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The Honolulu Advertiser

Posted at 2:33 p.m., Tuesday, July 10, 2007

Business highlights: Home Depot, Sears, euro

Advertiser Staff

Home Depot issues troubling forecast

ATLANTA — The Home Depot Inc., the world's largest home improvement store chain, on Tuesday cited continued weakness in the housing market and the sale of its wholesale distribution business as it issued a bleaker-than-expected financial outlook for the year.

But the Atlanta-based company also said it was launching a tender offer for 250 million shares of its common stock at a price range of $39 to $44 per share as part of a larger program to buy back up to $22.5 billion of its stock.

Home Depot shares rose 2 cents to $40.25 Tuesday.

Home Depot said it now expects its earnings per share to decline by 15 percent to 18 percent for fiscal 2007. In May, the company had projected an earnings per share decline of 9 percent for the year.

The earlier guidance included an estimated 18 cents of earnings per share contribution from the company's HD Supply unit for the last six months of the fiscal year.

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Stocks fall ahead of earnings reports, over Home Depot, Sears news

NEW YORK — Stocks plunged Tuesday as investors, nervous about upcoming earnings reports, cringed at troubling forecasts from retailers Home Depot and Sears and at soaring oil prices. The Dow Jones industrial average fell 148 points.

The market seemed to be following the pattern of previous earnings seasons, turning lower as second-quarter reports had a rocky start. Home Depot Inc., Sears Holdings Corp. and homebuilder D.R. Horton Inc. offered dreary outlooks that suggested the sluggish housing market may dampen consumer spending.

The outlooks followed Monday's news that aluminum producer Alcoa Inc.'s second-quarter sales missed estimates and that printer manufacturer Lexmark International Inc. slashed its second-quarter earnings forecast. Together, the reports dispirited investors who had been counting on corporate America's performance giving a boost to the stock market, which has been stuttering in recent weeks.

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Sears warns of disappointing second quarter

CHICAGO — Sears Holdings Corp. surprised Wall Street Tuesday, warning its second-quarter earnings will likely fall well below expectations because of more disappointing sales at its Sears and Kmart.

The news tanked Sears' stock, which fell more than 10 percent to a 10-month low before rebounding slightly.

It would be the second earnings miss in a row for the department store chain led by Chairman Eddie Lampert, a hedge-fund guru who acquired Kmart in 2003 and Sears, Roebuck and Co. in 2005.

With Lampert at the helm, many investors have regarded Sears as a hedge fund masquerading as a department store, and have been anxiously awaiting word from Lampert about a possible expansion that could turn around the company's fortunes. But while Sears' profits and stock price have fared well in the past two years, revenues have continued to sink.

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D.R. Horton to post loss

DALLAS — The traditional spring home-selling season was a bust for D.R. Horton Inc., one of the biggest nationwide homebuilders.

Horton said Tuesday it will post a loss from operations for its latest quarter after net orders fell 40 percent and it wrote down the value of unsold houses.

The report provided more evidence that the housing sector continues to sink.

Inventories of unsold used homes are at their highest level in 15 years. Experts blame tougher rules on qualifying for mortgages. They also say the slowdown is a normal comedown after several years of strong sales.

Horton shares fell 39 cents, or 2 percent, to $19.40 Tuesday after sinking to a new 52-week low of $19.16 earlier in the session.

Horton said it took orders for 8,559 houses worth $2 billion in the three months that ended June 30, down from 14,316 homes worth $3.8 billion a year earlier. The decline was sharpest in California and less severe in the Southeast.

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Jury hung up on verdict for fallen media tycoon Black

CHICAGO — The jury in the racketeering and fraud trial of fallen media tycoon Conrad Black sent a note to the judge Tuesday saying they are unable to reach a verdict and asking for advice.

The note read to the court by U.S. District Judge Amy St. Eve said: "We have discussed and deliberated on all the evidence and are still unable to reach a unanimous verdict on one or more counts. Please advise."

The note, sent during their ninth day of deliberations, was signed by the jury foreman and ended with: "P.S. We have read the jury instructions very carefully."

Black is accused of swindling shareholders in the Hollinger International Inc. newspaper empire out of more than $60 million. He faces 13 criminal counts, including mail fraud, wire fraud and racketeering.

The trial, which included three other defendants, began March 20.

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Bernanke says expectations of tame prices ease recession fears

WASHINGTON — Taking into account the mind-sets of both the public and investors about where prices are headed is a key factor for policymakers working to tame inflation, Federal Reserve Chairman Ben Bernanke said Tuesday.

If investors, consumers and businesses feel confident that the Fed will keep prices stable, the Fed chief suggested, they may be less inclined to act in ways that could aggravate inflation. Bernanke also said that these groups may be less inclined in such circumstances to worry that inflation will eat away at investments and paychecks, and might feel better about longer-term financial planning.

A copy of Bernanke's remarks in Cambridge, Mass., was made available in Washington.

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Euro hits all-time high against dollar

NEW YORK — The euro shot to an all-time high against the U.S. dollar Tuesday on concerns about the American economy that were fueled by discouraging growth forecasts from key U.S. retailers and homebuilders.

The British pound, which has been trading around 26-year highs against the dollar, briefly touched $2.0273 after reports showed British consumer prices were rising at a faster pace than the target set by the Bank of England.

The euro hit a new record of $1.3738 Tuesday, its highest level against the dollar since the 13-nation currency started trading in 1999, before retreating to $1.3729. That was still above the euro's previous high of $1.3682 reached on April 27 and the $1.3623 it bought late Monday in New York.

A higher euro makes goods from the 13-nation currency zone more expensive for customers abroad.

Along with the rise in the pound, the stronger euro also makes visits to much of Europe more expensive for travelers from elsewhere and makes shopping trips to the U.S. more appealing to Europeans.

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Levi's profits rise

SAN FRANCISCO — Levi Strauss & Co.'s second-quarter profit rose 14 percent, accelerating a comeback that has spurred talk that the storied jeans maker might go public again after more than two decades as a privately held company.

The San Francisco-based company said Tuesday it earned $45.7 million during the three months ended May 27 compared with net income of $40.2 million a year ago.

Net revenue including licensing revenue rose nearly 6 percent to $1.02 billion from $961 million a year ago.

Although Levi's has been family owned since 1985, the company still discloses its financial results because its debt is publicly traded.

For most of the past decade, Levi's quarterly reports have been gloomy accounts marked by eroding sales and crumbling profits that reflected the declining popularity of its jeans and other clothes.

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Gas prices continue to climb

NEW YORK — Gasoline prices extended their upward climb Tuesday, jumping another penny overnight while oil and gas futures rose on concerns about gasoline production.

The market received new reports of refinery problems, exacerbating concerns from Monday, when BP PLC was forced to shut down a huge oil processing unit for maintenance in Whiting, Ind. Investors were again questioning the adequacy of gasoline supplies, putting upward pressure on gas futures.

At the pump, gas prices jumped a cent overnight to a national average of $2.975, according to AAA and the Oil Price Information Service. Retail prices, which typically lag futures prices, peaked at $3.227 a gallon in late May, then fell steadily until last week. Prices have risen 2.6 cents since then.

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Wall Street numbers

The Dow fell 148.27, or 1.09 percent, to 13,501.70, near its low of the session.

The Standard & Poor's 500 index fell 21.73, or 1.42 percent, to 1,510.12, while the Nasdaq composite index was off 30.86, or 1.16 percent, at 2,639.16.

Light, sweet crude for August delivery rose 62 cents to settle at $72.81 a barrel on the New York Mercantile Exchange, a new 10-month high. Gasoline for August rose 2.48 cents to settle at $2.3694 a gallon on the Nymex.

August Brent crude rose 62 cents to settle at $76.40 a barrel on the ICE Futures exchange in London.

In other Nymex trading Tuesday, August heating oil rose 3.1 cents to settle at $2.1238 a gallon, while natural gas futures rose 28.9 cents to settle at $6.699 per 1,000 cubic feet.