August 14th 2006

In This Issue


Economic Snapshot – FY 2006

Economic Notes:

This Weeks Leads



Gross Taxable Retail Sales – April 2006

  • The “Top Ten” represent 45% of the market.
  • The “Top Twenty” represent almost 60% of sales.
  • State-wide April increases were 13.3%
  • The “Top 10%” gainers include:
    1. West Bountiful +181.9%%
    2. South Jordan +86.3%
    3. Lehi +90.7%
    4. Lehi +50.1%
    5. Riverton +45.1%
  • The “Bottom 10%” include:
    1. North Salt Lake -15.3%
    2. Holladay -14.1%Midvale -9.2%
    3. Payson -5.3%
    4. Woods Cross +2.6%

April 06 Retail Sales – Top 45 Cities (Large Monthly Filers Only)

Congratulations to Cottonwood Heights! This is the first time they have appeared in the Tax Commission Reports.

Rank (March Rank) CityApril 2006 (000) % Change 06/05Mkt Share March 06 (% of Total)
1Salt Lake City$344,004+2.7% 11.3%
2Sandy $140,200+5.6%4.6%
3Orem$132,139 +11.3%4.4%
4 (5)St George$130,532+15.0% 4.3%
5 (4)West Valley$128,201+4.7% 4.2%
6Murray $121,955+5.3%4.0%
7South Salt Lake$110,784+11.2% 3.7%
8West Jordan$94,706+11.6% 3.1%
9Layton $86,592+9.5%2.9%
10Ogden $86,29515.0%2.8%
11Provo $78,995+8.6%2.6%
12 (14) Riverdale$49,004+ 12.5%1.6%
13 (15) Logan$48,703+7.1 %1.6%
14 (16)American Fork$44,222+17.9% 1.5%
15 (17) Draper$37,518+18. 2%1.2%
16 (19)Cedar City$37,060+11.4% 1.2%
17 (20) Vernal$36,167+33. 1%1.2%
18Taylorsville$35,73 9+14.9%1.2%
19 (13) Midvale$34,056- 9.2%1.1%
20 (22) Lindon$32,022+25. 8%1.1%
21South Jordan$31,599+86.3% 1.0%
22 (23) Bountiful$28,093+8 .1%0.9%
23Cottonwood Hieghts$26,6530.0% 0.9%
24Tooele $25,723+33.0%0.8%
25 (12)Park City$25,464+32.4% 0.8%
26Centerville$21,91 2+12.1%0.7%
27Springville$21,679 +18.5%0.7%
28 (25) Lehi$20,345+50.1 %0.7%
29 (30) Price$18,423+7.8% 0.6%
30 (29)Spanish Fork$18,2523.0% 0.6%
31 (28)Woods Cross$15,445+2.6% 0.5%
32 (34) Richfield$14,481+1 9.1%0.5%
33Roy$14,287 +11.7%0.5%
34 (31)North Salt Lake$14,214-15.3% 0.5%
35 (37) Kaysvile$13,979+2 0.8%0.5%
36South Ogden$13,822+8.5% 0.5%
37 (42)Pleasant Grove$13,439+8.5% 0.5%
38 (40) Riverton$12,636+4 5.1%0.4%
39 (35)Brigham City$12,291+13.0% 0.4%
40 (45) Moab$11,947+21.6 %0.4%
41 (38) Clearfield$11,885+ 11.4%0.4%
42 (32) Holladay$11,579- 14.1%0.4%
43 (41) Pason$11,536- 5.3%0.4%
44 (39)West Bountiful$10,787+181.9% 0.4%
45 (44) Heber$9,411+31.0 %0.3%

Tesco plans Las Vegas supermarkets

Tesco’s unusually stealthy US expansion strategy is about to take it to Las Vegas, one of the fastest growing cities in the US, in addition to its previously reported plans to open stores in the Los Angeles and Phoenix areas next year.

The US expansion comes as the UK’s biggest supermarket chain, which already takes 1 in every 8 spent on the British high street, powers ahead in its home market. Verdict Research, the retail analysts, predict it will become Britain’s biggest non- food retailer by the end of the year, overtaking Argos Retail Group.

The US push is part of a double-pronged effort to expand in its domestic market and abroad.

Commercial real estate brokers say the chain is looking for sites in Las Vegas for its planned Tesco Fresh & Easy range of mini-supermarkets. It has also registered its two US subsidiaries – Tesco Stores West and Tesco Stores Holdings – in the city’s home state of Nevada, as well as in California and Arizona.

In Arizona, Tesco was so keen to keep its arrival quiet that it placed newspaper advertisements in May announcing “Buttoncable West”, a Delaware registered corporation, was about to start a “retail sales” business in the state. A few weeks later, Buttoncable changed its name to Tesco Stores West.

Tesco announced its US plans in March, after conducting comprehensive market research that included a trial store in a warehouse in Los Angeles that it passed off as a film set.

Tesco has not said how many stores it plans to open in the US and declined to comment on its strategy for Las Vegas.

The company said in March it will invest 250m ($476m) a year to fund its US expansion, a budget that Goldman Sachs analysts estimate should enable it to open as many as 200 stores a year. Las Vegas, with 1.7m people, is expanding at a rate that has made Nevada the fastest growing state in the US. Two phone books are printed every year to keep up with the city’s rapid rate of expansion.

Las Vegas is witnessing intense competition for new customers between its existing traditional supermarkets – dominated by Kroger and Safeway – and Wal-Mart, the largest US retailer, which now has about 20 per cent of the overall US grocery market.

Tesco’s strategy is based on creating a range of small stores on sites of about 14,000 sq ft based loosely on its Tesco Express concept in Europe. The stores will stock private label and branded goods, as well as perishables and prepared foods.

Source: The Financial Times, 2006

US hospitals for the 21st century

US hospitals rank among the triumphs of 20th- century technology and organization. Yet they must change drastically to adapt to the needs of the 21st.

US hospitals are under fire: recent reports have highlighted medical-safety issues, the uneven quality of emergency rooms, high costs, and lengthening wait times. Simultaneously, these institutions face increasingly severe economic pressure as their competitiveness against more focused alternatives declines and health care consumers become more value conscious. To overcome such difficulties, the industry must make some big moves. Many hospitals will have to reorganize around a narrower range of clinical activity, differentiate themselves on quality and service, think more like the retailers they are fast becoming, and overhaul their relationships with physicians.

How did US hospitals—a triumph of 20th-century technology and organization—reach the point where such dramatic changes are needed? Like the vertically integrated businesses that emerged contemporaneously early in the last century, hospitals once exploited economies of scale and scope by combining and managing a specific set of assets, such as pharmacies and imaging departments, clinical laboratories, and emergency rooms. Thanks to the professional nursing and aseptic procedures of hospitals, they were just about the only places that offered high-quality medical treatment. For physicians, practicing in hospitals was far more productive than traveling door to door. In addition, the standard of excellence hospitals are known to adhere to, as well as their inspirational mission made them frequent beneficiaries of philanthropy, which in turn helped them acquire expensive cutting-edge technologies that further enhanced the care they offered.

Little noticed were the seeds of future problems. Hospitals never really had to depend upon their most direct customers—patients—for revenue. The generosity of philanthropists and volunteers, the rise of employer-sponsored insurance in the 1930s and 1940s, and the emergence of government-sponsored insurance in the 1960s all insulated hospitals from the need to compete for patients. Today hospitals are "price takers" for nearly 50 percent of their revenues, which is subject to the political whims of the federal and state governments. Hospitals are also required to see, evaluate, and treat virtually any patient who shows up, solvent or not.

Furthermore, physicians were productive because hospitals put a great deal of capital at their disposal. Yet these hospitals didn't enforce standardized and efficient approaches to the delivery of care. At many hospitals today, doctors still bear only limited economic responsibility for the care decisions they make. Little wonder that it is often they who introduce expensive—and sometimes excessive— nonreimbursable technologies or that hospitals not only suffer from declining margins but are also performing less well than other players in the health care value chain.

These structural weaknesses have created openings for more focused providers that increasingly offer superior value: lower prices, higher quality, and better service. Stand-alone ambulatory service centers, diagnostic-imaging centers, endoscopy suites, and specialty hospitals have become powerful competitors. More are surely on the way as the equity markets (both public and private) and physicians themselves pour capital into the sector. At the same time, payers and consumers are becoming much better at recognizing and acting on price and value differences. Patients have much more at stake with the advent of high-deductible health plans, whose growth has accelerated as a result of the introduction of health savings accounts (HSAs).1 Enrollment in US consumer-directed health plans (CDHPs) of all types seems likely to exceed seven million people by the end of 2006. And a growing number of "infomediaries"—from payers to independent Web-based services to state governments—now help consumers make more informed decisions by providing information in areas such as hospital prices, quality, and service. Knowledgeable, value-conscious patients are beginning to view some hospitals as less effective places to seek care compared with many of their alternatives, including physicians' offices.

Hospitals can't respond to this shifting competitive and consumer landscape without tackling the underlying structural issues. A vital first step is to compete on the basis of strengths in specific clinical service lines rather than relying on the power of full integration. In areas such as cardiology, neurosciences, and oncology, it's impossible to sustain excellence with just a few patients a day, so all but the largest hospitals will need to rationalize their activities and become more focused: only with a critical mass of patients for individual service lines will they achieve competitive quality at reasonable cost. Several large payers are already nudging hospitals in this direction by adopting a "center of excellence" approach, which allows these payers to inform patients about (and reward them for using) preferred institutions. Hospitals that resist organizing around a narrower set of clinical services will probably enter a downward performance spiral as they experience greater difficulty recruiting top physicians, paying for the best specialty-service and equipment providers, exploiting economies of scale, and implementing best practices consistently. But hospitals that do these things well will also capture direct financial value from the quality improvements.

When hospitals become more focused and their patients more value conscious, they will start to resemble companies in other competitive service industries. Like cutting-edge retailers, they must identify the characteristics of the patients they can best serve and attract those people by creating specific value propositions. Indeed, since different patients want different types of improved services (such as private rooms, catered meals, and more attentive nursing), hospitals must understand what customers want and how they want it.2 Along with players in many other competitive service industries, hospitals are likely to find that a key source of differentiation is the consistent execution of frontline tasks, such as adhering to clinical protocols, maintaining efficient patient flows, administering drugs safely, and coordinating disparate activities effectively.

The importance of execution will extend beyond clinical activities. Hospitals that can't or won't quote prices before delivering service will drive away selective, value-conscious consumers. Hospitals with weak skills and systems for extending credit or making collections at the point of service may have higher bad debts. Better execution will require drastic behavioral changes from physicians, nurses, administrative personnel—and senior executives, whose jobs are becoming more complex. Better training, performance metrics, and compensation structures will all be needed to help hospitals change.3

Given the central role of physicians in operational and resource allocation decisions, it will be difficult to effect change without building a much stronger cultural and economic alignment between physicians and hospitals. For many physicians—particularly clinical specialists in the service lines where hospitals hope to differentiate themselves—the traditional arm's-length and more recent competitive relationship must give way to some sort of formal employment or to gain-sharing schemes such as joint ownership of equipment or even whole facilities. Furthermore, performance criteria for physicians must shift. In a world in which transparent quality, service, and prices help patients choose places to seek treatment, metrics such as admissions volumes will become less relevant. The more important considerations will include a physician's adherence to well-established standards of medical practice, willingness to embrace teamwork, and bedside manner, as well as a selection of services and equipment that strikes the right balance between cost and performance.

Changes of this magnitude may seem a tall order, but they are not impossible. US hospitals still represent the medical world's greatest accumulations of technological, human, and financial resources. If hospitals improve their focus, execution, responsiveness to consumers, and internal alignment, they can better their economic performance and make an even bigger contribution to health care in the 21st century than they did in the 20th.

Source: McKinsey & Co.


"April Retail Sales - City Rankings"

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  • Economic Snapshot – FY 2006
  • The Utah Tax Commission estimates that, based on preliminary fiscal year 2006 revenue collections, actual revenue will exceed the February Consensus Forecast by $355.5 Million, with over three quarters of this amount coming from individual and corporate income taxes. Final numbers for FY2006 will not be available until early September.

    Source: Utah State Tax Commission, 7/19/06

  • Economic Notes:
    • Consumer Credit (G19)

    • Consumer credit increased $10.3 billion or 5.7% at an annual rate in June. The latest increase in consumer credit was driven by gains in both nonrevolving and revolving credit. The latter continues to post strong growth as high interest rates undermine home equity borrowing.
    • Global Business Confidence

    • Business confidence is sliding once again, under pressure from developments in the Middle East, but it remains consistent with a global economy that is expanding at its potential. This comes after sentiment in July recovered much of its May and June losses. Sales have been unable to sustain their improvement through the first three weeks of July. Investment has also led the decline while hiring has held up better. Pricing pressures remain intense, although they too have moderated. North American, Asian, and South American business confidence is about as equally as optimistic. European business confidence continues to lag. High-tech firms are the most positive. Non-auto manufacturers also remain optimistic. Vehicle manufacturers, retailers, entertainment and educational firms are negative
    • FOMC Meeting

    • After 17 consecutive rate hikes, the FOMC held the fed funds rate steady at 5.25%, citing slowing growth, including a weakening in the housing market and the lagged impact of higher interest rates and energy prices. While noting higher core inflation, the statement said this is likely to moderate given slower growth. The FOMC maintained its tightening bias, referring to “additional firming that may be needed”. The decision was not unanimous, with one member favoring a 25 basis point increase in the fed funds rate.
    • Chain Store Sales

    • Chain store sales fell 0.2% in the week ending August 5, according to the ICSC. Year-over-year growth rose to 2.5%, the best growth in four weeks.
    • MBA Mortgage Applications Survey

    • Mortgage demand increased last week, with the market index rising 4.9% in the week ending August 4. Purchase applications increased 3.4% and refinance applications increased 7.1%.
    • International Trade (FT900)

    • The nominal U.S. trade deficit in goods and services narrowed in June. In June, the U.S. trade deficit came in at $64.8 billion, $0.2 billion less than May’s revised $65.0 billion, according to the Bureau of Economic Analysis. In June, exports increased more than imports. The goods deficit with China, however, widened again to $19.7 billion in June.
    • Federal Budget

    • The unified deficit for July was $33.2 billion, on track with the CBO’s preliminary estimate. Through the first ten months of fiscal year 2006 the U.S. has run a unified deficit of $240 billion, 21% smaller than at the same point last year.
    • Job Openings and Labor Turnover Survey

    • The U.S. labor market created 4.76 million new jobs in June, while 4.55 million left their jobs. Both the number of hires and separations fell. As a result, the hire rate fell to 3.5% from 3.7% in May and the separation rate fell to 3.4% from 3.6% in May. Meanwhile the number of openings increased to 4 million, suggestive of difficulty finding qualified workers.
    • Oil and Gas Inventories

    • Crude oil inventories fell 1.1 million barrels for the week ending August 4, according to the Energy Information Administration, which was above expectations of a 0.8 million barrel decline. Gasoline inventories also fell sharply by 3.2 million barrels for the week, which was far above expectations of a 1.1 million barrel draw. Weaker gasoline imports and strong demand growth weighed on gasoline inventories. Refinery utilization edged up slightly. This report will have a clearly bullish impact in prices.

  • This Weeks Leads
    • Le Creuset Store and Le Creuset Outlet Store
    • Schiller Stores, Inc. trades as Le Creuset Store and Le Creuset Outlet Store.
    • The 38-unit chain operates locations nationwide.
    • The stores, selling cast iron cook wares, occupy spaces of 900 sq.ft. to 2,500 sq.ft. in freestanding locations, lifestyle, outlet and specialty centers and downtown areas.
    • Plans call for six openings nationwide during the coming 18 months.
    • For details, contact: Vikki Jackson 114 Bob Gifford Boulevard Early Branch, SC 29916
    • Bubbles, Haircuttery and Salon Cielo and Spa. Bubbles and Salon Cielo and Spa
    • Ratner Companies trades as Bubbles, Haircuttery and Salon Cielo and Spa. Bubbles and Salon Cielo and Spa operate 40 locations throughout FL, MD, NC, Philadelphia, PA and Washington, DC.
    • The hair salons and spas occupy spaces of 1,200 sq.ft. to 1,600 sq.ft. in malls and strip centers.
    • Growth opportunities are sought throughout the existing markets during the coming 18 months. Typical leases run five years with five-year options. Haircuttery operates 1,000 locations throughout DE, FL, GA, IL, IN, MD, NC, NJ, NY, PA, SC, VA, WI, WV and Washington, DC.
    • The hair salons occupy spaces of 1,100 sq.ft. to 1,400 sq.ft. in strip centers. Plans call for 75 openings throughout the existing markets during the coming 18 months. Typical leases run five years with one, five-year option.
    • For details, contact John Colvin, 1577 Spring Hill Vienna, VA 22182; 703-269-5280, Fax 703-269- 5418, Email: jcolvin@ratnerco.com Website: www.ratnerco.com
    • Consolidated Theatres
    • Consolidated Theatres, a 26-unit chain operates locations throughout GA, MD, NC, SC, TN, VA and Washington, DC.
    • The movie theatres occupy spaces of 40,000 sq.ft. to 100,000 sq.ft. in mixed-use and power centers.
    • Plans call for four locations east of the Mississippi during the coming 18 months.
    • For details, contact: David Orr, Consolidated Theatres , 5970 Fairview Road, Suite 700 , Charlotte, NC 28210 704-643-7740, Fax 704-643-1884
    • Fudgery
    • Fudgery, Inc. trades as Fudgery at 26 locations throughout AL, FL, IL, LA, MA, MD, MO, NC, NY, NV, PA, SC, TN, TX and WA.
    • The confection shops occupy spaces of 600 sq.ft. to 1,400 sq.ft. in entertainment, outlet and tourist centers and urban/downtown areas.
    • Growth opportunities are sought nationwide during the coming 18 months. Typical leases run five years. A vanilla shell is required.
    • For more information, contact: A.C. Marshall Fudgery, Inc. 119 Green Street Northeast Gainesville, GA 30501 770-287-1990 Fax 770-535-0045 Website: www.fudgeryfudge.com.

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