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Shopping

Reporting on holiday spending

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Despite retailers’ best efforts, holiday spending dropped this year even as more people went to stores. It’s not a great sign for the season if people are watching their budgets instead of taking advantage of the discounts.

Here’s the Wall Street Journal story:

Aggressive discounts on clothes and toys lured slightly more consumers into stores on Thanksgiving and Black Friday this year, but budget-conscious shoppers spent less.

Total spending from Thursday through Sunday fell 3% from a year earlier to $57.4 billion, with shoppers spending an average $407.02, down 4% from $423.55 a year earlier, according to the National Retail Federation.

The retail trade group said the number of people who went shopping over the four-day weekend that kicked off with Thanksgiving rose slightly to 141 million, up from 139 million last year.

As retailers offered some of their biggest promotions a day earlier, store traffic on Thanksgiving Day jumped 27% to 45 million shoppers. As a result, traffic on Black Friday rose just 3.4% to 92 million shoppers.

More consumers decided to bypass stores altogether. Online shopping continued its steady rise over the Black Friday weekend, accounting for 42% of sales racked up over the four-day period, up from 40% last year and 26% in 2006, the trade group said.

The results suggest that the crowds that piled into stores across the country were careful in their spending and the weekend’s added hours didn’t lead to a surge in buying. Retailers have warned that intense promotions this holiday season could hurt margins as they battle for sales in a barely growing market.

The Reuters story had a similar lead as the WSJ story, and went on to note that the week is often a predictor for how much money people will end up spending:

The Thanksgiving weekend is an early gauge of consumer mood and intentions in a season that generates about 30 percent of sales and nearly 40 percent of profit for retailers.

But many have given modest forecasts for the quarter. Wal-Mart Stores Inc said it expects no growth in its U.S. comparable sales, and Macy’s Inc didn’t raise its full-year sales forecast despite strong numbers last quarter.

The shorter holiday period this year – there are six fewer days between Thanksgiving and Christmas compared with 2012 – prompted retailers to begin offering bargains on Monday, earlier than usual, something Shay said likely pulled some sales forward to the first part of the week.

The NRF stuck to its forecast for retail sales to rise 3.9 percent for the whole season.

One problem for some retailers is that if customers expect deep discounts the entire season, it cuts into profit. The Associated Press story had a quote from National Retail Federation CEO highlighting the problem:

Matthew Shay, president and CEO of The National Retail Federation, said that the survey results only represent one extended weekend in what is typically the biggest shopping period of the year. The combined months of November and December can account for up to 40 percent of retailers’ revenue.

Overall, Shay said the trade group still expects sales for the combined two months to increase 3.9 percent to $602.1 billion. That’s higher than the 3.5 percent pace in the previous year.

But to achieve that growth, retailers will likely have to offer big sales events. In a stronger economy, people who shopped early would continue to do so throughout the season. But analysts say that’s not likely to be the case in this still tough economic climate.

“It’s pretty clear that in the current environment, customers expect promotions,” Shay said. “Absent promotions, they’re not really spending.”

Interestingly, Bloomberg chose to use statistics from a different organization that reported sales were up for the season. Lower in the story they used the NRF numbers every other outlet used in the lead:

U.S. retailers eked out a 2.3 percent sales gain on Thanksgiving and Black Friday, in line with a prediction for the weakest holiday results since 2009.

Sales at brick-and-mortar stores on Thanksgiving and Black Friday rose to $12.3 billion, according to a report yesterday from ShopperTrak. The Chicago-based researcher reiterated its prediction that sales for the entire holiday season will gain 2.4 percent, the smallest increase since the last recession.

Retailers offered more and steeper deals on merchandise from flat-screen televisions to crockpots that, while luring shoppers, may ultimately hurt fourth-quarter earnings. Many consumers showed up prepared to zero in on their favored items while shunning the impulse buys that help retailers’ profits.

“You could get the same deals online as you could get in the store, and yet there were still a ton of people out there,” Charles O’Shea, a senior analyst at Moody’s Investors Service in New York, said in an interview. Going out to stores, “is part of the experience,” he said.

While the story might seem mundane, sales during the Thanksgiving weekend are an important indicator of how the year will end for retailers and if they’ll hit their predictions. Analysts, investors and the media, who are likely hoping that customers will open their wallets a bit more this holiday season, are closely watching the numbers.

New York Post Christmas

Forget Black Friday, many shopping on Thanksgiving

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In the quest to grab as big a share of people’s holiday shopping budget as possible, more and more retailers are opening their doors on Thanksgiving. While Black Friday has traditionally been the day for people to spend money, those looking to get the best deals are shopping earlier than ever before.

The New York Times had this story with an excellent anecdote to begin:

Before most Thanksgiving turkeys even approached the oven on Thursday, a small line of tents had formed in front of a Best Buy in Falls Church, Va., their inhabitants waiting for the holiday deals to begin. First in line was William Ignacio, who pitched his tent at 2 p.m. on Wednesday.

Traditionally, the holiday shopping season kicks off on Black Friday, the day after Thanksgiving. But every year, more stores are opening on the holiday itself and keeping their doors open longer, beginning in the predawn hours and stretching through the day.

“The sales are good,” said Divya Quamara, 25, who stood in an Old Navy in Manhattan on Thanksgiving afternoon. “And the stores are open.”

In Annandale, Va., rock salt had been sprinkled on the parking lot in front of the Kmart that opened at 6 a.m. Though the temperature was just below freezing, a handful of shoppers were lured out of bed for discounted electronics or to browse in advance of Friday’s sales. Wind had partly dislodged a plastic banner hanging above the entry.

The Associated Press led with retailers instead of customers shopping:

Stores are hoping holiday shoppers will gobble their turkey on Thanksgiving afternoon, but save the pumpkin pie for later.

As more than a dozen major retailers from Target to Toys R Us open on Thanksgiving Day, shoppers across the country are expected to get a jump start on holiday shopping. The Thanksgiving openings come despite planned protests across the country from workers’ groups that are against employees missing Thanksgiving meals at home.

The holiday openings are a break with tradition. The day after Thanksgiving, called Black Friday, for a decade had been considered the official start to the holiday buying season. It’s also typically the biggest shopping day of the year.

But in the past few years, retailers have pushed opening times into Thanksgiving night. They’ve also pushed up discounting that used to be reserved for Black Friday into early November, which has led retail experts to question whether the Thanksgiving openings will steal some of Black Friday’s thunder.

In fact, Thanksgiving openings took a bite out of Black Friday sales last year: Sales on turkey day were $810 million last year, an increase of 55 percent from the previous year as more stores opened on the holiday, according to Chicago research firm ShopperTrak. But sales dropped 1.8 percent to $11.2 billion on Black Friday, though it still was the biggest shopping day last year.

“Black Friday is now Gray Friday,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “It’s been pulled all the way to the beginning of November.”
Stores are trying to get shoppers to buy in an economy that’s still challenging. While the job and housing markets are improving, that hasn’t yet translated into sustained spending increases among most shoppers.

Overall, The National Retail Federation expects retail sales to be up 3.9 percent to $602.1 billion during the last two months of the year. That’s higher than last year’s 3.5 percent growth, but below the 6 percent pace seen before the recession.

USA Today found the best lead, a family who celebrated Thanksgiving on Wednesday in order to shop without the hindrance of family obligations on Thursday:

 Asked what day Thanksgiving is each year, Katie Brenner’s kids can barely wait to answer.

“I know this one!” says 6-year-old Alex Brenner, waiting in line Thursday afternoon at a Toys “R” Us store in Asheville, N.C.

“It’s on the very fourth Wednesday, every year, on every November,” she says. “You eat turkey and green beans, you go to sleep, then you go for big shopping.”

Katie Brenner covers her daughter’s ears and whispers.

“They don’t even know most people celebrate Thanksgiving on Thursday,” she says. “All the good stores open on Thanksgiving now, so we just have to celebrate a day early.”

Maybe Thanksgiving Day isn’t a secret in most homes, but more families are celebrating the day as the Brenners did — standing in line to score bargains as the holiday shopping season is launched.

Much of the criticism around shopping on Thanksgiving is that it takes away a holiday for people who have to show up and work in the stores. Fox News had a counter story about laws that prevent retailers to be open on the holiday:

As workers across America protest against working on Thanksgiving Day, laws that may date back to the Colonial era are keeping shoppers and employees in three states at the dinner table.

In Rhode Island, Maine and Massachusetts so-called “blue laws” prohibit large supermarkets, big box stores and department stores from opening on Thanksgiving.

Business groups say the laws are unnecessary barriers during an era of 24-hour online retailers, but many shoppers, workers and even retailers say they appreciate one day free of holiday shopping.

“I shop all year. People need to be with their families on Thanksgiving,” Debra Wall, of Pawtucket, R.I., told The Associated Press.

The holiday shopping frenzy has crept deeper than ever into Thanksgiving this year. Macy’s, J.C. Penney and Staples will open on Thanksgiving for the first time. Toys R Us will open at 5 p.m., and Wal-Mart, already open 24 hours in many locations, will start holiday deals at 6 p.m., two hours earlier than last year. In recent years, some retail employees and their supporters have started online petitions to protest stores that open on Thanksgiving — but shoppers keep coming.

No matter when you decide to start shopping, someone will have to open the doors, restock the shelves and run the registers. As retailers strive to better each other, they’re also pushing steeper discounts and costly days of labor. Soon, the competition could drive some to a loss.

Mens Wearhouse

Men’s Wearhouse turns tables on suitor

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When Jos. A. Bank made a bid for Men’s Wearhouse, it was just a straightforward M&A transaction. But on Tuesday, when Men’s Wearhouse turned the tables and made a bid for Jos. A. Bank, the whole story got a lot more interesting.

The Wall Street Journal wrote this story:

Men’s Wearhouse Inc. launched a surprise offer to buy rival men’s clothing retailer Jos. A. Bank Clothiers Inc., turning the tables on its erstwhile suitor in what has become one of the year’s most colorful takeover dramas.

The bid comes less than two weeks after Jos. A. Bank walked away from its bid to buy its larger competitor, which said the $2.3 billion offer was too low and rebuffed it. The new bid values Jos. A. Bank at about $1.5 billion, or $55 a share—an 8.7% premium over its closing price Monday and 32% above where the shares traded before the possibility of the two companies uniting surfaced in early October.

Investors in both companies cheered the latest step in the takeover dance, with Jos. A. Bank and Men’s Wearhouse shares rising 11% and 8%, respectively, from their already-elevated levels. Both stocks surged when Jos. A. Bank made its $48-a-share bid—and the stocks barely retreated even after it pulled the offer Nov. 15, suggesting investors expected another chapter in the saga.

Men’s Wearhouse’s countermove sets up one of the year’s most unusual deal situations. The company, based in Fremont, Calif., is attempting a version of a rare maneuver known in mergers-and-acquisitions circles as a Pac-Man defense, in which deal prey turns into predator. Popularized during the 1980s, the gambit has met with mixed results, with the proposed deals often not getting consummated.

Reuters reported that this wasn’t just about trying to get a higher price on the original deal, but a true takeover attempt:

The combined company would have 1,700 stores that rent tuxedos and sell suits, a scale that in the past has raised antitrust questions about a merger.

The retaliatory offer from Men’s Wearhouse, which the company said implies an enterprise value of about $1.2 billion for Jos. A. Bank, follows pressure from its largest shareholder, New York-based hedge fund Eminence Capital LLC.

Eminence, along with other hedge funds that hold about 30 percent of Men’s Wearhouse shares, had tried to persuade other investors to pressure the company into accepting the takeover offer from Jos. A. Bank.

“We are pleased to see that the board of Men’s Wearhouse agrees with us and recognizes the substantial benefits of merging with Jos. A. Bank,” said Eminence Chief Executive Ricky Sandler.

The last person to push Men’s Wearhouse to sell itself was its founder, George Zimmer, known to U.S. television audiences for his advertising catch phrase, “You’re going to like the way you look – I guarantee it.”

Zimmer was ousted by the board in June after arguing for a sale of the company to an investment group. At the time, he accused the board of trying to silence him for expressing concerns about the direction of the company he founded 40 years ago.

Men’s Wearhouse is serious about acquiring Jos. A. Bank and is not simply trying to force the company to raise its bid for Men’s Wearhouse, according to sources familiar with the process.

USA Today had this information about the deal and the combined finances of two firms:

A combination of the two companies would create the fourth-largest U.S. men’s apparel retailer, with more than 1,700 total stores and annual sales of more than $3.5 billion, Men’s Wearhouse said.

The company forecast that the combination would create about $100 million to $150 million of annual synergies over three years through more efficient purchasing, customer service and marketing, and streamlining corporate functions. The deal would add to Men’s Wearhouse’s earnings in the first year following closing, it added.

Men’s Wearhouse said it plans to pay for the deal with existing cash from its balance sheet and borrowed money.

Jos. A. Bank withdrew its $2.3 billion offer to buy Men’s Wearhouse earlier in November.

The New York Times story had this background on the original offer and the history of the negotiations:

Jos. A. Bank made an unsolicited $2.3 billion bid in early October for Men’s Wearhouse, which rejected the offer as highly conditional and said it believed that its own turnaround plan would be better for shareholders.

Jos. A. Bank indicated later that it would consider raising its $48-a-share offer if it were allowed confidential access to Men’s Wearhouse’s books. Men’s Wearhouse again rejected the offer, and Jos. A. Bank withdrew its bid this month, but left the door open for possible talks in the future.

The Men’s Wearhouse offer is not contingent on any financing and will not require additional costly third-party equity commitments, the company said.

Bank of America and JPMorgan Chase are advising Men’s Wearhouse, and Willkie Farr & Gallagher is providing legal advice.

Now is when the talks get interesting. One thing is for sure, investors like the idea of a combination of the two men’s retailers and are willing to buy into the idea. Who will have control is the big unknown.

walmart_logo

Wal-Mart investors get new CEO for the holidays

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Wal-Mart shareholders and employees are getting a new head of the company for the holidays. The world’s largest retailer announced that its promoting Douglas McMillon to replace retiring chief executive Michael Duke.

The Wall Street Journal reported he will be the fifth person to head the company:

Wal-Mart Stores Inc. said company veteran Douglas McMillon will take over as the retailing giant’s chief executive, a rare leadership change at a company that brings in nearly half a trillion dollars in annual revenue but is struggling to book further growth.

The retail giant’s board met Friday in Bentonville, Ark., and named Mr. McMillon as the company’s fifth-ever CEO. The 47-year-old executive, currently president and CEO of Wal-Mart International, will take the top job on Feb. 1, after current CEO Michael Duke retires early next year.

Wal-Mart has a long history of grooming leaders from within and said it began planning for Mr. Duke’s succession years earlier.

The move will create a ripple effect throughout the world’s largest retailer at a time when it is grappling with sluggish sales in its international and U.S. businesses, a global investigation into allegations of bribery at its foreign operations, and worker protests over poor pay practices at its domestic stores.

Mr. McMillon and William Simon, president of Wal-Mart U.S., were among the favored candidates. Now, analysts are watching to see what happens with Mr. Simon and are waiting to see who will take over the international operations as it tries to retool its strategy at its 6,200 stores abroad.

The New York Times added this context around Wal-Mart’s recent performance and struggles to continue to grow:

In recent weeks, Walmart has been busily promoting its holiday deals, in one of the fiercest competitive sales seasons in recent memory, driven partly because there is a very short window this year between Thanksgiving and Christmas. The company’s executives have noted that Walmart’s core customer base remains very budget-conscious, hit by the end of the payroll tax holiday earlier this year and uneasiness over events like the federal budget shutdown. At the busiest time of the year, major retailers are already slashing prices and many are chipping away at the lure of Black Friday deals by offering them even earlier.

Mr. McMillon’s ascension is also occurring at a time when the company has announced major expansion plans in China.

Bloomberg Businessweek wrote a piece about the four things to know about McMillon, including that his division has had some troubles recently. Here are the first two:

1. McMillon’s part of Wal-Mart has had its share of troubles recently.The U.S. Department of Justice and the Securities and Exchange Commission are investigating allegations of corruption by Wal-Mart executives in its Mexican subsidiary, the company’s biggest, and a potential cover-up by executives at its headquarters in Bentonville, Ark. Wal-Mart is cooperating with the investigations and conducting its own internal investigation and review. The retailer also facedcriticism that it wasn’t doing enough to ensure safe working conditions in garment factories in Bangladesh, after several fires killed more than 1,000 people. And last month Wal-Mart had to break up with its Indian partner, delaying its ambitious plans to open hundreds of supercenters there.

2. His rival for the job faced worse problems. Bill Simon, the head of Wal-Mart’s U.S. operations, was the other executive frequently named as a potential successor to Duke. But Wal-Mart’s U.S. stores have been dealing with even bigger issues than its international ones. Bloomberg News has reported that the retailer alienated some shoppers on its home turf because the retailer doesn’t have enough workers to keep shelves adequately stocked. Some of those workers, meanwhile, have been protesting Wal-Mart’s low wages. And recently the company said it expects same-store sales over the all-important holiday season to be “relatively flat.”

The USA Today story chose to focus on McMillon’s qualifications, which helped him edge out other candidates for the top job:

“Unless you’re there, you don’t really understand it, and when you’re big, people may assume that you’ve got bad intentions,” McMillon said. “I learned more in the first six months at Wal-Mart than I learned in 5 1/2 years of post-secondary education.”

Originally from Jonesboro, Ark., McMillon, 47, started his career in 1984 as a summer associate at a Wal-Mart distribution center.

He got a B.S. in business administration from the University of Arkansas and an MBA from the University of Tulsa. While pursuing the MBA, he rejoined the company in a Tulsa Walmart store.

A lot of McMillon’s 22 years at the company were spent in merchandising in the Walmart U.S. division, giving him with experience with food, apparel and general goods. From 2006 to February 2009, he ran Sam’s Club and then took over Walmart International.

That deep Wal-Mart experience likely gave him leg up versus other candidates like Bill Simon, who runs Walmart U.S.

“Bill Simon was more of an outsider,” said Sucharita Mulpuru, a retail analyst at Forrester Research. “It was going to be one of them.”

McMillon also has a record of generating growth – both at Sam’s Club and the International business, which he ran from Arkansas.

Investors seemed to be indifferent to the news of an insider taking over since the stock only rose slightly on the news. It will remain to be seen how radically a nearly life-long Wal-Mart executive will change things. With all the pressure to keep costs low on one hand and to pay workers more on the other, McMillon will have his fair share of problems to solve.

Money stacks

Investors love Cinda IPO

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Chinese asset management company Cinda is shaping up to be the hottest initial public offering of the holiday season. Hedge funds and other investors are pouring cash into the offering, hoping to capitalize on the growing pile of debt expected to go bad.

The Wall Street Journal offered this list of investors:

China Cinda Asset Management Co. has lined up 10 cornerstone investors to take up 44% of the funding it seeks to raise—up to $2.46 billion—in its initial public offering, people familiar with the deal said Sunday.

The offering is set to be Hong Kong’s biggest IPO of the year, and if the interest among cornerstone investors is any indication, it may be one of the more popular. The so-called bad bank, whose bread-and-butter business is buying up bad loans from Chinese banks and distressed assets from factories and real-estate firms, could benefit from an uptick in nonperforming loans in China.

The 10 cornerstone investors have together committed to buying $1.09 billion of the IPO.

New York-based Och-Ziff Capital Management Group LLC, which has a strong focus on distressed debt, and China Life Insurance Co. are taking $200 million each, the people said. Norges Bank Investment Management, Norway’s sovereign-wealth fund, is buying $150 million.

Three other investors, including San Francisco-based Farallon Capital Management LLC and Chinese fund Rongtong Capital Management Co. are taking $100 million each.

Ping An of China Asset Management, a unit of Ping An Insurance (Group) Co.  of China Ltd. is investing $75 million and Shandong State-owned Assets Investment Holdings Co. is buying $60 million.

Distressed-investment specialist Oaktree Capital Management, a unit of the U.S.’s Oaktree Capital Group LLC, and Upper Horn Investments Ltd., a unit of Chinese power firm Guangdong Yudean Group Co., are buying $52.95 million and $50 million, respectively, the people said.

Reuters offered this background on the firm’s creation and how investors expect to make money as more people fall behind on their loans:

The offering is set to be the biggest in Hong Kong this year as global investors bet that soured loans will be a growth business in China. It opens a window into how the four firms have managed loans, investments and properties seized from companies unable to repay their lenders as the world’s second-largest economy slowed.

Cinda, the first of the four to launch an IPO, said in a filing to the Hong Kong Stock Exchange that total assets rose 11 percent to 283.55 billion yuan ($46.5 billion) as of June 30, compared to the end of December last year.

The next Chinese bad debt manager expected to pursue an IPO is Huarong Asset Management Corp, which hopes to raise up to $2 billion through a listing though no timetable has been set. Reuters reported the Huarong IPO plans in June.

Created in 1999 to handle the bad loans of China Construction Bank, the country’s No. 2 lender, Cinda said profit attributable to equity holders was 4.06 billion yuan ($667 million) for the six months ended June 30, 2013, up 36 percent from 2.99 billion yuan a year earlier.

In its IPO Cinda is offering 5.32 billion new shares in an indicative range of HK$3.00 to HK$3.58 ($0.39 to $0.46) each.

The MarketWatch story pointed out that the Chinese financial system is become more complex, creating both opportunities and problems for companies like Cinda that are trying to capitalize on the missteps of others:

In recent years, investment trusts, real estate and investment banking have been added to Cinda’s distressed-loan business. It also appears to have done well, with an operating margin of 28% in 2012 referenced in pre-deal research. No doubt China’s asset boom in recent years will have done its part to rescue some of these earlier bad loans.

But going forward, investors will need some comfort understanding its business model.

Indeed, reports suggest Cinda will be using funds raised in this listing — and then some — to help clean up China’s next batch of problem loans. The Financial Times says Cinda is ready to buy 100 billion yuan ($16.4 billion) in bad debt over the next two years.

As concerns mount that China is careening toward a new bad-loan cycle, the reception of Cinda will be a key gauge of how much confidence investors have that the lid can be kept on problem loans.

Optimists will hope that this listing exercise will, at the very least, bring a bit more transparency to China’s murky world of distressed debt.

At a conference on China debt-restructuring opportunities held in Hong Kong earlier this month, a key message was that the next bad-debt cycle will be tougher than the last one.

Not only has the size of China’s financial sector grown exponentially, but it’s also much more complicated. China’s banks are not just much bigger, but also now have operations and listings overseas.

The last time around, for instance, China cleaned up loans without outside help, and it appeared relatively painless, with problem loans taken on at par. This time, however, the size of the financial sector means it may not be realistic to expect a crisis to be handled alone.

And that’s likely why all these U.S. hedge funds and distressed investment vehicles are turning to Cinda. Yields on opaque foreign restructurings will likely be higher than the well-understood reworkings in the U.S. Anything that sheds more light onto the financial sector is a good thing, especially in a country as tightly controlled as China.

Bangladesh factory

Retailers agree on standards for Bangladesh

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With consumers ready to open their wallets for the holiday shopping season, those worried about the quality of working conditions for factory workers may find some comfort in a retail agreement announced Wednesday.

The Wall Street Journal had this story:

Three parallel safety pacts spurred by the death of more than 1,100 people in the April collapse of a garment factory in Bangladesh have tentatively agreed on common standards for plant inspections in the country.

Experts from the three groups—the Accord on Fire and Safety in Bangladesh, which is led by mostly European retailers; the Alliance for Bangladesh Worker Safety, led by Wal-Mart Stores Inc. and Gap Inc.; and the government’s own National Tripartite Action Plan—reached the deal last week.

It would prompt the groups to adopt unified standards to simplify inspections and avoid duplication, officials with the three programs said.

The agreement, which still needs final approval from each group’s steering committee, could be a significant breakthrough in international efforts to raise standards in Bangladesh’s garment industry, according to Srinivas Reddy, country director of the International Labor Organization, which helped broker the deal.

“It was vital to agree on a coordinated approach toward safety standards and inspection methodologies to avoid multiple inspections of the same factories and to ensure that the same basic standards are applied,” Mr. Reddy said.

Reuters added these details of the agreement between the various retailers:

European retailers have agreed to finance fire and safety reforms for buildings that do not meet requirements, while the North American group – Alliance for Bangladesh Worker Safety – pledged $100 million in loans to factory owners to finance safety upgrades.

“The reason garment factories continue to be unsafe is not for a lack of common standards. It is because the monitoring visits carried out by brands were not conducted by competent engineers, not done in manner that is transparent, and did not include any commitment by brands and retailer to finance repairs,” said Theresa Haas, a spokeswoman for the Worker Rights Consortium, a labor rights group that is a member of the European-led Accord on Fire and Building Safety in Bangladesh.

“It’s up to the factory owner to decide if they want to remediate. We can’t force them to make these changes,” said Jeffrey Krilla, president of the American-led alliance, who called the agreement a huge step forward.

Individual retailers can voluntarily pull out of factories that do not meet safety requirements.

The new agreement comes as hundreds of workers take to the streets, demanding higher wages in protests that resulted in the death of least two workers and suspended production in up to 200 clothing factories.

Bangladesh garment factory working conditions have been under close scrutiny since the April collapse of the Rana Plaza factory complex killed more than 1,100 garment workers and a November 2012 fire at the Tazreen factory killed 112 workers.

USA Today’s story talked about how many labor groups felt the agreement didn’t go far enough:

The agreement is less stringent than the guidelines being pushed coalition of labor groups that called for third-party monitoring and labor representation and the coalition immediately lashed out at the retailers’ plan, calling it a “sham.”

“Worker representatives are not part of the agreement and have no role whatsoever in its governance,” the labor groups said in a statement Wednesday. “Given the grave risks facing millions of workers in Bangladesh, there can be no credible or effective program without a central leadership role for worker representatives.”

Scott Nova of the Worker Rights Campaign called the deal “an attempt to side-step the issue.”

Retailers said they objected to the labor-backed pact because they say it exposes them to unlimited liability. They also say that the pact called for large funding from the retailers and other private businesses without providing accountability for how the money would be spent.

Under the retailers’ plan, inspectors will “prioritize factory safety risks for remediation efforts” and will be empowered to report dangerous safety conditions to all parties. The initiative also includes an independent chair of a board of directors responsible for oversight.

The Bloomberg story added this context about the backdrop for labor unrest and why retailers are being pressured to make changes to business practices:

Unsafe factories and wages higher than only Myanmar in Asia have sparked labor tensions in Bangladesh’s $20 billion garment industry. A series of protests by workers demanding higher wages have taken place in the past several months in the industrial zones of Gazipur and Ashulia on the outskirts of the capital Dhaka. Some workers clashed with the police in demonstrations that forced the shutdown of factories.

Two workers died and 30 others injured in a protest this week as thousands took to the streets demanding a higher monthly salary of 8,000 taka ($103). The government last week increased the minimum wage to 5,300 taka, below the amount unions are demanding.

Except for one or two factories, most that had been shut by labor unrest have resumed production, Abdus Salam Murshedy, president of Exporters Association of Bangladesh, said via phone today. “Workers have joined work,” he said. “We expect that the government will issue a formal, written notice on the new wage structure today. The situation is returning to normal.”

Bangladesh Prime Minister Sheikh Hasina yesterday urged workers to accept the wage increase and to end violence, she said in a speech broadcast by Bangladesh Television.

The standards will hopefully help relieve some of the worst labor abuses, but often when regulations are enacted, business simply moves to a less regulated environment. As pressure mounts for retailers to lower costs and increase margins, it will remain to be seen how many companies continue to manufacture in Bangladesh instead of moving to another location. What would really be newsworthy is if these standards could be applied to all countries.

Star Ledger

Newark editor, publisher suing business that retaliated after coverage

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The editor and publisher of the Newark Star-Ledger claim a disgruntled businessman who was featured in the newspaper is using their names in an Internet domain that directs users to hard-core pornography, reports Cheryl Armstrong of the Couthouse News Service.

Armstrong writes, “Editor Kevin Whitmer and publisher Richard Vezza sued Alfred Demola and Domains by Proxy LLC in Federal Court, alleging harassment, cybersquatting, cyberpiracy and privacy violations.

“The newspaper itself is not a party to the lawsuit.

“‘Between December 2010 and October 2013, the Ledger published seven articles in the Business section of the Ledger as part of a weekly column entitled ‘Bamboozled’ concerning reports of defendant Demola’s allegedly unscrupulous business practices in his waterproofing businesses,’ the complaint states.

“The articles by freelance columnist Karin Price Mueller were based on customer complaints about alleged failure to return deposits and shoddy workmanship.

“‘On September 10, 2013, Demola contacted Ms. Mueller by phone after Ms. Mueller left him voicemail messages to offer Demola a chance to comment on a story that she was preparing concerning his business practices. He demanded that she stop writing about him,’ the lawsuit states.”

Read more here.

Money stacks

The end of easy money

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The Federal Reserve Board is considering pulling back on its bond purchases, but it won’t be easy to wean the market from the stimulus it now considers nearly essential.

The release of the minutes from the October meeting sparked a round of media coverage. The Wall Street Journal wrote this story:

Federal Reserve officials, mindful of a still-fragile economy, are laboring to devise a strategy to avoid another round of market turmoil when they pull back on one of their signature easy-money programs in the months ahead.

Central-bank officials have been debating for months when to start paring the $85 billion-a-month bond-purchase program. They were surprised during the summer when their discussions and public pronouncements on the potential timing rocked markets, pushing interest rates higher and stock prices down.

Minutes of the Oct. 29-30 policy meeting, released Wednesday, showed officials continued to look toward ending the bond-buying program “in coming months.” But they spent hours game-planning how to handle unexpected developments and tailoring a message to the public to soften the impact of the program’s end.

Investors responded Wednesday with new disappointment. The Dow Jones Industrial Average fell 66.21 points, or 0.4%, to 15900.82. The Dow had crossed the 16000 mark during intraday trading for the second time this week, but turned negative following the release of minutes from the Fed’s Oct. 29-30 policy meeting. Bond yields rose to a two-month high, with the 10-year Treasury notes climbing 0.083 percentage point to 2.795%.

The Fed’s next policy meeting is Dec. 17-18. The decision on whether to act then on cutting back on bond purchases will depend largely on the strength or weakness of economic data over the next few weeks.

The New York Times pointed out the move has been in the works for some time, but the Fed is considering making it policies and factors for making a decision better known:

The outlines of that shift have been clear for some time. The Fed intends to reduce and then suspend its monthly purchases of Treasury and mortgage-backed securities. At the same time, the Fed is seeking ways of emphasizing that it remains determined to keep borrowing costs for businesses and consumers as low as possible well into the future.

The leading candidate, according to the account, is a proposal to include in the Fed’s policy statement, released after each meeting, a formal declaration that the Fed is likely to keep short-term rates relatively low even after it eventually decides to end the long period, dating back to 2008, that it has held those rates near zero.

The Federal Open Market Committee also discussed the possibility of describing some of the factors that it would consider in deciding how quickly to raise rates. So far, the committee has said only that it will keep interest rates near zero at least as long as the unemployment rate remains above 6.5 percent.

The Fed’s chairman, Ben S. Bernanke, employed both approaches in a speech Tuesday night, stating that the 6.5 percent threshold would be the point at which Fed officials would begin to discuss the timing of an initial rate increase. That suggests that when the official unemployment rate, currently at 7.3 percent, reaches that point, it will probably not initiate an immediate increase in the lending tool, known as the federal funds rate, that the Fed directly controls.

MarketWatch’s story said the Fed wanted to broadcast its position on rates and give unemployment guidance in an attempt to prepare investors for tapering of quantitative easing:

The Fed also was eager to clarify or strengthen the forward guidance for rates. “Several” said extra qualitative information could be provided after the 6.5% unemployment rate threshold was actually reached, which by the Fed’s own projections could come next year.

A “couple” wanted to reduce the 6.5% unemployment rate threshold, and a “few” wanted to add that the federal funds rate wouldn’t be raised as long as inflation was projected to run below a given level.

Also on the chalkboard: reducing the interest rate paid on excess reserves, setting up a standing purchase facility for shorter-term Treasury securities or providing term funding through repurchase agreements.

The Bloomberg story added economic context around the state of unemployment and what the Fed might need to see in order to pull back on bond purchases:

The FOMC has pledged to press on with so-called quantitative easing until seeing substantial improvement in the outlook for labor market. Employers added 204,000 workers to payrolls in October, more than forecast by economists, and the unemployment rate has fallen to 7.3 percent from the 8.1 percent rate the month before the central bank began a third round of bond buying in September 2012.

Participants said they still expect a pick-up in the pace of economic activity even as reports suggest growth in the second half of this year may prove to be “somewhat weaker than many of them had previously anticipated,” the minutes said. While they saw less risk for the economy, they also said “several significant risks remained,” specifically citing fiscal drag and budget standoffs.

Fed officials saw the economic impact of the government shutdown “as temporary and limited,” while a number said they were concerned about effects of “repeated fiscal impasses” on business and consumer confidence, according to the minutes.

All of the stories are helping the Fed make its policy well known before it actually makes a move. Having a window into their thoughts should be some comfort to investors. But if they actually believe the guidance remains to be seen.

Huffington Post business

The Huffington Post brand of business journalism

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Peter S. Goodman is the executive business editor of The Huffington Post, where he supervises business, economic and technology coverage. He is also the global news editor and writes frequently about the upending of basic economic security for ordinary Americans and the search for new sources of quality jobs.

Goodman joined the Huffington Post in the fall of 2010, after two decades in traditional newspaper journalism, most recently as the national economic correspondent for the New York Times, where he played a leading role in the paper’s award-winning coverage of the 2008 financial crisis and the Great Recession. Prior to that, he spent a decade at the Washington Post as a foreign correspondent and a financial writer.

Goodman is the author of “PAST DUE: The End of Easy Money and the Renewal of the American Economy” (Times Books, 2009), which draws on more than a decade’s reporting to trace the origins of the breakdown in American economic life while exploring ways to reinvigorate the economy. The book was selected as an Editor’s Choice title by the New York Times Book Review and as one of Bloomberg’s Top 50 Business Books.

Goodman grew up in New York City and graduated from Reed College in 1989. He began his newspaper career as a feature writer in Kyoto, Japan for the English language-Japan Times, then spent three years freelancing from Southeast Asia for several newspapers, among them the Los Angeles Times, Dallas Morning News, Miami Herald and London’s Daily Telegraph. Returning to the United States in 1993, Goodman worked as a Metro reporter for the Anchorage Daily News in Alaska, where he covered the Wasilla City Council and a then-unknown member of the body known as Sarah Palin.

After a year at the University of California, Berkeley — where Goodman gained a Master’s in Asian Studies — he joined the Washington Post as metro reporter in the summer of 1997. By 1999, he was the newspaper’s telecommunications reporter, giving him a front row seat for the emergence of the Internet as a force in commerce, culture and ordinary life.

Goodman spoke Wednesday afternoon with Talking Biz News about how Huffington Post covers business and economics stories. What follows is an edited transcript.

What is the philosophy behind your business news coverage?

We view our business site as one that is edited and written for a general interest reader. We are very much cognizant that most people are put off by jargon, esoteric terms that don’t get explained, and a lot of business sections don’t invite in the outsiders. We try to make the connections between big, important and hard-to-understand events and everyday people in their lives as workers, parents and one day retirees. We try to break them down into terms they can understand, such as saving for retirement and paying for kids to go to college.

We are also very serious about accountability. Business and economics issues spill over into the rest of life. So we are looking for stories that make sense of hard to understand events and to sound a warning when the public interest is being threatened or not adequately.

So an example of accountability would be the JP Morgan piece on the home page right now?

We look at JP Morgan as a company that, for better or worse, has been at the center of every big business story for the past decade. Any time that we write about financial regulatory reform or misdeeds by big companies, we have at the center of our thinking that we barely survive the last financial crisis, so what are the odds that we’re going to survive another one, and what lessons have we learned? So the JP Morgan becomes a hook to explore those questions of financial fairness and safety.

Peter Goodman 2How are stories assigned?

It’s quite collaborative. In the morning, we all read and check our Twitter feeds and in-boxes. Some things get planned in advance, like if the jobs report is going to happen or if the Fed is going to meet. Every morning, we bat around a bunch a possible stories and consider the merits of each and see who we have available.

How big is your staff — permanent and freelancers?

We don’t have any freelancers in business. Business and tech together we have seven reporters, a managing editor and an assistant managing editor and four associate editors. The seven reporters are all doing originally reported stuff. And the four associate editors are doing some aggregating and some original reporting.

Do you have a goal to post a certain number of stories per day or week?

No. We don’t have quotas. We stay on top of the news. We feel like you ought to be able to glance at our site and surmise what people are talking about and get some enterprise as well. We don’t operated on a quota basis.

How do you differentiate your coverage from other sources of business news and information?

A lot of the ways that I started off talking about. We understand that most of the business press is for people in business or trading or seeing the world through the eyes of companies and executives. We’re interested in looking at business and economic developments through the eyes of everyday people. I think lots of people do that well to a degree, but there isn’t anybody doing it wholesale.

What stories have your staff done recently that you’ve been proud of?

We did a terrific two-part investigative series into Youth Services International, a big prison conglomerate. We built the database from scratch, without much help from the states, and analyzed trends and discovered that this company has a history of abuse and neglect but nevertheless keeps getting contracts. That was really masterful work by Chris Kirkham.

Tech is doing a series on stolen iPhones and the international distribution of iPhones from the U.S. Our reporter, Gerry Smith, has been all over this.

And then Kim Bhasin, who covers retail for us, has had a bunch of solid scoops about JC Penney and the chaos at the company. We were very enterprising with the  story that Barney’s security was harassing black customers at its stores.

Ben Hallman did tremendous work on a company called Safeguard, that gets bank contracts for foreclosed homes they’re sitting on. It’s a real free for all. It’s an industry that nobody understands.

And Mark Gongloff, who is deputy managing editor, writes a column, and his work on JP Morgan has been tremendous.

What areas would you like to expand or improve coverage?

That’s never ending. I’d love for us to get more enterprising at the business opportunity that climate change represents. Everyone is writing that in bits and pieces, but no one has figured out how to make that compelling.

You’ve got a lot of bloggers on the business page. How are they selected?

We don’t have anything to do with the bloggers. That is a tricky situation. We’re both a journalistic outfit and a platform. A team of blog editors sometimes reach out to people, and they vet people and make sure there’s an interesting mix. There’s something there for everybody.

How do you reconcile Huffington Post as place known for links with your original reporting?

I run the risk of repeating myself, but most people begin thinking of The Huffington Post as a very quick, sophisticated packager of other people’s work. We still are very good at serving as a lens on everything because we don’t feel bound to the traditional newspaper format. We don’t live in that world. We live in a world of links, and if the New York Times has a wonderful story, we will link to that.

At the same time, we have a made a very aggressive investment to original reporting. Kirkham has also dominated for-profit college coverage. And Kim’s retail reporting is up there with just about anybody. It’s that kind of sophistication that I see as our future, which is getting much more serious about our original reporting while curating the web.

What is your visitor and page view growth like recently?

I don’t know if we break that out publicly, but we have seen very steady growth in the three plus years that I have been here. Steadily increasing growth.

Bank-of-America-logo1

Investors mixed on Bank of America settlement

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Depending on whom you ask, the $8.5 billion settlement between Bank of America and 22 institutional investors is a great way for them to move on or a terrible idea. The two-year-old lawsuit has been in hearings for the past eight weeks.

The Financial Times led with the unhappy investors, who are in the minority on claiming the settlement should be rejected:

Bank of America’s plan to pay $8.5bn to compensate 22 institutional investors for soured mortgage-backed securities is a “Frankenstein settlement”, and should be rejected, a lawyer for a dissenting group of investors told a New York judge Tuesday.

The claim came as lawyers for investors locked in combat over the proposed settlement made their last pitches after eight weeks of hearings.

BofA and a group of investors that includes BlackRock, MetLife and Pimco, agreed to the $8.5bn deal more than two years ago to resolve claims on mortgage-backed securities issued by Countrywide, the troubled bank it rescued in 2008.

But a contingent of investors, led by American International Group and representing less than 7 per cent of the outstanding claims, is fighting the June 2011 settlement, which must be approved by Judge Barbara Kapnick of the New York state’s Supreme Court.

“This monster is a Frankenstein settlement . . . They [the creators] were not willing to give life to this settlement, instead they brought it to you,” Daniel Reilly, AIG’s lawyer, told Judge Kapnick.

If she finds the deal is acceptable, the dissenting investors will be bound by it. If not, BofA could face new claims and further litigation. It is not clear when she will rule.

The bank is already on the hook for around $50bn in settlements, not including this one, stemming from the financial crisis. It is also under investigation by at least three US attorneys’ offices – California, New Jersey and Atlanta – and the DoJ for various MBS securities deals. BofA says it has set aside money to cover the $8.5bn.

Reuters had this story on Monday about the investors in favor of the settlement:

A lawyer for an investor group on Monday urged a judge to approve Bank of America Corp’s proposed $8.5 billion settlement over mortgage-backed securities that soured in the financial crisis, noting that not one investor testified against the deal in a nine-week proceeding.

Kathy Patrick, a lawyer for a group of institutional investors who entered into the settlement, was summing up the case in New York state court in Manhattan.

Bank of America agreed to the settlement in June 2011 to resolve claims over shoddy mortgage-backed securities issued by Countrywide Financial Corp, which the bank acquired in 2008.

Bloomberg added this context about the settlement and why Bank of America is eager to put this behind them:

The settlement is part of an effort by Brian Moynihan, chief executive of Charlotte, North Carolina-based Bank of America, to resolve liabilities tied to faulty mortgages that have cost the company about $50 billion in legal claims, including those the bank inherited with the purchase of home lender Countrywide Financial Corp. in 2008.

The accord, which includes more than $3 billion in servicing improvements, resolves claims over mortgages packaged into securities. It settles allegations the loans backing the bonds didn’t meet their promised quality.

BNY Mellon, as trustee for more than 500 residential mortgage-securitization trusts, filed a petition in June 2011 seeking approval of the settlement under a state law that allows trustees to seek judicial consent for their actions.

While the settlement was backed by a group of more than two dozen investors including BlackRock Inc. (BLK) and Pacific Investment Management Co., almost four dozen investors objected, including AIG. Only 15 objectors opposed to the settlement remained as closing arguments began, Ingber said.

The closing arguments cap a hearing that started in June, stretched over eight weeks and included testimony from almost two dozen witnesses and evidence from more than 200 documents.

Bank of America declined to participate in mediation talks proposed by AIG and other opponents of the settlement after Kapnick urged the parties to consider using a mediator to resolve their objections during a break in the hearing.

The arguments before the judge comes as JPMorgan Chase works through a $13 billion civil settlement with the Justice Department. Banks are trying to put the financial crisis behind them and remove some of the overhang from litigation risk. At least once settlements have been approved then it removes the doubt from stock market valuation. It might not be best in the short-term but should be a good way for the industry to move forward.