ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Not-so-speedy delivery. FedEx
(NYSE:FDX) cuts its full-year profit forecast for the second time this
year, and it is blaming a worldwide economic slowdown.
Playing to win. Google (NASDAQ:GOOG) is making a big push into the video
game industry and it could change the business as we know it.
Denim debut. Why the company that invented blue jeans is getting ready to
return to Wall Street.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
Good evening, everyone, and welcome. Bill is off this evening.
We begin with a company that has become synonymous with the global economy,
FedEx (NYSE:FDX). The company, which ships more packages when activity is
strong, reported quarterly results below Wall Street estimates. And the
future doesn`t look much better. FedEx (NYSE:FDX) lowered its full-year
outlook for profit again citing a slowdown in global trade.
The logistics company earned $3.03 a share, missing expectations. Revenue
was up from last year, but below consensus forecast. And that sent the
stock lower in initial after-hours trading.
Kate Rogers (NYSE:ROG) has more on FedEx`s results.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The big thing to focus
on here, continued impacts of a global slowdown on the company`s business.
CFO Alan Graf said in a statement, slowing international macroeconomic
conditions and weaker global trade growth trends continue as seen in our
year-over-year declines in our FedEx (NYSE:FDX) Express (NYSE:EXPR)
International Revenue. The company lowered its guidance for the full-year
EPS with a weaker Q4 range than anticipated, due to concerns over global
This comes after lowering guidance last quarter, citing weaker
international business, particularly in Europe.
For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG).
HERERA: So let`s turn now to Donald Broughton for more on FedEx`s results
and what those numbers may be telling us about the health of the global
economy. He is managing partner at the independent research firm Broughton
Nice to have you here, Don. Welcome.
DONALD BROUGHTON, MANAGING PARTNER, BROUGHTON CAPITAL: Nice to be here.
HERERA: All right. What do you make of these results? Obviously, the
street thinks that it does not portend anything on the very good side for
the global economy, but what about you? You say you`re generally speaking
BROUGHTON: Well, I really am. And this is the company that`s going to
deliver e-commerce in the coming years and decades. But the bottom line
is, they`re just following through on what they told us 90 days ago, which
is that if you look at air freight numbers, volumes in Europe, you can
blame it on Brexit, you can blame it on whatever, but the rates of volume
there continue to decline.
But more concerning is that since that last release 90 days ago, in the
interim not only did they get proved right about Europe, but the rates have
declined in air freight volumes in Asia have really stumbled and fallen.
HERERA: You know, those two issues you bring up, Asia, the U.S./China
trade war and Brexit, both of those remain largely unresolved. We may be
getting a little bit of progress on trade. So that does not really portend
a bright future for FedEx (NYSE:FDX), does it, if it still has those two
clouds hanging over it?
BROUGHTON: Well, it doesn`t portend a bright future in the short term.
That`s granted. But I would tell you the air freight numbers in Asia tell
you is that, quite frankly, China needs to do a trade deal more desperately
than we do, which raises my confidence that one will actually get done.
And eventually one will and then the dominant player in that market, FedEx
(NYSE:FDX), will be the biggest beneficiary.
Brexit will eventually get settled and as it does, hopefully, we`ll get
relief and improvement in volumes there and again FedEx (NYSE:FDX) will be
HERERA: What do you do with the stock in the time that we have left?
BROUGHTON: We continue to be a long-term bull about the company and its
prospects and as a result its stocks. If you look at how well they are
managing their operations, their technology, they move things more
efficiently and make more money on every package than they ever have. But
they can`t control the macro economy. They can`t control Brexit and they
can`t control Trump and the trade tariffs and trade war.
HERERA: Indeed. Don, thank you very much, as always. Don Broughton with
BROUGHTON: My pleasure.
HERERA: On Wall Street, the Dow snapped its four-day win streak after a
report that Chinese officials are pushing back on U.S. trade demands. As a
result, stocks ended mixed. The Dow fell 26 points to 25,887. The Nasdaq
rose 9, but the S&P 500 fell ever so slightly.
Bob Pisani has more.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The markets whipsawed
on a couple of conflicting headlines about U.S./China trade talks. The Dow
Jones Industrial Average snapped a four-day win streak. Stocks rallied
early ahead of tomorrow`s Federal Reserve meeting per the usual pattern.
In fact, the Fed itself has conducted studies on what is called the Fed
drip. It`s the tendency for stocks to drift higher in the 24 hours
preceding a Fed announcement.
The Fed has found this phenomenon puzzling but it does exist. But the S&P
500 passed below the day`s prior low late in the day and we saw heavy
selling pressure pick up and the rally fizzled out by the close. Still,
stocks have held up very well recently. Crude oil prices are hovering near
four-month highs and there`s definitely hopes for a trade deal. We`re
getting very close to the final stages of negotiations.
Recent headlines suggest the U.S. and China are in very tense negotiations.
China wants assurances that the tariffs will be eliminated as part of the
deal and that`s certainly a sticking point. U.S. Treasury Secretary Steve
Mnuchin still scheduled to go to Beijing this week. China`s vice premier
is slated to travel to Washington the following week, so negotiations are
really intense right now.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: There are new developments tonight related to Boeing (NYSE:BA).
The Department of Transportation has asked its inspector general to audit
the FAA`s certification of the Boeing (NYSE:BA) 737 MAX following two fatal
crashes involving the aircraft since October. Boeing (NYSE:BA) says it
will fully cooperate with the audit. Separately, there are reports that
former delta executive, Steve Dixon, will be nominated by the White House
to head the FAA.
And as Bob just mentioned, Federal Reserve policy makers began their two-
day meeting today. The central bank is widely expected to hold interest
rates steady when they announce their decision tomorrow.
Ahead of that decision, Steve Liesman surveyed market watchers to get a
sense of where they see the market and the economy heading.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: As Fed officials
huddle to set interest rates at their March meeting, a new survey shows
Wall Street preparing for slower U.S. growth this year and some thinking
the Fed might even cut rates down the road. The CNBC Fed survey for March
sees growth slowing to 2.3 percent from 3.1 percent in 2018, bumping down
again in 2020 to 2 percent.
The 43 responders include economists, strategists and fund managers point
to slower global growth and trade tensions as the leading threats to the
U.S. expansion. The two could possibly shave more than half a point
together off of growth this year.
ROBERT BRUSCA, FACT AND OPINION ECONOMICS: If the global economy is still
in difficult shape, I don`t think the economy is going to snap back that
much. I think the economy is in a little bit more trouble.
LIESMAN: On the other side are those in the survey who are more optimistic
because they think the tax cuts this year could continue to deliver
STEPHEN STANLEY, AMHERST PIERPOINT: It`s unrealistic to believe that all
of the beneficial impacts of the tax cuts on investment took place in a
six-month period. These are multi-year projects that take a long time to
be planned, executed, delivered, and then incorporated into business
LIESMAN: In bringing down growth forecasts, respondents also brought down
their outlooks for rate hikes this year from the Fed. At the height of the
bull market last year, respondents thought the Fed would hike rates as many
as three or four times in 2019. That`s been pared back where barely a one-
quarter point hike is now expected.
Next year, most are betting on a single hike, but 35 percent think the Fed
could even cut interest rates. So the Fed is seen as on hold for now, but
investors are on the lookout for whether more than just patience is needed
from the Central Bank.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: The news tonight takes us to the Midwest, which has seen
devastating and historic flooding. Most of Nebraska is under a state of
emergency. According to some early estimates, Nebraska`s agricultural
sector could face nearly a billion dollars in damage and loss. Agriculture
accounts for 20 percent of that state`s economic activity. Livestock
accounts for nearly 60 percent of Nebraska`s agriculture revenue. And some
say flooding could prevent farmers from planting next year`s feed crops.
It is time to take a look at some of today`s “Upgrades and Downgrades”.
Domino`s Pizza (NYSE:DPZ) was upgraded to overweight from neutral at
JPMorgan (NYSE:JPM). The analyst cites the potential for double-digit
sales growth. The price target is $270. The stock was up more than 2
percent to $248.76.
Union Pacific (NYSE:UNP) was downgraded to hold from buy at Luke Capital
Markets. The analyst cites the problems posed by the flooding in Nebraska.
The price target is $182. The stock fell more than 3 percent to $160.75.
Noble (NYSE:NE) Energy was upgraded to buy from neutral at Mizuho. The
analyst cites the company`s free cash flow. The price target is $29. The
stock was up a fraction to $24.
Coming up, big tech is making a big push into video. We`ll explain.
HERERA: The top antitrust Democrat is calling for the FTC to investigate
Facebook (NASDAQ:FB). The chairman of the House Judiciary Committee`s
antitrust subcommittee wants to know whether the social media company`s
conduct violated antitrust law. In a “New York Times (NYSE:NYT)” op-ed,
the congressman encouraged the FTC to take a tougher stance against the
country`s largest tech companies. And he cited the Cambridge Analytica
scandal and Facebook`s handling of user data among other issues.
Well, there is big money to be made in the video game industry, and Google
(NASDAQ:GOOG) wants a piece of it. The tech company made its intention
known at the Annual Game Developers Conference in San Francisco, which is
where we find Josh Lipton.
SUNDAR PICHAI, GOOGLE CEO: To build a game platform for everyone.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Google`s CEO Sundar
Pichai took the stage today at the game developers conference in San
Francisco, where he announced his company`s big push into the $135 billion
video game market.
It`s called Stadia, a new game service for devices running Google`s Chrome
browser. And Google (NASDAQ:GOOG) hopes it will upend the traditional
video game market, because it means fans will soon be able to stream
complex, high-level games over the Internet right to their phones, tablets
and televisions. No need for PCs or expensive game consoles.
Google (NASDAQ:GOOG) executives say Stadia is a game-changer.
PHIL HARRISON, GOOGLE VICE PRESIDENT AND GM: As we said in our
presentation, we want games to be available for everyone. Without the
barriers or the limitations of the hardware that they may have in their
homes, we`ll take care of the hardware in our data center. All you need is
a laptop or a PC or a TV to stream to, so you don`t have to have that
expensive custom hardware to get the best possible game experiences. And
over time, we think that that will dramatically increase the game audience
LIPTON: Google (NASDAQ:GOOG) isn`t saying exactly when Stadia will launch,
only that it`s at some point this year. The company isn`t yet detailing
the business model either. Will it be a subscription? Or will Google
(NASDAQ:GOOG) take a portion of all proceeds spent on stadia. There`s
plenty of competition when it comes to video gaming. Microsoft
(NASDAQ:MSFT) is exploring this technology and so is Amazon (NASDAQ:AMZN).
Analysts say that one question is whether the big game developers now buy
into this vision and partner with Google (NASDAQ:GOOG). That could mean
giving up some of their game`s proceeds. Is that worth it to potentially
reach that many more gamers around the world?
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, San Francisco.
HERERA: A media milestone has been reached. For the first time, more
households subscribe to a digital streaming service than to traditional pay
According to a new survey from Deloitte, 69 percent of respondents pay for
Internet video versus 65 percent for cable or satellite television. The
trend was most pronounced among Generation Z where 80 percent subscribe to
Internet video only
Netflix (NASDAQ:NFLX) says it has no plans to make its shows and movies
available on Apple`s upcoming video offering. CEO Reed Hastings says he
wants customers to watch Netflix` content on its service.
Joining us now Brett Sappington, director of research with Park Associates.
Brett, nice to have you here. Welcome.
BRETT SAPPINGTON, PARK ASSOCIATES DIRECTOR OF RESEARCH: Glad to be here,
HERERA: This is such a fascinating space to me and it`s one where you`re
getting new entrance to it all the time. You say there are going to be a
number of winners in the space but you single out Netflix (NASDAQ:NFLX).
SAPPINGTON: Well, Netflix (NASDAQ:NFLX) is the leader. They`re the
dominant leader by a significant margin. Over half of U.S. households have
a Netflix (NASDAQ:NFLX) subscription right now, and that`s significantly
more than anyone else. The next closest is Amazon (NASDAQ:AMZN).
HERERA: What about Apple`s entry into it. Do they have an uphill battle
to fight? I mean, they`re very, very innovative company certainly and they
want in on this space. Netflix (NASDAQ:NFLX) doesn`t want to do business
with them in this particular niche at this point. What does Apple
(NASDAQ:AAPL) have to do?
SAPPINGTON: Well, I think anyone entering the online video space right now
for subscription services, everyone has kind of an uphill battle to try and
rival Hulu, Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX). But there`s no
company perhaps that`s out there other than maybe Facebook (NASDAQ:FB) or
others that has a better path to success than Apple (NASDAQ:AAPL). Apple
(NASDAQ:AAPL) has iPhones, they have iTunes, they have smart watches.
There`s a number of ways to be able to both get services to consumers and
to promote their service.
HERERA: What about content? Does it come down to who can create the most
original content, or does it come down to who can aggregate the content
from other players or maybe both?
SAPPINGTON: It really does come down to content. You don`t subscribe to a
service unless you`re interested in watching what it has. So, for Apple
(NASDAQ:AAPL) to be successful, it needs to have good distribution and it
needs to have a unique reason for consumers to pick them either over other
services or in addition to the other services that they pay for.
HERERA: What does Netflix (NASDAQ:NFLX) have to do to maintain its
dominant threat? As we mentioned, Apple (NASDAQ:AAPL) is a very innovative
company. A lot of these companies that are in this space, you know, their
bread and butter is innovation. So, what does Netflix (NASDAQ:NFLX) have
to do to stay in its lead position?
SAPPINGTON: They have to continue to produce good content. And they have
proven very adept at doing that. In fact, what we`ve seen from Netflix
(NASDAQ:NFLX) is a number of — a significant portion of their library has
gone from movies and television shows to original content and original
They`re winning awards. They`re gaining subscribers both here and
internationally. So they just need to keep up that momentum. It`s going
to be difficult, particularly with a number of known brands entering the
HERERA: On that note, Brett, thanks so much. Brett Sappington with Park
Well, the other shoe drops at DSW (NYSE:DSW), and that`s where we begin
tonight`s “Market Focus”.
The shoe retailer reported a surprise quarterly loss. Analysts had been
expecting a profit. The company cited higher overall expenses and an
increase in inventories. DSW`s CEO also announced a rebranding effort that
includes a name change to designer brands. The stock fell nearly 13
percent to $22.09.
It was a different story, though, for Michael`s. The arts and crafts
retailer reported better-than-expected quarterly earnings which helped
offset guidance that was below consensus. The company plans to open 24 new
stores during the new fiscal year. The stock was up more than 8 percent to
Goodyear Tire plans to cut 1,100 jobs in Germany. The company says the
decision is part of its plan to modernize manufacturing facilities. The
move follows Ford`s announcement just a few days ago that it plans to cut
about 5,000 jobs in Germany. The stock closed up a fraction to $17.92.
Weak sales data is sapping the energy out of the shares of Monster
Beverage. A Wall Street analyst citing Nielsen data said sales were down
more than 3 percent in the week that ended March 9th. Rival energy drink
maker Bang saw sales rise that same week. The stock fell more than 4
percent to $57.92.
Well, Levi Strauss is credited with creating the first pair of blue jeans.
The company is one of the dominant forces in the industry, and investors
will soon be able to buy shares of the denim pioneer.
Courtney Reagan has more on the company`s upcoming IPO.
COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Denim lovers can
invest in more than just a pair of Levi 501s when the 166-year-old company
goes public for the first time in more than three decades on Thursday.
Levi Strauss is the top seller of jeans in the world and its Wall Street
debut comes amid big changes in the industry. Competition is stiff from
the likes of wrangler and old navy.
Rival Wrangler parent company, VF Corporation, is spinning off its jeans
wear business into a new public company. And Gap (NYSE:GPS) Inc. is
spinning off Old Navy and to each own publicly traded entity.
These newly public companies come at a time when jean sales are forecast to
improve globally, though at a slower rate over the past five years.
And one of denim`s biggest challenges has been athleisure.
FRED CRAWFORD, ALIXPARTNERS SENIOR VICE CHAIRMAN: Athleisure is a concern
for the category broadly speaking. However, with that said, I think Levi`s
in many ways defines the category.
REAGAN: As consumers buy more stretchy, casual clothing, companies
including Nike (NYSE:NKE), Adidas, Lululemon, Under Armour (NYSE:UA) and
Gap (NYSE:GPS) Inc.`s Athleta gain apparel share in the U.S. As Levi`s,
True Religion, Gap (NYSE:GPS), J. Crew, Banana Republic and Ralph Lauren
lose apparel share, according from research from Bernstein.
But NPD sees the trend turning, forecasting women are looking to replace
yoga pants with jeans this year.
CRAWFORD: Denim is one of those categories that will cycle in and out of
popularity. And certainly, in recent times it`s been experiencing an
REAGAN: That`s good news for Levi`s women`s business which is less than 30
percent of sales but growing. It`s also good for the competition.
American Eagle global brand president Chad Kessler says his brand is number
one for women in the U.S. and, quote, growing rapidly. And he expects
significant growth to continue in both men`s and women`s jeans this year.
So why go public now? Levi Strauss says the offering will give it more
financial options, but experts point to another motivation for the dual-
share class IPO that gives the descendants of the founders family 10 class
B votes to every 1 vote of the class A investors, or nearly 81 percent of
the voting power. Investors hope that history of profitability and sales
can continue for years to come.
For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan.
HERERA: Coming up, is the item listed on that e-commerce site real or
fake? With the U.S. and China in the middle of a trade war, it might be
harder to know.
HERERA: Peloton was hit with a $150 million lawsuit. A group of music
publishers allege that the maker of video streaming exercise bikes used
more than 1,000 songs from well-known artists without permission. The
publishers say Peloton failed to license songs from the companies, and that
resulted in a loss of income. Peloton says it is evaluating that
As the U.S. and China continue their trade war and it heats up, in fact,
Chinese nationals may have found a surprising way around the tariff,
increasing the number of counterfeit goods according to the FBI. China is
behind an ever-increasing number of fake products and is now targeting
American trademark records in a quest to gain access to e-commerce sites
and American consumers.
Andrea Day has the story.
ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is the federal
inspection station at JFK Airport, a massive warehouse where almost every
package coming into the United States through New York City must pass
FRANK RUSSO, CUSTOMS AND BORDER PROTECTOIN, JFK PORT DIRECTOR: We`re
talking about, you know, anywhere from 800,000 to a million pieces of mail
DAY: That`s $92 billion worth of legitimate trade in just this past fiscal
year. Frank Russo is the JFK port director for Customs and Border
Protection. The mission: keep the real goods flowing and stop imposters in
their tracks, a challenge, he says, like never before.
RUSSO: We`ve seen a big spike certainly of just volume.
DAY: From phony guns, jewelry and guitars.
Just in the last 72 hours, all of these products came in here.
RUSSO: Absolutely. Yes.
DAY: So what`s behind these doors?
RUSSO: This is our most secure room.
DAY: The room loaded with potentially counterfeit drugs and more.
RUSSO: Everything from pharmaceuticals, tramadol, oxycodone, to ecstasy,
MDMA, to counterfeit money, counterfeit IDs.
DAY: Fueling the spike, he says, e-commerce and smaller packages headed
straight for the consumer.
RUSSO: An incredible uptick in e-commerce.
DAY: And some of these new super fakes, he says, are so real it`s almost
impossible to tell the difference.
Was this on its way to a consumer?
RUSSO: Probably. Somebody ordered it online.
DAY: Fake or real?
DAY: Where are we seeing most of these counterfeit products coming from?
RUSSO: Certainly China, one part of the world where we`re seeing an ever-
increasing number of counterfeit goods.
DAY: We wanted to find out what`s behind this virtual epidemic of fakes
coming in from China and how so many are winding up on e-commerce sites for
DYAN FINGUERRA-DUCHARME, PRYOR CASHMAN PARTNER: It`s driving up cost for
DAY: Dyan Finguerra-Ducharme specializes in trademark law. She says
imposters are trying to hijack her clients` luxury brands by duping the
U.S. Patent and Trademark Office or USPTO so they can register as the brand
on sites like Amazon (NASDAQ:AMZN).
FINGUERRA-DUCHARME: They file a document with the trademark office that
says our e-mail address has changed. Then they go over to the Amazon
(NASDAQ:AMZN) brand registry and say we are the owner of this mark and they
give their e-mail. Amazon (NASDAQ:AMZN) looks at the USPTO records and
confirms the e-mail. At that point, Amazon (NASDAQ:AMZN) gives them access
to all of their tools, as the rightful brand owner. With access to those
tools, they can take down legitimate product and they can ensure that their
own counterfeit product is sold on Amazon (NASDAQ:AMZN).
DAY: So you`re saying it could be as easy as just changing an e-mail to
start this process?
FINGUERRA-DUCHARME: I`m saying it is as easy as changing an e-mail.
DAY: Amazon (NASDAQ:AMZN) tells us in part, we remove suspected
counterfeit items as we become aware of them. Amazon`s proactive
technologies and services for protecting brands, including brand registry,
are increasingly effective. As a result, bad actors are attempting to find
new ways to abuse our protection. We are working closely with the brands,
the USPTO and others to continue to strengthen our protections.
FINGUERRA-DUCHARME: It`s unbelievable how easy it has become.
DAY: When an e-mail address is changed, the trademark office sends out an
alert to the old address to confirm, but Ducharme says they can easily be
missed or even ignored by a brand.
FINGUERRA-DUCHARME: For my clients alone, I received about 12 or 15 of
these e-mail alerts.
STEVEN SHAPIRO, FBI`S INTELLECTUAL PROPERTY RIGHTS UNIT CHIEF: Every day I
come in and I find a new product, a new product category that
counterfeiters are producing and faking.
DAY: Steven Shapiro is the unit chief for the FBI`s intellectual property
SHAPIRO: They`ll communicate with the patent and trademark office as if
they`re the actual brand holders in an attempt to change the contact
DAY: And as trade wars intensify, he says criminals are looking to e-
commerce and selling any way they can.
SHAPIRO: There are some that feel that as tariffs increase and other
policy issues come along, that counterfeit is seen as an alternative route
towards making additional profits. It`s very difficult to monitor every
single seller operating on these platforms because they are massive and
they do have millions of transactions a day.
DAY: The USPTO tells us it takes the issue of fraudulent, unauthorized and
improper submissions very seriously and is working right now to identify
those filings and stop them from being processed or causing any harm.
I`m Andrea Day for NIGHTLY BUSINESS REPORT.
HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera,
thanks for joining us. We`ll see you tomorrow. END