Monthly Archives: June 2015

Fruit of the Loom Negotiating to Sell European Luxury brands to Private Equity Firm

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Berkshire Hathaway’s Fruit of Loom is in negotiations to sell its European lingerie brands to a private equity firm.

In 2014, Fruit of the Loom began looking for a buyer for its European luxury lingerie brands.

According to the Financial Times, private equity group Perceva is in exclusive talks with Fruit of the Loom to purchase Variance, Lou Paris, Vanity Fair, BestForm, and Cherry Beach swimwear.

The lingerie brands were acquired by Fruit of the Loom in 2007 for $350 million from branded lifestyle apparel company VF Corporation . Fruit of the Loom has run them under the umbrella Vanity Fair Brands.

Perceva is interested in the brands because sales of luxury lingerie are strong in France, which leads the Euro-zone in per capita spending on women’s undergarments.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future performance.

Dairy Queen Wins Big With Jurassic World Tie-In

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With Universal’s Jurassic World racking up the highest grossing global opening weekend ever, and coming in a close second to Marvel’s The Avengers for the biggest U.S. opening weekend, Berkshire Hathaway’s Dairy Queen found its movie tie-in has become a monster hit as well.

Jurassic World posted a $204.6 million opening weekend, making it the biggest opening weekend for any film ever to debut in the month of June.

The Jurassic World tie-in is a coup for a midsized quick-service restaurant chain such as Dairy Queen, which has 6,400 U.S. locations, as compared to McDonald’s 14,350 restaurants, McDonald’s movie tie-in is with the animated film, Minions, which opens the U.S, market on July 10.

The ad campaign is Dairy Queen’s first movie tie-in in 20 years, and was created by Minneapolis-based Clarity Coverdale Fury Advertising.

Dairy Queen is promoting its Jurassic Smash Blizzard Treat and Jurassic Snack Wrap Duo through a mix of television, digital advertising, and social media. The national and spot advertising already had 4,803 airings as of June 15, according i.spot.tv.

The campaign’s tagline is “An adventure in every bite.”​

The ads feature a customer purchasing a Jurassic Smash Blizzard Treat while the Dairy Queen is under attack by raptors.

“We are absolutely thrilled to be partnering with Universal Pictures for the new Jurassic World promotion,” said Tim Hawley, Vice President of Marketing Communications for American Dairy Queen Corporation. “Like the Dairy Queen system, the Jurassic Park franchise has a tremendous fan base and incredible staying power. This is a spectacular cross-promotional, retail marketing program for us to kick off the summer season and it is certainly one of the highlights of our 75th Fanniversary year.”

Movie tie-ins can be high risk if the movie fails to catch fire. While Dairy Queen is rejoicing with its connection to a box office smash, GM may be less than sanguine with its Chevy Volt tie-in to the Disney flop, Tomorrowland.

For more information, read a Mazor’sEdge special report on Dairy Queen.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Public Utility Commission Rejects Switch’s Exit from NV Energy

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The state of Nevada’s Public Utility Commission (PUC) voted 2-1 to reject Switch Communication’s application to leave NV Energy, a subsidiary of Berkshire Hathaway Energy (BHE). Switch is a developer and operator of data center facilities.

Despite the rejection, it looks inevitable that Switch will move to another energy supplier, and it is all just a matter determining the appropriate exit fee.

The PUC had proposed a $27 million exit fee, and Switch asked to only pay $18.5 million.

Casinos Want to Leave Too

Switch Communications is not the only one pushing to leave the utility. Caesars, Wynn Las Vegas, MGM Resorts International, and Las Vegas Sands Corp. are all now planning to purchase their power from another “qualified energy provider,” using the exit provision passed by the Nevada Legislature in 2001.

Heated Accusations from Wynn Las Vegas

In testimony before the PUC, Matt Maddox, president of Wynn Resorts, accused NV Energy of reaping huge profits from Nevada customers and taking the profits back to parent company Berkshire Hathaway. The accusation is inaccurate, at least as to the ultimate destination of any profits, as Berkshire Hathaway lets BHE retain all of its earnings.

A big part of the conflict is related to who will bear the cost of closing the Reid Gardner coal-fired units in Moapa, Nevada. NV Energy has announced it will end its use of coal for electricity generation by 2019. The move is in accordance with Nevada’s Senate Bill 123 of the 2013 session that required NV Energy to close its lower-cost coal-fired generation facility.

The estimated $100 million in plant closing costs will be borne by ratepayers, and the casinos and Switch are hoping to leave before those costs are passed on to consumers.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future performance.

Central United States in Berkshire’s Solar Plans

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Berkshire Hathaway Energy, which is already a leader in solar energy generation in California and Arizona, is looking to the central U.S. to locate a new solar farm development. The company filed its land acquisition plans with the Midcontinent Independent System Operator (MISO), a Regional Transmission Organization that covers the transfer of energy along the interconnected transmission system in 15 states and the Canadian province of Manitoba.

According to the filing, BHE has acquired a site for solar generation development in MISO’s central region, consisting of 74 individual locations not to exceed 1 megwatt each.

The precise location of the land has not been released.

Currently Berkshire Hathaway Energy, through its subsidiary BHE Renewables, has 1,271 megawatts of owned solar generation.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Dairy Queen Goes for First Movie Tie-In in 20 years with Jurassic World

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Dairy Queen continues to boost its national advertising profile with its new cross-promotion campaign tied to Universal Picture’s film Jurassic World, which hits theaters June 12.

The film is the next installment of Steven Spielberg’s Jurassic Park series.

Dairy Queen is promoting its Jurassic Smash Blizzard Treat and Jurassic Snack Wrap Duo through a mix of television, digital advertising, and social media. The national and spot advertising already had 3,765 airings as of June 9.

The campaign was created by Clarity Coverdale Fury Advertising, Inc., and is the first movie tie-in for Dairy Queen in 20 years.

The campaign features a customer purchasing Jurassic Smash Blizzard Treat while the Dairy Queen is under attack by raptors.

“We are absolutely thrilled to be partnering with Universal Pictures for the new Jurassic World promotion,” said Tim Hawley, Vice President of Marketing Communications for American Dairy Queen Corporation. “Like the Dairy Queen system, the Jurassic Park franchise has a tremendous fan base and incredible staying power. This is a spectacular cross-promotional, retail marketing program for us to kick off the summer season and it is certainly one of the highlights of our 75th Fanniversary year.”

The campaign’s tagline is “An adventure in every bite.”

For more information, read a Mazor’sEdge special report on Dairy Queen.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Special Report: CORT Furniture Courts Academic Institutions

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With formerly generous relocation dollars in short supply in the aftermath of the 2009 recession, CORT Furniture has been aggressively seeking new markets. While relocation dollars still exist, “companies are no longer giving them out like candy,” says George Bertrand, CORT’s Regional Vice President for Operations and Sales.

Founded in 1972, and acquired by Berkshire Hathaway in January 2000, CORT’s primary business is providing rental furniture for homes, businesses and events (including trade shows), and providing relocation services. The company’s service area is the U.S. and the U.K., and annual revenues for all CORT operations exceeds $420 million.

Earnings in 2014 were roughly $36 million.

Seeking New Markets

With its core business hit hard by the 2009 recession, CORT expanded into the party rental business with the 2011 acquisition of the Seattle-based ABC Special Event Rentals, and the 2014 acquisition of another Seattle-area party rental business, AA Party Rentals. Party rentals now make up roughly $12 million in CORT’s annual revenues.

Academic Institutions Offer Opportunities for Growth

Another market CORT sees great potential in is providing furniture leasing to academic institutions.

Traditionally, academic institutions maintain huge inventories of furniture for dorm rooms that requires a high degree of maintenance and upkeep. These days, colleges and universities are increasingly aware that the on-campus quality of life is a major selling point to prospective students. They have upgraded athletic facilities with rock-climbing walls and rows of treadmills, and they have upgraded food services with gourmet entrees that are a far cry from the bland foods of yesteryear. They have also upgraded the dormitory experience, and in this area CORT is providing solutions that include furniture delivery service and ongoing maintenance.

Currently, only 14.3 percent of academic institutions are outsourcing their furnishing services, offering CORT a huge potential market for expansion.

According to CORT’s own survey, which they conducted with University Business Magazine, “budget restrictions” were the biggest impediments respondents cited in providing up-to-date and top condition furniture for students’ dorm rooms.

According to the survey results:

87 percent of respondents stated that budget and personnel restrictions are the biggest challenges facing their institution.

95 percent said the appearance and condition of their furnishings is important or very important to the maintaining the college’s image and integrity.

However, 37 percent described their furnishings as “outdated” and almost 20 percent said it’s “showing its age.

Out-sourcing their furniture needs to CORT is one way for institutions to keep their focus on academics, rather than on running a used furniture empire. CORT puts it simply. “Furniture leasing is a simple and affordable solution, especially as many colleges and universities are trying to meet increasing expectations with less available resources.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

NetJets Drama Could Lead to Labor Breakthrough

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With the twists and turns of a political thriller, changes in NetJets’s management may just lead to a breakthrough in its labor dispute between its pilots and management.

The ongoing dispute has been a familiar sight to anyone attending Berkshire’s annual meeting the past few years, as hundreds of pilots from the NetJets Association of Shared Aircraft Pilots Union have picketed in “informational protests” that laid out a host of grievances, including working without a contract for two years.

“It’s human nature to sometimes have differences about how people get paid,” Berkshire chairman Warren Buffett said when questioned about the dispute at the annual meeting.

Pedro Leroux, president of the pilots’ union, has said that NetJets has demanded that pilots and other unionized employees concede to wage and health care concessions despite the luxury jet fractional ownership business having revived from near bankruptcy levels during the 2009 recession.

Berkshire credited its 9.5% increase in 2014 revenue in its service businesses to NetJets and aviation training company FlightSafety International.

Leroux also noted that the pilots had lost trust in NetJets’s chief executive and chairman, Jordan Hansell.

Now, in an odd twist, Hansell is out the door after four years at the helm, and Adam Johnson has been appointed CEO and chairman.

Letters to Buffett

After almost 22 years at NetJets, where Johnson had risen to number 2 in the management hierarchy, Adam Johnson left the company on May 1, ostensibly to take a job outside of the aviation industry. According to reports, it was clear that Johnson and Bill Noe, who had also resigned, were dissatisfied with Hansell’s leadership, and The New York Post wrote that Johnson had sent a letter to Berkshire chairman Warren Buffett questioning “the direction of the company.” They also reported that Johnson had sent a similar letter back in 2009 that lead to the ouster of NetJets founder Richard Santulli.

With Johnson back as the new chairman, Noe has also returned and moved up the ladder as president and chief operating officer.

Now the pressure is on Johnson and Noe to resolve a dispute that Hansell had no luck with. He apparently had avoided meeting with Leroux over the two years since the contract had expired, something that Johnson and Noe promptly remedied after just a few days back on the job.

No word yet if the talks were fruitful, but its clearly time that NetJets resolves the conflict, as a shortage of pilots has given the pilots union increased leverage.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Nebraska Furniture Mart Looks to Grab Half of Dallas’s Furniture Market

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Move over Bassett, Charter Furniture, and Pottery Barn, when it comes to the new Nebraska Furniture Mart in Dallas, Texas, Warren Buffett has high hopes. “I believe the store will do over $1 billion,” Buffett recently told CNBC.

Officially, NFM has been projecting that the new Dallas store will have annual revenues of $600 million, which is $200 million more than its Kansas store generates.

If the $1 billion annual sales goal Buffett spoke of can be reached, it will be roughly half of all the home furnishing sales in the Dallas area.

In order to generate that type of business, NFM has built a massive store with a 560,000-square-foot retail showroom and 58 acres of parking. The store’s massive loading area can load 120 cars simultaneously.

Over 2,000 people are staffing the new store, and if the Kansas store is any indication, the average furniture sales associate will sell some $1.1 million of home furnishings a year.

Big Stores for a Big Market

According to Furniture Today Magazine, 41% of all U.S. households have plans to buy furniture and mattresses, and it looks like a huge number of them will be doing that at a Nebraska Furniture Mart.

While the Dallas store is expected to draw customers from as far as 300 mile away, the reach of NFM is nearly nationwide, delivering to 48 states (excluding Alaska and Hawaii).

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BNSF Railway Unites With Oil Refineries in Washington State for Accident Response Mutual Aid Pact

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BNSF Railway and Washington State-based oil refineries have inked a Mutual Aid Agreement to respond to accidents. The agreement between BNSF and the Western States Petroleum Association (WSPA), which includes Phillips 66, BP Cherry Point, Shell Oil Products US, Tesoro Companies, and U.S. Oil Refining Company, covers both rail accidents and refinery accidents.

“We are extremely pleased to enter into this agreement to further advance rail safety. Working hand-in-hand with community first responders and emergency managers has long been ingrained in the BNSF culture,” said John Lovenburg, BNSF’s vice president, Environmental. “This agreement is an extension of our long-standing practice to provide aid to communities no matter if an incident involves rail or not. Nothing is more important than safely operating through the communities we serve and we are absolutely committed to ensuring local first responders have access to training, information and access to BNSF’s safety experts and response equipment.”

Pressure Builds for Safer Oil Trains

Growing pressure over railroad oil train accidents has BNSF taking a number of measures to increase safety. The measures include lower speeds in high-population density areas, new tank car safety standards that include increasing the thickness of tank car walls, and increased training for emergency responders along BNSF routes.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Benjamin Moore Launches $50 Million Ad Campaign

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With much of the house paint sold to do-it-yourselfers these days being purchased at big-box stores, such as Lowes and Home Depot, Berkshire Hathaway’s Benjamin Moore has launched an aggressive campaign to highlight the brand as a premium product that is sold exclusively at 5,000 small retailers.

The campaign, which uses the new tagline—”Paint like no other,” parodies the big-box store experience by using two marionettes to represent the big-box store staff. The ads emphasis the professionalism of the Benjamin Moore retailers, which are small, locally-owned businesses.

The $50 million campaign is using a mix of TV, radio, print and digital media to reach consumers that have been increasing their DIY projects now that the 2009 recession is firmly in the rear-view mirror.

The ad campaign is Benjamin Moore’s largest ever, and is the first to be overseen by Ron Schuller, who joined the company in November 2014 as the Chief Marketing Officer.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.