Starbucks Warns Of Weak Earnings, As Amazon And Apple See Profits Jump
Delta and Northwest Airlines, hoping to merge and become the nation's largest airline, posted big losses on Wednesday, the New York Times reported:
Delta Air Lines and Northwest Airlines, preparing to merge amid a steep industry downturn, reported a combined first-quarter loss of $10.5 billion on Wednesday, most of it an accounting recognition that the two carriers are worth far less than when they emerged from bankruptcy a year ago.
Airline stocks were stable Wednesday afternoon after plunging Tuesday, led by a decline of more than 35 percent at UAL, the parent of United Airlines. Both Delta and Northwest closed down slightlyAcross the industry, carriers are reeling from a huge increase in fuel costs -- roughly 50 percent above first-quarter prices in 2007 -- and preparing for a decline in demand with the economy faltering.
Delta and Northwest plan to merge and hope the combination produces savings and other efficiencies of more than $1 billion by 2012. Others are in merger discussions, too. But for the industry to return to consistent profitability, airlines will need to push through big fare increases, which to date have been resisted by some discount carriers and by price-savvy customers.
In the meantime, in a replay of the period after the attacks of Sept. 11, 2001, carriers will be reducing their domestic schedules, laying off workers, deferring investments in planes and other equipment and generally hunkering down.
Starbucks Corp said on Wednesday it was the latest victim of the U.S. mortgage meltdown, and warned of weak earnings according to Reuters:
Blaming consumers in hard-hit housing markets of California and Florida, the coffee shop chain slashed its quarterly and 2008 profit forecast below Wall Street targets and said it faced the "weakest economic environment" in its history.The company's shares tumbled 12 percent on the news, which came four months after company founder Howard Schultz returned as chief executive with a mandate to turn around the struggling U.S. business.
"The wheels have really come off of this train," RBC Capital Markets analyst Larry Miller told Reuters, noting his surprise at the warning. "It's amazing how fast business has derailed. If sales are down mid-single digits, that is a rapid erosion."
Starbucks long considered itself virtually immune to economic swings, but has admitted in recent months that some consumers have avoided its premium coffee as the economy soured.
Amazon.com said Wednesday that profits rose 29 percent in the First Quarter, buoyed by strong sales in the U.S. and abroad, the AP reported:
Sales in North America rose 31 percent to $2.13 billion from a year ago. International sales grew 44 percent to $2.01 billion, and accounted for 49 percent of total revenue, up from 46 percent last year.
Chief Financial Officer Tom Szkutak said in a conference call Wednesday that he did not see evidence in Amazon's results that U.S. shoppers had changed their buying behavior, despite widespread concern about a possible recession."We don't have a lot of data points about the economy specifically, but what we're seeing in our business is, it's very solid," he said.
Amazon said it expects sales between $3.86 billion and $4.08 billion for the current quarter. Analysts are looking for $3.84 billion.
For the year, the retailer forecast $19.1 billion to $20.0 billion in revenue, close to Wall Street's current outlook for $19.29 billion.
Apple, Inc reported that Second Quarter profits jumped 36 percent, but the stock tumbled amidst worries that earnings were below expectations, the AP reported:
The Mac and iPod maker is believed to be especially vulnerable to slowing consumer spending in the United States because of its stronger presence here than overseas.
Another factor weighing on Apple during the second and third quarters is the company's decision to delay recognizing iPhone sales until a software upgrade for the multimedia gadget is shipped this summer.The company has traditionally issued conservative financial forecasts.
Apple shares fell $1.08, or less than 1 percent, to $161.81, in after-hours trading, climbing back from a dip of nearly 5 percent right after the close of trading and the release of the earnings report. The shares had closed up $2.69, or 1.7 percent, at $162.89.
The report showed that Apple was firing on all cylinders during the first three months of the year.
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Huffington Post | April 23, 2008 at 05:20 PM