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Discounts spur surprising Aug. retail sales gains
NEW YORK (AP) - This year's back-to-school season isn't as big a bust for retailers as they feared - or as last year's - but it's not great either.
Americans are spending only when the item and price are just right, according to August reports from major chains released Thursday that showed shoppers bought a little more than a year ago.
Analysts expect stores will need to keep discounting to get shoppers to spend this fall and for the holiday season while they grapple with job worries and tight credit.
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Data shows jobless claims drop, retail sales rise
WASHINGTON (AP) - A weak economy got a little lift Thursday with new data suggesting companies aren't pursuing mass layoffs and stores are a little busier.
New applications for unemployment benefits declined for a second straight week after rising in the previous three. Retailers reported surprisingly strong sales in August. And more people signed contracts to buy homes.
Economists were mildly encouraged by the news, which followed several downbeat reports on housing and weaker economic growth last week. But few saw signs that the economy is gaining momentum.
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Second Gulf spill puts moratorium back in question
NEW YORK (AP) - Just when America's ban on offshore exploration seemed like it might end, another disaster in the Gulf of Mexico put Big Oil back on the defensive.
An offshore production platform owned by Mariner Energy Inc. caught fire Thursday morning about 200 miles west of BP's blown-out well. The incident raised more doubts in Congress about the risks of offshore drilling.
The Obama administration had been mulling a quick end to its drilling moratorium, now that BP has brought its leaking well under control. White House spokesman Robert Gibbs said the Mariner explosion shouldn't affect a decision on the ban, and he would not link it with BP's well.
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Burger King sets sights overseas after $3.26B sale
CHICAGO (AP) - Burger King's new ruler could help its empire expand.
Burger King Holdings Inc. sealed a deal Thursday to sell itself for $3.26 billion to 3G Capital, an investment firm with strong ties to Latin America. The fast-food chain's chairman and CEO, John Chidsey, said the deal will help it expand more rapidly overseas.
Chidsey, who will become co-chairman of the company after the tender offer is complete, said the $24-per-share deal also brings 3G Capital's experience and contacts abroad.
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Stocks move higher following jobs, housing reports
NEW YORK (AP) - Stocks rose Thursday, extending their gains from the day before, after reports on housing, manufacturing and jobs all indicated that the economy continues to grow.
The Dow Jones industrial average rose 50 points, having jumped 254 on Wednesday thanks to strong reports on manufacturing in the U.S. and China. Broader indexes also rose.
Trading was somewhat muted ahead of the government's closely watched monthly report on employment due out Friday.
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Dell cedes data-storage maker 3Par to HP
SEATTLE (AP) - Dell Inc. is walking away from a bidding contest with rival Hewlett-Packard Co. for data-storage maker 3Par Inc.
Dell said Thursday it won't match HP's offer to pay $33 per share for 3Par, or about $2.07 billion. Dell's decision came barely an hour after 3Par announced it had received Dell's revised offer of $32 per share and then the even stronger bid from HP.
In a statement, 3Par said Dell's revised offer contained new terms that it found unacceptable, including a multiyear reseller agreement with Dell that would remain in effect even if 3Par were to be bought by another company.
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Bernanke: Shut down banks if they threaten system
WASHINGTON (AP) - Federal Reserve Chairman Ben Bernanke told a panel investigating the financial crisis that regulators must be ready to shutter the largest institutions if they threaten to bring down the financial system.
Bernanke also said while testifying before the Financial Crisis Inquiry Commission that it was impossible for the Fed to rescue Lehman Brothers from bankruptcy in 2008 because the Wall Street firm lacked sufficient collateral to secure a loan. Lehman's former chief executive told the panel a day earlier that the firm could have been saved, but regulators refused to provide help.
The Fed chief presented his analysis of the crisis and views on potential systemwide risks as the panel approaches the end of its yearlong investigation into the Wall Street meltdown.
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More Dems buck plan to let taxes increase for rich
WASHINGTON (AP) - Congress seems increasingly reluctant to let taxes go up, even on wealthier Americans.
Worried about the fragile economy and their own upcoming elections, a growing number of Democrats are joining the rock-solid Republican opposition to President Barack Obama's plans to let some of the Bush administration's tax cuts expire.
Democratic leaders in Congress still back Obama, but the willingness to raise taxes is waning among the rank and file as the stagnant economy threatens the party's majority in the House and Senate.
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Oh snap! New baby carrot campaign mimics junk food
NEW YORK (AP) - Baby carrot farmers are launching a campaign that pitches the little, orange, crunchy snacks as daring, fun and naughty - just like junk food.
A group of 50 producers hopes the 'Eat 'Em Like Junk Food' effort starting next week will double the $1 billion market in two or three years.
The goal is to get people to think of baby carrots as a brand they can get excited about - not just a plain, old vegetable. A website, http://www.babycarrots.com, features metal music and deep male voices chanting "Baby. Carrots. Extreme." On social networking site Twitter, the campaign's account suggests people eat them "like there's no tomorrow (maybe there won't be...)"
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By The Associated Press
The Dow Jones industrial average rose 50.63, or 0.5 percent, to close at 10,320.10.
Broader indexes also rose. The Standard & Poor's 500 index rose 9.81, or 0.9 percent, to 1,090.10, while the Nasdaq composite index rose 23.17, or 1.1 percent, to 2,200.01.
Benchmark oil for October delivery rose $1.11 to settle at $75.02 a barrel on the New York Mercantile Exchange.
Natural gas for October delivery lost 1.1 cents to settle at $3.751 per 1,000 cubic feet.
In other Nymex trading in October contracts, heating oil added 2.12 cents to settle at $2.0623 a gallon and gasoline gained 3.25 cents to settle at $1.9216 a gallon.
In London, Brent crude rose 58 cents to settle at $76.93 a barrel on the ICE Futures exchange.
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HOUSTON - An oil and gas platform in the Gulf of Mexico exploded yesterday, setting off a blaze and a small oil spill, but the accident does not appear to be as serious as BP's deadly rig explosion and oil spill in April.
The US Coast Guard said an oil sheen of 100ft (30.5m) by one nautical mile had been reported at the site. All 13 crew members on the burning platform were evacuated to another offshore platform, the US Coast Guard said. The fire had been contained but was not yet extinguished, it added.
Platform and field operator Mariner Energy said the crew did not suffer any injuries.
The platform is located more than 90 miles (145km) south of Louisiana's Vermilion Bay, west of BP's ruptured Macondo well that killed 11 people and caused the world's worst offshore oil spill.
At the moment, the incident did not appear to be another BP- style disaster, said Raoul LeBlanc, a senior director at PFC Energy in Houston.
"If it's an industrial accident and doesn't involve a well, it's obviously still bad and we hope that no one has been hurt, but it's unlikely to have long-term implications for production in the Gulf of Mexico," Mr LeBlanc said.
The platform, located in 104m (340ft) of water, was undergoing maintenance and was not in active production, the US interior department said. The platform was authorised to produce oil and natural gas.
The cause of the explosion was not known.
The facility averaged 9.2 million cubic feet of natural gas per day and 1,400 barrels of oil and condensate a day during the last week of August, Mariner said.
Company spokesman Patrick Cassidy told CNN that the platform had seven wells that produced both oil and natural gas.
The platform's output is a small fraction of the 1.6 million barrels of oil the region produces on a daily basis.
White House spokesman Robert Gibbs said he did not know whether the fire would affect the Obama administration's current deepwater drilling moratorium.
News of the fire helped to push up crude oil prices 59 cents, or 0.81 per cent, to $74.50 a barrel on the New York Mercantile Exchange. - (Reuters)
(c) 2010 Irish Times. Provided by ProQuest LLC. All rights Reserved.
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TOKYO - Most Asian stock markets climbed Friday as investors took heart from improving U.S. housing and jobs data amid lingering worries over the pace of the global economic recovery.
But gains were modest across the region as investors took a wait-and-see stance ahead of closely-watched U.S. employment data due out Friday. The jobless rate for August is expected to rise to 9.6 percent from 9.5 percent in July, according to Thomson Reuters.
Japan's benchmark Nikkei 225 stock index rose 34.79 points, or 0.4 percent, to 9,097.63 in the morning session. South Korea's Kospi edged up 0.3 percent to 1,780.83. Australia's S&P/ASX 200 was up 0.2 percent at 4,573.40.
Elsewhere, Hong Kong's Hang Seng index added 0.2 percent to 20,918.81. Markets in New Zealand, Singapore and Taiwan all advanced in early trading.
But the Shanghai Composite Index slipped 0.1 percent to 2,652.14. Stocks in Malaysia also declined.
In New York on Thursday, the Dow Jones industrial average added 50.63 points, or 0.5 percent, to 10,320.10.
Sentiment on Wall Street turned upbeat after the National Association of Realtors said Thursday that the number of buyers who signed contracts to purchase homes rose 5.2 percent in July after hitting a record low in June.
A fall in new claims for U.S. unemployment aid last week also helped lift sentiment. The Labor Department said Thursday that the number of American people requesting jobless benefits fell by 6,000 the previous week to a seasonally adjusted 472,000.
The four-week average of claims, a less-volatile measure, also fell by 2,500 to 485,500, the first drop after four straight increases. But even with the declines, U.S. jobless claims are still at much higher levels than they would be in a healthy economy.
When economic output is growing rapidly and employers are hiring, such claims generally drop below 400,000.
In currencies, the dollar rose to 84.38 yen in Tokyo Friday from 84.28 yen in New York late Thursday. The euro slipped to $1.2821 from $1.2828.
Benchmark oil for October delivery rose $1.11 to settle at $75.02 a barrel Thursday on the New York Mercantile Exchange. Prices dropped as low as $73.11 earlier in the session.
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FORT WORTH, Texas - Pier 1 Imports Inc. said Thursday its second-quarter sales rose 8 percent year-over-year as more customers shopped in its stores and the retailer enticed more browsers to buy its furniture and home accessories.
Traffic and the average amount spent by customers both increased during the second quarter, and all merchandise divisions saw gains in all parts of the country, Pier 1 said. Total sales rose to $310 million from $287 million a year ago, with sales at stores open at least a year up 11.2 percent.
The latter is an important metric because it measures sales growth at established stores rather than new or recently closed locations. In last year's second quarter, sales at stores open at least a year fell 7.6 percent.
Smith said merchandise margins were very strong at about 58 percent of sales and forecast second-quarter earnings of 10 cents to 12 cents per share for the quarter that ended Aug. 28.
Analysts polled by Thomson Reuters, on average, expect earnings of 11 cents per share on sales of $310.2 million.
Shares jumped $1.11, or 17 percent, to close at $7.65 on more than twice average daily volume.
After years of losses, Pier 1 has been steadily improving its results under the turnaround efforts of CEO Alex Smith. The company in June posted a surprise first-quarter profit.
Keybanc Capital Markets analyst Bradley B. Thomas said Thursday that while he remains cautious on the outlook for home-related spending, especially looking ahead to 2011, he is encouraged by management's ability to drive sales and margin expansion. In a client report, Thomas noted that the August sales results were solid given that Pier 1 didn't hold a clearance event as it did last year.
He kept a "Hold" rating on the stock, saying negative housing turnover results could weigh on investor sentiment for home-related names. But he thinks Pier 1 and other home-related retailers should see favorable sales trends through the rest of this year.
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MIAMI _ Burger King agreed Thursday to be acquired by private investment firm 3G Capital in a $4 billion deal that could help the chain gain ground in the burger wars.
The new owners have pledged to keep the fast-food chain in Miami, which it has called home through five sets of owners since Burger King's founding in 1954. But it is too soon to tell if 3G Capital will stick with Burger King's current strategies or go with a Whopper-sized remake.
The deal comes as the world's second-largest hamburger chain has suffered amid an economic downturn that has seen its core young male consumers hit harder than most by rising unemployment. By comparison, McDonald's appeals to a wider variety of consumers, attracting more mothers and children.
The contrast shows in the companies' financial reports.
In the most recent quarter, Burger King said last week that profit fell 17 percent and revenue declined 1 percent. By comparison, McDonald's revenue rose 5 percent and profits increased 12 percent.
By removing Burger King from the scrutiny of the public markets, analysts say the chain will be able to focus on remodeling restaurants, repairing lawsuit-fractured franchisee relations and differentiating itself from McDonald's.
"The benefit of being private is you can do things at your own pace," Chairman and Chief Executive John Chidsey said during an interview Thursday. "You can make long-term decisions and not worry about short-term numbers."
Burger King's restaurants are viewed by many as old and tired. As restaurants have been revamped, they've seen a spike in sales. But it's a slow process to create a new image for a company with more than 12,000 restaurants.
"If Burger King can collaborate with and get franchisees to invest alongside them, we believe the company could affect a brand turnaround in three plus years," wrote David Palmer, restaurant industry analyst with UBS.
Burger King has been challenged in the past year to keep pace as McDonald's diversified its menu with smoothies, coffee bars and salads.
The strategy at Burger King has been a "bar bell" menu, emphasizing both value-priced items and more upscale premium items. But the success of the premium products, such as the Steakhouse XT burger and the BK Ribs, has been inconsistent, and the value menu has hurt franchisee profits.
Tom Forte, restaurant industry analyst with Telsey Advisory Group, thinks Burger King needs to allow time for the premium products to generate sales, as the economy rebounds. The success of the rib launch this spring demonstrates that customers will pay more for the right products.
Burger King is in the process of introducing new breakfast menu items and adding Seattle's Best Coffee.
"The pieces are in place," Forte said. "It's a car that needs a tune-up, not a major overhaul."
Chidsey believes much of Burger King's growth will continue to come internationally, where he expects 3G's connection to help accelerate the process _ particularly in Latin America and Asia.
The New York investment firm has ties to Brazilian billionaire Jorge Paulo Lemann, one of the architects behind the merger that lead to the creation of InBev.
The firm's managing director, Alex Behring, was once the chief executive of America Latina Logistica, Latin America's largest independent railroad and logistics company.
In letters to franchisees and Burger King employees, Behring pledged financial support to continue growing the brand.
"We share a common goal to improve the Burger King brand experience for guests ... while running a sustainable business on an ongoing basis," Behring wrote. "We believe our deep consumer sector expertise and extensive global network presents strong opportunities for Burger King franchisees and the Burger King brand to grow and succeed."
Chidsey will become co-chairman of the board, along with Behring, following the deal's closing during the fourth quarter. There was no word on who will replace Chidsey as chief executive.
"It's a tough environment for the restaurant industry in general," Chidsey said. "Relatively speaking, I couldn't be prouder of what we've accomplished."
The changes are welcome news for Burger King franchisees, who control about 90 percent of the chain's restaurants. Franchisees have been at major odds with the company, including several pending lawsuits over the installation of new cash registers, $1 double cheeseburger and late night hours.
"I'm looking forward to a whole new beginning," said Al Cabrera, a Miami franchisee. "Hopefully new ownership will look to significantly improve our relationship."
Franchisee Steve Lewis estimates that the average franchisee-owned restaurant has declined in value between 10 percent and 25 percent over the last year. He hopes new ownership will make changes ranging from operating hours to menu items and marketing.
"My hope is that these guys understand that this is a franchise business and franchisees have to be profitable for them to be profitable," Lewis said. "There has to be radical changes."
Chidsey said the company wasn't being marketed for sale, when it was approached by 3G Capital.
The deal at $24 cash per share, offers a 46 percent premium to shareholders over where the stock was trading at before news of the potential merger leaked out. Burger King's stock had just hit a 52-week low of $16.31 on Aug. 16 and was below its $17 IPO price from May 2006.
Some analysts were surprised at the pricing, which reflects a value higher than most other restaurant companies have traded at recently.
"I wouldn't pay $24 a share for Burger King," said Mark Kalinowski, restaurant industry analyst with Janney Capital Markets. "Perhaps they think there is quite a bit of costs that can be cut."
Burger King has until Oct. 12 to solicit competing offers.
The 3G deal provides an opportunity for Burger King's previous private equity owners to cash out their remaining 31 percent stake in the company. Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners paid $1.5 billion to purchase Burger King in December 2002 from Diageo, a London-based global beverage company.
3G Capital said it has received commitments from JPMorgan Chase Bank, N.A. and Barclays Capital to provide the debt financing for the deal, which includes $3.3 billion to shareholders and the remainder to pay off Burger King's existing debt.
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(c) 2010, The Miami Herald.
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