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Wednesday, March 12, 2014


Original story from USATODAY.

The Men's Wearhouse will buy Jos. A. Bank Clothiers in a cash deal worth $1.8 billion, or $65 a share, the companies said Tuesday.

Boards of directors of the companies have unanimously approved the transaction.

"We are excited by the opportunities this transaction presents," said Men's Wearhouse CEO Doug Ewert, "and are confident that our combined best-in-class offerings for our valued customers will drive significant shareholder value."

The companies have been volleying competing offers for each other since the fall, when Jos. A. Bank made an unsolicited offer to buy Men's Wearhouse for $48 a share. Men's Wearhouse rejected the bid and countered with its own to buy Jos. A. Bank for $55 a share. Most recently, Men's Wearhouse raised its bid to $63.50 a share two weeks ago.

Combining the companies will allow both to maximize merchandise offerings and store locations, the companies said in a statement. Jos. A. Bank will retain its name. The merger will make the combined company the fourth-largest men's apparel retailer, with more than 1,700 stores in the U.S. and about 23,000 employees. In a presentation given to investors in November on a potential acquisition of Jos. A. Bank, Men's Wearhouse listed Macy's, Kohl's, and J.C. Penney as the top three menswear retailers based on retail sales.

The presentation also outlined some of the key differences in the two brands. Men's Wearhouse appeals to a slightly younger, more trend-conscious customer and offers a variety of brands, including Michael Kors and Calvin Klein. Jos. A. Bank tends to cater to an older, more affluent customer and primarily sells its own private label products. The presentation referred to the possibility of creating a loyalty program for customers and spending more on advertising.

As part of the deal, Jos. A. Bank will not go forward with a separate agreement announced last month to buy Eddie Bauer for roughly $825 million. Termination of that deal requires Jos. A. Bank to pay a $48 million fee to Eddie Bauer's parent company.

Jos. A. Bank and Men's Wearhouse have an opportunity to learn from each other and increase their value to customers through the deal, says Mark Montagna, senior analyst with Avondale Partners. Plus, "it's a win for both retailers' shareholders," he says.

He says Jos. A. Bank should adopt Men's Wearhouse's tux rental strategy and that Men's Wearhouse will be able to capitalize on Jos. A. Bank's expertise in sourcing product for less overseas without sacrificing quality.

"So both parties have a lot to learn on two really distinct areas," he says. "And that's very beneficial to both sales and margins."

The new company will also have more resources to invest in marketing efforts and clothing factories, Montagna says.

Men's Wearhouse stock rose $2.57, or 4.7%, to close at $57.14, and Jos. A. Bank shares gained $2.39, or 3.9% to $64.22 a share.

Monday, March 10, 2014


Original Story: USATODAY.com

The Boeing 777 is one of the safest planes on earth, and the Malaysia Airlines tragedy Saturday should do nothing to tarnish that record -- or that of parent company Boeing -- unless a flaw is found to have caused the incident, business analysts said.

"This is the best international plane ever built yet -- it's got an impeccable track record after 20 years and over 1,200 deliveries," said Richard Aboulafia, vice president for analysis with the Teal Group in Virginia. "It's typically used on international routes, and it's established a new standard for international safety."

The disaster in the South China Sea with 239 people aboard is Malaysia Airlines' first crash in nearly 20 years.

The Asiana Airlines Flight 214 crash that killed three people in July also involved a 777, which struck a seawall and broke apart at San Francisco's airport. National Transportation Safety Board investigators have focused their attention on pilot training and confusion in that incident.

The Malaysia crash came the same day Boeing announced it found hairline cracks in the wings of 42 Dreamliner 787 planes under construction, but none in the 122 already delivered. The problem arose because a supplier, Tokyo-based Mitsubishi Heavy Industries, changed its manufacturing process, according to Boeing.

Boeing's stock closed at $128.54 Friday, down 32 cents. It did drop 1.1% to $127.43 in after-hours trading, as reports of the Dreamliner crack surfaced. The stock is up 58% the past year (March 8 to March 8). In January, the company said its fourth-quarter profit rose 26% as it delivered more commercial planes.

Aviation analysts said that unless a mechanical flaw is found in the Malaysian incident, there is no reason the crash should affect Boeing at all.

"Absent inherent defects" to the air frame, engines, avionics or other equipment, "the operator is responsible for safe use according to published and approved manuals," said Robert Mann, an aviation consultant with R.W. Mann and Co. in New York.

Boeing issued a statement saying it was assembling a team to offer technical assistance in investigating the crash, and that "our thoughts remain with all on board and their families."

Henry Harteveldt, an analyst with Hudson Crossing in San Francisco, said the plane's "black box" that records data about the flight needs to be recovered and examined along with the rest of the recoverable wreckage.

"Only after investigators can determine the crash's cause will we be able to determine whether there will be any long-term impact to Boeing," Harteveldt said.

The NTSB, which often helps other governments investigate crashes, is monitoring the incident and could potentially send investigators to the scene.

Harteveldt also said the 777 "is one of the safest, most reliable planes – ever."

Friday, March 7, 2014


This story first appeared in USA Today.

Staples said Thursday it will close 225 stores in North America by the end of 2015 amid falling fourth-quarter revenue as sales increasingly shift online.

The stock closed down $2.05, or 15.3%, to $11.35.

"With nearly half our sales generated online today, we're meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency," Staples CEO Ron Sargent said.
For the fourth quarter ended Feb. 1, total company sales fell 10.6% to $5.9 billion a year ago, the nation's No. 1 office supply chain said. Earnings were $212 million, or 33 cents per share, compared with $78 million, or 14 cents a share in a year-ago period that included substantial one-time charges. Wall Street analysts expected net income of 39 cents a share in the fourth quarter.

The company said it expects per-share earnings in the current quarter of 17 cents to 22 cents, well below analysts' estimates of 27 cents and the 26 cents it earned in the first quarter of 2013.

The store closings will affect about 12% of the company's 1,846 North American outlets — the majority in the U.S. — and are part of a plan to save $500 million in costs by the end of next year.

Like other retailers, Staples' last quarter was hurt by soft consumer demand for electronics and heavy discounting, says analyst Scott Tilghman of B. Riley & Co. Also, its business customers are disproportionately located in the Northeast, which was battered by cold and stormy weather.

Staples is snaring a healthy share of online sales, but must trim its base of stores accordingly, Tilghman says. A similar dynamic has partly contributed to recent store closings by retailers such as RadioShack, J.C. Penney, Sears and others. About 6% of all retail sales are online — a figure that's expected to grow to 10% in three to five years, according to Tilghman and the Commerce Department.

Specialty stores such as Staples are also facing increased competition from department stores such as Walmart and Target, further pressuring per-store profits, Tilghman says.

Staples, meanwhile, also has been hobbled by technological shifts at the office and home, which have sharply reduced the need for bread-and-butter Staples products such as paper, ink and toner, as well as the store's legacy services.

"You don't have people faxing stuff, and you don't have people making huge copies," says Brian Yarbrough, a research analyst with Edward Jones.

The company is responding with an increased emphasis on technology products such as tablets, which may drive traffic but are lower-margin, and open Staples up to more competition from the likes of Walmart and Target, Yarbrough says.

Staples is also expanding to offer new product lines for businesses, including industrial and medical supplies. Staples today said it's adding eight new product categories and 1,600 items to its stores, representing 20% of its offerings. They include breakroom supplies, gifts and cards for office parties and early-education toys and learning aids.

"We think they're taking the right steps," Tilghman says. "It will take a little while before it shows up in the numbers."

But Yarbrough says the chain likely needs to close more stores in the future and make them smaller — the average store is about 23,000 square feet.

"I wouldn't be surprised if there's a couple hundred more that need to be closed," he says. "The problem at the end of the day is every product they sell, you can go on Amazon and buy. And Amazon prices are just cheaper."


This story first appeared in USA Today.

Federal safety officials on Thursday ordered child seat maker Graco to explain why it decided to exclude seven infant seat models from its recall of 3.8 million child seats last month and to hand over a trove of other related information.

In the child seats recalled, the buckles may not unlatch, making it difficult to remove the child from the seat. That could increase the risk of injury in a crash, fire or other emergency when a speedy exit from the vehicle is required.

The "special order" issued by the National Highway Traffic Safety Administration, asks for all complaints and information relating to its decision to change buckles and suppliers.

Graco said earlier that food and dried liquids can make some harness buckles progressively more difficult to open over time or become stuck in the latched position.

"We have received a request for information from NHTSA and are happy to comply with their request," Graco said in a statement Thursday . "We look forward to working with NHTSA as we continue our ongoing, constructive conversation to clarify any questions."

Graco said the company remains confident that its car seats are safe and comply with NHTSA's standards: "They have withstood rigorous internal testing that far exceeds federal requirements."

Consumers can order free replacement harness buckles online. The company says the seats can still be used while waiting for the new buckle. Graco's customer service team can be reached at 800-345-4109 or consumerservices@gracobaby.com.

Thursday, March 6, 2014


Original Story from USATODAY.com.

Go west, young job-seeker.

Seven of the 10 states with the fastest job growth this year will be in the West, as the region benefits from a stronger housing recovery and continued gains in its bread-and-butter energy, technology and tourism industries, according to forecasts by IHS Global Insight.

The states, which generally led the nation with rapid payroll increases last year, as well, are North Dakota, Texas, Arizona, Colorado, Utah, Idaho and Oregon.

The West was a hotbed of population and job growth for decades after World War II, but some states in the region were hit harder by the housing downturn than the rest of the country and were slower to rebound early in the recovery.

Now that states such as Arizona and Nevada have worked through most of their home foreclosures, residential construction is rebounding sharply, spawning thousands of new jobs, economists say. Many Western states, however, still trail the nation in recouping jobs lost in the recession.

"It was down so far, and the housing market has finally stabilized," says Richard Wobbekind, head of business research at University of Colorado, Boulder.

Other factors are also at work. North Dakota and Texas are riding an oil boom after largely avoiding the recession's most punishing blows. Colorado and Utah, while enjoying a surge in oil and natural gas drilling, are also now high-tech centers helping satisfy Americans' appetite for mobile devices and applications.

Oregon is a semiconductor manufacturing hub. In Arizona, job growth is being fueled by a technology base that includes Apple's new 2,000-employee glass factory in Mesa, as well as surging tourism, now that rising household wealth is spurring more consumer spending.

As technology increasingly allows Americans to work remotely, the entire Western region is drawing more residents from other states who want to live amid scenic mountains and enjoy a better quality of life, says IHS economist Jim Diffley.

"They're just progressive, attractive places to live," Diffley says.

During the recovery's early days, migration to the West was limited by the large number of Americans who couldn't move because they owed more on their mortgages than their homes were worth, says economist Chris Lafakis of Moody's Analytics. But the stock of so-called underwater homes has fallen dramatically.

Home buyers are also finding it easier to qualify for mortgages, allowing them to pick up stakes. Many older Americans are finally feeling that their nest-egg investments are secure enough for them to move to retirement havens in the West.

"We expect 2014 to be the year when in-migration (to western states) picks up a lot," Lafakis says.

That will increase the need for local services and jobs.

Wednesday, March 5, 2014


This story first appeared in The Detroit News.

General Motors CEO Mary Barra vowed Tuesday to hold the company accountable for the chain of the events that led to the recall of 1.6 million older cars linked to 13 deaths when ignition switch problems caused air bags not to deploy in frontal crashes.

Barra posted on an internal website and on a company blog Tuesday that she has created a “working group of senior executives, which I lead, to direct our response, monitor our progress and make adjustments as necessary. We sincerely apologized to our customers and others who have a stake in GM’s success.” The company originally reported that the message was sent as an email to employees.

A chronology that GM turned over to NHTSA last week showed GM downplayed the ignition switch issue in prior years, including canceling in 2005 an approved redesign of the ignition key head. By the end of 2007, GM said it knew of 10 frontal crashes in which air bags didn’t deploy — linked to the ignition problem — but the automaker opted not to recall the cars. Of the 13 deaths reported by GM as linked to the issue, the last occurred in December 2009.

The Detroit automaker “launched an internal review to give us an unvarnished report on what happened. We will hold ourselves accountable and improve our processes so our customers do not experience this again,” said Barra’s email, which was distributed by GM to reporters.

She said the company is going far beyond simply recalling the vehicles.

“When this was brought to my team a few weeks ago, we acted without hesitation to go well beyond the decision by the technical experts,” Barra said in an email to employees.

This is the first major crisis Barra has faced since taking over the reins at GM less than two months ago.

Last week, The Detroit News first reported GM had hired an outside law firm to conduct a full review of the issue. GM said after it released Barra’s email that the internal review to which she referred is an outside review being led by the law firm that GM has not identified.

The review will carefully scrutinize decisions by GM over a decade, and the automaker’s initial decisions not to recall the cars but instead issue a technical service bulletin to dealers. GM North America President Alan Batey apologized last week for the company’s handling of the issue and said in a statement that its review was flawed.

Barra declined to comment about the issues when asked about them by the Reuters news organization last week.

In the letter, Barra said, “Our process for determining whether and when to recall a vehicle is decided by experienced technical experts. They do their work independent of managers with responsibilities for other aspects of the business, so that their decisions are made solely on technical facts and engineering analysis.”

GM expects to have replacement parts ready by early April. Barra said GM has “empowered our dealers with resources to provide affected customers with the peace of mind they deserve” and has “coordinated with our supplier to ramp up development and validation of replacement parts to get them into the field as fast as possible.”

She said some have asked if “the recall of these out-of-production vehicles might affect our company’s reputation or sales of our current models.

“My answer is simple: that’s not the issue. The vehicles we make today are the best in memory and I’m confident that they will do fine, on their own merits. And our company’s reputation won’t be determined by the recall itself, but by how we address the problem going forward.”

Last week, the National Highway Safety Administration said it was opening a formal investigation into the timeliness of GM’s recall. It is reviewing GM’s recall of 2005-07 Cobalts and other similar cars. In early February the automaker said it would recall 788,000 vehicles but didn’t recall all models with the same suspect part.

Last week, GM announced it was doubling the size of the recall to 1.62 million worldwide, including about 1.37 million in the United States.

GM could face a maximum $35 million fine if it failed to recall the vehicles within five days of determining they posed an unreasonable risk to safety. It also faces tens of millions of dollars in costs to recall the vehicles.

GM could also face new lawsuits over the problem. The automaker already has settled at least two suits involving fatal Cobalt crashes. Sean Kane, a safety advocate, said the recall could prompt Congress to scrutinize NHTSA and look at how fast it is responding to safety issues.