Transcript: Nightly Business Report – September 19, 2017

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

store in the U.S. files for bankruptcy as the former powerhouse becomes the
latest victim of the upheaval in the industry.

Retail revival. Best Buy (NYSE:BBY) came back from the brink by playing
defense against Amazon (NASDAQ:AMZN). And its new playbook seems to be

Houston after Harvey. With a shortage of workers, residents wonder when if
ever they`ll be able to rebuild.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
September 19th.

Good evening, everyone, and welcome. I`m Sue Herera. Tyler Mathisen is
off tonight.

We begin tonight with a tale of two retailers. First, Toys “R” Us, the
store that once dominated the industry has filed for bankruptcy. As we
told you yesterday, the company has been crippled by increased competition,
a mountain of debt and a retail business that`s being turned upside down.
The bankruptcy is among the largest ever by a specialty retailer and it
could usher in changes to the company`s nearly 1,600 stores.

Kate Rogers (NYSE:ROG) is at a Toys “R” Us in Paramus, New Jersey.


the wishful thinking in their TV commercials, we all grow older and as a
company, Toys “R” Us is no exception.

CHARLES O`SHEA, MOODY`S INVESTORS SERVICE: The bankruptcy itself is a Toys
“R” Us story, obviously. But I think that when you look at retail, the way
it`s being portrayed in the market right now is that it`s under siege. And
there are some retailers that are challenged, and toys was in that camp.

ROGERS: During a time when consumers are increasingly turning to online
shopping to compare prices, the iconic toy retailer says it plans to
restructure $5 billion in debt. Toys “R” Us has shown signs of struggle in
recent years, prepping plans for an initial public offering in 2010, then
reversing course in 2013. It also closed its flagship Times Square retail
store in 2015.

UNIDENTIFIED MALE: It is simply one of the great post-war retail
businesses of America.

ROGERS: This wasn`t always the case. Toys “R” us grew from some 350
stores in the 1980s to more than 1,600 stores around the globe today. But
as shoppers turned to the Web, Amazon (NASDAQ:AMZN) is stealing market
share. While the toy industry grew just 5 percent in 2016, Amazon
(NASDAQ:AMZN) experienced 24 percent growth in its toy sales.

UNIDENTIFIED FEMALE: Preferred is probably not leaving the house and
shopping online. I typically don`t ever really come to the store,
especially Toys “R” Us.

ROGERS: Toys “R” Us has not announced closures or layoffs. In fact, it
says it expects to announce plans to hire thousands more workers during
peak holiday season. Customers can rest assured, the toy chain says they
will not see any disruptions to their rewards program and gift cards won`t
expire. But that hasn`t stopped nervous shoppers from rushing to the
stores today to use their gift cards.

UNIDENTIFIED FEMALE: Someone had posted the rumor that it was closing and
if you have gift cards, to go out and apparently spend them by the end of
the week because they weren`t going to be good anymore.

UNIDENTIFIED FEMALE: Rumor has it that Toys “R” Us is claiming bankruptcy.
And once that happens, our gift cards go to zero dollar balance.

ROGERS (on camera): Toys “R” Us isn`t alone in its struggles. In fact, it
joins other major retailers Payless and RadioShack in filing for bankruptcy
in 2017.

For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG) in Paramus, New


HERERA: And then there`s Best Buy (NYSE:BBY). Just a few years ago, that
company was on death`s door. Back then, its new CEO decided to close some
stores and focus on its online business. And that strategy helped turn the
company around. Today, the consumer electronics chain held its first
investor meeting in five years. And the message was starkly different from
the last one in 2012.

Courtney Reagan is at Best Buy (NYSE:BBY) headquarters in Richfield,


a different feeling at Best Buy (NYSE:BBY) headquarters these days. Just
five years ago, many wondered if the consumer electronics retailer was
viable in the age of Amazon (NASDAQ:AMZN).

HUBERT JOLY, CEO & CHAIRMAN, BEST BUY: We had negative comps. Our margins
were going down. There was questions about whether we were going to

REAGAN: CEO Hubert Joly was new to the job then and had a plan to turn it

JOLY: We`ve had four years of positive comps, our margins have expanded.
We`ve been in the last five years in the top 10 percent of the S&P 500 from
a total shareholder standpoint. Consumer satisfaction is up. We`re
gaining share. So, we`ve become relevant again.

REAGAN: Joly says he fixed what was wrong. Now, Wall Street analysts say
he needs to find growth.

BRIAN NAGEL, OPPENHEIMER & CO.: Best Buy (NYSE:BBY) today is much better
equipped to compete with Amazon (NASDAQ:AMZN). To stay relevant is, can
they continue to appeal to that consumer, the consumer who wants both the
online and in-store shopping experience?

REAGAN: One key category Best Buy (NYSE:BBY) is focusing on is the
connected home, with both products and service. Industry estimates
forecast the connected home market could be worth $50 billion worldwide by

Piper Jaffray says Best Buy (NYSE:BBY) could capture 10 percent of the U.S.
smart home market, adding substantially to sales.

(on camera): With its new in-home adviser network, experts will actually
come to your home, help you figure out how to make your home smarter, more
connected, install things like security systems and even smart door bells.

(voice-over): Best Buy (NYSE:BBY) is also expanding its new total tech
support program, a step beyond its Geek Squad.

JOLY: It covers every technology product you have in your home, whether or
not you bought it at Best Buy (NYSE:BBY). And we`re going to help you.
So, as an example, you know, if Netflix (NASDAQ:NFLX) is not working
tonight, is it because of Netflix (NASDAQ:NFLX)? Is it (INAUDIBLE) getting
into the home? Is it the Wi-Fi? Is it the TV? Is it the streaming

Honey, please help me! And we`re honey.

REAGAN: It`s not the only retailer wanting to save the tech and connect
your home, while still small, Amazon (NASDAQ:AMZN) has its own tech rescue
team. And Amazon`s formidable online dominance is one of the reasons Best
Buy (NYSE:BBY) had to undergo its transformation in the first place.

For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in Richfield, Minnesota.


HERERA: But today, Wall Street wasn`t buying Best Buy`s growth story. The
company said it expects its long term earnings to come in below Wall Street
estimates. And shares took a tumble, off 8 percent.

In another sign of the changing retail times, Kohl`s (NYSE:KSS) will let
Amazon (NASDAQ:AMZN) customers return items at some of their stores. The
retailer will pack and ship the merchandise back to the online retailer for
free. Earlier this month, Kohl`s (NYSE:KSS) announced plans to sell the
Alexa enabled Echo speaker, Fire TV and other Amazon (NASDAQ:AMZN) branded
devices in ten of its stores.

On Wall Street, stocks edged higher and closed at record levels, as
investors held off on making big investments ahead of the Fed`s upcoming
policy announcement. We`ll have more on that in a minute.

This afternoon, traders were also keeping watch over a powerful earthquake
which rocked Mexico City. Buildings collapsed, airports closed, and
Mexican stocks fell before trading was halted. The Dow Jones Industrial
Average gained 39 points to 22370, the Nasdaq was up six, and the S&P 500
added almost three.

In Washington, Federal Reserve policymakers met for the first day of a two-
day meeting. An interest rate hike is not expected to be announced
tomorrow. But many are looking for details on the central bank`s plan to
pare back its bond holdings.

Steve Liesman takes a look at what else Wall Street is looking for.


for September showing no change expected in rates at the end of this
meeting here. Rates 100 percent of our 42 respondents are expected to
remain unchanged after the meeting and the announcement tomorrow. The
third rate hike, though, 76 percent do believe there will be another
quarter point hike before the end of the year. That`s a little bit higher
than market prices might suggest. And finally, the balance sheet, 68
percent say by October, the Federal Reserve will begin to reduce that $4.5
trillion balance sheet.

As for the outlook for rates, they have come down, compared for example
from our March survey. The same for 2017. But look what happened for
2018, down by 0.3 percent, down by 0.2 for 2019 with 2.5 percent. The long
run rate that we`re going to watch that tomorrow to see if Fed officials
are bringing down their estimate for how far they have to go in this rate

As for their expectations for the balance sheet, it`s expected to go down
from $2.5 trillion, down to $2.4 trillion. But don`t get too excited.
Some people say it`s like watching paint dry, it`s going to take 4.4 years
to get there.

We also asked an interesting question here, which is, how low can the
unemployment rate go before it sparks inflation? Three-point-seven
percent, that`s pretty much below the 4 percent level on the 4.4 percent
level where we are right now. So, there`s room to run, according to these
respondents, before inflation spark.

But note this, 45 percent say there`s little or no connection of the
unemployment rate to inflation.



HERERA: Many on Wall Street were also watching events at the United
Nations. In his first address to the U.N., President Trump threatened to,
quote, totally destroy North Korea if the U.S. is forced to defend itself
or its allies in East Asia.


mission for himself and for his regime. The United States is ready,
willing, and able, but hopefully this will not be necessary. That`s what
the United Nations is all about. That`s what the United Nations is for.


HERERA: The North Korean ambassador to the U.N. walked out before
President Trump`s speech began.

The Senate easily passed a nearly $700 billion defense bill late yesterday.
The measure would put the U.S. armed forces on track for a bigger budget
than at any time during the wars in Iraq and Afghanistan. The bill calls
for expanded missile defenses in response to those escalating tensions with
North Korea.

And a new effort to reform the health care system is gaining steam in the
Senate. The Graham/Cassidy bill would repeal the infrastructure of the
Affordable Care Act. But it would leave the taxes in place and funnel that
revenue towards the states. The White House backs the bill. So does the
speaker of the house.

And the bill`s sponsor, Lindsey Graham, appears optimistic.


SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: We`re going to get 50 Republican
votes. And I make a prediction: there are going to be a lot of Democrats
struggling with a no vote, because at least eight of them, eight of them,
their states do far better than Obamacare in terms of funding and they have
more control over the money. And that`s going to be a hard no.


HERERA: Andrew Friedman is the principal at “The Washington Update” and he
joins us now to discuss this latest effort.

Good to see you again, Andrew. Welcome back.


HERERA: I`m good.

What do you — how do you handicap the odds on this? Because what we`re
hearing from Republican leaders is they kind of feel like this is it, that
this is their last best bet to getting health care reform through.

FRIEDMAN: Well, it`s probably their last bet, I`ll agree with that. The
concern many have expressed about the bill, and as Senator Graham noted,
some states do better under this bill, they get more money from the federal
government for their health care system than they do now, they would get

But what that does is it`s taking money away from states that expanded
Medicaid and provided free insurance to all lower income people. They`re
left holding the bag. They don`t get as much money from the federal
government, which means many of the constituents and residents in those
states are going to lose insurance that they currently have under the ACA.
And I think that will be a problem for senators and governors in those

HERERA: Do you think that they have the votes? Senator graham seemed to
think they do. But as you know, it always comes down to the wire.

FRIEDMAN: It sure does. Well, first of all, they`re not going to get
Democratic votes. That`s hyperbole. The question is, will Republicans
that held out on the prior attempt to fix the ACA support this attempt? We
don`t know.

And one problem that we are facing is, we`re not going to have an estimate
from the Congressional Budget Office as to how many people lose insurance
and how high premiums would go under this legislation. So, everybody is
going to be shooting blind.

My guess is, and we`ll have to see, when it comes right down to it, I think
that enough Republicans that did not support the prior attempt are probably
not going to support this attempt. They`re worried about constituents
losing insurance who are used to having it.

HERERA: You know, it says it would restructure the ACA waivers to let
states more easily drop certain insurance rules. What rules would that
refer to? And is that another contentious piece of the plan, or not?

FRIEDMAN: Well, it could be. What it will allow the states to do, as I
understand it, is to determine what types of diseases or maladies that the
insurance is required to cover. Which means that states could decide that
insurance purchased might not have to cover — you know, pick a disease or
condition. And that means, again, people could be left holding the bag in
the sense that they have to pay for their own medical procedures. And that
too means people may be left with unexpectedly bad results.

HERERA: We will see. Andrew, good to see you again. Thanks for joining

FRIEDMAN: Thanks for having me.

HERERA: Andrew Friedman with “The Washington Update”.

And still ahead, rebuilding Houston after Hurricane Harvey.


homeowners need skilled workers to help them rebuild their homes. And they
need them fast. But that`s just not going to happen. We`ll tell you why,



HERERA: A cyberattack and Hurricane Harvey are causing problems for FedEx
(NYSE:FDX). The logistics company is blaming those two events for a
decline in profit in the most recent quarter which saw revenue come in just
shy of estimates. The company also cut its earnings guidance for the full
year. Investors showed their disappointment, sending the stock lower in
initial after hours trading.

Dominic Chu has more on FedEx`s quarter.


and logistics giant FedEx (NYSE:FDX) reported quarterly earnings and sales
that included not just the effects of not just Hurricane Harvey but also a
larger scale cyberattack on its European shipping operations. The TNT
Express (NYSE:EXPR) unit which FedEx (NYSE:FDX) bought last year to
increase its footprint in Europe suffered a big cyberattack that hampered
many of its operations. Earnings were lowered by 79 cents because of the
attack and lower by another 2 cents per share given the effects of
Hurricane Harvey on its operations in the Texas and Louisiana Gulf Coast

FedEx (NYSE:FDX) also lowered its full year expectations because of the TNT
cyberattack. It did say that substantially, all TNT Express (NYSE:EXPR)
critical operations systems have been restored but that shipping volumes,
sales, and profits are still below previous levels. Remember also that the
company said yesterday it was going to raise shipping rates on certain
services beginning next year.

The size and scope of just how badly FedEx (NYSE:FDX) was hurt by the cyber
attacks is one of the biggest things to focus on in the earnings report.
And going forward, investors will be looking for any tea leaves or any kind
of guidance the company has on how the holiday shipping season is expected
to shape up.



HERERA: There are new reports tonight that Equifax (NYSE:EFX) was hit by a
breach months before the big one. The first breach reportedly happened in
March, but Equifax (NYSE:EFX) told “Bloomberg News” that the intrusion was
not related to the one in late July which compromised the personal
information of 143 million users. Some have criticized Equifax`s handling
of the cyberattack, including not being able to identify whose information
was even stolen.

But Equifax (NYSE:EFX) is not alone. Other companies like Yahoo
(NASDAQ:YHOO) and Target (NYSE:TGT) also struggled to understand the
severity of their own attacks.

As Andrea Day reports, some companies have no response plan at all.


major breaches that have made it in the news, the bungled response actually
causes more damage to the company`s brand and reputation than the breach
did itself.

damage to Equifax (NYSE:EFX), only time will tell. But if you think most
businesses are ready for a hit, think again.

WENDI WHITMORE, IBM SECURITY GLOBAL LEAD: Over 75 percent of organizations
throughout the world actually don`t have incidence response plans in place.

DAY: That reality creating a business opportunity for firms like IBM
Security, now helping companies with challenges like navigating a slew of

BARLOW: There are 47 different breach disclosure laws in the 50 U.S.

DAY: Like this: California requires notification, even if encrypted
information was breached. New York mandates state agencies are notified.
And nationwide if health information was breached, you may be required to
notify the media.

Meanwhile, Alabama, New Mexico, and South Dakota have no data breach laws.
And when it comes to a hack, the old adage is true. Time is money.

WHITMORE: If organizations can respond and contain a breach within 30 days
or less, they tend to save $1 million over those organizations that don`t.

DAY: Even Internet companies are not immune. Yahoo (NASDAQ:YHOO) lost
$350 million on its merger with Verizon (NYSE:VZ), after breaches that took
years to fix were revealed. IBM Security offers incident response,
training services, and a multimillion dollar facility called the Cyber

BARLOW: That`s an area where companies can come in and practice a breach
and a response to that breach on a fictitious company.

and the protection of our client information and client funds is the
lifeblood of this company.

DAY: The payroll and human resources company ADP recently put their C-
level execs through IBM`s high tech boot camp.

CLOUTIER: It`s as important for me to understand how to respond during a
crisis as it is for my team to be able to operate in a crisis.

DAY (on camera): And the Cyber Range can simulate common cyber attacks,
allowing execs to train on breach responds before customers` data is even
at risk. Since cyber criminals` tactics are constantly changing, the boot
camp also evolves to include new attacks.



HERERA: Sprint and T-Mobile are reportedly in merger talks again. That`s
where we begin tonight`s “Market Focus”.

After a potential tie-up between the two telecoms was derailed by
regulators in 2014, reports surfaced earlier this year that the companies
were considering combining. And now, CNBC says Sprint and T-Mobile are in
active discussions about a stock for stock merger where T-Mobile`s parent
would become the majority owner. Sprint`s shares rose nearly 7 percent to
$8.20. Shares of T-Mobile were higher by 5 percent to $65.42.

Cereal giant Post is adding more products to its portfolio with its $1.5
billion deal to buy packaged foods company Bob Evans Farms (NASDAQ:BOBE).
Bob Evans says it was the refrigerated foods division that sealed the deal.


MIKE TOWNSLEY, CEO, BOB EVANS FARMS: If you look at what attracted Post to
Bob Evans, it was really our refrigerated side dish business. Our
refrigerated side dish business that we`ve been now 20 years has been
growing double digits for the last 20 years. We have a 50 percent market
share and growing at a rate that far exceeds our competitors.


HERERA: Shares of Post were slightly higher to $86.36. Bob Evans` shares
popped 6 percent to $77.41.

The government is reportedly taking steps to make it easier for American
gun makers to sell small arms to foreigners. That`s according to
“Reuters”. The report said new rules would cut regulatory costs and
potentially lead to more job creation in the U.S. That was good news for
the gun makers Sturm Ruger (NYSE:RGR) and American Outdoor Brands. Sturm
Ruger (NYSE:RGR) shares jumped 13 percent to $54.35. Shares of American
Outdoor Brands were higher by 10 percent to $15.70.

And after the bell, Bed Bath & Beyond (NASDAQ:BBBY) reported disappointing
profits and weaker than expected sales growth. The home goods retailer
cited a number of issues including restructuring charges and the impact
from Hurricane Harvey. Shares initially plunged in the extended hours
session and also ended the regular day down about 1 percent to $27.03.

Homebuilding activity fell for a second straight month in August, thanks to
a decline in housing starts for multifamily dwellings. But the report
wasn`t all negative. Building permits, an indicator of future activity,
hit a seven-month high. Economists expect to see swings in the data in
coming months as a result of Hurricanes Harvey and Irma.

And it`s been nearly three weeks since Hurricane Harvey finally moved out
of Houston. But the rebuilding has barely begun. For tens of thousands of
homeowners, it could take years to get help.

Diana Olick is there.


OLICK (voice-over): On street after street, Houston`s houses are inside
out. Rotting remnants of comfort and necessity sit on former front lawns,
in piles higher than homeowners` heads.

JENNIFER TAYLOR, HOMEOWNER: Ultimately, it ended up about four feet.

OLICK: Jennifer and Andy Taylor gutted their home themselves and with a
little help.

J. TAYLOR: We had about 25 friends and family that we called, Facebook
(NASDAQ:FB), texted, phone calls. And we had an army of friends and family
come out, with some church volunteers as well.

OLICK (on camera): To do all that?

J. TAYLOR: To do all this.

OLICK: You guys seem incredibly calm and Zen about this.

ANDY TAYLOR, HOMEOWNER: We`ve had our moments to be sure, yes. But a lot
of those moments were really being touched by the outreach.

OLICK (voice-over): The outreach from volunteers with food, clothing,
anything they needed, helped them process those horrific days of the
hurricane, when everything they had disappeared under water. And that is
why they wanted to stay.

J. TAYLOR: The fabric of the community has been amazing. And we`ve been
here 14 years. We knew that. But to feel it firsthand has been amazing.

OLICK (on camera): Hundreds of Houston homeowners needed skilled workers
to help them rebuild their houses. And they need them fast. But that`s
just not going to happen.

put it back together. There`s not enough workers. There`s not enough
material. There`s not enough time.

OLICK (voice-over): Contractor Leslie King had sobering news for all the
people calling her daily.

KING: Most of us who are reputable contractors will tell you that we
already have 50 people on our list.

OLICK: Houston had a severe labor shortage before the storm. Houston
builders permitted 27,000 new homes this year. But now with more than
30,000 additional homes destroyed and even more damaged, the shortage is so
much worse.

King and the National Association of Homebuilders are asking the Trump
administration to let more workers in the country, even if only

KING: I would ask them to please let anybody who wants to come, workers
willing to make a dollar and willing to pay some taxes, let them come,
please. We need them.

OLICK: Because the work is still piling up.

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


HERERA: And to read more about post-Harvey rebuilding in Houston, you can
head to our Website,

Coming up, thousands of GM workers walk off the job. And NAFTA
negotiations are at the heart of that strike.


HERERA: Ford is trimming production lines at five North American plants,
including three in the U.S. All of the plants manufacture cars, not SUVs
or trucks. Ford is scheduling one to three weeks of downtime to lessen
unsold car inventory on dealer lots.

And General Motors (NYSE:GM) is facing its first strike in Canada since the
mid-1990s. Workers at the company`s plant in Ingersoll, Ontario, have
walked off the job after negotiations failed to produce a new contract.

Phil LeBeau has more on the strike and why it`s being watched.


workers walked off the job at GM`s plant in southeast Canada, it was the
latest indication that automakers are thinking twice before deciding where
they build cars and trucks in North America.

The GM plant in Ingersoll, Ontario, employs roughly 3,000 workers, who
build the Chevy Equinox SUV. Their primary issue: job security. They want
a GM commitment to build another model at the plant.

The workers in Canada used to build the GMC Terrain. Earlier this year,
General Motors (NYSE:GM) moved production of that SUV to a plant in Mexico.
And that`s at the heart of this strike.

GM exports more vehicles from Mexico and Canada than any other automaker.
And before it adds or subtracts production to plants north and south of the
border, it`s watching to see what happens with the North American Free
Trade Agreement. If NAFTA is ripped up or dramatically altered, GM may
think twice about how many vehicles it builds in Mexico and Canada.

In the meantime, the strike is not stopping the sale of GM`s bestselling
SUV, the Chevy Equinox is still being built at a GM plant in Mexico.

(on camera): So, the Chevy Equinox supply that`s heading into showrooms
continues, albeit at a slightly slower pace.



HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us. Have a great evening, everybody, and we will see
you right back here tomorrow.


Nightly Business Report transcripts and video are available on-line post
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