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Wal-Mart cuts outlook due to store closings, Sam’s Club weakness

NEW YORK (Reuters) – Wal-Mart Stores Inc (WMT.N) Friday cut its quarterly profit outlook because of a host of issues, including reduced food stamp benefits and the restructuring of Sam’s Club’s in the United States and the closing of stores in Brazil and China.

The announcement comes the day before Doug McMillon, who had been chief executive officer of the Walmart International unit, becomes president and CEO of the Bentonville, Arkansas-based company.

After decades of robust growth, Wal-Mart now faces fierce competition in the United States from Inc (AMZN.O) and other retailers as well as challenges abroad as it adjusts its big-box model.

“We have had some reorganization within the global finance organization,” spokesman Randy Hargrove said in an email, “and as the new leaders reviewed the processes and procedures, we have uncovered some issues that we are addressing today.”

The company, the world’s largest retailer, expects to provide more details when it reports quarterly results on February 20.

Wal-Mart said Friday that it expected to report earnings for the fourth quarter ending on January 31 at or slightly below the low end of its previous forecast of $1.60 to $1.70 a share.

“Wal-Mart caters to lower-income consumers which have been hit disproportionately hard,” said Morningstar analyst Ken Perkins.

About 20 percent of the company’s shoppers are food stamp recipients, analysts have estimated.

About one in seven Americans took a hit in 2013 when the federal food stamps program was cut by more than $5 billion. Additional cuts are expected this year.

Wal-Mart is also facing serious competition from dollar stores and other small-format chains, Perkins added.

The retailer now expects to report lower fourth-quarter sales at stores open at least a year for Walmart U.S. and Sam’s Club. It had previously expected same-store sales to be relatively unchanged at Walmart U.S. and flat to up 2 percent, without fuel, at Sam`s Club.

For the fiscal year, the company said it expected earnings at or slightly below the low end of its prior outlook of $5.11 to $5.21 a share.

The company’s shares were up 0.3 percent at $75 in afternoon trading.


Wal-Mart joins a long list of U.S. retailers that in recent weeks cut their outlooks, laid off workers and closed stores. Faced with shoppers worried about their job prospects and modest economic growth, retailers offered more discounts during the holiday season than a year earlier., the world’s largest online retailer, said on Thursday that it had missed Wall Street estimates for the holiday season and warned investors about a possible operating loss.

Perkins said he planned to take a closer look at the charges tied to Wal-Mart’s international operations but still cared more about the retailer’s U.S. business.

“When you look at the long-term drivers of Wal-Mart’s business and their competitive advantage, the U.S. business is still the strongest business,” he said. “If they can get that back on track, then I think that gives them more options to right the wrongs or improve the international business as well.”


Walmart International’s profitability has suffered from an aggressive expansion and lags that of the overall company. The unit is also the focus of a costly bribery probe.

The company said it had closed about 50 stores in Brazil and China.

In October, Wal-Mart said it would close up to 25 small and mid-size stores across Brazil, where it operates about 560 locations and employs about 80,000 people. It also said it would end the year with 22 new stores and 44 renovated ones there, at a total investment of nearly 1 billion reais ($413.2 million).

The Brazilian market is showing signs of weakness as the economy enters what is widely expected to be its fourth straight year of sluggish growth.

Wal-Mart Brasil, which is on its third CEO since 2008, has remained mired in third place behind French rivals Carrefour (CARR.PA) and Casino (CASP.PA), which controls market leader Grupo Pão de Açúcar SA (PCAR4.SA). The U.S. company’s “everyday low price” business model never fully caught on with Brazilian consumers, who are accustomed to hunting for big sales in the competitive retail market.

Wal-Mart’s growth in India has been hindered by still-evolving rules on foreign investment, an internal bribery probe and the breakup of its partnership with New Delhi-based Bharti Enterprises in October.

Wal-Mart took over its Indian partner’s 50 percent stake in Bharti Wal-Mart Pvt Ltd, which runs 20 wholesale stores under the Best Price Modern Wholesale brand.

However, if Wal-Mart wants to set up its own retail stores in Asia’s third-largest economy, foreign investment rules require the company to find another local partner to own 49 percent of that business.

The retailer said a charge for certain terminated franchise and supply agreements in India would be higher than it had previously estimated.

The company also added charges of 6 cents a share to account for tax-related liabilities in Brazil and 5 cents for employment claims there. In addition, it expects to record a charge for certain store leases in China.

(Reporting by Dhanya Skariachan; Additional reporting by Todd Benson in New York and Marcela Ayres in Sao Paulo; Writing by Jilian Mincer; Editing by Lisa Von Ahn)

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Google’s strength in advertising to drive growth: analysts

(Reuters) – Google Inc looks set to extend its leadership in online advertising as it sharpens its focus on its core business, analysts said after strong ad sales helped the No. 1 search company report stronger-than-expected quarterly revenue.

Google’s shares, which closed at $1,135 ahead of the results announcement on Thursday, opened about 3 percent higher after at least 12 brokerages raised their price targets on the stock to as much as $1,400.

Broker Canaccord Genuity raised its target price by $370 to $1,370, noting that Google’s website revenue growth accelerated to 22.1 percent in the fourth quarter, the third consecutive quarter of faster growth.

Canaccord and others also said the sale of Google’s loss-making Motorola handset unit to China’s Lenovo Group Ltd would help it focus on its core internet business and boost margins.

Citi Investment Research, which raised its target price to $1,350 from $1,190 and maintained a ‘buy’ rating, said Google’s report demonstrated the company’s continued business momentum.

Goldman Sachs noted that the quarter was the second out of the last nine that net ad revenue had beaten the average estimate. Goldman raised its price target to $1,200 from $1,125.

Google, whose shares were trading at $750 this time last year, said it benefited from strong demand from brand marketers and retailers in the quarter.

“In coming quarters, we expect improvement in cost-per-click (CPC) trends as Product Listing Ads and AdWords Enhanced Campaigns lift CPCs,” UBS Securities analyst Eric Sheridan, who raised his target by $50 to $1,350, wrote in a note to clients.

CPC refers to the price advertisers pay Google each time a user clicks on their ad.

In the past year, Google has changed the way advertisers run campaigns on its website, offering the same ads simultaneously on PCs and mobile devices.

RBC Capital Markets analyst Mark Mahaney, who raised his price target to $1,400 from $1,300, said Google had positioned itself well to take advantage of most of the major trends in consumer internet through organic investments and acquisitions.

Google’s recent acquisitions include artificial intelligence company DeepMind Technologies and smart thermostat and smoke alarm-maker Nest Labs.

Google also bought a stake in Taiwan displaymaker Himax Technologies, bringing it closer to producing a commercial version of its Google Glass eyewear.

Google shares were up 1.8 percent at $1,158 in early trading on the Nasdaq.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Ted Kerr)

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Consumer sentiment dips in January

NEW YORK (Reuters) – Consumer sentiment dipped slightly in January, with recent economic improvement not translating to expectations for future gains, a survey released on Friday showed.

The final reading on the Thomson Reuters/University of Michigan’s overall index of consumer sentiment slipped to 81.2 in January, down from the 82.5 posted in December but up from the preliminary January reading of 80.4.

Analysts were looking for a reading of 81.0 in the month.

While upper income households reported improved confidence, households with incomes less than $75,000 reported a decrease.

“Prospects for either consumers’ own personal finances or for the economy as a whole have remained more resistant to improvement, especially longer term prospects,” survey director Richard Curtin wrote in a statement.

“This has prevented recent economic gains from building the type of positive upward momentum that has sparked and sustained increases in consumer optimism and confidence.”

The survey’s barometer of current economic conditions dropped to 96.8 in January, down from the 98.6 December reading but above both the initial read of 95.2 and the analyst expectation for a read of 95.5.

The survey’s gauge of consumer expectations fell to 71.2 from 72.1 in December and was slightly below the mean estimate of 71.5. However, it was up from the preliminary reading of 70.9.

The one-year inflation expectation was 3.1 percent, above the 3.0 percent December figure, while the survey’s five-to-10-year inflation outlook rose to 2.9 percent from 2.7 percent last month.

(Reporting by Ryan Vlastelica; Editing by Meredith Mazzilli)

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Amazon shares fall 9 percent after warning of possible loss

(Reuters) – Inc shares fell more than 9 percent in early trading on Friday, after the online retailer warned of a possible loss in the current quarter and its quarterly results missed expectations in the holiday shopping season.

At least seven brokerages cut their price targets on the stock, by as much as $30 to a low of $415. Another seven raised their price targets by as much as $100 to a high of $500.

Amazon shares were down at $372.81 in early trading. The stock had gained by about a third in the last six months.

The world’s biggest online retailer said it expects operating results for the current quarter to range from a $200 million loss to a $200 million profit, compared with a profit of $181 million a year earlier.

The outlook was somewhat conservative, reflecting Amazon’s focus on investing aggressively in growth opportunities and new initiatives, analysts said.

“In addition to increased internal investment to build out the digital library, distribution center capacity and enhance offerings, … Amazon may be facing further margin pressure due to the success of its Amazon Prime offering,” Benchmark analyst Daniel Kurnos wrote.

Amazon charges users an annual fee of $79 for its “Prime” two-day shipping and online media service, considered instrumental in driving online purchases of both goods and digital media.

The company said it was considering raising prices for Amazon Prime by $20-$40 in the United States due to higher fuel and transportation costs and increasing usage.

Analysts said the price increase would add about $600 million to Amazon’s annual revenue while still representing compelling value to customers.

The company more than doubled its profit to $239 million, or 51 cents per share, in the fourth quarter, but fell short of analysts’ average estimate of 66 cents per share.

Amazon faced lofty expectations going into one of the most heavily competitive holiday seasons in years, with retailers vying to out-do each other with steep discounts.

“As much as we continue to hope for a 4Q unit acceleration, AMZN continues to prove that its business is less holiday-driven than many other retailers due to the high volume of ‘staple’ and recurring unit sales,” Susquehanna Financial analyst Brian Novak wrote.

At least seven brokerages raised their price targets on the stock, saying the value created by Amazon’s innovation and investments in retail and the cloud should help the company to grow more quickly.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Savio D’Souza)

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Exclusive: Lone Star hires advisors for IKB sale as stress tests loom

FRANKFURT (Reuters) – Private equity investor Lone Star LS.UL has hired Rothschild ROT.UL and Bank of America Merrill Lynch (BAC.N) as advisors for the planned sale of German corporate bank IKB (IKBG.F), two people familiar with the transaction said.

The sale of one of the highest-profile German casualties of the financial crisis is likely to begin shortly, they said, as upcoming European bank health tests put pressure on Lone Star to find a financially robust home for the lender.

It is likely to spark the interest of banks hoping to expand business with medium-sized German companies. Potential suitors include BNP Paribas (BNPP.PA), Societe Generale (SOGN.PA), Santander (SAN.MC) or HSBC (HSBA.L), the people said.

“Lone Star has shown that it is ready to exit German banking assets now,” said one person close to the sale.

Lone Star, IKB, Rothschild, Bank of America, BNP Paribas, Societe Generale, Santander and HSBC declined to comment.

U.S. investor Lone Star, which owns 91.5 percent of IKB, sold property lender Corealcredit RWBG.UL to Aareal Bank (ARLG.DE) in a 342-million-euro ($464 million) deal in December.

IKB was known before the financial crisis mainly as a lender to mid-sized German companies. It required several bailouts from development bank KfW KFW.UL and the German state after its off-balance sheet investment vehicles ran into funding problems in 2007.

Following the rescues, IKB was taken over by KfW, which sold it to Lone Star in August 2008 for 137 million euros.

By late 2012, IKB had returned the last of the 12 billion euros in state guarantees it received from Germany’s bank bailout fund Soffin during the crisis, and its Chief Executive Hans Joerg Schuettler said late last year that a restructuring of the lender was now largely complete.

IKB now has a market capitalization of 432 million euros, but the sources familiar with the sale said the current stock price was unlikely to be a good indication of how much a sale could be worth.


Potential buyers will be allowed to bid for individual parts of IKB, one of the sources said, adding that Lone Star aimed to conclude a deal this year.

IKB reported a profit of 8 million euros for the six-month period ending in September, compared with a 51 million-euro loss in the same period last year, mainly because of lower legal and consulting costs.

Bankers said a sale of IKB to a peer with a strong balance sheet may help the German lender pass European bank health checks that the European Central Bank and the European Banking Authority are running this year.

IKB is the smallest German bank deemed important enough to be supervised from November by the ECB rather than the national regulator. IKB said last year it could meet the ECB’s demands, but it would not be easy.

Tested banks will need to have minimum Core Tier 1 equity capital of 8 percent of risk-weighted assets by the end of 2013, something IKB described as a “surprisingly harsh” requirement “that left banks little time to react”.

IKB’s balance sheet totaled 25.8 billion euros at the end of September, compared with 1.65 trillion euros at Deutsche Bank (DBKGn.DE), Germany’s largest bank.

(Reporting by Arno Schuetze; editing by Maria Sheahan and Tom Pfeiffer)

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Barclays must hand over more ex-boss emails in Libor case

LONDON (Reuters) – Barclays (BARC.L) has been told to hand over thousands more emails and other documents from its former bosses in a UK court case tied to the alleged manipulation of Libor interest rates, which will start in April.

In a case being heard at London’s High Court, Barclays is accused by a UK residential care home operator of mis-selling products that were based on Libor rates. The hearing will start on April 29 or 30 and is expected to last for about six weeks.

It is seen as a test case for whether the manipulation of Libor – which several banks around the world have admitted and been fined for – means deals such as interest rate hedges that were based on benchmark rates may have been mis-sold.

In a hearing on Friday to resolve issues before the case starts, judge Julian Flaux said Barclays must produce documents from several executives and traders related to a fund the bank ran. That includes emails and other correspondence from former Chief Executive Bob Diamond and investment bank bosses Rich Ricci and Jerry del Missier.

“I’m not going to give them the key to the door, but I certainly think more (disclosure) is in order,” Flaux said.

The order could add up to 38,000 more documents to the 220,000 already produced for the case.

Diamond, Ricci and del Missier are among 23 people who are being called as witnesses for the trial. Former Finance Director Chris Lucas will also be called.

Diamond and del Missier left Barclays in 2012 shortly after Barclays agreed to pay a $450 million settlement with U.S. and UK authorities due to alleged Libor manipulation. Ricci and Lucas left last year.

Guardian Care Homes claims the bank’s rigging of Libor meant interest rate hedging products it was sold were invalid and is suing for 70 million pounds ($115.5 million). Barclays, which says it is owed the same amount by Guardian, said the claims are without merit and it will provide the information requested.

Guardian Care Homes said at the heart of its case is the Ricardo Master Fund, which was run by Barclays. Guardian said Ricardo had $4 billion invested in securities and relied on low 3-month sterling Libor rates as “its most profitable single strategy”.

The care homes operator said Barclays was therefore a direct beneficiary of the downward manipulation of Libor rates, while at the same time the bank was selling it an interest rate hedging product “on the basis that Barclays believed rates would go up”.

Flaux told Barclays’ lawyers they must provide by March 21 documents where the Ricardo fund was mentioned by Diamond and others. Documents from former Barclays trader Quan Lee, and Mark Dearlove, who is still at the bank and previously was money markets desk head, must be handed over first.

Flaux however refused Guardian’s request to have more documents about the alleged manipulation of Euribor benchmark rates provided by Barclays.

“There’s going to be enough to fight about in April without bringing in Euribor,” he said, referring to another benchmark. (Editing by David Holmes)

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MasterCard profit misses Street as expenses rise

(Reuters) – MasterCard Inc (MA.N) posted a lower-than-expected quarterly profit and said its net revenue for the year would come in at the low end of its three-year forecast range as customers migrate to Visa Inc (V.N) as part of a previously announced deal.

In 2013, JPMorgan Chase Co (JPM.N), which issues both MasterCard and Visa-branded cards, signed a 10-year agreement under which the bank will commit more credit and debit card transaction volumes to Visa.

“We don’t have any specifics on how these cards will migrate, but we are now assuming an impact in 2014. Given the size of this portfolio we can offset some, but not all, of this attrition with our wins,” MasterCard Chief Financial Officer Martina Hund-Mejean said on a post-earnings conference call.

MasterCard shares were down 5 percent at $75.98 in late-morning trading. They fell as much as 10 percent.

The company had forecast net revenue growth of between 11 and 14 percent for the period between 2013 and 2015.

MasterCard reported a 21.1 percent rise in operating expenses at $1.21 billion as the company set aside $95 million for litigation settlements.

The company also saw its rebates and incentives it offers to customers increase 23 percent to $925 million as it signed up more business.

In the fourth quarter, MasterCard signed an agreement with pan-African bank Ecobank Group and also extended its agreement with U.K.-based Tesco Bank. MasterCard also renewed its agreement with Bank of Montreal (BMO.TO).

MasterCard joined its larger rival, Visa, in urging U.S. merchants and banks to hasten the adoption of a more secure technology for credit and debit cards after security breaches at several retailers.

“What we would now like to see is that all players within the payments ecosystem come together with a sense of urgency to ensure that the highest payment security standards are put into place,” MasterCard Chief Executive Ajay Banga said.


MasterCard’s net income rose 3 percent to $623 million, or 52 cents per share, in the fourth quarter, from a year earlier.

Adjusted earnings were 57 cents per share, below the average analyst estimate of 60 cents.

Net revenue rose 12 percent to $2.13 billion. Analysts on average had expected $2.14 billion, according to Thomson Reuters


MasterCard’s worldwide purchase volume increased 11 percent to $805 billion from a year earlier, while annual growth in its U.S. purchase volumes rose 7.4 percent to $275 billion.

The company announced a 10-for-1 stock split and raised its quarterly dividend by 83 percent last month.

Shares of MasterCard have risen 66 percent in the 12 months ended December, outperforming the broader SP 500 Index .SPX which rose 30 percent in the year.

Visa reported a better-than-expected rise in quarterly profit on Thursday as more people used cards instead of cash to make payments.

Visa shares were down 1.7 percent at $217.15.

(Reporting by Tanya Agrawal in Bangalore; Editing by Maju Samuel)

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Delaying the inevitable

A listed company on any of the major exchanges doesn’t have many options when trying to fend off a bid from a rival company these days.

It could find a ‘white knight’, try its best to discredit the aggressor to put shareholders off, or force through a different ‘value-enhancing’ option before an offer goes public. Gone are the days of discharging a poison pill and scuppering a takeover. Osisko Mining Corp’s legal action was a new one.

The Canadian-listed miner has put up a staunch front when defending itself against a C$2.6 billion (US$2.3 billion) bid from Goldcorp Inc, detailing in its circular the history of the six-year courtship and spelling out why shareholders should turn down the current offer and why management never entertained previous advances.

It raised the ante this week as it filed proceedings with the Quebec Superior Court that alleged Goldcorp misused confidential information and acted against some of its confidentiality agreements when trying to get its hands on the owner of the Canadian Malartic gold mine in Quebec.

Goldcorp denied any wrongdoing and said it would “take all necessary steps to vigorously defend its position”, but the legal pursuit, on the surface, appeared to be a delaying tactic.

Within Goldcorp’s rebuke, CEO Chuck Jeannes said that the company had met with a “significant number of Osisko’s shareholders” and “received strong support for this business combination.”

“In addition to the immediate premium, they are excited at the prospect of further value creation available to them as shareholders of Goldcorp given our 50% growth profile over the next two years, our portfolio of low-cost operations which mitigates single-asset risks, and our strong balance sheet able to withstand any conceivable downturns in the gold market,” Jeannes added.

Goldcorp confirmed that it had received an advanced ruling from Canada’s Commissioner of Competition advising that there were no grounds to challenge a potential tie-up. So, despite the court filing, it must be pretty confident of proving its innocence and capturing Osisko.

In addition, one of the Osisko’s minority shareholders, Sprott Asset Management Inc, which owns 0.6%, has come out in support of the deal.

Sprott chairman Rick Rule told Bloomberg that Goldcorp’s bid would succeed. “The bid has fully priced in current gold prices and will yield Goldcorp tremendous benefit down the road at higher gold prices,” he said. “It’s a vindication of what the team at Osisko has done.”

Osisko’s CEO Sean Roosen said at a conference this week that the company had the “ability” to see its share price rise to C$8 to C$12 in the next 12-18 months based on current gold prices.

Having the ‘ability’ was one thing, but shareholders and even bullish analysts were not expecting a bid in this region, with Osisko’s stock trading around the C$6.50/share mark.

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Labor costs rise in fourth quarter

WASHINGTON (Reuters) – Labor costs rose in the fourth quarter, with the biggest jump in wages and salaries since 2009, but there was still little sign of wage inflation amid slack in the jobs market.

The Employment Cost Index, the broadest measure of labor costs, increased 0.5 percent after rising 0.4 percent in the third quarter, the Labor Department said on Friday.

Economists polled by Reuters had expected labor costs to increase 0.4 percent. In the 12 months through December, compensation costs rose 2.0 percent.

During periods of strong economic growth, the U.S. central bank closely monitors the index for signs of wage inflation. The absence of wage inflation is keeping overall price pressures in the economy subdued.

This means the Fed could keep interest rates near zero for a while even as it is reducing its monthly bond purchases. Wage growth is, however, expected to gain traction later this year as the economy attains a sustained pace of stronger growth.

Wages and salaries, which account for 70 percent of employment costs, increased 0.6 percent in the fourth quarter. That was the biggest increase since the third quarter of 2009. It followed a 0.3 percent advance in the third quarter.

They were up 1.9 percent in the 12 months through December and up from 1.6 percent in the same period in 2012.

Benefit costs increased 0.6 percent in the fourth quarter after rising 0.7 percent in the July-September quarter.

They rose 2.2 percent in the 12 months through December after advancing by the same margin in the same period in 2012.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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