Transcript: Nightly Business Report – February 21, 2017

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue

Funded in part by —


ahead to new records on the back of earnings, and the shoulders of Wal-Mart
(NYSE:WMT).  So, how healthy really are consumers and retailers?

lenders have grabbed a huge share of mortgage business but that growth may
be at risk.

MATHISEN:  And back to the future.  As online tools grow, we`ll show you
why the hottest new organizational app might just be the pen and paper.

All that and more for Tuesday, February 21st.

Good evening, everyone, and welcome.  I`m Tyler Mathisen.

BREWER:  And I`m Contessa Brewer, in for Sue Herera.

Investors kicked off the holiday weekend style with all three major indices
finishing in a record territory helps my earnings and energy.  All three
are up more than ten percent since the election.  Today, the Dow 118 points
up to 20,743.  The NASDAQ added the 27, and the S&P 500 tackled — look at
this — ending up 14 points.  Energy shares higher thanks to a one-percent
game in oil.

MATHISEN:  And Wal-Mart (NYSE:WMT) was one of the key drivers in the Dow
today and in stocks in general.  Earnings at the world`s largest retailer
fell in the holiday quarter but so what?  They beat those all-important
Wall Street estimates.  On the other hand, sales came in a little bit below
forecasts even though they were — get this — a whopping $131 billion.

But here`s what caught investors eyes: same-store sales in the U.S. rose at
the fastest clip since 2012, and that is what sent the stock up 3 percent.

Courtney Reagan has more on Wal-Mart`s big quarter.


largest retailer had a pretty good holiday quarter.  Wal-Mart (NYSE:WMT)
U.S. sales where the bulk of its sales come from grew at the strongest rate
in more than four years and e-commerce is making up a bigger share of those
sales.  The discounter saw strong traffic in stores and even though food
prices continue to fall, grocery sales were positive, which is important
for Wal-Mart (NYSE:WMT) grocery represents more than half of total sales
and it`s a big traffic driver.

The discounter did acknowledge sales have been slower than expected to
start the year, which it chalks up to the delay in tax refund versus last

on Wal-Mart (NYSE:WMT) right now.  I`ve had them in the question mark
phase.  I`ve said they`re doing all the right things but it`s hard to get
it for the bottom line.

Unfortunately, they`re competing with a really, really tough business than

REAGAN:  Investing in e-commerce remains a top priority for Wal-Mart
(NYSE:WMT) as it spends billions of dollars to catch up to Amazon
(NASDAQ:AMZN) online.  Wal-Mart (NYSE:WMT) says it`s free two-day shipping
on orders of $35 or more has led to a nice uptick in e-commerce in the
three weeks since it launched.

Interestingly over the weekend, Amazon (NASDAQ:AMZN) quietly dropped its
free shipping threshold back down to $35.

I spoke to Wal-Mart (NYSE:WMT) chief financial officer Brett Biggs.  And
when I asked how Wal-Mart (NYSE:WMT) is thinking about a potential border
adjustment tax, Biggs explained, “We are pro-tax reform for anything that
will help with jobs and help consumers.”  He went on to say, “We do have
concerns that the border adjustment tax has the probability of increasing
prices.  It is concerning to us.”

Biggs added, “The devil is in the details, so it`s too difficult to
speculate on any potential impact.”

So, for now, Wal-Mart (NYSE:WMT) guidance assumes the tax and regulatory
landscape stays as is.



BREWER:  Fellow Dow component Home Depot (NYSE:HD) had a strong quarter
blowing past Wall Street expectations as the housing market remains strong.
The home-improvement retailer also hiked its dividend 29 percent to 89
cents a share.  That`s up from 69 cents.

Home Depot (NYSE:HD) wasn`t finish there.  Nope.  It said it`s buying back
$15 billion worth of shares.

Put that all together, and you have shares up 2 percent to an all-time

MATHISEN:  And now to Macy`s and a different kind of retail result.  The
company`s profits fell more than 10 percent and its same-store sales
slumped, with the company telling investors to brace for another year of
the same.  Earlier this month, the reports surface that Hudson Bay had
approached Macy`s (NYSE:M) about a possible takeover.

But despite the results today, Macy CEO is betting on the consumer and says
his company has to be ready.


TERRY LUNDGREN, MACY`S CHAIRMAN AND CEO:  Consumers have money.  They`re
spending their money.  They`re spending it in different places than in
stores like ours in mall-based stores.  But — and they`re spending it with
us online.

But still, at the end of the day, the consumer has the money once they
spent their money on these various categories, they`ve got to be ready to
come back to ours.  And when they do, we`ve got to be in position to take
advantage, particularly in our stores.


MATHISEN:  Macy`s shares flat on the day.

BREWER:  On Friday, we told you one of the biggest deals ever was closed
and now call it a deal undone.  Kraft (NYSE:KFT) Heinz dropped its $143
billion takeover bid for rival consumer goods giant Unilever (NYSE:UN).
The deal broke up when the offer became public and it was clear Unilever
(NYSE:UN) was not interested in a tie-up.  Kraft (NYSE:KFT) shares lost
about 2 percent on the day.

MATHISEN:  And another deal we told you about last week that it might
happen actually did.  Burger King`s parents Restaurant Brands will buy the
chicken chain Popeyes for nearly $2 billion.  That`s a lot of wings.

Both companies taking off on the news.  Restaurant Brands up about seven
percent and Popeyes spreading higher by nearly twenty percent.

BREWER:  Consumer staple companies particularly food companies are having a
hard time growing.  So, they`re working on new strategies to find a way to
do that.

Sara Eisen is in Boca Raton, Florida, with a look at some innovative


growth problem.  That`s why companies from General Mills (NYSE:GIS) to
Conagra are rolling out new innovations for longtime household brands to
meet changing consumer taste.  Like Oreo and Ritz Crackers maker Mondelez
launching a new brand called Vea, no artificial ingredients and GMO-free.

IRENE ROSENFELD, MONDELEZ CEO:  Consumers still want indulgence I think I
think there`s always a sense that all everybody`s moving over to what well-
being.  We certainly on are more indulgent brands, we`re continuing to
evolve them with products like Oreo Thins, with products like Bubbly
Chocolate and making sure that we have portion control packages.  So,
there`s all sorts of ways to meet the consumers needs.

But at the end of the day, there`s no question it is a trend everywhere in
the world and as the world`s largest snacking company, we intend to
capitalize on.

EISEN:  Ingredion supplies ingredients to many of these companies and sees
the health trend evolving.

What`s really working right now?  What are some insights you can give us?

ILENE GORDON, INGREDION CEO:  People want a protein in different ways and
certainly meat protein has been evidence in the past.  Soy protein has been
around.  So, I think vegetable protein is going to be the next trend where
consumers want that in the crackers, in their pasta, in their rice, and we
at Ingredion are really participating with our customers to formulate that.

EISEN:  Besides falling behind on big food trends like healthier and
fresher eating, companies have grappled with slower growth both abroad and
here in the U.S.  And they have yet to see any meaningful boost in spending
despite the strong jump and consumer confidence after the election.

TOM HAYES, TYSON FOODS CEO:  What we see is in the second quarter of the
year is usually a difficult time for us, because consumers are coming out
the holidays.  The holiday period, based on our product portfolio, is a
huge, huge period for us.  So, right now, we`re not necessarily seeing that
play through.  But certainly, you know, confidence is building and helps
the restaurant business, our food service business is starting to gain some
momentum.  And overall, you know, of course, people are going to focus more
on brands to the extent that they`re more confident.  That`s always good
for us.

EISEN:  Companies are also adapting to any potential policy changes from
Washington on trade taxes and regulation.

For the meat industry, for example, China and Mexico are big buyers of U.S.
poultry, beef and pork.  So, executives are watching nervously, bracing for
any heated rhetoric and a slowdown in trade.

But despite the growth problems, overall food stocks have been great
investments lately.  They`re considered safe.  They pay big dividends and
they`ve been a hot space for deal-making.

For NIGHTLY BUSINESS REPORT, I`m Sara Eisen in Boca.


MATHISEN:  So, what do all of these results from retailers, deal news, and
so forth tell us about the state of the consumer and retail today?

Jan Kniffen knows.  He`s the CEO of the retail research firm J. Rogers
(NYSE:ROG) Kniffen Worldwide Enterprises and he`s with us now to discuss.

Let`s start, Jan, with Wal-Mart (NYSE:WMT), which is not exactly been a big
market participants, a driver of the market until today.  How did they get
their mojo back?

hard at it.  They`ve done retailing pretty darn well.  They`ve got better
in stocks.  They`ve fixed the supply chain.  They`ve made the stores more

They`ve actually done what they`ve been needing to do for a long time,
which was just get back to the fundamentals making the consumer happier.
But the other thing they`ve done is they`ve done a really good job of
getting online, and they`ve done it without costing themselves bottom line.

The biggest problem but we thought they might have was that as they
transferred more and more online, that it would cost them at the bottom
line.  It hasn`t done that.  So, people were pretty excited about that.
They had good, solid store for store sales numbers and they didn`t wreck
their earnings to get there.

So, this looks like Wal-Mart (NYSE:WMT) has turned the corner and I think
they were up 29 percent online, with a really big number, and that tells
you what Jets doing for them and what their own business is doing for them.
That`s what they`ve got to do to be competitive with Amazon (NASDAQ:AMZN).

BREWER:  And they are really giving Amazon (NASDAQ:AMZN) a run for their
money.  In fact, there was news today about Amazon (NASDAQ:AMZN) now
dumping back from of its cost on those items what they have — what you
have to pay on Amazon (NASDAQ:AMZN) in order to get free shipping if you`re
not a prime member.

So, Amazon (NASDAQ:AMZN) looking at Wal-Mart (NYSE:WMT) with a skeptical
eye, but Wal-Mart (NYSE:WMT) itself it`s not only seeing a big jump in
online, it saw a big jump in same-store sales.  How do they do that?  What
kind of it experience do you see that`s drawing customers in?

KNIFFEN:  Well, they actually have up traffic.  I think that up traffic was
like one-point-four percent, and, boy, that`s hard to get in the current
environment.  So, not only did they get up store for store comps.  They
actually had more people coming to the store and most stores are not seeing

And they`ve done that because they`ve made the store a better place to buy.
They`ve got a better assortment of products.  They`ve got much better
business in the grocery than they`ve had in the past.  They`re doing pick
up at the store, drive-in, loaded in your car and more than 500 stores now.

So, they really made themselves much more attractive to the customer and
the customer finally have started responding, which is what they`ve been
waiting to see.

MATHISEN:  So, my sense is that the consumer is pretty healthy.  Incomes
are stable or rising.  Unemployment is low and so forth.

But when we were talking, Jan, right after the holidays, we all sort of
universally agreed that the mall base stores and their holiday results were
kind of meh.  Here, you got Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD)
not going to cover off the ball, take it out a little, broaden it out a
little bit, are others doing as well?  Macy`s sure isn`t.

KNIFFEN:  Well, you know, the two you just named are not mall-based stores
and they`re also not dealing in exactly the same space.

MATHISEN:  Good point.

KNIFFEN:  If you look at people who are dealing in apparel as of Amazon
(NASDAQ:AMZN) became the biggest apparel seller in the country last year,
apparel really got hurt, and apparel continuing to deflate where we`ve seen
a slowdown in food inflation.

And Home Depot (NYSE:HD) is in another category all by itself, right?  It`s
clearly best-in-class of what it does but it`s also selling a product where
everybody is doing things to their home.


KNIFFEN:  Plus, we`re seeing housing turns do really well.

But people are nesting too.  They want to do more for the house they`re
currently in and they`d rather do that and sit home and ordering Domino`s
than go out and shop.  And that`s hurting everybody else.  So it`s great
for Home Depot (NYSE:HD).

BREWER:  Yes.  By the way, Home Depot`s offering that experience to the
shoppers too because they`re offering the kids workshop at the beginning of
the month.  They offer how-to programs for people who come in.  And you top
that off with the branding and the knowledge and you`re making loyal
customers out of the people who might just venture into you went there.

KNIFFEN:  And experiential is where we are.


KNIFFEN:  If you can get the customer to want to come to your store to do
something, they may buy something while they`re there.  And that`s kind of
what we`ve come down to.

MATHISEN:  Well, have fun in Las Vegas, Jan.

KNIFFEN:  It`s always fun.  I love magic.

MATHISEN:  See you, man.  Jan Kniffen with J. Rogers (NYSE:ROG) Kniffen

BREWER:  Earlier, we mentioned Home Depot`s massive stock buyback and while
the repurchases generally help to lift earnings, Bob Pisani tells us
they`re not necessarily a cure-all.


had great learning for what really moved the stock to an historic high
today was the announcement that they were hiking the dividend 29 percent
and buying back $15 billion in stock.  That`s nearly nine percent of the
shares outstanding.

Home Depot (NYSE:HD) was already what I call a buyback monster.  Since
2003, they cut their shares outstanding in a half from $2.36 billion to
$1.21 billion shares.  And they`re not alone.  A lot of companies have
drastically cut shares outstanding in an effort to boost earnings.

For example, since 1997, IBM has cut its shares outstanding in half.  Exxon
has cut their shares by 42 percent since 2000.  Big tech names like Intel
(NASDAQ:INTC) and Cisco (NASDAQ:CSCO) have also cut their shares
outstanding by about 30 percent since 2001.

The buybacks are not a panacea for stock growth.  IBM has woefully
underperformed the S&P 500 in the last five years because they`ve been
beset by growth issues.  Its revenues from its online businesses were
shrinking and there wasn`t revenues from newer businesses like artificial
intelligence replacing it.

The lesson here is no amount of financial engineering like buying back
shares can replace management`s inability to grow the businesses.

Home Depot (NYSE:HD) grows their business.  The stock goes up.  IBM has
troubles growing their business.  The stock has trouble going up.  Buybacks
are not a panacea for stock growth.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.


MATHISEN:  Coming up, why the president`s agenda could be troublesome for
the companies that issue most of the nation`s mortgages.


MATHISEN:  CEOs of more than a dozen companies including Boeing (NYSE:BA),
Caterpillar (NYSE:CAT), United Technologies (NYSE:UTX) have called on
lawmakers to overall the corporate tax code.  In a letter to the House and
Senate leadership, the chief executives argued a so-called “border
adjustment tax” will make the U.S. products more competitive overseas.
This comes following last week`s meeting at the White House with the topic
execs from the retail industry who say the opposite.  They say this type of
tax would raise their costs and likely prices for consumers.

BREWER:  Canada`s foreign minister says any renegotiating of the North
American Free Trade Agreement, NAFTA, would be between Canada, the U.S. and
Mexico, and not negotiated individually.

And as Kayla Tausche tells us, that it`s all been not to talk so far.


100-day action plan list renegotiating NAFTA as a top priority.  But it
could be months before official talks with Canada and Mexico begin.  By law
passed in 2015, the White House must notify in writing the House Ways and
means and Senate finance committee of a negotiation period beginning that
last 90 days.  The two branches then have that time to set their agenda
before the U.S. approaches Canada and Mexico.

Aides from both committees confirmed that no such letter has been sent as
of this week`s recess.  Meanwhile, Mexico has already begun its
renegotiation clock.

The president and his team have met more casually with the relevant parties
earlier this month, but a senior administration official says it will
pursue the proper channels to renegotiate with Congress once a U.S. trade
representative is installed.  No hearing yet for that nominee, Robert

In the meantime, NAFTA remains a key pillar of Trump`s economic talking

tremendous trade deals all over the world, but they`re going to be
bilateral or as we would say, one-on-one.  None of these deals will we get
caught in a quicksand, where we get mired in and we can`t do anything about
it, like by the way, NAFTA and so many others.

TAUSCHE:  Canada`s foreign minister on Tuesday struck down the notion that
a new NAFTA could actually be two deals, one with each country, saying any
negotiations would involve all three.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche, Washington.


MATHISEN:  Lumber Liquidators post on a narrower loss and shares take off,
and that is where we begin tonight`s “Market Focus”.

The results easily beat analyst expectations.  The beleaguered hardwood
flooring retailer said a rise in same-store sales helped overall revenue
top street estimates.  The company also said it remains committed to
returning the profitability.  Shares pop 17 percent to $17.98.

The railroad company CSX (NYSE:CSX) said it would cut a thousand management
position through what it called an involuntary separation program.  The
layoffs are expected to be concentrated in the company`s Jacksonville,
Florida, headquarter operations and the company also said its CEO and
president are expected to retire at the end of May.  CSX (NYSE:CSX) shares
up 37 cents to $48.91.

Shares of Community Health Systems (NYSE:CYH) took off today following the
hospital operator`s better-than-expected earnings and revenue report came
out yesterday.  Community Health said it has divested more than 20
hospitals in the latest quarter and will continue to focus its efforts on
reducing its debt load.  Shares soared more than 33 percent to $9.23.

BREWER:  Self-driving technology company Mobileye has inked another deal
with an automaker.  Last week, we told you the company signed an agreement
with Volkswagen.  And today, Mobileye and luxury car company BMW said that
Mobileye`s data generation technology will be available in BMW`s models.
Mobileye shares rose 1 percent to $46.12.

Horizon confirmed it would buy Yahoo`s core assets at a discount.  We told
last week that the two companies were reportedly in talks to revise the
takeover price following Yahoo`s two data breaches.  Well, now, Verizon
(NYSE:VZ) said it will pay about $4.5 billion for Yahoo (NASDAQ:YHOO).
That is $350 million less than its initial offer.  That`s my kind of
bargain.  Verizon (NYSE:VZ) shares were up a fraction to $49.43, while
shares of Yahoo (NASDAQ:YHOO) rose 40 cents to $49.50.

And Boeing (NYSE:BA) has received an order from a private Chinese carrier
for five of its Dreamliner jet.  That deal is valued at more than $1
billion.  Boeing (NYSE:BA) shares rose more than 1 1/2 percent to $175.56.

MATHISEN:  Wells Fargo (NYSE:WFC) has fired four of its senior managers as
part of the fraudulent accounts scandal that has rocked the bank since last
year.  None of those executives will get a bonus and they will forfeit all
of their unvested equity awards and vested outstanding options.

The move is part of the company board of directors` independent
investigation into the bank sales practices.  Wells Fargo (NYSE:WFC) was
fined in September nearly $200 million for creating some 2 million
fraudulent accounts.  And the bank`s former CEO, John Stumpf, resigned in

BREWER:  Tighter regulation on the banks led to the rise of a whole new
group of companies like Quicken and Loan Depot, who grabbed a huge chunk of
the mortgage market.

But as Diana Olick tell us, if President Trump is able to roll back some of
the regulation, those non-bank lenders will feel a pinch.


with his employees, the CEO of Loan Depot had some sobering word.

ANTHONY HSIEH, LOAN DEPOT CEO:  Everything that we`re doing today
unfortunately will change.

OLICK:  Anthony Hsieh was talking technology but he could have said the
same for regulation in the mortgage market.  The Trump administration has
signaled it will roll back stringent safeguards put in place following the
financial crisis.  Those rules in addition to billions of dollars in
lawsuits and fine cause the big banks to pull back on home loan lending,
opening the door for non-bank lenders like Loan Depot, Quicken and Caliber
Home Loan.

HSIEH:  In one since, we really don`t want any changes because of what it
really does it creates the barrier to entry.  It just makes life more

OLICK:  For the past six years, there had been a staggering takeover by
non-bank lenders, especially in government insured FHA lending.  They went
from just ten percent of new originations in 2010 to half the market today.
But if the Trump administration loosen regulations on big bank and stop
suing for every single loan infraction, the big banks could move back in
and the nonbanks could face stiffer competition.

The CEO of Caliber Home Loans who used to run Citi Mortgage sees another

SANJIV DAS, CALIBER HOME LOANS CEO:  I do expect that the regional banks
would step up their exposure to lending a lot more, because the U.S.
consumer is still very strong, home buying is very strong, and everybody
has to show growth for their shareholders and investors.

OLICK:  Whether banks large or local move back in or not, one thing is
certain.  Higher mortgage rates will shrink demand for all home loans,
especially refinances.  And that means all lenders will be competing for an
ever-smaller pool of business.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


MATHISEN:  And coming up, why the good old-fashioned a planner day is back,
sort of.  We`ll explain.


BREWER:  Here`s what to watch on Wednesday.  On the housing front, sales in
January of existing homes are expected to tick higher.  As for earnings,
one of Wall Street`s darlings, Tesla, is expected to release its quarterly
results.  And the markets will pick apart the minutes of this month`s
Federal Reserve meeting.  That`s what to watch for tomorrow.

MATHISEN:  Well, at a time when seemingly everything is done online,
millennials are starting to schedule their lives in a very old school way,
with the notebook.  In fact, sales of traditional journals and notebooks
have taken off over the past year.

And as Jane Wells tells us, what`s old is new again.



something marketing professional who discovered the hottest new app for
organizing her life is a notebook.

CRAVEN:  I wanted to kind of get more religious and ritualistic about my
planning and my list making.

WELLS:  Everything old is new again as millennials are taking pen to paper.
They call it bullet journaling.  Hundreds of thousands of images have been
posted on Instagram from simple to elaborate.  There`s even a how-to video.

RYDER CARROLL, BULLETJOURNAL.COM:  We keep track of things.

WELLS:  That`s Ryder Carroll, an app designer in Brooklyn who has led the
bullet journal movement.  He says apps like Google (NASDAQ:GOOG) Calendar
are great, but limited.

CARROLL:  And what I really like about bullet train was really important to
me is that all kind of goes into one place.  It`s like one tool.

WELLS:  But it`s so easy now to schedule your life, go to the dentist and
put down your goals.  And an app and if you fail to do something, you can
just cut and paste it over to the next week or delete all evidence of

Physically writing something down makes it permanent.  It takes more time
and perhaps leads to better results, at least that`s the idea.

CRAVEN:  It does give me time to sit down and think about what`s coming up
and plan a little bit more effectively.  However, I don`t think I`ve been
doing it long enough to really see the improvement yet.

WELLS:  Even so, sales by publicly traded notebook maker Moleskine rose 12
percent in the U.S. last year.  Ryder Carroll is selling a bullet journal
made by Leuchtturm, a 100-year-old German company started back when people
used to write.  He says there`s one other benefit.

CARROLL:  The Bullet Journal by its very nature of the analog forces you to
disconnect.  It forces you not to be online, and that`s also really
powerful thing.

WELLS:  However, digital apps do have one advantage lose your device and
your info is stored in the Cloud.  Lose your notebook and it`s gone

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.


BREWER:  Next up, manual typewriters.

MATHISEN:  Yes, I`m not that organized digitally or on paper. I can`t do
it.  I don`t have the discipline.


That`s NIGHTLY BUSINESS REPORT for tonight.  I`m Contessa Brewer.

MATHISEN:  I`m Tyler Mathisen.  Thanks for watching.  Have a great evening.
We`ll see you tomorrow.


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