NBR Transcripts-December 24, 2007
Monday, December 24, 2007Procrastination Pays Off For Shoppers
JEFF YASTINE: Shoppers packed stores across the country today as many of the nation's retailers extended their hours to pick up every last dollar of holiday spending. On this Christmas Eve, huge markdowns enticed consumers into malls. But those deep discounts are costing retailers' bottom lines. And despite the flurry of activity today and over the past weekend, experts say the 2007 holiday selling season is still expected to be sluggish. Suzanne Pratt reports.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Last-minute holiday shopping in New York today was a procrastinator's dream. The weather was clear, the street traffic was light and the discounts were abundant. Recent surveys show consumers are completing their gift buying later this year than in the past. Retail expert Dana Telsey says tardy gift buyers benefited from last-minute deals.
DANA TELSEY, CEO, TELSEY ADVISORY GROUP: We believe the level of promotions for the holiday season this year is greater than it was last year. The key is going to be what level of markdowns and were people able to sell it at decent rates.
PRATT: Nevertheless, experts say it would take a lot of Christmas Eve spending to prop up this holiday season for the nation's stores. Shoppers across the country have been grappling with bad winter weather, higher gasoline and food prices, as well as concerns about declining home values and a potential recession. While JPMorgan Chase analyst Brian Tunick gives the 2007 holiday season a "B" for retailers, he's most worried about the future.
BRIAN TUNICK, RETAIL ANALYST, JP MORGAN: If this is the foreshadowing of what's to come in 2008, I mean, that's going to be ugly. I mean this will be the first time in three or four years that the consumer may have already spent sort of their refinancing from the past couple of years.
PRATT: In the retail universe, experts say electronics are the clear winner this year, while department stores and most specialty apparel shops are having a bad season. And it looks like Internet sales rose at the slowest pace ever, despite deep discounts and a plethora of free shipping deals. According to Comscore which measures online shopping, holiday e-commerce spending was up 19 percent through Friday, compared to a 26 percent gain last year. Gift cards could still help save the season, as those sales are not recorded until the cards are redeemed, usually in January.
TUNICK: These gift cards are really reshaping the holiday shopping period, so that's going to be another thing. People are going to be encouraged to look at the December and January sales results combined I think for a better view.
PRATT: Most retailers will report those December sales results on January 10, so it will be a few more weeks before investors know exactly how blue this Christmas was for the nation's stores. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Quality Float Works Benefits From The Weak Dollar
JEFF YASTINE: The U.S. dollar has been beaten down this year, but the dollar’s downfall may be a boom to many small U.S. businesses. The National Association of Manufacturers says this year exports are up across the board for everything from airplanes to the nuts and bolts it takes to build them. Diane Eastabrook takes us to a nearly century-old family firm that is finding new customers on foreign soil.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At Quality Float Works, business couldn't be better. The Schaumburg, Illinois-based company makes floats, hollow balls used to level liquids. The firm's products are found in everything from gas pumps to aircraft carriers. Sales this year are up about 5 percent over last. Quality Float Works President Sandra Westlund-Deenihan knows why.
SANDRA WESTLUND-DEENIHAN, PRESIDENT, QUALITY FLOAT WORKS, INC.: I would say a good 13 percent of our business has grown because of the weakening dollar. It has affected our international market.
EASTABROOK: For many American manufacturers, the weak dollar has been a shot of adrenaline in an otherwise sluggish U.S. economy. The U.S. Commerce Department says exports grew more than 12 percent in the first 10 months of the year, while imports increased only around 5 percent. The hottest markets for exports were Canada, Mexico, China and Japan. The National Association of Manufacturers thinks the growth in exports will continue for a few more years. But NAM's chief economist David Huether says the weak dollar is just part of the story.
DAVID HUETHER, CHIEF ECONOMIST, NATIONAL ASSOCIATION OF MANUFACTURERS: Growth overseas is strong, not only in Asia, but in south central America and Europe as well. So if the dollar would appreciate modestly, I still think as long as growth overseas maintains a good pace, that we will continue to see solid export growth going forward.
EASTABROOK: Still, companies like Quality Float Works are quick to point out that it takes more than currency fluctuations and economic growth to open international doors. Equal doses of imagination and marketing are also needed. Quality Float Works' international business actually took off after 9/11. When the U.S. business climate began to deteriorate, the company decided it had to find a way to diversify. The company, started by Deenihan's grandfather, had been making pretty much the same basic product and selling it in the U.S. since the beginning of the 20th century. But Jason Speer, Deenihan's son and the company's vice president and general manager, saw potential abroad. He helped create an entire float assembly that could be used in water purification systems.
JASON SPEER, V.P. & G.M., QUALITY FLOAT WORKS, INC.: In developing countries they don't have the infrastructure with the water and sewers. A lot of them have giant water tanks on the tops of their house. So one of these would just be right in there, and when the water level starts to rise up to the very top, it will shut it off.
EASTABROOK: Deenihan says that single idea helped Quality Float Works tap markets around the world.
DEENIHAN: Thirty percent of the market in Poland is agrarian and so I am exploring their infrastructure and how these valve assemblies can be used to be integrated into their livestock applications.
EASTABROOK: Deenihan is confident the relationships her company has cultivated with foreign firms will continue if and when the dollar strengthens and that could help this family firm thrive for many more generations. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Schaumburg, Illinois.
Digital TV Countdown
PAUL KANGAS: Flat-panel digital televisions are one of the hottest holiday gifts around and soon they'll be even more popular. In just over a year, TV is going digital, with television stations being required by law to stop broadcasting analog signals. As Stephanie Dhue reports, millions of households will have to make changes to keep their TV's from going dark.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The transition from analog to digital television has been in the works for 20 years, but a recent survey shows about half of all Americans don't know about it. Federal Communications Commissioner Michael Copps predicts a train wreck if the administration doesn't take a more active role educating the public.
MICHAEL COPPS, FCC COMMISSIONER: We don't really have government coordination or government leadership to direct a good program to bring the private sector parties together and make sure they’re all operating in concert with one another and spreading a similar message.
DHUE: But the television industry isn't waiting for the government to act. The National Association of Broadcasters has already begun an educational public service campaign. Public television stations are planning how-to programs and are working with groups like AARP to raise awareness. John Lawson heads the Association of Public Television stations.
JOHN LAWSON, PRESIDENT & CEO, ASSOCIATION OF PUBLIC TELEVISION STATIONS: We're sort of boot-strapping a very extensive, grassroots outreach campaign to make sure that by February 2009, everybody knows what their options are.
DHUE: Basically, the options are to either subscribe to cable or satellite, buy a digital TV or purchase a converter box, now retailing for about $200, to convert the digital signal on an analog set. The cost of converter boxes is expected to drop over the next year. The government will be providing some relief. Soon consumers will be able to apply for a $40 coupon to help defray the costs. Retailers who stand to profit from the transition are also alerting consumers. Best Buy stopped selling analog sets in October and now only sells digital ones. Store manager Ryan Seymour says most customers opt to buy a new TV.
RYAN SEYMOUR, STORE MANAGER, BEST BUY: Because of the price of flat- panel TVs now, a lot of people are deciding to upgrade their TV.
DHUE: The transition has benefits. Viewers will have more choices of programming, with many over-the-air stations providing three or four channels. Public television's Lawson says the transition is an opportunity.
LAWSON: We have probably at least two generations of Americans who think television comes out of a little silver plug on the wall, that you have to pay a monthly fee for it. But with digital, with the great quality we get and the new channels made possible by digital, it actually gives us as broadcasters a chance to reinvent television.
DHUE: But first the industry needs to make sure everyone is aware of the changes coming in 2009 and to help consumers prepare. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Commentary"-How Best to Avoid a Recession
JEFF YASTINE: Tonight's commentator says a recession can be avoided, but it's going to take some work. She's Alice Rivlin, senior fellow at the Brookings Institution and former vice chair of the Federal Reserve.
ALICE RIVLIN, SENIOR FELLOW, THE BROOKINGS INST.: Economic forecasts for the New Year range from optimistic to downright scary. But the recession of 2008 need not happen. The challenge is to keep a fundamentally productive economy growing while we absorb excess houses, fix the home mortgage market and unwind some dumb financial investments. The government and the Federal Reserve can't do that alone. It will take the collective efforts of many people.
Big financial institutions will have to grab the liquidity offered by central banks and keep credit flowing to worthy borrowers. Risk-averse investors will have to recover their nerve, while retaining a sensible residue of caution and get back in the game. Rating agencies will have to restore their credibility. Housing lenders will have to work with distressed borrowers and community groups to keep families in their homes and contain the contagion of foreclosures. Businesses will have to find new profit opportunities in a turbulent world of changing technology and a weak dollar. The reliable American consumer will have to hang in there and political candidates will have to stop sniping at each other long enough to prove that they can face up to problems and work across party lines to keep America productive. And oh, yes, it will take some luck. Maybe we can appeal to Santa Claus for that. I’m Alice Rivlin.
"Last Word"-Hello Kitty Celebrates A Milestone
JEFF YASTINE: And finally tonight, she's one of the world's most famous felines and a legend in the worldwide business of licensed goods. The Hello Kitty franchise now reaches across 60 countries. Lucy Craft recently spent a day dodging paparazzi with the celebrity cat and has this report from Tokyo.
LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hello Kitty has hit the ripe old age of 34, but her paws are still all over a mega-business worth almost $1 billion. Kitty is just one of about a dozen uber-cute creatures from the Sanrio Corporation, but Kitty remains the unchallenged diva of them all, her whiskered mug driving more than half the profits of the Tokyo-based character goods firm. Entrepreneur Shintaro Tsuji, inspired by Hallmark greeting cards and the success of the Peanuts cartoon franchise, decided to dream up his own stable of cuddly characters. Kitty back then was just another cute cat.
TRANSLATION OF: SHINTARO TSUJI, FOUNDER & CEO, SANRIO CORP.: I did a survey of the world's most popular animals. First was dogs, then cats -- white ones -- and bears were number three. At first, we had a bear named Koro, a character named Honey Bunny, and Hello kitty. Honey Bunny was my favorite, but somehow Kitty became the hit.
CRAFT: Sanrio credits Kitty's staying power with the fact that her mouth has never been drawn in, leaving her face open to interpretation. Her wardrobe and sidekicks are meticulously styled to keep her au courant. Kitty's story line says she comes from England, but from red bow to tail, by temperament she's an Asian pure breed.
TSUJI: American cartoons tend to be modern and humorous, rather than straightforward cute. Kitty, of course, moves around, but she doesn't do handstands or jump all over the place. She's quiet, refined and mature.
CRAFT: Hello Kitty began life as a plush toy and a character used to festoon juvenile stationery. But as toys and stationery become dime store commodities, Kitty is being packaged for just about any age, gender, or pocketbook, from infants to octogenarians. Her visage graces canes, computers, and cappuccino makers -- nearly 50,000 products at any given time.
This Broadway-style musical to tour China, showcases the new and improved Hello Kitty. Along with the standard cutesy characters, it shows plenty of leg -- think "Barney" meets "A Chorus Line." While the company eschews tobacco, hard liquor or violent content, just about anything else is fair game for a kitty logo and the lucrative royalties that go with it, including Victoria's Secret-style lingerie, designer handbags and rhinestone bling-bling. Still, is the world really ready for Hello Kitty for men? Ready or not, a Kitty menswear line is set to debut in January.
TSUJI: We sell things people don't need: birthday gifts, get well gifts, anniversary presents and souvenirs. That's the kind of business we've evolved into. Our rivals have largely gone under, so we think we'll get a big boost out of this Christmas season.
CRAFT: One group that isn't purring over Hello Kitty these days, shareholders of the Kitty's corporate parent, Sanrio. Sanrio's sales and profits have been sliding in recent years. The company blames tepid demand here in Japan and vows to restore growth by focusing on overseas markets, like Russia, China and India. Lucy Craft, NIGHTLY BUSINESS REPORT, Tokyo.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street's knee-jerk reaction to the big capital infusion at Merrill Lynch was positive with Merrill stock leading an early rally in the financial sector. The Dow posted an 88-point gain after 30 minutes of trading while the NASDAQ was up 14 points. The market held on to its early gains, helped by optimism that the nation's retailers would get a nice boost from a late surge of last-minute shopping. The major stock indices all closed near the day's best levels. The Dow Industrial Average ended up 98.68 at 13,549.33. The NASDAQ Composite up 21 ½ points at 2713.50. Standard & Poor’s 500 Index rose nearly 12 points to 1496.95. Over in the bond market, the 10- year note lost 10/32 to par and 10/32, putting the yield at 4.21 percent. Big board volume leader, Citigroup (C) on nearly 10 million shares, edging up $0.74. Citigroup, Bank of America, JPMorgan Chase have scrapped efforts to create a massive liquidity conduit aimed at aiding troubled structured investment vehicles, SIVs, they’re called, saying that such a fund is no longer necessary.
General Electric (GE) $0.39 gain. As you heard, it’s acquiring Merrill’s capital unit.
Then Merrill Lynch (MER) itself closed down $1.64, but that big capital infusion news early in the day had the stock as high as $58.37 a share, then it backed down.
Coeur d'Alene (CDE) down $0.18. The company said it’s now completed the acquisition of Bolnisi Gold and Palmarejo Silver.
Bank of America (BAC) in there with a $0.36 gain. We just mentioned what they were doing.
Pfizer (PFE) a $0.09 gain there.
And then Time Warner (TWX) a $0.32 advance.
Wells Fargo & Co (WFC) edged up $0.83.
Washington Mutual (WM) down $0.11.
JPMorgan Chase (JPM) $0.72 gain, tenth in volume.
Alcoa (AA) moved up $0.66. The company’s going to sell its packaging and consumer businesses to New Zealand’s Rank Group Limited. The price, $2.7 billion in cash.
Fedex (FDX) down $2.16, didn’t have a good day. First the IRS says the company’s ground unit owes it $319 million in back taxes and then the company said it’s received a grand jury subpoena regarding a Department of Justice probe into possible anticompetitive practices in the international air freight forwarding business.
Then we see Target (TGT) moving up $1.79. A hedge fund called Pershing Square said it boosted its stake from 9.6 to 10 percent. Separately, Target said December same store sales are flat.
Quinsa (Quilmes) adr (LQU). This is a brewing company and AmBev plans to buy all of the American depository shares that it doesn’t already own and the price will be $81.25 a share.
Giant Interactive (GA), you can see that stock just went public in November. The price at that time was $15.50, but the Chinese online game developer is going to buy back up to $200 million of its ADSs (ph) from time to time.
First Horizon Intl (FHN) down $1.21. The company’s going to increase its loan loss provision to about $150 million. Meanwhile, the Janey Montgomery Scott brokerage downgraded it to just a "neutral" rating.
Apple (AAPL) topped the active list, moving up $4.89.
Research in Motion (RIMM) down $0.65.
Google (GOOG) was up just over $4.
Microsoft (MSFT) $0.52 gain.
Yahoo! (YHOO) edged up $0.04 a share.
Then Intel (INTC) $0.35 gain.
First Solar (FSLR) up $5.64. "Barron’s" said this on the best gainer in the NASDAQ so far this year, up 723 percent.
Cisco Systems (CSCO) $0.12 gain.
Similar rise in Baidu.com (BIDU).
Then Oracle (ORCL) with a nickel advance at $22.76.
MTC Technologies (MTCT) up $5.72. BEA Systems will acquire the company for $24 a share in cash.
And Fuelcell Energy (FCEL) $2.82 loss after the company got a smaller than expected energy project from the state of Connecticut.
And those are the stocks in the news tonight.
