Hits & Misses

Company bets that paid off and those that bombed.

By David Jacobson, Business 2.0 Magazine

(Business 2.0 Magazine) -- [HIT] Hog heaven. While Detroit continues to sputter, at least one American vehicle maker is firing on all cylinders. In July, Harley-Davidson embarked on the most ambitious new product rollout in its history, introducing four new models and bolstering its lineup of road-trip-friendly touring bikes and retro-styled "softails" with its new Twin Cam 96 engines, which provide up to 17 percent more torque. "Torque is the power you feel when you first step on the accelerator," explains spokesman Paul James. "We increased the part of the power that riders love the most." Apparently the love didn't go unrequited: In October, Harley announced that it had set new records for quarterly sales and profit and now projects double-digit earnings growth through 2009.

[MISS] The softening side of Sears. Wall Street seems happy to invest in any enterprise led by financier Eddie Lampert. Since March 2005, when he closed the deal that merged Kmart and Sears, stock in Sears Holdings has risen 32 percent, thanks largely to cost cutting that's improved margins even as same-store sales have declined. But signs of trouble remain - notably in one of Sears's key product categories, home appliances. Chains like Lowe's and Home Depot have been steadily grabbing market share from Sears, going from a combined 16.2 percent to 26.6 percent in the past four years; each gained a full percentage point in the second quarter of 2006 alone. It's an area in which Sears can hardly afford to slip, given its impact on the bottom line: Last year Sears's Kenmore brand accounted for two-fifths of the chain's profit.

[MISS] WhoseSpace? You know the reaction when 55-year-old guys try to be "hep"? That's the reaction Wal-Mart got when it launched its own social network for teens, the Hub - a locked-down environment in which page contents were strictly controlled and users' parents were informed when they joined. As if that weren't lame enough, the Hub also featured ringers who delivered duds like "Shopping will be my number ONE hobby this fall. I am going to be the most fashionable teen at school!" Actual fashionable teens avoided the Hub in droves: Despite drawing from Walmart.com's audience of 25 million unique visitors, in September the Hub lured barely 100,000. Wal-Mart pulled the plug the following month.

[HIT] Culture cash. Your average Swiss eats 70 pounds of yogurt each year. Your average American? Just 12 pounds. This explains why No. 2 U.S. brand Dannon, bullish on the growth prospects of the $3 billion American yogurt market, this year rolled out a new-to-America (but popular overseas) product category: "probiotic" yogurts with special cultures that offer health benefits. To back its Activia line, containing a proprietary bacterium said to aid digestion, Dannon exceeded its entire 2005 ad budget to air commercials asserting its beneficial effects and sponsored in-store demos to prove that the reformulated yogurt still tastes good. Selling at a 20 percent premium over Dannon's other yogurts, Activia has rung up more than $100 million in sales and quickly become the nation's eighth-largest yogurt brand.

[HIT] Crossing swords. The fight for the hearts and minds of razor-wielding men has become an epic duel. Procter & Gamble's Gillette brand landed a solid blow early this year with the launch of its five-bladed Fusion razor (see "Who's Laughing Now?," Hits & Misses, June), but Energizer Holdings's Schick brand has parried brilliantly. Though Schick's ad budget was less than a quarter of Gillette's in the first half of '06, it got its point across in June when it unveiled both a new titanium-bladed version of its Quattro razor and an ad campaign that mocked Gillette's ultraserious spots by touting "lab tests" that measured "Schick-enhanced studliness" in a "simulated social environment." This summer Schick outpaced last year's sales by 10 percent, and it has grabbed market share from Gillette in both razors and blades. After falling sharply when plans for the Fusion were announced, Energizer's stock has rebounded by 45 percent this year, with a Citigroup analyst noting that "investors' fears that [P&G] would kill [Energizer] have largely abated."  Top of page

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