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In the Headlines-May 8th, 2015

In The Headlines

Built for Comfort: Wrangler Jeans Make a Comeback

Skinny jeans are out. Wranglers are in. The Western-themed jeans brand, known for dusty cowboy commercials in the 1980s, is making a comeback as more consumers seek roomier pants. Wrangler sales have grown for four straight quarters, climbing 9% in the most recent period.

Wrangler is courting shoppers with the message “Life is Comfortable,” capitalizing on the shift from ultra-tight jeans and other restrictive attire. But Wrangler’s parent company, VF Corp., is not relying on nostalgia to fuel sales. The company has introduced new product lines that feature four-way stretch, wicking, and sweat-controlling technology. It also has turned to athletes, not cowboys, to tout the brand, with an ad starring 36-year-old Drew Brees, quarterback for the New Orleans Saints.

“If you make a product that is really comfortable but still has that style and functionality of denim, you’ve built a product that your consumer wants,” Scott Baxter, President of Jeanswear Americas at VF Corp., said. “Denim can be worn to a lot more occasions than sweatpants.” The company is also coping with a shift to “athleisure,” the trend of people wearing gym clothes as streetwear. When athleisure clothes took off in recent years, it began to hurt denim sales across the industry. In response, Wrangler set out to make its jeans as comfy as yoga pants or sweats.

While the shift primarily affected women’s sales, the company wanted to update its men’s jeans to address the changes, VF Corp. Chief Executive Officer Eric Wiseman said. As part of a push for innovation, the jeanswear division has worked for the last five years to develop new products based on consumer research. Now, those products are hitting shelves.

Wrangler last year introduced its “Advanced Comfort” products, which incorporate more stretch. This summer, the company will debut its “Cool Vantage” line, which wicks sweat five times faster than traditional denim, with the tagline “Cowboys never lose their cool.” They are meant to appeal to men who work in the jeans, and the products will be promoted in campaigns on television, radio, billboards, and in stores, especially in Southwestern states.

Wrangler’s results last quarter lend support to the strength in VF Corp.’s overall denim business, which reported 6% revenue growth excluding currency moves. The company, based in Greensboro, North Carolina, sells its jeans through retailers like Wal-Mart Stores, Inc., and J.C. Penney Co. Wrangler has outperformed the company’s overall Jeanswear category for the last seven quarters.

Wrangler also makes jeans cut in a U-shape rather than a traditional V, for “more room where you need it most”—at the point below the hips where the material flexes the most during wear. Lululemon Athletica, Inc., is taking a similar tack with its popular ABC pants, a design the company says “gives you room to breathe.” Baxter said innovation will continue to be a hallmark of Wrangler products in the future as the brand appeals to a wide set of consumers.

The Jet Card: A New Way to Join the Jet Set

In the private-aviation world, the card model is supplanting full or fractional plane ownership. Jet cards have become the newest status symbol, similar to owning an Apple Watch Edition. As plane sharing develops into a fast-growing segment of the private-aviation industry, old and new companies alike are offering memberships, apps, and flexible options to make private planes increasingly affordable for business travelers.

The concept is simple: A jet card provides access to private planes for a flat fee, usually for a set number of hours. Unlike fractional ownership, the once-popular air travel equivalent to a timeshare, jet cards are similar to Zipcar and Spotify. You do not need to own a plane—even partially—to use it. You just will not always fly on the same aircraft. And as jet cards gain traction, shared ownership is on the decline. One example: In 2013, Bombardier sold off its Flexjet unit as customers began turning away from shares and toward cards. Now Flexjet also offers a card system, called Flexjet 25.

The jet card is not a brand new idea, but it is more popular than ever before. The options are dizzying as more companies get into the game. The current leader in the market is Marquis Jet, which was founded by Kenny Dichter in 2001 and sold to Berkshire Hathaway’s NetJets in 2010. Marquis charges just over $100,000 for 25 hours of flight time (far less time than is needed by a typical globe-trotting CEO). Now Dichter’s newest venture is Wheels Up, a more exclusive club model aimed at celebrities and athletes.

Magellan Jets, the charter operator, has created a 25-hour card and also has a “build-a-card” option. New apps like JetSmarter and BlackJet (started by an Uber co-founder) show you empty jets for booking or open seats on private planes for a single flight, à la Kayak. Despite all the new options, some critics have expressed doubt about whether such businesses can charge so little and survive. “There are 50 different ways to make this work,” says Drew Callen, President of Boston JetSearch, “and many are interesting, but complicated.”

The appeal of a jet card is obvious: Even if you can afford to own a plane, why buy one if you could save money by using someone else’s? The deciding question is: How many hours a year will you fly? If it is under 200, ownership does not make sense. The average full or fractional owner of a plane travels 400 hours a year.

For jet owners, the trend is creating new opportunities. Anyone with a plane can create a jet card program, and many are—from big national players like NetJets to regional outfits, which are sometimes just one individual selling blocks of time on his or her own plane. In some cases, you can now get a 10-hour card for less than $50,000. Research firms JetNet and Argus count eight major jet card providers, including Flexjet, Marquis, and Delta PrivateJets, but there are dozens of smaller operators. To be sure, there are still those who see value in owning their own plane, and will not settle for less. “In some of the Asian markets especially, there’s an emotional preference to buy a new aircraft,” says David Mayer, a partner at aviation law firm Shackelford, Melton, McKinley & Norton. “They want it to be their plane, their design. ‘I bought it, it’s mine and mine only.’”

What is the real reason for the popularity of jet cards? They cleverly target a large population of travelers who have wealth, but are still on a budget. “I can’t even see, today, why a business guy needs to own his own aircraft. For the majority, ad hoc charter is sufficient, and if they owned an airplane, it would bankrupt them,” says private-aviation consultant Richard Ziskind. “I think these hybrid programs are going to become the dominant product.”

1. http://bloom.bg/1EJCgnJ – Bloomberg
2. http://for.tn/1ysvI85– Fortune

The Good News Is . . .

• U.S. consumer sentiment rose in April, according to a report released on Friday. The Thomson Reuters/University of Michigan’s final April reading on the index was 95.9. It was up from the previous month’s reading of 93.0, and barely missed estimates of 96.0. Consumer sentiment in April was at its second highest level since 2007, and was higher than the average level during the last five months than at any time since May 2004.

• Apple, Inc., a global consumer technology company, reported earnings of $2.33 per share, an increase of 40.4% over year-ago earnings of $1.66. The firm’s earnings topped the consensus estimate of analysts by $0.17. The company reported revenues of $58.0 billion, an increase of 27.1%. Management attributed the company’s results to record sales of iPhone and Mac, and all-time record performance of the App Store.

• Capgemini, the French technology and outsourcing company, agreed to buy its United States rival iGate in an all-cash deal worth $4 billion. The move comes as Capgemini, which provides consulting, information technology, and other tech services to companies around the world, tries to bolster its presence in the North American market. Under the terms of the deal, Capgemini, which is based in Paris, will pay $48 per share of iGate, which has its headquarters in Bridgewater, N.J. In total, the transaction would create a combined company with more than $13.6 billion in annual revenue and with a global work force of 190,000.

1. http://on.wsj.com/1AynpbS – Wall Street Journal
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://apple.co/1HLufAX – Apple, Inc..
4. http://nyti.ms/1FIQUxC – NY Times Dealbook

Planning Tips

Tips for Evaluating Home Warranties

Homeowners can purchase a home warranty to cover repairs on items such as heating and air conditioning systems, plumbing and electrical systems, and appliances in their homes. Many home sellers and real estate agents buy a home warranty as a buyer incentive. Warranties can provide peace of mind, but if you are considering purchasing one, you should understand the limits of their coverage so you are not surprised by service fees and other out-of-pocket costs. Below are some tips for evaluating home warranties.

Determine what is covered – The most important thing for you to understand about a home warranty is what is covered and what is not. Some consumers think the warranty automatically covers all appliances and systems, and that those items will be replaced by the warranty company if they cannot be repaired. But there are limits to every policy.
• Read the plan: Before you purchase a home warranty policy or rely on one, read the details so you understand whether all of your appliances and systems are covered or not. For example, your heating system could be covered but not your air conditioning.
• Limits: Every home warranty company limits their coverage for specific systems and appliances to a maximum of $500, $1000, or $1500, which may not pay in full for a replacement if one is needed.
• Pay for extra coverage: If you want to have your garage door opener, central vacuum system, or septic system covered by a home warranty, you may have to pay for enhanced or optional coverage.

Understand whether coverage can be denied – If you have a home warranty you may think all repair costs for covered appliances and systems will be paid, but there are many circumstances under which the home warranty company can deny payment. For example:
• Improper installation or maintenance: Home warranties only cover working appliances and systems, so if there’s evidence that your sump pump was installed incorrectly or your water heater was never maintained, the repair payment could be denied.
• Unusual wear and tear: Items that are normally covered by a home warranty policy, such as a whirlpool tub, may not be covered if your tub shows signs of being improperly used.
• Code violations: If the components of your heating or electrical systems don’t meet local building codes, the warranty company won’t necessarily repair them.

Check out the service providers used – One of the benefits of a home warranty is that the company will choose and send a service provider to your home, which relieves you of the burden of finding someone. The disadvantage of this system, though, is that you typically cannot be reimbursed for work you do yourself or for hiring your own contractor. Important questions to ask include:
• Are service providers licensed? Check out the fine print of the home warranty to find out whether the company requires contractors to be licensed, bonded, and insured.
• Can you use your own providers? Most home warranty companies require the use of their providers to make sure the work is done correctly and for the right fee.
• How will the company handle a complaint? If you are unhappy with the service you receive, find out if the company will send out a different contractor with or without charging another service fee.

Calculate the cost of the warranty – The cost of a home warranty, typically paid annually in a lump sum, varies according to your location, your property and the level of coverage you choose.
Annual cost: Average costs range from $350 to $500 annually and are customized according to your state and the type of home you live in, such as a townhouse, condominium, single-family home or duplex.
Level of coverage: Your warranty cost will depend on what you choose to cover, such as just your appliances or just your systems, and whether you opt to cover both.
Fees: Service fees vary according to the company and the plan you choose, but average $75 to $100 per service call. Find out if you are charged a fee for repeat visits for the same issue.

Investigate the warranty company’s reputation – You should base your choice of a home warranty company on its reputation for honoring contracts, for quick response time to claims and for their reliable service providers. Real estate agents are often a good source of information about reliable companies. Other items to check include:
License: 32 states require home warranty companies to be licensed, while the rest do not, so you should check out your state’s regulations.
Reviews and complaints: Check out reviews on the company’s reputation for reliable service, how often they replace appliances or systems and their cost and look for complaints.
Claims process: Find out how long it will typically take to get service if you make a claim. The best companies allow you to make a claim 24 hours a day.

1. http://bit.ly/1GS2UM9 – Bankrate.com
2. http://bit.ly/1GIEphS – Consumer Affairs
3. http://bit.ly/1EZE7bq – HomeWarrantyReviews.com
4. http://bit.ly/1zpC7Xi – Popular Mechanics
5. http://bit.ly/1FW05tv – Zillow.com

Please don’t hesitate to give us a call if you need help with any component of your financial planning.

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