Hits & Misses
(Business 2.0) – [HIT] What happens when you've got a good crystal ball ... For years Airbus has been giving Boeing a drubbing--especially with the A330, a competitor to Boeing's 767. But thanks to a smart bet it made in the wake of 9/11, Boeing has turned the tables. Presciently forecasting a dramatic rise in oil prices, Boeing began work on the 787 Dreamliner, a lighter-framed successor to the 767 that burns 20 percent less fuel. The $10 billion gamble paid off this year, when Boeing landed deals for the 787 with Air Canada, Air India, and Korean Air, among others, doubling its orders to 237. Boeing's production run is now sold out through 2010; Airbus, meanwhile, has yet to green-light the A350, its would-be competitor to the Dreamliner.
[MISS] ... and when you try to make a crystal ball out of plastic building blocks. After Lego suffered a loss of $150 million in 2003, then-CEO Kjeld Kirk Kristiansen admitted, "We have not been good at forecasting." He went on to say the company would break even in 2004. Kristiansen, who stepped down in October, was half right: In April, Lego reported a $328 million annual loss--the worst in its 73-year history--and said efforts to find a bidder for its Legoland theme parks had failed. The company blamed the poor showing on kids' growing preference for electronic toys, but analysts say its sales also suffered from missteps like temporarily discontinuing its Duplo line of blocks for preschoolers and failing to respond to competitors' popular new magnetic construction sets.
[HIT] Silly sells. When Oakley unveiled its new Thump line--otherwise sleek sunglasses larded with built-in MP3 players--reviewers everywhere scoffed: "Geeky." "Ridiculous." "Silly." Now, however, the far more important reviews are in, and they've given Oakley the last laugh. In its most recent earnings reports, the company credited Thump for most of its 24 percent sales growth in the fourth quarter and said the line also helped boost first-quarter sales to a record $142 million. As an added bonus, the company also gleaned some valuable lessons about pricing power: While Oakley admits that the $400 shades languished among cheaper MP3 players at Circuit City, they sold briskly in its company-owned O Stores.
[MISS] Where's the lift? A bra that supports its customers' top lines is vital to Limited Brands's bottom line, since Victoria's Secret is by far the retailer's most important division. Unfortunately, Victoria's new Ipex bra, despite the promotional efforts of supermodel Gisele Bundchen, didn't fly off the shelves like last year's Body by Victoria line. The highly engineered padding resulted in a bra that just didn't look sexy, customers complained. "So plain and practical that it seems almost medical," said one. In March, the month of the Ipex launch, the company's same-store sales dropped 7 percent.
[HIT] The new old thing. It all seemed so 1999: Dotcom spends $4.8 million on a Super Bowl ad, comes up with a controversial spot to get people talking, and waits for users to roll in. But lest you think this year's Super Bowl darling, GoDaddy.com, is doomed to repeat history, note that industry analysts announced in April that GoDaddy had passed Network Solutions to become the Web's No. 1 domain-name registrar. While GoDaddy did get some gerbils-from-a-cannon-like buzz from Fox's decision to pull the second airing of its ad--a risqué spoof of the Janet Jackson "wardrobe malfunction"--it cashed in with a decidedly old-economy strategy: lower prices and better customer service. CEO Bob Parsons says the privately held company made about $24 million on $102 million in revenue last year and expects sales to jump by 96 percent in 2005.
[MISS] Great taste, less profitable. Anheuser-Busch is still the king of beers when it comes to market share, but it's having a tough time adding froth to its bottom line. Budweiser Select, its new premium brew, did capture a healthy 2 percent of the market in its first two months--but its success came mostly at the expense of other Anheuser brands. Company management, which had predicted that only half of Bud Select's sales would come from cannibalizing other AB suds, was left with a nasty hangover: In the first quarter, the company reported its profits were down 6.7 percent, the first drop in seven years.