Texas Business Report: Making a Killing In the Funeral Industry

America's leading death-care provider, based in Houston, charges 42% more for its traditional funeral services; Torchy's taco is suing the Texas Taco Company; bags might not fly free at Southwest; and more.
Fri October 25, 2013 3:15 pm

As I Pay Dying
Businessweek’s latest cover story profiles Houston-based funeral services provider Service Corporation International and its rise to the top of the U.S. death-care industry. SCI — which operates funeral homes and cemeteries, oversees burials, and offers services ranging from embalming to cremation — is a publicly traded company with a market cap valued at about $4 billion. It could soon grow even more if the Federal Trade Commission approves its proposed $1.4 billion bid to acquire the second-largest player in the industry, Stewart Enterprises, early next year.

The article compares SCI’s position in the market to that of its smaller, family-owned competitors, finding that despite its streamlined operations, the company charges about 30 percent more for cremations and about 42 percent more for traditional funerals than its independent counterparts. Also, according to the magazine’s research, SCI owns 73 of the 100 most expensive funeral homes in the U.S.

The Bottom Line : The company’s earnings per share grew by 26 percent in the first half of this year, and its stock value has increased by nearly 40 percent. Its future could be even brighter: Thanks to pre-arranged contracts for future funeral arrangements, SCI anticipates “a backlog of future revenue of $7.5 billion,” or more than $9 billion if the Stewart acquisition goes through, Businessweek reports.

Hostile Taco-ver
The first shot in the Texas Taco War of 2013 has been fired. Austin-based Torchy’s Tacos is suing the Houston-area Texas Taco Company for offering menu items it claims are “blatant Torchy's rip-offs,” thus causing “clear consumer confusion,” CultureMap Austin reports. In the lawsuit, Torchy’s claims it fired a former cook after catching him stealing a compilation of secret recipes dubbed the “Taco Bible,” which he later handed over to its rival.

The Bottom Line : As CultureMap notes, the key issue in the case — which could set a historic legal precedent in the field of taco law — is whether “style and presentation make a recipe so unique that it's a trade secret.”

Pier Pressure
Following a quarter in which its profits declined by more than 30 percent, Pier 1 Imports now plans to buy up about $200 million of its own stock . Businessweek reports the home furnishings retailer’s share price “took a pounding” after the release of the Q2 filing in September. However, the stock has gradually ticked upward in recent days on the news of the buyback.

The Bottom Line : Pier 1, which is headquartered in Fort Worth, also announced that it is preparing to add several new faces to its board of directors, including executives who have worked at Coca-Cola, Yale University, and Weight Watchers International, according to the Dallas Morning News .

Winner of the Week: AT&T
AT&T reported this week that it signed up more than 360,000 new wireless customers in the third quarter — more than double the 150,000 it added in the same period in 2012, according Businessweek. Thanks to the boost in subscribers as well as a bump in data plan revenue, the Dallas telecom company’s profit surpassed most analysts’ projections, as sales increased by 2.2 percent and net income grew 4.9 percent.

Earlier in the week, AT&T announced a $4.85 billion deal to sell or lease out 9,700 of its cell towers. The carrier will use that cash to continue its aggressive $14 billion data network overhaul, according to Businessweek.

Losers of the Week: Heavy Packers
Southwest Airlines passengers, be warned: The days of the “Bags Fly Free” policy may be numbered. The Wall Street Journal reported Thursday that “the carrier could soon start charging for checked baggage if the flying public comes to accept the fees that other airlines charge.”

In a conference call, CEO Gary Kelly said Southwest will continue to allow passengers to check up to two free bags through at least the end of 2014, but he added that the airline could eventually move toward an “a la carte approach” of charging fees for checking luggage and other services.

The policy has been a mixed bag for Southwest, which analysts estimate could be “missing out on tens of millions of dollars a year” by not imposing the fee. However, according to the Journal, Southwest flights are about 10 percentage points fuller than they were before other airlines began charging bag fees in 2008. And earlier this year, Kelly estimated that removing the perk “would negatively impact our revenues by close to $1 billion a year through defections of customers.”

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