Abercrombie & Fitch posted a much better-than-expected quarterly profit on Friday, helped by cost cuts, and the retailer’s shares rose more than 6 percent.
The retailer of young men and women’s clothing said net income fell to $38.8 million, or 44 cents per share, in the third quarter ended on October 31 from $63.9 million, or 72 cents per share, a year earlier.
Excluding items, the company earned 30 cents per share. Analysts on average were expecting 20 cents, according to Thomson Reuters I/B/E/S.
Net sales fell 15 percent to $765.4 million as same-store sales, or sales at stores open at least a year, fell 22 percent.
Same-store sales, a closely watched metric of retail health, fell 18 percent at the flagship Abercrombie & Fitch chain, 22 percent at the Abercrombie kids’ chain, 26 percent at Hollister and 30 percent at Ruehl, which the company is planning to close by the end of the current fiscal year fast payday loan.
Abercrombie said it expected to incur charges of $60 million to exit the Ruehl business, which is down from its prior estimate of $65 million.
The company also said it was on track to open an Abercrombie & Fitch flagship store in Tokyo in December, as well as five more Hollister stores in Europe during the fourth quarter.
In the next fiscal year, the company expects to open flagship Abercrombie & Fitch stores in Copenhagen and Fukuoka, Japan.
Abercrombie shares rose to $39.00 in premarket trading from Thursday’s close at $36.76 on the New York Stock Exchange.
(Reporting by Martinne Geller; Editing by Derek Caney and Lisa Von Ahn)
Hewlett-Packard Co is making a move into the network equipment market by striking a $3.1 billion deal for 3Com Corp, in a major challenge to Cisco Systems Inc.
The deal is the latest sign that technology giants from IBM to Oracle Corp are increasingly encroaching in each other’s markets as they seek to become one-stop shops for computing, networking and data storage. Cisco itself this year pushed into the server market, of which HP is a major player.
HP, which also reported higher-than-expected preliminary earnings on Wednesday, said it would pay $7.90 per share for 3Com, a 39 percent premium over its closing price. The deal values 3Com at $2.7 billion excluding its net cash.
“Cisco and HP are going to compete more and more,” said Jayson Noland, analyst at Robert W. Baird & Co. “We’re headed to a world where each of these large companies can give you everything you want.”
By buying 3Com, HP will be competing with Cisco on a wider range of network equipment, including routers and switches. 3Com also has a large presence in China and can help HP expand sales into one of the world’s fastest-growing markets.
HP is already a dominant force in personal computers, IT services, servers and printers, with recurring revenue streams that have helped it during the economic downturn.
3Com, for its part, has been pushing into the large enterprise market outside China with its H3C brand, trying to take on giants like Cisco.
“We wanted to create a powerhouse in the networking industry,” said Marius Haas, senior vice president of HP’s ProCurve networking division, adding that the 3Com deal puts HP in a good position to compete against Cisco payday cash advance.
When asked for comment, Cisco said: “While Cisco has a healthy respect for all of our competitors, acquisitions in our industry only validate the fact that networking is becoming the platform for all forms of communications and IT.”
3Com has been an acquisition target before. In 2008, Bain Capital Partners and China’s Huawei Technologies tried to buy 3Com for $2.2 billion but failed to win approval from a U.S. government security panel. Huawei is a privately held company set up by a former Chinese army officer.
3Com shares jumped 35 percent to $7.66 in after-hours trading. They climbed over 5 percent on Wednesday ahead of the announcement. HP shares edged 0.8 percent lower to $49.61.
A rise in 3Com shares and call options before the offer was announced sparked talk that the news had been leaked, option traders and analysts said.
3Com would be HP’s fourth biggest acquisition ever. The Marlborough, Massachusetts-based 3Com has 5,800 employees and posted fiscal 2009 revenue of $1.3 billion, more than half of which came from China.
TECH DEALS GALORE
Worldwide tech mergers and acquisitions have totaled $109.1 billion this year, down 20 percent from year-to-date 2008, according to Thomson Reuters data.
Activision Blizzard Inc’s hugely anticipated “Call of Duty: Modern Warfare 2″ video game went on sale early Tuesday morning, welcomed by eager fans who lined up hours in advance of the release.
The first-person shooter game is set to be one of the biggest and fastest-selling titles in history, challenging records set by blockbuster releases from the “Grand Theft Auto” series.
This despite a dicey economic climate that is pinching consumer spending. Video game industry revenue in the United States, the world’s largest market, is down 13 percent this year, according to industry tracker NPD.
But Call of Duty arrives amid high expectations and plenty of hype. Activision partnered with retailers including GameStop Corp and Best Buy Co for more than 10,000 midnight store openings in North America.
At the GameStop store near Union Square in New York City, around 80 mainly young people were lined up Monday night ahead of the launch, some for two hours.
“This is the only game I’m probably going to do this for,” said Paola Altamirano, 21, who was waiting in the queue. She said she planned to play Call of Duty against another friend online later that night.
With what Activision called a record level of preorders, there was little doubt about the strong demand for a game.
“Gamers are enthusiastic about picking this stuff up at midnight,” said Paul Swiderski, who works at the Union Square Gamestop online payday advance.
Analysts’ sales estimates for the $60 game range from 11-13 million units by the end of 2009. Call of Duty is likely to account for a sizable chunk of Activision’s profits in the fourth quarter, analysts say, so there is plenty at stake in the launch.
HARD-CORE AUDIENCE
The audience for the latest Call of Duty — the sixth installment in the franchise — is primarily younger men, the gaming demographic that makes up the core of the estimated $50 billion global industry.
John Paneto, 20, was lined up outside a Best Buy store in San Francisco with about 10 others at around 10 P.M. Monday. He said he played a number of the other games in the Call of Duty franchise.
“I’m going to be up all night playing it, until I crash,” he said.
Analysts say so-called hard-core gamers are unlikely to be dissuaded from buying a big-name title by economic concerns, as some casual gamers are.
But Call of Duty will have to turn in an impressive performance to top that of last year’s mega-hit from Take-Two Interactive Software Inc, “Grand Theft Auto IV.” The title sold 3.6 million units on the first day, and 6 million in its first week or more than $500 million in sales.
Treasury Secretary Timothy Geithner on Saturday stressed the necessity of keeping global economic stimulus in place until recovery is assured and opposed the utility of a tax on financial transactions as a way to dampen risky bank behavior.
Speaking at the conclusion of a two-day meeting of Group of 20 finance minister and central bankers, Geithner said there was broad agreement that “growth remains the dominant policy imperative across our economies.”
He said high U.S. unemployment, which hit a 26-1/2-year high at 10.2 percent of the civilian workforce in October, highlighted a “very tough economic environment” that will a period of sustained growth to correct.
Earlier, British Prime Minister Gordon Brown had suggested that the G20 should levy on banks — blamed for the excessive risk-taking that led the world into a now-easing financial crisis — and used the proceeds to fund future bailouts.
Geithner played down that idea, noting that the Obama administration was already pushing an overhaul of financial market rules in Congress that would ensure that banks pay the costs of their failures in future from their own pocket.
“A day-by-day financial transaction tax is not something we are prepared to support,” Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.
“This idea (of a bank transaction tax) has been around for a long time…I think frankly the experiences are mixed,” he said, expressing an American view that there was no widespread backing for such a tax.
Canadian Finance Minister Jim Flaherty was similarly skeptical.
“It’s one of the ideas that’s on the table, but is not particularly attractive to me as finance minister of Canada. We have been a government that has been reducing taxes,” Flaherty said.
ON DANGEROUS GROUND
Geithner’s key message was that recovery still remains on perilous ground and that it was too soon to discuss the timing for removing the massive fiscal and monetary stimulus that countries around the world have poured into their economies.
“Government policy has to provide a bridge to growth led by the private sector,” he said. “We’re now in the middle span of that bridge.”
That meant policymakers must move cautiously in trying to bring down huge budget deficits without choking off chances for growth led by consumer spending and business investment.
“If we put the brakes on too quickly we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater,” Geithner said.
“It’s too early to start to lean against recovery.”
What could have been a heated battle between Toyota and the National Highway Transportation Safety Administration in a game of "he said/she said" quickly cooled.
Last month, Toyota and NHTSA warned drivers to remove the mats in certain models or risk a forced-down accelerator pedal that could lead to a crash. Toyota plans a recall to fix the problem, and began sending notifications this week to Toyota and Lexus vehicle owners about the issue.
But the NHTSA took issue with how Toyota worded its warnings. The agency released a statement Wednesday accusing the world’s largest automaker of sending a letter to owners with "inaccurate and misleading information."
Toyota’s letter told owners that NHTSA said "no defect exists in vehicles in which the driver’s floor mat is compatible with the vehicle and properly secured." The agency took those as fighting words: In its view, the vehicles have an underlying defect that means floor mats can’t be properly secured.
NHTSA recommends that consumers remove the floor mats from affected cars to eliminate the risk that a mat will become stuck and trap the accelerator online payday advance. But that is "simply an interim measure," the agency said. It won’t consider the problem solved until Toyota comes up with "a suitable vehicle-based solution."
The standoff could have turned ugly, but when called out on the issue, Toyota backed down fast.
"Toyota agrees with NHTSA’s position that the removal of floor mats is an interim measure and that further vehicle-based action is required," the company said in a statement released late Wednesday. "We are in the process of developing vehicle-based remedies."
Toyota has not yet launched an official recall campaign, but it plans to for the following models: 2007-2010 Camry, 2005-2010 Avalon, 2004-2009 Prius, 2005-2010 Tacoma and 2007-2010 Tundra.
The Lexus models facing the safety recall are the 2007-2010 ES 350, and the 2006-2010 IS 250 and IS 350.
The Federal Reserve on Wednesday is expected to reaffirm its intention to keep U.S. interest rates at ultra-low levels for a long time to support the economy, even as signs of recovery accumulate.
The U.S. central bank cut overnight rates close to zero percent last December and it has vowed to keep them there for an “extended period.” While some analysts think the Fed could start to tip-toe away from that pledge, most say it is too soon.
“Once they start removing that, that’s a real sign that they intend, within six months, to start raising rates,” said Deutsche Bank economist Torsten Slok. “But it’s just premature, looking at the economic numbers, to arrive at that conclusion.”
The Fed will issue a statement around 2:15 p.m. EST at the conclusion of its two-day policy meeting on Wednesday. Analysts expect the Fed to nod to modestly encouraging signs suggesting the economy is gaining strength, but still expect a cautious tone on policy.
Policy makers will need to take into account the economy’s faster-than-expected 3.5 percent annualized growth rate in the third quarter, which effectively signaled the end of the most painful recession since the 1930s. Suggesting further momentum, data on Monday showed manufacturing activity hit its highest level in 3-1/2 years last month.
Improved third-quarter corporate earnings have also fed optimism that the upturn can be sustained next year even after government help has dried up.
In an act underlining rising confidence in the recovery, billionaire investor Warren Buffet on Tuesday said his company, Berkshire Hathaway Inc, agreed to purchase the nation’s largest rail company, saying it is poised to benefit from the recovery.
Fed officials in recent weeks, however, have sent the message that while the outlook has improved, the recovery is likely to be sluggish and needs continuing support.
Unemployment is expected to climb above 10 percent before the labor market improves, damping the consumer spending that accounts for around 70 percent of U.S. output. The banking system is still under pressure from loan losses, and credit remains tight.
“We have to think about our exit policy and are looking at it very carefully, but at the moment, that’s not our first order concern. At the moment, it’s policy accommodation,” Chicago Federal Reserve Bank President Charles Evans, a voter on the Fed’s policy-setting panel, said on October 22.
Other central banks are also wrestling with how best to spur growth and when to withdraw extraordinary measures to support their economies.
The European Central Bank is expected to keep rates on hold at a record-low 1 percent on Thursday, while there is a good chance the Bank of England will expand its large asset purchase program at a meeting the same day.
Most analysts at top U.S. banks expect the Fed to keep interest rates on hold until mid-2010 or later, although interest rate futures markets are pricing in an increase earlier in 2010.
(Editing by Leslie Adler)
U.S. factory workers at Ford Motor Co overwhelmingly rejected proposed concessions it has said it needs to stay competitive, while union workers in Canada on Sunday accepted cuts aimed at retaining jobs.
The Canadian Auto Workers union voted 83 percent in favor of an agreement that freezes wages for some 7,000 workers into September 2012 in exchange for protecting most factory jobs in Canada.
The CAW had announced the tentative pact with Ford on Friday and set a whirlwind weekend vote.
The win for Ford in Canada, which accounts for a little over 10 percent of its North American output, comes as its main union, the United Auto Workers, prepares to announce a stunning defeat for a similar proposal in the automaker’s home market.
A UAW vote in the United States has dragged on for two weeks to steadily building opposition from rank-and-file workers who have objected to giving Ford the same concessions already granted to rivals General Motors Co and Chrysler as part of their government-financed bankruptcies.
An official tally was not yet available on Sunday, but UAW members voted against the concessionary deal at most of Ford’s U.S. assembly plants leaving no doubt about the outcome.
The UAW represents about 41,000 U.S. factory workers at Ford and ratification of the proposed changes required the support of a majority of votes cast.
The UAW plans to release the results formally on Monday and President Ron Gettelfinger told reporters on Friday that he had no plans to seek a revote on the deal or more talks with Ford before 2011 payday advance loan. The current four-year deal expires in 2011.
The margin of defeat was substantial at some of Ford’s biggest assembly plants. Overall, seven of the 10 listed assembly plants voted down the contract, many overwhelmingly.
Workers in Kansas City, Missouri, where Ford builds the F-150 pickup truck and Escape SUV, voted 92 percent against the deal, while those at a truck plant near the automaker’s headquarters voted 93 percent to reject it.
At a local that represents two Kentucky assembly plants the vote was 84 percent against approving the tentative agreement that Ford and the UAW announced in mid October.
The tentative UAW agreement included a “no-strike” provision on wages and benefits for the next negotiations in 2011 that became a lightning rod for opposition.
Workers also objected to a blurring of job classifications for skilled workers that would increase Ford’s flexibility and reduce its costs, and to allowing Ford to increase hiring of entry level workers at $14 per hour for a period.
The UAW and Ford agreed on other cuts earlier in 2009 that the automaker believes will save it $500 million per year.
Ford’s deal with the Canadian union is the second cost-cutting agreement between the two sides in 18 months and includes cuts in benefits, a reduction in vacation and breaktimes and higher healthcare costs for workers.
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