TIME Retail

Shoppers Just Don’t Care About Credit Card Hacks

Major Retailers Begin Black Friday Sales Thanksgiving Night
People shop at a Target on Thanksgiving night November 22, 2012 in Highland, Indiana. Tasos Katopodis—Getty Images

Target and Home Depot both reported great earnings reports this week

If Target and The Home Depot are still reeling from the collective breach of 96 million customers’ credit and debit cards, it didn’t show in either company’s earnings reports this week.

Target posted $17.73 billion in revenue on Wednesday, beating one Wall Street consensus forecast by $17 million. That paled in comparison to Home Depot’s rosy earnings report on Tuesday, which showed store sales in the U.S. climbed by 5.8% in the third quarter. Breaches? What breaches?

Target’s dataclysm receded into the rear view mirror as the company revealed that expenses related to a credit card data breach late last year had plateaued at $153 million. The market rallied around its stock, driving up the share price by more than 6%. The Home Depot’s breach, though, was bigger and more recent. The verdict?

“We believe the breach is firmly behind [Home Depot] with momentum heading into 4Q,” wrote J.P. Morgan analyst Christophers Horvers. That assessment comes two months after Home Depot’s September announcement that 56 million credit card accounts had been hacked and upwards of 53 million email addresses were stolen. The only major business fallout for the company, as far as analysts could detect, was a curious blip in traffic toward Home Depot’s chief competitor, Lowe’s. “Perhaps the breach provided some traffic benefit,” Horvers speculated, before moving onto the retailer’s solid sales growth.

If neither shoppers nor shareholders ultimately punish big businesses for data breaches, will companies move to prevent them before they occur?

“In the end, the market’s behaving completely rationally,” says Avivah Litan, a security analyst for Gartner. “It’s still a pain in the neck for everyone, but there’s very little actual fraud committed as a result of these breaches.”

Litan says that hackers like those who pilfered credit card numbers at Target and Home Depot typically have a very short window of opportunity — less than one month — to rack up fraudulent charges before banks detect the suspicious activity. These heists tend to run in the range of $10 million, and shoppers rarely ever bear the costs. Instead, banks split the sum with the affected retailer, where any remaining cash vanishes into the fine print of the company’s quarterly earnings reports.

The real question, then, is why credit card hacks continue to make front page news. In the grand scheme of online theft, Litan says, what happened to Target and Home Depot shoppers is small potatoes — identity thieves have pulled off heists at ten times the scale of credit card fraud by going after medical and tax records. However, credit card hacks on retailers get lots of public attention because so many people can be affected so quickly.

“Stealing 50 million cards is just as easy as stealing 100 cards,” Litan says. The sheer number of stolen cards conjures up an image of a whole nation of shoppers exposed and helpless. But these crime stories tend to end with about as much drama as a third quarter earnings report.

TIME Money

Millennials Will Make These 15 Companies Tons of Money

Bags of tortilla chips sit in a row at a Chipotle Mexican Grill Inc. restaurant in Hollywood, California on July 16, 2013.
Bags of tortilla chips sit in a row at a Chipotle Mexican Grill Inc. restaurant in Hollywood, California on July 16, 2013. Patrick T. Fallon—Bloomberg / Getty Images

Where Millennials choose to spend their money could pay off serious dividends

The question on every Wall Street trader’s mind these days: “What do millennials like?”

Or at least it should be, according to a new report released Tuesday by Morgan Stanley’s equity strategy team. The report paints a pretty compelling picture of the millennial generation’s spending power five years out.

First, in terms of sheer size, millennials outnumber baby boomers as the largest demographic group. But more importantly, they are aging into some of the spend-happiest years of their lives. In the average lifecycle of the American shopper, spending tends to spike between the ages of 25 and 39:

Screen Shot 2014-11-18 at 3.54.45 PM
Morgan Stanley Research


Where they choose to spend that money could pay serious dividends to a few savvy stock pickers. Which brings us back to the question, “What do millennials like?”

“Fast casual dining, hotels, buying online, gaming (social and online, less so casinos), eating organic and healthy, and working out more,” writes Morgan Stanley’s consumer stock researchers. They winnowed down a shortlist of 15 companies that hit those millennial sweet spots, and presented them as a “millennial basket” for investors’ consideration before the flood:

Screen Shot 2014-11-18 at 3.52.44 PM
Morgan Stanley Research





MONEY Health Care

The Hidden Financial Benefits of Keeping Yourself Fit

running shoes hovering over a scale
Geir Pettersen—Getty Images

Investing in fitness can generate financial rewards as well as health benefits.

You know exercise is good for you. What you may not know is that working out can have financial benefits too.

Plenty of research suggests that overweight people spend more on health care, but it’s not just the thin who stand to save. Fact is, regardless of your weight, if you’re a couch potato you’re likely missing out on earning and saving opportunities.

The Payoff in Your Paycheck

Health care costs aren’t the only way physical activity is a benefit. People who work out regularly, as in at least three times per week, are more productive at work than those who don’t, according to research published in the Journal of Occupational and Environmental Medicine. Those who get sufficient exercise also miss fewer workdays, according to the same study. Those absences can translate to lost income and lost opportunities for advancement.

Another study published in the Journal of Labor Research found that men who work out regularly can expect to make 6% more than their sedentary counterparts, on average. For women, the pay boost is higher: Fitness-savvy females make 10% more, on average.

A Nudge From the Boss

If you’re not already working out, it doesn’t have to cost an arm and a leg to start.

For starters, some employers just flat-out pay their employees to work out as part of workplace wellness initiatives. For example, IBM offers cash to employees who meet certain fitness goals. Employees at Google and Zappos can use on-site fitness classes and facilities, enabling them to skip membership fees at traditional gyms. Even if your company doesn’t currently offer wellness benefits, it might soon: Under the Affordable Care Act, employers can receive grants to get one started.

Your employer may have a deal worked out with a local gym where employees can get discounted rates. Even if your company doesn’t offer such an incentive, chances are that your health insurance provider does. UnitedHealthcare offers reimbursements of $20 per month to members who use one of many participating gyms, while Blue Cross Blue Shield has worked out a $25 membership fee for their members at over 8,000 gyms nationwide. These insurance giants aren’t the only ones in on the game—most health care insurers offer some type of fitness benefit for members.

Just Do It

On the other hand, skipping the gym altogether may be your biggest money saver. If a participating fitness center isn’t available near you, or you’re just not the gym-going type, there are plenty of ways to get in shape for free. You can use the myriad online videos in the comfort and privacy of your own home, such as those offered on Bodyrock.TV or YouTube’s workout channel. If you like mobile apps, try Daily Workouts free app, or iPump. If you’re close with your co-workers you can start a lunchtime walking group. Your boss may just end up rewarding you for it.

Read more from NerdWallet Health, a website that empowers consumers to find high quality, affordable health care and lower their medical bills.

TIME Earnings

Urban Outfitters’ Profits and Shares Tumble

Shoppers walk outside Urban Outfitters on Dec. 14, 2013 in London.
Shoppers walk outside Urban Outfitters on Dec. 14, 2013 in London. Dan Dennison—Getty Images

Same-store sales fell 7% at the namesake brand, which courted controversy in the third quarter

Urban Outfitters reported record third-quarter sales, but the clothing company’s profits fell year-over-year as it’s namesake brand courted controversy. Here are some of the key points from Monday’s third-quarter earnings report.

What you need to know: Quarterly sales for Urban Outfitters — whose brands also include retailers Anthropologie, Free People and Terrain — increased by 5% year-over-year, to $814 million, but sales at the company’s namesake brand fell by $1.5 million. What’s more, same-store sales across the company dipped 1% after analysts predicted they would be flat for the quarter.

Urban Outfitters also reported a quarterly profit of $47 million, or 35 cents per share, which is down nearly a third year-over-year. Shares of the company fell almost 5% in after-hours trading following the release of the earnings report. The company’s stock has tumbled nearly 17% since the start of the year after profits through the first three quarters of the year have dropped 22% year-over-year, to $152 million.

CEO Richard Hayne said in a statement that he is “disappointed by the results at the Urban Outfitters brand.”

The big number: Sales for the Urban Outfitters brand dropped again, offsetting gains from some of the company’s other brands. Same-store sales for the namesake brand fell 7% in the third quarter after dropping 10% in the previous quarter.

The Urban Outfitters brand recently suffered through a social media firestorm after the retailer put a bloodstained Kent State University sweatshirt for sale on its website, drawing connections to the 1970 student massacre at that school. The item was removed from the website after much public outcry, but the incident was just the latest for a chain that previously peddled a women’s t-shirt emblazoned with the phrase “Eat Less,” which critics said was an inappropriate swipe at people with eating disorders.

It is hard to say whether or not the controversy adversely affected the brand’s sales in the third quarter, especially since same-store sales took an even bigger hit the previous quarter, but Hayne clearly thinks improvement is needed at Urban Outfitters stores.

“There is much work to be done to improve the merchandise margins and store performance at the Urban brand, but I see positive signs as shown by strong results at the brand’s direct-to-consumer channel,” the CEO said.

What you might have missed: Once again, the poor performance by Urban Outfitter stores overshadowed positive news from the company’s other divisions. Same-store sales at Free People jumped 15% in the quarter while the Anthropologie got a 2% bump. Same-store sales at the two chains were also up in the second quarter: 21% and 6%, respectively.

This article originally appeared on Fortune.com


Why The Lowest Paid Workers Are Getting a Raise—And The Middle Class Isn’t

"Save the Middle Class" on a sign
Jen Grantham—iStock

Low-wage workers are making more money, but wages continue to stagnate for the middle-class. Here's why.

If you’re a working adult, you probably haven’t received much of a raise in recent years. Earnings growth has declined dramatically since 2007, and wages bounced back only 2% this year, barely keeping pace with inflation. In October, wage growth was essentially static.

But we may be seeing light at the end of the tunnel, at least for some employees. Over the weekend, payroll processing firm ADP released data showing that the average hourly pay for low-wage workers — that is, those making less than $20,000 a year — increased by 5.4% in the last year, and that workers earning between $20,000 and $50,000 saw pay jump 4.9% on average.

As USA Today noted on Sunday, ADP’s methodology tends to overestimate earnings growth because it tracks only employees of businesses that can afford to contract with the company. The firm also reported that earnings for all Americans were up 4.5% in the third-quarter year-to-date; more than double the increase was reported by the Bureau of Labor Statistics in October for 2014.

But while ADP may have overestimated earnings growth among low-wage Americans, that doesn’t mean that group isn’t getting better raises than the rest of the population. The paper also observed that data from the BLS showed the bottom 10% of earners received a 3% hike in wages for the year ending on September 30, compared to a 0.5% raise for the 90th percentile.

Why do low-wage workers seem to be getting raises when the middle-class is not? According to Eugenio Alemánm, a senior economist at Wells Fargo, the answer is employment polarization. As the St. Louis Federal Reserve explains, this phenomenon describes how the automation of many routine tasks has decreased demand for middle-skill, middle-income labor, while increasing demand for both low-skill, low-wage workers and high-skill, high-wage workers. This trend was exacerbated by the great recession, and resulted in a hollowing out of the American labor force.

Higher wages for low-skill workers simply reflects higher demand for that particular class of laborer. High-wage employees have also seen a disproportionate increase in earnings during the recession compared to the middle-class.

“One of the characteristics of the current economic recovery is that we are seeing a lot of jobs in the very, very low levels of income, very low paying jobs, and very strong movement in the high paying jobs,” said Alemánm. “Those are the two sectors that seeing some upwards pressure on wages and this data is a confirmation of that.”

“Middle income jobs are not being offered in this economic recovery, so there is no pressure on those salaries,” added Alemánm. “The type of jobs that are being offered today”—which he says mainly exist in the leisure, hospitality, and retail industries—”are not conducive to having middle-income earners.”

Will the middle-class ever see some relief? Alemánm says yes, recent job growth is likely to exert upward pressure on wages across the board — but it’s hard to tell when that will happen for the majority for workers. “At some point, it has to change,” he predicts. “You’ll see some spillovoer into middle-income wage earners. That is the third leg we are waiting for.”

TIME Earnings

Bad Press, Harry Potter Contributing to SeaWorld’s Epic Bellyflop

SeaWorld is heavily emphasizing conservation amid controversy over its killer whales.
SeaWorld is heavily emphasizing conservation amid controversy over its killer whales. Orlando Sentinel—MCT/Getty Images

A cost-cutting plan won’t be enough unless the company can get people back into its parks

SeaWorld is having what can only be considered a massively disappointing year. The theme park operator released its third-quarter earnings report today, and things aren’t looking any better than they did earlier this year.

The company reported decreases in revenue, net income, and earnings per share. Those declines can’t be blamed on increased expenses — the simple fact is that fewer people are going to SeaWorld parks, and when they are there, they are spending less money.

A big reason for this ongoing decline is continued bad publicity. The anti-SeaWorld documentary “Blackfish” seems to be a perennial favorite on lists of suggested documentaries to watch on Netflix. An announcement of larger habitats for the park’s trademark Orca whales last summer largely backfired, with much of the coverage still focusing on the underlying issues, namely that no tank can recreate the ocean habitats where Orcas live naturally.

Tuna Amobi, an analyst at S&P Capital, said the backlash generated by Blackfish has lasted longer than he thought it would, and that it seems to be continuing. Jared Goodman, the director of animal law at the People for the Ethical Treatment of Animals, said his group was going to continue to press SeaWorld on its treatment of Orcas. He said that the continual tanking of the SeaWorld business was a sign that investors and visitors are “deciding not to support marine animal abuse with their hard-earned money.”

Attendance at SeaWorld fell to 8.4 million visitors last quarter, down from 8.9 million in the quarter before. But its not just allegations of animal abuse that are keeping people out of the parks; competition is another factor. In Orlando, Fla., home of one of SeaWorld’s three parks, there’s always tough competition from the likes of Disney, but this year the opening of a second Harry Potter-themed park (operated by Universal) compounded it. During Wednesday’s earnings call, CEO Jim Atchison partially attributed the falling attendance at SeaWorld to “competitive pressures in Florida.” When asked directly about the new Harry Potter park, Atchison said that while he admits the opening may have hurt SeaWorld this year, he doesn’t know if that’s a long-term problem, noting that the initial launch of a major attraction tends to see an attendance spurt, and then “things tend to norm out a little bit.”

And don’t look now, but Elsa and Anna are coming to Orlando soon, with a “Frozen” themed ride coming to the Norway section of Epcot. Epcot has generally been seen as the Disney park with the least appeal to kids — sorry, but a world cultures pavilion isn’t ever going to compete with Cinderella’s Castle — but that may chance now that the mega-hit Frozen is making its way there.

All of this, of course, is bad for SeaWorld. With so many options, it’s hard to see parents who might already be iffy about the treatment of Orcas making the choice to schlep their kids to the park. To adjust for this decrease in revenue, SeaWorld is announced a plan today to cut $50 million in annual expenditures by the end of 2015. The plan will “focus on the centralization of certain administrative and support functions and the further optimization of our park operations,” according to CEO Jim Atchison.

Amobi, though, sees this measure a bandage on a bullet wound, and S&P downgraded the stock from a buy to a hold.

“It’s a step in the right direction,” he said, adding “it’s a bit underwhelming. I feel like they had their backs up against the wall.”

This article originally appeared on Fortune.com

TIME Earnings

Macy’s Reports a Surprise Drop in Sales

Pedestrians cross the street in front of the Macy's Inc. flagship store in New York City on Aug. 6, 2014.
Pedestrians cross the street in front of the Macy's Inc. flagship store in New York City on Aug. 6, 2014. Bloomberg—Bloomberg via Getty Images

Weak performance led the retailer to trim its sales and profitability targets for the current fiscal year

Macy’s reported a 23% jump in third-quarter net income as the department-store operator trimmed expenses, helping to offset a surprising drop in sales. Here’s what you need to know about the latest earnings report.

What you need to know: Macy’s reported weaker sales for the quarter ending Nov. 1, even though Wall Street analysts had anticipated growth. Comparable-store sales, a key retail metric, fell 1.4%. Analysts surveyed by Consensus Metrix had projected a 1.9% increase. Meanwhile, total sales slipped a worse-than-expected 1.3% to $6.2 billion. The weak performance for the quarter led Macy’s to trim its sales and profitability targets for the current fiscal year, though the retailer struck a positive tone about the upcoming holiday season, in part lauding its merchandise assortment.

Macy’s isn’t the only department store suffering from poor sales trends. Sales at department stores slid 2.5% in the first nine months of 2014 from the year-ago period, according to the Commerce Department.

The big number: Profitability for the period was far better than Wall Street had anticipated, with per-share earnings rising 30% to 61 cents from a year ago (analysts had anticipated a 50-cent profit). CEO Terry Lundgren said profitability was bolstered by trimming overhead costs, as well as Macy’s ability to maintain a flat gross margin.

What you might have missed: The winter hasn’t even begun, but the word “weather” has already made an appearance in Macy’s earnings statement. A ton of retailers, including Macy’s, complained about poor winter weather last year and how it hurt sales trends. But on Wednesday, Macy’s seems to think weather will be less of a factor. “We are poised to capitalize on a return to more normalized weather patterns after the unusually severe snowstorms in the fourth quarter last year,” Lundgren said. The better weather is one of several factors Lundgren believes will help Macy’s perform well during the critical holiday season.

This article originally appeared on Fortune.com

TIME Earnings

SeaWorld Continues to Flounder

SeaWorld is heavily emphasizing conservation amid controversy over its killer whales.
SeaWorld is heavily emphasizing conservation amid controversy over its killer whales. Orlando Sentinel—MCT via Getty Images

Company facing continued fallout from the controversial documentary ‘Blackfish’

SeaWorld means different things to different people. To some, it’s a place where you had fun watching the Shamu as a kid. For others, it’s a terrible place where animals are abused.

For investors, though, its increasingly looking like a sinkhole.

The company released its third quarter earnings report today, and things are not looking good. The firm’s rotten 2014 continued, with revenues and earnings down and no light at the end of the tunnel. Here are a few important things to note in today’s report.

What you need to know: The biggest problem with SeaWorld? Fewer people are going. The parks drew 8.4 million visitors in the third quarter, down from 8.9 million in the third quarter of 2013 — a 5.6% decline. Attendance is especially important in the third quarter for theme parks — it makes up the summer months, where kids are out of school and families are most likely to take a vacation. In a year when the economy was generally doing better, for SeaWorld to see a decrease in attendance is the clearest sign that there are serious problems with the company.

Wells Fargo industry analyst Tim Conder told CNBC Wednesday that the company is facing continued fallout from the controversial documentary “Blackfish,” which raised concerns about the way SeaWorld treats its animals.

The big number: Revenue for the quarter clocked in at $495.8 million, significantly down from $538.4 million the year before. This is obviously unsustainable, and with no sign coming of a strong reversal in revenue, the company has to look to impact the bottom line in another way — through cost savings. The earnings indicated that the SeaWorld is looking to implement a plan to save $50 million in expenses annually by the end of 2015.

What you may have missed: It’s bad enough that fewer people are going to SeaWorld. The real kicker, though, is that the people who do go through the turnstiles are spending less money to do it. Due to promotions and a less favorable customer mix, the average price paid for admission was $36.47, down 5% from 2013. The total spent per capita on food and other in-park purchases was up slightly, but the total spent on a day at the park per visitor was down nearly 3% to $58.99.

This article originally appeared on Fortune.com

MONEY College

One Type of College Education That Almost Never Pays Off

Hand holding out mortarboard begging for money
Paul Hudson—Getty Images

Short-term college certificate programs seem like a good way to boost your earning power -- but new research suggests they don't produce results.

Short-term college certificate programs sound like a no-brainer. These community college programs, which are intended to take less than a year to complete, promise a meaningful credential with a fraction of the workload and price tag of a more conventional college degree.

But according to new research, published in the journal of Educational Evaluation and Policy Analysis, these short-term certificates don’t actually make graduates more employable, or lead to a significant increase in earnings.

“While we find that earning associate degrees or long-term certificates is associated with increased wages, an increased likelihood of being employed, and increased hours worked, we find minimal or no positive effects for short-term certifications,” wrote Mina Dadgar and Madeline Trimble, who jointly authored the study. Long-term certificates are designed to be completed in at least one year.

Using a dataset containing information on students attending 34 Washington State technical and community colleges during the 2001-2002 academic year, the researchers found short-term certificates, on average, gave students lower returns than longer-term degrees, and even when returns are positive, the gains are minimal. Short-term degrees that did produce positive results generated an average earnings bump of just $300 per quarter, or $1,200 a year.

While short-term certificates didn’t yield worthwhile results, the authors say associate degrees and long-term certificates generally do give graduates a significant leg up in the labor market. A long-term certificate increased the chance of a woman being employed by 9%, and of men being employed by 11%. Associates degrees increased employment likelihood by 11% and 9% among women and men respectively. Women especially were found to receive significantly higher wages after completing a full-year program.

However, the authors caution, the value of a long-term or associates degree is heavily dependent on industry. An associate degree in nursing was found to boost the average woman’s wages by 37.7%, but an associate degree in humanities, social sciences, information science, communication, or design did not correlate with significantly higher wages.

The study’s findings are especially important because of the growing popularity of short-term certificate programs. Between 2000 and 2010, the number of students receiving these degrees increased by 151% nationwide. The study’s authors suggested state lawmakers should examine short-term certificates further, and called their skyrocketing popularity a matter of concern.

TIME Autos

Tesla Delays Model X But Turns a Surprise Profit

The Tesla Model X is introduced at the 2013 North American International Auto Show . STAN HONDA—AFP/Getty Images

New SUV won't be delivered until late 2015

Tesla’s upcoming Model X SUV has been delayed again, the company announced in its quarterly earnings report. The new vehicle is now slated for release in Q3 of 2015, a delay of several months.

In a letter to shareholders, CEO Elon Musk wrote that Tesla’s difficulty rolling new products out quickly was a “legitimate criticism” of the company, but said that the car maker’s practices would not change. “We prefer to forgo revenue, rather than bring a product to market that does not delight customers,” Musk wrote. “Doing so negatively affects the short term, but positively affects the long term.”

Tesla’s revenue for the quarter missed analysts’ expectations slightly at $852 million, but was nearly double the same period last year. The company also posted a surprise profit, generating adjusted earnings of two cents per share. Analysts had expected a loss of one cent per share.

The company delivered 7,785 of its flagship Model S vehicles during the quarter. It expects to deliver 33,000 vehicles for all of 2014.


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