Gap's Old Navy spinoff plans in doubt with CEO Art Peck out - CNBC

Traffic passes by an Old Navy and GAP stores in Times Square, March 1, 2019 in New York City.

Drew Angerer | Getty Images

Gap Inc.'s plans to spin off its once-star Old Navy brand are being called into question with the ouster of CEO Art Peck.

The San Francisco-based apparel retailer announced Thursday evening that Peck has stepped down from the position he had held since 2015. Peck has been replaced temporarily by  Robert Fisher, son of Gap's founders Donald and Dorothy Fisher.

With Peck's abrupt departure, analysts are doubting a looming split of Old Navy and Gap will go through, especially with the Old Navy brand in such poor shape.

Gap shares were down 7% Friday morning. The stock as of Thursday's market close had tumbled nearly 30% this year. Gap is valued at roughly $6.9 billion.

The company announced in February it planned to split Gap into two publicly traded companies — Old Navy and Gap, which would still have been led by Peck and would include Banana Republic and athletic performance brands Athleta and Hill City. The separation had been scheduled to be completed next year.

Until recently, Old Navy had been the star of Gap's portfolio, bringing in about $8 billion in annual sales. It has been successful at offering basic apparel like white tees, jeans and logo hoodies at lower prices, rivaling the likes of T.J. Maxx and Ross Stores.

Today's shoppers have countless options for finding less-expensive apparel online and at fast-fashion players like H&M, which recently reported a return to sales growth. Shopping at second-hand merchants and clothing rental options are also cutting into apparel sales.

Gap said Thursday that same-store sales fell 4% companywide in the third quarter, including a disappointing 4% drop at Old Navy.

"We have to think this new development will make the original timeline of the planned Old Navy separation extremely difficult," Evercore ISI analyst Omar Saad said in a note to clients.

"An already skeptical market is going to have a hard time embracing [a] fundamentally challenged Gap/Banana Republic combination without a leader and clearly articulated turnaround plan," he added.

"What about the spin?!" RBC Capital Markets analyst Kate Fitzsimons said. "With the CEO departure, while there is no update on the Old Navy spin planned for 2020, we think the board may be re-evaluating their options."

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https://www.cnbc.com/2019/11/08/gaps-old-navy-spinoff-plans-in-doubt-with-ceo-art-peck-out.html

2019-11-08 14:29:00Z
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A Recession Warning Reverses, but the Damage May Be Done - The New York Times

The message from Wall Street is clear: The American economy is not in the kind of trouble that investors feared earlier this year.

Stocks are at all-time highs and climbing. Yields on long-term government bonds, which reflect expectations for growth and inflation, are also rising. Corporate bond spreads show that investors are more confident in the prospects for businesses.

Then there’s the yield curve, an indicator from the bond market that just a few months ago set off alarms about the risk of a recession. It has gone back to normal, and that signal has been met with relief in the markets.

But as far as the economy is concerned, it might not matter. Once the yield curve has predicted a recession, one usually follows even if that signal changes later.

To understand why, it’s important to remember what the fuss over the yield curve was about in the first place.

Remind me: What is the yield curve?

The yield curve measures the difference between interest rates on short-term government bonds and long-term government bonds (like three-month Treasury bills and 10-year Treasury notes).

Usually, long-term interest rates are higher because, like any borrower, the government ought to be paying more to borrow for 10 years than for three months. But every once in a while, things get flipped around in the bond market and short-term interest rates rise above the long term, in a sign that investors expect slower economic growth or interest rate cuts — or both.

When it does, the yield curve becomes what economists call “inverted.” It happened this year, starting in March, and it got attention because an inverted yield curve is considered one of the financial world’s most reliable predictors of a recession.

In fact, each recession of the last 60 years was preceded by a yield curve inversion.

So the return to normal, what’s referred to as a “steep” yield curve, is being taken as a good sign.

“A steep curve is a signal that people think that the future is bright, and that is very important to investors,” said Jonathan Golub, chief United States equity strategist at Credit Suisse Securities. “This was an incredibly important thing for us to see.”

What’s with the change in outlook?

It’s important to note that the mood in financial markets can change overnight, and that all these feel-good signals could evaporate if investors are confronted with evidence that they’re wrong.

The recent optimism overlooks the fact that economists continue to see the global economy, including in the United States, decelerating as trade slows and manufacturing contracts.

But there are some reasons investors are right to relax a little, after months of anticipating the damage of the trade war on the United States economy: The job market is holding up, corporate profit reports have been better than expected, and the hope is that the Federal Reserve’s decision to cut interest rates three times so far this year will help keep things going.

Lately, officials in Beijing and Washington have telegraphed that they’re making progress in de-escalating the trade war. On Thursday, yields on the 10-year Treasury note rose to their highest level since July, and the S&P 500 closed at a new high.

So was the recession signal from the yield curve wrong?

Those who have studied the yield curve and its relationship to the economy stress that, historically speaking, it doesn’t matter if the yield curve returns to normal. The recession predictor is that it inverted at all — though the downturn can take as long as two years to arrive.

“In a way, the damage is done,” said Campbell Harvey, a Duke University finance professor whose research first showed the predictive power of the yield curve in the mid-1980s. “If you look at the track record, if you’ve got an inversion, there is a recession that follows.”

One reason is that the yield curve has a real-world impact on the banking system. Banks borrow money at short-term rates and then lend it out — in a 30-year home mortgage, for example — at long-term rates.

So when short-term rates are higher than long-term rates, bank profits are crushed and they cut back on lending. That’s bad news for the economy.

Then there’s the market’s feedback loop, which can stymie decision-making by executives, discouraging new investments.

“When the yield curve is inverted, investors pull in risk taking,” Mr. Golub of Credit Suisse said.

Mr. Harvey stressed, however, that history didn’t always repeat precisely.

And this time, something is slightly different. Since the yield curve inverted, the Fed’s three rate cuts have largely been seen as effective ways to keep the economic expansion rolling.

The first of those, in July, came just a few months after the yield curve first inverted.

That’s a marked difference from the last time the yield curve inverted, in 2006. Then it was roughly a full year before the Fed began to lower short-term rates. (The last recession began in December 2007.)

“In the face of the inversion, it did nothing,” Mr. Harvey said, referring to the Fed. “This inversion, they actually did cut.”

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https://www.nytimes.com/2019/11/08/business/yield-curve-recession-indicator.html

2019-11-08 14:16:00Z
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'It seems insane now' — WeWork employees bought into cofounder Adam Neumann's vision but grew worried as red flags mounted - Business Insider

Michael Kovac/Getty Images for WeWork

• WeWork employees were swept up by cofounder and then-CEO Adam Neumann's wild ambitions and enthralled by his startup's cool culture and lavish perks, according to the New Yorker.
• "In retrospect, there's no way this could have worked," a WeWork software engineer told the magazine. "People were high. It seems insane now, but at the time it made so much sense."
• WeWork flew 8,000 employees to London for a company retreat where Lorde performed and Deepak Chopra led a meditation, and Neumann floated the idea of a WeWork on water called WeSail, the New Yorker reported.
• Read more of Business Insider's WeWork coverage here.

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WeWork employees were swept up by cofounder and then-CEO Adam Neumann's wild ambitions and enthralled by his company's cool culture and lavish perks, but grew concerned as red flags mounted, according to the New Yorker, which interviewed several WeWork staff.

"In retrospect, there's no way this could have worked," a WeWork software engineer told the magazine. "People were high. It seems insane now, but at the time it made so much sense."

The shared-workspace startup plowed money into growing its business without setting realistic targets.

"It was chaos," a WeWork architectural designer told the New Yorker. Trying to organize the large teams "was like herding cats," she said, and WeWork's sales staff "were always promising insane things like 'We'll get it done by October!' And it's July."

WeWork also splashed its cash on flying 8,000 employees to a company retreat in London last summer, where Lorde performed and Deepak Chopra led a meditation, the New Yorker reported. The event was a warning sign for some employees.

"OK, this is $2,500 a head just for the flights," a WeWork designer told the magazine. "From a business perspective, there were some red flags there."

WeWork staff, increasingly worried about their employer's scattershot approach and reckless spending, hoped there were adults pulling the strings.

"There was always this assumption that, behind Adam, there was someone intelligent — a group of people — who were watching and making the practical, financial decisions," a WeWork development worker told the magazine. "That someone was taking care of it."

However, that idea was dashed at another WeWork gathering in Los Angeles in January — figure skater Adam Rippon and actor Jaden Smith made appearances — where Neumann floated the idea of a WeWork on water called WeSail, and creating a WeBank.

"That was when it hit me," the development worker told the New Yorker. "There wasn't anyone else running the company. It was just Adam and his wife."

WeWork, which secured a private valuation of $47 billion in January, scrapped its planned IPO in September after investors attacked its business model, mushrooming losses, governance, and Neumann's controversial behavior. Running short of cash, it agreed a $9.5 billion rescue deal with SoftBank last month.

The Japanese conglomerate slashed its valuation of WeWork by more than 80% to below $5 billion in the three months to September 30, it revealed this week.

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2019-11-08 11:25:07Z
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Two Sears, two Kmart stores in NH set to close - WMUR Manchester

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1. Two Sears, two Kmart stores in NH set to close  WMUR Manchester
2. Sears and Kmart store closings: 51 Sears, 45 Kmart locations to shutter. See the list  USA TODAY
3. Sears to close 96 stores, including 3 South Florida locations  WSVN 7News | Miami News, Weather, Sports | Fort Lauderdale
4. Sears at Whitehall Mall closing, the last in Lehigh Valley  Morning Call
5. Hagerstown Kmart to close in February  Herald-Mail Media
6. View full coverage on Google News

https://www.wmur.com/article/two-sears-two-kmart-stores-in-nh-set-to-close/29731934

2019-11-08 05:38:00Z
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From Kim Kardashian to Disney tickets: Alibaba gears up for Singles Day, a $30 billion shopping event - CNBC

Alibaba CEO Daniel Zhang speaks in front of a screen showing total sales at over 213.5 billion yuan (30.7 billion USD) shortly after the end of the 11.11, or "Singles Day" shopping festival, at the 2018 Tmall 11:11 Global Shopping Festival gala in Shanghai early on November 12, 2018.

STR | AFP | Getty Images

Singles Day or 11.11, is the biggest shopping day of the year for singles, as Chinese e-commerce players led by Alibaba offer massive discounts on everything from electronics to cars.

Taking place on Nov. 11 each year, Singles Day is widely believed to have started in the 1990s by men celebrating being single in universities.

In 2009, Alibaba launched its first shopping event that day, offering heavy discounts on its Tmall shopping platform. That year, gross merchandising value — or the value of goods sold via Alibaba platforms — hit $7.8 million.

Last year, that figure was more than $30 billion — a new record for the Chinese technology giant.

To keep growing, against the backdrop of the ongoing U.S.-China trade war, slowing Chinese growth, and increased competition, Alibaba has been expanding its offerings into new product categories and experiences.

Star power and live streaming

Alibaba usually kicks off Singles Day with a gala event which ends just before midnight on Nov. 11. Last year, Mariah Carey put on a performance, and this year, Alibaba signed up U.S. pop superstar Taylor Swift. The gala, which is streamed online, often showcases some of the brands that will be on offer and prompts users to begin pre-ordering.

Live streaming has become a big part of the shopping experience on Chinese e-commerce sites. Often online personalities will speak to their followers and talk about products.

Within the livestream, there will be an option to buy the goods. Alibaba's platforms Taobao and Tmall have this feature. On Wednesday, Kim Kardashian did a livestream announcing her fragrance brand KKW will be available for sale on Tmall.

Kim Kardashian did a live stream on Alibaba's Tmall platform to announce her fragrance range KKW would be available for purchase on the e-commerce site.

Tmall | Alibaba

Companies are selling items from cars to cosmetics via livstreaming. Alibaba said on the first day of its pre-sales that more than 17,000 brands started livestreaming. Chinese smartphone-maker Xiaomi's livestream attracted over 200,000 online viewers within the first 10 hours.

Short videos are also very popular in China and livestreaming commerce taps into that trend. Xiaofeng Wang, senior analyst at Forrester, said consumers can often get exclusive discounts when watching the live streams.

"Livestreaming commerce provides a lot of exclusive offers which increases the urgency. Livestreaming might be a few minutes or 30 minutes long, within the time they provide exclusive offers. That is another motivation for consumers," Wang told CNBC.

More items for sale

Alibaba said that 1 million new products will be on offer during the Singles Day festival. Over the past few years, the categories of items available have been expanding.

Users can buy cars, for example. In fact, Alibaba said that on one of its Taobao livestreams, 55 cars were sold in just 1 second. International auto brands are also taking part in this year's Singles Day event.

Meanwhile, Alibaba's travel arm is offering packages to the 2020 Olympics in Tokyo. Disney is also offering discounted tickets to its theme park in Shanghai.

International brands are expected to play a big role. In China, 60% of consumers intend to purchase imported products, according to a 1,000-person survey carried out by management consulting firm Oliver Wyman.

Of the 200,000 brands that are expected to participate in the 11.11 festival, 22,000 will be from 78 overseas markets, according to Alibaba.

International efforts

Singles Day used to be a phenomenon only open to Chinese consumers, but Alibaba has been looking to expand its reach in a bid to boost sales and as the e-commerce giant continues to push its business overseas.

Lazada, a Singapore-based e-commerce site that has operations across Southeast Asia and is majority-owned by Alibaba, is having its own sales.

And Alibaba-owned AliExpress, will let local merchants from Russia, Spain, Italy and Turkey to participate in the 11.11 sales event for the first time.

What it means for business

Alibaba is expected to bring in GMV of $37 billion for this Singles Day, according to Forrester forecasts — that represents a roughly 20.5% rise. That growth rate is slower than the year-on-year increase of some 27% recorded in 2018.

Wang said that this is not a concern.

"When a market matures, you cannot continue to grow at a high double digit every time. Just like the Chinese economy used to be double digit growth, it's just single digit now. It is natural, it is still growing, it's still a big market, that is a positive," Wang said.

The December quarter tends to be Alibaba's biggest by revenue, thanks in part to Singles Day.

While commerce is still the biggest portion of Alibaba's overall business, in the long term, analysts see its rapidly-growing cloud division to become crucial for profits.

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2019-11-08 04:53:00Z
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Facing shorter holiday season, U.S. retailers rev up faster delivery, early deals - Reuters

(Reuters) - U.S. retailers are rushing in with faster-than-ever delivery deals and earlier Christmas promotions in hopes of easing the impact of this year’s shorter holiday selling season, a period that can be make-or-break for retailers.

FILE PHOTO: A shopper wears a Santa Claus hat at the King of Prussia Mall, United States' largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018. REUTERS/Mark Makela

Thanksgiving, the traditional kick-off of the U.S. holiday shopping period, falls on Nov. 28 this year, a week later than last year’s Nov. 22, leaving retailers with six fewer days to drive sales between Thanksgiving and Christmas day.

The last shortened shopping season was in 2013 - a year when retail chains and delivery companies scrambled to get packages to shoppers in time for Christmas.

Retailers’ urgency to avoid a repeat of 2013 is on full display as is the rush to compete with Amazon, which began rolling out free one-day shipping on over 10 million products in June.

The holiday season spanning November and December can account for as much as 40 percent of annual sales.

“It’s a very compressed holiday season...every day counts,” Target Corp’s chief executive, Brian Cornell, said in October.

For the first time, Target is offering its “Drive Up” service, which lets shoppers order on the Target app and have their items brought to their car, in all 50 states. The company said most orders will be ready within an hour and brought out in less than two minutes upon arrival.

That will be in addition to free shipping with no minimum purchase, order pickup on online purchases and same-day delivery services.

Similarly, Best Buy has promised free next-day delivery on thousands of items. And Walmart Inc is, for the first time, offering free next-day delivery on orders over $35 without a membership fee.

“A shorter holiday season puts more importance on each shopping day,” said Steve Sadove, senior adviser for Mastercard and a former CEO and chairman of department store operator Saks Inc. Sadove said the sales outlook for the season remains positive despite the fewer days between Thanksgiving and Christmas.

Mastercard, which measures consumer spending across all payment types including cash and checks, expects U.S. retail sales, excluding automobiles, to grow 3.1% from a year ago between Nov. 1 and Dec. 24.

The holiday deals deluge, which traditionally has started on the day after Thanksgiving, known as Black Friday, has been starting earlier and earlier in November each year. This year such promotions began in mid-October due to the shorter season. For example, Walmart began offering holiday deals on Oct. 25.

Steep discounts on merchandise, typically visible just ahead of or immediately after Thanksgiving, are being offered by many companies. Online home retailer Wayfair is offering up to 70 percent off on top-selling items. Others like Amazon, Target and Kohls have already begun offering Black Friday deals.

“Retailers will need to plant a sense of urgency early-on, then reinforce it after Thanksgiving, when the rubber meets the road,” said Carol Spieckerman, president at consultancy Spieckerman Retail.

To be sure, the deals and shipping offers do not necessarily mean shoppers will buy more, retail consultants said. The tariffs imposed by President Donald Trump on Chinese imports, which have raised prices of many items, are weighing on sentiment, they said.

Seventy-nine percent of Americans are worried that tariffs will make their holiday shopping more expensive, according to the National Retail Federation, a leading industry trade body.

The tariffs on Chinese-made clothes, shoes and some electronics went into effect on Sept. 1. Another round of 15% U.S. tariffs, on consumer goods, is expected on Dec. 15.

A senior official of the Trump administration said on Wednesday that a meeting between Trump and Chinese President Xi Jinping to sign a long-awaited interim trade deal could be delayed until December.

Reporting by Aishwarya Venugopal in Bengaluru and Nandita Bose in Washington; Editing by Leslie Adler

Our Standards:The Thomson Reuters Trust Principles.

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2019-11-07 12:08:00Z
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Sterling falls after Bank of England split on interest rate cut - CNBC

Bank of England

Justin Tallis | AFP | Getty Images

The Bank of England (BOE) held interest rates steady on Thursday, opting not to adjust borrowing costs in the world's fifth-largest economy ahead of a snap election.

With 35 days to go before Britons head to the ballot box, the BOE's nine-member Monetary Policy Committee (MPC), led by Mark Carney, voted to hold interest rates at 0.75%.

Seven policymakers, including Carney, voted in favor of leaving interest rates unchanged, but Jonathan Haskel and Michael Saunders surprised financial markets by voting for a quarter-point rate cut.

Sterling traded at $1.2811 shortly after the announcement, falling over 0.3%.

Saunders and Haskel said their vote for an interest rate cut was driven by reduced job vacancies and downside risks from the global economy and Brexit.

Other members of the MPC suggested a willingness to cut rates over the coming months, if necessary, but did not vote in favor of lower borrowing costs in November because the U.K. economy had performed largely in line with expectations from three months ago.

"With the risk of a no-deal Brexit falling recently, we expect the uncertainty facing households and businesses to fall. We also expect global growth to recover gradually," the BOE said in its Monetary Policy Report.

The central bank suggested these developments would help growth in the U.K., but conceded if that does not happen then it "may need to lower interest rates to support U.K. growth and ensure that we return inflation to our 2% target sustainably."

Brexit uncertainty

Much has changed in British politics since the MPC last voted to leave interest rates unchanged in mid-September.

Prime Minister Boris Johnson ultimately failed to rush his Brexit deal through Parliament, prompting the Conservative Party leader to request a Brexit extension and call a snap vote for December 12.

The EU agreed to push back the Brexit deadline until the end of January, with an earlier departure possible should U.K. lawmakers ratify their divorce deal.

Economists believe the BOE will cut interest rates at some point next year, amid a slowing economy and Brexit uncertainty.

Ahead of the central bank's split vote, market expectations for a quarter-point rate cut by the end of 2020 stood at 55%, according to the CME BOE Watch Tool. Shortly after Thursday's surprise announcement, expectations jumped up to 80%. 

A long-running U.S.-China trade war and a global economic downturn have prompted the Federal Reserve and European Central Bank to cut interest rates in recent months, but, so far, the BOE has resisted following suit.

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2019-11-07 12:01:48Z
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