Texas Business Report: Penney’s Performs Poorly

In addition to announcing a $163 million first-quarter loss this week, the ailing retailer, which has recently tried to reinvent itself, will no longer pay quarterly dividends. 
Sat May 19, 2012 3:21 am
Associated Press | Tony Gutierrez

The Texas economy is one of the most robust in the world. Wildly profitable companies and ingenious entrepreneurs call this state home, and what happens here influences businesses around the nation. Here’s a slice of the profits, losses, big deals, and backroom decisions happening across Texas this week.

Penney Lame
It’s been a tough week for J.C. Penney: On Tuesday the Plano-based retailer reported a $163 million first-quarter loss and announced it will no longer pay its quarterly dividend to investors. The company’s stock has dropped by more than twenty percent since the report. And on Thursday, Standard & Poor’s downgraded the retailer’s credit rating for the second time in three months in anticipation of poor performance throughout the year.

The Dallas Business Journal reports reports that analysts are blaming the slump on Penney’s new pricing strategy, which eliminated sales and special promotions in favor of maintaining lower year-round prices. CEO Ron Johnson implemented the plan following his arrival at the company late last year.

The Bottom Line : Johnson conceded that the company needs to improve its communication with customers, who may be turned off by the lack of coupons and seasonal deals, according to the Dallas Business Journal .

AMR Authorized to Downsize the Nonunionized
On Wednesday a federal bankruptcy judge ruled that American Airlines parent AMR Corp. “can cut wages and benefits of some employees who are considering joining a union,” the Dallas Business Journal reports. The decision affects non-unionized workers who book reservations and work at ticket counters for the Fort Worth-based airline.

AMR now “needs to give only 60 to 90 days’ notice to the employees before cutting their jobs and salaries,” according to MarketWatch. The employee group, which plans to vote in June on whether it will unionize, argued that nonunion workers should receive the same legal protection as unions in bankruptcy proceedings.

The Bottom Line : The decision could help AMR cut $95 million per year in jobs and benefits, MarketWatch reports. Even more cutbacks are ahead: The company intends to slash a total of $1.25 billion in yearly labor costs.

Anadarko Accusations Come to Light
The Woodlands–based oil and gas company Anadarko Petroleum Corp. appeared in court this week to defend itself against a U.S. Justice Department lawsuit seeking $25 billion in damages. Kerr-McGee, a chemical company Anadarko bought out in 2005, allegedly polluted more than 2,700 sites with toxins over the course of several decades, resulting billions of dollars in claims from the Environmental Protection Agency and residents affected by the toxins.

The Justice Department claims Kerr-McGee attempted to dodge creditors by shifting its debt to a subsidiary that it subsequently spun off, according to Bloomberg Businessweek . Kerr-McGee then sold its remaining assets to Anadarko, allegedly to keep them “out of reach of future creditors.

The Bottom Line : The debt-saddled subsidiary, Tronox Inc., sued Anadarko after filing for bankruptcy in 2009. The Justice Department then took over the suit on behalf of the EPA — Tronox’s largest creditor — in hopes of recovering money to pay for cleanup at the polluted sites, Bloomberg Businessweek reports.

Putter There
Golfsmith announced Monday that it will be acquired by Canadian retailer Golf Town for $97 million. The sale will generate premium of more than 30 percent for the Austin company’s investors, the Austin Business Journal reports. Golfsmith’s shares shot up 30 percent on the news, rising to a four-year high of $6.35, according to Bloomberg Businessweek.

The Bottom Line : Golfsmith released a slightly disappointing quarterly report the day after the announcement, showing a net loss of $3.6 million. However, some of the losses were one-time costs associated with the acquisition, the ABJ reports. Revenue grew to $90.5 million, an increase of 11 percent.

Winners of the Week: Nurses
A new economic analysis highlights the importance of nurses in maintaining an efficient healthcare system in the Lone Star State. The Houston Business Journal reported this week that giving advanced-practice registered nurses (APRNs) expanded authority to prescribe medication could “increase state economic output by $8 billion and create nearly 100,000 permanent jobs,” according to the report, which was conducted by an economist and funded The Texas Team Advancing Health Through Nursing. The group is proposing legislative changes aimed at addressing that goal.

The economic windfall would come from “the efficiency gains and savings from using nurses, who are less expensive to train and a reduced need for costly treatments because of preventive care,” Fort Worth’s KDAF-TV reports.

Losers of the Week: Boardroom Tweeters
Francesca’s Holdings CFO Gene Morphis learned the hard way that it’s possible to damage your career in 140 characters or less. The Houston-based clothing retailer fired Morphis on Monday for “improperly” communicating inside information via Twitter and Facebook. The Houston Chronicle reports that the former CFO hinted at the company’s positive financial results several days before they had been released to the public — potentially in conflict with SEC regulations.

On March 7, Morphis tweeted, “Board meeting. Good numbers = Happy Board.” Social media–savvy investors took advantage of the over-share and snapped up Francesca’s stock based on the promise of good news. The company’s shares jumped up by more than seven percent overnight.

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