforce, but it will probably involve looking for ways to save, upping your contributions, and looking for higher returns. Below are some strategies you can use to achieve your savings goal. Be sure to consult your financial advisor to determine what is best for your situation.

Get Rid of Your Debt before Retirement and Rein in Expenses – Looking at saving and investing strategies is important, but debt, especially high-interest-rate credit card debt, could wipe out any investment gains. You should not use your retirement savings to pay off debt, but how can you rein in spending to get to a debt-free lifestyle long before retirement? Do not accumulate assets only to give it all back in debt payments. You have to spend less to gain more. One of the best ways is to downsize. That giant home you are living in with all the bedrooms? Sell it and get something that fits an empty-nest lifestyle while still leaving room for the kids and grandkids to visit.

Make Catch-Up Contributions – The Internal Revenue Service (IRS) puts limits on how much you can contribute to your tax-advantaged retirement accounts each year. In 2018 you can put up to $18,500 into your 401(k). This includes employee salary deferrals along with after-tax contributions to a Roth IRA within your 401(k). This is the total for all 401(k) accounts, not a per-account limit. However, the IRS allows you to contribute an extra $6,000 as a catch-up contribution if you are age 50 or older, bringing the total to $24,500 for 2018. Unlike so many IRS rules, the catch-up rule is as simple as it sounds. If you are 50 or older you can catch up on funding your retirement accounts. You may contribute up to $5,500 to your individual retirement accounts (IRA) in 2018, with a catch-up contribution of $1,000 if you are 50+, for a total of $6,500. There may be other IRS rules concerning contributions that apply to you, but you should aim to contribute the maximum each year if you’re behind.

Up Your Risk – It is not hard to find advice encouraging you to dramatically lower your risk level in your investments as you get to your 50s, but most planners believe that is too early to retreat to predominantly low-risk assets, such as bonds and cash instruments. You can only up your contributions so much; however, combine that with higher rates of return on what you have and you will move much closer to your goals. If upping your risk profile keeps you awake at night, though, the strategy might not be for you. Talk to a financial advisor and get an opinion on how you can tweak your portfolio for higher returns.

Understand Social Security – Social Security is not easy to wrap your brain around, so start with this. The longer you can delay taking it, the greater your monthly checks will be. Although you can file for benefits at age 62, waiting until 66, the Social Security full retirement age for the current generation of retirees, will increase them by one-third. Waiting longer raises the amount even more, until you reach age 70, when you must start taking benefits.

Consolidate Accounts – If you switched jobs at least once in your career, you might have multiple 401(k) plans with as many providers. Consolidate them into one account for easier management. There are plenty of options, including consolidation into an IRA. Talk to a financial advisor about the best way to get all or most of your retirement assets under one roof.

Citations

  1. http://bit.ly/2IjEu4I – AARP
  2. http://bit.ly/2p1GNBe – US News & World Report
  3. http://bit.ly/2FJLFEW – Investopedia
  4. http://bit.ly/2FpSRqk – com
  5. http://bit.ly/2FpPPT8 – US Dept. of Labor