Tuesday Report - February 13, 2001

The weekly newsletter for everyone interested in barter--the world's most versatile business tool!

February 13, 2001

Gargantuan Inventory Pile-Up Bodes Well For Barter Industry

Retailers across the country are staggering beneath tons of unsold holiday merchandise--the largest in decades. Desperate to empty their bulging warehouses they're dumping their stockpiles to deep-discount stores, and turning to barter companies and liquidators for relief.

All in all, retailers are trying to liquidate a gargantuan pile-up. Inventories have hit $4 billion, up from just $250 million a year ago, according to liquidation experts. Half of that comes from two mega-bankruptcies since Christmas...Montgomery Ward and Bradlees.

The rest comes from smaller failures and a series of closings by chain stores. OfficeMax, for example, is shutting 46 stores and J.C. Penney 47 stores.

John Kramer, president of corporate barter company Icon International, says retailers are offering to trade merchandise for TV ad time and other services. "We've always had last year's Christmas gifts such as breadmakers and snakelights, but now we're looking at a lot more stuff that could be put back on the shelves."

Why did the stores make such a horrendous mistake? (Wall Street analysts expected a 5% increase in retail profits for the fourth quarter, but are now looking for a 2% drop!) They were far too optimistic about Christmas sales back in the spring and summer, when many of them put in their holiday orders. On top of that, overexpansion of U.S. stores has added to the widening inventory ocean.

What's ahead? Retailers are still likely to face tougher times thanks to a new mentality by bargain-hunting shoppers. A year ago, one-third of U.S. households surveyed by America's Research Group said they were willing to pay full price for many of their purchases. Today, that number has fallen to fewer than one in four--a sign that may spell even bigger inventory troubles later on.

ITEX Corporation Gets Exposure On Haig's World Business Review TV Series

Collin Christensen, president & CEO of Sacramento-based ITEX Corporation, a nationwide trade exchange network, will be seen on Alexander Haig's World Business Review, February 10-15 on U.S. public television stations. For specific dates e-mail healingm@mmpusa.com.

Haig, the former Secretary of State for President Reagan and COO/President of United Technologies, queries Christensen about trade exchange services.

According to Kristin Pealy, the show's associate producer, ITEX was selected to appear on the program because they use the Internet as a major tool, assisting their clients in organizing their resources.

Christensen declared, "We believe using internet technology is a critically important tool for our clients. Not only for brokers and corporate communications, but for data and transaction processing as well."

Here And There. . .

The IRTA European Conference will be held April 26-29 in Milan, Italy. We have been told that all barter company officials from around the world are welcome. Further details on this exciting event will be posted next week.
Nigeria has placed an order for twenty CN-235 planes with Indonesian aircraft maker PT Dirgantara, in a barter deal under which the African country will supply crude oil.
Www.tradedollarauction.com is a new site, announcing "The World's First Auction" using trade dollars.
Bill Seidman, CNBC TV chief commentator, says we are entering the 15% recession, which is accounted for by the manufacturing sector of our economy. And it's that segment that is in a recession -- not the 85% service sector, which is simply a bit softer. He admitted that this is a unique situation, in that during the last recession the country faced manufacturing was 30% of the economy.

Reinforcing Seidman's comments, only 5% of economists surveyed by Blue Chip Economic Indicators say that the U.S. has slipped into a recession, though this year's economy is expected to be the worst since 1991. (Growth is expected to be just 2.1% this year in inflation-adjusted gross domestic product.)
Law firms from California are following the right business model, according to Cameron Stracher, a noted author who follows the legal profession.

According to Stracher, taking equity as partial payment for work done not only holds out the promises of riches to law firms that receive shares in an IPO, but it creates an entrepreneurial environment, with the law firm acting as a partner in a start-up's business.

Equity investment in clients recently received a cautious nod of approval from the New York City Bar Association's Committee on Professional and Judicial Ethics.

Stracher says the new economy may crash and burn, but it's sure to rise from its ashes, and the West Coast attorneys will be skipping all the way to the bank--on both coasts--while New Yorkers tentatively embrace a business model that offers equity to lawyers.
The February 21st Barter Venture Capital Conference scheduled for Chicago is being sponsored by Ibart. For further information call (847) 303-3616.
Delta Airlines has restructured its agreement with Priceline.com. They agreed to swap six million convertible preferred shares of Priceline for 80,000 new preferred shares plus warrants (or rights) to acquire 27 million shares of Priceline at $2.97 a share.

The deal is a good one for Priceline in that it sharply reduces their dividend expense--they were obliged to pay an 8% common stock dividend on Delta's preferred stake--and removes $280 million in liability from Priceline's balance sheet.
Internet advertising spending rose 52.6% to $2.9 billion in 2000, up from $1.9 billion in 1999, according to CMRi, a research unit of Taylor Nelson Sofres Company. (That figure is still less than 2% of the overall advertising placed in the United States.)

We welcome your comments, questions, and observations.

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