Transcript: Nightly Business Report – September 8, 2016

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT: Food fight. It`s true. Prices
are falling, and while that may be good for consumers, it`s putting a lot
of pressure on grocers.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: From none to one. An Arizona
county will not go down as the first region to have zero Obamacare plan,
but that`s not easing the concerns of one family.

MATHISEN: Brain drain. As baby boomers retire, some companies are trying
hard to hang on to their older workers longer.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
September 8th.

HERERA: Good evening, everyone, and welcome.

Food prices are falling, and while you may not be feeling it just yet, your
portfolio may be, and supermarket stocks are definitely being strained.
The latest is SuperValu (NYSE:SVU). That grocer cut its profit outlook for
the year in large part because of food price deflation but also because of
increased competition. And that sent shares of SuperValu (NYSE:SVU) down
9.5 percent in trading today.

It`s not just SuperValu (NYSE:SVU). Yesterday, we reported that Sprouts
Farmer`s Market cut its guidance because of significant ongoing deflation.
California-based Smart and Final Stores cut its outlook in July for the
same reason, and Dollar General (NYSE:DG) also mentioned deflation as a
threat on its earnings call last month.

Tomorrow, Kroger (NYSE:KR), the country`s largest supermarket chain, and a
barometer for the industry reports earnings, and many are expecting to hear
much of the same.

Susan Li takes a look at the expiring fortunes of the grocery industry.

(BEGIN VIDEOTAPE)

SUSAN LI, NIGHTLY BUSINESS REPORT CORRESPONDENT: A carton of eggs, 40
percent cheaper, whole milk that costs 11 percent less, beef, pork and
chicken at a discount from 2015. Fruit prices have been falling for nine
straight months, according to the Bureau of Labor Statistics and on track
for the longest stretch of declines in 50 years.

JOE FELDMAN, TELSEY ADVISORY GROUP: Dairy prices have come down because
the price of dairy has gone down because of so much supply, and as a
result, it`s great for the consumer, not as good for the supermarkets.

LI: SuperValu (NYSE:SVU) and Sprouts are among a number of food sellers
that have blamed food depletion as a threat to their bottom line, but it`s
not just falling prices that`s pressuring earnings. There`s also a grocery
price war under way as grocers are cutting prices to gain market share and
big-end trends entering into the grocery game like retail giants Walmart
and Europe`s Aldi.

VINCENT SINISI, MORGAN STANLEY: One of the largest steps in the retail
food industry happened a lot of years ago when the conventionals and big
boxes started to pay attention to, you know, things such as natural and
organic and good-for-you type of items. More recently, you have some
sharpening of those prices, whether it`s Walmart, whether it`s, you know,
some of these — Aldi, which are more kind of deep discount oriented.

LI: Many analysts say that cheaper protein prices should continue into
next year and such a competitive environment that there will be some
winners and some losers.

FELDMAN: It really hurts a lot of the regional grocers. Their margins or
the profit line is very thin for a grocer to make some money, and as a
result there`s a lot of pressure if you`re not a very good executor or have
scaled the way a Kroger (NYSE:KR) or Walmart does.

LI: At the end of the day, there`s a clear winner as a result of falling
food prices, the American household. They can spend less on their grocery
bills each and every week.

For NIGHTLY BUSINESS REPORT, I`m Susan Li.

(END VIDEOTAPE)

MATHISEN: Let`s bring in Joe Feldman, whom you just saw in that report, to
continue our discussion on falling food prices and the impact it is having
on some of the nation`s grocers.

Joe, I know what the numbers say. It doesn`t maybe feel that way at the
supermarket when you go in.

FELDMAN: Right.

MATHISEN: You mentioned just in that piece how thin the margins are for
grocery stores. How thin are they, and what can they do?

FELDMAN: Well, let`s put it this way. For every dollar of sales that, you
know, the grocer makes, they generate around 2, 2.50 to 3 cents of profit
on the bottom line. So, it`s really thin.

Most of that is going to pay for the cost of the food, to pay for the
labor, to run the operation. It`s a very capital-intensive, you know,
industry that actually requires a lot of those labor items and, you know,
people in the stores.

HERERA: Yes. Where do you think we are in the deflationary cycle, Joe,
closer to the beginning or closer to the end?

FELDMAN: I feel like we`re more middle to the second half. Look, nine
months straight, as you mentioned in the segment, is the longest period
we`ve had really in 50 years. You know, our view is sometime late this
year, maybe early next year, you get back to kind of knew travel. We have
seen, you know, puts and takes there. For example, produce was wholly
deflationary earlier this year, and now it`s kind of come back, and it`s a
little bit back in a positive territory.

So I think once the supply/demand balance comes into shape we`ll be OK.
So, it feels like we`re more middle to second half right now.

MATHISEN: When you have prices doing, Joe, what they seem to be doing now,
it would put a premium, it would seem to me, on the companies that can
really execute terrifically well. Which companies in your view are the
ones that can do that and thus might be the better stocks to look at today?

FELDMAN: Well, Kroger (NYSE:KR) is right at the top of the list. I think
by far they are the best at execution. They have got a terrific management
team. They execute really well. They are forward thinking. They have got
great data analytics to help with pricing, and they do it better than
anybody.

You`ve got to think about a Walmart. They are very good executors, and
they have got scale and they are the largest grocer in the nation. That`s
going to help.

Those two guys are going to be big winners I think within this space. I
think it`s the smaller regionals, the mom and pops. That`s where there`s
pressure. You know there`s definitely good ones like there`s Wegman`s,
there`s — HEB does a good job in the Southeast, Publix.

But some of those regional players, it makes it very difficult, like we
heard from SuperValu (NYSE:SVU) today. Really challenging results both,
you know, in their own food business and save a lot business which is like
the deep discount Aldi company.

So, there`s definitely pressures in the grocery world right now.

HERERA: Very quickly. What about whole foods because it seems to take
away some of the market share from like the Sprouts of the world and things
like that?

FELDMAN: Yes. Well, it`s funny because I think for a while sprouts has
probably taken some share from them. I think that some of the mass grocers
like the Krogers, the Walmarts and all the regionals that I just mentioned
are actually taking share from Sprouts and from Whole Foods because they
are going after organic and natural. It`s a hot growing part business, and
there, now, you can get it at your one-stop shop when you go into Kroger
(NYSE:KR).

MATHISEN: All right.

FELDMAN: So there`s pressure on I think Whole Foods and Sprouts and that`s
not really going to led up in the near term.

MATHISEN: All right. Joe Feldman, always helpful, always clear, we
appreciate it.

FELDMAN: Thank you.

MATHISEN: With the Kelsey Advisory Group.

FELDMAN: Appreciate it.

HERERA: On Wall Street, stocks came under pressure despite a rise in oil
prices and investors also paying close attention to the European Central
Bank which surprised the markets by not extending its stimulus program.
And we`ll have more on that in just a couple minutes.

Here are the closing numbers for you. The Dow Jones Industrial Average
fell 46 points to 18,479. The NASDAQ was off 24, pulling back from its
record, and the S&P 500 dropped four.

MATHISEN: The number of Americans filing for unemployment benefits
unexpectedly fell last week. Initial jobless claims dropped by 4,000 to
remain near historically low levels. Reports suggest that the job market
remains tight and that firms are reluctant to lay off workers.

HERERA: Consumer spending is an important part of the economy since it
accounts for about 70 percent of economic activity. In an interview today
on CNBC, the CEO of Bank of America (NYSE:BAC) said he`s optimistic about
Americans` ability to spend and borrow.

(BEGIN VIDEO CLIP)

BRIAN MOYNIHAN, BANK OF AMERICA CHAIRMAN & CEO: The year-to-date consumers
on debit and credit cards are spending 4.7 percent more than last year and
the space accelerating. So, the consumer is very good shape, credit
quality-wise, spending-wise, and if you thought slow them down, confidence
in the markets. Those seem to be in good shape.

It could be confidence in the economy, not growing as fast as we want but
continue to grow. Unemployment levels, I might have a job and get paid
more? You`re seeing wage growth, again, not what people would like to see,
in the mid-2s. Unemployment staying low.

So, the consumer is very constructive.

(END VIDEO CLIP)

HERERA: Moynihan also said his bank, which is the nation`s second largest
lender by assets, is prepared for any move in interest rates.

MATHISEN: European economy has been a concern for global investors, and
today, the head of the European central bank surprised the market by doing
nothing. The ECB failed to extend the deadline for its trillion euro
stimulus program leaving many investors disappointed.

Annette Weisbach reports tonight from Frankfurt.

(BEGIN VIDEOTAPE)

ANNETTE WEISBACH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Mario Draghi is
sitting on his hands when it comes to expanding or enlarging the
quantitative easing program that European central bank has in place, and
that comes despite really sluggish inflation. We had inflation at very low
levels for the month of August. The economy is not doing greatly, but they
are still stilling on their hands saying they want to wait until they see
the effects of other tools actually reaching the market. There is no need
to act, he was saying today.

But he was also saying that they are working on further measures. They
have topped the relative committees in their word, meaning they are talking
about either expanding the purchase program into other asset classes. He
wouldn`t exclude buying stocks but, of course, would not say, yes, that`s a
good plan.

And also another alternative is that in the future they might even buy
bonds which yield less than the deposit rates which currently stands at
minus 4.4 percent. In essence what we can still do here is to wait and
see. Probably in October or December, we`ll get more monetary easing from
the European Central Bank.

For NIGHTLY BUSINESS REPORT, I`m Annette Weisbach in Frankfurt.

(END VIDEOTAPE)

MATHISEN: And coming up from no health exchange options to one. Now one
family is figuring out how long it can afford the coverage.

(MUSIC)

MATHISEN: The Hanjin shipping bankruptcy which we have been telling you
about is expected to cause disruptions for port operations to two to three
months. The Department of Agriculture report, meantime, says the company`s
failure will also delay the processing of agricultural products. According
to the “The Wall Street Journal”, the bankruptcy of the container carrier
has left as much as $14 billion worth of cargo stranded at sea.

HERERA: Democratic presidential candidate Hillary Clinton held a news
conference today, her first one since early December, and she used it to go
after her rival Donald Trump.

(BEGIN VIDEO CLIP)

HILLARY CLINTON (D), PRESIDENTIAL NOMINEE: Bizarrely once again he praised
Russia`s strong man, Vladimir Putin, even taking the astonishing step of
suggesting that he prefers the Russian president to our American president.
Now, that is not just unpatriotic and insulting to the people of our
country as well as to our commander in chief. It is scary.

(END VIDEO CLIP)

HERERA: Her news conference follows a televised forum last night where the
two candidates talked about national security.

John Harwood joins us now from Washington.

So, John, why did she hold this rather rare news conference this morning?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Sue, she had
been edging towards that by having reporters fly on the same plane with her
beginning this week, but she also had reason to want a reset after that
forum last night. She drew the short straw. She had to go first. She got
pressed very hard on e-mail and didn`t have a chance to rebut some of those
statements that Donald Trump made last night, both praising Vladimir Putin
and also saying that U.S. generals had been reduced to rubble under
President Obama.

MATHISEN: Two questions here, John. Why has it taken Ms. Clinton so long
to meet the press, number one, and how did Trump respond to her comments
today?

HARWOOD: Hillary Clinton has a longstanding, Tyler, skepticism about the
value of interaction with the press. This has built up over many, many
years. We all remember the special prosecutor resulting from Whitewater
that turned into a long-term disaster for Bill and Hillary Clinton, so she
has her guard up.

That wasn`t so much the case at the State Department, but it is now, and
it`s come back in this campaign, so that`s where Hillary Clinton`s coming
from while she`s been reluctant.

In terms of Donald Trump, he was very pleased with the results of last
night`s event, and he shifted from defending a little bit his claim that he
had opposed the Iraq war. There`s still no proof of that, but he went on
offense and said, she doesn`t know how to create jobs and I do.

HERERA: Speaking of Mr. Trump, what do the numbers look like at this
point, especially after the forum last night? Is there evidence that he`s
making progress in catching up to Ms. Clinton or not?

HARWOOD: He does have some encouraging news, sue. We have four new swing
state polls out from Quinnipiac today. They showed that in the states of
North Carolina and also Pennsylvania, he`s running behind but not too far
behind, and he`s dead even in the states of Ohio and Florida. That
suggests that general tightening in the race since the peaks that occurred
after the Democratic Convention when Hillary Clinton was on a high, Donald
Trump was making mistakes.

The edge has come off that lead. We`re looking at a much, much closer race
right now.

HERERA: All right. John, thank you so much. John Harwood in Washington
for us.

MATHISEN: Senator Elizabeth Warren, Bernie Sanders and others want answers
now from Aetna (NYSE:AET). In a letter, the lawmakers questioning the
company`s decision to pull out a large portion of its affordable care act
business. The lawmakers want to know if the move was motivated by the
Justice Department`s decision to challenge Aetna`s proposed merger with
rival Humana (NYSE:HUM). In response Aetna (NYSE:AET) says it`s pulling
back due to an increasingly unstable marketplace and that reforms are
needed.

HERERA: Residents of one Arizona County will now have at least one option
when shopping for health insurance on the exchanges. This after Arizona`s
Blue Cross reversed its decision and will now offer a plan as part of the
Affordable Care Act.

But what happens in Pinal County is making one family very nervous.

Bertha Coombs reports tonight from Florence, Arizona.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: For Colin and
Yvette, having an Affordable Care Act plan has meant more time to spend
with their kids while growing their small business south of Phoenix,
Arizona.

UNIDENTIFIED FEMALE: Hi, it`s Annie with tactical pest control.

COOMBS: But this summer, Blue Cross of Arizona said it was dropping ACA
plans in Pinal County where the Becks live and then Aetna (NYSE:AET)
dropped out suddenly leaving 10,000 residents in this community with no ACA
options for 2017.

KYLE BECK, TACTICAL PEST CONTROL OWNER: We`ve talked about my wife having
to go back to work to get insurance through her job as a teacher which
would be — she would be going to work just to pay for insurance and child
care.

COOMBS: Late yesterday, Blue Cross reversed its decision because it didn`t
want to leave Pinal residents in the lurch, despite facing big losses,
nearly $200 million on ACA plans in the last year and up to $50 million
more this year.

Blue Cross senior vice president Jeff Stelnik says that`s why the company`s
strategy was to cut coverage in the state`s two biggest counties, here in
Pinal and in neighboring Maricopa which covers Phoenix. They won`t go back
to Maricopa as long as Cigna stays on exchange there.

It`s a pattern happening across the country. Nine states will now have
just one ACA insurer for 2017. Many nonprofit Blue Cross plans.

CECI CONNOLLY, ALLIANCE OF COMMUNITY HEALTH PLANS CEO: No health insurance
company, even a mission-driven nonprofit can lose large sums of money year
after year after year. You don`t have to be a CEO or an economist to
understand that that math will not work over the long term.

COOMBS: Many are raising premiums. Blue Cross of Arizona is asking for a
50 percent increase. ACA subsidies should soften the blow for most
enrollees. Not for the Becks, already paying $900 a month.

K. BECK: We don`t get any subsidies. It`s pretty much making an extra
mortgage payment every month just to have insurance that`s not very good.

COOMBS: It`s unsustainable for these entrepreneurs.

ANNI BECK, TACTICAL PEST CONTROL: I`m concerned for my children, concerned
for the business, concerned for our family.

COOMBS: Bertha Coombs, NIGHTLY BUSINESS REPORT, Florence, Arizona.

(END VIDEOTAPE)

MATHISEN: Barnes & Noble (NYSE:NE) (NYSE:BKS) says the presidential
election will cause sales to fall, and that`s where we begin tonight`s
“Market Focus”.

The book store chain posted lower than expected same-store sales and cut
that metric guidance for the year. The company blamed its soft outlook on
customers staying indoors to follow election coverage. Shares fell 4
percent to $11.85.

Navistar meantime saw its sales fall for the sixth straight quarter as weak
demand for heavy duty trucks hampered results. The engine and truck-maker
also saw its net loss widen. In addition, the company said its defense
unit received a subpoena from the Department of Defense regarding a recent
government transaction, and the stock nevertheless, up fractionally at
$19.12.

Clovis Oncology said the Food and Drug Administration will forgo holding a
panel discussion regarding the biotech`s new drug for ovarian cancer. The
regulatory agency recently granted the treatment priority review. Shares
are up today, 15 percent, to $28.01.

HERERA: Twitter is hosting its board meeting today, and sources who spoke
to CNBC said the topic of cost cuts will be driving the conversation there.
The social media company`s management is expected to discuss ways to save
money which could include possible layoffs or spinning off company assets.
Shares dropped more than 5.5 percent to $18.70.

Restoration Hardware beat profit and sales expectations, prompting that
company to reaffirm its guidance for the year. The home furnishing
retailer said the better than expected results were due to shipments going
out earlier than anticipated. Shares popped 7 percent in initial extended
hours trading after ending the regular session up 1 percent to $35.27.

MATHISEN: The 79 million baby boomers in the U.S. comprise still the
largest generation in U.S. history and over the next two decades an
estimated 10,000 boomers will retire each day. That poses a challenge for
companies who will see some of their very valued, very knowledgeable
employees leave the workforce.

Sharon Epperson tells us now what some businesses are doing to avoid a
brain drain.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sixty-three-year-
old Randal Braaksma still enjoys coming to the office every day.

RANDAL BRAAKSMA, HERMAN MILLER EMPLOYEE: There are a lot of interesting,
bright people here. They are fun to be with.

EPPERSON: But after nearly 30 years of work, the last 11 spent with the
furniture designer Herman Miller (NASDAQ:MLHR), he says he`s ready for a
change.

BRAAKSMA: I`m part of a baby boomer generation, and we get to remake
everything, right? So, for me I use the word retirement sort of
reluctantly.

EPPERSON: Baby boomers are know for redefining life at every turn, and
retirement is no different. The generation is active, engaged and
interested in continuing to work in some capacity as they age.

BRAAKSMA: I see it as a transition from, you know, the work that I`m doing
now to some other kind of work.

EPPERSON: More than 46 million Americans are already 65 or older, and that
age group is growing fast. About 10,000 baby boomers retire and leave the
workforce every day. It`s a shift that`s starting to have an effect on
companies big and small.

KERRY HANNON, AARP CAREER EXPERT: There`s going to be a need for employers
to hang on to these older workers, these experienced workers because they
don`t want that brain drain. As you look down the road of the pipeline,
there`s not as many younger workers coming on.

EPPERSON: Some companies like Herman Miller (NASDAQ:MLHR) are being
proactive trying to avoid this boomer brain drain.

MICHAEL RAMIREZ, HERMAN MILLER SENIOR VICE PRESIDENT: We realize very
quickly of all those people at ounce or even half decided to leave the
business, it would be detrimental for us.

EPPERSON: In response, the company began what it called a flex retirement
program, open to employees like Braaksma who are 60 and older. It allows
these workers to slowly transition into retirement for up to two years
while at the same time training someone to take their place.

RAMIREZ: Capturing what that person does and how they do it, what the
nuances are, the things that aren`t written down in a job description, s
vitally important that you put something into place to catch this before it
goes because once they are gone, they are gone.

EPPERSON: Four years into the program it`s been a success for the
furniture manufacturer and its workers.

BRAAKSMA: I`m earning less, but that also gives me a chance then to look
at personal finances and see can we make it work?

EPPERSON: For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson.

(END VIDEOTAPE)

HERERA: Coming up, the most powerful women in business includes one of the
country`s most controversial CEOs.

(MUSIC)

MATHISEN: Well Fargo has been fined $185 million for secretly opening of
unauthorized deposit and credit card accounts. It`s a story we first told
you about last year. Regulators now allege that more than 2 million
accounts were opened, and money in customers` accounts were transferred to
these new accounts without authorization. In a to th fine, the bank will
also pay restitution to the affected customers.

HERERA: MasterCard (NYSE:MA) is facing damages of about — damages claims
of about $18 billion. That claim was filed on behalf of U.K. customers who
say they were charged higher prices because of MasterCard`s high swipe
fees. This is only the second claim to be filed under the Consumer Rights
Act of 2015, and it is the biggest in U.K. legal history.

MATHISEN: The most powerful women in business, “Fortune” magazine, has
published its eagerly awaited top 50 women and topping that list is General
Motors (NYSE:GM) CEO Mary Barra, followed by Indra Nooyi, who`s now on her
tenth year at PepsiCo, as the CEO there. Rounding out top three is
Lockheed Martin`s chief executive Marillyn Hewson.

With us now is a familiar face and friend to all of us, Susie Gharib,
senior special correspondent at “Fortune.”

Susie, welcome. Good to have you here.

SUSIE GHARIB, FORTUNE: Great to be here to talk about —

MATHISEN: Miss Barra on top of the list for a second year in a row. Why?

GHARIB: That`s right. Well, you know, she gets a lot of credit for this
incredible job that she did in turning around General Motors (NYSE:GM).
You remember when she took over as CEO, she got hit right at the beginning
with this massive —

MATHISEN: Yes, bad timing.

GHARIB: Yes, that ignition switch thing.

But, you know, she was honest, she was direct, she acted decisively, and
she led the company to this comeback.

HERERA: You know, the person on the cover is Hillary Clinton.

GHARIB: Right.

HERERA: She`s not on the list.

GHARIB: I thought you were going to ask that.

Right. This is list of corporate power players, Sue. If she wins the
election, she will be the most powerful woman in the world, right, let
alone business.

But the story is about is Hillary good for business?

HERERA: I see.

MATHISEN: Controversial choice coming in at number 23, and that is the CEO
of Mylan (NASDAQ:MYL) Pharmaceuticals.

GHARIB: Heather Bresch.

MATHISEN: Heather Bresch, down one slot this year. Was the list compiled
before all the controversy about the EpiPen?

GHARIB: They change. It`s very fluid. You know how it is in the news
business.

But some people will say why wasn`t she even lower? Obviously, not the
most popular CEO these days given the way she handled EpiPen and the price
increases.

But this isn`t a popularity contest. I mean, she is a powerful woman in
business. I mean, just looking at her stature, she`s the only woman who
runs a major pharma company, $9 billion company, and she has a good track
record. Revenues are up and substantially since she took over, and the
stock has outperformed the S&P so there`s a reason she`s on the list.

HERERA: Yes. There`s some new people on the list, nine new women. Give
us a couple.

GHARIB: Yes. The first one, the big one is Tricia Griffith who is the
head of Progressive (NYSE:PGR), the ads for the auto insurer.

MATHISEN: Not Flo?

HERERA: No, Flo didn`t make it.

GHARIB: She`s number 18 on the list. She started — just became CEO in
July. She started out in 1988 as a claims rep and worked her way up, and
now she`s the CEO.

HERERA: The way (INAUDIBLE) fluid at some point, we never know.

GHARIB: Maybe, maybe.

MATHISEN: And Beyonce at 51.

GHARIB: She`s the super bonus, Tyler. I knew you would get excited about
it, number 51.

MATHISEN: Right.

GHARIB: She`s more than just a rock star and superstar. She has a
business, apparel business, and — and, you know, she`s — she has a lot of
business savvy so she`s on the list and she`s the youngest woman on the
list

MATHISEN: Oh, is that true? She`s the youngest as well.

GHARIB: Thirty-five

MATHISEN: Susie, great as always to see you. Thanks for coming out.
Senior special correspondent over at “Fortune.”

HERERA: And that does it for NIGHTLY BUSINESS REPORT tonight. Thanks for
joining us. I`m Sue Herera.

MATHISEN: I`m Tyler Mathisen. Have a great evening, everybody. See you
tomorrow.

END

Nightly Business Report transcripts and video are available on-line post
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Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
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