Archive for August, 2009

Late Labor Day seen pulling down August sales (Reuters)

Monday, August 31st, 2009 | Finance News

CHICAGO (Reuters) –
U.S. retailers are likely to get an "incomplete" mark for the key back-to-school season when they report August sales this week, as a later Labor Day is expected to pull some sales into September, pressuring August results.

Retailers that report August sales -- a group that does not include industry giant Wal-Mart Stores Inc (WMT.N) -- are expected, on average, to post a decline of 3.9 percent in sales at stores open at least a year, according to Thomson Reuters data.

Investors are looking for signs that consumers, who account for about 70 percent of U.S. economic activity, are loosening their purse strings after pulling back during the worst recession since the Great Depression.

"It's going to be watched very closely," Ken Perkins, president of Retail Metrics Inc, said of August sales data. "Did anyone go out and start picking up their discretionary spending here?"

Retail stocks have rallied sharply since early March, helped by cost cuts that helped offset falling sales. The Standard & Poor's Retail index (.RLX) is up more than 56 percent since early March, though some analysts say retailers will need to start showing sales improvement for the stocks to rally much further.

WHEN IS LABOR DAY?

The sales view is likely to be distorted by the shift of Labor Day -- which falls on the first Monday in September -- to September 7 in 2009 from September 1 in 2008. That shift means seven more pre-Labor Day selling days, including the entire holiday weekend, will be in the September sales reporting month this year. Last year, the Saturday of Labor Day weekend fell in August.

"A lot of people traditionally wait for that Labor Day weekend to do their back-to-school shopping," Perkins said, estimating that a couple of percentage points of sales growth could be lost this August.

But some of the impact from the later Labor Day will be muted by a shift of some states' sales tax "holidays" into August from July, analysts said.

Overall, a better look at the back-to-school season -- often seen as a harbinger of the Christmas holiday selling season -- will be seen by combining August and September sales this year.

"There are some tricks of the calendar this year, with variations in tax holidays and a delayed back-to-school season, so there may be volatility in August sales and September" sales, Lawrence Creatura, a portfolio manager at Federated Investors, said.

Still, there are some signs of brighter consumer sentiment and economic improvement, which could help sales going forward. The U.S. economy shrank less than expected in the second quarter and fewer workers filed new claims for jobless benefits last week, among the latest signs that the economy could be shrugging off the recession. [nN27303398]

"If there is an uptick, then the holiday season could have a chance at a modest season, not just an absolutely terrible one like (retailers) had last year," Perkins said.

Most retailers have seen sales hammered by the recession, though discounters and other stores seen as offering value for cash-strapped consumers, such as TJX Cos Inc (TJX.N), have benefited.

"I can't tell you how many people I talk to who say they are doing their back-to-school shopping at Ross (ROST.O) or T.J. Maxx," Patricia Edwards, founder and chief investment officer at Storehouse Partners, said. "It's becoming chic to save money."

Ross and TJX are both expected to post higher same-store sales in August, with all apparel retailers expected to show a 3.2 percent decline, according to Thomson Reuters data. Discount retailers are expected to show a 5.6 percent decline, while department stores are seen down 6.9 percent.

Same-store sales at teen and child apparel retailers, which are particularly affected by back-to-school sales, are expected to be down 9.5 percent.

(Reporting by Brad Dorfman; Editing by Richard Chang)

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BofA offering to repay part of bailout: report (Reuters)

Monday, August 31st, 2009 | Finance News

NEW YORK (Reuters) –
Bank of America (BAC.N) is offering to repay part of the U.S. government bailout money, starting with the $20 billion it received in January to help with the acquisition of Merrill Lynch & Co, the Wall Street Journal reported on its website late on Monday.

The government is meanwhile pushing the bank to pay up to $500 million to end a tentative pact that would have had the government share Bank of America's losses on certain assets, added the report, which cited people familiar with the matter.

Bank of America is not offering to repay all of the $45 billion in taxpayer funds it received from the government's Troubled Asset Relief Program, the report said.

The repayment of $20 billion, however, would remove the bank from the list of "exceptional" aid recipients, a designation that brings more congressional scrutiny.

The U.S. Treasury and Federal Reserve have asked the bank to pay between $300 million and $500 million to end a tentative plan that would have seen the government absorb a portion of losses on assets owned by Bank of America and Merrill Lynch, the report said.

In exchange, the plan called for the bank to issue $4 billion in preferred stock to the Treasury, costing it about $320 million a year, the report said.

A Bank of America spokesman did not immediately return a call seeking comment.

(Reporting by Jonathan Spicer; Editing by Lincoln Feast)

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U.S. pay czar starts review of TARP firms’ proposals (Reuters)

Monday, August 31st, 2009 | Finance News

WASHINGTON (Reuters) –
The U.S. pay czar has begun reviewing the appropriateness of the richest pay packages proposed by firms that received billions of dollars in government aid.

Kenneth Feinberg has deemed the proposals for the 25 highest-paid employees at the seven companies "substantially complete," starting a 60-day clock on Monday, a Treasury Department spokeswoman said.

His determination that they are complete kicks off the controversial process of the government scrutinizing pay contracts of private-sector companies and then greenlighting or putting the brakes on them.

The government sent out letters on Monday about the step to the seven firms who have received "exceptional assistance" from the Troubled Asset Relief Program (TARP): Citigroup Inc (C.N), American International Group Inc (AIG.N), Bank of America Corp (BAC.N), Chrysler Financial (CCMLPF.UL), Chrysler Group LLC, General Motors Co (GM.UL) and GMAC Inc.

The government has laid out general principles that will guide Feinberg's decisions, such as ensuring the contracts do not encourage excessive risk taking, that they have an appropriate balance of short-term and long-term pay, and that pay is tied to performance.

The pay plans should also be generous enough that the firms can retain top people and become profitable enough to repay taxpayer investments, Treasury has said.

Feinberg, who previously oversaw payouts to victims of the September 11 attacks, has a great deal of latitude in making his determinations and can even claw back pay that employees have received if he finds that it was paid out unfairly.

He has been verifying the submissions since they were due in to Treasury on August 14.

Feinberg said earlier this month that he has been regularly consulting with the seven companies, and described the meetings as "very amicable."

"There have been some tough disagreements, but everyone is trying to get to an end place in compensation that makes sense in a post-TARP world," Feinberg said.

He said Citigroup, in particular, has concerns about pay restrictions causing its top employees to leave.

Andrew Hall, a Citigroup energy trader on pace to make about $100 million this year, has recently become a target for accusations of excessive pay at bailed-out companies.

Feinberg told Reuters that Citigroup included Hall's contract when it submitted its pay plans earlier this month.

After Feinberg makes his initial determination about whether to approve or disapprove pay contracts, the companies have 30 days to ask him to reconsider, after which Feinberg has 30 days to make a final determination.

His final determinations are binding, Treasury has said.

Separately from that process, Feinberg has already made some rulings on pay. AIG said earlier this month that Feinberg had approved in principle a $10.5 million pay package for newly appointed Chief Executive Robert Benmosche.

It is not yet clear how much the government will reveal about the pay contracts of other top-paid employees, largely because federal privacy laws restrict public disclosures about individuals' pay.

Feinberg has said he has wrestled with the disclosure issue. "There is a tension between not wanting to put on the front page of every newspaper in the country the specific compensation packages of these individuals ... versus the public's right to know," he said.

After judging the pay packages for the companies' top 25 employees, Feinberg will have to approve broader compensation structures for the 75 next-highest-paid employees.

(Reporting by Karey Wutkowski in Washington and Steve Eder in New York; Editing by Gary Hill)

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