News Archive

Target beats fourth-quarter sales forecast, sees first quarter growth

(Reuters) – U.S. retailer Target Corp (TGT.N) reported a stronger-than-expected jump in same-store sales and profits for the key fourth quarter, helped by its expanding online business, and forecast modest earnings growth in the current quarter.

Target said comparable sales at stores open longer than a year rose 3.8 percent in the November-January quarter. That beat its forecast, unveiled last month when it announced plans to pull out of the Canadian market, for a rise of 3 percent.

Adjusted earnings per share, which excludes items including a massive loss related to the Canada exit, came to $1.50 in the fourth quarter. That was above the $1.43 to $1.47 per share range forecast by the company last month.

The results suggest that Target has moved firmly past a damaging breach of consumer data that hurt sales during the holiday season in 2013 and prompted a change of management last year. The company is now focusing its resources on its U.S. business after the Canada exit, which triggered a pre-tax loss of $5.1 billion in the fourth quarter.

The fourth quarter is the most important for retailers due to the boost in demand for Christmas

In an earnings release CEO Brian Cornell said the company enjoyed strong sales of focus product categories including baby, kids and wellness and that efforts to reduce costs were bearing fruit.

“We’re confident that these efforts will allow us to grow our earnings while returning cash to our shareholders in 2015 and beyond,” Cornell said in the release.

For the current quarter to end-April, Target forecast adjusted earnings per share of $0.95 to $1.05, up from $0.92 in the first quarter of 2014 and compared with the average analyst estimate of $1.04, according to Thomson Reuters I/B/E/S.

Target said it will unveil guidance for the full year at a meeting of analysts on March 3.

(reporting by Nathan Layne)

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Exclusive: China drops leading technology brands for state purchases

BEIJING (Reuters) – China has dropped some of the world’s leading technology brands from its approved state purchase lists, while approving thousands more locally made products, in what some say is a response to revelations of widespread Western cybersurveillance.

Others put the shift down to a protectionist impulse to shield China’s domestic technology industry from competition.

Chief casualty is U.S. network equipment maker Cisco Systems Inc (CSCO.O), which in 2012 counted 60 products on the Central Government Procurement Center’s (CGPC) list, but by late 2014 had none, a Reuters analysis of official data shows.

Smartphone and PC maker Apple Inc (AAPL.O) has also been dropped over the period, along with Intel Corp’s (INTC.O) security software firm McAfee and network and server software firm Citrix Systems (CTXS.O).

The number of products on the list, which covers regular spending by central ministries, jumped by more than 2,000 in two years to just under 5,000, but the increase is almost entirely due to local makers.

The number of approved foreign tech brands fell by a third, while less than half of those with security-related products survived the cull.

An official at the procurement agency said there were many reasons why local makers might be preferred, including sheer weight of numbers and the fact that domestic security technology firms offered more product guarantees than overseas rivals.

China’s change of tack coincided with leaks by former U.S. National Security Agency (NSA) contractor Edward Snowden in mid-2013 that exposed several global surveillance program, many of them run by the NSA with the cooperation of telecom companies and European governments.

“The Snowden incident, it’s become a real concern, especially for top leaders,” said Tu Xinquan, Associate Director of the China Institute of WTO Studies at the University of International Business and Economics in Beijing. “In some sense the American government has some responsibility for that; (China’s) concerns have some legitimacy.”

Cybersecurity has been a significant irritant in U.S.-China ties, with both sides accusing the other of abuses.

U.S. tech groups wrote last month to the Chinese administration complaining about some of its new cybersecurity regulations, some of which force technology vendors to Chinese banks to hand over secret source code and adopt Chinese encryption algorithms.

The CGPC list, which details products by brand and type, is approved by China’s Ministry of Finance, the CGPC official said. The list does not detail what quantity of a product has been purchased, and does not bind local government or state-owned enterprises, nor the military, which runs its own system of procurement approval.

The Ministry of Finance declined immediate comment.

“We have previously acknowledged that geopolitical concerns have impacted our business in certain emerging markets,” said a Cisco spokesman.

An Intel spokesman said the company had frequent conversations at various levels of the U.S. and Chinese governments, but did not provide further details.

Apple declined to comment, and Citrix was not immediately available to comment.


Industry insiders also see in the changing profile of the CGPC list a wider strategic goal to help Chinese tech firms get a bigger slice of China’s information and communications technology market, which is tipped to grow 11.4 percent to $465.6 billion in 2015, according to tech research firm IDC.

“There’s no doubt that the SOE segment of the market has been favoring the local indigenous content,” said an executive at a Western technology firm who declined to be identified.

The executive said the post-Snowden security concerns were a pretext. The real objective was to nurture China’s domestic tech industry and subsequently support its expansion overseas.

China also wants to move to a more consumption-based economy, which would be helped by Chinese authorities and companies buying local technology, the executive said.

Policy measures supporting the broader strategy include making foreign companies form domestic partnerships, participate in technology transfers and hand over intellectual property in the name of information security.

Wang Zhihai, president and CEO of Beijing Wondersoft, which provides information security products to government, state banks and private companies, said the market in China was fair, especially compared with the United States, where China’s Huawei Technologies [HWT.UL], the world’s largest networking and telecoms equipment maker, was unable to do business due to U.S. security concerns.

Local companies were also bound by the same cybersecurity laws that U.S. companies were objecting to, he added.

The danger for China, say experts, is that it could leave itself dependent on domestic technology, which remains inferior to foreign market leaders and more vulnerable to cyber attack.

Some of those benefiting from policies encouraging domestic procurement accept that Chinese companies trail foreign competitors in the security sphere.

“In China, information security compared to international levels is still very far behind; the entire understanding of it is behind,” said Wondersoft’s Wang.

But Wang, like China, is taking the long view.

“In 10 or more years, that’s when we should be there.”

(Additional reporting by Beijing Newsroom and Noel Randewich in SAN FRANCISCO; Editing by Will Waterman)

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Buffett sets sights on German companies

BERLIN (Reuters) – Renowned U.S. investor Warren Buffett is readying for an acquisition spree in Europe’s biggest economy after setting the ball rolling last week with the purchase of a niche German retailer by his Berkshire Hathaway (BRKa.N) holding company.

In an interview with Handelsblatt newspaper on Wednesday, Buffett said that he liked German companies because of the regulatory and legal protection for investors, as well as the global reach of even smaller businesses, such as Detlev Louis Motorrad-Vertriebs, the motorcycle apparel and accessories retailer bought last week.

“We are definitely interested in buying more German companies,” told the newspaper. “Germany is a great market: lots of people, lots of purchasing power and Germans are productive. We also like the regulatory and legal framework.”

Buffett, who said he is ready to pay cash for good German companies, said the euro’s weakness was only one factor for the decision to ramp up investments in Germany.

“The bottom line is that the weak euro is naturally good for acquisitions,” he said. “But the euro’s exchange rate is not our primary motivation. We simply want to own more good companies in Germany – that’s our goal.”

Asked about past rumors that Berkshire Hathaway was interested in buying German sweet maker Haribo and printing press manufacturer Heidelberger Druckmaschinen (HDDG.DE), he said: “Sometimes there are reports that we’re interested even though it’s not true. But if you can arrange a transaction, I’d pay you a fee.”

Berkshire Hathaway agreed to buy Detlev Louis for a little more than 400 million euros ($456 million).

(Reporting by Erik Kirschbaum; Editing by David Goodman)

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HBC to form real estate joint ventures in U.S., Canada

TORONTO (Reuters) – Canadian retailer Hudson’s Bay (HBC.TO) said on Wednesday it had agreed to form two real estate joint ventures that would bring in about C$1.1 billion in cash, reducing its debt, and paving the way for an initial public offering or alternate transaction.

The company announced separate joint ventures with two real estate investment trusts, or REITs, U.S.-based Simon Property Group Inc (SPG.N) and Canada’s RioCan Real Estate Investment Trust (REI_u.TO).

HBC will contribute real estate assets, signing long-term leases so it can continue to operate its stores. The REITs will invest in the new ventures in return for equity stakes. HBC valued the U.S. joint venture at $1.8 billion, and the Canadian venture at C$2 billion ($1.61 billion).

The joint ventures, structured to allow for a potential initial public offering or sale, will scout for real estate growth opportunities in Canada and the United States.

“By partnering with industry leaders, we have created two tremendous real estate vehicles for growth,” said HBC Chief Executive Richard Baker, in a release. “Importantly, we have retained the flexibility to create REITs at a future date of our choosing.”

Under the agreement with RioCan, HBC will contribute 10 owned or ground-leased properties into the new joint venture, including its flagship properties in Vancouver, Calgary, Ottawa, and Montreal.

A centuries-old company with roots in the fur trade, HBC owns U.S. department store chains Lord Taylor and Saks Fifth Avenue, Hudson’s Bay department stores in Canada, and Canadian housewares chain Home Outfitters.

(Reporting by Euan Rocha Editing by W Simon)

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Chesapeake profit falls short, company to slash spending

(Reuters) – Chesapeake Energy Corp (CHK.N) on Wednesday said it would slash its 2015 spending and rig count in response to low crude oil prices that also pushed its fourth-quarter profit below Wall Street expectations.

Shares of Chesapeake fell more than 11 percent, hurt by the earnings miss and a disappointing production outlook, analysts said.

Crude prices have slumped more than 50 percent since June as the global oil market remains oversupplied in a time of waning demand. Exploration and production companies have responded by cutting their budgets to conserve cash.

Chesapeake forecast total capital expenditures of $4 billion to $4.5 billion this year, down from $6.7 billion in 2014.

The smaller budget translates into slower output growth. Oil and gas production for the year is forecast to rise 3 percent to 5 percent. In 2014, it increased 9 percent to an average of 706,000 barrels oil equivalent per day.

Analysts at CapitalOne Southcoast characterized the quarter as soft and told clients that Chesapeake’s “weaker-than-expected liquids pricing plus 2015 guidance for production” would probably drive Wall Street estimates lower.

The average price Chesapeake received in the quarter fell far short of Wall Street forecasts.

Sterne Agee said Chesapeake’s average oil price of $76.40 per barrel was 6 percent below the brokerage’s estimate, and the company’s natural gas liquids price of $13.11 missed its forecast by 28 percent.

On a conference call, Chesapeake said it started shutting in about 250 million cubic feet a day in natural gas production in December in the Marcellus Shale, citing low prices.

“We’re forecasting weak Marcellus pricing for the full year,” Chief Financial Officer Nick Dell’Osso told investors.

The Oklahoma City company also said it planned to operate 35 to 45 rigs this year, its lowest number since 2004 and down from an average of 64 rigs in 2014.

Chesapeake reported a profit of $586 million, or 81 cents per share, compared with a year-earlier loss of $159 million, or 24 cents per share.

Excluding gains from hedging, the profit was 11 cents per share. Analysts on average had expected 24 cents, according to Thomson Reuters I/B/E/S.

Shares of Chesapeake were down 11.3 percent at $17.65 in morning trading.

(Reporting by Anna Driver; Editing by Lisa Von Ahn)

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RBS suspends another two staff in foreign exchange probe

LONDON (Reuters) – Royal Bank of Scotland (RBS.L) said another two employees had been suspended as part of an investigation by the bank into failings in its foreign exchange business.

“We can confirm that two members of staff have been suspended as part of the on-going FX investigation at the bank,” the bank said on Wednesday. It declined to comment on the identity of the employees suspended.

RBS, 79 percent owned by the British government, launched an internal review into its forex activities after it was one of six banks fined a combined $4.3 billion last month for failing to stop traders trying to manipulate currency markets.

RBS has already suspended three employees who were among six placed in a disciplinary process. It also said it was reviewing the conduct of more than 50 current and former traders who were involved in the part of the investment bank that was the focus of the regulators’ investigations.

RBS paid $634 million in fines to UK and U.S. authorities as part of the forex settlement, when authorities said traders had shared confidential information about client orders and coordinated trades to boost their own profits.

The Times newspaper reported on Wednesday that the Financial Conduct Authority is escalating its supervision of foreign exchange traders in the City after the discovery of further misconduct by the U.S. Department of Justice.

It said the latest cases relate to the rigging of emerging market currencies, which did not form part of the FCA’s internal investigation.

The DoJ, Federal Reserve and New York’s financial regulator are still probing banks over foreign exchange trading.

(Corrects to show three staff previously suspended were among six placed in disciplinary process)

(Reporting by Matt Scuffham; Editing by Steve Slater and Susan Thomas)

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Unions, charity accuse McDonald’s of avoiding $1.1 billion in tax

LONDON (Reuters) – Labor unions and a charity accused fast food chain McDonald’s (MCD.N) of avoiding around 1 billion euros ($1.1 billion) in tax between 2009 and 2013 by routing revenues through a Luxembourg unit and called on the European Commission to investigate.

Corporate tax avoidance has become a hot political issue in Europe and the EU executive has opened investigations into tax deals that some countries have cut with multinationals, including deals between Luxembourg and carmaker Fiat (FCHA.MI) and online retailer (AMZN.O) .

Umbrella organizations for unions representing millions of workers in the United States and Europe and charity War on Want, called on the Commission to expand that investigation to include McDonald’s.

The European Federation of Public Service Unions and The Service Employees International Union said McDonald’s saved on tax by having restaurants make tax-deductible royalty payments equivalent to five percent of turnover to a lightly taxed subsidiary in Luxembourg.

A spokeswoman for McDonald’s said it had complied with all applicable tax rules, saying: “In addition to paying taxes on profits, we pay significant taxes for employee social contributions, property taxes on real estate, and other taxes as required by law.”

In 2012, a Reuters investigation revealed that fast food restaurants including Burger King, Subway and McDonald’s reduced their European tax bills by having their restaurants send royalty payments for the use of brands and know-how to low tax jurisdictions. (

Filings in Luxembourg show that McD Europe Franchising Sarl, received over $1 billion in fees from franchisees and McDonald’s subsidiaries across Europe in 2013.

It paid tax of just 1.4 percent on profits of $288 million in 2013 — well below the headline Luxembourg corporate tax rate of around 29 percent.

The labor groups said the low tax rate could be due to the use of tax breaks for exploiting intellectual property, although the company could also benefit form the fact that many of its operations are through its Swiss branch.

By routing profits linked to patents or brands to Swiss branches or subsidiaries, companies can achieve low single digit effective tax rates, lawyers have told Reuters.

The civil society groups said the 1 billion euros tax saving they alleged, reflected what might have been paid if the royalties were retained in countries like France and Britain and taxed there.

(Reporting by Tom Bergin in London and Foo Yun Chee in Brussels; Editing by Keith Weir and David Evans)

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Higher home renovation spending drives sales at Lowe’s

(Reuters) – Lowe’s Cos Inc (LOW.N), the No. 2 U.S. home improvement chain, reported same-store sales well above analysts’ estimates as lower gas prices and an improving job market encouraged Americans to spend more on home renovations.

Lowe’s shares rose 2.5 percent to $76.50 premarket as the company also forecast full-year sales above estimates.

“Macroeconomic fundamentals are aligned for modestly stronger home improvement industry growth in 2015,” Chief Executive Robert Niblock said on Wednesday.

Increased spending on home renovations also helped larger rival Home Depot (HD.N) post better-than-expected sales and profit on Tuesday.

Lowe’s forecast full-year earnings of about $3.29 a share, edging past the average analyst estimate by one cent.

The company said it expects same-store sales to grow 4-4.5 percent in the year ending January 2016.

Total sales are expected to rise between 4.5 percent and 5 percent. The forecast translates to sales of $58.75-$59.04 billion – above the average analyst estimate of $58.52 billion, according to Thomson Reuters I/B/E/S.

Lowe’s same-store sales increased 7.4 percent in the fourth quarter, higher than the 5.1 percent estimated by analysts on average, according to research firm Consensus Metrix.

Net income rose to $450 million, or 46 cents per share, in the fourth quarter ended Jan. 30, from $306 million, or 29 cents per share, a year earlier.

Net sales rose to $12.54 billion from $11.66 billion.

Analysts on average expected a profit of 43 cents per share on sales of $12.31 billion, according to Thomson Reuters I/B/E/S.

In the 52 weeks to Tuesday’s close, Lowe’s stock gained 58 percent, outperforming Home Depot’s 50 percent increase.

(Reporting by Nandita Bose in Chicago and Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty)

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VW CEO sees BMW, Daimler managers as potential successors: Stern

FRANKFURT (Reuters) – Volkswagen (VOWG_p.DE) boss Martin Winterkorn sees Andreas Renschler and Herbert Diess, who are joining VW from rivals Daimler (DAIGn.DE) and BMW (BMWG.DE) respectively, among his potential successors, according to German weekly magazine Stern.

“The decision about who will succeed me is not an easy one for the supervisory board,” Winterkorn, whose contract as chief executive runs until 2016, was quoted as saying.

Both Renschler and Diess were in the running, the magazine said on Wednesday.

“Both colleagues are managers who did good work in their previous jobs, otherwise we would not have hired them,” Winterkorn told the magazine, adding that internal candidates were also regarded as potential leaders.

“A Volkswagen boss has to have a big affinity to our products. He needs to be close to customers, and he needs to have a relationship to dealers,” the magazine quoted Winterkorn as saying.

“And he has to have a certain level of social acceptance within the company. Like always it depends on the personality,” Winterkorn said. It also helps if the candidate is an engineer, he added.

Asked whether he could imagine carrying on another four years, Winterkorn said: “Who knows. My contract ends in 2016, and it depends on the situation. Four years ago I could not have imagined working until I am 69.”

(Reporting by Edward Taylor; Editing by Mark Potter)

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