Transcript: Nightly Business Report – February 20, 2018

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

online sales at the world`s largest retailer are cooling off, as e-commerce
competition heats up.

Odd couple. A supermarket chain is buying a drugstore chain, reminding
investors just how quickly the retail and healthcare landscapes are

Corporate responsibility? Can the private sector do more to regulate gun
sales than the government?

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for this
Tuesday, February the 20th.

Good evening, everybody. I`m Bill Griffeth. Tyler and Sue are both off
tonight. And I`m here at the New York stock exchange with stocks started
this week with a sharp decline. And a big reason for that decline was

Shares of the world`s largest retailer had one of their worst days ever
today. The company did report earnings that missed analyst`s estimates.
And on top of that, its online sales which had been a big part of its
growth story lately, they slowed. That`s not something investors were
expecting, especially during the critical holiday quarter. And so, the
stock was down, more than 10 percent in today`s trade.

Courtney Reagan has more on what happened at Walmart.


largest retailer has been on quite a run for some time, growing sales and
its stock price. But investors aren`t thrilled about the holiday quarter
results. While the most recent quarter showed a continuation of strong
total U.S. sales, with 14 straight quarters of growth and positive in store
traffic, the discounter`s profit forecast fell short of expectations. And
online sales grew at the slowest pace for in least five quarters.

Walmart says most of the e-commerce sales slowdown was expected because of
the anniversary of the acquisition. But there was also a hit from
some inventory missteps during the holidays. CEO Doug McMillon explained
further on an atypical live earnings call.

DOUG MCMILLION, CEO, WALMART: During the seasonal spikes, seasonal
inventories, think electronics, toys, gifts, things like that, came into
our fulfillment centers and there was enough cube that it harmed our basic
in stock on more every day items and our basic in stock for e-commerce
suffered as a result.

REAGAN: Well, Walmart expects online sales to grow 40 percent this year.
Not all investors or analysts are convinced after growing it just 20
percent in the fourth quarter.

growth is such a meaningful slowdown versus 50 percent just a quarter ago.
I think that it`s very difficult for investors to really get a handled on
just how Walmart is going to very quickly reaccelerate that one line

REAGAN: And stores are still the cornerstone for Walmart. Online sales
are still under 4 percent of total sales. Using stores and its Website
together is where Walmart shines over Amazon (NASDAQ:AMZN).

the Walmart shoppers also shop at Amazon (NASDAQ:AMZN). So, there really
is a three-way boxing match between Amazon (NASDAQ:AMZN), Walmart, and
Target (NYSE:TGT). The Amazon (NASDAQ:AMZN) rivalry will be a big
multiyear story, and Walmart will use its stores, 4,800 stores as
fulfillment points.

end of the day, Walmart had a little stumble here, maybe lost a battle. I
still think they are winning the war. They have added 65 million skews
online since June of `16 when we upgraded the stock. Their prices are
competitive, more competitive than Amazon (NASDAQ:AMZN), frankly.

REAGAN: And wars are long and costly endeavors. For NIGHTLY BUSINESS
REPORT, I`m Courtney Reagan.


GRIFFETH: So, does Walmart still have momentum in e-commerce? And where
does its stock go from here?

Joining us tonight with her thoughts, industry expert Liz Dunn. She`s the
CEO of retail data company Pro4ma.

Good to see you. Welcome back.

LIZ DUNN, CEO, PRO4MA: Great to see you, too.

GRIFFETH: A hundred thirty-six billion dollars in revenue, they did 23
percent growth in e-commerce. Of course, the stock will go down 10
percent. You think it was overdone today?

DUNN: I do think it was overdone. I mean, in isolation, the top line was
great. The miss had some noise in the numbers. They definitely pulled
some things forward to take advantage of the tax write-offs that they will
get this fiscal year versus going forward. But I think overall, the sales
number was quite strong. E-commerce was softer and you can`t ignore that.
That`s the thing that everyone is focused on.

GRIFFETH: That`s the key component. Now, they want — their goal is to do
40 percent growth this year. Can they do it?

DUNN: Well, I think that they will reaccelerate. I think this was
definitely a weak quarter and they acknowledged that they made some
missteps. They had some problems getting, you know, their inventory in the
right places and really investing in the key categories that were
performing in those peek periods.

So, that`s a fixable issue. I think they need to focus on growth more so
than profitability for that online division. And that`s something that`s
been a line they have had a little bit of trouble walking.

GRIFFETH: Now, as Courtney outlined on this online ballots of the retail
giants, you`ve got Walmart, you`ve got Amazon (NASDAQ:AMZN), of course, and
Target (NYSE:TGT).

DUNN: Yes.

GRIFFETH: Who do you like?

DUNN: Well, I actually think they are all three —

GRIFFETH: There is room for all three to prosper?

DUNN: I think there is room for all three to continue to grow double
digits. And I think Amazon (NASDAQ:AMZN) will outgrow the other two. But
I think that what Walmart has and what Target (NYSE:TGT) to a lesser
degree, but Walmart really I think can benefit from their network of
stores. So, they really need to look for more and more ways to use those

And both Walmart and Target (NYSE:TGT) are looking for kind of same day
delivery options and all the multichannel things that you can bring in and
bring the power of that store network to bear. So, I think the people that
are going to get crushed, or the companies that are going to get crushed
are those smaller companies that can`t compete or can`t find a competitive
mode. I think that Walmart can compete well against Amazon (NASDAQ:AMZN).
Certainly, this quarter, they didn`t do so well.

GRIFFETH: You know, when you think about it, it`s only been a year since
Walmart bought, the online upstart. They have made great strides
in the last year in their e-commerce category, haven`t they?

DUNN: I have been impressed with how innovative they`ve been in their
thinking and certainly bringing Marc Lore and the Jet team on board has
been a piece of that, or a big piece of that. One thing that we`ve heard a
little bit of rumblings between the online and store divisions at Walmart.

I don`t think they need to be managing their business that way. I think
they really need to be thinking about gaining share across all channels.
So you know you look at a positive comp in this environment, that means
that they are gaining share. I think — I think that they need to do more
to enhance their opportunities with the online business and not think so
much about cost containment, because really, they need to invest to gain
dominance. And I think that they are doing that.

GRIFFETH: Liz Dunn with Pro4ma, always good to see you. Thanks for
joining us tonight.

DUNN: Good to see you, too.

GRIFFETH: You bet.

As we said, the big decline in Walmart shares pulled the broader market
lower today. The Dow fell for the first time in seven trading sessions and
hit some key technical levels during the day. A rise in treasury yields
also pressured stocks. The yield on the ten-year remained near a four-year
high. The two year hit close to a ten-year high today.

Dow Jones Industrial Average when all was said and done fell by 254 points
at the close to 24,964. The Nasdaq, which spent much of the day higher,
finished down five points. And the S&P 500 was down nearly 16. Dow
component Home Depot (NYSE:HD) reported quarterly earnings and sales that
topped Wall Street expectations.

The world`s largest home improvement retailer gave an upbeat forecast for
the year and raised its quarterly dividend at the same time. The company
was helped by a strengthening economy and a solid housing market which has
led consumers to spend more as well. And that helped Home Depot (NYSE:HD)
reached $100 billion in annual sales for the first time ever. The
company`s stock initially traded higher today, but then fell along with the
rest of the market into the afternoon session.

Qualcomm (NASDAQ:QCOM) meanwhile sweetened its bid to acquire NXP
semiconductor to $44 billion. This new offer is Qualcomm`s boldest move
yet to fend off that $121 billion hostile bid from Broadcom (NASDAQ:BRCM).
Following news of Qualcomm`s sweetened offer for NXP, Broadcom
(NASDAQ:BRCM) said it was evaluating its options. Shares of NXP and
Broadcom (NASDAQ:BRCM) rose in trading today while shares of Qualcomm
(NASDAQ:QCOM) were lower.

And by the way, a shareholder advisory firm is recommending that Qualcomm
(NASDAQ:QCOM) shareholders vote for all six of the board candidates
proposed by Broadcom (NASDAQ:BRCM). Glass Lewis says that Qualcomm`s
failure to achieve profitable growth and recent disputes with regulators
throw doubt on their business strategy. So, it is essentially siding with
Broadcom (NASDAQ:BRCM) in this case.

Investors were reminded of the massive changes underway in the health care
and consumer sectors when privately held supermarket chain Albertsons made
an offer to buy the rest of the drugstore chain Rite Aid (NYSE:RAD) that is
not already being sold to Walgreens. The move would create a supermarket
and drugstore giant. It would allow Albertsons to go public in the future.
The news sent shares Rite Aid (NYSE:RAD) 3 percent higher today.

Bertha Coombs is in New York with more on this unlikely get-together.


bedfellows merger. Grocery chain Albertsons has agreed to acquire Rite Aid
(NYSE:RAD), adding to a privately held grocery conglomerate that include
Supervalu, Safeway (NYSE:SWY) and Jewel Osco. Executives say putting
together grocery and pharmacy clinics could provide customers with a
different kind of health care experience.

JOHN STANDLEY, CHAIRMAN & CEO, RITE AID: I think our opportunity to help
people bring health care to life in terms of how we work directly with
patients in our pharmacies and in our supermarkets is — could be
differentiating for us. The ability for us to talk about, you know, diet
and nutrition as part of that interaction and have capabilities to bring to
bear to help those patients I think is very powerful.

COOMBS: It is a rapidly shifting retail and health care landscape.
Pharmacy giant CVS`s $69 billion deal to buy health insurer Aetna
(NYSE:AET) aims to create a drugstore clinic health system. Walgreens,
after buying nearly half of Rite Aid (NYSE:RAD) stores, is reportedly
exploring a deal to acquire drug distribution firm AmerisourceBergen
(NYSE:ABC) to cut costs. And Amazon (NASDAQ:AMZN) launching a new health
care firm with Berkshire Hathaway (NYSE:BRK.A) and JPMorgan (NYSE:JPM).

employers are — they are satisfied with the health care system and the
inefficiency of the health care system. And there are many deals that we
are seeing, like CVS (NYSE:CVS) and Aetna (NYSE:AET), like Amazon
(NASDAQ:AMZN) and Berkshire Hathaway (NYSE:BRK.A), and JPMorgan (NYSE:JPM).
They are looking to find ways to integrate and solve some of these health
care issues.

COOMBS: These new retail family mergers aim to tackle what consumers want
and need. Lower costs and more on site help managing their health.

SINGH: Giving them convenience and choice is the key to creating the right
kind of health care landscape.

COOMBS: For these would-be mergers partners, the task will be to convince
regulators that in a changing landscape where Amazon (NASDAQ:AMZN) plays a
bigger and bigger role, these unconventional mergers may be the best way to
preserve consumer choice.

For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs in New York.


GRIFFETH: Now to some of today`s upgrades and downgrades.

Snap saw its rating cut to a sell today from neutral at Citi. Citi saying
that the negative reviews of Snapchat`s recent redesign could result in a
decline in user activity which in turn could hit Snap`s financial results.
The price target was lowered to $14. Shares of Snap fell by 7 percent to

Meanwhile, Gap`s rating was downgraded from sector weight to overweight at
KeyBanc. The firm citing the surprise departure of the head of the Gap
(NYSE:GPS) brand`s products, perception and store fleet. The stock fell by
5 percent to $31.61.

And Chipotle Mexican Grill (NYSE:CMG) saw its shares upgraded to hold from
sell at Stifel today. The firm says that the new CEO there who was hired
away from Taco Bell last week could provide Chipotle with a much needed
reboot. The analyst adds that there`s now optimism over a potential pickup
in traffic and margins. Shares rose nearly 4 percent at Chipotle today to

Still ahead, three big market calls on where stocks go from here. But
there is virtually no agreement.


GRIFFETH: A setback for touchdown in its legal fight against the
government. A federal judge denied AT&T`s request that it`d be allowed to
see internal communications between the White House and government lawyers.
AT&T (NYSE:T) believes that those communications would show that politics
played a role in the government`s decision to file a lawsuit against the
company`s $85 billion proposed merger with Time Warner (NYSE:TWX). But the
judge ruled that AT&T (NYSE:T) did not in fact show that it was singled out
in the government`s lawsuit.

Shares of both AT&T (NYSE:T) and Time Warner (NYSE:TWX) fell in today`s

And after weeks of stock market volatility, Wall Street is speaking up. A
number of big firms are now issuing new forecasts for equities. And they
don`t all agree on what could happen next.

Dominic Chu breaks it down for us tonight.


like everything was being constructive and the stock market was going to
recover from those recent selloff lows you get a day like we had and the
markets taken a turn for the worst. So, it puts to light again this idea
of a bull/bear debate and whether or not there is a reason to still remain
constructive and positive on the stock market.

Well, a number of strategists and experts on Wall Street have now weighed
in, given the recent market volatility and some of the more bullish calls
have come out of shops like Blackrock, the biggest asset manager out there.
A lot of exchange traded funds.

The folks at Fiscal stimulus is super charging U.S. profit growth
expectations and that those positive effects are being underappreciated by
the markets overall. They are bullish on stocks, especially in the U.S.,
they have upgraded them. So, Blackrock is on the bullish side of things.
Goldman Sachs (NYSE:GS) and the analysts and strategists team there think
most corrections don`t involve recession or bear market like what we`ve
seen so far, the recent pullback. Positive returns typically follow in the
months after that, so, three, six, 12 months later. Goldman Sachs
(NYSE:GS) bullish on the overall picture for stocks as well.

And then there`s Morgan Stanley (NYSE:MS). Some analysts and strategists
feel as though we may be due for more selling pressure. They say that the
recent pullback that we have seen is the appetizer not the main course,
meaning one if not several 10 percent pullbacks in the market could happen
in 2018.

So, a bull case, bear case, a lot of debate right now over whether or not
we could see the market direction shift for the overall stock picture.



GRIFFETH: By the way, to read more about the different forecasts for
stocks, you can head to our Website at See if you can make sense
of it all.

BHP Billiton (NYSE:BHP) delivers a rise in profits. And that`s where we
begin tonight`s “Market Focus”.

The world`s largest miner reported a 25 percent gain in first half
earnings, thanks to higher commodity prices. BHP plans to focus on cutting
debt and increasing shareholder returns. And today, it did just that. It
raised its dividend to 55 cents a share. But shares themselves fell by 4
percent to $46.55.

Theme park operator Six Flags reported better than expected earnings, even
as poor weather during the period caused attendance to slip. The company
CEO said that he is happy with Six Flags` performance and optimistic about
the stock`s upward potential.


JIM REID-ANDERSON, SIX FLAGS CEO: We registered our eighth straight record
year. And the fourth quarter was the biggest fourth quarter in our
history, with revenue up 7 percent and EBITDA up 16 percent. So, while the
stock is down, I have to tell you that today, I have taken the opportunity
to spend $9 million to acquire about 160,000 Six Flags shares via our stock
option program.


GRIFFETH: Shares of Six Flags, by the way, fell more than 4.5 percent to
close at $66.18.

Newspaper publisher Gannet reported a quarterly loss and a drop in sales.
That company warned that it`s continuing to face declining print ad
revenues and circulation revenues. It also said that it does not expect
that to change any time soon. That`s what`s going on in newspapers right
now. Shares of Gannet were down 11 percent today to $9.97.

And despite reporting profits that topped expectations, Domino`s Pizza
(NYSE:DPZ) served up disappointing sales growth in the latest quarter.
Same store sales at the pizza chain lagged expectations, fueling concerns
of potential weakness in the future. And separately, this is intriguing,
it was reported that Burger King owner Restaurant Brands was preparing a
bid for Domino`s. Domino`s` stock rose fractionally to $221.49.

And technology company Ubiquiti Networks has disclosed that the SEC has
requested documents relating to the company`s accounting and international
trade practices. They said they are working to respond to the SEC
requests. The firm was recently targeted by known short seller Citron
Research which accused the tech company of fraud. The stock lost a quarter
of its value, dropping 25 percent today to $55.28.

And there has been a lot of talk recently about gun sales in this country.
A column in today`s “New York Times (NYSE:NYT)” folds in a new idea that
puts the private sector at the center of the story. Our Andrew Ross Sorkin
looks at how banks could play a role in gun sales if Washington won`t.

He writes that banks and credit card companies could restrict sales of
assault weapons by simply refusing to do business with retailers that tell
those types of weapons. Joining us to talk about that and whether big
business can indeed be a catalyst for change in brand — in this gun sales
debate, brand expert Dean Crutchfield is with us tonight. He`s founder of
brand advisory firm Dean Crutchfield Company.

Dean, good to see you. Welcome tonight.

inviting me on the show.

GRIFFETH: You bet. What do you think of Andrew`s idea? Overall, that the
private sector could have a role in the whole gun sales debate right now?

CRUTCHFIELD: Yes. I think it`s huge. I mean, look, (INAUDIBLE) is
clearly in a division of deep regret. But, you know, we have a situation
on our hands here where it`s really about the why anymore of doing it.
It`s about the moment and what you do in that moment.

And the government has basically been sitting there too long to be any
good. So, really, it`s up to the private sector, it`s up to brands to lead
that way and support the public in making changes that are necessary. So,
that`s really a clear opportunity for brand to play. The act that Apple
(NASDAQ:AAPL) Play and PayPal and Square have come out with decisions
saying they will not do business with those types of business is a big
statement. The beauty is that means they have opened the gates. Now,
let`s see what comes through.

GRIFFETH: I wonder, though, and I worry about the possibility that this
represents restraint of trade.

CRUTCHFIELD: I agree with you.

GRIFFETH: What role do they have in keeping people from being able to buy
a gun, you know, whether we agree with the whole idea of gun regulations or
not, but what about the idea that it`s restraint of trade?

CRUTCHFIELD: Well, I think businesses make decisions about what they want
to do and things they don`t want to do. It`s the same for guns.


CRUTCHFIELD: So, I don`t think it is a restriction of trade depending how
they go about it. It is a business decision. It`s basically saying my
business, my brand doesn`t do that business. So, that`s a simple decision
to make.

I think there will be issues. There will be legal debates but I think
ultimately businesses make decisions every day about who they want to do
business with.

GRIFFETH: I mean, the whole point is that maybe it is the free market that
can come up with a solution that we face in this country, which we all know
something needs to be done about it, where regulation in Congress has
failed to this point.

CRUTCHFIELD: Yes. Well, brands — you know, we trust brands more than we
trust institutions and the government. A lot. Brands do some stupid
things sometimes. We`ve seen that. But typically we do trust them a lot.
So, we want their involvement.

I think we have seen so many movements, so many marches, so many
demonstrations and ultimately, they have all become submerged. So, I think
here`s an opportunity right now in this moment for big brands to get on the
street with the public to show you there are some things that need to
change, and they need to happen now.

And if you look today at President Trump, he threw some socks our way about
bump stocks. I mean, bump stocks was Las Vegas. That was ages go. What
about now? It seems that everything is dragging on.

So, I think retailers, brands, PayPals, those kind of prolific frontier
brands coming in to help the cause will really kind of smash open the gates
to make change a reality.

GRIFFETH: Dean Crutchfield of the Dean Crutchfield Company — good the see
you again. Thanks for joining us tonight.


GRIFFETH: And coming up, why the debate over hiking the gas tax is hitting
a roadblock.


GRIFFETH: General Electric (NYSE:GE) is said to be considering a sale of
its gas engine business. This is according to “Reuters”. The unit could
be worth as much as $2 billion. Such a sale would help streamline GE`s
power division, which saw its profits plunge by 45 percent last year.
Earlier this year, as you may know, GE CEO John Flannery signaled he is
open to a more far reaching breakup of that company.

Customer satisfaction in the airline industry dipped even as a record
number of people took flights. The Annual Air Travelers in America survey
found that 81 percent of those questioned were satisfied with their overall
experience last year. But that`s down from 85 percent in 2016.

The survey of more than 5,000 travelers comes after a year when the airline
industry was hit with several high-profile incidents where passengers
clashed with flight crews.

As we reported last week, there is talk in Washington lately of hiking the
federal gas tax to help pay for needed infrastructure repairs. But a new
report shows just how much that would hit drivers in some states, and
that`s not going over very well.

Ylan Mui has the latest for us tonight from Washington.


federal gas tax hitting a roadblock in Washington. A new report out today
projects increasing the gas tax by just a quarter would translate into
hundreds of dollars in new costs for consumers every year, $220 in Rhode
Island, $300 in Minnesota. Up to $390 in Mississippi.

The data comes from Freedom Partners, the conservative group leading the
charge against raising the gas tax, especially on the heels of Republican`s
sweeping tax cuts.

wrong course of action to give long needed tax relief to Americans and then
claw back nearly a quarter of that in the form of raising taxes at the gas

MUI: The federal gas tax is currently 18.4 cents a gallon. And that money
goes into the National Highway Trust Fund and helps pay for repairs to
roads and bridges. But the gas tax hasn`t been raised since 1993, leaving
the government in a cash crunch. Now, President Trump is reportedly
willing to consider an increase to pay for his big infrastructure plan.

One key congressman, Republican Bill Shuster, chairman of the
Transportation Committee, says he is on board.

It`s efficient. It`s understandable. And it is a fee, it is a tax we
collect that goes 100 percent to its intended purpose. And that`s the
highway system, the transit system in this country.

MUI: Also backing the idea, the U.S. Chamber of Commerce. It`s the one
proposing that 25 cent hike in the gas tax, and letting it rise with
inflation after that. It says that`s fundamentally good for business.

relies on our national infrastructure to move their product to market, to
move our employees to and from work, and provide a quality of life for all

MUI: No matter what happens here in Washington, you could still wind up
paying more when you fill up your tank. Seven states raised their gas tax
last year. And several more are considering it this year. So, there is
still plenty of fuel left in this fight.

For NIGHTLY BUSINESS REPORT, I`m Ylan Mui in Washington.


GRIFFETH: As expected, “Black Panther” had a very strong showing at the
box office over the weekend. The movie pulled in more than $240 million
over the president`s day weekend, one of the biggest openings ever.

Before we go, here`s another look at the stock slide on Wall Street today.
When all was said and done the Dow fell 254 points, closed at 24,964. The
Nasdaq was down by five after spending most of the day higher. And the S&P
down nearly 16 points today.

That is the NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth.
Thanks so much for joining us. Have a great evening. See you tomorrow.


Nightly Business Report transcripts and video are available on-line post
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Business Report is not and should not be considered as investment advice.
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