Americans may be descending on the malls today to hunt for bargains. But this is still expected to be a blue Christmas for many retailers and a gloomy end to what’s turning out to be a dismal 2008.
Nonetheless, some consumer stocks are actually thriving this year. Not surprisingly, almost all of the retailers that are in the black through Black Friday are benefiting from the weak economy because they tend to focus on thrifty shoppers. (And who isn’t trying to be more frugal these days?)
Shares of Wal-Mart Stores (WMT, Fortune 500) have gained nearly 20% so far this year. That makes it not just the best-performing stock in the Dow in 2008 — it’s the only one of the Dow 30 that’s up this year.
The discount retailer is expected to post an 8% gain in sales and 10% increase in profits — incredibly impressive in this economic environment.
Big Lots (BIG, Fortune 500), a closeout retailer of bargain-priced merchandise, is also doing well as consumers pull back. The stock is up 10% this year and earnings per share are expected to increase 35%.
But the companies that are really taking off this year are the ones that offer consumers the most bang for their buck — literally. Shares of the dollar store discount chains have been among the best-performers in the market in 2008.
Dollar Tree (DLTR) has soared about 60% so far. Shares of Family Dollar Stores (FDO, Fortune 500) are up 50% while 99 Cents Only Stores (NDN) has gained more than 35%.
Are these stocks still worth buying though? That’s less certain.
On the one hand, many are predicting that the economic malaise will linger into the early part of 2009 easy fast payday loans. That means these companies are likely to rack up sales and profits increases that will outpace the rest of the retail industry.
Wal-Mart, for example, is expected to report an earnings per share increase of 8% in its next fiscal year. Analysts are forecasting a 10% jump in profits for Dollar Tree next year.
But investors are already anticipating this sluggishness to continue and have priced that into the stocks of many of these discounters. So several now actually trade at luxury-like valuations when compared to other retailers.
Wal-Mart, Family Dollar and Dollar Tree all trade at more than 16 times earnings estimates for this fiscal year, compared to an average price-to-earnings ratio of just below 13 for the retailing sector.
In addition, it’s important to remember that investors often do a pretty good job of predicting economic recoveries well before they happen. Even though the next few quarters look bleak, there are growing hopes that the worst of this downturn will be over by late 2009.
If that’s the case, money may start to move out of hot stocks like these discount retailers and back into other more hard-hit consumer stocks, as well as beaten down banks and tech companies, which could all do well once the economy improves.
So buyer beware. Cheap may be chic now. But the discount retailers are so in vogue on Wall Street that these stocks are no longer the "doorbuster" deals they used to be.
Diversified manufacturer Tyco International Ltd. said Tuesday that per-share profit for fiscal 2009 will fall short of Wall Street estimates.
In releasing its fiscal fourth-quarter earnings,Tyco (TYC) said it expects earnings per share for the new year to be $2.20 to $2.50.
Analysts surveyed by Thomson Reuters expect per-share earnings for 2009 to be $3.01.
Shares tumbled $3.36, or 13%, to $21.98 in early afternoon trading.
Edward D. Breen, chairman and chief executive officer, told analysts in a conference call that currency translation could cut per-share earnings about 38 cents and that per-share earnings at the electrical and metal products business could drop by 35 cents.
"While this estimate may be too harsh, we think it’s prudent to be conservative in this environment," he said.
Tyco said its electrical and metal products business that manufactures steel tubes and pipes, electrical conduit, armored wire and cable, metal framing systems and building components, will feel an impact from declining steel prices short term cash loans.
More than 50% of Tyco’s revenue is generated outside the United States, the company said. At current exchange rates, Tyco said it has seen about a 20% devaluation in non-US currencies, which it said will cut revenue by about 10 percentage points in 2009.
However, Tyco said it will benefit next year from improved operating performance, additional restructuring and a lower tax rate, Breen said.
Tyco said per-share earnings in 2008 were $3.06, above the $2.99 expected by analysts, according to Thomson Reuters.
Iceland's central bank unexpectedly raised the benchmark interest rate by six percentage points to the highest level in at least seven years to boost the currency after reaching a loan agreement with the International Monetary Fund.
The rate was lifted to 18 percent, the Reykjavik-based bank said in a statement today, taking it to the highest since the bank began targeting inflation in 2001.
“Six percent isn't worth a lot if the currency drops another 15 percent,'' said Henrik Gullberg, a strategist at Deutsche Bank AG in London. “What we're seeing is a complete liquidation of everything in emerging markets, and Iceland, even in the emerging- market universe, is very vulnerable. The only thing that'll improve the krona is a return of risk appetite, and there are no signs of this happening any time soon.''
The central bank is raising rates as Iceland, the first western nation to seek financial help from the IMF since the U.K. in 1976, faces an economic contraction, coupled with possible hyperinflation and rising joblessness. The economy will shrink as much as 10 percent next year, the IMF forecasts. Iceland will receive about $2.1 billion from the Washington-based fund, according to a deal struck on Oct. 24.
“The interest-rate rise is a natural part of the IMF package but can't stand alone,'' said Lars Christensen, chief analyst at Danske Bank A/S, by telephone from Reykjavik. “There'll have to be fiscal tightening and stricter regulatory controls.'
Iceland's Talks
Iceland is in talks with the governments of Sweden, Norway and Denmark to secure as much as $4 billion in additional loans. The central bank has also sent requests for support to the European Central Bank and the Federal Reserve, Prime Minister Geir Haarde said at a Nordic government summit in Helsinki today.
The increase in the key rate comes after the central bank on Oct one hour cash. 15 cut it by 3.5 percentage points from 15.5 percent. That move indicated policy makers were focusing on growth and abandoning their target of stabilizing inflation, which may soar as high as 75 percent in coming months, according to Lars Christensen, chief analyst at Danske Bank A/S in Copenhagen.
The IMF deal is due to be presented to the fund's executive board later this week. One of the conditions attached to the loan was that policy makers raise the key rate to 18 percent, the central bank said in a statement on its Web site today.
Central bank Governor David Oddsson told reporters today he hopes rates “don't stay at the current level for too long. This decision doesn't necessarily mean that we assume that rates will rise further.'' The bank holds its next rate setting meeting on Nov. 6.
Under Review
Still, the central bank will continue to “review the matter,'' he said. Policy makers target price gains of 2.5 percent. Inflation was 15.9 percent in October, Statistics Iceland said yesterday.
The central bank has been holding daily auctions since the currency's collapse earlier this month with local market makers setting the rate at about 150 kronur per euro. According to Roed- Frederiksen, further rate increases can't be ruled out if policy makers want to strengthen the krona once international traders are granted access to the market.
Iceland's financial regulator took control of Kaupthing Bank hf, Landsbanki Islands hf and Glitnir Bank hf earlier this month, after they couldn't secure short-term funding. That precipitated the collapse of the currency. The central bank on Oct. 7 attempted to peg the krona only to abandon the measure a day later citing “insufficient support.''
Treasury Secretary Henry Paulson pressed his case for an unprecedented $700 billion bailout of financial markets on Sunday as negotiations over the plan opened between the administration and Congress.
The sweeping proposal would have the Treasury buy up bad mortgage-related debts from financial institutions, including U.S. subsidiaries of foreign banks, to try to stem the worst financial storm since the Great Depression.
Two key questions, however, remained unanswered even after Paulson appeared on four national television talk shows. What price will the United States pay for these toxic debts, which spawned a global credit crisis. When will it start buying them?
Paulson painted the proposed intervention into private markets as a necessary evil, arguing the consequences of inaction would be so dire that the large burden taxpayers would shoulder would be worth it.
“This is not something that we wanted to do faxless payday loans freecreditreport. This was something that was very necessary,” Paulson said on the NBC Sunday program “Meet the Press.”
“We did this to protect the taxpayer.”
LAWMAKERS VOW SWIFT ACTION
New York Sen. Charles Schumer, a member of the Democratic leadership, said Democrats would not load up the bill with numerous extraneous provisions and said a measure to give a lift to the economy would likely be moved separately.
The House of Representatives on Tuesday approved an energy bill that could clear the way for more drilling in the United States, as the Democrats who control Congress yielded to pressure from Republicans on the issue.
But the bill, which passed 236-189, contains provisions Republicans do not like, including a repeal of tax cuts for the oil industry and a lack of incentive for states to allow drilling on their land.
"It’s time for an oil change in America," House Speaker Nancy Pelosi, a California Democrat, told reporters Tuesday. She contrasted her party’s plan with "the status quo, which is preferred by Big Oil" and the Bush administration, "or change for the future to take our country in a new direction."
She insisted that Republicans "must set aside their drill-only mentality."
Rep. Mike Pence, an Indiana Republican, called the Democratic bill "a charade," denying it would do what its backers claim.
"This is not ‘yes’ to drilling. This is ‘yes, but,’" he argued.
"This is ‘yes, but no drilling in Alaska, no drilling in the Eastern Gulf, no drilling inside 50 miles.’ This is ‘yes, but no litigation reform that will prevent radical environmental attorneys from tying up leases even before a single shovel of dirt is turned.’"
The Democratic bill would allow drilling between 50 and 100 miles offshore, as opposed to the three-mile line favored by Republicans. It would require states to give their permission for drilling on their land freecreditreport faxless payday loan. It would also include incentives for renewables, require the government to release oil from its emergency reserve, and force oil companies to drill on federal lands they already lease from the government.
Democrats and Republicans traded harsh words on the House floor Tuesday in the debate over the bill.
Rep. Anthony Weiner, D-N.Y., said President Bush’s "idea of an energy policy is holding hands with the Crown Prince of Saudi Arabia, embracing him with a big smooch."
When the Republicans "controlled Congress, [they] passed their own energy bill, signed into law by the president. We got into this mess," the New York Democrat said.
But Rep. Jeb Hensarling, a Texas Republican, shot back that the Democrats’ bill is a "sham" and a "fraud."
"This is a bill designed to ensure Democrats’ re-election, not designed to ensure affordable energy in America," he said.
He also complained about how the bill was brought to the floor: "No amendments, no substitutes, no committee hearings. Is this democracy? No."
The Senate could vote on various energy proposals, including more offshore drilling, as early as this week.
– The Associated Press contributed to this report.
The Broward County Commission is expected to vote Tuesday morning on whether to approve funding for a $150 million streetcar system that would replace its Sun Trolley buses by 2012.
The commission’s vote is the last step needed to move the project from the planning stages to reality.
The Downtown Development Authority of Fort Lauderdale is planning the project – dubbed the Wave – which it projects would increase ridership to 6,000 a day, up from about 100 riders who now use the Sun Trolley’s downtown routes.
The proposed route would cover about 2.7 miles with double tracks.
Funding would come from a mix of local, state and federal dollars. In April, Fort Lauderdale city commissioners voted to contribute $10.5 million to construction costs payday loan cash advances. The state has budgeted an additional $37.5 million. The federal government would put in $75 million, and the remaining $27 million would come from special assessments on downtown residents and businesses, which would be spread over 30 years.
Although the county would not contribute to the initial cost, it would serve as owner-operator for 20 years and would assume annual operating costs, which are estimated at between $2.2 million and $2.5 million.
If county commissioners approve the project, it will move to the next level, which includes applying for federal money.
As oil companies sent crews back to their rigs to perform in-depth safety checks some operations see production beginning to come online as early as Wednesday.
95.8% of crude oil production and 91.6% of natural gas production in the Gulf of Mexico remains shutdown, according to a report on the damage left in the wake of Hurricane Gustav by the U.S. Department of the Interior’s Minerals Management Service. That’s down from 100% of crude and 95.4% of gas production that was shut down as of early Wednesday morning.
Oil companies with infrastructure in the Gulf region such as Royal Dutch Shell (RDSA), Devon Energy Corporation (DVN, Fortune 500), Exxon Mobil (XOM, Fortune 500), and ConocoPhillips (COP, Fortune 500) all said they are in the process of returning workers to their offshore facilities Wednesday, but they cannot return their rigs to operability until safety checks are completed.
"Early assessments established we did indeed dodge a bullet on any major damage in the region," said Robert Dodge, a spokesman for the American Petroleum Institute. "Now that they’re getting their personnel out there, the companies will need to take a look for damage deep down under water before they can return to operability."
Devon, which maintains 25 manned production platforms and three drilling rigs in the Gulf, said it might be able to resume production in the area as early as Wednesday if the underwater pipelines, which cannot be visually inspected from the air, are deemed serviceable after an on-site inspection.
Powerful hurricanes can shift the seabed, damaging pipelines that deliver oil from the rigs to the onshore refineries, API said.
"We expect to begin producing a small amount of production today, and that will continue to improve throughout the week," said Devon spokesman Chip Minty.
Devon said it did not have a timetable to return to full operability, as it has had difficulty transporting its workers to the rigs. Louisiana airports were hard-hit during the storm, and much of the power remains out. That has delayed helicopter transportation, which is necessary to return crews to the platforms.
Shell said most of its platform workers will return Wednesday with the remaining crews returning Thursday. The company expects production to be restored in three to five days, depending on when power and communications are restored to the rigs.
Power disruptions have affected 55% of all Louisiana customers, according to the Energy Department. That could delay the return to operations for many oil producers, as refineries and pumps for delivery pipelines rely on electricity to operate. The American Petroleum Institute said backup generators were available and could speed up the restoration process.
Exxon Mobil said Wednesday it is in the process of starting up the two refineries it shuttered for the storm, but the company could not yet offer a timetable on the return to operations.
Of the 32 Gulf coast refineries, 13 remained completely shut down Wednesday morning, and 10 were operating with reduced capacity, according to the U.S fast cash advance cash advance. Department of Energy. The decline in refinery operations has resulted in about 5.6 million barrels per day in reduced gasoline output.
As a result of the the loss of Gulf production, oil refiner Citgo requested a 250,000 barrel loan from the 707 million barrel U.S. Strategic Petroleum Reserve, which was approved by the Energy Department late Tuesday.
Though Louisiana Governor Bobby Jindal requested that the Energy Department open up the SPR to all companies, the request was refused, and the government said it would deal with SPR loans on a company-by-company basis. Thus far, no other companies have requested an SPR loan, according to the Department of Energy.
Though much of the undamaged Gulf of Mexico infrastructure will return to operability in the next few days, sites without power may not resume full operations until next week, according to Eileen Angelico, a spokeswoman at MMS.
But the oil market didn’t flinch much at the fact that 26% of total U.S. oil production as well, as about 15% of U.S. refining capacity remains shutdown.
Oil fell about $1 Wednesday after dropping nearly $6 Tuesday. Despite the loss of production, crude prices are at five-month lows.
"Although we’re shutting off production in the Gulf, it’s not as much of an issue as in 2005 when demand was higher," said Phil Flynn, senior energy analyst with Alaron Trading.
Demand for oil is 1.2 million barrels a day less than it was a year ago, as oil prices are nearly twice as high now as they were when Hurricanes Katrina and Rita devastated the Gulf region three years ago. As a result, refineries are operating at 6.8% less capacity than they were last year, according to the U.S. Energy Information Administration.
"Even if refiners stay down, others can make up for the lost capacity," Flynn added. "Despite the fact that we may have a spot shortage, the supply [currently on the market] is enough to weather us through the storm."
Home heating bills are expected to spike this winter as high gasoline prices are already straining household budgets. Are you planning to do anything different in order to reduce your heating bills? Are you cutting back on things to get by? Share your story with iReport.
In the aftermath of Hurricane Gustav, energy analysts say that the fate of gas prices in coming days could hinge on possible damage to the area’s dozens of refineries that turn crude into gasoline.
Gas prices declined following Monday’s plunge in oil prices and gas futures. But the extent of the damage from Hurricane Gustav remains to be seen.
The U.S. Department of Energy said Monday that 12 refineries have shut down and 10 have reduced their output.
"If there’s no damage to refineries and they’re able to get back up relatively quickly, we would assume gas prices would continue the downward trend that we’ve seen over the last few weeks," said Doug MacIntyre, senior oil market analyst at the Energy Information Administration, on Monday.
As it appeared Tuesday that the weaker-than-forecast Gustav would not wreak as much havoc as anticipated, oil prices plummeted by more than $7 to $108.37 a barrel, while gas futures in the wholesale market fell more than 21 cents to $2.65 a gallon.
Also on Tuesday, motorist group AAA reported that the nationwide average for retail gas prices slipped slightly, by two tenths of a cent, to $3.684 a gallon.
Peter Beutel, an analyst with energy risk management firm Cameron Hanover, expects gas prices to stay flat or fall based on the recent decline in oil prices and gas futures. But he cautioned that it’s too early to tell what retail gas prices will do until the full extent of the storm’s damage on oil production in the Gulf of Mexico is known.
"I’m surprised at this strong decline [in oil prices] before we even know what the damage is from the hurricane," said Beutel.
Kenneth Medlock, energy fellow at Rice University in Houston, said it will take several days before the effects of Gustav will be felt on gas prices.
After Hurricane Katrina devastated New Orleans in 2005, three days passed before gas prices spiked 10 cents a gallon in a single day credit report first cash advance. Within one week of Katrina’s landfall on Aug. 29, gas prices had surged by 45 cents to $3.05 a gallon nationwide.
"If one or two refineries have any damage [from Gustav], gasoline prices will start to move up, no matter what oil prices do," said Medlock.
Already, there was some disruption. Conoco-Phillip’s (COP, Fortune 500) refinery in the area normally produces 90,000 barrels of gasoline-a-day. It is one of nine refineries in the region that are temporarily closed due to Hurricane Gustav, according to oil industry analysts.
Citgo also operates a refinery. While the company says its policy is not to reveal whether facilities reduce or shutter production, Larry DeRoussel, Executive Director of the Lake Area Industry Alliance told CNN the refinery "is operating at 75% capacity."
Gas prices fell in both Louisiana and Mississippi according to AAA.
Prices rose, however, in Florida, Georgia and Alabama trumping the national average, as Tropical Storm Hannah threatens to bring heavy rain and winds to those states by the end of the week.
The price of unleaded gas has been declining steadily since hitting a nationwide record of $4.114 a gallon on July 17. But that trend broke last week as Hurricane Gustav gathered strength and moved toward the Gulf Coast.
The nationwide average for retail gas prices rose about 3 cents a gallon over the three days ending on Sunday, according to AAA. Gas prices rose dramatically in certain areas of the Gulf Coast, like the Mississippi cities of Biloxi, Gulfport and Pascagoula, where they jumped by more than 9 cents a gallon on Friday, according to AAA.
- Additional reporting by Allan Chernoff, CNN
United Airlines said on Wednesday it will furlough 1,550 flight attendants as it reduces its flying this fall.
The furloughs work out to roughly 10 percent of United’s cabin workers. United is seeking 7,000 job reductions companywide by the end of 2009, said spokesman Jeff Kovick. United has previously announced plans to cut as many as 1,600 managers and 5,500 front-line workers, and to furlough 950 pilots.
United (UAUA, Fortune 500) said it would seek voluntary flight attendant furloughs first, but will need to get to a total of 1,550 by Oct. 31.
"As we reduce the size of our fleet and take other actions to enable United to compete in this environment of record fuel prices, we must take the difficult but necessary steps to reduce the number of people we have to run our operation," Kovick said.
United is also laying off 213 foreign national flight attendants based in Bangkok and Singapore. Those workers, who are not part of the Association of Flight Attendants-CWA, are required to be dismissed before any union members can be furloughed, the union said no fax payday loan payday loans application. United, along with Northwest Airlines Corp., is one of the biggest U.S. carriers in Asia.
Furloughed flight attendants keep their health insurance and flight privileges. AFA spokeswoman Sara Nelson said the union is encouraging voluntary furloughs in an effort to avoid involuntary ones.
Also on Wednesday, testimony began in U.S. District Court in Chicago on United’s request for a temporary injunction to stop alleged sick-outs by pilots. The Air Line Pilots Association has said it did its best to discourage any organized sick-out. Testimony was scheduled to continue on Thursday.
Shares of United parent UAL Corp. fell $1.27, or 11.4 percent, to close at $9.88 on Wednesday as oil prices rose.
The U.S. probably lost jobs in July for a seventh consecutive month and the unemployment rate rose, increasing the risk the economic slowdown will worsen, economists said before a government report today.
Payrolls fell by 75,000 after a 62,000 decline in June, according to the median estimate of 80 economists surveyed by Bloomberg News. The jobless rate probably rose to 5.6 percent, the highest level in four years, according to the survey median.
Fewer jobs, combined with decreasing property values, stricter lending rules and near-record energy prices, would further undermine the ability of Americans to spend. Cutbacks at UAL Corp. and Starbucks Corp. signal firings are spreading beyond builders and manufacturers as the cost of raw materials soars.
“We'll see accelerated declines in payrolls,'' said Lindsey Piegza, an economic analyst at FTN Financial in New York. “That will really compound the pressure on the consumer.''
The Labor Department's employment report is due at 8:30 a.m. in Washington. Payroll estimates in the Bloomberg survey ranged from a decline of 150,000 to no change. The jobless rate is forecast to rise from 5.5 percent in June.
A private report today may show manufacturing shrank in July for the sixth time in eight months. The Institute for Supply Management's factory index fell to 49 from 50.2 in June, according to the Bloomberg survey median. A reading of 50 divides growth from contraction.
The payrolls report is projected to show a 40,000 decline in factory jobs.
Recession Signal
The employment figures may reinforce concern that the economy is in a recession. The July cuts would bring the total drop in payrolls so far this year to more than half a million.
The National Bureau of Economic Research, the official arbiter of U.S how to get a free credit report easy payday loans. contractions, tracks payrolls, sales, incomes, production and gross domestic product in making the recession call. The group defines downturns as a “significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.
The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed yesterday. Some economists said this indicated the U.S. slipped into a recession late last year. Investors pared bets the Federal Reserve will raise interest rates this year.
More Americans filed initial claims for unemployment benefits last week than at any time in more than five years, Labor reported yesterday. Consumer confidence surveys have indicated that Americans, growing more pessimistic about job prospects, may trim spending.
More Firings
Starbucks, the world's largest chain of coffee shops, this week said it'll cut another 1,000 jobs as sales slump. The Seattle-based company on July 1 announced plans to eliminate as many as 12,000 positions worldwide.
Automakers and airlines continue to shed jobs. General Motors Corp. may cut about 5,000 U.S. jobs by year-end, people familiar with the plan said this week. July announcements at carriers included 7,000 cuts at UAL's United Airlines, and 6,840 at American Airlines parent AMR Corp.
Sealed Air Corp., the maker of Bubble Wrap packaging, said this week it plans to eliminate 900 to 1,000 jobs globally after second-quarter profit fell because of rising costs to make plastics.
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