Financial life in a big town

Americans backed off from their holiday spending pace in January, but retail sales rose for a third month in a row compared with a year earlier, largely because of higher gas prices, according to figures released Wednesday.

Analysts expect the modest spending pace to improve, though it will be far from robust as high unemployment and tight credit show little sign of disappearing payday loan lenders.

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Hoya Corp. kept its Pentax camera plant north of Tokyo open as rivals steadily moved factories overseas to cut costs, yet it couldn’t compete as the yen surged against the dollar and euro during the global recession.

The company paid suppliers and workers in yen, sold products in dollars and euros, and converted revenue into yen. Six straight quarterly losses prompted Hoya in June to close the last domestic Pentax plant, in Tochigi prefecture, as the yen rallied against the dollar.

“The rise in the yen is definitely one of the biggest triggers that convinced us to accelerate our move offshore,” said Hiroshi Hamada, Hoya’s chief operating officer. “There was no reason to keep high-cost manufacturing in Japan.”

Lens-maker Hoya is one of 13 companies — including Komatsu Inc. and Panasonic Corp. — shutting or downsizing Tochigi factories in the past year. The strengthening yen, weakening domestic demand and second-highest corporate taxes among major economies are spurring the exodus of manufacturers to Vietnam, the Philippines and China, companies and analysts say.

Hoya rose 2 percent to 2,570 yen at the close trading in Tokyo, outpacing the 1.1 percent gain on the benchmark Nikkei 225 Stock Average. Shares of the Tokyo-based company have gained 55 percent in the last 12 months.

About 740,000 Japanese manufacturing jobs disappeared last year through November, the statistics bureau said. More than a third of factory capacity sits idle, trade ministry figures show.

‘Breaking Point’

Japan’s industrial output is 19.8 percent below its pre- recession peak, with the country shipping 35 percent fewer goods in November than the peak of 7.6 trillion yen ($82 billion) in March 2008.

“Corporate Japan is voting with its feet,” said Jesper Koll, now head of equity research at JPMorgan Chase & Co. in Tokyo. “They’re going overseas. The hollowing out of Japan is being turbo-charged.”

Profits from overseas operations at Japanese companies exceeded domestic earnings for the first time in fiscal 2008, said the Japan External Trade Organization, a government-funded organization focused on luring investment. Foreign operations generated 52.5 percent of earnings, according to JETRO’s analysis of 890 listed companies.

The yen surged 14 percent since Lehman Brothers Holdings Inc. filed for bankruptcy protection in September 2008, the most among 16 major currencies tracked by Bloomberg. It reached a 14- year high of 84.8 against the dollar on Nov. 27. The yen gained 20 percent against the euro since January 2008.

No Incentives

A stronger currency erodes the value of repatriated earnings and makes Japanese exports more expensive for foreign buyers.

Overseas markets are more lucrative as domestic demand slips because of declining wages — down 14 percent since a 1997 peak — and an aging, shrinking population. More than 20 percent of Japanese are over 65, and the population will decrease by 3.2 percent this decade, according to the National Institute of Population and Social Security Research.

Japan’s 39.5 percent corporate tax rate for large firms is second-highest behind the U.S.’s 40.8 percent, according to the Finance Ministry.

“There’s less incentive to keep, stay or do business in Japan, especially the factories,” said Masafumi Yamamoto, chief foreign-exchange strategist at Barclays Capital in Tokyo instant payday loans completely online. “That movement should continue.”

Last month’s 7.2 trillion yen government stimulus package didn’t promote long-term growth, said Yasukazu Shimizu, senior market economist at Mizuho Securities Co. in Tokyo.

Komatsu, Panasonic Leave

Manufacturing is 40 percent of Tochigi’s economy –twice the national average. Before the recession started in November 2007, there were three job openings for every two applicants, according to the Labor Ministry.

Now there are three applicants for every opening in the prefecture, about an hour from Tokyo on the bullet train.

Komatsu, the world’s second-biggest maker of construction equipment behind Caterpillar Inc., closed a dump-truck assembly plant there. China surpassed Japan as Komatsu’s biggest market for construction and mining machinery in the quarter ended June 30.

Komatsu forecasts full-year profits of 35 billion yen as sales decline by 6.5 percent.

Consolidating Operations

Panasonic Communications Co., subsidiary of Tokyo-based Panasonic Corp., the world’s biggest maker of plasma TVs, shut its fax-machine factory in June. The parent company says cost cuts, including 15,000 jobs, will help narrow a net loss for the current fiscal year to 140 billion yen from the earlier estimate of 195 billion yen.

“We wanted to increase efficiency,” Panasonic spokesman Akira Kadota said. “It made sense to consolidate our operations.”

Shuttered shops abound in Utsunomiya, a city of 500,000 where Tochigi’s government established an unemployment center. The converted storefront advised more than 12,000 people since April, manager Chiaki Yashiro said.

“There isn’t anything out there,” said Yuuji Takashi, 53, who lost his job at a car parts-maker early last year. “They’re sending it all to China.”

Toyota City, Japan-based Toyota Motor Corp., which makes more than half of its cars abroad, plans to suspend one domestic assembly line and add capacity in China and India, its fastest- growing markets. Domestic passenger car sales are down 25 percent since the 1990 peak of 5.1 million, according to the Japan Automobile Dealers Association.

Yen Tips Scale

The surging yen helped tip the scales, Toyota Vice President Takeshi Uchiyamada said in October.

“We’re affected by the exchange rate,” Toyota spokesman Paul Nolasco said. “We deal with that by building as much of our product as close to our customers as possible.”

The Pentax factory peaked in the 1970s, with 1,500 workers making 35-millimeter, single-lens reflex cameras. Hoya’s Hamada moved all camera production offshore helping the company’s Pentax division to return to profit with operating income of 1.19 billion yen last quarter. Continuing to manufacture in Japan was “stupid,” according to Hamada.

“It was a waste,” he said.

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A federal appeals court on Tuesday upheld a lower court’s $290 million patent infringement ruling against Microsoft that will prevent the world’s largest software maker from selling the current version of its popular Word program.

The injunction goes into effect on Jan. 11, but Microsoft said sales of Word will not be affected: The company will have a new version of the Word software available before that date that eliminates the feature in question.

"We have been preparing for this possibility … and have put the wheels in motion to remove this little-used feature from these products," said a Microsoft spokesman. "Therefore, we expect to have copies of Microsoft Word 2007 and Office 2007, with this feature removed, available for U.S. sale and distribution by the injunction date."

Microsoft noted that Word 2010, which is scheduled for release early next year, does not contain the technology covered by the injunction.

The U.S. Court of Appeals for the Federal Circuit affirmed an August 2009 ruling by a Texas jury that found Microsoft in violation of a patent held by Toronto-based document collaboration firm i4i payday loans for people with bad credit. After the jury ruled in favor of i4i, a U.S. District Court judge fined Microsoft $290 million and said that Microsoft could no longer sell Word 2003 or Word 2007, with the disputed feature that allows users to edit XML — a computer code that instructs the computer how to display content in a document.

Microsoft had appealed the lower court’s ruling, saying the i4i patent was invalid. The appeals court rejected Microsoft’s claim on Tuesday, upholding the validity i4i’s patent and the lower court’s ruling that Microsoft willfully violated it.

"We couldn’t be more pleased with the ruling," said i4i chairman Loudon Owen in a statement. "This is both a vindication for i4i and a war cry for talented inventors whose patents are infringed."

The injunction does not affect copies of Word that have already been sold, and Microsoft will be allowed to support those previous versions.

Shares of Microsoft (MSFT, Fortune 500) rose 1% Tuesday. 

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CVS Caremark Corp has found a way to stop the Energizer bunny. It will discontinue sales of the company’s alkaline batteries early next year.

The national drug store chain will still offer customers lithium batteries produced by Energizer Holdings Inc, but the move comes as CVS and other retailers narrow the variety of products they sell.

“After testing various options in the battery category in a number of stores, we found that our customers responded best to an offering which included a single ‘national brand’ alkaline, plus Energizer lithium and our own private label batteries,” a spokeswoman said.

CVS said it decided to sell Procter & Gamble Co’s Duracell alkaline batteries and would continue to sell Energizer lithium batteries in all of its stores.

A spokeswoman for Energizer did not return calls seeking comment.

Alkaline batteries account for the majority of U.S. battery sales. Duracell Coppertop is the leading alkaline battery in the United States, with a 41.6 percent share, followed by Energizer Max, which has a 27.8 percent share, according to Information Resources Inc., a Chicago-based market research firm.

IRI’s data covers the 52 weeks ended on November 1. It includes sales at supermarkets, drugstores and mass market retailers, but excludes sales from Wal-Mart, club stores, gas stations and convenience stores.

Last month, Deutsche Bank analyst Bill Schmitz said he expected retailers to make shelf space decisions over the coming weeks. He expected Energizer to get additional space at Wal-Mart Stores Inc and Safeway Inc stores and said it could see a “potential loss” at CVS.

According to Schmitz, Energizer had about $25 million in sales at CVS.

Major U.S. retailers, including CVS, have been putting more emphasis on their private label products. Such goods typically carry lower prices than their branded rivals but are more profitable for the stores. Store-branded household goods have gained popularity during the downturn, as shoppers try to curb their spending.

Private label alkaline battery sales rose 5.5 percent, in dollars, to a 18.9 percent share during the latest 52 week period, according to IRI. Sales of Duracell and Energizer’s top alkaline batteries declined 4.6 percent and 1.9 percent, respectively, during the same period.

(Reporting by Jessica Wohl, editing by Gerald E. McCormick, Leslie Gevirtz)

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ConocoPhillips reported a 71 percent decline in third-quarter profit on Wednesday as weak demand for fuel hurt its refining business and oil prices fell from a year earlier, but the results exceeded Wall Street estimates.

The global recession has taken a serious toll on demand for both natural gas and crude oil. And fuel inventories like diesel remain high, hurting refining margins.

“Although we operated well, we were adversely impacted by low North American natural gas prices and worldwide refining margins,” Conoco Chief Executive Officer Jim Mulva said in a statement.

Natural gas prices were depressed in the quarter as the slowdown in demand also caused those supplies to swell to all-time highs.

“We know the earnings came down because of the gas prices,” said Fred Burke, president of Johnston Lemon Asset Management. “That’s been known. You’ve got to starting looking at when the natural gas element and refining margins will turn around.”

Conoco, the third-largest U.S. oil company, reported a profit of $1.5 billion, or $1.00 per share, down from $5.2 billion, or $3.39 per share, a year earlier.

Analysts on average had expected earnings of 94 cents per share, according to Thomson Reuters I/B/E/S.

Production from the company’s exploration and production arm, excluding its 20 percent stake in Lukoil, averaged 1.79 million barrels of oil equivalent per day in the quarter, up from 1 payday advance lender.75 million BOE a year earlier, but below 1.87 million BOE in the prior quarter.

Revenue fell sharply to $40 billion from $70 billion a year earlier, but was higher than the $35 billion that analysts had expected.

Investors and analysts are eagerly awaiting details of Conoco’s planned $10 billion asset sale. The company announced the plan, aimed at reducing debt, on October 7, but provided no specifics.

Analysts have since speculated assets that may go on the block include the company’s North American natural gas operations and part of its 20 percent stake in Russian oil major Lukoil.

Looking ahead, Conoco said it expected fourth-quarter cash from operations to continue to improve, based on current commodity prices and margins.

In addition, the Houston-based company expects the liquidation of inventory built during the year in response to market conditions to benefit fourth-quarter cash flow by about $1.5 billion and earnings by $150 million.

Conoco shares were down 1 percent at $50.39 in morning New York Stock Exchange trading. That decline was in line with a drop in the Chicago Board Options Exchange index of oil companies .OIX.

(Reporting by Anna Driver, editing by Gerald E. McCormick)

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Boeing Co on Wednesday posted a larger-than-expected quarterly loss on costs related to its long-delayed 787 Dreamliner program, but the world’s second-largest planemaker reaffirmed that the aircraft is on track to fly this year.

The loss, combined with a lowered 2009 earnings outlook, sent shares down in early trading, although most of the details in the earnings statement had been previously publicized.

“The surprise was they reiterated the (787) schedule,” said Alex Hamilton, senior managing director at Jesup & Lamont.

“I always look at these as opportunities to kind of reset the bar,” Hamilton said. “I think there’s a lot of skepticism growing on the street about their delivery schedule.”

Chicago-based Boeing and rival Airbus have been hit hard this year as carriers and cargo operators grapple with the global recession and credit crisis. Meanwhile, Boeing’s defense unit struggles with sweeping government budget cuts.

Boeing said its revenue was $16.7 billion, up 9 percent from the year-ago period, which was impacted by a labor strike, but still far short of $17.16 billion that analysts had expected, according to Thomson Reuters I/B/E/S.

“There is no doubt that both our commercial and defense businesses continue to face challenging times right now,” Boeing Chief Executive Jim McNerney said on a conference call with analysts and reporters.

Shares of Boeing, a Dow component, were down 1.18 percent at $51.28 at midday on the New York Stock Exchange.

DREAMLINER ON TRACK

Boeing has grappled this year with delays to the Dreamliner program no fax needed payday loans. The Dreamliner is Boeing’s upcoming aircraft that features revolutionary composite materials and construction methods. The plane is two years behind schedule, and some industry watchers say it could be delayed further.

Boeing said on Wednesday the plane would fly this year with first delivery set for the fourth quarter of 2010. The company has a record 840 firm orders for Dreamliners from 55 customers.

The company previously said it would reclassify to research and development costs incurred through July for the first three 787 flight-test planes. Those costs amounted to $2.46 per share. Boeing reported an additional cost of 14 cents per share related to spending on those planes for August and September.

Earlier this month, Boeing said it would delay the first flight and delivery of its 747-8 Freighter and take a 99-cent-per-share third-quarter charge because of high production costs and tough market conditions.

To reflect the 787 and 747 impacts, earnings guidance for 2009 has been changed to a range of $1.35 to $1.55 per share, from $4.70 to $5.00 previously.

“The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance across our commercial production programs and defense business,” McNerney said in a statement. 

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American Express Co President Alfred Kelly will leave the company early next year to seek an opportunity as a chief executive elsewhere, the credit card issuer said on Monday.

Kelly, 51, joined American Express in 1987 and in recent years has been responsible for the company’s consumer and small business card franchise. He has been president for the last two years.

“In the context of discussions we have had about longer-term plans for the organization, Al made clear to me that he wanted the opportunity to run a company as chief executive,” American Express CEO Kenneth Chenault said in a statement.

“Given my own plans for the coming years, we both agreed that was not likely to happen at American Express in the short term.”

Bank of America Corp, the largest U.S. bank, is currently looking for a chief executive, after CEO Kenneth Lewis announced he will leave the company by year-end.

Analysts said it was unlikely Kelly would get the CEO post at Bank of America. Kelly has not been previously mentioned as a candidate to lead the Charlotte, North Carolina-based bank.

American Express, the largest credit card company by revenue, also announced the creation of a new global services organization — including customer service, technologies, operations, business processing and information management — and a new enterprise growth organization to increase fee revenue and drive growth into new payment business.

Steve Squeri, who has been in charge of technologies and corporate development, will lead the global services group. American Express said it was recruiting a manager from outside to lead the enterprise growth division.

The company also combined its global consumer, small business and network businesses under Vice Chairman Ed Gilligan.

American Express was the fastest growing credit card company between 2003 and 2007 as it relaxed lending standards. But it paid a heavy price when the bubble burst and bad loans rose to record highs.

Still, the company is the only large credit card issuer that remained profitable during the financial crisis. Earlier this year, it repaid a $3.4 billion government bailout it received during the peak of the financial meltdown.

However, the lender, which makes money every time a client swipes its card, faces headwinds as frugal consumers spend less and new regulations limit credit card fees and interest rates.

American Express shares rose 66 cents to $33.15 in late-morning trading on the New York Stock Exchange. The stock was up before the news of Kelly’s resignation.

(Reporting by Juan Lagorio, editing by Gerald E. McCormick and John Wallace)

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It has been 31 years since the last trains left Union Station. And 24 years since its $140 million renovation as a hotel, shopping and entertainment spot on Market Street. But today the station is a shell of what it once was.

Banana Republic? Gone. Talbot’s? Gone. Body Shop, Brookstone, Nature Co.? Gone, gone, gone.

The space formerly occupied by Nature Co. is a gift shop called Fat Sassy’s. Nearby, a shop that calls itself a newsstand has one magazine rack near the front door and several shelves of liquor behind the counter.

But don’t write of this downtown landmark just yet.

A large expansion by Marriott, which in December took over the station’s hotel from Hyatt, is about to get under way. Marriott will move the front desk to the atrium near the station’s western end, allowing greater use of the barrel-vaulted Great Hall for

private events. Marriott also will extend its meeting and restaurant space into much of the retail area along the midway.

As a result, Union Station’s shops will be concentrated along the eastern concourse, where the food court is situated beneath the arched train shed, which dates to 1894. Whether this transformation — the station’s most extensive since the 1980s — will revive the place is yet to be seen.

Barbara Geisman, deputy mayor for development, said city officials hope better times are ahead.

"We would certainly like to see as much retail as possible in Union Station," she said. "As the downtown residential and business population grow, we think there’s a market for more mainstream retail there."

Resuscitating shopping at Union Station will require "some big-time marketing," Geisman said.

"A lot of this is that you get a name draw and then that kind of sets the tone for the rest of it," she said. "We think the station presents opportunities for larger retail."

Bass Pro Shops, based in Springfield, Mo., took a look a few years ago but passed on Union Station, Geisman said. She added that shopping habits have changed since the 1980s, when "festival markets" such as Quincy Market in Boston, South Street Seaport in New York and Union Station drew big crowds. All have faded.

"Things have changed a lot since then," Geisman said. "Instead of people going there on a whim because they want to see a neat old building, you now have a lot of people with disposable income who like to shop."

Frances Percich, Union Station’s marketing manager, said "serious" discussions are under way with two retailers, including one that would be new to St. Louis. She declined to name them. Percich said the station will continue to market itself as a tourist attraction with numerous spring and summer events.

"When people walk in here expecting a mall, they will be disappointed," she said. "We’re not a mall. We have no anchor store."

Among the few Union Station visitors one afternoon last week were Russ and Donna Clark of Yuba City, Calif. They were staying at the Marriott for a meeting. The Clarks said they had been unsure whether Union Station’s emptiness resulted from a renovation still under way or from a lack of business.

Told that the renovation was completed in 1985 and that the station had been in decline for years, Donna Clark said: "Wow, that’s a shame. This looks like a great idea. It’s disappointing not to see a lot of people."

Union Station’s current retail occupancy is 79 percent, Percich said. Ownership has changed in recent years. In 2003, the inability of St. Louis Station Associates, the investment group behind the 1980s renovation, to pay the mortgage led to foreclosure by Regency Savings Bank of Oak Park, Ill. Park National Bank of Chicago bought the property from Regency and owns it through Union Station Holdings LLC.

Doug Dean, the Marriott’s general manager, said the hotel renovation will restore some of the inn’s original 1890s configuration. He noted that the original front desk was off the atrium, remarkable for its glass-block floor. All 539 rooms, including the 67 in the station’s original "headhouse," will be redone. Dean declined to specify the overall cost, saying it remained "a moving target."

Four meeting rooms and a restaurant will be built near the new lobby. One floor above, the existing restaurant will be used mainly for private events. Beginning with a ballroom freshening done by November, the renovation project will be completed in late 2011, he said.

Hotel and shopping areas will remain open during the renovation.

Across Market from Union Station is the western end of the Gateway Mall, the milelong park that extends east to the Old Courthouse. Tricia Roland-Hamilton, head of the project to redo the mall, said that to thrive, the Union Station area must have more offices, residents and stores.

"The key to livening up that space, not just Union Station but that part of the mall, is density," she said. "And we don’t have that right now."

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Lennar Corp, the No. 3 U.S. homebuilder, reported a larger quarterly loss on Monday, as it wrote down the value of land and other assets to deal with the recession, but it pointed out signs of real estate market recovery.

Lennar said its net loss widened to $171.6 million, or 97 cents per share, in the third quarter ended August 31 from $89 million, or 56 cents per share, a year earlier.

Analysts were expecting a net loss of 51 cents per share, according to Reuters Estimates.

Revenue dropped to $720.7 million from $1.1 billion as deliveries of homes tumbled 29 percent to 2,691 homes.

The company said its loss included 42 cents per share in charges related to valuation adjustments and other write-offs and 34 cents per share in tax-related charges.

The sector has been gaining steam in recent weeks, following several brokerage upgrades, as Wall Street becomes increasingly confident that the worst of the housing slump has passed.

As evidence of the recovery, Lennar’s cancellation rate fell to 19 percent from 27 percent in the same quarter a year ago, and the value of its backlog rose 19 percent from the previous quarter to $647 million allstate insurance company.

New orders in the third quarter slipped 8 percent from the same period a year ago, the smallest percentage year-to-year decline since November 2006, Lennar said.

“Our new orders increased sequentially each month during the quarter and we ended the quarter with our highest backlog since August 2008,” Chief Executive Officer Stuart Miller said in a statement.

“In order to capitalize on the improvement in our sales pace, we increased our home starts during the quarter, which will lead to higher deliveries in the fourth quarter,” he added.

Lennar trails Pulte Homes Inc, which became the nation’s largest homebuilder following its August acquisition of Centex, and D.R. Horton Inc.

Its stock has soared from a low of $3.42 in November last year to a year-high of $17.66 last Thursday.

(Reporting by Christopher Kaufman, with additional reporting by Scott Malone; Editing by Lisa Von Ahn and Gerald E. McCormick)

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Procter & Gamble Co said it expects sales to improve in the coming quarter as new products and other investments pay dividends, sending its shares up 4.3 percent.

The maker of Tide laundry detergent, Crest toothpaste and a host of other well known household brands has faced major pressure from cheaper store brands and also felt the pinch as retailers cut back on goods they keep in stock.

At the same time, P&G’s upscale products, such as perfume, have suffered as consumers shy away from small luxuries amid the recession.

But in a presentation at an analyst conference, P&G Chief Financial Officer Jon Moeller said the company expects organic sales to rise 1 percent to 4 percent in the second quarter, which starts in October, after being flat to down 3 percent in the first quarter. Organic sales excludes the impact of currency fluctuations, acquisitions and divestitures.

“We clearly see that we are approaching an inflection point in P&G’s organic sales trends,” Moeller said.

P&G’s sales comparisons get easier in the second quarter because year-earlier results were weaker, he noted.

“I think the Street is going to be pretty happy that they are talking more optimistically about the second quarter,” Edward Jones analyst Jack Russo said.

P&G’s stock “kind of looks like the ugly duckling compared with the rest of the market,” he said.

Through Wednesday, P&G shares were down 13 percent this year, compared with an 8.8 percent increase for the Dow Jones industrial average .DJI, of which P&G is a component.

P&G said it still expects earnings per share from continuing operations of 95 cents to $1.00 for the fiscal first quarter. Analysts’ average forecast is 97 cents, according to Reuters Estimates.

For the full year, P&G forecast earnings of $3.99 to $4.12 a share, including a one-time boost of 44 cents from the sale of its pharmaceuticals business to Warner Chilcott Plc. The forecast also includes 10 cents to 12 cents of dilution related to the transaction, the company said.

P&G CEO Bob McDonald also addressed the analyst conference, his first major appearance since he took over from A.G. Lafley on July 1. Lafley remains chairman.

McDonald said P&G wants to expand the number of consumers that use P&G products to 5 billion by fiscal 2015 from about 4 billion in the current fiscal year.

The company is looking to do this by offering more items at lower prices, especially in parts of the developing world like India, where McDonald said the company is focused on switching consumers from cloth diapers to a version of Pampers.

The company also wants global per capita spending on P&G products of $14 by fiscal year 2015, up from $12 this year. 

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