tv Nightly Business Report PBS May 13, 2016 7:00pm-7:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. >> surprisingly strong. retail sales grew at the fastest pace in more than a year so why are so many traditional stores stuck in the mud? billion-dollar bet. why apple decided to make a sizable investment in one of uber's biggest rivals. how i made my millions. no, not me. our newest series introduces you to a serial entrepreneur who made a special sponge and is now soaking up success. those stories and more tonight on "nightly business report" for friday, may 13th. good evening, welcome. a triple-digit decline on this friday the 13th. but the week filled with retail angst didn't end as it began. today we learned that retail
sales were robust last month. according to the latest government data, consumers spent more in april than expected and that's important because consumer spending is responsible for about two-thirds of economic output. but it flies in the face of everything that we've heard this week from some of the nation's biggest retailers who are struggling to attract shoppers and grow revenue. jcpenney was the latest to report an unexpected sales drop and cut its gross margin guidance for the year. steve liesman looks at the possible reasons behind the disc. >> reporter: a strong national retail says report for april gave a major boost to the idea that the u.s. economy's in the early stages of a rebound from that weak first quarter. retail sales grew 1.3%, beating estimates in auto sales and furniture. economists looking for 2.5% overall economic growth in the second quarter. but the number raised a troubling question. why have retail earnings been so
lousy? nordstrom's had comparable sales fall 17%, kohl's saw them to 4% for the quarter. macy's reg jerred a decline of nearly 6%. theories abound. at the top of the list, internet retailers eating the lunch of department stores. year over year online sale rts up double digits compared to no growth at department stores. >> the retail's got to pick up its game, got to make -- the mall owner's got to create activities in a mall, like a hotel, to pull people into the property. do stuff that you can't do online. >> reporter: the ob line growth trend has been around for years, odd that anybody should be surprised by it. others suggest the election undermining consumer confidence. >> we think it's election related. there's a lot of people not happy on either side with the presumptive nominees. and the consumer's voting. >> reporter: working against that idea, consumer sentiment surged in may unexpectedly. how much confidence can consumers lack if they're back to the lots buying cars? we know this, job growth has been pretty solid and wages are even rising now, up about 2.5%
year over year. gas prices, they're up a bit. but still low. stock prices, they've rebounded. home values contie to rise modestly. consumers have the means to spend if they want to. >> people are spending but what are they spending it on? an experience. they're spending it on something where it's a sense of entertainment. social activity. >> reporter: for now, the retail mystery remains unsolved. consumers, they're spending, but investors, they're trying to figure out in whose cash register the money is ending up. >> so where and what are consumers buying with their money? jan nissen, ceo of the retail consultant form jay rogers nissen worldwide, welcome, good to have you with us. my sense is we get an idea of where that money is going, they're spending on cars, on stuff at home depot, and spending on specious experience. but they're not going to jcpenney or macy's or nordstrom's.
>> that's for sure, we're not seeing them turn out in the mainline stores. we're seeing continued growth in fast fashion, we're seeing continued growth in the off-price sector. we're seeing continued growth in online. let's read that as amazon. we are not seeing growth in the traditional brick and mortar full-price malbased retail space. >> you say you've seen this movie before how do you think the sequel, if we're living it right now, is going to turn out? >> well, these guys aren't going away, right? i mean, macy's is a big, health company, they're going to monetize the real estate. they'll get better at what they do, do more omni retail. my concern is not are they going to be here? even penny's is going to be here even given the tough time they went through. it's a question of what to these stores look like going forward? what does the roi on their investments look like? the problem i see is every time macy's takes a sale out of the store and puts it online, roi
goes down. every time a vendor takes a sale out of the macy's or another department store and sells it themselves, direct to consumer, they sell it at retail and their roi goes up. so we're seeing the vendors doing more and more direct to the consumer. and we're seeing more and more vendors selling to off-price. we're seeing a lot of price compression. >> i infer from that then, jan, that maybe if i want to make a buck here on retail, i might be better investing in some of the retail manufacturers who are selling direct or have their brands, whether it's a polo ralph lauren, a coach maybe, a michael kors. am i right? >> you're in my bali wick. i like ralph lauren, pvh, vf, columbia, haines brands. those are vendors are i think
are going to be better in the back half of the year, sell more themselves. so i like that space. you also mentioned something else i like. i like strong brands that have a real serious presence in the mind of the consumer. kate spade is a good example. their mind share is a lot bigger than their business. you said michael kors, i'm not a fan, i think they're on the downside now. but i like coach's resurgence require like them. i also like things that i would call amazon-proof. that's not going to be forever. but things like bali beauty, alta, i like things like that as well. >> lots of ideas, jan, thank you so much, have a great weekend. >> thank you. >> jan nissen, j.r. nissen worldwide present surprises. our market monitor has retail names she says are worth owning three to five years. down day on wall street. stocks dropped sharply pressured by consumer companies and energy
shares which followed oil lower. the dow jones industrial average dropped 185 points to 17,535. the nasdaq off 19. the s&p 500 was down 17. all the major indexes were lower for the week. the dow and the s&p 500 registered their third straight week of losses. the nasdaq its fourth. a closely followed gauge of inflation rose slightly last month. producer prices, the prices businesses receive for goods and services, increased .2% in april. that was a little less than expected but it was the first increase since january. exclude food and energy the index was up a little less than 1%. the latest data suggests overall inflation remains tame. dow component apple is making a billion-dollar bet in a country where it's facing obstacles. the dow component is investing in china's most popular ride-sharing company. a major competitor to uber. akiku fujita reports from shanghai.
>> reporter: this is certainly a huge coup for china's largest ride-sharing company. that investment today, $1 billion, the largest investment for this company. and with the funding in place, apple joins the likes of alibaba who have been strategic investors in this company. tim cook has framed this as an opportunity to get a better sense and to learn more about certain markets in china. this comes as apple looks to reinvigorate sales here in china, the world's second-largest market. sales in china slipped 26% the last quarter. apple has been under tremendous pressure from chinese regulators. the ibooks and itunes and movie store shut down in china last month. speaking of bbchu ching, a company valued at $25 billion, they've been lost in a very heated competition with uber but
they are the dominant player here with 87% market share, 11 million riders a day. they've expanded their service as recently, not just to include private riding but also buses and chauffeurs that drive cars of these users. certainly investors have been speculating for some time that apple could be entering the car business. today's announcement that perhaps another hint of apple's larger strategy moving forward, tim cook has said he's more interested in the software aspect of it. finding ways to connect that smartphone with infotainment, in-car experience. there's speculation whether apple is building up their own driverless car. the timing of this is very interesting, considering that tim cook will be visiting china later this month. akiko fujita, shanghai. hackers strike at the heart of the global financial system. wooerl we'll tell you what they did and what it means.
an anti-counterfeiting group has suspended ali baba's membership. the international anti-counterfeiting coalition told members it had failed to inform the board about conflicts of interest involving an executive of the group. member companies had recently pushed back against alibaba's inclusion which some view as a marketplace for fakes. gucci america, michael kors and tiffany left the coalition because of alibaba's involvement. facebook ceo zuckerberg defending against accusations of political bias which we told you about earlier this week. in an online post he wrote that facebook does not censor conservative topics and that the
social media network does not permit the prioritization of one viewpoint over another. zuckerberg said he is conducting a full investigation and will reach out to conservative leaders to discuss the issue. global bank hackers strike again. they found their way into the financial messaging system believed to be the most secure in the world. the system is used by thousands of banks to move money all over the globe. and it comes as investigators are still trying to solve the heist from the central bank of bangladesh in february. eamon javers is following the to have story for us. >> this is scary for banks around the world. the international consort shum is called swift, based in brussels, they operate the electric messaging system that thousands of banks around the world and more than 200 countries use to send messages authorizing wire transfers of large amounts of money. billions and millions of dollars
at a time in some of these messages. so the fact that hackers could get into software that interacts with swift and authorize transfers right out of a bank account is really scary. swift saying in a statement last night that they found a second instance where this apparently has happened. they would not name the bank or say how big it was or even what continent this bank was on but it has deep imapplications for the financial system. >> any other shoes to drop in this story? >> well, one of the big questions in all of this is w whodun whodunit? don't know who did this attack against the unnamed bank revealed last night, we don't know who was behind that $81 million heist at the new york fed's account that they held for the bank of bangladesh. one report out today suggested there may be a similarity between the hack at the bank of bangladesh and the attack on sony that we saw that was later blamed on the north koreans. we're going to need a lot more reporting on this to find out who is exactly behind it but there's some tantalizing threads now in the public discussion. >> is there another alternative
for the banks to use other than swift? that's one of the questions that was floated out there. why are we using swift if they can hack into it? but almost everybody uses it. is there an alternative? >> well, there isn't, sue. you're right to spotlight that. carolyn maloney, congresswoman on capitol hill, wrote to the new york fed asking them why they put so much stock in this particular system and the fed replied in answers that were revealed today, in essence, everybody around the world uses this system, so we have to use it too. the global financial system is really dependant on a few electronic systems, swift is just one of them. >> eamon, thank you very much, eamon javers in washington. it's an important time of the year for the media industry, broadcasters and digital media want madison avenue to commit to buys ad ford the upcoming season. while digital has been taking ad dollars from television the trends this year are surprising. julie boorstin explains. >> reporter: rumors of television's demise may have been exaggerated.
this year's broadcasters pitching lineups will be the first time in five years they secure morive-front ad dollars than the prior year. media dynamics projecting a 5% increase in dollars, a 10% increase in prices. >> few media can match the kind of impact, the kind of sight, sound, motion that tv delivers for advertiser, particularly advertisers that are -- that care about their brands and care about their image. you know, it's very hard to match that kind of impact with a digital banner or search app. >> reporter: broadcasters of benefitting from political ad and the olympics but higher prices are also coming from less inventory. a number of cable networks are cutting back on commercial time. even "saturday night live" is reducing its ad load. now tv ads are getting more high-tech. media giants are leveraging big data to more narrowly target ads. traditional media companies use
digital targeting, internet giants are becoming more like traditional media. at this year's digital new front, some 40 companies presenting to madison avenue putting premium digital video in the spotlight. best positioned, facebook with its live video, hulu's mix of shows, google's youtube and google preferred which sold out last year. drawing magnet global to shift over $250 million into google preferred the next three years. >> the business news is we are funding it from television budgets which is obviously where the majority of our spend resides. if you look at consumer usage, we're just acknowledging that audiences are shifting out of linear television to other platforms. >> as digital individual draws more viewers it's growing its ad lars, digital advertising projected to hit $68 billion, topping tv ad spending for the
first time. while tv returns to growth it's facing more competition than ever. for "nightly business report," i'm julia boorstin in los angeles. try and fund management exits its stake in pepsi in "market focus." according to a regulatory filing the activist hedge fund sold its more than 18 million-share stake in the snack and beverage company in march. triann said pepsi addressed many of the operational issued addressed by the hedge fund. the news sent pepsi down 1.5%. the cfo at tiffany and company steps down resigning from the luxury jewelry retailer by the end of the month to become cfo at newell brands which owns sharpie, markers and yankee candle. shares fell nearly 3% to 64.43. honda posted an $860 million loss as currency he winds and hefty costs related to its takata air bag recall dragged down results. subsequently the company plans
to recall 21 million more vehicles in addition to the 30 million vehicles it previously recalled. shares down more than 4% on the day to 26.28. acacia communications made its stock market debut today. the telecom equipment company rai 4.5 million shares sold at $20 apiece. the stock rose more than 34% on the day to 30.95. and pfizer will no longer allow its drugs to be used in lethal injections saying its products are meant to save lives. it is the latest u.s. drugmaker to impose such controls which means the drugs used in executions are no longer legally available to authorities. shares of pfizer were unchanged for the day at 33.19. our market monitor tonight is a value investor. she likes companies she says are misunderstood by the market and names that belong in your
portfolio for the long-term. joining us for the first time is our guest kim forrest, senior equity analyst at fort pick capital, good to see you. >> thanks for having me. >> let's start with your stock picks. it's retail which really got slammed this week. urban outfitters, why do you like them? >> well, they're misunderstood like all the stocks that we're going to talk about today. they are cast as a teen retailer and malbased, and they're not really either one of those things. about 50% of their revenues are from the teen market but it's the older teen and college age. then the rest is for women's clothing. and that tends to be the higher-end woman shopper. but the really exciting thing is the company goes after millennials where they want to shop which is in urban areas and next to colleges. so the company is just
well-positioned and we think it's very misunderstood. >> my wife loves anthropology by the way. vf corps, i don't know one child in the northeast who does not have a north face jacket. >> well, i'm sure there are because this year, the sales of their jackets were a little light. and that is why they're on the list. they're underperforming because everybody who made jackets underperformed this year. >> warm winter. >> yes but again, they have this stable of brands including vans, timberland, the north face, among others. and they are just excellent merchandisers and retailers. and they know what people want, make it, and do it in a very cost effective way. >> now to technology. intel made your list? >> exactly. we think they're misunderstood because they are intel inside, in your pc. but we think they're going to move into mobile devices more and more.
and cars and everything's getting smarter. we think intel has the technology that will drive our smart devices. >> all right, kim, on that note we thank you very much. we'll have you back soon. kim forrest with fort pitt capital. coming up, how a box marked "junk" became one man's secret to success. the story of how he made his millions coming up next. and here's a look at what to watch for next week. tuesday more retail earnings
when home depot reports its quarterly results. wednesday the federal reserve releases the minutes of its last meeting. the world's largest retailer walmart reports earnings thursday. that's what to watch for next week. general motors is halting sales, halting sales of nearly 60,000 suvs. the vehicles have incorrect epa window stickers that overstate fuel economy. including the 2016 chevy traverse, gmc acadia, and the buick enclave large cross-overs. a warning tonight from subaru to its drivers. don't drive some of our cars. the automaker is recalling more than 48,000 2015 to 2017 outback and 2016 to 2017 legacy models. the reason, the steering may fail. subaru says these vehicles should not be driven until inspected or repaired. you've seen our stories we hope every jobs friday promising startup companies but when do
bright ideas turn into even bigger businesses? i got my hands dirty finding out how one man turned a revolutionary sponge, yes, a sponge, into a multi-million dollar enterprise based in fallcroft, pennsylvania, near philadelphia. part of our new series "how i made my millions." >> reporter: keeping up with aaron kraus isn't easy. >> a lot of inventers are serial inventors. and that description fits you? >> absolutely, i've been inventing products and ideas since i was probably 10 years old. >> reporter: his most successful brain child, the perpetually happy, scrappy, scrub daddy sponge. >> this is not an overnight success by any means. >> the original business was a car washing and car detailing business? >> i like to tell everyone, i learned everything about business in the detailing busine. >> reporter: it was a business he started right after college
back in 1993. not exactly the career path his parents, body of them doctors, had envisioned. >> i started this process of inventing all these new improvements and new types of buffing and polishing pads. >> reporter: and in 2008 about 14 years after specializing in automotive foam products, 3m, having noticed the upstart competitor, offered him a deal he couldn't refuse. >> we were bought out by a $28 billion a year company. >> reporter: the terms of the acquisition weren't disclosed but one of the patented products 3m definitely didn't want was this tough as nails sponge kraus initially designed to clean mechanics' hands. >> we took the product, we made about 100 of them, put them in a box, i labeled it "junk," put it in the back of the factory, and that's where it sat. from 2008 until 2011. and what got it off the shelf? >> i got to credit my wife. >> i asked aaron to come out here and clean the lawn
furniture. >> i was looking at it, what am i going to use that's not going to scratch the paint off of this? got those old sponges, i'll have a use for them, use them, throw them out. >> reporter: he grabbed one of the rock-hard plastic scrubbers and plunged it into a bucket of warm, soap why are water. >> and it wasn't -- >> softened? >> totally soft. i said, what's that? the thing's ruined, it's not going to scrub at all. i took it out, it worked a little bit. but as i was scrubbing, the temperature outside was changing, getting harder and harder. >> reporter: it was at that moment he realized the foam actually changed texture. soft in warm water, hard in cold. which made it perfect for cleaning just about anything >> i looked at it and i said, oh my god, we missed the entire boat. >> reporter: an epiphany for a sponge that kraus is still excited to show off. >> oh, man. >> isn't it amazing? >> he started giving it out to friends and family to test. >> now it's going to be great for scrubbing all your pots.
>> everybody came back with great results. >> get out of my way, i want to do this. >> reporter: not everyon was this enthusiastic at first but a shot on qvc and a trip to the "shark tank" in 2012 stirred up interest. >> the retailers started calling. bed, bath, beyond. walmart. home depot. >> reporter: until they kraus had only sold $100,000 worth of sponges. now he estimates total retail sales have hit $100 million. >> what do mom and dad say now? >> at this point i'm the only one in my family that has patents and i think that they're finally pretty proud. >> kraus said it would not have been possible without support from his parents. his dad let him run the car detailing business out of his garage and loaned him the money to get started, a true five-year loan at one point above the bank's rate. why? at that point kraus was a credit risk. he paid it all back. if you don't have them, the
sponges are really, really good. >> i'm going to get one. >> they're tough, tough as nails. >> why doesn't that ever happen to sinus before we go, another look at the day and the week on wall street. the dow dropped 185 points. the nasdaq off 19. the s&p 500 was down 17. the major indexes were all lower for the week. that does it for nightly pills report tonight. i'm sue herera. thanks for joining us. >> grab your sponge scrub daddies. have a great weekend. we'll see you on mon
>> mr. trump goes to washington. agreeing with house speaker paul ryan it's time to unite the republican party. hillary clinton can't stop her campaign on two fronts, against trump and bernie sanders plus, the white house steps into the highly-charged debate over schools and transgender rights. i'm pete williams in for gwen ifill tonight on washington week. >> we had a very encouraging meeting. it's very important that we don't fake unifying, pretend, that we truly and uley unify that -- so that we are full strength in the fall. >> i think we had a great meeting today and agreed on a lot be things. it will be a process but it will come along. peter: donald trump turns on the charm. hoping to