Welcome to the Jan. 11 Monday Business Briefing, your private business intelligence digest from Insider Louisville.
How three local stocks fared in the tumultuous first week of 2016
Like much of the market, some stocks of local importance fell in the first week of trading this year – though some were burned by the fallout from the Chinese sell-off more than others.
The S&P 500 index fell nearly 5 percent in the first four days of the year, while Louisville-based Yum! Brands, which has nearly 6,000 restaurants in China, fell 5.4 percent. The stock still has not recovered from the near 19-percent decline on Oct. 7, when the company reported disappointing third-quarter results. On Oct. 7, YUM closed at $67.26. On Thursday, it closed at $69.08. Investors also may have reacted last week to the impending departure of Yum! Executive Chairman David Novak.
UPS, the Louisville area’s largest employer, dropped 3.8 percent in the first four trading days of the new year. UPS employs about 6,500 in China at more than 500 locations.
Meanwhile, Louisville-based health insurer Humana declined just 1.9 percent in the first four days of 2016, following a tumultuous year with a lackluster second half.
The company’s shares spiked more than 20 percent on May 29, closing at $213.64, after Cigna Corp. signaled it was interested in a deal. However, about a month later, the stock had given up nearly all of those gains, closing at $183.37 on June 24.
In the remainder of the year, Humana’s stock fell nearly $5, or 2.6 percent. The S&P 500 during that span lost 3 percent.
While a strong jobs report on Friday indicated continued economic growth, the editor of the Gloom, Boom & Doom report told Yahoo Finance that he would be surprised to see any growth in the U.S. this year because of indicators including a weak home-building sector and poor earnings outlooks. —Boris Ladwig
How Thorntons is dealing with sales declines amid store renovations
People may be creatures of habit, but Thorntons has learned that customers are quick to change their habits when gas stations close for renovation.
Thorntons is investing $125 million to renovate all of its 183 stores in Kentucky, Indiana, Ohio, Illinois, Tennessee and Florida. The process started in 2014 and is expected to take about five years to complete.
And even though Thorntons locations close for only four weeks during renovations — a short period in construction time — Tony Harris, president of the Louisville-based convenience store company, told Insider Louisville that Thorntons has noticed sales numbers declined for items such as cigarettes once a renovated store reopens.
“We lost a lot of our core business,” he said.
That isn’t to say store sales have declined overall. In fact, Harris said, sales remain steady when compared to pre-closure numbers because renovated Thorntons stores have seen food and beverage sales double when they come back online.
“We really just had to improve our quality (of food),” he said. Food, such as sandwiches, pizza and burgers, now are made fresh daily at individual Thorntons stores.
And slowly but surely, that core business is returning, Harris said.
“It is starting to come back, but it is taking a while,” he said. “We should have anticipated more loss.”
Thorntons has learned its lesson, though, and now when it closes a store for renovations, it keeps the gas pumps running and operates a small makeshift store in front that sells tobacco products, soft drinks and other small items.
In addition to renovating all stores, the company also is undergoing big changes at home. Thorntons is moving from its longtime headquarters on Linn Station Road to a brand new site behind Jewish Hospital Medical Center Northeast.
Wayne Estopinal’s architectural firm TEG Architects designed Thorntons’ new $27.8 million, 92,500-square-foot headquarters (shown above). Shepherdsville, Ky.-based Kelsey Construction and Cincinnati-based Messer will handle the construction of the building.
Thorntons has received $2.6 million from the Kentucky Economic Development Finance Authority to help cover the cost. The company expects to move in February 2017 and will add 110 new jobs.
The new headquarters will accommodate 10 to 15 years of company growth, Matt Thornton, Thorntons’ CEO, said at the groundbreaking Friday. The company also has the option of eventually expanding its headquarters. Thornton said the entire property will accommodate 40 years of growth.
Garden, home décor store moving out of Westport Village
Secret Garden is growing.
The garden and home décor store will shut its doors in Westport Village on Jan. 25 and open in a larger 5,000-square-foot store in Eastgate Shopping Center, 12621 Shelbyville Road, on Feb. 1.
“We needed to expand. We are doubling the size of the store, and we are also including in that store a little specialty boutique,” said Cheryl Susiemichael, owner of Secret Garden.
The boutique within the shop will be called Magnolia and Fig. It will feature women’s and children’s clothing as well as art and jewelry. Secret Garden also will add more fountains and statuettes — popular items for the store.
“We just don’t have enough room here to display enough of them” at our current location, she said.
Susiemichael tried to negotiate a new, larger place within Westport Village, she said, but they could not accommodate her.
Secret Garden is one of multiple Westport Village tenants involved in an ongoing lawsuit against the shopping center’s owner, Camelot Acquisitions. The suit alleges that tenants were overcharged by the company for maintenance and upkeep services that were not performed adequately. While Susiemichael said the lawsuit was not the reason for her departure, she noted that it was a factor considered.
“Obviously, that is something that has to be thought about before a company invests for five more years. Do I want five more years under this situation?”
For Secret Garden, the move comes at the perfect time, Susiemichael said. Its five-year lease at Westport Village is up; all the new products for 2016 will start rolling in this month, and Feb.1, the day it opens in Eastgate, will be the store’s 20th anniversary. —Caitlin Bowling
PharMerica agrees to pay $2.5m to settle anemia drug case
Louisville-based PharMerica has agreed to pay $2.5 million to settle allegations it was involved in a scheme in which drug companies padded their profits by switching medications of tens of thousands of long-term care facility patients for uses for which they had not been approved.
The settlement dates back to a lawsuit filed in South Carolina in 2011 by the federal government, 25 states, the District of Columbia and the city of Chicago. Frank Kurnik, a whistleblower and former employee of drug maker Amgen, had alerted authorities to the alleged fraud.
Pharmerica delivers more than 30 million prescriptions a year to nursing home patients, according to its website.
In the legal complaint, the governments allege that PharMerica, Amgen, Omnicare and other companies conspired to commit fraud to meet “overly ambitious sales goals” for Amgen’s anemia drug Aranesp.
The suit alleges that Amgen, in a battle over market share with Johnson & Johnson, and the other companies orchestrated a scheme to mislead health care professionals to switch patients to Aranesp for uses that had not been approved by – and some that had been specifically rejected by — the Food and Drug Administration.
The companies “altered the treatment of tens of thousands of patients, many of whom were/are in long-term care facilities and incapable of detecting that their pharmaceutical regimen was being altered for the primary purpose of meeting a giant pharmaceutical company’s bottom line projections,” the governments allege.
PharMerica, a Louisville-based long-term care pharmacy, did not return a phone message left by IL.
South Carolina U.S. Attorney Bill Nettles could not be reached but said in a press release that the case shows how the government can work with whistleblowers “to recover money for taxpayers.”
“Public health insurance programs shouldn’t foot the bill for drug company schemes that manipulate doctors and patients to maximize profits,” Nettles said.
Amgen in 2012 pleaded guilty to a federal charge in New York and agreed to pay $762 million to resolve criminal and civil suits.
Through the first nine months of this year, Amgen generated net income of $5.14 billion.
During that same period, Pharmerica has recorded net income of $14.9 million, but the company has had repeated run-ins with federal authorities:
In May of last year, PharMerica agreed to pay $31.5 million to settle a lawsuit that alleged it had dispensed controlled drugs without a prescription and submitted false claims to Medicare for the improperly dispensed drugs.
And in October, the company agreed to pay $9.25 million to settle allegations that it solicited and received kickbacks from Abbott Laboratories in exchange for promoting the anti-epileptic prescription drug Depakote for nursing home patients. Abbott settled criminal and civil cases related to the Depakote scheme in 2012, agreeing to pay $1.5 billion.—Boris Ladwig
Affordable Housing Trust in search of new director
The Louisville Affordable Housing Trust Fund is seeking applicants to become the new executive director for their organization, which helps raise and manage funds to increase the supply of affordable housing in Louisville.
The vacancy comes following the departure of Rachel Hurst, who left in November after more than three years at the helm. It is unclear what prompted her departure, though WFPL reported it followed “lengthy discussions” on the trust fund board.
The executive director is responsible for managing and directing the fund, as well as working with city government staff, affordable housing advocates and developers in order to secure dedicated funding and build broad-based support in the community for affordable housing.
The LAHTF was created in 2008 by Metro Council, along with a pledge to allocate a dedicated annual stream of $10 million to the fund – though to date no such source has been identified.
LAHTF board chairwoman Natalie Harris is serving as interim director until a replacement is hired.
Interested candidates are to submit their résumés to [email protected] by Jan. 22. —Joe Sonka
Funtown Mountain to be sold; new occupant for old Why Louisville space soon?
It’s been widely reported that Cave City’s Funtown Mountain is being put up for sale by Kentucky Tourism Development Finance Authority and South Central Bank Inc. The orders of sale were granted by Barren Circuit Court Judge John Alexander.
South Central Bank loaned owner Will Russell $250,000 and holds a lien on the portion of the property that is located below the hill. The Kentucky Tourism Development Finance Authority also granted Russell a $250,000 loan and holds a lien against the property, but only for the portion that is located atop the hill.
Funtown Mountain was meant to be the culmination of Russell’s lifelong dream: to own a roadside attraction in Cave City. But shortly after the attraction’s soft opening, Russell’s long-time issues with mental illness and addiction led to a series of events that derailed the dream.
After entering inpatient treatment, Russell filed for bankruptcy and shuttered both of his popular WHYLouisville stores — one in NuLu and one on Bardstown Road.
Last week we saw the iconic “WHY Louisville yellow” being covered up by dark paint at the NuLu store. That’s some prime real estate there.
Louisville named a top destination for LGBT travelers
Last week, we published a list of all the accolades Louisville garnered in the last year from various national and international media outlets. From “Best Up-And-Coming Food City” to “20 Greenest Cities in America,” we have certainly caught the attention of people who make lists.
And they just keep on a-comin’. The Orbitz travel site recently named us one of the “10 hottest gay destinations for 2016,” and we’re rubbing elbows with fancy spots like L.A., Paris, Thailand and Rio de Janeiro. We come in at No. 4 on the impressive list:
“Don’t let one homophobic county clerk fool you into thinking the Bluegrass State is intolerant. Southern hospitality rules in Louisville, an urban charmer that rolls out the welcome mat for queer tourists along culturally rich Main Street which bustles with cool lodgings like the 21c Museum Hotel, cultural attractions including the Actors Theatre of Louisville and places to swill bourbon. Meanwhile, gay nightlife has shifted away from downtown and toward lively and rambling Bardstown Road where hetero hangouts rub shoulders with happening queer joints like Chill Bar, Big Bar and Nowhere Bar.”
WaterStep receives $18,750 gift from Delta Dental
Louisville nonprofit WaterStep has received a $18,750 gift from Delta Dental of Kentucky’s Making Smiles Happen initiative to support its Water Education Program. The program teaches students about the world’s water crisis and solutions, and the social, economic and environmental effects of unsafe drinking water.
The curriculum targets students in grades 1-12. The program can come to a classroom or host it onsite at WaterStep’s HQ.
“Clean water is an essential element in oral and overall health, so WaterStep’s education program falls right in line with our mission to support organizations that promote improved well-being of Kentuckians,” said Dr. Cliff Maesaka, Delta Dental of Kentucky’s president and CEO. “We value and applaud their efforts to educate local youth about the importance of having access to safe water, as many people around the world are not so fortunate.”
WaterStep and the Water Education Program were founded in 1995 by Mark Hogg. WaterStep equips communities with tools and training in water purification, disaster relief, health education and well repair. They’ve brought safe water to people in more than 30 countries.
The gift from Delta Dental will go toward updating the curriculum and teaching supplies. —Melissa Chipman
Despite concerns about a lack of parking in Germantown, the eight-person Planning Commission unanimously approved a rezoning as well as variances and waivers needed to move forward with the Bradford Mill Lofts project.
“This is two-and-a-half acres of blighted property, so I think this is a home run, and that there are many, many more people in that neighborhood who will benefit and be happy that this is there than people who will be inconvenienced by the parking,” said planning commissioner Vince Jarboe.
The project will head to Louisville Metro Council for final approvals.
Bradford Mill Lofts is a proposed 147 loft-style apartment complex with a 2,500-square-foot restaurant, a pool and a fitness center. The Marian Development Group, along with investor Chad Middendorf and attorney Ashley Blacketer, are the developers behind the project.
Much of the Planning Commission meeting last week revolved around parking. Bradford Mill Lofts developers propose 144 parking spaces, but some commissioners questioned whether that was enough to accommodate not only the renters but also the people visiting the restaurant.
“It is a big deal in my mind,” said planning commissioner David Proffitt.
Cliff Ashburner, the attorney representing the developers, said that the project’s target demographic is Millennials who tend to walk, bike or take alternative modes of transit at a higher rate than prior generations.
He admitted that Germantown is a dense neighborhood but felt the project accounted adequately for parking.
Louisville Metro Councilman Steve Magre (D-10) spoke out in support of the project.
“I really feel comfortable with however this parking thing works out. There will be enough parking,” Magre said.
The lone dissenter at the meeting, a resident named James Lynch said that nowadays, homes have more than one vehicle meaning more parking is need.
He also was concerned about noise from the planned restaurant. He cited personal experience living near Phoenix Hill Tavern.
Ashburner said that would not be the case. Jake Brown, founder of The Marian Development Group, used to live near Phoenix Hill Tavern as well, he said, comparing Bradford Mill Lofts’ restaurant to other Germantown eateries.
“That is not the sort of thing that happens around Hammerheads, Come Back Inn or Check’s,” Ashburner said.
He also noted that about 70 of the apartments will face the restaurant, and they’d would be hard to rent if noise or the behavior of restaurant goers become a problem.
“There is no one with more at stake than the developer of this project.” —Caitlin Bowling