Retailers and Daiwa Get a Lot of Bad News
Retailers got more bad news, Daiwa Bank got an exit visa, and Carl Icahn got back into the game.
A look at the big news in business this past week:
IT’S BEGINNING TO FESTER A LOT LIKE CHRISTMAS
It’s a good thing storeowners are putting up all their red, gold and green decorations, because underneath all the frou-frou it’s looking really ugly.
October sales figures released by big merchants this past week were almost uniformly bad and followed several months of bumpy results.
Analysts issued more forecasts of a really tough Christmas season as consumers are becoming increasingly antsy about money. And Friday, Edison Brothers Stores Inc. joined Bradlees Inc.,
Jamesway Corp. and Caldor Corp. in bankruptcy court.
On the brighter side, Edison and Jamesway are closing stores. So is
J. Baker Inc., disposing of the Fayva shoe chain.
Brighter side? Closing stores?
Yes. The retail industry, choked with too many stores and malls, is overdue for this kind of winnowing, akin to the painful shrinkage that manufacturing endured years ago.
A lot of retailers thought closing warehouses and switching to more streamlined distribution was the way to keep expenses down and sales and profits up. But what about shutting underachieving stores? Or not opening so many branches?
Never! The idea of closing stores is anathema to most retailers. They prefer to open as many as possible _ even when sales fall. They cling to the idea that even if consumers cut spending, they’ll cut it at somebody else’s store.
When stores have closed in recent years, it’s usually struggling companies doing the axing: Woolworth Corp., Limited Inc.,
Kmart Corp. The flailing ones are still cutting back.
Nonetheless, the weakness in retailing has raised the question of when stronger merchants might start cutting stores. They may be forced to do it later as profits fall and stockholders revolt.
In the meantime, Christmas is coming. Yes, it’s going to be tough. Americans will buy plenty of gifts, but since they’re preoccupied with the economy, taxes, shrinking paychecks and Windows 95, they’re not going to spend at a robust pace on clothes and non-necessities.
Many retailers, expecting the worst, will probably be thrilled with anything better than disaster.
PULLING BACK THE WELCOME MAT
Federal and state officials gave Daiwa Bank the gate this past week, ordering the Japanese bank to close its U.S. operations within three months. Daiwa also was indicted on charges it masked more than $1 billion in trading losses.
Daiwa’s punishment had been expected after a bank trader, who pleaded guilty to federal charges last month, said his bosses had told him to conceal the losses. The Japanese government said the U.S. actions wouldn’t hurt Japan’s already troubled banking industry. At the same time, the government said it would be more vigilant in overseeing Japanese banks’ operations, especially those overseas.
WHITHER THE ECONOMY? OR IS IT WITHER?
A slew of economic statistics made it hard for the average American to get a handle on how we’re doing.
On the negative side, in addition to dismal retail sales, there were sluggish auto sales, another drop in the government’s major economic forecasting gauge and a slowdown in manufacturing.
On the other hand, factory orders were up, the stock market hit a new record and the unemployment rate dropped slightly.
Analysts summed it all up by saying the is economy is growing, but at a slow pace.
WINNERS, LOSERS, IN BETWEEN
WINNERS: Wal-Mart Stores Inc., its customers and American Express Co., now that Wal-Mart has decided to accept AmEx’s charge cards. And just in time for Christmas.
LOSERS: Fruit of the Loom Inc., forced by cooling apparel sales to cut 3,200 jobs, or 12 percent, of its U.S. work force. And
Dow Chemical Co., which must pay $10 million to a woman who said the company’s breast implants made her ill.
SOMEWHERE IN BETWEEN: Consumers, who, thanks to new federal regulations taking effect in a year, will be able to tell if there’s ``mechanically separated poultry″ _ chicken or turkey scraps _ in their hot dogs and other processed meat. Currently, what’s really poultry mush is getting by under the labels ``chicken″ and ``turkey.″
Novell Inc. abandoned the word processing and spreadsheet businesses it acquired last year, deciding to focus on software to network personal computers ... Corporate raider Carl Icahn and investor Bennett LeBow said they’ll try to force RJR Nabisco Holdings Corp. to spin off its food business from its tobacco operations. Icahn had a similar run-in with USX Corp. a few years back, forcing the company to issue separate stock for its steel and energy divisions ... Intel Corp. unveiled its new chip, the Pentium Pro.
TUESDAY: The Labor Department reports on productivity and labor costs during the third quarter, while the Federal Reserve announces how much credit consumers took out in September.
THURSDAY: Labor has two reports, one on weekly jobless claims and the other on October wholesale prices.
End adv for weekend editions Nov. 4-5