Financial News from The Wall Street Journal

  • Chipotle to Raise Prices; Profit Climbs on Better Traffic The Wall Street Journal - Fri, Apr 18, 2014 2:48 AM AEST

    To compensate for the high costs for ingredients like beef and avocados, Chipotle Mexican Grill Inc. said it would raise menu prices companywide for the first time in three years. But executives said higher food costs are weighing on profits, resulting in their decision to increase prices by single-digit percentages starting in the current quarter. For the quarter, food costs were the equivalent of 34.5% of the company's revenue, up from 33% a year earlier. Executives said Chipotle's planned price increases will be in effect in all markets by early in the third quarter, and will help profit margins expand later in the year.

  • Home Depot Lumbers Into E-Commerce The Wall Street Journal - Thu, Apr 17, 2014 10:11 AM AEST
    Home Depot Lumbers Into E-Commerce

    LOCUST GROVE, Ga.—Home Depot Inc.'s newest location is 10 times bigger than its average store, stocks three times more items and has no customers. It's an online distribution center, for a company that seems the unlikeliest of Internet retailers. For decades, Home Depot excelled at the traditional retail model of growing by adding new locations. "The retail model forever was to increase sales through opening additional units, but as you added stores to a finite group of households, each store becomes less profitable," Home Depot Chief Executive Frank Blake said in an interview.

  • Home Depot Joins the Shale Rush The Wall Street Journal - Thu, Apr 17, 2014 9:53 AM AEST

    Home Depot Inc. has all but given up on opening new stores in the U.S., but the home-improvement retailer made an exception in January to open a store in an area it said it couldn't pass up: Minot, N.D., in the heart of the American shale oil and gas boom. "If you had said to me seven years ago, you'll be opening a store in Minot, North Dakota, I would have asked, Why?" Chief Executive Frank Blake said in an interview. The 100,000 square-foot store is more than a four-hour drive from Home Depot's nearest location and is the only U.S. store Home Depot opened in the fiscal year ended Feb. 2. Home Depot is among a number of retailers including Wal-Mart Stores Inc. and GameStop Corp. targeting oil and gas towns in North Dakota, Texas and Louisiana, in an otherwise dour environment for retail real estate.

  • Citigroup Received Mixed Signals On 'Stress Test' The Wall Street Journal - Thu, Apr 17, 2014 9:48 AM AEST

    The Federal Reserve's New York office indicated to Citigroup Inc. that the bank would have more time to fix certain "stress test" planning problems before Fed officials in Washington last month gave it a failing grade, said people close to the company. The divergent messages from different parts of the Fed were a major reason why Citigroup executives were taken aback when the bank's capital plan, which included dividend increases and more stock buybacks, was rejected on March 26, these people said. The surprise move sent Citigroup stock reeling, and the bank will likely miss a key profitability goal for next year because of the rejection. The Federal Reserve Bank of New York had agreed to give Citigroup a 2015 deadline to address a series of shortcomings identified by the regulator in the wake of the 2013 test, the people said.

  • RadioShack Mired in Talks With Lenders Over Closings The Wall Street Journal - Thu, Apr 17, 2014 6:26 AM AEST

    RadioShack Corp. is mired in negotiations with its lenders over plans to close as many as 1,100 stores, complicating the struggling consumer-electronics retailer's turnaround efforts, said people familiar with the talks. The delay also is intensifying tensions with some lenders, who were surprised by the store-closing plan when RadioShack publicly disclosed it on March 4, the people said. The company, which operates about 4,300 stores in the U.S., said at the time that the plan still needed permission from its lenders, adding that its credit agreements allowed it to close only about 200 stores without the approval of lead lenders Salus Capital Partners and GE Capital, a unit of General Electric Co. Meanwhile, RadioShack has continued its store-closing plan but is currently targeting just 200 stores, people familiar with the plan said.

  • GM Chief Can't Shake Recall Furor The Wall Street Journal - Wed, Apr 16, 2014 11:22 AM AEST

    General Motors Co. Chief Executive Mary Barra sought to shift the focus on Tuesday to the auto maker's coming new vehicles and away from investigations of a troubled ignition-switch recall, but struggled amid a barrage of questions about its responses to the probes. In New York ahead of an auto show, Ms. Barra deflected questions about a potential U.S. criminal probe, saying she wasn't aware if the Department of Justice has sought documents from the company, and declined to say when GM expected to answer all questions posed by auto-safety regulator National Highway Traffic Safety Administration. "We are working on those every day," she said of the NHTSA inquiry while surrounded by a media crowd peppering her with questions. GM Global Product Chief Mark Reuss was recruited to help provide crowd control after her speech.

  • Housing Market Slow to Hit Its Spring Stride The Wall Street Journal - Wed, Apr 16, 2014 10:08 AM AEST

    Reports from local real-estate agent groups in some of the markets that were the first to rebound, including Las Vegas, Phoenix and San Diego, show year-over-year declines in March home sales. "Overall, even after adjusting for weather, it has been worse than what most people expected," said Tom Lawler, an independent housing economist in Leesburg, Va. With prices and mortgage rates up, the nation's median monthly home payment—including principal and interest—has risen 20% in the past year to about $900, according to John Burns Real Estate Consulting. At the same time, there has been a continued increase in the number of nondistressed purchases made by ordinary buyers and families, further reducing the inventory of homes for sale.

  • More Yellen to Do on Bank Capital The Wall Street Journal - Wed, Apr 16, 2014 5:05 AM AEST

    When it comes to shoring up bank balance sheets, the Federal Reserve isn't ready to put down its tools and call it a day. Fed Chairwoman Janet Yellen gave bankers and investors a reminder of that Tuesday in remarks to a financial-markets conference. Speaking of the need for additional regulatory work related to wholesale-funding markets and bank liquidity, she referenced a study that found there could be, on net, economic benefits from even higher capital requirements. "This study provides some support for the view that there might be room for stronger capital and liquidity standards for large banks than have been adopted so far," Ms. Yellen said.

  • GE Rethinks the 20-Year CEO The Wall Street Journal - Tue, Apr 15, 2014 2:01 PM AEST

    Jeff Immelt may give up leadership of General Electric Co. sooner than his expected 20-year tenure, as he and fellow directors re-evaluate the right term for its chief executive, people familiar with GE's ...

  • Twitter's Lockup Holds Key to Stock The Wall Street Journal - Tue, Apr 15, 2014 6:33 AM AEST

    Amid the technology sector selloff, Twitter's recent nosedive may be one of the few actually tied to something specific: On May 5, the lockup on 489 million Twitter shares not previously eligible for sale will expire. Certainly, the social-messaging company felt compelled Monday to issue a statement saying that co-founders Jack Dorsey and Evan Williams, along with Chief Executive Richard Costolo, have no "current plans" to sell shares. Another big holder, Benchmark Capital, also doesn't plan to sell or distribute Twitter stock "before or immediately after" the lockup expiration. Altogether, they control about 20% of the company, according to Twitter's last proxy filing.

  • Wal-Mart Cries Foul on China Fines The Wall Street Journal - Mon, Apr 14, 2014 10:38 AM AEST

    Over the past three years, Chinese authorities have fined Wal-Mart Stores Inc. $9.8 million, sanctioning the retailer for using misleading pricing, selling poor-quality products and even peddling donkey meat that turned out to be fox. Wal-Mart has increased testing and inspections. Food testers at Wal-Mart distribution centers in China check more than 600 products daily to catch flaws before the food is sent out to stores. After Wal-Mart found the fox meat labeled as donkey in January, the company said it would start testing its products' DNA.

  • Google Tests a Way to Follow You to the Mall The Wall Street Journal - Sat, Apr 12, 2014 7:26 AM AEST

    Now, Google Inc. is testing a way to solve that puzzle. A pilot program begun by the Internet company is helping about six advertisers match the anonymous tracking cookies on users' computers to in-store sales information collected by data providers like Acxiom Corp. and DataLogix Holdings Inc., according to people familiar with the test. "We are running a number of tests to help clients use their own sales data to measure how their search campaigns impact sales," said a Google spokesman. Online advertising has grown into a $117 billion-a-year business, and Google is the industry's leader, with ad revenue of $50.5 billion last year.

  • Citigroup Faces Inquiry in California Over Failure to Report Suspicious Activity The Wall Street Journal - Fri, Apr 11, 2014 12:01 PM AEST

    The Justice Department is investigating whether a Citigroup Inc. unit in California failed to alert the government to suspicious banking transactions along the U.S.-Mexico border that in some cases involved suspected drug-cartel members, said people familiar with the probe. U.S. prosecutors want to know why Citigroup didn't submit so-called suspicious-activity reports flagging the questionable transactions, one of these people said. The focus of the federal probe highlights the breadth of problems faced by Citigroup following the Federal Reserve's recent rejection of its capital plan and revelations of potential fraud in a separate Mexican unit called Grupo Financiero Banamex. Citigroup disclosed in February that it had cut its fourth- quarter and full-year results by about $235 million after the bank investigated its dealings with a Mexican oil-services company, Oceanografía SA de CV, and found an apparent gap of $400 million in an account that owed money to Citigroup's Mexican unit.

  • J.P. Morgan's Dimon Would Like Corporate Cash to Find a New Home The Wall Street Journal - Fri, Apr 11, 2014 6:59 AM AEST

    J.P. Morgan Chase chief James Dimon suggests that may soon happen, at least when it comes to the business of holding idle corporate cash or nonoperational deposits. In his annual letter to shareholders, Mr. Dimon noted these are "hugely unprofitable," especially given new rules governing the amount of liquid assets banks must hold. As a result, Mr. Dimon wrote, "banks probably will minimize this type of deposit, and clients will seek other alternatives, probably in the money markets." That would invite competitors to swoop in with offers to accept the deposits in hope of also winning more profitable business, such as bond issues and transactional banking.

  • Coke Sticks to Its Strategy While Soda Sales Slide The Wall Street Journal - Thu, Apr 10, 2014 9:59 AM AEST
    Coke Sticks to Its Strategy While Soda Sales Slide

    For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. A growing number of industry analysts suggest Coca-Cola should spend less to advertise cola and more to diversify aggressively through acquisitions of companies, like energy-drink maker Monster Beverage Corp. Sales of Coke's nonsodas, including Minute Maid juice, Dasani water and Powerade sports drinks, rose 5% last year by volume. Chief Executive Muhtar Kent has said that last year, when Coke's U.S. soda volume dropped 2%, was an anomaly.

  • It's Really Hard to Be a Whole Foods Clone The Wall Street Journal - Thu, Apr 10, 2014 9:40 AM AEST

    It's harder to be Whole Foods Market Inc. than many companies thought. Fairway Group Holdings Corp., a chain of about a dozen stores in New York and neighboring states, raised $177 million in an initial public offering last April, and its stock jumped 33% on its first day of trading. When Sprouts Farmers Market Inc. followed with an IPO in August, it fetched at least $333 million, and its shares surged 123% in their market debut. In March, Fresh Market Inc., based in Greensboro, N.C., reported a 90% drop in fourth-quarter net income, thanks partly to a write-down of real estate and other assets, and said it would close four of its 155 stores.

  • J.P. Morgan's Dimon Describes Year of Pain The Wall Street Journal - Thu, Apr 10, 2014 8:54 AM AEST

    J.P. Morgan Chase & Co. Chairman and Chief Executive Officer James Dimon acknowledged Wednesday that a series of legal headaches in 2013 evolved into "the most painful, difficult and nerve-wracking experience I have ever dealt with professionally." The comments in Mr. Dimon's annual shareholder letter offer the most revealing picture to date of how the 58-year-old bank chief reacted to a combination of government probes and lawsuits that culminated in payouts of more than $20 billion. In his 32-page letter, Mr. Dimon also presented a more detailed view inside J.P. Morgan's scramble to adapt to heightened scrutiny from its federal overseers and a raft of new U.S. regulations enacted since the financial crisis. A new "state-of-the-art control room" at J.P. Morgan's Park Avenue headquarters is now up and running, and by the end of 2014 the company will have added 13,000 employees over two years to beef up controls in areas ranging from compliance to legal to risk to technology.

  • Goldman Mulls Closing Dark Pool The Wall Street Journal - Wed, Apr 9, 2014 12:44 PM AEST

    Goldman Sachs Group Inc. is considering shutting down one of the world's largest private stock-trading venues, according to people familiar with the matter. In conversations with market participants over the past several months, Goldman executives have broached the subject of closing its so-called dark-pool trading operation, known as Sigma X, the people said. Goldman executives are weighing whether the revenue that the firm generates from operating Sigma X is worth the risks that have been highlighted by a series of trading glitches and growing criticism of dark pools, the people said. No decision is imminent, and Goldman could keep the business, according to the people.

  • Teaching Children How to Be Entrepreneurs The Wall Street Journal - Wed, Apr 9, 2014 9:51 AM AEST
    Teaching Children How to Be Entrepreneurs

    Jensen Bergman spent weeks preparing to pitch his team's business idea to investors. Jensen was taking part in a program called "8 and Up" that teaches young children about entrepreneurship. As a culmination of the class, which met for six weeks in Princeton, N.J., and cost $350, Jensen and his 15 peers would soon pitch their idea—"Tiger KidsClub," a Friday night hangout space for children—to real, grown-up investors at Tigerlabs, a local seed fund. As startups like WhatsApp and Oculus VR Inc. get snapped up for billions of dollars and others, like Twitter and Facebook, go public for more, younger children are filling classes, camps and other programs that promise to develop entrepreneurial skills in the pre-pubescent set.

  • As Wage Debate Rages, Some Have Made the Shift The Wall Street Journal - Wed, Apr 9, 2014 9:37 AM AEST
    As Wage Debate Rages, Some Have Made the Shift

    SAN JOSE, Calif.—As lawmakers in the nation's capital are mired in debate over likely outcomes from raising the federal minimum wage, businesses hit with local wage increases across the U.S. already are grappling with the reality. A Carl's Jr. franchisee in San Francisco offset the county's higher minimum wage—now $10.74—by using less shortening to make french fries. A White Castle in Illinois cut two jobs to match competitors' costs in nearby Indiana, where the mandated wage is lower. The consequences of a minimum-wage increase cut across everything from the number of hours employees are assigned, to menu prices to how often a drive-through lane is cleaned, according to interviews with more than a dozen businesses.

  • Friends of Fannie and Freddie Flex Their Muscles The Wall Street Journal - Wed, Apr 9, 2014 9:17 AM AEST

    Investors in Fannie Mae and Freddie Mac appear to be building a more sophisticated lobbying apparatus in Washington weeks ahead of a key Senate vote on a bill that would replace the companies. A new tax-exempt group calling itself the Coalition for Mortgage Security launched on Monday to campaign for legislation that would protect the rights of investors in the bailed-out mortgage-finance giants. The group echoed the position of many hedge funds and other investors that are suing the government over its oversight of the companies, arguing that changes to their government-bailout agreements violated property rights. Separately, a conservative senior group, the 60 Plus Association, last week said it had bought $1.6 million in television and radio advertising targeting lawmakers in seven states that have signaled support for the housing-finance overhaul, which they said would harm "ordinary investors" in the companies.

  • Big Banks to Get Higher Capital Requirement The Wall Street Journal - Wed, Apr 9, 2014 7:07 AM AEST

    WASHINGTON—The eight largest U.S. banks will have to add as much as $68 billion in extra capital to comply with a new rule intended to help firms weather losses during periods of market stress, federal regulators said Tuesday. The so-called leverage ratio, approved by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp., will require the largest banks to maintain well above the global minimum levels of capital held against all assets on their books, not just those deemed risky. The requirement, which will affect banks such as Citigroup Inc., J.P. Morgan Chase & Co. and Goldman Sachs Group Inc., comes as U.S. agencies ratchet up pressure on large, complex firms to ensure they can survive periods of turmoil without a government rescue. The rule will require banks to either shed assets or raise additional cash from investors, a move that some warn could limit their growth but which regulators say will protect their ability to lend during a downturn.

  • Investors Brace for Weak Earnings Reports The Wall Street Journal - Wed, Apr 9, 2014 6:07 AM AEST

    Investors are bracing for a raft of weak earnings reports, another factor that is adding to nervousness in the stock market. Shares of the streaming-video service, which is scheduled to report on April 21, have fallen 23% in the past month.

  • How Oreos Hopes to Maintain Its Chocolate Supply The Wall Street Journal - Wed, Apr 9, 2014 6:01 AM AEST

    How green can you make an Oreo? That's a question facing Irene B. Rosenfeld, chief executive of Mondelez International Inc., maker of the sandwich cookies and other well-known brands. The company is trying to meet a number of challenges facing the food business, including loud warnings about climate change disrupting crops and calls to enforce sustainable practices. Irene B. Rosenfeld, CEO at Oreo-maker Mondelēz International talks about reducing the amount of materials used in her company's product packaging. Joseph B. White, a Wall Street Journal editor, spoke with Ms. Rosenfeld to get an insider's take on these issues.

  • Citi Is Bracing to Miss a Profit Target The Wall Street Journal - Tue, Apr 8, 2014 9:20 AM AEST

    Citigroup Inc. is warning investors it may miss a key profitability target after the Federal Reserve rejected the bank's capital plan last month, people familiar with the matter say. The Fed on March 26 shot down the New York bank's proposal to boost its dividend and ramp up stock buybacks, saying it had failed to measure potential risks to its operations during a severe economic recession. The rejection makes it unlikely Citigroup can hit its 2015 goal for return on tangible common equity. The measure—a ratio of profit to equity owned by shareholders—isn't a headline number like earnings per share.

  • Citigroup Must Run Harder to Cross Profit-Return Finish Line The Wall Street Journal - Tue, Apr 8, 2014 5:59 AM AEST

    It is cold comfort for Michael Corbat, but Citigroup's capital-return debacle at least provided one thing: a useful reminder of how sensitive banks remain to leverage, and constraints on its use. The Citi chief suffered the indignity last month of having the bank's request to return about $7 billion in capital to shareholders rejected by the Federal Reserve. Beyond this, targets set by Mr. Corbat will now be far more difficult to meet, particularly Citi's return on tangible common equity exceeding 10%. Speaking before the Fed's decision, Citi finance chief John Gerspach acknowledged that the bank's targets included capital returns.

  • Sears CEO Slices Off Assets, Leaves Less for Bondholders The Wall Street Journal - Mon, Apr 7, 2014 9:25 AM AEST

    Chief Executive Edward Lampert is carving out some of the best pieces of Sears Holdings Corp. for its shareholders, moves that could leave bondholders at risk if its remaining businesses continue to deteriorate. The latest step in that pattern was Sears's spinoff of Lands' End, one of the crumbling holding company's few bright spots. Shares in the preppy clothing maker were distributed to existing Sears shareholders on Friday. Lands' End had net income of $79 million in the most recent year, compared with a loss of $1.4 billion for Sears Holdings.

  • Stock Buybacks Abound, but Come at a Price The Wall Street Journal - Mon, Apr 7, 2014 7:19 AM AEST

    C-suite occupants made this error when deploying their shareholders' money on buybacks during the last stock-market cycle. Cheap money and a dearth of investment opportunities has helped push buybacks' dollar value back near their precrisis peak. During the reporting season that just ended, earnings growth slowed to a crawl and likely would have been negative without buybacks. If buybacks slow, so will earnings growth, all else being equal.

  • Caterpillar Likely to Face Closer IRS Scrutiny The Wall Street Journal - Mon, Apr 7, 2014 5:23 AM AEST

    Caterpillar Inc. is likely to face tougher scrutiny from the Internal Revenue Service after being grilled over its tax strategies at a U.S. Senate subcommittee hearing last week, some tax experts say. But the subcommittee's nine-month investigation—involving examination of more than 150,000 documents and interviews with executives from Caterpillar and its tax adviser PricewaterhouseCoopers— unearthed information not previously available to the IRS. A Caterpillar spokeswoman declined to comment. Caterpillar began looking for ways to shrink its U.S. tax burden in the 1990s, documents released by the committee show.

  • Cities See a 'Bright Flight' The Wall Street Journal - Fri, Apr 4, 2014 11:03 PM AEDT

    Highly educated Americans are choosing cheaper metropolitan centers in the West and South over more dominant—and expensive—population centers on the coasts and former industrial hubs. After flocking to areas with ample employment opportunities such as New York City and Los Angeles for years, the nation's most educated are fanning out in search of better jobs, lower housing costs and improved quality of life. The 25 U.S. counties with the largest net inflow of people older than 25 with graduate or professional degrees arriving from out of state are nearly all linked to more affordable cities like Raleigh, N.C., and San Antonio, according to an analysis of census data by The Wall Street Journal. "It's a kind of middle-class flight—a bright flight," said William Frey, a demographer at the Brookings Institution, a think-tank in Washington, D.C. "People are moving to where the cost of living is reasonable."

  • In Minimum-Wage Debate, Tipped Workers Have Place at Table The Wall Street Journal - Fri, Apr 4, 2014 11:56 AM AEDT

    GLEN BURNIE, Md.—Restaurant owners Rose Saia and Bob Garner occupy opposite ends of a brewing debate over how to pay the nation's 3.3 million waiters, hairdressers, blackjack dealers and other workers who live predominantly off tips. Ms. Saia, owner of the Local Table café in Acton, Mass., agrees with Democratic lawmakers and worker-advocacy groups who say tipped workers are long overdue for a bump in the federal minimum tipped wage, which hasn't changed since 1991. Mr. Garner, co-owner of the Glory Days Grill restaurant chain here in Maryland and northern Virginia, sides with many Republicans and much of the restaurant industry in opposing the move, which would primarily affect workers in the restaurant trade. Democrats are pushing to boost the federal base wage for tipped workers to at least $7.10 an hour.

  • Discounts Are Piled On as Americans Buy Fewer Basics The Wall Street Journal - Fri, Apr 4, 2014 11:19 AM AEDT
    Discounts Are Piled On as Americans Buy Fewer Basics

    But that rule of thumb no longer applies, which is bad news for billion-dollar brands like Tide and Colgate. For the past three years running, unit sales of consumer products have been largely flat, according to market research firm Nielsen. And more people are choosing freshly prepared food over packaged fare. Reuters Procter & Gamble's Downy softener and Tide laundry detergent on display at a store in Pasadena, Calif., earlier this year. Procter & Gamble Co., Georgia Pacific Corp., Henkel AG and other companies have responded with a blitz of deals and coupons in conjunction with retailers.

  • Yelp Reviews Brew a Fight Over Free Speech vs. Fairness The Wall Street Journal - Thu, Apr 3, 2014 10:31 AM AEDT
    Yelp Reviews Brew a Fight Over Free Speech vs. Fairness

    A closely watched Internet free-speech case is headed to the Virginia Supreme Court this month, with many businesses that live and die by online reviews rooting for the owner of a small, suburban carpet cleaner. In early 2012, Joe Hadeed, owner of Hadeed Carpet Cleaning Inc., arrived at his office atop a 70,000-square-foot warehouse in Springfield, Va., to discover a critique posted on Yelp.com: "Lots of hype, a mediocre cleaning and a hassle at the end. Over the next several weeks, a string of similarly harsh reviews replaced more-favorable comments "as if someone had flipped a switch," said the 47-year-old Mr. Hadeed, in an interview last month at his offices, where trucks drop off carpets to be washed, rinsed and dried. Following the rash of negative Yelp reviews, business sank 30% in 2012, Mr. Hadeed says.

  • Seeing Facebook Through Google's Glasses The Wall Street Journal - Thu, Apr 3, 2014 5:02 AM AEDT

    Despite Facebook's new virtual-reality goggles, its investors may be more puzzled than ever about the company's vision for its own future. One clue comes from a rival that makes some nifty glasses of its own: Google. Facebook has been on a shopping spree lately, spending $19 billion on messaging service WhatsApp and snapping up goggle maker Oculus VR for $2 billion. The two deals call to mind Facebook's surprise $1 billion purchase of photo-sharing platform Instagram two years ago.

  • Amazon Will Let Customers Leave Returns in Lockers The Wall Street Journal - Wed, Apr 2, 2014 4:38 PM AEDT

    Amazon.com Inc. has quietly rolled out a new service to let customers return unwanted merchandise using large metal lockers it has installed for deliveries in garages, convenience and grocery stores in major metropolitan areas. The service will help address a problem that has plagued Amazon and other e-commerce retailers. Packaging and shipping orders is a major expense for Amazon. Amazon spent $8.59 billion on order fulfillment in 2013, up from $6.42 billion a year earlier.