tv Nightly Business Report PBS November 11, 2015 6:30pm-7:01pm PST
>> announcer: this is "nightly business report" with tyler mathisen and sue herera. macy's meltdown. it's the worst day for the stock in seven years after the retail bellwether reported a slide in revenue and said the outlook for the holiday quarter isn't much better. new normal. are you harming your portfolio by following one of the most traditional and popular rules of investing? and from the battlefield to the business world, the real reason some veterans are becoming entrepreneurs. all that and more tonight on "nightly business report" for wednesday, november 11th. good evening, everyone, and welcome. tyler mathisen is off tonight. well, the magic of macy's was nowhere to be found, and it sent a chill through the retail sector. the department store that many consider to be a bellwether for the industry reported a sharp
drop in quarterly sales, and it lowered its earnings guidance for the year, something many investors don't want to see heading into the holiday season. and that sent shares lower, falling nearly 14%, its worst day since 2008. courtney reagan has more on macy's meltdown. >> reporter: for the second straight quarter, the magic was missing at macy's. the department store beat profit expectations but reported disappointing sales and cut its full-year earnings forecast. ceo terry lundgren said many of the issues that plagued them during the year have gotten worse, including declining tourist spending at its highest volume and most profitable big-city stores and unseasonably warm weather crimping sales of cold-weather merchandise. >> the reality is, particularly in the northeast, it is much warmer this year than last. and so, we expect that's going to continue. that's not going to -- those things are just not going to change dramatically, i don't believe. and at some point in time, you
run out of days to sell through the inventory, because december 27th comes and volume just drops off precipitously. so, earnings is forecast down for fourth quarter because we're going to take markdowns. i mean, great for consumers. consumers are going to have a field day. >> reporter: macy's also said sales of merchandise like handbags, jewelry and accessories also slowed. while macy's stock posted its biggest loss in more than seven years, not every analyst thinks it spells trouble for the long term. >> it's sll a very powerful place with great vendors, great brands, a very attractive online business, very steady free cash flow generation. so, i think there's a place for macy's in the long term, but just acknowledging the near term, there is some pressure, and the company's really trying to figure out the right strategies to insure that they're relevant to customers for the near and long term. >> reporter: not every retailer's still waiting to report results will be hurt to the same degree from warmer weather and lower tourist spending.
last quarter, when analysts asked nordstrom if declines in tourism was an issue, they said while they have tourists in their stores, it's not a discussion point. ahead of their full earnings report on friday, jcpenney reported stronger than expected same-store sales. it is a bet that t.j. maxx, ross stores and burlington will be less affected by weather issues and retailers like lululemon and american eagle that report later can point to better trends as the weather does get cooler, but there's still a full holiday season ahead. anything can happen. for "nightly business report," i'm courtney reagan in san francisco. >> and a bit later in the program, we'll find out just how much heat the broader retail sector will feel from this warmer weather. it's a done deal. anheuser-busch inbev is acquiring rival sab miller. the deal would create a massive global beer company that will
sell nearly one in three beers worldwide. as part of the deal, sab miller will sell its stake in miller coors to molson. on wall street, that merger deal wasn't enough to offset the decline in macy's and the other retailers, which pressured the broader market. investors also sold shares of energy companies on a 3% decline in oil prices. so, by the close, the dow jones industrial average fell 56 points to 17,702. the nasdaq dropped 16 and the s&p 500 was down six. spending records were smashed in china. ali baba reported blockbuster sales during its singles day online shopping event. we told you last night that sales started out strong, and tonight we can tell you that they finished that way as well. totaling $14 billion, better than expected, and a 54% gain from last year. eunice yoon reports from the event in beijing.
>> reporter: chinese people greeted each other on the singles day with the question, did you buy? the numbers were impressive. ali baba clocked $14.3 billion of sales on its site. that's a record with over 460 million transactions. singles day is a sort of an anti-valentine's day here. the allure is that university students got together to buy each other presents, but ali baba turned the day into a monster consumer shopping extravaganza, and executive chairman jack moss said this shows that consumption here is on the rise, even though he does see trouble for the economy. >> i think the problem of china is we have to know that it's not -- it's impossible to keep on growth for 8% and 9% every year. this economy is transforming. so, what we will see is the next five to ten years china should pay much more attention to the quality instead of the quantity. >> reporter: some of the best
sellers today, phones, cadillacs and nike shoes. out of all the countries, u.s. products saw the biggest overseas sales by chinese buyers. ali baba hopes to make singles day global, possibly bringing it next to new york or to london. for "nightly business report," i'm eunice yoon in beijing. >> they also addressed counterfeit products on ali baba's site and said he's not concerned that the fakes will harm the company's global ambitions. >> we will continue to work. i think if we are not the best, we are the largest troop against and fighter against this counterfeit products. and i will continue to work. give us some years. give us three, five years. we will give the world a wonderful response. >> jack may be china's wealthiest man, but jeff bezos is climbing the list of the world's richest, edging past mexico's carlos slim to take the
number four spot on the list. by some estimates, bezos' fortunate tops $58 billion. his net worth has more than doubled this year, helped by a more than 110% gain in shares of amazon. daily fantasy sports companies are out of luck in new york. the attorney general has demanded that the two largest operators, draft kings and fanduel, stop taking bets in the state, because he considers them illegal gambling operations. dominic chu has more on the latest setback for this fast-growing industry. >> reporter: daily fantasy sports, is it or isn't it gambling? well, the new york attorney general says it is gambling and of the illegal variety and that their business violates the law. and this is the most important development in the debate over fantasy sports to date for one important reason. >> the state of new york is critical to both fanduel and draft kings. not only is it 10%, approximately, of their overall business, but in addition to
that, again, new york is the hub of finance in america, in the world! >> reporter: a central part of the raging debate over daily fantasy sports is whether or not it's a game of skill or just wagering on an eventual outcome. supporters of daily fantasy sports argue that there is research and strategy that's involved in creating portfolios, or lineups of players, to compete against others. opponents say that these are short-term exercises designed to cater to instant gratification of winning money and that they're different than traditional fantasy sports that require hours of preparation and weeks of commitment. now, regardless of the view, everyone is trying to figure out how to deal with emerging product companies like fanduel or draft kings. draft kings board member hadi nada sees the challenges that lie ahead. >> start-ups are disrupting the world, right? you're seeing it with ali baba, with amazon. start-ups are disrupting the world. and many companies are running into these issues, whether it's airbnb or uber, have very similar issues that we're
dealing with. the traditional infrastructure's ill-equipped to handle these start-ups, and i think this is one aspect of that. >> reporter: new york becomes the sixth state to demand a ban on daily fantasy wagers. so, how do new yorkers feel about the ban on these daily fantasy sports sites? >> those guys are taking some leadership on this and kind of getting ahead of the curve and maybe try to save some people from getting into trouble. >> i honestly don't see anything wrong with it. >> i think it's skills. there's lots of data and analytics and statistics that go into that. it's not betting horses. >> reporter: the next chapter of this story involves what promises to be a lengthy legal battle between site operators, like fanduel and draft kings, against state governments. should they be regulated like the lottery, horse racing or even casino gaming? ultimately, though, it may come down to just money and whether the state's ability to regulate and tax daily fantasy sports opens up the door for play to resume. for "nightly business report," i'm dominic chu. >> fanduel's ceo says his company will use every avenue we
can to stay open in new york and that a court would disagree with the new york attorney general's decision. comcast ventures and nbc sports ventures have stakes in fanduel. comcast is the parent company of cnbc, which produces this program. from fantasy games to video games, activision blizzard says "black ops" made more than $500 million in worldwide sales in its first three days of release. the company says this is the biggest entertainment launch of the year, including theatrical box office, music and books, and that sent shares 2% higher in trading today. still ahead, keeping tabs. a deal is reached to better track flights over the oceans, but there's one company that's already working on a new system.
a new vaccine may be able to prevent high cholesterol. researchers at the national institutes of health and the university of new mexico say an early-stage study shows promise. the new vaccine has significantly reduced ldl cholesterol, or bad cholesterol, in both mice and monkeys. about 73 million american adults have high levels of that bad cholesterol. world nations struck a landmark deal that would use satellites to track planes in the air. the agreement was reached at a united nations conference and would dedicate part of the radio spectrum to a global flight tracking system. the move is an attempt to prevent a repeat of the disappearance of malaysia flight 370, and it updates the current radar system. phil lebeau tells us about one
company that's already working on satellite tracking technology. >> reporter: every day, more than 93,000 commercial flights are taking off and landing around the world. the vast majority are tracked almost constantly by ground-based radar, but what happens over large stretches of oceans or when flights cross the polar region? at rockwell collins in annapolis, maryland, a new system, called multilink, ensures planes can always be monitored. >> any aircraft that's flying anywhere in the world, if it deviates from its course, the system's going to report that to the airline back office. >> reporter: here's how multilink works. depending on the flight and its location, separate radar and satellite systems are sending and receiving signals from that plane, but those systems don't always communicate with each other. multilink takes all of those signals to track where a particular plane is flying and if it is on its designated flight path. if it's not, multilink alerts an
airline that something has changed. >> a very important attribute of the system that we have is an aircraft monitoring function. so, in the event that aircraft were to go off course, off its intended path, we can immediately alert the airline that that's occurred, and they can contact the aircraft to try and understand what's happened. >> reporter: for "nightly business report," i'm phil lebeau. we begin "market focus" tonight with an update from jcpenney on a class-action lawsuit it's facing. the retailer says that it will make $50 million available to settle a suit that accuses the company of tricking customers into thinking that they were getting big discounts on some of its items. the company also said that despite the impact of that settlement, it's still pleased with the results, which will be released soon. shares fell nearly 2% to $8.52. kroger announcing it will purchase a smaller supermarket chain called roundy's in a deal worth about $800 million. the ceo says there's an important strategy behind the move.
>> we really view this as a perfect fit from a geography standpoint to kroger. a lot of synergies and a great group of stores. so, we can't wait for the associates to become part of the kroger family. we think this is a much more efficient way to go into a new market, and they really have a great market share. >> shares were off a fraction to $37.03. iac interactive has offered more than $500 million to purchase the customer reviews website angie's list. iac owns match.com and other dating services and says that angie's board was uninterested in the proposal. no word from angie's list on the matter yet. angie's list saw its shares surge in initial after-hours trading. during the regular session, it was up 1% to $7.92. iac interactive was pretty much little changed. paypal took a hit in today's session in a "wall street journal" report. according to the "journal," apple will roll out a mobile person-to-person payment system that's similar to paypal's
service venmo. shares fell nearly 2% to $36.33. more signs of softness in the art market that we reported on last night. a number of works at a christie's auction went unsold or sold for below the guaranteed price. for instance, the andy warhol fetched $32 million, and it sounds like a lot of money, but christie's agreed to pay the seller $40 million, meaning they have to pay the difference. while some pieces weren't profitable, others didn't sell at all, like this one priced at $6.5 million and this warhol, among others. as we reported earlier, the warm weather was one of the reasons why macy's reported a weak quarter. when temperatures increase, consumers are less likely to buy winter clothing. temperatures have been above normal, and according to the weather company, are expected to stay that way this month for much of the nation. paul walsh joins us. he's vice president with weather analytics, analyzes weather impact on spending trends, and
he joins us tonight. good to see you again, paul. welcome back. >> hi, thank you. >> so, how much warmer is it in most parts of the nation than it normally is at this time of year? >> well, across the entire eastern half of the country, it's been, especially the northeast and midwest, which is really where it matters as it relates to national retailers, it's been 10, 15, even 20 degrees warmer than normal, which is obviously very unusual for november and really bad news for department store retailers, as we are seeing. >> yeah, we have seen department store retailers use weather as an excuse in the past, and i say excuse in quotes, but this time it sounds like perhaps there really is a legitimate reason why consumers aren't buying. >> yes. >> will they, do you think, get off the couch, though, as we get closer to thanksgiving and closer to christmas? >> yeah, they definitely will. and there's two things that are going on for this november. number one, last november was one of the coldest on record. so, we saw really strong sales in november of last year. this year, the absolute opposite is happening, so people are just
not getting off the couch, because when it feels like -- if it's 60 degrees in new york in november, it doesn't feel like winter and people aren't shopping. the good news, though, is that as we move into december, we're going to be up against unusually warm weather last year, so what's going to happen is that demand curve is going to shift to the right, and i think we're going to see these sales happen. they're going to happen very, very strongly, i believe, as we get into the holiday season. unfortunately for a lot of the retailers, though, that's often too late. >> right, and they've already heavily discounted. >> exactly. the other challenge that we're going to have as we move into december is that we are experiencing this el nino sort of condition, which means that oftentimes with that you get a lot more rain and even snow. and that's really the biggest challenge for retailers as we move into december is precipitation on a weekend. that's what keeps people home. cold weather doesn't keep people home. we did some surveying last week. we found that it needs to be really, really cold before people don't go shopping. but if it's raining or snowing, people will stay home, and those sales will be lost.
>> yeah, there's no fun walking through the parking lot when it's raining and snowing. paul, thank you. paul walsh with weather analytics. >> thank you. and coming up, how some veterans are going from the battlefield to the business world and becoming their own bosses. but first, a look at how commodities and currencies fared today. the treasury market was closed for veterans day. here's a look at what to watch for tomorrow. dow component cisco systems will report earnings. lots of fed speak, including a scheduled speech from fed chair janet yellen. two reads on the health of the labor market with jobless claims and the job openings and labor turnover survey. and that's what to watch for on thursday. years ago, managing your
investment portfolio was easy, for the most part. you invested 60% in stocks and 40% in bonds. but in today's environment, our next guest says this traditional asset allocation may no longer work and could be putting your retirement nest egg at risk. he is scott puritz with rebalance i.r.a. scott, welcome. nice to have you here. >> pleasure. >> so, what has changed? why does the 60/40 formula, which so many people have relied on for so long, no longer apply? >> well, there are really two major reasons why this classic rule no longer applies. first, interest rates are at historic lows. with u.s. treasury trading around 2.2%, that is at historic low, and 97% lower than any time in american history, other than after world war ii. and second, americans are living
dramatically longer. so, the combination means that the old rules are not only out of sorts but downright dangerous. >> so, you advocate that people in their 50s and 60s who by the old rule might be moving more into fixed income or more conservative investments, conservative in quotes, should have, actually, more exposure to equities. let's take a look at what you're recommending here. so, if you're in your 20s and 30s, 100%, 40s 90% to 100%. >> correct. >> but when we get into the 50s, 60s and even 70s, that's a fairly sizable allocation to equities. >> it's about balancing risk between the risk of volatility in stocks and outliving your money, if investors go too early into bonds and fixed income with historically low interest rates. >> you know, do you have to stay domestically for this kind of equity allocation? i mean, now the world is also
much bigger in terms of investment opportunities. so, if, perhaps, you think our stock market has run its course with a bull market at some point in time, would you recommend looking for equity exposure in markets outside of the u.s.? >> yes. we recommend that retirement investors be globally diversified, and the best way to have equity exposure is through low-cost index funds. >> all right. on that note, scott, thank you very much. with rebalance i.r.a. well, opening a business isn't easy, whether you're a well-known entrepreneur or someone just starting out. kate rogers is back tonight at the iconic entrepreneurial conference in our nation's capital with some of the challenges facing business owners, big and small. >> reporter:o matter how successful they are, entrepreneurs still struggle with their own day-to-day challenges. at the cnbc and inc. magazine
iconic tour in washington, d.c., kenneth cole told the crowd he's still proving himself to customers three decades into the game with his namesake brand. >> every day you've got to look around and figure out, am i still relevant? and if not, why, and what do i need. and the universe today is so -- everybody who exists everywhere is an alternative. and i've been doing this for 30 years. so, i believe after 30 years, i've earned the right to be considered, but every day i have to earn the right to be chosen. >> reporter: and burt jacobs admits retail is still a challenge. despite growing his t-shirt business into a $100 million brand. >> it's a tough market, and i think that too many retailers are talking about how to engage and create community but are still just hanging things in the window and hoping they have the right brands. so, we really need to make changes and we're trying ourselves in that area as well. >> reporter: entrepreneurs here on the ground found inspiration in hearing from these seasoned vets and also shared some of their own growing pains.
>> the main challenge is to continuously innovate and tell about yourself through the community. >> one of the other things that the growth challenge is finding great team members who are going to be able to support the business as it grows, who are going to being to take over parts of the things that i'm really not supposed to be doing. >> our biggest challenge as an entrepreneur is probably access to capital. we have a lot of good ideas. we've been fortunate enough to succeed in where we are today. once you get over that few million, $5 million sort of threshold, there are some big ideas and it's going to take capital to get us there. >> reporter: but despite the ups and downs of running a business, for many it's worth the ride. for "nightly business report" in washington, d.c., i'm kate rogers. and on this veterans day, there are more than 3 million veteran-owned small businesses across the country. that's according to the small business administration. for some, opening a business allowed them to continue using their leadership skills learned in the service. for others, it's a way to turn their lives around.
dina gusoffski reports. >> reporter: from the front lines of war to battling the business world, america's veterans are taking an interest in owning their own businesses, especially franchises. >> it's scary. you know, i was in the military for 20 years, and you're always told what to do, where to be, how, and you know, there's an anxiety of, you know, that safety net isn't going to be there anymore. >> reporter: diana walters served in the marines for 20 years, and just six months ago started her own franchise by buying into housemaster. >> we're a home inspection business. i mean, we come in when someone wants to purchase a home or sell a home. we will come in and we will go through the house and we will look at safety issues, and we're going to give them a report. >> reporter: the business made it into the top five of franchise business review's list of the top 100 franchises for veterans. pino's palate, a paint and sit franchise was at the top of the list. rankings are based on feedback
from franchise owners, including data on how much the owners enjoy operating the business, whether they feel valued and if they trust their franchiser, among other things. >> these are a couple canvases i brought in. >> reporter: scott drummond opened his first studio in brooklyn, new york, just a few months ago. >> i was in desert storm. i was exchanging enemy gunfire, i had rounds land next to me. i would say many veterans would do the same. i would encourage you to look at many franchises out there, see what fits for you, see what makes you feel happy and just go for it. >> reporter: many veterans have had a tough time transitioning back to civilian life, and the help in pushing that adjustment has increasingly gone from creating any employment opportunities to ones where veterans can become their own bosses. and finally tonight on this veterans day, if you are a veteran, a number of restaurants are offering discounts to show their support for the men and women of the military. they include applebee's, buffalo
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