NEWS ARTICLE ARCHIVES

NEWS ARCHIVES

U.S. stocks dive on weak retail sales, Citi woes
Citigroup swings to big loss on massive write-down, slashes dividend
NEW YORK (MarketWatch) -- U.S. stocks tumbled Tuesday, pressured by slumping retail sales in December and large losses at Dow industrials component Citigroup Inc.
"U.S. equities are snorkeling underwater following the weak round of data, with the retail sales report especially disappointing," said analysts at Action Economics.
Chart of $INDU
Retail ails
Underscoring investors' fears about the economy, the Commerce Department reported retail sales fell 0.4% in December, the first decline in six months and a performance worse than analysts had projected. Separately, the Labor Department said producer prices declined 0.1% last month, while core producer prices, which exclude food and energy, climbed 0.2%. See full story.
Citigroup, the largest U.S. bank, set aside $539 million in the fourth quarter to cover job cuts including those already announced and those yet to come, CEO Vikram Pandit told a conference call Tuesday morning.
"You can interpret this current quarter's $539 million charge as a down payment on the productivity efforts we are working on," Pandit said.
Earlier, Citigroup reported its first quarterly loss since 1998 -- a fourth-quarter hit of $9.83 billion -- while also raising more than $12 billion in new capital needed in the aftermath of massive write-downs tied to the company's exposure to the U.S. subprime meltdown.
Blockbuster 3Q Loss Widens, Plans Cuts

Dallas - November 1 - Blockbuster Inc.'s third-quarter loss widened as it lost a half million online customers and absorbed costs for layoffs and store closings.

Blockbuster reported a quarterly loss of $37.8 million compared with a loss of $27.5 million a year earlier. Revenue fell 5% to $1.24 billion, below analysts' forecast of $1.28 billion.

Blockbuster has spent heavily in the last couple years to build up its online business and was narrowing the gap in customers with industry pioneer Netflix Inc. But over the summer, the number of Blockbuster online subscribers fell to 3.1 million from 3.6 million.

Blockbuster aims to cut annual overhead costs by about $45 million. The company cut 400 jobs in September and closed more than 500 stores in the third quarter—about 7,800 stores remain worldwide. Blockbuster also trimmed advertising spending in the third quarter to $27.5 million from $33 million a year ago.

For the first nine months of the year, Blockbuster lost $125 million after preferred stock dividends on $2.44 billion in revenue, compared with a profit of $33.4 million on revenue of $2.51 billion last year.

Report: Canadian Finance Minister Urges Retailers to Slash Prices

Ottawa - October 24 - Canada's finance minister called on wholesalers and retailers on Tuesday to lower their prices to make them reflect the new strength of the Canadian dollar, which is now stronger than the U.S. greenback, according to global news agency AFP.

To make his point during a news conference, Finance Minister Jim Flaherty held up a copy of a Harry Potter book that was bought in Washington over the weekend and said that the same one was 20% more expensive in Canada.

The Retail Council of Canada, however, said that businesses cannot lower their prices immediately because they must first sell off stocks that were purchased when the Canadian dollar was weaker than the U.S. dollar.

Wholesalers and retailers also argue that the prices reflect the higher transport costs and expenses to translate products into French or English because of the country's bilingual policy.

Report: Consumers Putting Off Holiday Shopping Until Thanksgiving


New York City - October 9 - Wal-Mart Stores and other retailers may be in a hurry to jump start holiday sales, but many Americans plan to wait until after Thanksgiving to buy gifts, according to a new survey by market research firm NPD Group.

“I spotted the first holiday set-up in a store on August 18th this year—that’s nearly a month earlier than last year,” wrote NPD’s chief retail analysts Marshal Cohen. “Retailers are looking to start the season earlier but consumers just aren’t ready.” Forty percent of consumers—10% more than last year—said they don’t anticipate beginning their holiday shopping until after Thanksgiving, according to NPD’s 2007 Survey of Consumers’ Holiday Purchase Intentions.

The survey also tried to gauge whether the state of the U.S. economy would impact holiday sales. Only 5% of respondents said they would spend less over the next two months than they did last year.

Gap Says Job-Applicant Data Stolen


San Francisco - September 28 - Gap Inc. said Friday a laptop containing personal information of about 800,000 job applicants, including Social Security numbers, was stolen from a vendor's office, according to the Associated Press.

The stolen laptop contained personal data for people who applied online or by phone for jobs at Old Navy, Banana Republic, Gap and Outlet stores between July 2006 and June 2007 in the United States, Puerto Rico and Canada. The computer did not contain Canadian applicants' Social Insurance numbers, the report said.

The vendor, which a Gap spokeswoman declined to identify, failed to encrypt the personal data, though that was part of Gap's agreement with it.

Gap said it has no reason to believe the applicants' data were the target of the theft or that the information has been accessed or used improperly. Since the company uses more than one vendor to manage job-applicant data, not all of those who applied for work during the time frame are affected, according to the report.

Economy Sends Off Warning Flares

By PHILANA PATTERSON,
AP
Posted: 2007-09-27 16:59:21
NEW YORK (AP) - Crumbling consumer confidence and slumping home sales could prove to be a bad combination for retailers, and for the broader economy going into the holiday shopping season, if the labor market contracts further and chokes off spending, economic data showed Tuesday.

But markets took some heart from the warning signs, hoping that they would goad the Federal Reserve to lower interest rates more.

Worries about jobs and the economy flared in September, driving a key barometer of consumer sentiment to its lowest level in nearly two years, a private research group said.

The bad news was compounded by a report from the National Association of Realtors that sales of existing homes declined for a sixth straight month in August, pushing activity to the lowest point in five years. The Realtors showed a rise in median home prices, but a separate report done by S&P/Case-Shiller said home prices fell 3.9 percent in July in its 20-city index. Economists said that decline was probably a better reflection of where the market stands now.

The New York-based Conference Board said its Consumer Confidence Index fell to 99.8, an almost 6-point drop from the revised 105.6 in August. The reading was below the 104.5 that analysts had expected.

It marked its lowest level since a 98.3 reading in November 2005, when gas and oil prices soared after hurricanes Katrina and Rita devastated the Gulf Coast.

"Weaker business conditions combined with a less favorable job market continue to cast a cloud over consumers and heighten their sense of uncertainty and concern," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. "Looking ahead, little economic improvement is expected, and with the holiday season around the corner, this is not welcome news."

The Present Situation Index, which measures how shoppers feel now about the economy, declined to 121.7 from 130.1 in August. The Expectations Index, which measures shoppers' outlook over the next six months, declined to 85.2 from 89.2.

Economists closely monitor confidence since consumer spending accounts for two-thirds of U.S. economic activity.

The National Association of Realtors reported Tuesday that sales of existing single-family homes dropped 4.3 percent in August, compared to July. Sales at a seasonally adjusted annual rate dropped to 5.5 million units, the slowest pace since August 2002.

The S&P/Case-Shiller report, also released Tuesday, showed that the decline in U.S. home prices accelerated nationwide in July, posting the steepest drop in 16 years. The index of 10 U.S. cities fell 4.5 percent in July from a year ago. That was the biggest drop since July 1991.

Tuesday's reports showing eroding consumer confidence and a further weakening of housing do not bode well for retailers, who are already bracing for a challenging holiday season. Merchants have seen spending slow all year amid falling home prices and higher gas and food bills. Financial turmoil in August and escalating problems in the credit market have made economists and retailers more nervous about the prospects for a decent holiday shopping season.

Such anxiety is further heightened by a weakened outlook for September sales.

Based on a weak weekly sales report, The International Council of Shopping Centers on Tuesday trimmed its September same-store sales growth estimates to between 2.0 percent to 2.5 percent, from the previous 2.5 percent. Same-store sales are sales at stores open at least a year and are considered a key indicator of a retailer's health.

And two of the nation's leading retailers - discounter Target  Corp. and home improvement merchant Lowe's  Cos. - both tempered their sales forecasts on Monday.

The Washington-based National Retail Federation last week predicted total holiday sales will be up 4.0 percent for the combined November and December period, the slowest growth since a 1.3 percent rise in 2002.

Holiday sales rose 4.6 percent in 2006 and growth has averaged 4.8 percent over the last decade.

"Our forecast has built in weak consumer confidence and the tough housing market," said NRF spokesman Scott Krugman, "If anything, this tells us that our forecast is in the right direction in terms of being so cautious."

While the Fed's decision last week to cut its interest rate by half a point was meant to soften the impact of the housing woes on the overall economy, economists say it won't do much to help spending this holiday.

Wall Street chose to interpret Tuesday's data as possible evidence the Fed could use to support a case for more rate cuts.

The Dow Jones industrial average rose 19.59, or 0.14 percent, to close at 13,778.65, clawing back from a more than 60 point decline after the opening.

Broader stock indicators were mixed. The Standard & Poor's 500 slipped 0.52, or 0.03 percent, to 1,517.21, while the Nasdaq composite rose 15.50, or 0.58 percent, to 2,683.45.

There might be some relief for homeowners with adjustable rate mortgages tied to the prime rate that are poised to reset soon, but it could take six to 12 months for consumers to feel the cumulative effect of the rate cut, said Diane Swonk, chief economist at Mesirow Financial in Chicago.

How well spending holds up hinges on the job market, economists said.

"The question is, do we add jobs?" said Scott Hoyt, director of consumer economics at Moody's  Economy.com. "If we do we should see modest growth in consumer spending."

Economists say they'll monitor the labor market, which saw its first drop in job creation in four years in August, for signs of weakness. Economists expect the job market to add 100,000 jobs in September when the Labor department reports its data on Oct. 5. Meanwhile, the unemployment rate is expected to inch up to 4.7 percent from 4.6 percent in July.

Copyright 2007 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.
09/25/07 16:37 EDT

3,000 laid off at GM Oshawa

Home Depot CEO: No Job Cuts, Core Store Closings

Atlanta - September 24 - Home Depot Inc. will not be making any job cuts or close any of its core retail stores despite the housing decline, the company’s CEO told the Associated Press in an interview.

"We're making investments, notwithstanding the downturn," CEO Frank Blake said. "I think that's absolutely the right thing to do for the business. It's going to lead to long-term success."

Home Depot had announced earlier this week that it was closing its 11 Landscape Supply stores (and previously shut down a number of its Expo design centers), but Blake said there are no plans to close any of the company's more than 2,000 main retail stores.

“We're not going to shut stores to save costs," Blake said. "We don't need to."

Despite the stock performance, Blake insisted that Home Depot's strategy to focus more attention on its core business is the right strategy for the world's largest home-improvement store chain.

On other issues, Blake said Home Depot will look at opportunities in the future for more expansion overseas, though it doesn't have any current plans. He indicated Home Depot wasn't looking at Europe for expansion.
 

Bombay Co. Files for Bankruptcy

Fort Worth, Texas - September 21 - Bombay Co. said Thursday it has filed for bankruptcy protection but will keep stores open as it continues to look for a buyer, according to the Associated Press.

The company said it had secured a commitment for $115 million in debtor-in-possession financing from General Electric Capital Corp. and GE Canada Finance Holding Co.

Bombay said it would continue to pay employees and suppliers and preserve workers' benefits. It also said it would honor customers' returns and exchanges, the report said.

In a filing in U.S. District Court in Fort Worth, Bombay said that it had $239.4 million in assets and $173.4 million in debts as of May 5. Bombay said its Canadian operations would also seek protection from creditors.

The company has lost money for the last three years. In its latest quarterly report, covering March through May, the company said it lost $15.4 million, only slightly better than the $15.6 million loss of a year earlier.

About that time, independent auditors said they were concerned about Bombay's ability to stay in business. The company said it had received buyout offers, but that they were nonbinding.

GM Canada's Oshawa car assembly Plant 1 has been shut down, idling 3,000 people, as a U.S. strike is having an immediate impact north of the border with the flow of key automotive components interrupted.

And Plant 2 at Oshawa, east of Toronto, is likely to shut down this afternoon, says Buzz Hargrove, president of the Canadian Auto Workers.
GM Canada spokesman Stew Low says Plant 2's fate will be decided at noon and a shutdown there could mean layoffs for another 3,000.
The Oshawa truck plant, with 4,000 employees, is "good until Thursday," Hargrove said in an interview.
He had warned yesterday that tens of thousands of workers at GM Canada and in the Canadian auto parts industry would be immediately hit by the impact of the strike against GM in the United States.
Workers on the overnight shift at Plant 1 were sent home at about 3 a.m., about four hours before the scheduled end of their shift. The plant, which produces the Impala and Monte Carlo models, ran out of engines made in the Untied States.
Hargrove said the second auto plant, which produces the Grand Prix and the Allure, is likely to shut down at the end of the day shift at 4 p.m.
He said the truck plant has enough parts to last about three days, so it will close late Thursday or early Friday unless the strike in the U.S. is settled before then.
The GM Canada transmission plant in Windsor, Ont., closed yesterday within an hour of the U.S. strike beginning and Hargrove says the company's engine and transmission plant in St. Catharines, Ont., will close by the end of the week.
The Windsor plant has 1,300 workers and the St. Catharines plant employs 3,000.
In a move that surprised many industry watchers, about 73,000 UAW members walked off the job at GM's assembly and parts operations across the U.S. yesterday morning after a 10-day extension of a strike deadline for a new contract. It is the first national strike at GM in the U.S. in 37 years.
"I'm shocked," said Gerald Fedchun, president of the Automotive Parts Manufacturers' Association. "It's like two guys who are chained together deciding they're going to jump in the water."

The strike is creating anxiety for GM workers, who already face the loss of more than a 1,000 jobs at the truck plant by the end of the year.
"I've got a wife and kids. Do I worry? Sure, but there's nothing I can do about it," said Greg Cutrara as he came off work at the truck plant. "You've got to hope for the best."
Other workers expressed optimism the U.S. strike would be settled before there's too much pain.
"It all depends on how long it lasts," said Peter Chapman, who works for an industrial cleaning firm at GM's Oshawa operations.
Idle GM workers are eligible for federal employment insurance and company supplementary unemployment benefits that total about 65 per cent of their regular gross pay. That pay would start in the second week of any layoff.

Industry watchers said Hargrove's estimates regarding the impact on Canadian parts plants and workers may be slightly high, but they agreed the ripple effect of the U.S. labour action will be significant and swift.
GM Corp., the world's second biggest vehicle maker, uses close to 50 per cent of Canada's independent auto-parts output.
GM assembly plants here need components that the auto giant produces in the U.S. while domestic parts makers supply the company's vehicle operations south of the border. The assembly plants hold little inventory so a strike would quickly eliminate any demand.
"The impact on Canada is immediate," said analyst Dennis DesRosiers. "This could very quickly get north of 50,000 direct jobs."
Fedchun said the strike will force big GM suppliers such as Magna International Inc., Lear Corp., Woodbridge Group, ABC Group and Martinrea International Inc., to cut operations drastically.

Furthermore, it will affect other smaller companies that provide parts and services to the upper tier suppliers, he said.
"By the end of the week, the whole parts industry could be shut down to a large degree," Fedchun said.
Magna spokesperson Tracy Fuerst acknowledged that the Aurora-based industrial powerhouse may need to "suspend the supply of parts to GM" if the strike is long.
Hargrove said although he is not at the bargaining table in Detroit, the chances of a quick settlement do not look good because the two sides have talked for 21 consecutive days.
GM had 67 days' worth of vehicles at U.S. dealerships on Sept. 1 in comparison to 57 days for the industry, according to the trade journal Automotive News. However inventory of some popular models is lower, which could result in supply shortages if the strike continues for more than a month.
The GM strike will mean a production loss of about 16,000 vehicles daily in the U.S. and Canada.

GM, which lost $12.4 billion (U.S.) in 2005 and 2006, is trying to reduce a labour cost disadvantage of $25 an hour with foreign rivals.
The UAW has shown signs of agreeing to a new retiree health-care fund to reduce GM's cost burden, but the union wants job security in return and is resisting other concession demands.
In 1998, an eight-week strike at two parts plants in Flint, Mich., cost GM more than $3 billion because it created component shortages that idled most of the firm's operations.

With files from Tony Van Alphen and Chris Sorensen.

THE CANADIAN PRESS
Sep 25, 2007
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