Friday, 28 February 2014

Citi discovers fraud in Mexico unit, cuts 2013 earnings


Banking giant Citigroup cut its fourth quarter and full year 2013 estimates on Friday, as its profit was hit by fraudulent activity at a Mexico-based subsidary.
The bank said in a statement that Banco Nacional de Mexico, or Banamex, had loaned $585 million in short-term money to a Mexican oil services company named Oceanografia. It was later discovered that the firm had been suspended by the government from being awarded new contracts,
"Based on Citi's review...Citi estimates that it is able to support the validity of approximately $185 million of the $585 million of accounts receivables owed to Banamex by Pemex as of December 31, 2013," the bank added. 
As a result of the incident, Citi will take an estimated $235 million after-tax, or $360 million pre-tax, charge against last year's earnings. The impact will lower 2013 net income from $13.9 billion to $13.7 billion.
Citi said it believed the fraud was "isolated to this particular client," but added that its review was ongoing. The bank expects it will determine "whether any or all portion of the $33 million of direct loans made to [Oceanografia], and the remaining approximately $185 million of accounts receivable due from Pemex is impaired."
The news was a new hit for the Wall Street giant, which—five years following the 2008 financial meltdown—has yet to reach escape velocity from the crisis that nearly collapsed the global financial system.
Citi was among the last to repay its bailout money in full, and in subsequent years has struggled with issues related to management and strategy. The bank, which originally pioneered the concept of a full service financial supermarket, has been weighed by weakness in key business areas such as mortgages and fixed-income trading.
--By CNBC

News Source: www.cnbc.com

Big Bitcoin Exchange Files for Bankruptcy

The company claims a loss of $473 million worth of the digital currency

A major Bitcoin exchange filed for bankruptcy protection on Friday, providing a detailed account of the estimated losses from what was one of the world’s largest exchanges for the currency.
In a news conference in Japan, a lawyer for the Tokyo-based Mt. Gox exchange said it had lost three-quarters of a million Bitcoin belonging to customers, along with 100,000 of its own. At current market prices for Bitcoin that’s an estimated loss of $473 million, the Associated Press reports. Mt. Gox listed outstanding debts of about $63.6 million against assets of about $37.7 million.
Late Monday evening, Mt. Gox’s website went blank unexpectedly, causing the value of the virtual currency to fall to around $470 from $550 in just a few hours. A leaked document revealed that a security breach had resulted in the theft of nearly three-quarters of a million Bitcoin—about six percent of all available Bitcoin. The heads of several other Bitcoin exchanges released a joint statement saying the Mt. Gox shutdown ”does not reflect the resilience or value of Bitcoin and the digital currency industry.”
The sudden implosion of an exchange that, according to the Wall Street Journal, at one time handled more than 80 percent of all Bitcoin trades has raised questions about the lack of regulations governing the currency. On Thursday, Federal Reserve chief Janet Yellen told the Senate Banking Committee that the central bank does not have the authority to regulate the digital currency.
“Bitcoin is a payment innovation that’s taking place outside the banking industry,” Yellen said. “To the best of my knowledge there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the Fed doesn’t have authority to supervise or regulate Bitcoin in anyway.”


News Source: 
business.time.com

LATEST AIRLINE PERK: SAFE DISTANCE FROM THE MASSES

NEW YORK (AP) -- On flights from San Francisco to Hong Kong, first-class passengers can enjoy a Mesclun salad with king crab or a grilled USDA prime beef tenderloin, stretch out in a 3-foot-wide seat that converts to a bed and wash it all down with a pre-slumber Krug "Grande Cuvee" Brut Champagne.
Yet some of the most cherished new international first-class perks have nothing to do with meals, drinks or seats. Global airlines are increasingly rewarding wealthy fliers with something more intangible: physical distance between them and everyone else.
The idea is to provide an exclusive experience -- inaccessible, even invisible, to the masses in coach. It's one way that a gap between the world's wealthiest 1 percent and everyone else has widened.
Many top-paying international passengers, having put down roughly $15,000 for a ticket, now check-in at secluded facilities and are driven in luxury cars directly to planes. Others can savor the same premier privileges by redeeming 125,000 or more frequent flier miles for a trip of a lifetime.
When Emirates Airline opened a new concourse at its home airport in Dubai last year, it made sure to keep coach passengers separate from those in business and first class. The top floor of the building is a lounge for premium passengers with direct boarding to the upstairs of Emirates' fleet of double-decker Airbus A380s. Those in coach wait one story below and board to the lower level of the plane.
London's Heathrow Airport took a private suite area designed for the royal family and heads of state and in July opened it to any passenger flying business or first class who's willing to pay an extra $2,500.
"First class has become a way for a traveler to have an almost private jet-like experience," says Henry Harteveldt, an airline analyst with Hudson Crossing. Airlines "will do everything but sing a lullaby."
The front of the plane has always been plusher than the back. But in recent years airlines have put a greater focus on catering to the most affluent fliers' desire for new levels of privacy.
There's a lot of money on the line. At big carriers like American Airlines, about 70 percent of revenue comes from the top 20 percent of its customers.
The special treatment now starts at check-in. American and United Airlines have both developed private rooms, located in discrete corners of their terminals in New York, Chicago and elsewhere, that allow for a speedy check-in. Boarding passes in hand, travelers exit through hidden doors leading to the front of security lines.
Some foreign airlines have gone further.
Lufthansa offers first-class passengers a separate terminal in Frankfurt. There's a restaurant, cigar lounge and dedicated immigration officers. For those who choose to shower or take a bath, the private restrooms come with their own rubber ducky -- an exclusive plastic souvenir for the international jet set. When it's time to board, passengers are driven across the tarmac to their plane in a Mercedes-Benz S-Class or Porsche Cayenne.
"That sort of exclusivity plays to the ego of people who are in a position to spend that much money on airline flight," says Tim Winship, publisher of travel advice site FrequentFlier.com.
At Heathrow's private suites, designed for up to six people, fliers pass swiftly and privately through their own immigration and security screening. While they're waiting, hors d'oeuvres and Champagne are provided. Steak, sushi or other meals can be delivered from airport restaurants. When it comes time to actually fly, passengers are driven to their plane in a BMW 7 Series sedan and escorted to their seat.
U.S. airlines have copied a bit of that touch. United started in July and Delta Air Lines in 2011 driving their top customers who have tight connections at major airports from one gate to another in luxury cars. No need to enter the terminal, let alone fight the crowd on the moving walkway.
Want to board first? No problem. Want to be the last one seated, moments before the door closes? Sure. Airlines will even save room for your bags in the overhead bin.
International first class has long been distinguished by gourmet meals, wide seats and giant TVs preloaded with hundreds of movies and TV shows. But in recent years, airlines also upgraded their international business class sections, ripping apart cabins to install chairs that convert into lay-flat beds. That left very little to differentiate first class from business class.
So some airlines scrapped the ultra-premium cabin. Others have cut the number of first-class seats in half, thereby creating a more intimate experience that commands the higher price. For instance, a roundtrip flight in July between New York and Hong Kong on Cathay Pacific costs $1,600 in coach, $7,600 in business class and $19,000 in first class. Other airlines charge similar price differences among their passenger classes.
Besides privacy, that extra cash provides an outsize seat, attentive service and superior wines and liquors. Austrian Airlines, Etihad Airways and Gulf Air are among the carriers to staff planes with their own first-class chefs. Instead of having flight attendants reheating meals cooked on the ground, these chefs prepare the meals at 35,000 feet.
Sometimes, that smell wafts back to the rest of the plane.
"You know they've got something good up in front of the curtain, and you know you don't have anything close to it," Harteveldt says. "When you fly coach, you are reminded of the fact that you are unimportant as a traveler."
In the ultimate show of indulgence, Emirates has offered an onboard shower for first class passengers on its A380s since the plane joined the fleet in 2008.
Once back on the ground, that luxury treatment continues. At airports in Paris, London, Istanbul, Bangkok, Sydney and elsewhere, airlines offer their top passengers fast-track cards allowing them to speed past immigration lines.
And then, while other passengers wait in lines for buses, taxis or shuttles, chauffeurs in suits meet these fliers ready to -- once again -- whisk them out of the chaos.
__
Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott 

Latest airline perk: Safe distance from the masses


  • Latest airline perk: Safe distance from the masses

    FILE - In this Sunday, Feb. 10, 2013, file photo the first class section of an Emirates airlines Airbus A380 is ready for boarding at the new Concourse A of Dubai airport in Dubai. When Emirates Airline opened a new concourse at its home airport in Dubai last year, it made sure to keep coach passengers separate from those in business and first class. The top floor of the building is a lounge for premium passengers with direct boarding to the upstairs of Emiratesí fleet of double-decker Airbus A380s. Those in coach wait one story below and board to the lower level or the plane. (AP Photo/Kamran Jebreili) ORG XMIT: NYBZ404

NEW YORK — On flights from San Francisco to Hong Kong, first-class passengers can enjoy a Mesclun salad with king crab or a grilled USDA prime beef tenderloin, stretch out in a 3-foot-wide seat that converts to a bed and wash it all down with a pre-slumber Krug "Grande Cuvee" Brut Champagne.
Yet some of the most cherished new international first-class perks have nothing to do with meals, drinks or seats. Global airlines are increasingly rewarding wealthy fliers with something more intangible: physical distance between them and everyone else.
The idea is to provide an exclusive experience — inaccessible, even invisible, to the masses in coach. It's one way that a gap between the world's wealthiest 1 percent and everyone else has widened.
Many top-paying international passengers, having put down roughly $15,000 for a ticket, now check-in at secluded facilities and are driven in luxury cars directly to planes. Others can savor the same premier privileges by redeeming 125,000 or more frequent flier miles for a trip of a lifetime.
When Emirates Airline opened a new concourse at its home airport in Dubai last year, it made sure to keep coach passengers separate from those in business and first class. The top floor of the building is a lounge for premium passengers with direct boarding to the upstairs of Emirates' fleet of double-decker Airbus A380s. Those in coach wait one story below and board to the lower level of the plane.
London's Heathrow Airport took a private suite area designed for the royal family and heads of state and in July opened it to any passenger flying business or first class who's willing to pay an extra $2,500.
"First class has become a way for a traveler to have an almost private jet-like experience," says Henry Harteveldt, an airline analyst with Hudson Crossing. Airlines "will do everything but sing a lullaby."

The 20 percenters

There's a lot of money on the line. At big carriers like American Airlines, about 70 percent of revenue comes from the top 20 percent of its customers.
The special treatment now starts at check-in. American and United Airlines have developed private rooms, located in discrete corners of their terminals in New York, Chicago and elsewhere, that allow for a speedy check-in. Boarding passes in hand, travelers exit through hidden doors leading to the front of security lines.
Some foreign airlines have gone further.
Lufthansa offers first-class passengers a separate terminal in Frankfurt. There's a restaurant, cigar lounge and dedicated immigration officers. For those who choose to shower or take a bath, the private restrooms come with their own rubber ducky — an exclusive plastic souvenir for the international jet set. When it's time to board, passengers are driven across the tarmac to their plane in a Mercedes-Benz S-Class or Porsche Cayenne.
"That sort of exclusivity plays to the ego of people who are in a position to spend that much money on airline flight," says Tim Winship, publisher of travel advice site FrequentFlier.com.
At Heathrow's private suites, designed for up to six people, fliers pass swiftly and privately through their own immigration and security screening. While they're waiting, hors d'oeuvres and Champagne are provided. Steak, sushi or other meals can be delivered from airport restaurants. When it comes time to actually fly, passengers are driven to their plane in a BMW 7 Series sedan and escorted to their seat.
U.S. airlines have copied a bit of that touch. United started in July and Delta Air Lines in 2011 driving their top customers who have tight connections at major airports from one gate to another in luxury cars. No need to enter the terminal, let alone fight the crowd on the moving walkway.
International first class has long been distinguished by gourmet meals, wide seats and giant TVs preloaded with hundreds of movies and TV shows. But in recent years, airlines also upgraded their international business-class sections, ripping apart cabins to install chairs that convert into lay-flat beds. That left little to differentiate first class from business class.
So some airlines scrapped the ultra-premium cabin. Others have cut the number of first-class seats in half, thereby creating a more intimate experience that commands the higher price. For instance, a roundtrip flight in July between New York and Hong Kong on Cathay Pacific costs $1,600 in coach, $7,600 in business class and $19,000 in first class.
Besides privacy, that extra cash provides an outsize seat, attentive service and superior wines and liquors.



News Source: www.tulsaworld.com

Japan factory output jumps ahead of tax hike, outlook murky

Tokyo: Japan`s factory output rose in January at the fastest pace in more than two years and core inflation hovered near a five-year high, comforting signs for an economy expected to take a hit from a sales tax hike scheduled for April.

Labour demand continued to improve and household spending rose more than expected, providing hope that domestic demand could underwrite a recovery after lacklustre growth in the fourth quarter of last year.

The upbeat data showed the economy started the year strongly as shoppers brought forward purchases before the tax hike, but there are concerns that more stimulus would be needed later in the year to support growth as consumer spending is expected to sag.

"I`m not that confident about the economy after the sales tax hike," said Norio Miyagawa, senior economist at Mizuho Securities Research & Consulting Co.

"Consumer spending will not be as strong as it is now. There are a lot of uncertainties about exports. Once the BOJ realises that consumer prices are not accelerating, it will start to debate other measures."

After decades of sluggish growth, the world`s third-largest economy shifted into higher gear over the last year after Prime Minister Shinzo Abe launched an aggressive cocktail of monetary and fiscal stimulus policies.

However, markets are starting to worry about the durability of the rebound, especially as exports have failed to substantially perk up while business investment and wages growth have trailed expectations.

The scheduled sales tax hike to 8 percent from 5 percent in April has added to the uncertainty, although policy makers have said that they are prepared to look past a temporary dip in activity.

Japan`s industrial output rose 4.0 percent in January, suggesting that robust domestic demand is underpinning the economy as consumers rush to beat the national sales tax hike.

The rise was more than the median forecast for a 3.0 percent as companies ramp up production of cars and consumer appliances. It was also the fastest increase since output rose 4.2 percent in June 2011.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 1.3 percent in February but decrease 3.2 percent in March, data showed on Friday.

Japan`s core consumer price index (CPI), which excludes fresh food prices but includes oil products, rose 1.3 percent year-on-year in January, more than the median estimate for a 1.2 percent annual increase.

That matched a 1.3 percent annual increase in December - the fastest in more than five years.

The central bank maintained its massive monetary stimulus at last week`s policy meeting, aiming to meet a 2 percent price goal around early 2015, which is seen by many analysts as overly ambitious.

Analysts expect that inflation will struggle to pick up pace in the coming months as the effects of a weak yen on imported goods taper off. There are also worries private consumption could lose steam after the sales tax is raised.

Japan`s jobless rate was unchanged at a six-year low of 3.7 percent in January.

Job availability as measured by the jobs-to-applicants ratio edged up to 1.04, meaning more than one job is available per job seeker. The ratio matched the median estimate and hit the highest since August 2007, underlying the strength of the job market.

Japanese household spending rose 1.1 percent in the year to January, blowing past the median estimate for a 0.2 percent increase.

That marked a fifth straight month of annual gains and an acceleration from a 0.7 percent annual increase in December as consumers spent more on clothes, cars and domestic travel.

A Reuters poll last week showed the BOJ is expected to ease policy further by this summer to help boost the economy as the effects from Prime Minister Shinzo Abe`s stimulus strategy begin to wane.

News Source: zeenews.india.com

Thursday, 27 February 2014

Spain's fourth-quarter growth picks up pace


Spain's economy improving, but unemployment rains high
Spain's economy improving, but unemployment rains high
Spain's economy picked up pace in the fourth quarter, official data showed today, adding to signs that the country is emerging from five years of stop-start recession which destroyed millions of jobs.
The Spanish economy expanded by 0.2% in the fourth quarter of 2013 from the third, accelerating from the previous quarter's growth of 0.1%, the National Statistics Institute said in a report.
The figure were below earlier estimates by the institute and the Bank of Spain that the euro zone's fourth-biggest economy grew by 0.3% in the October-December period.
Spain's economy shrank by 1.2% over the whole of 2013, its fourth annual contraction in five years, as the country struggled with the aftermath of a decade-long property bubble that burst in 2008.
Prime Minister Mariano Rajoy said in his state of the nation address he saw the economy growing 1% this year, up from the current 0.7% forecast, and by 1.5% next year.
He credited his tough economic reforms and austerity policies with pulling Spain back from the precipice of a full-blown bailout, widely feared in mid-2012. 
"Spain was seen as a burden for Europe and now it is seen as a motor," he said.
To reduce Spain's unemployment rate of 26%, one of Europe's highest, Rajoy announced that social security contributions on new hirings would be cut.
Though avoiding a widely feared economic rescue in mid-2012, Spain's government obtained a €41.3 billion rescue loan from the euro zone to save its struggling banks, whose assets had been hammered by plunging property values.
Besides cutting spending to rein in Spain's yawning public deficits, the government reformed the labour market in 2012 by cutting dismissal costs and making it easier to change work conditions. 

News Source: www.rte.ie

Sturm Ruger misses estimates for first time in four years

Sturm Ruger, the largest publicly traded U.S. firearms maker, reported fourth-quarter earnings that missed analysts' estimates for the first time since 2009.
Per-share profit rose to $1.33 from $1 a year earlier, the Fairfield-based company said late Tuesday without giving a net-income figure. That trailed the $1.38 average estimate of analysts in a Bloomberg survey, and the shares fell 7.9 percent to $62.99 in New York.
The results put an end to 16 quarters of beating analysts' estimates. While enthusiasts have been stockpiling guns amid concern that President Barack Obama's administration would seek tighter firearm regulations, Congress hasn't curbed access and Sturm Ruger's fourth-quarter orders fell to the lowest in 2013.
"It's the overall market weakness," said Brian Ruttenbur, a CRT Capital Group analyst in Stamford. Background checks, which can serve as a general guide to sales, have dropped by 50 percent in the last month or so, he said.
Ruttenbur rates Sturm Ruger as buy. He is among two analysts with that recommendation, while one says hold and the other says sell, according to data compiled by Bloomberg.
Revenue rose 28 percent in the quarter to $181.9 million, Sturm Ruger said. That beat analysts' estimates of $179 million. The firm declared a quarterly dividend of 54 cents payable March 28 for shareholders of record as of March 14.
Those payouts vary each quarter because they're based on a percentage of earnings rather than a fixed amount per share, according to a Sturm Ruger statement. The previous dividend was 58 cents a share.

News Source: www.newstimes.com

J.C. Penney Gains as Sales Forecast Signals Turnaround Momentum

Feb. 27 (Bloomberg) -- J.C. Penney Co. surged after forecasting an increase in annual revenue and margin expansion, prompting Chief Executive Officer Mike Ullman to predict its turnaround will be completed this year.
Same-store sales will increase by a mid-single digit percentage and gross margin will “significantly” improve this year, the Plano, Texas-based company said yesterday in a statement. Liquidity at the end of 2014 is projected to hold steady at $2 billion, the company said. The shares rose as much as 17 percent in extended trading in New York.
Ullman’s attempt to revive the department-store chain gained traction during a holiday season marked by a discount war among retailers seeking to attract tentative shoppers. Following losses and plummeting sales caused by former CEO Ron Johnson, Ullman returned to the helm in April and helped the chain post its first same-store sales gain last quarter since the period ended April 2011.
“The most important thing Ullman’s done is to give people confidence, whether its vendors, merchants or store employees,” said Paul Swinand, an analyst for Morningstar Inc. in Chicago. “His strategy is not anything earth shattering. It’s just getting back to where they were, working hard and being smart. Not trying to change too much at once.”
J.C. Penney jumped 14 percent to $6.77 at 6:07 p.m. in late trading yesterday in New York, after reaching $6.96. The shares had declined 35 percent this year through the close of regular trading yesterday.

First Profit

The chain also posted its first profit in more than two years in the fourth quarter, benefiting from Ullman returning the company to its traditional discounting strategy and reviving popular private-label brands.
Net income was $35 million, or 11 cents a share, in the quarter ended Jan. 31, compared with a loss of $552 million, or $2.51, a year earlier, the company said. Excluding the sale of assets and tax benefits, such as a $270 million change in the value of its pension, the company posted a loss of 68 cents a share. The average of 24 estimates compiled by Bloomberg was a loss of 86 cents.
The company has spent the past 10 months improving its finances and operations and now is ready to return to growth and profitability, Ullman said on a conference call with analysts to discuss the results.
“The most challenging parts of the turnaround are behind us,” Ullman said.

Liquidity Concern

Liquidity became a concern after the company wracked up losses and spent heavily on trying to execute Johnson’s transformation of the century-old retailer. After Ullman returned in April, the company raised almost $4 billion in cash through borrowings and a share sale last year.
Despite saying it would have $2 billion in liquidity at the end of last year, Charles Grom, an analyst for Sterne Agee & Leach Inc., wrote in a note to clients on Feb. 19 that the chain may need to raise more capital in a few quarters if the sales recovery doesn’t accelerate.
J.C. Penney’s operations generated $383 million last quarter, down from $645 million a year earlier. That led to free cash flow of $246 million, boosting its cash position 23 percent to $1.51 billion. That coupled with $500 million in borrowing capacity under its credit revolver gave it $2 billion in liquidity at the end of the last fiscal year. It expects to have the same amount by the end of 2014.

Best Performance

Revenue fell 2.6 percent to $3.78 billion, trailing analysts’ $3.86 billion average estimate. Excluding sales during an extra week a year earlier, revenue would have risen 1.6 percent.
Same-store sales, which are a key gauge of a retailer’s growth because new and closed stores are excluded, had the first gain since the quarter ended April 2011. Revenue by that measure, which includes online sales, may increase by as much as 5 percent this quarter. That would be the best performance since the period ended Oct. 28, 2006.

News Source: www.sfgate.com

Exxon Lowers Capital Projects Spending by 13% to $37 Billion

Exxon Mobil Corp. (XOM:US), the world’s largest oil company by market value, lowered spending on new wells, offshore platforms and fuel plants by 13 percent after boosting reserves to a record last year.
Capital expenditures will average about $37 billion annually this year and for the next several years, compared with $42.5 billion in 2013, Irving, Texas-based Exxon said in a U.S. Securities and Exchange Commission filing yesterday.
Exxon plans to spend $6 billion this year on projects to reduce emissions linked to climate change and air, water and soil pollution, according to the filing. That level of expenditure would be even with 2013 and will continue at that rate next year.
Exxon increased the proportion of its reserves made up of oil to the highest in a decade in 2013 as shale-drilling expertise acquired in the $35 billion XTO Energy deal was mobilized to find crude, it said on Feb. 21.
Chairman and Chief Executive Officer Rex Tillerson is scheduled to brief analysts and investors next week on the company’s long-term exploration and development outlook at a meeting in New York.
Exxon shares have outperformed oil in the past year, advancing 8.2 percent compared with a 2.8 percent decline for Brent crude futures that are benchmarks for more than half the world’s petroleum.
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

J.C. Penney surprises investors with better-than-expected quarter

Vernon Bryant/Staff Photographer
In CEO Mike Ullman’s upbeat presentation, analysts learned that J.C. Penney is nowhere near throwing in the towel. In fact, towels have traditionally been among Penney’s strongest sellers.
Penney is on a path to recovery, he told analysts after reporting a smaller-than- expected fourth-quarter loss and a profit when one-time benefits are added in.
The upbeat presentation wasn’t exactly what investors expected, and Penney’s stock is trading at historic lows this year. Results were released after the market closed, and shares will probably trade higher Thursday.
Ullman’s positive outlook included telling analysts that the company doesn’t plan to close more stores this year beyond the 33 previously announced. Those stores will close by May.
Other highlights:
The company expects to fund its turnaround this year without borrowing more money and said it will have $2 billion at year-end.
Penney predicts its sales will increase about 5 percent in 2014, including a first-quarter same-store sales increase in the range of 3 percent to 5 percent.
The effects of deep clearances to discontinue brands won’t be a big factor this year because the old merchandise has been sold.
In the 10 months since he arrived, Ullman said, Penney has been through a period of stabilization and rebuilding. Now it’s in what he called the “go-forward phase” to position the business for long-term growth.
Morningstar analyst Paul Swinand said Ullman has calmed its vendors, whose confidence is crucial to any retailer.
“Ullman has done a lot with his leadership and putting a plan in place and carrying it out. When your vendors have confidence in what you’re doing, that gives a retailer a lot of breathing room,” Swinand said.
Penney chief financial officer Ken Hannah said the company sees a “path forward to generating free cash flow.”
Penney has spent $3 billion in the last couple of years, scaring investors who can’t see an end to Penney’s cash burn. But if sales go up and costs continue to be contained, there’s a chance it could become profitable again, Swinand said.
Plenty of analysts are skeptics. Penney was one of the most shorted stocks in the market because investors were betting that it couldn’t dig out of former CEO Ron Johnson’s failed and costly transformation that started in late 2011 and continued into 2013.
Charles Sizemore, chief investment officer at Sizemore Capital in Dallas, said it bodes well for the chain’s survival if Penney can postpone going to the debt markets.
“The stock is cheap, but no one thinks Penney is going to be a leader in the retail industry anytime soon,” Sizemore said. Investors will be buying the stock Thursday and bidding up the price, he said, and some of those will be covering their short positions.
Penney reported a fourth-quarter net loss of $206 million, or 68 cents a share, which was better than analysts expected. In the fourth quarter of 2012, Penney posted a net loss of $552 million, or $2.51 a share.
With a one-time tax benefit and a gain from the sale of assets, Penney reported a fourth-quarter profit of $35 million, or 11 cents a share. Analysts surveyed by Thomson Reuters had forecast Penney would report a loss of 82 cents a share.
Total sales of $3.78 billion compared with $3.88 billion a year earlier. Same-store sales, a more closely watched measure, were up 2 percent, and online sales increased 26.3 percent to $381 million.
Penney said its gross margin, or rate of profitability, will improve. The fourth-quarter gross margin was 28.4 percent, compared with 23.8 percent a year earlier. Historically, Penney’s gross margin has been around 38 percent.
The most recent profit margin includes the effect of selling clearance merchandise of brands that are being discontinued, Penney said.
Brands going away include JCP Men’s, Stafford Prep, JOE by Joseph Abboud, William Rast, Joe Fresh Kids and JCP Everyday. It’s also downsizing other brands, including Joe Fresh in women’s apparel, Michael Graves Design, Conran and several in the home department.
Home, men’s apparel, women’s accessories and Sephora shops inside Penney were the company’s top-performing merchandise divisions in the fourth quarter.
Separately Wednesday, Penney said in an SEC filing that it received a termination letter from the Security and Exchange Commission’s Fort Worth office saying that it had concluded its investigation and was not recommending SEC action.
That investigation had to do with Penney’s comments and actions about its liquidity, cash position, and debt and equity financing, as well as the company’s underwritten public offering of common stock announced Sept. 26.
Follow Maria Halkias on Twitter at @MariaHalkias.

News Source: www.dallasnews.com

Wednesday, 26 February 2014

Tesla Battery Jolts Shares Higher While Disrupting Power

Tesla Motors (TSLA) Inc.’s plan to boost battery production by building what Chief Executive Officer Elon Musk calls a “gigafactory” may do more to transform the power industry than it does to advance the electric car.
Utility customers throughout the U.S. have already begun turning to battery storage and solar panels as a way of reducing electricity bills and their dependency on local power companies. The trend threatens the more than 100-year-old monopoly utility business model that books about $360 billion in annual power sales.
By lowering the cost of energy-storage with its lithium-ion batteries, Tesla could accelerate the disruption of the electric utility business as it doubles its share of the global car market to about 1 percent, Adam Jonas, a Morgan Stanley analyst, wrote in a note yesterday. Morgan Stanley’s note helped push Tesla’s market value above $30 billion for the first time yesterday, as the company’s Model S sedan also became the first U.S. car to receive Consumer Reports’ “best overall pick” in the magazine’s annual ranking.
Related:
  • Tesla Tops $30 Billion as Morgan Stanley Boosts Outlook
  • Tesla Sedan Is Ranked ‘Best Overall’ by Consumer Reports
  • Musk Wealth Soars $1.1 Billion in One Day as Tesla Surges
“If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again,” said Jonas, who rates the shares the equivalent of a buy. “If Tesla can become the world’s low-cost producer in energy storage, we see significant optionality for Tesla to disrupt adjacent industries.”

Utility Obsolescence

Tesla gained 5.8 percent to $262.32 at 9:38 a.m. in New York. The shares have climbed more than sevenfold in the past year. The company has said it may partner on the new battery plant with Panasonic Corp., which rose 5.3 percent to close at 1,259 yen in Tokyo trading, the highest in about three weeks.
NRG Energy Inc. Chief Executive Officer David Crane, who says the U.S. utility industry is doomed to obsolescence unless it changes, drives himself to work every day in his Tesla Model S.
Tesla’s Musk told Bloomberg Television last week that the company plans to provide details on a proposed “gigafactory” to produce the batteries needed to make more affordable vehicles. With each Tesla capable of storing enough energy to power the average house for 3.5 days, a growing population of Tesla cars represents a significant increase in how much electricity can be held in a country’s infrastructure.

‘Holy Grail’

Worldwide, the market for energy storage is expected to grow from about $500 million to about $12 billion in 2023, according to Navigant Consulting Inc.
Homeowners might use battery storage, combined with solar power, to further reduce their dependence on utilities and potentially sell electricity back to the grid, a new business model known as distributed generation. Batteries allow customers with solar panels to store energy during the day and then tap the excess overnight when the sun goes down.
“Battery storage is the holy grail of the distributed generation movement,” said Travis Miller, an analyst at Morningstar Inc. “If developers can create a high-capacity battery technology, it opens the door to a significant increase in options for customers to supply their own power.”
While still considered too expensive for wide-scale adoption, a drastic reduction in the cost of home energy storage systems would be a “game changer,” American Electric Power Co. Chairman and Chief Executive Officer Nick Akins said during an interview last year.
“If you can get batteries cheap enough and combine them with solar panels, you no longer need the utility,” said Sam Jaffe, an analyst with Navigant. “Then the question is how cheap does it have to be? And it has to be really, really, really cheap.”

New Partnerships

Tesla would have to reduce the costs of its batteries by more then 70 percent for it to make sense for most homeowners to producer their own electricity, Jaffe said.
Companies already are tapping into grid storage. NRG Energy (NRG) said a year ago it started selling power from electric cars to the nation’s largest power grid in a partnership with the University of Delaware. SolarCity Corp. is now offering Tesla batteries as part of a power-storage system for commercial customers in parts of California and New England that will reduce utility bills and provide electricity during blackouts.
SunPower Corp., the second-largest U.S. solar-panel maker, said in December that it was testing use of power-storage systems to couple with its rooftop solar units.
California has opened up the market for the technology by requiring the state’s utilities to use 1.3 gigawatts of storage by the end of this decade.

California Innovation

Musk and SolarCity CEO Lyndon Rive are scheduled to speak on innovation before state regulators on Feb. 27, according to an e-mailed statement today from the California Public Utilities Commission.
“The scale of Tesla’s battery production, even for its own use as an auto manufacturer, thrusts the company into ‘key player’ status for grid storage,” Morgan Stanley’s Jonas said in his note.
The battery plant would be built with partners, and “there’s a likelihood Panasonic would be part of it,” Musk told Bloomberg last week. Panasonic Corp. is both a Tesla investor and its main supplier of lithium-ion cells. Panasonic’s participation is “not 100 percent confirmed,” he said.
“Nothing has been decided at this stage, however Panasonic has a cooperative relationship with Tesla, and the company will look into a variety of options,” Chieko Gyobu, a spokeswoman for Panasonic, said by e-mail.
To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

News Source: www.bloomberg.com

BofA under probe over US housing program, forex

Bank of America Corp may have a new mortgage problem on its plate, saying on Tuesday that federal investigators are looking into whether the bank violated requirements of a U.S.government housing program.
The second-largest U.S. bank said the civil division of the U.S. Attorney's Office for the Eastern District of New York in Brooklyn is investigating Bank of America's compliance with the rules of the Federal Housing Administration's Direct Endorsement Program. Bank of America made the disclosure in its annual report filed on Tuesday with the U.S. Securities and Exchange Commission.
(Read more: Loan complaints by homeowners rise once more)
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Spokesmen for Bank of America and U.S. Attorney Loretta Lynch declined to provide additional details on the probe.
The Charlotte, North Carolina-based bank also said in the filing that government authorities in North America, Europe and Asia are investigating the bank's conduct and practices in foreign-exchange markets as part of a broader industry inquiry.
(Read more: Bank of America details new housing probes)
The FHA program has been at thecenter of cases brought by U.S. Attorney Preet Bharara, who is Lynch's counterpart in Manhattan. In 2012, Citigroup Inc agreed to pay $158.3 million and Deutsche Bank AG agreed to pay $202.3 million to settle cases, while a third case is pending against Wells Fargo & Co.
Under the program, mortgage lenders such as Bank of America are given the authority to approve home loans that the federal government then insures without further review. If the mortgage defaults and it is later determined that the lender did not follow FHA underwriting standards, the FHA can demand to be reimbursed for any losses.
JPMorgan Chase & Coagreed in early February to pay $614 million to settle claims that it defrauded the FHA and the Department of Veterans Affairs by making sub-standard mortgage loans.
In February 2012, Bank of America agreed to $1 billion in payments to the federal government to settle separate claims that its Countrywide home loan subsidiary made FHA-insured mortgages to unqualified borrowers. That settlement covered loans made before April 30, 2009.
Bank of America raised its estimate of overall litigation costs to as much as $6.1 billion above what it has already set aside, up from an estimate of $5.1 billion at the end of the third quarter, according to its SEC filing.
Getting a capital boost
The bank also disclosed in the filing an agreement with Warren Buffett's Berkshire Hathaway Inc that could give it an additional $2.9 billion in capital.
(Read more: Court approves BofA's $8.5B mortgage settlement)
Berkshire acquired a special class of preferred stock in Bank of America in 2011 as part of a larger $5 billion investment. Under international regulatory capital rules that U.S. regulators finalized in 2013, that preferred stock would not have counted toward the bank's capital ratios.
But in exchange for agreeing not to redeem the preferred stock for five years, Berkshire agreed to change the terms of the investment so that it counts for Tier 1 capital purposes. The new terms include a fixed annual dividend of 6 percent and the removal of a provision that would have let Berkshire receive additional payments if the bank missed a dividend.
The deal is subject to shareholder approval. An amendment will be put to a vote at the bank's annual meeting in May.



News Source: www.cnbc.com

Macy's Grows 4Q Profits 11%, Weak January Drives Sales Miss


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Macy’s (M) logged a better-than-expected 11% jump in fourth-quarter profits on Tuesday, but the department store’s sales missed targets as harsh winter weather kept shoppers away.
Shares of the retailer ticked lower in premarket action following the mixed quarterly report card.
Macy’s said it earned $811 million, or $2.16 per share, last quarter, compared with a profit of $730 million, or $1.83 a share, a year earlier.
Excluding one-time items, it earned $2.31 a share, topping forecasts from analysts for $2.17.
Revenue dipped 1.6% to $9.2 billion, trailing the Street’s view of $9.27 billion. Same-store sales increased 1.4% during the fourth quarter. Gross margins were flat at 40.6%, compared with estimates for a drop to 40.3%.
Macy’s acknowledged January sales fell more than the company had been bracing for due to “unusually harsh winter weather” across much of the U.S. The company said at one point or another 244 of its Macy’s and Bloomingdale’s stores were closed because of bad weather in January.
“Once warm spring weather arrives and our full assortment of fresh spring merchandise is in place, we believe customers will return to a more normalized pattern of shopping. But based on our experience in January and early February, we are watching business trends closely,” Macy’s CEO Terry Lundgren said in a statement.
Still, Macy’s reaffirmed its call for full-year EPS of $4.40 to $4.50 on same-store sales growth of 2.5% to 3%.
Shares of Cincinnati-based Macy’s fell 1.43% to $52.30 ahead of Tuesday’s opening bell.

News Source: www.foxbusiness.com/