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Malls on the Mend, Soup Psychic and Greenwashing

Jason Stipp

Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to the Friday Five. This is our look back at five notable headlines for investors. Joining me, as always, with the Friday Five is Morningstar markets editor Jeremy Glaser. Jeremy, thanks for being here.

Jeremy Glaser: My pleasure, Jason.

Stipp: So what do you have for the Five this week?

Glaser: Mall M&A action picks up. Abercrombie begins to turn the corner. We'll have our footnote of the week, our favorite Tax Relief Week tidbit, and finally, we'll take a look at the cutting edge in soup science.

Stipp: Well, I always like to go to the mall, so let's start there.

Glaser: This week, Simon Properties made an offer for General Growth Properties, which is a bankrupt mall REIT, for about $9 a share, around $10 billion. This is not a surprising bid, necessarily, but it shows that there's some strength in the mall sector.

Most surprising, in some respects, is that General Growth summarily rejected the offer and said that they wanted to go around and look for better offers. The market seems to agree, as shares are trading well above the $9 offer price.

So the fact that there is a pretty big market for a bankrupt mall REIT at the moment, with decent properties, shows that there's some resilience in the commercial real-estate market and that investors haven't completely written the sector off yet.

Stipp: So while we're at the mall, A&F, a popular store, at least among the younger set, had some tough times recently, but they might be turning the corner?

Glaser: I'm not sure if they've turned the corner yet, but they're definitely looking at the corner. They had a really tough time during the recession, you're absolutely right. Their same-store sales were falling 20%, 30%, month after month after month, as people just eschewed these high-priced flip-flops and cargo shorts. Not really where the style was. Not really where the price point was.

But Abercrombie didn't want to lose their premium price point and their premium positioning and refused to discount like a lot of their peers did. This really had some trouble, but now that people are willing to spend a little bit more, you see people going into the mall, willing to maybe open the wallet, and the teenagers opening their wallets a little bit more than they did before.

I think an interesting thing about the company is their opportunity to expand, both in Europe and Asia. One of our colleagues from Europe was in town last week, and he mentioned that the thing his daughter really wanted was some Abercrombie and Fitch clothing from the United States. Hard to get in Europe. I think, as they expand into those other markets, they have some room for growth. Shares aren't incredibly cheap right now, but it is rated four stars, and if it sells off a little bit, it could be an interesting opportunity for investors.

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Stipp: Well, I don't think I'll be opening my wallet for a $30 ripped T-shirt anytime soon, but if it does show that consumers are spending a little more, I'll take that.

Another thing on Morningstar that we've added recently is footnoted. This is run by Michelle Leder, digs into SEC filings and finds some really interesting tidbits. The first one that we ran on the site this week is about environmental actions. Tell us a little bit about what she found there.

Glaser: The SEC gave some guidance to companies, that if they think that they're going to be very seriously impacted by environmental legislation, be it cap-and-trade or anything else that's coming down the pipe, they should put it in their 10-K and say that it's a risk factor.

Now, I don't think the Senate's going to be passing cap-and-trade anytime soon, considering they can barely decide to adjourn for the day, but I do think that it is a possible risk in the future that environmental legislation is going to become increasingly prominent.

Coca-Cola Enterprises, which is one of the Coke bottlers, in their 10-K said that they're voluntarily going to try to cut emissions by about 15% by 2020. Now, if this is just green-washing, to make the company seem more green than it is, or it's a true idea to try to save money and if they think energy prices are going way up, we're not sure yet, but I think it's something investors are going to see a lot more in SEC filings going forward.

Stipp: Well, certainly looking forward to what Michelle has for us in the future. Also this week, we had Tax Relief Week. There are a lot of tips and tidbits about what's going to happen in 2010 going forward, with Roth IRAs and with dividend taxation. But something really interesting from the ETF team. Tell us about that.

Glaser: Scott Burns gave us the idea of tax-gain harvesting. Instead of tax-loss harvesting, where you take the loss to offset gains that you're having elsewhere, his idea is that it might make sense for some investors to pay taxes now. If you think the tax rates are going way up, or for some reason you have a particularly low marginal tax rate this year. If you have a lot of gains in an ETF or a stock, you might sell it and then buy it right back.

So you'll have to pay the tax now, but when you go to sell the stock later -- let's say 3, 5, 10 years down the road -- your basis is going to be that much higher, and you won't owe all those taxes at a potentially higher rate in the future. Does it make sense for everybody? Probably not. But an interesting idea, and something new to think about.

Stipp: Well, certainly, an interesting tip from Scott Burns. And if you missed anything from Tax Relief Week, you can go online and see everything that we have there.

So for number five, Jeremy, maybe you can read my mind about what I'm going to ask you. But if you can't, maybe Campbell's can.

Glaser: Well, they're certainly trying. For the first time, Campbell's is looking at biometric data of individuals who are looking at their soup cans. Now, I know that I love soup, and I'm sure many other people do, but apparently we have quite a visceral reaction to it, and you can tell a distinct difference between looking at a plain can of soup and one with a delicious bowl of soup pictured on the cover.

Campbell's is going to try to use this data, along with other interviews that they did, to create a new label, to create new packaging, to create new in-store displays, to try to help their lagging soup sales. I don't know if it's going to be enough to turn the corner, but I'm glad that we're pushing the envelope on soup science just a little bit further.

Stipp: I'll look forward to seeing those labels in the store, then.

Glaser: Yeah, definitely.

Stipp: Thanks for joining me, Jeremy.

Glaser: You're welcome.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.