×

BUSINESS BRIEFS



Wednesday, September 10, 2014
U.S. financial markets ended slightly lower Thursday, marking their first loss in a week of record highs.

The escalating conflict in Ukraine, disappointing retail earnings and profit outlooks combined to weigh down the market, eclipsing some good news on the U.S. economy and labor market.

“The key driver was largely the Ukraine news and the uncertainty of what that means,” said Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank.

U.S. stock index futures pointed to a lower opening in premarket trading Thursday, following a downward turn in global stock markets as traders reacted to the developments in Ukraine.

Ukraine President Petro Poroshenko said Russian forces had entered his country. He called an emergency meeting of the nation’s security council. The yield on the 10-year Treasury note declined as investors sought out lower-risk assets.

A string of disappointing earnings and profit outlooks late Wednesday and early Thursday also weighed on the market early on.

Not all the news was discouraging.

The Commerce Department estimated that the U.S. economy grew at an annual rate of 4.2 percent in the April-June quarter.

The Labor Department added to the good news, saying the number of Americans seeking unemployment benefits slipped last week to 298,000, a low level that signals employers are cutting fewer jobs and hiring is likely to remain strong.

“The economic data in the U.S. continues to look quite good,” Davidson said.

Nonetheless, major U.S. stock indexes opened lower. They pared some of their losses as the day went on, but remained down the rest of the day.

All told, the Standard & Poor’s 500 index fell 3.38 points, or 0.2 percent, to 1,996.74. The index hit record highs the first three days of the week.

The Dow Jones industrial average slid 42.44 points, or 0.3 percent, to 17,079.57.

The Nasdaq composite shed 11.93 points, or 0.3 percent, to 4,557.69.



Apple announces Sept. 9 event; iPhone 6 at hand?

Apple made it official: The company Thursday issued media invitations to a Sept. 9 event in Cupertino, Calif., where the company is expected to unveil the latest iPhone 6 and maybe more.

Rumors, consistent in detail but not officially verified, suggest Apple will announce a 4.7-inch screen iPhone and a 5.5-inch model. At those sizes, they’d be larger than any of their predecessors, and on par with Android smartphones such as the Samsung Galaxy S5.

Rumors also suggest Apple will introduce an “iWatch,” a wrist-worn computer capable of connecting to the iPhone via Bluetooth.

— LOS ANGELES TIMES

More robust economic rebound in second quarter

WASHINGTON — The economic rebound in the second quarter was stronger than previously estimated, another sign of a recovery gaining momentum after stalling early in the year.

The Commerce Department said Thursday that gross domestic product, the broadest measure of economic activity, expanded at a robust annual rate of 4.2 percent in the April-to-June period, up from the initial estimate of 4 percent growth. Inflation-adjusted GDP contracted 2.1 percent in the first quarter, which analysts attributed largely to the harsh winter.

While the upward revision was modest, details of the report suggested more strength for the second half of the year. There was a bigger boost from business investment on buildings and equipment, while companies’ spending to bolster inventories was smaller than previously thought, which means potentially more stockpiling of goods in the current quarter.

Moreover, second-quarter growth in after-tax personal income was revised higher, to 4.2 percent from 3.8 percent, which bodes well for consumer spending.

— LOS ANGELES TIMES

Abercrombie name to shrink from clothing

NEW YORK (AP) — The Abercrombie & Fitch logo has lost the power it once wielded.

Shares of Abercrombie & Fitch Co. tumbled Thursday after reporting weak sales as more teens shop elsewhere.

The company is trying to stock trendier clothing — and it turns out that means stripping off the once-prized Abercrombie logo.

It is a major change for the retailer, whose sweatshirts and T-shirts emblazoned with its name long held major cachet with teenagers. Now, individuality is the name of the game.

“Personal style, specifically with teens, is becoming less about fitting in and more about standing out,” said Lauren Wolfenden, a senior advisory analyst at WGSN, a fashion trend consultancy. “A&F has wised up to this by phasing out the cookie-cutter logo-ed product look and bringing in trendy pieces that can be worn in a multitude of different ways.”

A&F and other traditional teen stores have to adapt in an uphill battle to turn their businesses around as mall traffic drops and shoppers’ tastes change.

A slowly recovering economy is making parents and teens to think twice about splurging on clothes. Expensive standbys like Abercrombie also have lost business to “fast fashion” chains like H&M, known for quickly churning out trendy $9 tops.

Teens are also spending less time at the mall and more time researching and buying on mobile devices. And when they do buy, they’re more likely buying the latest gadget than filling their closets.

Last week, Aeropostale last week reported its seventh consecutive quarterly loss on slumping sales. It also forecast another loss in the current quarter.

At the same time, Aeropostale, based in New York, reinstated Julian Geiger, its former CEO.

Earnings at another competitor, American Eagle, have also declined on weak sales.

Mike Jeffries, A&F’s CEO, said in a statement that the retailer has made progress in stocking trendier clothing and said the improvement is “clearly evident” in its back-to-school business.

“In a continuing challenging environment, our sales for the second quarter were somewhat below plan, but we have seen modest improvement since the back-to-school floor set,” he added.

A&F has been shortening the time from developing a design to shipping the clothing to the stores. It’s also changing its color palette.

WGSN’s Wolfenden said Abercrombie announced earlier this year that it would start using black in their collections, something it had never done before. She praised some of the current fashions in the stores, which include Aztec printed silky pants, sleek maxi-dresses and slouchy T-shirts with scenic images and French sayings.

But the big change, of course, shoppers are seeing is clothes that don’t shout the Abercrombie name.

For the fall shopping season, A&F has reduced its logoed merchandise by half, and plans to go further.

“In the spring season, we are looking to take the North American logo business to practically nothing,” Mark Jeffries, CEO of A&F told investors on a conference call

In a note to investors Thursday, Richard Jaffe, an analyst at Stifel Nicolaus, noted that “it’s taking time to win back customers.” But he believes that the merchandise changes are “gaining traction.”

A&F said it earned $12.9 million, or 17 cents in its fiscal second quarter. That compares with $11.3 million, or 14 cents per share, a year earlier.

Earnings, adjusted for non-recurring costs, came to 19 cents per share. Analysts surveyed by Zacks Investment Research expected 10 cents per share.

The New Albany, Ohio-based retailer reported that revenue fell 5.8 percent to $890.6 million, short of analyst estimates.

Revenue at stores open at least a year dropped a steep 11 percent, including 8 percent at U.S. stores.

A&F’s shares fell nearly 6 percent, or $2.57 to $41.43 in late morning trading. American Eagle’s shares fell nearly 2 percent, or 25 cents, to $13.95. And Aeropostale’s shares slipped more than 2 percent, or 9 cents, to $4.07 in late morning trading.

————————————

Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio