Maryland Business

An update on the Reisterstown water main break arrived yesterday from Sen. Bobby A. Zirkin, D-Baltimore, that said officials now believe the break will be repaired by noon today.

“Once the main is repaired it will take several hours for the Pleasant Hill reservoir to fill to the proper capacity and begin the regular flow of water throughout the area,” the news release says. “The City hopes full service will be restored by midnight on Wednesday.”

That means businesses that have been forced to close could possibly reopen Thursday. Those that have remained open but with limited services could be at full service too.

Zirkin also says some people have contacted his office with complaints about car washes operating in the area at a time when water conservation is critical. He says the Department of Public Works has dispatched officials from the Bureau of Utilities to ensure that the car washes use recycled water only.

Not bad compared with the bleak, two-week picture officials were painting yesterday. But it still means businesses like restaurants, hair salons and coffee shops were forced to close for at least five days this week, losing thousands of dollars in potential revenue.

The county has assisted residents with water rations but is it fair to let businesses fend for themselves when many are struggling to stay afloat?

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Just in case eight downtown steakhouses wasn’t enough, one more is opening Friday.

OK, just to be fair, Prime Steakhouse is located a little more off the beaten path than the others. Sullivan’s Steakhouse, the two Ruth’s Chris Steak Houses, Flemings Prime Steak House & Wine Bar, Morton’s the Steakhouse and Shula’s Steak House are all within a half-mile of the Inner Harbor. Prime is set in Fells Point, a bit to the East of the bunch.

But my point is still the same — we must really love our steak in this town for someone to come in, look at the market and think, “You know what’s going to fill a need here? A steakhouse!”

The economy’s doing a little better. But it’s not doing THAT much better. And for an owner to try and open a high-end restaurant in direct competition with eight others (most of them chains) it’ll be a major uphill battle.

One thing going for Prime is while its menu is pretty standard (steaks, chops and a few seafood options), none of the entrees exceed $30.

(On a side note, the ownership of the new restaurant is in its own little battle, as The Sun’s Dining@Large blog pointed out Thursday.)

Do you think Prime Steakhouse stands a chance?

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Two bits of retail news came my way this morning that don’t look good for retailers. With the massive snowstorms and weather across the country in February, the news isn’t a surprise … but that still doesn’t soften the blow.

A report by Richard Jaffe, an analyst for Stifel Nicholaus, says in his February same-store sales preview that the harsh weather will likely contribute to a drop in business for this month.

“While cabin fever contributed to some short term sales spikes and likely strong Internet sales, we anticipate February sales will be off the pace with those seen in [the fourth quarter],” he wrote.

He said he believes consumers “splurged” in the fourth quarter after being on a tight budget all year. But now they’ll likely return to that frugality given the uncertain economic environment.

“A focus on value is likely to prevail with retailers effectively utilizing promotions to communicate value,” Jaffe wrote.

Contributing to that notion of uncertainty is the other piece of news I received today — the Conference Board Consumer Confidence Index, which had increased in January, declined sharply in February.

The Index now stands at 46, down from 56.5 in January. The Present Situation Index decreased to 19.4 from 25.2 and the Expectations Index declined to 63.8 from 77.3 last month.

Yuck.

But Jaffe points out there are still a few winners to look out for. He likes The Gap, Children’s Place and American Eagle for their promotional strategy and likes the fact that discount retailer TJX Companies is increasing its inventory of premium brands.

He also predicts Aeropostale’s “compelling fashion at very sharp price points” and Urban Outfitters’ “willingness to take risks and offer the consumer fashionable and differentiated merchandise” will help both retailers gain market share this spring.

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Valentine’s Day has come and gone, but Maryland sure seems intent on making a love connection of an economic development sort.

And its courtship strategy looks like it hasn’t changed much in 10 years. (I know what you’re thinking: We’re really exploring the romance theme a lot here at the blog lately, huh?)

News of state efforts to woo Northrop Grumman Corp. trickled out last week. Gov. Martin O’Malley, General Assembly leaders and state economic development Secretary Christian Johansson have put the Free State’s best foot forward in hopes of landing the California defense contracting giant’s corporate headquarters.

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Sometimes the realities of being a retailer during an economic downturn reminds me of encountering people who are so starved for attention that any little glance their way means they’ll attach themselves to your hip for the next half hour.

With that said, here’s what “positive” news looks like these days in the retail industry:

According to the National Retail Federation, January’s seasonally adjusted retail sales (which exclude autos, gas stations and restaurants) increased 0.5 percent over December and grew 3.2 percent unadjusted year-over-year.

The NRF says the January increase was largely accomplished by retailers creating special deals aimed at enticing shoppers to hit the stores and use gift cards they received over the holiday season. Popular categories included electronics, clothing and sporting goods.

Just to give you a little perspective, retail industry sales for January 2007 rose 0.7 percent seasonally adjusted over December and 5.3 percent unadjusted over the prior year.

Here’s what Rosalind Wells, chief economist for the NRF, had to say: “We continue to see the economy show subtle signs of improvement. While the recovery still has a long way to go, we remain encouraged by the latest retail sales figures.”

Based on what retail experts tell me, we had better get used to these kind of numbers. Unlike the last decade, which saw insane growth that probably gave too many people overly ambitious expectations, this decade will be the one of inching our way forward on the road to recovery.

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Capitals owner Ted Leonsis

The 15th annual National Sports Forum wrapped up in Baltimore yesterday, and boy did they have an all star cast this year.

Here are just a few of the speakers and panelists that have been imparting their wisdom upon the sports business world: Ravens owner Steve Bisciotti, Oriole Hall-of-Famer Cal Ripken Jr., Washington Capitals owner Ted Leonsis, Under Armour CEO Kevin Plank, Feld Entertainment CEO Kenneth Feld and Orioles President of Baseball Operations Andy MacPhail.

Topics covered include social media, the economy, best practices and the blend of sports and entertainment. The Baltimore Ravens, Orioles and concessionaire Aramark are hosting the event.

If you’re wondering why you haven’t read anything about what the speakers said — sorry, folks. The sessions and panels are all off the record so that the panelists can speak freely.

I attended Tuesday’s super panel, “Leadership in the Economy” featuring Plank, Feld, Leonsis, Ripken and moderated by local lawyer and sports agent Ron Shapiro. The room was packed and the audience of about 500 people were hanging on the panelists’ every word.

But here’s something else I noticed — most of the attendees were men. As were most of the speakers. Chris Plonsky, women’s athletic director at the University of Texas at Austin, was a featured panelist this week, as was sports marketing consultant Dockery Clark. But the women participants were few and far between.

I’m not knocking the sports forum organizers — they worked with what they’ve got and who’s available. But looking across the sea of attendees and seeing so many suits and ties made me think that ratio isn’t changing any time soon.

Does anyone care about this? Should this be changed…and how do you do that? What is it about sports that makes it so lopsided toward men? When I think about my girlfriends, I can only think of one or two who will genuinely talk sports with me — most of the people I talk sports with are my guy friends.

So does that mean sports business forever destined to be a man’s profession?

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I got an e-mail this week that started out with this:

Dear Liz,

According to a new study, 78% of respondents said the American Dream has died.

Wow, that’s depressing.

The statistic is from a recently released report called Coming of Age in the Great Recession, compiled by the consulting firm, Context-Based Research Group, and Baltimore ad agency, Carton Donofrio Partners. The report explores consumer attitudes about the post-recession era.

The study is a follow up to the firms’ “Grounding the American Dream” released in 2008.

The 2009 study found that some believe the American dream has died because “the dream” had become defined in terms of material possessions rather than freedom and ideals. It found that 83 percent of respondents made permanent changes in spending and saving behavior, and the same percentage planned to spend more time with family and friends over the holidays then they had previously.

“Our studies portray a society moving into an era where we measure the quality of our lives in social terms before economic ones,” Cleve Corlett, Context-Based Research Group’s director of quantitative research, said in a statement. “Forty-three percent of Americans believe the recession has positively affected their lives. With this kind of positive reinforcement, we now see the potential to maintain a healthy balance between our consumer and non-consumer sense of selves.”

So maybe these findings aren’t as depressing as the e-mail started out (unless you’re a retailer and dependent on people buying expensive items they don’t need).

Do you agree with these findings? I personally think they might be a little optimistic in terms of people’s permanent willingness to place inner happiness over having outside things. But maybe I’m a cynic. I am a journalist, after all…

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A week ago, I was going through my morning routine, which includes, most mornings, listening to WYPR, the local NPR affiliate, before I head to work. One of the station’s regular features is the “Morning Economic Report,” hosted by local economist Anirban Basu, who heads the local think-tank the Sage Policy Group Inc. In Basu’s minute-long segments, he tends to focus on one part of the economy — housing, banking, public finance — and provide very quick, but usually very expert analysis of data. It’s not quite investment advice, but it’s the kind of thing that a businessperson, an amateur investor or even just an informed citizen might listen to and get ideas about money, the state of the market, or how things are likely to change and develop in the future.

Last Tuesday, Basu’s segment was about being a rental landlord, and a recent report that showed rising vacancies in rental properties in 79 markets across the country. The point of it was, in the end, that renters have the upper hand in the current market, as far as demanding lower rents and better service, because there simply aren’t enough tenants to fill the space. Baltimore was not mentioned specifically, and the implication was that this is a problem of national scope. The transcript started like this:

Those looking for a new apartment should be aware that renters presently enjoy the negotiating upper hand vis-à-vis landlords. According to vacancy and rental rate data … apartment vacancies hit a 30-year high during last year’s fourth quarter and rents have been falling as landlords compete aggressively to retain existing tenants and attract new ones.  Rents declined 3 percent last year, led by declines in West Coast markets such as San Jose, Seattle and San Francisco; cities that were expanding briskly prior to the recession.  Analysts believe that rental market weakness will last at least through the first half of 2010 and probably beyond …

Here’s the issue: Anirban Basu is, in addition to being a highly respected economist, a rental landlord. He owns five rental properties in Baltimore, a house in Deep Creek and another house in Harrisburg, Pa. Why does this matter? Because he didn’t mention it on the air. He was presented merely as an expert and introduced only in his context as chairman and CEO of the Sage Policy Institute, but the fact is, Basu has a financial interest in the rental housing market, its fluctuations, and questions of business strategy surrounding rental housing investing.

And now’s the time where I disclose that Basu, in addition to all the other things he is, is also frequently quoted in The Daily Record, especially as an expert in our quarterly mergers and acquisitions stories. He also is the lead author on many of the research reports that guide city and state economic policy decisions. This, I admit, is just a fact of life that you have to deal with, being a business reporter in Smalltimore. There are only a handful of economists at local think tanks or academic institutions who cover the local and statewide markets. Richard Clinch of the University of Baltimore and Daraius Irani of Towson’s RESI institute come to mind. And yes, we quote them frequently too.

But WYPR’s lax disclosure rules are a bit troubling. If Basu has a financial interest in something, shouldn’t he mention it when providing expert opinions on the subject? And if the trends he’s reporting are negative, isn’t that all the more reason to ask, Why not? Why shouldn’t he mention it?

Reached by phone last week, Basu said he didn’t see any conflict of interest in the “Morning Economic Report” spots, because they’re very short, and entirely data-based.

“I’m reporting what the data say. I’m working against my own interest, because I’m suggesting that the rental market is weak, and that people can afford to be selective,” he said. “Those are 65-second spots. There is not a lot of opportunity to disclose … I report on the economics of banking, and I sit on the board of First Mariner Bank. I don’t disclose that.”

Well, why the heck not?

We put the question to WYPR’s vice president and program manager, Andy Bienstock, pointing out that Don Fry, who also provides regular commentary for WYPR, always discloses that he is president and CEO of the Greater Baltimore Committee, a business booster group, when he speaks on-air. Bienstock responded that in last Tuesday’s report, he agreed that that there was no conflict of interest, that “putting [Basu] into Jim Cramer territory is an enormous stretch,” referring to the CNBC host who was the subject of a scandal related to disclosure issues last year. But he also said that in mentioning the First Mariner issue, we had “buried the lede.”

“I did not know the full extent of his involvement with First Mariner and, if he is speaking directly about the bank we will ask him to disclose, on-air, his role there,” Bienstock wrote in an email. “We are, co-incidentally, working up internal disclosure forms for all our contributors – both commentators and news stringers. With journalists needing to keep there hands in a lot of pots – just to eat, since full time work is so scarce – we need to do a better job of catching any conflicts of interest before they happen. That way we can either disclose on air, or not air the piece to begin with.”

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After holiday sales predictions across the industry ranged from down a percentage point to up nearly two points, the official word is in from the National Retail Federation: sales were up 1.1 percent this season.

Phew!

The numbers are preliminary, but NRF estimates that sales during November and December totaled $446.8 billion, surpassing the association’s projected decline of 1 percent.

NRF’s numbers do not include automobiles, gas stations or restaurants … which would surely paint a different landscape if thrown in there. Typically, NRF separates dining and the auto industry from its retail tallies.

In the months leading up to the holiday season, the name of the game for retailers was inventory — being cautious and not being stuck with too much at year’s end.

“With an eye on managing inventory and maintaining lower price points, retailers did a tremendous job of planning for the holiday season,” NRF Chief Economist Rosalind Wells said in a statement. “While the consumer appears to be spending again, double digit unemployment numbers will remain an impediment to maintaining this momentum.”

Apparel was a star for retailers this year as clothing and clothing accessories drove sales in December and increased 7 percent compared with the prior year. Sporting goods, hobby, book and music stores also performed well with December sales increasing 3.9 percent from last year and health and personal care stores increased 4.8 percent, according to the NRF.

The weak housing market, however, damped some categories — furniture and home furnishing store sales decreased 3.5 percent during December 2009.

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Once again, Fleming’s Prime Steakhouse & Wine Bar is offering a winter prix fixe menu to lure in diners whose budgets would otherwise balk at the idea of going out to a pricey steakhouse. We saw this a lot last winter, too, with white tablecloth establishments such as Ruth’s Chris Steak House.

But look for a slight change this year — prices are up. Fleming’s prix fixe menu this winter is $39.95 per person, compared with $35.95 last winter. This year’s menu also doesn’t include a glass of wine (although this year’s dessert beats last year’s milk and cookies).

Ruth’s Chris prix fixe menu has stayed the same at $39.95. But here’s another kicker — Baltimore’s Winter Restaurant Week meal prices have also gone up about $5 to $35.10. (Restaurant Week dinners were $30.09 last winter).

In covering the restaurant industry, I heard a lot over the last year about food costs going up for restaurateurs who didn’t want to pass on that price increase to their customers for fear of losing them. How much of these price increases do you think are a result of restaurant owners finally just upping their prices to stay afloat — or are they upping the prices because the economy seems to be inching back up?

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