Finance Blog number 1

Talbots Inc. said Wednesday it has slowed its growth plans for this year and will close about 20 underperforming Talbots brand stores in light of the economic challenges to the company.

It is not known what, if any, St. Louis locations are affected by these closings. A Talbots spokeswoman did not immediately return a call seeking comment.

The news comes on the heels of Talbots' January announcement that it will shut 78 Talbots Kids and Mens stores by September resulting in the shutdown of three St. Louis area stores. The Talbots Kids and Talbots Mens stores in Plaza Frontenac and the Talbots Kids store in Chesterfield were affected by that announcement.

The Talbots Misses store in Fairview Heights, Ill., the Talbots Misses store in Chesterfield, and the Talbots Woman store and Talbots Petites & Accessories stores located in Plaza Frontenac were not included in the initial round of store closings.

The Hingham, Mass.-based specialty retailer (NYSE: TLB) of women's classic fashions reported a $171 million loss in sales for the fourth quarter in 2007, which ended Feb. 2. Sales for the full year 2007, however, increased 2.5 percent to $2.289 billion, up from $2.231 billion in 2006 payday loans.

Same-store sales, a key economic indicator for retailers, decreased 6 percent for the fourth quarter; same-store sales fell 5.5 percent for the full year, 2007 over 2006.

Trudy F. Sullivan, Talbots president and CEO, said in a statement that 2007 was a difficult year and that 2008 will be "a year of transition, as it represents the launch of a three-year initiative to strengthen and grow the business. As such, we will acutely focus on the successful execution of our Talbots brand core strategy, which includes the roll-out of more compelling merchandise assortments beginning in the fall season, significantly improved inventory management, and a tighter cost structure."

Talbots announced it plans to open 27 Talbots brand stores and 19 J. Jill brand stores for a total of 46 new stores in fiscal 2008 compared to 75 new store openings in fiscal 2007. The company is planning for total consolidated direct marketing sales to grow in the mid-single digit range.

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The Hawaii Department of Health has cited seven companies for violations in 2007.

Syngenta Seeds and Dekalb Genetics Corp. were both cited for changing the operation of their fumigant chambers without proper notification and approval from the DOH, the department said. The Kauai seed-processing facilities were fined $9,900 and $5,900, respectively. Both companies paid their fines.

Ameron Hawaii was cited for submitting its January to June 2007 semiannual reports late. The Kailua-based stone processing and concrete plant was penalized $2,200.

The City and County of Honolulu's Kaneohe sewage treatment plant was cited for submitting its January to June 2007 semiannual reports late. The city was fined $2,400 and the penalty has been paid savings account payday advance.

Hawaiian Dredging Construction Co. was cited for not submitting semiannual reports for two different facilities, the department said. The company had been fined two penalties of $2,700 each, which have both been paid.

Meadow Gold Dairies was cited for late submittal of its January to June 2007 semiannual reports. The milk processing facility was fined $1,900 and the penalty has been paid.

Pineridge Farms Inc. was cited for failing to conduct the 2006 annual source performance test and the annual visible emission test. The company was penalized $4,800, which has been paid.

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Consumer spending at U.S. retailers slowed in February as increasing fuel costs eroded Americans' buying power, economists said reports this week will show.

Purchases rose 0.2 percent last month after a 0.3 percent gain in January, according to the median estimate in a Bloomberg News survey before a March 13 Commerce Department report. Figures from the Labor Department the following day may show the cost of living increased.

A weakening job market and rising gasoline costs are hurting consumer confidence and spending, increasing the odds the economy is already in a recession. Investors last week raised bets the Federal Reserve will keep cutting the benchmark interest rate, currently at 3 percent, as it focuses on reviving growth over taming inflation.

Sales are “reflecting the many strains on consumers,'' said Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York. “We expect the Fed to cut rates to 1.5 percent by early 2009.''

Auto purchases in February were little changed from a three-year low reached in January, according to industry figures last week. Retail sales excluding automobiles also increased 0.2 percent after a 0.3 percent January gain, according to the Bloomberg survey.

Sales at chain stores in February increased more than forecast, as consumers suffering from higher fuel bills and the slump in hiring rushed to discounters such as Wal-Mart Stores Inc., according to figures from the International Council of Shopping Centers issued last week.

Confidence Wanes

“It does seem like this consumer sentiment is continuing to be affected by housing and credit,'' Richard Wagoner, chief executive officer of General Motors Corp., said in a Bloomberg Television interview March 4. “I honestly can't tell you when and if we're going to see things turn back this year.''

Ethan Harris at Lehman Brothers and Bruce Kasman at JPMorgan Chase & Co. were among economists last week who said the U.S. had already fallen into a recession after the Labor Department reported the economy lost 63,000 jobs in February bad credit payday loan. They joined colleagues at Merrill Lynch & Co., Goldman Sachs Group Inc. and Morgan Stanley who had previously made a similar call.

The decline in payrolls was the second in a row and the biggest since March 2003.

“It's another nail in the consumer's coffin,'' said Josh Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York.

16-Year Low

Weaker job growth, the biggest declines in home prices in at least 20 years and energy costs at record highs have shaken Americans' confidence. Consumer sentiment probably fell this month to the lowest level in 16 years, economists project a preliminary report from Reuters/University of Michigan on March 14 will show.

A Labor Department report on the same day may show prices paid by consumers rose 0.3 percent in February, according to the Bloomberg survey median, after a 0.4 percent gain the prior month. Excluding food and energy, so-called core prices probably increased 0.2 percent after a 0.3 percent gain the prior month.

Even as growth is slowing, inflation remains a concern for Fed policy makers as crude oil prices continue to rise, reaching an intraday record of $106.54 a barrel last week.

Bigger Risk

Still, some Fed policy makers have reiterated in recent weeks that slowing growth is the greater risk to the economy.

The Fed “will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' Fed Chairman Ben S. Bernanke said in testimony to Congress Feb. 27.

Traders are virtually certain the central bank will lower the benchmark rate by three-quarters of a percentage point at its March 18 meeting, according to futures markets. A month ago, the odds of a cut that large were only about 25 percent.

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Japan's economy is set to slow, the government's broadest indicator of future growth showed, as the nation's factories trim output in anticipation of a worsening U.S. slowdown.

The leading index fell to 30 percent in January, below the threshold of 50 that signals growth will slow in the next three to six months, the Cabinet Office said today in Tokyo, matching the median estimate of 26 economists surveyed by Bloomberg News. The December number was revised to 50 from 45.5.

Consumer confidence at a four-year low suggests household spending is unlikely to make up for a drop in export demand as the U.S. heads for its first recession since 2001. Business investment fell at the fastest pace in five years last quarter, the Finance Ministry said yesterday, signaling the government will have to trim its gross domestic product estimate next week.

“We don't know whether the term recession applies to current situation, but it's getting close,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo. “At the very least we're looking at a full-fledged slowdown.''

The yen was little changed, trading at 103.90 per dollar at 2:25 p.m. in Tokyo from 103.91 before the report. The leading index was below 50 for five of the six months to January.

Capital spending, used by the government to revise GDP estimates, fell for a third quarter in the three months ended Dec. 31, yesterday's report showed. Industrial production fell at the fastest pace in a year in January and machinery orders, an indicator of spending plans, slid for two months to December.

Growth Revision

The decline in business investment will cause annualized fourth-quarter growth to be cut to 2.3 percent from the preliminary 3.7 percent, according to the median estimate of 16 economists surveyed by Bloomberg News. The Cabinet Office will release the revised GDP figures on March 12.

“The issue isn't the fourth quarter, that's past history,'' said Bank of America's Fujii. “The issue is what happens from here same day payday loans. We're looking for growth close to zero in the first half of the year.''

The risk of a slowdown has investors betting the Bank of Japan will cut interest rates before the end of the year. Traders see a 61 percent chance the bank will lower the key rate from 0.5 percent by December, according to calculations by JPMorgan Chase & Co.

Governor Toshihiko Fukui, whose term at the central bank ends March 19, heads his last policy meeting today and tomorrow. The bank will keep its overnight lending rate at 0.5 percent at the conclusion of the meeting, according to all 40 economists surveyed by Bloomberg News.

U.S. Recession

Goldman Sachs Group Inc. and Morgan Stanley forecast the U.S., Japan's largest market, will fall into a recession this year. Growth in emerging economies, where Japan ships more than half its exports, will slow to 6.9 percent this year from 7.8 percent in 2007, according to the International Monetary Fund.

Should exports and capital spending falter, household spending is unlikely to pick up the slack.

Consumer confidence slid in January to the lowest level since June 2003, as households paid higher prices for gasoline and food amid sluggish wage growth. Average wages fell 0.7 percent in 2007, the steepest decline in three years.

Hiring, which has been supporting consumption in the absence of pay growth, is showing signs of slowing. Applicants outnumbered job offers for the second month in January.

The leading index is derived from 12 monthly indicators including housing starts, stock prices and other statistics that are a barometer for future economic activity. For a component to be negative, it has to be weaker than it was three months ago.

The coincident index, a measure of the current state of the economy, fell to 22.2, the second time it's been below 50 in 10 months. The government lowered the assessment of the index today.

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Shares of gem maker Charles & Colvard advanced in trading Tuesday after an analyst said the company could be an acquisition target.

Eric Wold of Merriman Curhan Ford & Co. said potential buyers would be interested in Charles & Colvard's inventory as well as the value of the patents on its product. The company could get snapped up at between $3 and $5 a share, Wold said - a high premium to the current price of the stock, which is trading near the 52-week low of $1.20.

Charles & Colvard, headquartered in Morrisville, manufactures a man-made gem known as moissanite that's similar to a diamond. Sales to wholesalers have slipped in recent quarters as retailers sold fewer pieces of the jewelry, leaving the company stuck with high levels of inventory cash advance flexible payments.

But a company interested in buying Charles & Colvard would want to turn that inventory into wholesale value, Wold writes in a note to clients. Further, a company that was willing to put money into an advertising campaign for moissanite could find the patents on the product valuable.

Shares of Charles & Colvard (Nasdaq: CTHR) closed up 3.2 percent, to $1.28, in trading Tuesday.

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Federal Reserve policy makers diverged on their assessments of interest rates and economic risks, with some highlighting dangers of a deeper slowdown and others stressing the need to maintain credibility on inflation.

Boston Fed Bank President Eric Rosengren, among five officials who spoke yesterday, said central bankers “may consider taking out some insurance against'' slower growth. By comparison, Chicago Fed President Charles Evans said officials can make clear their commitment to stable prices by “promptly'' reversing cuts when the “insurance'' is no longer needed.

The comments reflect the difficulties at a central bank trying to avert a recession and stabilize financial markets while coping with surging oil and food costs spurring consumer prices. Chairman Ben S. Bernanke acknowledged to lawmakers Feb. 28 that inflationary “stress'' is “complicating'' Fed policy.

“There is pretty universal acceptance of the seriousness of the problem and that policy has a role to play'' in reviving growth, said David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. Talk by some officials about raising rates “is a way to try to validate their inflation-fighting concerns,'' he said.

The dollar fell and commodity prices climbed to records this week after Fed Vice Chairman Donald Kohn said reviving growth is a bigger priority than containing inflation, a message Bernanke reinforced in semiannual testimony before Congress. The dollar touched $1.5239 per euro, the lowest ever, gold advanced as high as $976.32 per ounce, and crude oil reached a high of $103.05.

Hit to Growth

Rosengren, Evans, St. Louis Fed chief William Poole and Fed Governor Frederic Mishkin addressed a monetary policy forum yesterday in New York, where economists presented a study concluding that credit losses may damp growth by 1.3 percentage point over the next year.

Mortgage credit losses may total $400 billion, with about half that amount falling to U.S. financial institutions, according to the study, written by analysts including Greenlaw and Goldman Sachs Group Inc. chief U.S. economist Jan Hatzius.

“Monetary policy is a balancing act, with dangers of recession and inflation both very real,'' said Poole, who retires this month. Still, “if inflation develops while the FOMC is concentrating on avoiding recession, the consequence will be to delay recession but not to avoid it.''

Traders now judge that a cut of 0.75 percentage point in the Fed's main interest rate at or before the March 18 meeting is more likely than a half-point move, by a 70 percent to 30 percent margin, based on futures prices. The chance of such a large reduction jumped from 2 percent a week ago no checking account payday advance.

Credit Losses

U.S. stocks tumbled and Treasuries rallied yesterday after a report showed business activity fell to the lowest level since 2001 and UBS AG said losses in credit markets may top $600 billion.

“I would characterize the current state of affected financial markets as evolving positively but still fragile — in other words, unusually vulnerable to shocks,'' Dennis Lockhart, president of the Atlanta Fed, said in a panel discussion in Atlanta on subprime mortgages. “Resolution of the current financial market problems requires some stabilization of U.S. housing markets.''

Lockhart also said lower interest rates should help the U.S. economy accelerate later this year.

“Let's hope they don't wait too long'' to tackle inflation, Carnegie Mellon University economist Allan Meltzer, author of a history of the Fed, said in an interview with Bloomberg Television. He faulted some Fed officials for the “mistake'' of adopting the approach that “we're going to solve one problem and create another, and then we're going to try to solve that.''

`Timely Manner'

Bernanke said in congressional testimony this week that the Fed “will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.'' Kohn said Feb. 26 that turmoil in credit markets and the possibility of even slower growth pose a “greater threat'' than inflation.

Evans's comments reflected the assessment of some officials at the Jan. 29-30 meeting that once the economy recovers, the Fed may need to raise rates at a “rapid'' pace, according to minutes of the gathering. They follow expressions of concern by lawmakers this week to Bernanke that lower rates may stoke inflation.

“You always have to be mindful that when you take an action to mitigate one risk, then conflicting risks are being elevated,'' said Evans, 50, the newest Fed bank president, having been promoted in September from Chicago Fed research director.

Rosengren placed a different stress in his remarks, saying that “one of the significant downside risks to the economy is that further declines in housing prices could depress residential investment, reduce consumer spending, generate elevated foreclosures, and contribute to financial instability.''

Taking “appropriate'' actions to reduce that risk “seems prudent,'' said Rosengren, who is also 50 and took office last year.

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