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November 17, 2017

Publishing News

Meredith Makes $17 to $20 A Share Bid for Time Inc.
WSJ reports that Meredith Corp. has made a bid for Time Inc.--specifically, an offer in the range of $17 to $20 pre share, which would value Time Inc.'s equity at nearly $2B. Following the NY Times's report yesterday that Meredith had lined up financial backing commitment from the conservative billionaire Koch brothers, Time Inc.'s stock jumped 28%, to $16.20, valuing the company at $1.6B. "Members of Time Inc.’s board have received the offer and have begun discussing the matter," according to one knowledgeable source... "If successful, Meredith would gain access to the company’s 139 million monthly unique visitors in the U.S. across all of Time and its growing online video business. Non-magazine revenue sources at Time Inc. are expected to reach $1B this year. Meredith would also have to assume Time Inc.’s long-term debt of about $1.2B." NY Post: "'“If the speculation regarding the Koch brothers is accurate, you have a better chance that they keep most of the assets,' said one Wall Street analyst. One large shareholder said he thinks more than one buyer may be circling. 'The only way to get a good price is with more than one buyer,' said the shareholder. 'If they want the best deal for shareholders rather than a sweetheart deal for themselves, they will have to drop the restrictions that prevented other companies from talking to one another.' Separately, this morning, Time Inc. filed an 8-K form with the SEC indicating that management will provide an overview of the company in one or more investor presentations, and attaching that presentation (link below).

B&N Dismisses Activist Investor's Proposal to Take It Private
Reuters: "Barnes & Noble said on Thursday a deal proposed by an activist investor to take the bookstore chain private was not 'bona fide,' as its chairman and founder, Leonard Riggio, would not participate and raising the required funds was highly unlikely. Sandell Asset Management had proposed to take Barnes & Noble private with the help of current shareholders and $500 million in debt financing in a deal that valued the company at more than $650M, or over $9 per share, the Wall Street Journal reported earlier, citing people familiar with the matter. B&N's shares closed up about 8 percent at $7.13. They hit a session-high of $7.80 after the WSJ report, valuing the company at $566.5M. The Journal said the proposal by Sandell, which holds a 2.75 percent stake in Barnes & Noble, also called for roughly $250 million coming from company shareholders keeping their stakes and rolling them into a new private entity it would control. 'The company does not take Sandell’s proposal as bona fide in that Sandell is the beneficial owner of 1M common Barnes & Noble shares worth approximately $7M, Mr. Riggio has no intention of rolling his shares into such a transaction, and the company believes a debt financing of $500M is highly unlikely,' B&N said... Riggio holds a roughly 18% stake in B&N, making him the biggest shareholder, according to Thomson Reuters data.The Journal said Riggio’s refusal to roll his stake into a private entity as per Sandell’s plan meant the hedge fund would need to find backing from other major shareholders or put up the cash itself..." PW: "In July, after acquiring a small stake in the retailer, Sandell Asset Management sent a letter to the B&N board urging the company to put itself up for sale. Among the options proposed by Sandell was for B&N to go private..."

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Forbes Reducing Frequency to !0X ; Lays Off 20
NY Post: Forbes is laying off 20 and reducing its print frequency from 14 to 10 next year, reflecting more focus on digital and mobile, said a spokesperson. "'These changes will shift even more investment to the impactful journalism and deep-dive investigative reporting that are the hallmarks of Forbes,' she added. Among those hit by the latest round of layoffs were the vice president of information technology, Bryan Phil, and veteran photo director Michele Hadlow. Lewis D’Vorkin, who resigned as chief product officer to become the new editor-in-chief of the Los Angeles Times, has not been replaced. Mia Carbonell, who was the chief spokesperson, resigned last week to jump to Bloomberg LP."

Forbes Teams With Accountability Board To Offer 'Membership' Service
MediaPost: Forbes is diversifying into a marketing accountability services practice. Dubbed the Marketing Accountability Membership Service, the practice is a collaboration of Forbes and the Marketing Accountability Standards Board--an independent, cross-industry forum proffering measurement and accountability standards developed by a board of marketing and finance executives and consultants--created to 'help CMOs communicate, measure and grow marketing’s contribution to growth, profits and share price.' The organizers cite new research from Forbes’ CMO practice indicating that “marketing is a key driver of enterprise value and should be managed as a growth asset, rather than a cost center.' More significantly, they said the research also found that 'too few business leaders understand how to measure marketing’s impact on enterprise value, leaving their most valuable asset unmanaged and undermining efforts to grow firm value.' The new service, they said, is designed to help CMOs work with peers, academics and a variety of experts to innovate marketing accountability, including the value of marketing assets, media and technology."

Fryling, Steffey Promoted at B&N
Stephanie Fryling has been promoted to VP, merchandising, children's books at Barnes & Noble. She will report to B&N CEO Demos Parneros until the company names a VP, chief merchandising officer, according to an announcement memo sent out by Parneros. Fryling will be responsible for all retail activities related to the kids’ portfolio, including publisher partnerships, business strategies, buying and inventory management, and marketing approaches. She first came to B&N in 2012 as VP, merchandising, newsstand. In addition, Krifka Steffey has been promoted to director, merchandising, newsstand. She will assume direct responsibility for the vendor management and distribution operations, along with the retail sales and marketing activities related to the magazine business. Krifka joined Barnes & Noble in 2015 as newsstand marketing manager.

Maxim Finally Turns a Profit
NY Post: "Maxim has finally posted its first quarterly profit since it was taken over by Biglari Holdings in March 2014. According to the latest quarterly earning report filed with the SEC, Maxim posted a net profit of $28,000 in Q3, reversing a loss of $1.8M a year earlier.Revenue was $1.8 million in the quarter (up from $1.4M a year earlier). Over nine months, it's still lagging, with only $5.4M in revenue this year, vs. $6.6M in the same period a year ago, and it posted a net loss in the first nine months of $314,000. Sardar Biglari, the chairman and CEO...had missed the target of returning Maxim to a profit once again in 2016. Since the takeover, the magazine has lost more than $50M. The rest of the company includes insurance holdings as well as the Steak ’n Shake chain of restaurants. The total company posted a quarterly loss of $24.7M on revenue that dropped to $214.2M (down from $216M)."

Deborah Joseph Named Chief Content Officer of British Glamour
WWD: Over the past few months, British Glamour has switched its focus, frequency and format and fused the editorial and commercial teams. Now, it has hired Deborah Joseph as chief content officer, a new position at the “beauty-first, digital-first media brand. Jo Elvin, the title’s launch editor, stepped down in October after the title switched to a digital-focused, beauty publication. Condé Nast U.K. said Joseph’s remit extends across all platforms and that she's charged with creating the “ultimate beauty destination” for today’s Millennial audience. She starts immediately and reports to Camilla Newman, the title’s publishing director. Joseph previously worked on the launch of British Glamour, serving as entertainment editor and later as associate editor. In 2004, she moved to The Daily Mail, before returning to Condé Nast as editor of Brides, then editor of Easy Living. Since 2013, she has worked as a content consultant and editor on various digital projects... The digital transformation of Glamour will make its debut early next year, and the print frequency will reduce to twice a year, with the first print issue on newsstands in March, coinciding with the Glamour Beauty Festival."

FCC Repeals Decades-Old Media Merger Rules
WaPo: The FCC has repealed decades-old rules in order to make it "far easier for media outlets to be bought and sold--potentially leading to more newspapers, radio stations and television broadcasters being owned by a handful of companies. The regulations, eliminated in a 3-to-2 vote, were first put in place in the 1970s to ensure that a diversity of voices and opinions could be heard on the air or in print. But FCC chairman Ajit Pai argues that those rules now hinder small outlets struggling to survive in a vastly different media world... A major beneficiary of the deregulatory moves, analysts say, is Sinclair, a conservative broadcasting company that is seeking to buy up Tribune Media for $3.9B. 'This has a huge impact,' said Andrew Schwartzman, an expert on media law at Georgetown University. He added that the decisions will 'reduce or eliminate' the need for Sinclair to sell off many stations to receive regulatory approval for the deal..."


Retail News

Analysis: Wal-Mart Is (Wisely) Betting Against the Middle Class
MSN: Wal-Mart's stock "soared more than 10% on Thursday following an upbeat earnings report, which included 2.7% same-store sales growth at U.S. stores... Gordon Haskett analyst Chuck Grom declared it a "monster quarter'..." But investors' enthusiasm "appears to be more than a reaction to strong sales and earnings growth... It's also a sign of growing investor confidence in W-M's strategy to attract new customers by targeting shoppers at both the highest and lowest ends of the income spectrum, according to Doug Stephens, a retail-industry consultant. 'If you’re Walmart, your choice has become binary: If you want to grow your business you either extend further down, which is treacherous and low profit at best, or you move upmarket, which is a much better choice, if they can pull it off'... W-M has been targeting high-income customers through acquisitions of upmarket brands like Bonobos, Modcloth, Shoebuy and the more recently announced addition of Lord & Taylor to W-M says it plans to turn its website into a 'premium fashion destination'... At the same time, Walmart appears to be maintaining loyalty among customers at the opposite end of the income spectrum by keeping prices competitive and adding new in-store discounts that rivals--most notably Amazon--will have a hard time beating... Wal-Mart's strategy puts less emphasis than ever before on a group that was once it's prime target: the middle class... In the 1960s, retailers couldn’t keep up with the growth of the middle class... Now the middle class is shrinking, and big-box retailers and department stores that once appealed to the middle class are being forced to change their strategies or go bankrupt. 'More and more people are dropping out of middle class and dropping into working class; hence the appeal and the growth of dollar stores,' Stephens said. 'If Wal-Mart is going to succeed they need to attract higher-income consumers.'"

Wal-Mart, Kroger Virtually Tied at Top of Kantar’s PoweRanking
PG: "Competition heated up in data, insight and consultancy company Kantar Retail’s 2017 U.S. PoweRanking report on retailers, with Kroger and Wal-Mart finishing in a virtual tie for the top spot, although [W-M] managed to hold onto its No. 1 ranking. Amazon, meanwhile, continued its rise through the ranks to claim the fourth position overall. Rounding out the retailer top five were Target Corp., at No. 3, and Costco, which came in fifth. Although Kroger gave it a run for its money, W-M particularly stood out in the areas of clear strategy and supply chain management. As one manufacturer told Kantar: 'Walmart manages their inventory better than anyone. They manage supply and demand with unrivaled precision.' W-M achieved the No. 1 position in the retailer rankings for the 21st year in a row,' Kantar noted... 'Last year, it was in a virtual tie with Kroger and, albeit with a narrow margin in 2017, W-M regained the lead over Kroger. W-M continues to prepare itself for the future by staying true to its ‘low-price strategy’ for Walmart stores, while looking for new sources of growth through acquisition of online and [brick-and-mortar] retailers'... Of Amazon, Kantar observed that 'no company made a more courageous bet on a different future in 2017 than Amazon’s expanding into brick-and-mortar grocery retail... Amazon will continue to make very courageous bets on growth in the future, challenging the rest of the industry to respond. [This] is showing the trade how B&M and ecommerce can work synergistically.' In the supplier rankings, PepsiCo edged out Atlanta-based Coca-Cola for first position... Procter and Gamble, General Mills and Kraft Heinz took the third, fourth and fifth positions among suppliers, respectively."

Smart & Final Boosts Q3 Promotions to Compete
SN: "Smart & Final Stores said its has increased its promotional spending at its Smart & Final banner to compete with increasing levels of promotional activity at traditional supermarkets. In an earnings call,  the Commerce, Calif.-based retailer said overall comp-store sales for Q3 were up 1.5% vs. a year ago, and it projected comp-store gains of 2.5% to 2.75% in Q4... Within the Smart & Final banner, comp-store sales were up 1%, including a 0.9% increase in comparable average ticket size and a slight increase in traffic. The company estimated that inflation boosted comps by 0.9%, mostly from increases in meat, dairy and produce.In the Cash & Carry banner, sales rose 10%, with comps up 3.4%, including a 3.7% increase in the average ticket, partially offset by a 0.2% decrease in traffic. Net income in Q3 totaled $5.1M, vs. $7M in the year-ago period, which included a tax benefit of about $1.86M. Revenues were up 4.5%, to $1.46B..."

Food, Agriculture Have $6.7 Trillion in Economic Impact
MNB: "The Food Marketing Institute yesterday released a new study saying that 'more than one-fifth (or 20.4%) of the nation’s economy is linked, either directly or indirectly, to the food and agriculture sectors and that more than one-fourth of all American jobs (28%) are similarly connected.' The study concluded that these sectors are responsible for more than 43M jobs, $1.9 trillion in wages, and $894.13B in paid taxes--representing $6.7 trillion in total economic impact. 'This historic farm-to-fork economic analysis quantifies the impact of the jobs, wages, taxes and exports the industry makes possible,' says Leslie G. Sarasin, FMI’s president/CEO. 'As policymakers consider tax reform and other means to expand economic activity, I hope they will have a better understanding of how the food and agriculture sector not only feeds Americans, but also feeds the U.S. economy.'"

Albertsons Invests in El Rancho Supermercado
MNB: "Albertsons Companies announced an investment in El Rancho Supermercado, a Texas-based retailer that focuses on stores for Latino customers. El Rancho will continue to operate as an independent company headquartered in Garland, Texas, the announcement says. According to the company, the agreement with El Rancho 'provides Albertsons Companies an opportunity to invest in the fast-growing Latino grocery sector. The company already successfully operates a variety of store banners in predominantly Latino areas, and together, Albertsons Companies and El Rancho can leverage their complementary strengths to better serve customers in this growing sector.' Terms of the deal were not disclosed."

Amazon Blames USPS for AmazonFresh Closures
MNB cites a Recode story about why Amazon may have decided to stop offering its Amazon Fresh service in parts of nine states: That privately, it 'laid blame on the U.S. Postal Service, which was responsible for delivering Amazon Fresh orders to customers in most, if not all, of the affected delivery areas.' According to the story, 'Amazon officials have told several food brands that the USPS had delivered an unreliable experience to customers with too many late or missed deliveries, according to people familiar with the discussions. With no other good delivery options for fresh food in these areas, Amazon decided to shut down the service. These brands were also told the economics of the business were harder in the service areas that Amazon chose to shut down, because they were less densely populated."

Why Wal-Mart Should Worry Amazon Investors (WSJ, Heard on the Street, paid sub req.)

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