Staples forecasts fifteenth straight quarterly sales decline

Business

Staples Inc (O:SPLS), the biggest U.S. office supplies retailer, forecast its 15th straight quarter of declining sales as it closes stores in the face of intensifying competition.

The company and former merger partner Office Depot Inc (O:ODP) are struggling to compete with Wal-Mart Stores Inc (N:WMT) and Amazon.com Inc (O:AMZN) at a time when people are using less stationery.

Staples' shares were down 8.5 percent at $8.54 in morning trading on Wednesday. The stock had lost about a third of its value in the 12 months through Tuesday's close.

The company's sales fell a slightly steeper-than-expected 3.7 percent in the second quarter and the company said it expected sales to also decline in the current quarter. It did not provide a specific forecast.

Analysts on average were expecting sales to drop 3.1 percent in the current quarter, according to Thomson Reuters I/B/E/S.

"The blunt truth is that market dynamics are firmly against Staples in that there are far more generalists in the stationery market than there used to be and online plays a much more significant role," said Carter Harrison, a retail analyst at Conlumino.

Framingham, Massachusetts-based Staples said total sales fell to $4.75 billion in the second quarter ended July 30 from $4.94 billion a year earlier.

Analysts on average had expected sales of $4.77 billion, according to Thomson Reuters I/B/E/S.

Sales at the company's established stores in North America fell 5 percent, steeper than the 3.1 percent drop analysts polled by research firm Consensus Metrix had expected.

Staples also reported a net loss of $766 million, or $1.18 per share, compared with a profit of $36 million, or 6 cents per share, a year earlier.

Besides trying to buy Office Depot - a deal that fell apart over antitrust concerns - Staples has been responding to tough conditions by closing stores and focusing on serving medium-sized businesses rather than Fortune 500 companies.

Staples reiterated that it would close 50 stores in North America this year. It closed a total of 242 stores in 2014 and 2015 as a part of its restructuring plan. Staples had 1,907 stores as of Jan. 30.

The company is also focusing on offerings other than office supplies, such as electronics and furniture, and said in May it would step up deliveries to 80 percent of total North American sales within three years in an effort to compete with Amazon.

Excluding items, Staples earned 12 cents per share, matching analysts average estimate.

The company said it expected an adjusted profit of 32 to 35 cents per share for the current quarter. Analysts on average were expecting a profit of 35 cents per share.

Source by Reuters

Walmart Q2 EPS estimated at $1.02 on revenues of $120.2 bn

Stock market

Walmart’s Q2 earnings expected to fall from year earlier on steady revenues.
The giant retailer is expected to report Q2 diluted EPS of $1.02 on revenues of $120.2 bn.
Walmart (NYSE:WMT) is due to release earnings report before the market opens on Thursday.
Walmart reported year-earlier Q2 EPS of $1.08 on revenues of $120.2 bn.
Walmart may increase its full-year EPS guidance currently at $4.0-$4.30.

Source by Investing.com

Target cuts fiscal-year profit forecast; shares drop

Business

Retail chain Target Corp (TGT.N) cut its fiscal-year profit outlook on Wednesday after quarterly sales fell more than expected due to lower demand for electronics and disappointing results in its grocery business.

Shares of the sixth-largest U.S. retailer dropped 7 percent to $70.15, erasing their nearly 4 percent gain for 2016.

"It's a very cautious consumer, ... and it will continue to be a very competitive environment," Chief Executive Officer Brian Cornell said on a conference call.

Cornell said electronics sales fell by a double-digit percentage rate in the second quarter ended on July 30 and accounted for about two-thirds of Target's 1.1 percent sales decline at stores open at least a year.

About a third of the decrease in electronics sales stemmed from reduced demand for Apple Inc (AAPL.O) products, which were down more than 20 percent.

Target, which has been reorganizing its grocery business by adding more organic and fresh food, said those early efforts were disappointing. The business had a "small" decline in comparable sales and was pressured by price deflation for food items like meat and milk.

The company's sales, like those of rivals, have suffered as shoppers increasingly use online retailers such as Amazon.com Inc (AMZN.O) and spend on big-ticket items like cars and home renovations rather than small discretionary purchases.

Cornell said customer visits declined during the quarter across product categories. The retailer, however, gained market share in apparel and home improvement.

The company said it expected same-store sales to be flat to down 2 percent in the second half of the year and cut its full-year profit forecast to between $4.80 and $5.20 per share from a prior range of $5.20 to $5.40.

Net income attributable to the company fell nearly 10 percent to $680 million in the second quarter.

Excluding items such as debt retirement losses and the impact of the sale of its pharmacy business to CVS Health Corp (CVS.N), Target earned $1.23 per share. Analysts on average had expected $1.12, according to Thomson Reuters I/B/E/S.

Net sales fell 7.2 percent to $16.17 billion, lagging analysts' expectations of $16.18 billion.

Digital sales increased 16 percent, a deceleration from previous quarters, and accounted for 3.3 percent of the company's total.

Source by Reuters

Cisco to lay off about 14,000 employees: CRN

Technology

Cisco Systems Inc is laying off about 14,000 employees, representing nearly 20 percent of the network equipment maker's global workforce, technology news site CRN reported, citing sources close to the company.

Cisco, which is due to report fourth-quarter results later on Wednesday, is expected to announce the cuts within the next few weeks, the report said.

"We think it's true," Jefferies analysts wrote in a client note, referring to the report.

"As we've met with investors in recent weeks, we've picked up on concerns that Cisco may be looking to reduce headcount in the not-too-distant future."

If confirmed, it would be the second big tech industry layoff of a similar scale announced this year. Intel Corp said in April that it would slash up to 12,000 jobs globally, or 11 percent of its workforce.

San Jose-based Cisco is facing sluggish spending by telecom carriers and enterprises on network switches and routers, its main business. In response, the company has been beefing up its wireless security and datacenter businesses.

Cisco, which had more than 70,000 employees as of April 30, declined to comment.

The company has already offered many early retirement packages to employees, the CRN report said.

Cisco's shares were down 2 percent at $30.50 in early trading on Wednesday on the Nasdaq.

Jefferies raised its price target on the stock to $35 from $30.72 and maintained its "buy" rating.

Up to Tuesday's close, Cisco's stock had risen about 15 percent this year, compared with a 10.5 percent increase in the Dow Jones U.S. Technology Hardware & Equipment index.

Source by Reuters

Daimler's top electric motors executive moving to Bosch: sources

Technology

Daimler's top electric motors development executive, Harald Kroeger, is joining auto supplier Robert Bosch [ROBG.UL], two people familiar with the matter told Reuters, as a battle to hire leading talents in the sector heats up.

German carmakers are investing heavily in electric cars, a segment once neglected by the industry as customers shunned their limited operating range and high cost.

But a growing political backlash against diesel fumes and recent advances in battery technology to increase the reach of an electric car by up to 50 percent have spurred major investments by Volkswagen VOWG_p., Daimler and suppliers such as Bosch and Continental.

Daimler and Bosch declined to comment on Kroeger's move.

The departure of the Stanford-educated executive, Daimler's head of Development for Electrics, Electronics, and E-Drive, comes as Daimler's luxury brand Mercedes-Benz prepares to launch a range of electric models.

Hiring Kroeger is a major coup for Bosch. The German executive has held various senior roles, including the position of Head of Quality at Mercedes-Benz, and two years on the board of directors at electric car company Tesla Motors.

Kroeger helped oversee development of motors for Mercedes-Benz pure battery powered cars as well as plug-in hybrids.

He was also responsible for development of all electronics for Mercedes-Benz passenger cars and for battery development, including stationary battery storage systems and the building of a factory to manufacture battery packs for electric cars.

The development of Mercedes-Benz electric passenger cars remains in the hands of Juergen Schenk, the engineer who has overseen development of vehicles including the electric Mercedes-Benz B-Class. Kroeger was Schenk's boss.

NEW CAR PLANS

Daimler remains on track to unveil a new electric car at the Paris motor show next month, a company spokesman said. In July, the German carmaker said it had accelerated development of premium electric cars, a segment currently dominated by United States-based rival Tesla.

Stuttgart-based auto supplier Bosch has in recent years built up its expertise in electric and autonomous car technology, helping a wider group of companies to gain a foothold in the auto industry.

Bosch built the electric powertrain and steering for Google's prototype autonomous vehicle and is a supplier of driver assistance systems to Tesla.

Bosch expects sales of driver assistance systems, which include radar and video sensors used for emergency braking and sophisticated cruise control functions, to reach 1 billion euros ($1.13 billion) by 2016.

In 2025, Bosch expects 125 million cars to be produced, of which 8 million will be electric cars, 8.3 million plug-in hybrids and more than 5 million hybrid vehicles.

(Reporting by Edward Taylor; Editing by Keith Weir)

Source by Reuters

China warns 'protectionist' Australia on investment after grid deal blocked

Business

China warns 'protectionist' Australia on investment after grid deal blocked

Australia's decision to block the A$10 billion ($7.7 billion) sale of the country's biggest energy grid to Chinese bidders was a protectionist move that would negatively affect investment in the country, China's Ministry of Commerce said on Wednesday.

Australian Treasurer Scott Morrison said last week that preferred bidders State Grid Corp of China [STGRD.UL] and Hong Kong's Cheung Kong Infrastructure Holdings (1038.HK) would be prevented from buying electricity network company Ausgrid, citing unspecified national security concerns.

"This kind of decision is protectionist and seriously impacts the willingness of Chinese companies to invest in Australia," China Commerce Ministry spokesman Shen Danyang said at a regular news briefing in Beijing.

"China hopes Australia will create a fairer and more transparent environment for Chinese investment."

The decision was the second time this year Canberra has rejected bids for major Australian assets by Chinese interests, the biggest source of proposed foreign investment in Australia, according to an April report from the Foreign Investment Review Board.

It previously knocked back an offer by a China-led consortium to buy the country's largest agricultural land owner, cattle company Kidman & Co.

UNDER SCRUTINY

China's offshore ambitions have come under increasing scrutiny this year by governments in Europe and the United States.

Following a surprise move by new British Prime Minister Theresa May to review the building of a nuclear plant part funded by China, Beijing questioned whether Chinese money was still welcome.

Australian Prime Minister Malcolm Turnbull used a major speech on Wednesday to criticize the rising tide of protectionism within parliament, despite his government being responsible for the rejection of the Ausgrid and Kidman bids.

The speech warned against giving in to the growing protectionist mood reflected in the new parliament, which he said could reverse gains made by the country since it liberalized its economy two decades ago.

Turnbull's conservative Liberal-National coalition will at times require support in the new parliament from a bloc of foreign investment critics led by the Far-right One Nation party to pass legislation.

FOREIGN INVESTMENT

Proceeds from the sale of state-owned assets are designed to be plowed back into the economy through job-creating infrastructure projects, including public transport networks.

"These are the transactions Australia needs if it is going to get out of the low growth, low productivity scenarios," said Brendan Lyon, chief executive of industry lobby group Infrastructure Partnerships Australia.

Chinese investment in Australia surpassed $11 billion in 2015, according to a report by accounting firm KPMG and the University of Sydney.

Former senior defense department official Peter Jennings said the trade relationship put Australia in a difficult strategic position.

"We've never had a greater dependency with any country," said Jennings, a director at the Australian Strategic Policy Institute.

"The risk that creates for us is if Beijing wants to adopt politically coercive policies, it's in a fairly strong position to do so with us because of that level of trade dependence."

Last year, Landbridge Group, owned by Chinese billionaire Ye Cheng, won a long-term lease to operate Darwin's port, in the north of Australia, in a deal worth A$506 million.

Turnbull defended the deal following reports that U.S. President Barack Obama had expressed anger at the Australian Prime Minister for not having informed him earlier.

U.S. Ambassador to Australia John Berry told Reuters national security must be taken into account when considering foreign direct investment in infrastructure and sensitive areas.

"The U.S. fully respects the process and decisions on foreign investment made by the Australian government, even when it affects U.S. companies," Berry said in a statement.

(Additional reporting by Matt Siegel and Tom Westbrook in SYDNEY and Michael Martina in BEIJING; Editing by Lincoln Feast)

Source by Reuters

Wall Street opens flat; Fed minutes awaited

Stock market

U.S. stocks opened little changed on Wednesday as investors held off from making big bets ahead of the release of the minutes of the Federal Reserve's July policy meeting.

The Dow Jones industrial average (DJI) was down 9.96 points, or 0.05 percent, at 18,542.06, the S&P 500 (SPX) was down 0.43 points, or 0.02 percent, at 2,177.72 and the Nasdaq Composite index (IXIC) was up 1.51 points, or 0.03 percent, at 5,228.62.

Source by Reuters

Fed minutes could provide wide open door for rate hike in December

Economy

Investors looked ahead Wednesday to the publication of the minutes from the July meeting of the Federal Reserve (Fed) at 18:00GMT, or 14:00ET, for clues as to the timing of the U.S. central bank’s return to monetary policy normalization.

The July 27 statement and said near-term risks to the U.S. economic outlook had diminished, but the Fed opted to maintain interest rates on hold and did not signal an imminent return to policy tightening.

The Federal Open Market Committee (FOMC) minutes, though often considered a lagging indicator since they represent the Fed’s thoughts from three weeks ago, will still be perused for details on policymakers’ outlook and will be especially relevant in light of the fact that no press conference was offered at the last meeting.

Some observers have commented that the strong July employment report, released after the July 27 decision, may have done much to turn the minutes into an anachronism.

However, experts from Bank of America Merrill Lynch (BoAML) appeared to hold a different opinion: “Headline payroll growth was strong, but with the unemployment rate steady, wages stable, and the labor force participation rate ticking up, the report does little to force the Fed\'s hand and leaves them comfortably on hold for now,” these analysts said in a note to clients.

Details under the microscope

Experts from Royal Bank of Scotland suggested that the minutes would likely follow the script provided by the July statement itself by noting that near term risks to the outlook are receding.

“But (they) may also begin to tilt the Fed’s assessment of the balance of risks towards further tightening again,” they said.

“This would be a clear signal policymakers think September’s FOMC meeting could potentially be a ‘live’ venue for changing interest rates,” RBS explained.

Their opinion was in line with remarks made on Tuesday by New York Fed chief William Dudley and Atlanta Fed president Dennis Lockhart.

UBS economists also said their focus would be to examine details about the key addition to the July statement: “Near-term risks to the economic outlook have diminished.”

They noted that this was the first mention of reduced risks since December when the Fed said risks to the outlook were balanced.

“If we are correct, it would suggest that July was the start of the clock for a year-end rate hike,” UBS explained.

Allianz SE chief economic adviser and former PIMCO chief exec Mohammed El-Erian noted growing recognition that the prolonged period of ultra-low interest rates could undermine the financial system.

“Hence, the Fed will leave the door open for a rate increase in September, and open much wider for December -- in hopes that the country’s policy regime may move away from excessive reliance on the central bank toward a more comprehensive response including more balanced demand management measures, structural reforms to amplify the economy's dynamism, actions to address pockets of over-indebtedness and much better global coordination,” El-Erian wrote in an opinion piece for Bloomberg.

Key factors ahead

With this idea that the Fed will be looking to signal for an end of the year move on policy, analysts identified key upcoming calendar events to keep an eye on.

UBS pointed to Fed chair Janet Yellen’s appearance at the Economic Symposium in Jackson Hole on August 26 and stated that they expect her “speech to support the view for a hike on the way in December”.

Meanwhile, RBS placed their focus on the August jobs report to be released on September 2 after the prior two months’ releases gave strong readings.

“Another firm report for August will increase FOMC members’ confidence further ahead of next month’s meeting,” they concluded.

Market reaction may be short-lived

While BoAML was expecting the minutes “to offer a bit more optimistic assessment of the U.S. economy and global financial conditions, similar to the July statement”, they weighed in on the possible reaction in currency markets.

“The knee-jerk reaction could see the dollar strengthen as this will be viewed on the hawkish side given the dollar selloff we have seen since the nonfarm payrolls report,” they said.

“But, a failure by the Fed to signal hikes are imminent and/or a more protracted normalization cycle means the FX market impact is likely to be short-lived,” they warned.

Markets ahead of the minutes at 13:40GMT, or 9:40AM ET

While waiting for the publication of the minutes, Wall Street opened slightly lower. The Dow 30 fell 42 points, or 0.22%, the S&P 500 lost 4 points, or 0.19%, while the tech-heavy Nasdaq Composite traded down 15 points or 0.28%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.18% at 94.92, off the previous session’s seven-week low of 94.38.

Gold for December delivery on the Comex division of the New York Mercantile Exchange dipped $8.85, or 0.65%, to trade at $1,348.05 a troy ounce, after rising $9.40, or 0.7%, on Tuesday.

Fed fund futures were currently pricing in a 12% chance of a rate hike in September, according to Investing.com’s Fed rate monitor tool. The odds for November and December were 15.6% and 47.8%, respectively.

Source by Investing.com

Target cuts full-year profit forecast as sales decline

Business

Retail chain Target Corp (N:TGT) cut its fiscal-year profit outlook on Wednesday after quarterly sales fell more than expected, sending its shares down nearly 5 percent.

The company's sales, like those of rivals, have suffered as shoppers increasingly use online retailers such as Amazon.com Inc (O:AMZN) and spend on big items like cars and home renovations rather than apparel.

Sales at stores open for at least a year fell 1.1 percent in the second quarter ended July 30, within Target's outlook of flat to down 2 percent. Analysts on average had expected a 1 percent decline, according to research firm Consensus Metrix.

"Based on the current retail environment the company believes it is prudent to lower its expectations for comparable sales in the second half of the year," said the company, the sixth-largest U.S. retailer.

The company said it expected same-store sales to be flat to down 2 percent in the second half of the year and cut its full-year profit forecast to between $4.80 and $5.20 per share from a prior range of $5.20 to $5.40.

The Minneapolis-based retailer's shares were down 4.9 percent at $71.80 in premarket trading. At Tuesday's close, they had risen nearly 4 percent since the start of the year.

Net income attributable to the company fell nearly 10 percent to $680 million, or $1.16 per share, in the second quarter.

Excluding items such as debt retirement losses and the impact of the sale of its pharmacy business to CVS Health Corp (N:CVS), Target earned $1.23 per share. Analysts on average had expected $1.12, according to Thomson Reuters I/B/E/S.

Net sales fell 7.2 percent to $16.17 billion, lagging analysts' expectations of $16.18 billion.

"Although we are planning for a challenging environment in the back half of the year, we believe we have the right strategy to restore traffic and sales growth over time," Chief Executive Officer Brian Cornell said in a statement.

Cornell, Target's CEO since August 2014, has been trying to turn the company around after several years of sluggish growth. Some of his efforts include pulling out of Canada and promoting a narrower set of higher-margin "signature" categories.

The signature categories, including children's, babies' and health and wellness items, outpaced overall comparable sales by 3 percentage points in the second quarter.

Digital sales increased 16 percent, a deceleration from previous quarters, and accounted for 3.3 percent of the company's total.

Source by Reuters

U.S. gas futures struggle for direction ahead of storage data

Commodities

U.S. natural gas futures flipped between gains and losses on Wednesday, as market players looked ahead to fresh weekly information on U.S. gas inventories to gauge the strength of demand for the fuel.

Natural gas for delivery in September on the New York Mercantile Exchange dipped 0.3 cents, or 0.11%, to trade at $2.614 per million British thermal units by 9:39AM ET (13:39GMT), after rising 2.7 cents, or 1.04%, on Tuesday.

Market players looked ahead to weekly supply data due on Thursday, which is expected to show an increase in a range between 24 billion and 35 billion cubic feet of gas in the week ended August 12.

That compares with a gain of 29 billion cubic feet in the preceding week, 52 billion a year earlier and a five-year average of 57 billion cubic feet.

Total U.S. natural gas storage currently stands at 3.317 trillion cubic feet, according to the U.S. Energy Information Administration, 10.9% higher than levels at this time a year ago and 13.3% above the five-year average for this time of year.

Meanwhile, updated weather forecasting models pointed to scorching heat along the U.S. east coast through August 21. The weather will then be hotter than normal in the Mid-Atlantic and Great Lakes region through August 26.

Demand for natural gas tends to rise in the summer months as warmer temperatures increase the need for gas-fired electricity to power air conditioning.

Natural gas futures have recently been under heavy selling pressure amid speculation that August heat won’t prevent stockpiles from reaching a record before the winter.

Unless intense summer heat boosts demand from power plants, stockpiles will test physical storage limits of 4.3 trillion cubic feet at the end of October.

Source by Investing.com

Forex - Dollar firms up ahead of Fed meeting minutes

Forex

The dollar firmed up against the other major currencies on Wednesday as investors looked ahead to the minutes of the Federal Reserve’s July meeting due for release later in the trading day.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, edged up to 94.85, holding above Tuesday’s seven-week lows of 94.38.

Investors were looking to the minutes of the Fed’s July meeting for possible indications on the future path of interest rates.

The U.S. central bank left rates unchanged at its meeting last month, but opened the door to rate hikes later this year and indicated that risks to the economy had diminished since June.

Comments by a Fed official on Tuesday supported the view that rates could still rise later this year.

New York Fed head William Dudley said a rate increase as early as September is “possible.”

The U.S. central bank raised interest rates for the first time in almost a decade in December.

Higher interest rates typically boost the dollar by making it more attractive to yield seeking investors.

The dollar had weakened across the board on Monday in the wake of a paper from San Francisco Fed head John Williams arguing that central banks might have to lift inflation targets and favor looser fiscal policy in future..

The euro was holding below seven-week highs, with EUR/USD steady at 1.1275.

The dollar moved higher against the yen, with USD/JPY rising 0.38% to 100.68.

The pound dipped against the dollar, with GBP/USD easing 0.15% to 1.3027.

Sterling remained supported above 1.30 after the latest U.K. jobs report gave little indication that the Brexit vote was affecting the labor market.

Source by Investing.com

Forex - USD/CAD trims gains ahead of Fed meeting minutes

Forex

The U.S. dollar trimmed gains against its Canadian counterpart on Wednesday, as investors remained cautious ahead of the minutes of the Federal Reserve’s latest policy meeting, due to be released later in the day.

USD/CAD pulled back from 1.2917, the session high, to hit 1.2875 during early U.S. trade, still up 0.11%.

The pair was likely to find support at 1.2793, Tuesday’s low and a one-and-a-half month low and resistance at 1.2976, Monday’s high.

The dollar strengthened broadly after Atlanta Federal President President Dennis Lockhart said on Tuesday that two rate hikes in 2016 were a possibility.

The comments came shortly after New York Fed head William Dudley said that the U.S. central bank might raise rates as soon as its September policy meeting.

The Fed kept interest rates unchanged following its meeting on July 27 and said near-term risks to the U.S. economic outlook had diminished. However, the central bank stopped short of signaling a near-term rate rise.

Meanwhile, the commodity-related Canadian dollar remained under pressure as oil prices moved back lower on Wednesday on bets for bearish U.S. stockpile data later in the day.

The loonie was fractionally lower against the euro, with EUR/CAD easing up 0.08% to 1.4519.

Source by Investing.com