News Archive

Wall Street falls as U.S. government faces possible shutdown

Fri Sep 27, 2013 7:25pm EDT

NEW YORK (Reuters) – U.S. stocks declined on Friday and the SP 500 and Dow posted their first weekly drop in four, as Democrat and Republican lawmakers struggled to agree on an emergency funding bill to avert a U.S. government shutdown days away.

The SP 500 declined 1.1 percent for the week and is roughly 2 percent below its record high set September 18 when the Federal Reserve announced it would keep its stimulus program unchanged for the present.

Time was running short for lawmakers to avert a partial shutdown of operations by the U.S. government on October 1. Republicans in the House want to use the spending legislation to gut the new healthcare overhaul, a goal of the conservative Tea Party.

The Senate passed the emergency funding bill on Friday, which will keep U.S. agencies operating after September 30. The measure must now be approved by the Republican-controlled House where it is expected to encounter rough going. The House could vote on a bill in an unusual Saturday or Sunday session.

“I think investors right now are contemplating what is the impact on consumer confidence, revenues and earnings if Washington gets caught up in a quagmire,” said Fred Dickson, chief market strategist at D.A. Davidson Co. in Lake Oswego, Oregon.

Eight of the 10 SP 500 sectors ended lower, with the materials sector leading losses on the index. The SP materials index .SPLRCMA declined 1.2 percent.

The Dow Jones industrial average .DJI was down 70.06 points, or 0.46 percent, at 15,258.24. The Standard Poor’s 500 Index .SPX was down 6.92 points, or 0.41 percent, at 1,691.75. The Nasdaq Composite Index .IXIC was down 5.83 points, or 0.15 percent, at 3,781.59.

For the week, the Dow was down 1.3 percent and the Nasdaq was up 0.2 percent.

Just before the close, President Barack Obama urged House Republicans to avoid a government shutdown without cuts to his healthcare law or other conditions.

He said he would not agree to delaying or defunding the new healthcare reform law, and that the Senate acted responsibly earlier in the day to keep the government open.

Shares of J.C.Penney (JCP.N) fell 13.1 percent to $9.05 and was the worst percentage decliner on the SP 500 after it said its public offering of 84 million common shares was priced at $9.65 per share.

Shares of Lumber Liquidators Holdings (LL.N) declined 5.2 percent to $107.13 after the company said it was cooperating with authorities after federal agents searched its headquarters and another office in a probe of the import of certain wood flooring products.

Among gainers, Nike Inc (NKE.N) jumped 4.7 percent to $73.64, giving the Dow its biggest boost, a day after the maker of sports clothes and shoes reported a stronger-than-expected quarterly profit.

The latest Fed officials to comment on stimulus measures included Federal Reserve Bank of Chicago President Charles Evans, who said the Fed could start reducing its asset purchases this year based on economic forecasts, but the decision to wind back stimulus could be pushed into next year.

Minneapolis Fed President Narayana Kocherlakota told Reuters the Fed needs to speak more clearly and tell the world it will do “whatever it takes” to boost employment.

The day’s economic data showed U.S. household spending rose in August as incomes increased at the fastest pace in six months, a sign that momentum could be picking up in the U.S. economy. Another report showed consumer sentiment slid in September to its lowest in five months.

Volume totaled about 5.5 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.3 billion this year.

Decliners outpaced advancers on the NYSE by about 2 to 1 and on the Nasdaq by about 1.6 to 1.

(Editing by Bernadette Baum and Kenneth Barry)

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Fed doves make case for patience on tightening policy

Fri Sep 27, 2013 6:57pm EDT

MINNEAPOLIS/OSLO/NEW YORK (Reuters) – The Federal Reserve must be patient in deciding when to scale back bond purchases, top officials said on Friday, with one arguing it could wait “years” to lift interest rates and another suggesting it could tolerate inflation rising to 3 percent.

The dovish remarks, by Chicago Fed President Charles Evans, Minneapolis Fed chief Narayana Kocherlakota and New York Fed boss William Dudley, came as investors reviewed expectations on whether the Fed will begin to taper bond buying this year or next, after it unexpectedly decided last week to stand pat.

Evans, speaking in Oslo, said the economic outlook suggested that a reduction in the level of bond purchases was in order, but that when to begin that process is not yet certain.

“Whether or not we’ll have enough confidence at the October meeting or the December meeting, I just can’t say that with a lot of certainty,” he told reporters. “I think there’s a decent chance of that. But it could go a little bit longer,” he said.

Financial markets were stunned when the Fed’s policy-setting committee announced at the end of its meeting last week that it would keep buying bonds at a monthly pace of $85 billion.

Kocherlakota, in an interview with Reuters, said the volatility in financial markets following the policy decision, which sparked complaints the central bank had failed to communicate properly, exposed the need for the Fed to re-think how it guides expectations.

“What went wrong is the fact that we don’t have a comprehensive strategy in place that is credible. … We do not have a comprehensive form of forward guidance.”


Kocherlakota said the Fed should do “whatever it takes” to achieve its goal of maximum sustainable employment.

“If that announcement is credible, (it) has enormous power in and of itself,” said Kocherlakota, who does not vote on Fed policy in 2013.

The Fed launched its third round of so-called quantitative easing, or QE3, in September, and said it would keep buying bonds until it saw a substantial improvement in the outlook for the labor market.

The jobless rate has since declined to 7.3 percent in August versus 8.1 percent a year ago. But it is still historically high and even the drop in August was attributed to the many discouraged job-seekers who have given up looking for work.

Kocherlakota said scaling back the purchase program last week would have sent the wrong message to markets – that the Fed was satisfied with weak growth and slack employment.

“That doesn’t make sense. That is not doing whatever it takes to bring employment up…to maximum as fast as possible,” he said.

The Fed cut interest rates to almost zero in late 2008 and has more than tripled the size of its balance sheet to around $3.6 trillion, through 3 massive campaigns of bond buying, in a bid to spur growth and hiring by holding down borrowing costs.

However, long-term rates rose sharply after the Fed began talking about scaling back bond buying in May, and after Fed Chairman Ben Bernanke said in June that officials expected to begin tapering later this year, and end the program by mid-2014.

To hold down borrowing costs, the Fed also says it will keep its overnight funds rate near zero until unemployment hits 6.5 percent, provided that the outlook for inflation remains under 2.5 percent.


New York Fed President Dudley said that could be a while.

“The amount of time that can pass between the decision to begin to taper and actually raising short-term interest rates could easily be a number of years,” he said in New York.

Fed officials last week refreshed quarterly forecasts for the U.S. economy, with 12 anticipating they would first raise rates in 2015.

The median of their projections for 2016 judged that overnight fed funds rates would have reached 2 percent by the end of that year, when the central tendency of their forecasts for inflation was 1.7 percent to 2.0 percent.

The U.S. central bank’s stated goal for inflation, measured by the personal consumption expenditures index, or PCE, is 2 percent. The PCE ticked down to 1.2 percent in August, though it was still up from 0.9 percent in April.

Evans said that flexibility on inflation could well be necessary, and may require even greater forbearance from the central bank, as policy-makers pursue their other objective, of achieving maximum sustainable employment.

“That’s not a goal but it could be a feature, in order to have accommodating conditions that support maximum employment, so that’s really very helpful,” Evans said. “We could even do this as long as inflation was below 3 percent, because I think symmetry around the inflation target is incredibly important.”

Evans has previously suggested holding rates near zero until either the unemployment rate drops under 7 percent, or the outlook for inflation rises above 3 percent.

(Writing by Alister Bull; Editing by Leslie Adler and Chizu Nomiyama)

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eBay must face Justice Department suit over recruiting: ruling

Fri Sep 27, 2013 6:46pm EDT

SAN FRANCISCO (Reuters) – A U.S. judge on Friday refused eBay’s attempt to dismiss a U.S. Department of Justice civil lawsuit over its alleged agreement with Intuit to refrain from recruiting each other’s employees.

In a tandem order, U.S. District Judge Edward Davila in San Jose, California, granted eBay’s motion to dismiss a parallel lawsuit brought by the state of California.

Representatives for eBay and the California attorney general’s office could not immediately be reached for comment.

The suit, and similar legal issues involving other technology companies, highlight the intense competition for talent in Silicon Valley.

A “handshake” agreement between eBay and Intuit came into place in 2006 and involved executives including then-eBay chief executive Meg Whitman and Intuit founder Scott Cook, according to court documents. At the time, Cook was serving on eBay’s board and complained about eBay poaching Intuit employees.

Federal and state antitrust regulators sued eBay last year. Intuit was not named as a defendant because it was already part of a wide-ranging 2010 lawsuit that federal officials brought against six technology companies, including Apple and Google. The companies agreed to a settlement agreement with the government that federal officials call sufficient to prevent similar conduct in the future.

In its motion to dismiss, eBay argued that the government’s lawsuit must fail because it solely reflects conversations between eBay and Cook. Since Cook was an overlapping director of both companies, eBay argued that the government could not allege a conspiracy between two separate entities.

However, Davila ruled that the government has “plausibly” alleged an actionable agreement between both companies. In a separate order, Davila ruled the state of California did not have legal standing to pursue claims against eBay.

The cases in U.S. District Court, Northern District of California are United States of America vs. eBay, 12-5869, and the People of the State of California vs. eBay, 12-5874.

(Reporting by Dan Levine; Editing by Gary Hill and Andrew Hay)

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CEOs take familiar, frustrating path to Washington on budget woes

Fri Sep 27, 2013 6:19pm EDT

(Reuters) – Some of America’s leading CEOs are beating a familiar path to Washington to support efforts to avert a government shutdown and raise the U.S. borrowing limit, warning lawmakers that the threat of the first debt default in the country’s history is damaging the economy.

The business leaders, all members of a group called “Fix the Debt,” said they went to Capitol Hill last week with a simple message for Republicans and Democrats, but it is the same as the one they delivered in budget standoffs of 2011 and 2012.

“Engage in whatever political machinations you wish, but do not default,” said Honeywell International Inc (HON.N) Chief Executive David Cote. “Don’t throw away a credit history built up since George Washington.”

For these corporate leaders, it’s a bit like the movie “Groundhog Day,” where the main character lives the same day over and over, wondering whether there is a way out of the scene.

The U.S. government faces the possibility of a partial shutdown on October 1 as Congress struggles to pass an emergency spending bill that the Republican-controlled House of Representatives wants to use to defund President Barack Obama’s healthcare law. The Democrat-controlled Senate and the White House reject the Republican position. If the gridlock persists then a spending bill may not be passed into law by the Tuesday deadline, triggering the shutdown.

Even though many of the CEOs believe federal spending is excessive and a large budget deficit puts U.S. economic health at risk, they want Congress to pass the spending bill and raise the limit on government borrowing.

On Friday, the U.S. Chamber of Commerce and 235 other business groups joined the push. In a joint letter to Congress, they urged lawmakers to fund the government past the deadline and to “act expeditiously to raise the nation’s debt limit.”

The letter also said, “It is not in the best interest of the employers, employees or the American people to risk a government shutdown that will be economically disruptive and create even more uncertainties for the U.S. economy.”


The “Fix the Debt” group calls for any short-term debt deal to be followed by fiscal reform to reduce the deficit. The CEOs insist that avoiding a shutdown cannot be the final goal and say a comprehensive bipartisan agreement on politically sensitive tax and spending reforms is needed.

They concede it will be tough to achieve in the deeply divided and gridlocked Congress.

“There’s plenty of different plans; what we haven’t done is land on one that everybody buys into,” said Bob Moritz, chairman of PricewaterhouseCoopers LLP PWC.UL.

Honeywell’s Cote, Tenneco Inc (TEN.N) CEO Gregg Sherrill and Paul Stebbins, executive chairman of World Fuel Services Corp (INT.N), plan to take an even bigger group of chief executives to Washington in October.

“It’s not for us to articulate precisely what the negotiated settlement should look like,” Stebbins said. “But we’re telling them that the dysfunction is doing deep damage to the country and to the world’s perception of us.”

Stebbins said the group urged lawmakers to pass the continuing resolution and not delay Obamacare.

“It’s just reckless to try to hold it hostage – to hold the whole country hostage – because you don’t like a law,” Stebbins said.

Separately, Goldman Sachs Group Inc’s (GS.N) CEO Lloyd Blankfein said that although he was optimistic an agreement to raise the debt ceiling would ultimately pass, concerns that Congress would fail to act in time were hurting markets and the economy.

“Saying we’ll blow up the credit rating is not responsible,” Blankfein said on Wednesday on a panel of the Clinton Global Initiative in New York.

The last close-call on a government shutdown in December 2012 and early 2013 dealt a blow to small-business confidence, hurting lending and job growth, said Richard Hunt, head of the Consumer Bankers Association.

Hunt told reporters on Wednesday that experienced lawmakers understand the implications of shutting down the government, but some newer members do not seem to realize how wide-ranging the effects could be.

“Some of these people who just got elected believe they are here to save the country, and they’re not worried about a two- or three-day shutdown,” Hunt said. “So we need to make sure we have adults in both parties right now.”

(Additional reporting by Dena Aubin, Lauren LaCapra, John McCrank and Emily Stephenson; Editing by Grant McCool)

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U.S. jobs report, other economic data would be delayed by shutdown

Fri Sep 27, 2013 6:07pm EDT

WASHINGTON (Reuters) – The United States will stop publishing much of its economic data next week if the government shuts down, including the closely watched monthly employment report, officials said on Friday.

Whole swaths of the U.S. federal government could shut down next week if Congress does not approve extensions to department budgets due to expire on Monday.

All non-essential federal employees would stop working, including those at the Labor Department’s Bureau of Labor Statistics (BLS), which is scheduled to release the monthly nonfarm payrolls report on October 4.

“All survey and other program operations will cease and the public website will not be updated,” said Erica Groshen, the commissioner of the BLS, said in a memo published on the department’s website.

The Commerce Department, which issues estimates on the pace of growth in the economy, also will stop releasing economic data, a spokesperson said.

The jobs report due on Friday would provide estimates for the nation’s unemployment rate in September. It would also show how many workers were added to employer payrolls during the month.

The report sets the tone for financial markets worldwide. Policymakers and investors use it to gauge the health of the U.S. economy.

Lawmakers on Capitol Hill have been racing to pass legislation to avert the shutdown, but time is running out. The Senate passed a emergency-funding measure on Friday that would keep the government running through November 15 and the House could vote on the bill over the weekend.

The BLS also publishes data on inflation and productivity. Should a shutdown occur, the next closely watched data that would be delayed would be a report on import prices, due on October 10.

The Commerce Department’s next scheduled economic indicator is for construction spending during August. That report is due on Tuesday.

Not all U.S. economic data would be delayed by a government shutdown, however.

A separate memo from the Labor Department said the government’s weekly jobless claims reports would not be affected.

The U.S. Federal Reserve, which also publishes economic data, would continue to issue data in a shutdown, a spokesperson at the Fed said. Also, the government would continue its borrowing and debt operations, the Treasury Department said.

(Reporting by Timothy Ahmann and Jason Lange; editing by G Crosse and David Gregorio)

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Telecom Italia chief Bernabe considering resigning: source

Fri Sep 27, 2013 5:48pm EDT

MILAN (Reuters) – Telecom Italia Executive Chairman Franco Bernabe is considering resigning at a board meeting scheduled for Thursday, a source close to the situation said, as his plans to relaunch the heavily indebted company may not get enough backing.

“We are heading towards a resignation,” the source told Reuters on Friday.

A second person familiar with the situation said Chief Operating Officer Marco Patuano could take up Bernabe’s powers to ensure management continuity and that its core shareholders would name a new chairman with a broadly representation role.

“Core shareholders are not worried because in such a case Patuano is the CEO,” the person said.

Telecom Italia could not be reached for comment.

Bernabe, who has been at the helm of the group since 2008, was considering proposing to the board meeting on Thursday a capital increase of up to 5 billion euros ($6.8 billion) to cut debt and fund badly needed investments, two sources close to the matter said earlier on Friday.

But they added Bernabe was checking if he had enough support for the plan, which could divide the board, as its core investors are reluctant to inject fresh cash into the company.

In a parliamentary hearing this week, the 65-year-old manager said Telecom Italia needed to raise fresh capital to avoid a credit rating downgrade to “junk” status and that the best way would be through a capital increase.

Bernabe spoke out against possible plans by top shareholder Telefonica to sell some of the company’s most valued assets, such as Brazilian unit TIM Participacoes, once it gains control of its Italian rival.

Director Luigi Zingales and other four independent directors have also spoken out against the sale of the Brazilian subsidiary.

Telefonica and three Italian investors struck a deal this week that could give the Spanish group full ownership of Telco, a holding that controls Telecom Italia via a 22.4 percent stake, sparking criticism among Italian politicians concerned that a strategic company could fall into foreign hands.

Other shareholders of Telco are insurer Generali and banks Mediobanca and Intesa Sanpaolo.

($1 = 0.7385 euros)

(Reporting by Paola Arosio and Danilo Masoni)

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CFTC fines Vision Financial for second time this week

Fri Sep 27, 2013 5:43pm EDT

CHICAGO (Reuters) – The U.S. Commodity Futures Trading Commission fined Vision Financial Markets $525,000 on Friday for illegally commingling customer money with company funds.

It was the second penalty this week against the broker, which raised its profile in the futures industry last year by absorbing the accounts of former customers of bankrupt brokerage Peregrine Financial Group.

David Stein, Vision’s general counsel, could not be reached for comment. The firm agreed to settle with the CFTC in both instances without admitting or denying wrongdoing.

From August 2008 to June 2009, Vision used funds from commodity futures and options customers to buy corporate notes and bonds and then commingled those assets with its own funds and the funds of its securities customers, the CFTC said.

Customer funds are supposed to be “segregated,” or kept separate, so the money can be available for clients to trade with or withdraw.

Vision’s violations went undetected because the broker did not notify regulators that the amount of money in segregated accounts did not meet requirements, according to the CFTC.

The agency requires that customer funds be separately accounted for and that brokers hold sufficient funds in customer segregated accounts to meet their obligations to clients.

Vision “misstated in monthly segregation statements filed with the commission the location and manner in which the customer funds were being held,” the CFTC said.

The violations were discovered during a regulatory check in June 2009, according to the CFTC, which did not explain why it did not impose the fine until now.

The CFTC on Tuesday fined Vision $140,000 for failing to supervise employees handling futures accounts in 2012.

Peregrine’s trustee, Ira Bodenstein, selected Vision to take on customer accounts last year because Vision offered the highest bid, said Robert Fishman, a lawyer for the trustee. Vision paid about $325,000.

“We’d never heard of them before,” Fishman said about Vision on Friday. “Their bid was the best bid and that was all we needed to know about it.”

Peregrine collapsed in July 2012 after founder Russell Wasendorf Sr. attempted suicide and confessed to stealing tens of thousands of dollars from customers over two decades.

(Reporting by Tom Polansek; Editing by Carol Bishopric and Ken Wills)

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Bank of America fraud trial spotlights whistleblower awards

Fri Sep 27, 2013 5:20pm EDT

NEW YORK (Reuters) – The former executive who blew the whistle on questionable mortgage lending at Countrywide Financial Inc could reap up to $1.6 million under a law dating from the 1980s savings-and-loan crisis.

Edward O’Donnell filed a whistleblower lawsuit last year, the basis for a U.S. Justice Department case against Countrywide’s parent, Bank of America Corp, that went to trial this week.

The Justice Department accuses Countrywide of fraudulently selling thousands mortgages it knew were bad to Fannie Mae and Freddie Mac, which suffered losses when the loans defaulted.

The lawsuits say a Countrywide program called the “High Speed Swim Lane,” also called “HSSL” or “Hustle,” starting in 2007 eliminated quality checkpoints and compensated employees based on loan volume.

O’Donnell filed his lawsuit under the False Claims Act, which allows whistleblowers to bring cases on behalf of the government against companies that defraud the United States.

Before the trial, the judge dismissed the government’s claims under the False Claims Act, which eliminated O’Donnell’s ability to recoup 15 percent to 30 percent of the up to $848.2 million in penalties the Justice Department has said it would ask for.

But in court on Tuesday, a lawyer from the U.S. Attorney’s Office confirmed that O’Donnell also filed a whistleblower claim directly with the Justice Department under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

FIRREA is a savings-and-loan-era law that has become a key tool in efforts to pursue institutions over the financial crisis. Among other provisions, the 1989 law has a 10-year statute of limitations, longer than the limit of other laws used in financial fraud cases.

Less publicized is the ability of whistleblowers to bring claims asserting violations of FIRREA. Under a process set up in a separate law in 1990, the Justice Department has a year to investigate claims under FIRREA submitted by whistleblowers.

O’Donnell filed a FIRREA declaration in February 2012, the same day as he filed his lawsuit in federal court in New York. The Justice Department intervened in the case in October 2012.

In testimony Friday, O’Donnell said he filed the lawsuit because he did not believe anyone in the government was aware of Countrywide’s “Hustle” program.

“Because they were not aware of it, no one was being held accountable,” O’Donnell said.


But in opening statements Tuesday, a lawyer for Bank of America sought to cast O’Donnell in different light, saying he entered, “into a little bit of a get-rich-quick scheme.”

“He had read about the fact maybe as a whistleblower he might collect some money by going back five or six years and saying that, you know what, this is a fraud,” said Brendan Sullivan of the law firm Williams Connolly.

With FIRREA complaints, whistleblowers such as O’Donnell are entitled to a range of awards. But they are capped at $1.6 million, much less than the multimillion-dollar prizes whistleblowers in False Claims Act cases have earned.

O’Donnell’s potential recovery, for example, pales in comparison to the $31 million earned by Sherry Hunt, a former employee who filed a complaint against Citigroup Inc under the False Claims Act. The Justice Department intervened in her case and obtained a $158.3 million settlement in February 2012.

Plaintiffs lawyers say they have been giving more attention lately to whistleblower awards under FIRREA. But the small size of the potential award for FIRREA complaints makes it less attractive for potential whistleblowers to step forward and risk their careers and reputations on a case, some lawyers say.

“If it was a 15 to 30 percent bounty provision for whistleblowers bringing claims under FIRREA, you’d see more,” said Shayne Stevenson, a lawyer at Hagens Berman Sobol Shapiro, who has brought other False Claims Act cases against Bank of America.

O’Donnell’s strategy of filing both a False Claims Act case and a FIRREA declaration might be becoming more common. Mark Labaton, a lawyer at Motley Rice, said he was considering doing the same for at least one purported whistleblower soon.

“Often it makes sense to do both because often you do not know which is the more practical statute to use to get damages,” Labaton said.

A spokeswoman for the Justice Department could not immediately provide statistics on how many FIRREA whistleblower claims it had received. A lawyer for O’Donnell did not respond to request for comment.

The case is U.S. ex rel. O’Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.

(Reporting by Nate Raymond; Editing by Eddie Evans and Andre Grenon)

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Hillshire Brands thinks outside the corn dog with CEO Connolly

Fri Sep 27, 2013 5:07pm EDT

NEW YORK (Reuters) – Since Hillshire Brands (HSH.N) spun off from the Sara Lee Corp. last June, CEO Sean Connolly has made a point of thinking outside the box – and even beyond the traditional pig and cow.

Connolly, 47, joined Hillshire last year after serving as the president of Campbell North America (CPB.N). He has focused for the last year on energizing the brand, best known for Jimmy Dean sausages. He is trying to reach a broader and younger consumer base and get creative with poultry and even no-meat options.

He has also tried to foster a more collaborative atmosphere at work, moving into a office with an open design and no special “executive row.”

“I am incredibly pleased with the amount of progress we’ve made in first year, but I am clear-eyed about the fact that it’s the first year,” he said in an interview this week with Reuters.

The largest and most important part of the company’s business is packaged meat. The $1 billion Jimmy Dean brand’s sales grew in the high single digits in the 2013 fiscal year, the company said.

The overall company, however, has seen sales slip due to high commodity prices and stiff competition. In the fourth quarter, operating income fell 23 percent and sales fell 2 percent. Earnings were 26 cents per share, topping the analysts’ average estimate by a penny, and net income fell to $41 million, or 33 cents per share, from $599 million, or $5.02 per share, a year earlier.

Out of ten analysts with a recommendation, only one has rated Hillshire as a “buy” according to Thomson Reuters, but none put a “sell” on the stock. Others have ratings of “hold”, “outperform” or “overweight.”

Connolly nevertheless remains optimistic that in the long-term, the company will be profitable, helped by healthier and more portable meat products but also chicken, turkey, and vegetarian items.

“The vast majority of our products have meat in them — meat is the ‘hero ingredient’, as we say — but we are building relationships with households, and in some cases, the household is saying ‘hey, every now and then I want a choice that doesn’t have meat'” Connolly said.

He said Aidells — an organic, hormone-free and antibiotic-free line of chicken and turkey sausages, acquired by Sara Lee in 2011 – is its fastest growing brand.

The “artisanal” sausages and meatballs, which are among the company’s most expensive products, come in unusual flavors such as spicy mango with jalapeno and pineapple and bacon. They are part of Hillshire’s Gourmet Foods Group, which grew in the single-high digits last year, according to the company.

Another well-received new breakfast, according to Connolly, is a Jimmy Dean-brand low-calorie flatbread with egg whites, Mozzarella-style “cheese product”, and spinach — a rare vegetarian item in Hillshire’s portfolio.

Morningstar analyst Ken Perkins said that Hillshire is trying to “appeal to a broader customer — so if you have a family where someone eats meat and likes Jimmy Dean, but someone else doesn’t like meat, they’ve got a meatless offering that’s just as good.”

Perkins added that some of these products have the benefit of appearing healthier — something that more and more consumers look for.

Hillshire’s share price is currently at $30.86, which Morningstar considers slightly above “fair value.”

One of Hillshire’s biggest challenges is to capture the attention of Millenial consumers — whom Connolly described as “very discriminating” — in a competitive market that includes Kraft Foods Group (KRFT.O) , Tyson Foods, Inc. (TSN.N), and Hormel Foods Corporation (HRL.N) .

“They are the future of Hillshire’s brands, so it means our brands must evolve to meet their needs,” Connolly said.

Connolly — who enjoys fishing with his sons on days off — also said the company would consider expanding its recently-acquired Golden Island jerky business to include more than beef and pork to accommodate consumers’ demands for a high-protein snack.

“There’s no turkey in the lineup yet but we’re certainly looking at more innovation in the jerky category down the road,” he said.

Timothy Raney, an analyst at D.A. Davidson Company, said that while he sees opportunity in the packaged meat sector, Connolly’s focus on innovation and higher-end products might not play to Hillshire’s core strengths.

“Aidells is a great product, but it’s a small percentage of the company for sure so they need to be doing Aidells and five other things like that,” Raney added.

“I think that their strategy is probably sound. But I don’t have a lot of illusions about this becoming a high-growth company. It’s a packaged meat company and innovation’s important but I suspect they’re a little aggressive in terms of their view to the long-term outlook for the future” said Raney.

(Adds missing letter “n” to “Dean” in analyst quote)

(Reporting By Atossa Araxia Abrahamian; editing by Andrew Hay)

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