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Back in May, McDonald's executives announced they had no plans to make changes to its "everyday affordability" concept, but the company's chief operating officer, Ralph Alvarez, recently noticed that the dollar menu is coming under pressure from rising ingredient costs. "The cost implications of having that value menu have changed when you see what's going on in beef and chicken," Alvarez stated to the Chicago Tribune.
Alvarez didn't offer too many details on how the dollar menu might change. However, the news is not great for all you lovers of the famous double cheeseburger. A spokesman for the hamburger giant said one of the company's strategies that is already tested in some markets was to lift prices for this best-selling U.S. sandwich.
Looking ahead, McDonald's said it expects cheese cost to jump by 21% this year in the U.S., while the price it pays for chicken may see a growth in a range between 5% and 6%. For 2008 U.S. beef costs, the company also anticipates an increase between 8% and 9%.
Rising commodity prices was one of the main reasons why the research firm Deutsche Bank to lower its rating on the company to a hold earlier this morning.
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
General Motors Corp. (NYSE: GM) noticed that fuel-efficient vehicles will be more appealing to consumers, and announced last week plans to reduce production at its truck division (a bit late to join the party, but at least it's something for the struggling auto maker). Toyota Motor Corp. (NYSE: TM) is also slashing truck production during three months at its U.S. plants.
While It is true that most less expensive cars don't offer the same luxury when compared to sedans or SUVs, they come with a lot of options that can satisfy every individual need. Among the cheapest cars available, the article points out Honda's Fit ranked No. 11 at $13,950, a small car whose standard version comes with an adjustable steering column and four-speaker audio system, and is equipped with multiple airbags in the front, rear and side. Other vehicles that follow the same logic are the Chevrolet Aveo, ranked No. 2 at $11,460; the Toyota Yaris, third at $11,550, and the Kia Spectra, fifth at $12,895.
The mall itself, which is scheduled to reopen in the fall of 2009, is seeing a major renovation from an enclosed shopping center to a three-level, 550,000-square-foot open-air retail plaza linking to the Third Street Promenade.
Leading fashion specialty retailer Nordstrom has signed a letter of intent to open a three-level, 122,000-square-foot store in the fall of 2010. "The extraordinary appeal of Nordstrom is a great match for this exceptional market, and for what we believe will be a one-of-a-kind retail project two blocks from the beach in downtown Santa Monica," Randy Brant, executive vice president, real estate, for Macerich stated.
Consumers spent on the basics, looking for bargains, boosting sales at some companies like Wal-Mart (NYSE: WMT), but resulting in losses for the others like Nordstrom (NYSE: JWN) and American Eagle (NYSE: AEO). This confirmed that retailers will face further weak demand even during the back-to-school shopping season, and more deep discounts will be needed.
As June is considered a key month for sales, merchants were hoping for a "stimulus" effect from tax rebates, despite worries tied to soaring gasoline and food costs. However, only companies offering cheaper gas like Wal-Mart, Costco (NASDAQ: COST) and BJ's Wholesale Club (NYSE: BJ) saw their dreams accomplished. Thus, Wal-Mart came with June sales growth of 4.3%, Costco reported a 9% increase in June same-store sales, while BJ's Wholesale saw a growth of 16.5%.
And what can be easier than establishing an official start to the back-to-school shopping season? Based on the example of Black Friday, which announces the start of the winter holiday shopping season, Staples followed the same logic and decided to declare July 8 as the official opening day of the 2008 back-to-school shopping season. Staples is serious about setting an official precedent, and celebrated it by ringing the bell to open the NASDAQ Tuesday.
"Staples is giving parents a clear road map of where and when to the find the best products and deals this season," the company stated. But the more apparent reality is that the current economic environment has consumers more closely watching their spending, while at the same time stores are trying to do anything they can to get shoppers through the doors.
PSA Peugeot Citroen SA, France's biggest carmaker, warned it expects a decline of 4% for West European sales this year, while Fiat SpA, Italy's biggest automaker, announced it plans to shut Italian plants on concerns about soaring record oil prices and increased inflation.
Hurt by declining consumer spending, Fiat saw its sales plunging 16.5% in June. But this was not the worst and Peugeot warned about "an even greater slowdown" for European demand in the second half of the year. "The rest of the year is going to be a disaster for European manufacturers,'' Stephen Pope, London-based chief global market strategist at Cantor Fitzgerald Europe, stated in a report on Bloomberg.
Frederic Seiller, a vice president in charge of retail operations for Greater China, stated that the the global economic slowdown had no impact on Adidas's sales in China. In addition, the company is optimistic about its further gains, and forecast a nice demand from the local sportswear market. From this point of view, total sales in China are expected to come to 1 billion euros by 2010.
As well as getting growth in revenue, by opening its biggest store in the world in central Beijing Adidas aims to beat rival Nike Inc. (NYSE: NKE). Back in 2007, China became Nike's second-largest market, and its Chinese sales reached $1 billion in 2008.
While those names could sound tempting for investors who may think they are cheap, BusinessWeek's Karyn McCormack reminds us that not everything that is cheap is a good bargain, and there are some risks that need to be taken into account.
One common problem for most of these stocks is that they trade under $10 for a reason. That reason is usually hardly any earnings growth, if any at all. And with a weak economy, these companies would have an even harder time to stimulate growth. Add to the mix the fact that institutional investors don't like to touch stocks under $10 and the potential for recovery is not good.
The negative effects have already started to become visible as gasoline demand has slipped in the U.S. due to high costs, while gold purchases in India saw a plunge of 50% year-over-year. "I've probably been positive for seven years and this is the first time I think there could be really a dramatic secular reversal, that it's not just a pullback" Michael Aronstein, president of Marketfield Asset Management in New York, stated.
The impact will not pass unobserved for airline companies, who will face a decline in the number of travelers over the Fourth of July holiday, following soaring jet-fuel expenses. Copper and gold demand are also facing weak levels after the price for copper reached $4.2605 a pound May 5, the highest ever, while the price for gold reached a record $1,033.90 an ounce March 17, and is expected to average $850 this year and $750 next year.
Over the last few months, real estate investment trusts (REITs) have shown that they are able to survive in tough conditions, at least compared with most other stocks. However, there have been signs of weakness for REITs lately and this is likely to continue.
With recession fears still looming, real estate operators are facing yet another difficult situation brought on by rising unemployment, which could result in lower office and retail space demand. And rising inflation will come with higher interest rates, leading to higher borrowing expenses for REITs. Considering these circumstances, the outlook for REITs is not all that promising.
With all these concerns and obstacles tied to the market and the industry, you may think it wise to stay away from real estate, at least until we see an improvement in consumer spending and the banking sector. Kiplinger suggests that we reconsider these thoughts, and actually suggests some names to invest in that could offer us the advantages we are all looking for.
However, as Dash explains, times have changed and in the current weak environment the bank is reconsidering its decision because of financial troubles. A year ago, the company said it would no longer use the "universal default" practice where a card issuers can raise the holder's rate when that person is late paying any bill. What the bank still held was the right to raise rates every two years, when people renew their cards.
At the time, it looked like Citigroup's decision was efficient as rivals such as Chase Card Services followed the company by announcing it would abandon the "universal default."
The current BusinessWeek looks at stocks such as First Solar (NASDAQ: FSLR), SolarWorld and Evergreen Solar (NASDAQ: ESLR), which have been facing increased volatility based on contract deal news or the lack thereof.
A major impact came in May, with speculation that Germany would lower subsidies given to companies and individuals who install alternative energy equipment. But the cut was not as deep as expected and stocks rebounded nicely.
Despite worries tied to the slowing U.S. economy and increased competition, "we think that some of the concerns are overdone and believe selective stocks are attractively valued," Rosenbluth stated. Rosenbluth also noted that telecom stocks have started showing signs of recovery for the past few weeks, helped by the launch of new handsets and merger and acquisition agreements.
Some of investors' favorite companies are AT&T Co. (NYSE: T) and Citizens Communications Co. (NYSE: CZN). Rosenbluth believes that the launch of Apple (NASDAQ: AAPL)'s new iPhone, 3G iPhone, will stir increased demand for smartphones, helping such companies, while putting pricing pressure on some of their competitors.
One such company is Archer Daniels Midland (NYSE: ADM), which could also benefit from higher ethanol prices, after purchasing seven businesses in 2007. Bunge Limited (NYSE: BG) is also amid possible winners, having forecast better-than-expected fertilizer earnings. Shell eggs producer Cal-Maine Foods (NASDAQ: CALM) is also on the selected list; the company saw its shares climb 15% year to date, and has just revealed a new dividend payout policy.
Another important name is Mosaic Co. (NYSE: MOS), whose stock prices have surged 70% so far this year. BusinessWeek cites Mosaic as being able to benefit from higher prices for fertilizer and potash. Following the same logic, the article points out potash provider Potash Corp. of Saskatchewan (NYSE: POT) and fertilizer distributor CF Industries Holdings (NYSE: CF), which should be able to take advantage of the weak dollar and higher sales prices.
For example, Ford Motor (NYSE: F) fell down to around $6 compared with $38 nine years ago -- is it a good investment? Well, while the automaker revealed its plans to shift production from trucks to cars and give a boost to its turnaround plan, it also warned it won't be profitable until 2010 at the earliest.
Perman quotes several investment specialists on the matter. John Schloegel, vice president of investment strategies at Capital Cities Asset Management says, "An investment in Ford today feels like being in the wrong place at the wrong time." And Greg Womack, president of Womack Investment Advisers, advices to stay away from the sector, which doesn't look promising now, for the next three to five years to find out the "winner."