Smart Business

P&G CEO switch will not lead to big strategy change: CFO

SBN Staff — Fri, 24 May 2013 13:27:48 +0000

CINCINNATI, Fri May 24, 2013 — Procter & Gamble Co. said on Friday the surprise return of A.G. Lafley as chairman and chief executive was not an indication of any bigger problems at the world’s largest consumer products maker.

Lafley replaces Bob McDonald, effective immediately, at P&G, which is in the midst of a major restructuring.
“This change very simply reflects Bob McDonald’s decision to retire and the board’s view that A.G. Lafley was currently the best person to replace Bob and build on the momentum that Bob has initiated and led,” Chief Financial Officer Jon Moeller said on a very brief conference call for analysts on Friday morning.
The CFO said there would not be any dramatic change in strategy due to the switch in CEOs.
The announcement late Thursday was “not indicative of any kind of bigger problem or financial issue,” he said.
Shares of P&G rose to $81.90 in premarket trading after closing at $78.70 on Thursday, before the decision was announced. P&G, the maker of Tide detergent and Gillette razors, did not give a specific reason for McDonald’s departure other than to say that he is retiring. McDonald is 59 and Lafley is 65.
Moeller was the only speaker on the call and he did not take questions from analysts.
He said P&G, which maintained its financial guidance as it made Thursday’s announcement, will continue to focus on maintaining its momentum in developing markets and strengthening its core developed market business, and that the company continues to be “optimistic.”

HP raises 2013 outlook as Whitman’s plan takes hold

SBN Staff — Thu, 23 May 2013 12:16:32 +0000

SAN FRANCISCO, Thu May 23, 2013 — Hewlett-Packard Co. raised its 2013 earnings outlook after quarterly results beat low expectations, as CEO Meg Whitman’s turnaround plan helped offset shrinking personal computer sales with enterprise computing services.
While fiscal second-quarter profit plummeted 32 percent, Wall Street had braced for worse. HP shares gained 14 percent after the company projected full-year earnings per share of $3.50 to $3.60, raising the lower end by 10 cents, and fiscal third-quarter profit that topped analyst estimates.
Whitman, who took the helm at the world’s largest PC maker more than a year ago, is orchestrating a turnaround, trying to recapture some of the Silicon Valley icon’s former strong growth. She has said the process could take years.
HP received a warmer welcome from investors for its results than smaller rival Dell Inc, which last week reported a 79 percent slide in profit and is now mired in a takeover battle between founder Michael Dell and activist investor Carl Icahn.
“This is another good deposit on the road to our turnaround here,” HP Chief Financial Officer Cathie Lesjak said in an interview. “We are roughly where we want to be in total on the company.”
Enterprise services and printing units are “probably a little bit ahead,” she said, adding the two businesses helped drive the company’s gross margin improvement during the quarter.

Lowe’s results miss estimates, underperforming Home Depot

SBN Staff — Wed, 22 May 2013 12:22:45 +0000

MOORESVILLE, N.C., Wed May 22, 2013 — Lowe’s Cos. Inc. reported a weaker-than-expected quarterly profit on Wednesday, hurt by colder-than-usual weather at the start of the spring selling season and strong competition from larger rival Home Depot Inc.
The results contrasted sharply with those of Home Depot and signaled that Lowe’s, the world’s No. 2 home improvement chain, was still struggling to narrow the performance gap with the industry leader.
Lowe’s sales fell 0.5 percent to $13.09 billion in the first quarter ended on May 3, missing the analysts’ average estimate of $13.45 billion. The company’s shares fell 3.3 percent to $42.45 in trading before the market opened.
Sales at stores open at least a year dipped 0.7 percent. It was the 16th straight quarter that Lowe’s posted weaker same-store sales than Home Depot.
“The spread between Home Depot and Lowe’s (same-store sales) expanded in the first quarter, something we had worried might happen,” said Janney Capital Markets analyst David Strasser.
Lowe’s stocked more lawn and garden products than Home Depot and therefore suffered more from the unfavorable weather, Strasser said. At the same time, he said, Home Depot had more of a presence in California, where housing has made a strong comeback.
While Lowe’s has been working to improve product selection and customer service, it has yet to turn around its business.
As part of its makeover, the company has started offering everyday low prices and products targeted to specific geographic markets. It made its stores more appealing with improved signs, television displays that stream videos on how-to-do projects, and lower racks to make items easier to reach.
Lowe’s has also increased its assortment of products available online and started mylowes.com, a site that allows shoppers to save their room dimensions, create a shopping list and set reminders to buy items such as air filters and batteries for smoke alarms.
Lowe’s, which was also slower than Home Depot to cut costs in the years after the housing collapse, said its first-quarter net earnings rose to $540 million, or 49 cents a share, from $527 million, or 43 cents a share, a year earlier.

Housing recovery boosts Home Depot results; outlook raised

SBN Staff — Tue, 21 May 2013 12:44:36 +0000

ATLANTA,Tue May 21, 2013 — Home Depot Inc. reported higher-than-expected quarterly results and raised its sales and profit outlook for the year as the world’s largest home improvement chain benefited from a nascent recovery in the U.S. housing market.

The news on Tuesday boosted Home Depot shares by 3.9 percent to $79.75 in premarket trading.

A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis. During the downturn, Home Depot’s sales at established stores fell more than 20 percent in such markets as Florida and California. In recent quarters, the company has gotten a boost as housing markets have rebounded in regions where it has a heavy presence.

“In the first quarter, we saw less favorable weather compared to last year, but we continue to see benefit from a recovering housing market that drove a stronger-than-expected start to the year for our business,” Chief Executive Officer Frank Blake said.

Despite cooler-than-usual weather in many parts of the United States at the start of the spring selling season, Home Depot’s sales rose 7.4 percent to $19.12 billion in the first quarter ended on May 5. That topped the analysts’ average estimate of $18.68 billion.

Better pricing and customer service have helped Home Depot take market share from smaller rival Lowe’s Cos. The industry leader has also gained from tailoring its marketing to local areas, centralizing distribution centers and shifting more workers to jobs where they serve customers directly.

Sales at Home Depot stores open at least a year rose 4.3 percent, including a 4.8 percent increase in the United States. Many on Wall Street expect same-store sales from Lowe’s to be weaker than those from Home Depot for the 16th straight quarter when the smaller chain reports results on Wednesday.

Under Blake, Home Depot was also quicker than Lowe’s to cut costs in the years after the housing collapse.

Net income in the first quarter rose to $1.2 billion, or 83 cents a share, from $1 billion, or 68 cents a share, a year earlier. Analysts on average had forecast a profit of 77 cents a share, according to Thomson Reuters I/B/E/S.

For the year, the company now expects earnings of $3.52 a share, up from its prior outlook of $3.37. It forecast a sales increase of about 2.8 percent, up from previous expectations of a 2 percent rise.

Actavis to buy Warner Chilcott in $8.5 billion stock deal

SBN Staff — Mon, 20 May 2013 12:17:26 +0000

PARSIPPANY, N.J., Mon May 20, 2013 — Generic drugmaker Actavis Inc., which has been the subject of intense takeover speculation, said on Monday that it had struck a deal to buy specialty pharmaceuticals company Warner Chilcott Plc for $8.5 billion in stock.
The move comes as Actavis has spurned approaches from Canadian pharmaceutical company Valeant Pharmaceuticals International Inc. and Mylan Inc. Analysts have said that if Actavis were to buy Warner Chilcott, it would kill the chances of its being taken over.
Warner Chilcott shareholders will receive 0.16 share of the combined company. The companies said that would equate to $20.08 per share, based on Actavis’ closing share price of $125.50 on Friday.
The purchase price is a 34 percent premium to Warner Chilcott’s closing share price of $15.01 on May 9, the day before the companies disclosed that they were in talks. Warner Chilcott shares have since risen and closed on Friday at $19.19, narrowing the premium to less than 5 percent.
Shares of Warner Chilcott were up 2.6 percent at $19.70 in trading before the market opened, while Actavis rose 2 percent to $128.
Warner Chilcott brings a portfolio of branded women’s health pharmaceuticals such as the contraceptive patch to Actavis, which makes and sells generic version of drugs that are no longer protected by patents. Because Warner Chilcott is based in Ireland, the deal creates a money-saving lower tax rate for Actavis, analysts have said. The combined company would have $11 billion in sales.

Penney CEO says company needs time to climb out of ‘abyss’

SBN Staff — Fri, 17 May 2013 12:47:05 +0000

PLANO, Texas, Fri May 17, — J.C. Penney Co. Inc. CEO Myron Ullman told Wall Street on Thursday that the department store chain is emerging from what he called an abyss but warned he needs time to fix the issues of the retailer.
Penney reported another steep quarterly loss on weak sales and heavy clearance deals, but Ullman said the company has taken steps in recent weeks to reassure vendors, shore up its finances, and win back shoppers that defected after a move last year away from coupons.
“This won’t happen overnight,” Ullman said on a conference call with analysts, of Penney’s efforts to recover lost revenue. “Rest assured, we recognize the magnitude of the challenges that we face.”
Under Ullman, who returned as CEO last month to replace his successor Ron Johnson, Penney has secured a new $1.75 billion loan and brought back brands such as St. John’s Bay.
That brand alone brought in $1 billion in sales a year before Johnson dropped it for more fashionable lines.
The department store chain suffered a net loss of $348 million for the quarter ended May 4, or $1.58 per share, more than twice the $163 million, or 75 cents per share it lost last year. Gross profit margin fell 6.8 percentage points to 30.8 percent of sales as it slashed prices to move inventory.
Total sales fell 16.4 percent to $2.67 billion, in line with the company’s warning last week.
Despite the wider loss, shares slipped only 2 percent to $18.42 as analysts dismissed it as a remnant of the Johnson era.
The shares have climbed nearly 40 percent since Ullman returned to the chain, which is showing signs of getting back on track. Ullman was CEO from 2004 to 2011.
“Trends are improving — this is still a year of change. But things are stabilizing and traffic is improving,” said Marie Driscoll, an independent retail analyst, referring to the volume of visits by shoppers.
In addition to a new pricing strategy, Johnson’s vision was to roll out dozens of boutiques within Penney’s larger stores over the course of four years to showcase hipper, but affordable brands and offer exclusive merchandise.

Wal-Mart profit misses Wall Street forecasts as U.S. sales weak

SBN Staff — Thu, 16 May 2013 12:13:59 +0000

BENTONVILLE, Ark., Thu May 16, 2013 — Wal-Mart Stores Inc.’s quarterly profit just missed Wall Street expectations on Thursday, with sales down 1.4 percent at its Walmart U.S. stores open at least a year.

The world’s largest retailer said U.S. sales suffered from a delay in income tax refund checks, cool weather, less grocery inflation than expected, and the payroll tax increase.
Shares of Wal-Mart fell 2.3 percent in premarket trading to $78. The stock had hit a new high of $79.96 on Wednesday.
Wal-Mart earned $3.78 billion, or $1.14 per share, in the first quarter ended on April 30, up from $3.74 billion, or $1.09 per share, a year earlier.
The analysts’ average forecast was $1.15 per share, according to Thomson Reuters I/B/E/S. In February, Wal-Mart had forecast a profit of $1.11 to $1.16 per share.
First-quarter revenue rose 1 percent to $114.19 billion.
Same-store sales at Walmart U.S. fell 1.4 percent, while the company had earlier expected such sales to be about flat. Visits to Walmart U.S. stores open at least a year fell 1.8 percent, while the average amount spent per visit rose 0.4 percent.
Wal-Mart forecast earnings of $1.22 to $1.27 per share for the current second quarter, up from $1.18 a year earlier.
The company said it expected second-quarter same-store sales, excluding those of fuel, to be flat to up 2 percent at Walmart U.S. and up 1 percent to 3 percent at its Sam’s Club warehouse store chain.

PayPal kills the cash register — and offers completely free payment processing for 2013

SBN Staff — Wed, 15 May 2013 12:10:45 +0000

SAN JOSE, Calif., Wed May 15, 2013 — PayPal’s killing the cash register and offering free credit, debit, check, and PayPal processing to qualifying U.S. businesses that adopt its PayPal Here solution — for the rest of 2013.

In other words, PayPal is all in.
PayPal Here, which offers a triangle dongle to compete with a certain rival’s Square, offers a mobile dongle that you can attach to smartphones or tablets to take payments on the go. But it’s also now a pre-integrated solution for existing point-of-sale machines from multiple vendors such as ERPLY, Leaf, Leapset, NCR Silver, ShopKeep, and Vend.
“The cash register has been a familiar sight for generations, but it’s time to replace it with a modern solution,” PayPal says.
While PayPal was late to this particular game, it has quickly added partners like Home Depot and Abercrombie & Fitch, and, after being available just in North America for some time, recently entered the UK. And the company absolutely crushes all other competitors — including Google, MasterCard, and Visa — in consumer awareness for its digital wallet services.
But the real juice in this latest program is the free payment processing for the rest of the year. That’s huge to merchants who are looking to squeeze a few extra percentage points of profit out of typically skinny retail margins. Payment processors can easily take one to three percent of a company’s gross sales, right off the top.

Dell committee seeks information on Icahn offer

SBN Staff — Mon, 13 May 2013 12:39:59 +0000

ROUND ROCK, Texas — Mon May 13, 2013 8:22am EDT
(Reuters) – The special committee of Dell Inc.’s board on Monday asked Carl Icahn for details of his plans for the computer maker, including how he would finance his offer and who would run the company.
Last week Icahn and Southeastern Asset Management Inc. offered $21 billion in cash for Dell, challenging founder Michael Dell’s $24.4 billion bid to take the company private.
Michael Dell and private equity firm Silver Lake want to take the company private for $13.65 per share, but stockholders, including Southeastern and T. Rowe Price, have complained that the offer severely undervalues the company.
Instead, Icahn and Southeastern, two of Dell’s biggest investors, proposed to give stockholders $12 of cash for every share they own, as well as allow them to keep their stock.
But in a letter to Icahn, the committee said it was not clear if he intended to make “an actual acquisition proposal that the Board could evaluate” or if he intended his offer as an alternative in the event the pending sale to Silver Lake and Michael Dell is not approved.
The committee also asked for information on the terms of the debt financing required for Icahn’s proposal and “contingencies available if cash on hand or stockholder rollovers are less than anticipated,” as well as financing commitment letters.

Facebook in talks to buy Israel’s Waze for up to $1 billion: report

SBN Staff — Fri, 10 May 2013 12:48:09 +0000

MENLO PARK, Calif., Fri May 10, 2013 — Facebook Inc. is in advanced talks to acquire Israeli mobile satellite navigation start-up Waze for $800 million to $1 billion, business daily Calcalist reported.

The deal, which would be Facebook’s largest acquisition, would give the social networking company a mapping service and allow it to better compete with Google Inc. and Apple Inc.
Maps and navigation services have become a key asset for technology companies as consumers increasingly adopt smartphones and other mobile devices.
Waze uses satellite signals from members’ smartphones to generate maps and traffic data, which it then shares with other users, offering real-time traffic info.
Due diligence between Waze and Facebook is underway after a term sheet was signed, Calcalist said, adding that talks began six months ago.
Officials at Waze and Facebook declined to comment on the report.
Facebook’s largest deal to date is the September acquisition of photo-sharing app, Instagram. Facebook agreed to buy the company for $1 billion in cash and stock, though the actual price it paid was $715 million due to declines in Facebook’s share price.
The four-year-old Waze, which has 47 million users, has raised $67 million in funding to date from firms including Kleiner Perkins Caufield & Byers, Blue Run Ventures and semiconductor company Qualcomm Inc.