Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of George Staphos – Banc of America Securities/Merrill Lynch.
George Staphos – Banc of America Securities/Merrill Lynch
I wanted to go through the volume trends first. Earlier you said there has been no pick up from what you could see. Can you provide any color perhaps on what some of the early third quarter trends look like, adjusting for seasonality if there is any factor there in some of the key businesses. As a tag along question, you mentioned you are seeing continued signs of cancellations and delays in orders specific to the RIS business. Can you give us a bit more color on that?
Dean Scarborough
First of all, we are about three weeks into the third quarter and it looks just like May and June. I am also reluctant to take any judgments from that. Europe will likely take the opportunity through their normal shut down period to take an extended shut down. I think a lot of businesses are thinking and talking about that. I am not optimistic the third quarter is going to show any kind of dramatic improvement.
When you talk about RIS, in fact Europe really did play a role here. Our order rates from European based retailers and brand owners were decreasing the last few quarters at a single digit rate and they moved into double digit territory in the second quarter. In fact, that was probably the single biggest surprise that I saw in that business. In the U.S. most of the retailers I talked to have this attitude; that is, I would rather run out of stock of something than have to mark it down because I can’t sell it.
In fact, most of the retailers and brand owners have anywhere from 15-20% inventory reduction targets and even when they place initial orders they are placing lower initial orders than they normally do and again will chase replenishment rather than having it kind of flow in. So they have definitely changed their buying behaviors there.
Finally, in Pressure Sensitive I think most of us see Pressure Sensitive, or at least those of us who have been around for awhile, it is a bit of a leading indicator. I would say that we have seen a little bit of an improvement in the emerging markets of Asia where we saw a little bit of a rebound in the back part of the quarter. Maybe we have hit a bottom in the U.S. but I wouldn’t characterize it as growth. As well in Europe I am just not sure we have hit the bottom yet. Hopefully that is enough color.
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