KB Home earnings fall, but orders increase

Los Angeles home builder KB Home posted lower earnings in the fiscal fourth quarter compared with a year earlier as the company sold fewer homes in higher cost areas. But another development signaled some cause for optimism: New orders for homes from the company grew.

The company reported net income of $13.9 million, or 18 cents a share, for the three months ending Nov. 30. That compared with $17.4 million, or 23 cents, during the same period a year earlier.

"We believe these results demonstrate our success in adapting to current market realities and positioning our business for the future,” Chief Executive Jeffrey Mezger said in a statement.

Revenues in the fourth quarter grew 6% over the previous year to $479.9 million, and net orders increased 38% to 1,494. For all of 2011, the company widened its net loss to $178.8 million. That compared with a 2010 loss of $69.4 million.

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Olive Garden parent Darden's earnings slip 28%

Darden Restaurants Inc. would have had a strong second quarter if not for the poor performance of its Olive Garden chain, which pulled net income for the entire company down 28%.

Earnings slipped to 53.7 million, or 40 cents a share, from $74.5 million, or 53 cents a share the same quarter in 2010. Revenue for the quarter, which ended Nov. 27, was up 6.1% to $1.83 billion.

Orlando, Fla.-based Darden said its other brands had “strong momentum.” Red Lobster’s same-store sales were up 6.8% and LongHorn Steakhouse saw a 6% sales increase. Seasons 52 locations open more than a year pulled in 2.9% more revenue this quarter, while Bahama Breeze enjoyed a 0.5% uptick and the Capital Grille attracted 5.7% more sales.

But Darden Chief Executive Clarence Otis said in a statement that the strong sales were “offset by below expectation sales results at Olive Garden, pressure on check averages as guests continue to be cautious about spending and unfavorable year-over-year food costs.”

Olive Garden, which serves Italian fare and has dozens of branches in California, needs to get “back on track,” Darden executives said. Same-store sales were down 2.5% over the quarter, with a 5.7% plunge in November alone.

The chain will attempt new promotions and advertising efforts while changing up its core menu and remodeling dowdy old restaurants, executives said.

Earlier this month, the company anticipated Olive Garden’s weakness by cutting Darden’s earnings forecast, saying that it expects earnings per share to increase 4% to 7% instead of the 12% to 15% bump it predicted earlier in the fall. Revenue in 2012 is expected to be slightly less than Darden had previously anticipated.

The earnings report, which was announced before the market opened, sent Darden shares down nearly 2% to $42.91 in midday trading in New York.

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Photo: Olive Garden. Credit: Darden Restaurants

Consumer Confidential: The skinny on Black Friday; Keds recall

Here's your feelin'-stronger-every-day Friday roundup of cosnumer news from around the Web:

-- Getting all excited about Black Friday? Maybe you'll want to rethink things. Here are a few reasons why the Black Friday hoopla is overblown: Most "door busters" are second-tier products offered by less-prominent brands. Many of the same deals you'll find in the store can be found online. Layaway may not be available until after Black Friday ends. Return policies are often stricter for discounted goods. And more importantly, you're likely to overspend after lining up in the middle of the night to get a shot at some bargain-basement product. The stores know this, which is why they go through all this fuss in the first place. Just saying. (MoneyWatch)

-- Heinz wants to make a little ketchup go a long way. The world's biggest ketchup maker's second-quarter profit fell as it focused on fast-growing emerging markets. But in struggling developed markets such as the U.S. and Europe, the company is shrinking product sizes and selling lower-priced products such as ketchup for 99 cents and beans for around a dollar to appeal to budget-stretched shoppers. Many people are living paycheck to paycheck, buying only what they can afford rather than bigger bottles or cans of food that might be more cost-effective. Heinz says that to meet consumers' needs, it is selling pouches instead of bottles of some of its condiments, reintroducing bean products to the U.S. and selling a bag of french fries for family dinners at $1.99. (Associated Press)

-- Heads up: Keds is recalling about 45,000 Know It All girls' shoes. Ornamental stars on the heel of the shoe may loosen, posing a laceration hazard. The company has received 27 reports of cuts and scratches resulting from metal stars that loosened from the heel of the shoe. This recall involves Keds girls' rubber-soled shoes. The shoes are black and pink, with white trim and a pink loop on the heel. The Chinese-made shoes were sold in girls' sizes 12 to 5 at various department stores and online retailers. Consumers should take them away from children immediately and contact Collective Brands to receive a gift card for $30 redeemable at Stride Rite stores or striderite.com. (ConsumerAffairs.com)

-- David Lazarus

Photo: Black Friday may be more hassle than it's worth. Credit: Al Seib / Los Angeles Times

 

Home Depot, unlike Lowe's, posts increased third-quarter profit

Home Depot Inc., the world’s largest home-improvement chain, reported strong third-quarter earnings a day after its closest competitor, Lowe’s Companies Inc., showed plunging profits.

For the third quarter ending Oct. 30, Atlanta-based Home Depot said its net income jumped 12% to $934 million, or 60 cents a share, from $834 million, or 51 cents a share, a year earlier.

Earnings at North Carolina-based Lowe’s dropped 44.3% year-over-year to $225 million, with earnings per share down nearly 38% to 18 cents from 29 cents.

Home Depot’s 2,246 stores in North America, Mexico and China -- including dozens in Southern California -- saw a spike in customers willing to spend more money. The number of transactions increased 1.2% to more than 325 million, while the average price per purchase jumped 3% to $53.03.

Same-store sales at locations open more than a year were up 4.2%. Overall revenue spiked 4.4% to $17.3 billion as customers preparing for (and then cleaning up after) Hurricane Irene in August flocked to stores.

The retailer had operated a Disaster Response Command Center in Atlanta, which had emergency response teams ensuring that stores were kept well-stocked with storm supplies.

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Photo: John Amis / Associated Press

Century City's Air Lease posts third-quarter profit

Air Lease Corp., the aircraft leasing company started last year by Los Angeles billionaire Steven Udvar-Hazy, reported a profit for the third quarter, citing strong demand for its aircraft amid airline expansion in many regions of the world.

The Century City company reported late Thursday that net income for the three-month period ended Sept. 30 came to $18.3 million, or 18 cents a share. Analysts had expected a profit of 15 cents a share. Revenue totaled $92.1 million.

Air Lease bought 14 planes during the quarter and now has a fleet of 79 aircraft. The company plans to expand to about 100 planes by the end of the year.

“Passenger airline growth in many regions of the world continues at a strong rate, coupled with the requirement on the part of all carriers to constantly push toward newer and more efficient fleets,” Udvar-Hazy, the company’s chief executive, said in a statement. “As such, global demand for new aircraft remains strong, and our lease placements and portfolio returns are in line with our expectations.”

Air Lease is growing its business by focusing on emerging markets such as Asia, Africa, Latin America and the Middle East, where fast economic growth is driving an increase in air traffic.

During the quarter, Air Lease signed deals with airlines that included South Korea’s Asiana Airlines Inc., Colombia’s Aerovías del Continente Americano and Brazil’s Gol Transportes Aéreos.

Udvar-Hazy, a Hungarian emigre, made a name for himself pioneering the business of buying planes and leasing them to airlines when he co-founded International Lease Finance Corp. nearly four decades ago.

After a rift with ILFC, Udvar-Hazy left to start Air Lease last year. He took the company public in April.

Air Lease shares rose 49 cents, or 2%, to $23.16 on Friday.

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Photo: Air Lease Corp. CEO Steven Udvar-Hazy. Credit: Lai Seng Sin / Associated Press

Wendy's tackles Five Guys and fast casual, introduces 'W' burger

Wendy’s Co.'s new chief executive isn’t treading lightly, promising this week to pump up the chain’s breakfast offerings, introducing a new line of burgers and zeroing in on fast casual restaurants such as Five Guys.

In a conference call with analysts Wednesday, just two months into his tenure, Emil Brolick said Wendy’s is emerging from an “identity crisis” during which the company “went through a difficult period and lost clarity of vision.”

In the third quarter ending Oct. 2, Wendy’s reported a nearly $4 million loss, equating to a drop of a penny per share, weighed down in part by costs related to the July 4 sale of Arby’s Restaurant Group Inc.

But Brolick was looking ahead, eyeing a new crop of competitors. Wendy’s has higher-quality products that put it “at the very high end” of fast-food restaurants and more in line with the “superior overall experience” offered by the fast casual segment, he said.

“I’m not for the moment suggesting that we want to try to pretend to become a Five Guys or a Smashburger or something like that, because I think that would be a big mistake for us to do that,” Brolick said. “But I do believe that there’s a significant opportunity in the marketplace for higher-quality products that are fresh made-to-order products.”

Fresh off the popular debut of the remade Dave's Hot 'N Juicy burger line, Wendy’s will also reveal its new “W” burger line later this month. The so-called mid-tier sandwiches will, at about $2.99 each, be a step above the chain’s value-menu offerings, Brolick said.

Breakfast, with items such as the Artisan Egg Sandwich, will also be a priority. Morning menus accounted for 92% of the overall traffic growth in the quick service restaurant segment over the last five years, he said.

Wendy’s is also testing new restaurant prototypes and is looking into wider international expansion, Brolick said.

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Consumer Confidential: Toyota's new recall, Macy's profit up

Here's your waiting-for-Godot Wednesday roundup of consumer news from around the Web:

-- Toyota is, yes, recalling more vehicles. The carmaker is recalling about 550,000 vehicles worldwide, including 420,000 in the U.S., for a potential steering problem. The defect involves the crankshaft pulley on V-6 Toyota- and Lexus-brand vehicles (four-cylinder models are not affected). Toyota says it has 79 reports about the defect dating back to 2007. The global recall is of 447,000 vehicles in the U.S. and Canada, 38,000 in Japan, 25,000 in Australia and New Zealand, 14,000 in Europe, 10,000 in the Middle East and 14,000 in Asia outside Japan. In recent years, Toyota has recalled about 14 million of its vehicles.

-- Things are looking up for Macy's. Profit surged in the third quarter as the department store chain benefited from tailoring its merchandise to local markets. The retailer also raised its full-year profit outlook but offered cautious guidance for the current quarter, which covers the holiday period. Macy's says it earned $139 million for the three months ended Oct. 29. That compares with $10 million in the same period last year. Analysts say it's a sign that Macy's is on the right track. The results also bode well for other retailers as we enter the all-important holiday shopping season.

-- David Lazarus

 

Earnings report: Big 3rd-quarter profits for Occidental, Exxon-Mobil

Occidental Petroleum saw its profit rise like an old-style gusher in the third quarter, up nearly 50% to $1.77 billion compared to a year earlier, the company said Thursday. It benefited, in part, from record domestic production that helped offset losses in the Middle East.

Occidental’s $2.17 per share compared with $1.19 billion, or $1.46 per share, a year earlier. Sales also jumped 26.1% to $6.01 billion.

“The third-quarter domestic production was 436,000 barrels per day  ... [the] highest in Occidental's history,” said President and Chief Executive Stephen I. Chazen. It was a showing that easily surpassed Wall Street expectations of $1.97 per share and profit on revenue of $5.46 billion, according to FactSet.

“We weren’t expecting any production growth for Occidental. It was very highly unlikely because of its exposure to Libya,” said Fadel Gheit, senior oil analyst for Oppenheimer & Co., referring to the North African nation where production had ceased during a hard-fought civil war. “Those barrels are gone,” Gheit added.

Argus Research analyst Phil Weiss said Occidental’s production in California has also been slowed by delays in getting permits. But Weiss said that the company did well because it has positioned itself to perform profitably in almost any political situation and earnings environment.

“Occidental remains one the industry’s best-managed firms,” Weiss said.

Occidental's daily oil and gas production volumes averaged 739,000 barrels a day, compared to 706,000 in the third quarter of 2010. Domestic crude production rose by 56,000 barrels a day from such places as South Texas, the North Dakota Williston Basin and California.

The world’s biggest integrated oil firm, Exxon Mobil Corp., reported a third-quarter profit of $10.33 billion, or $2.13 a share, compared to $7.35 billion, or $1.44, a year earlier.

The results were indicative, Gheit said, of an industry enjoying substantially higher world oil prices compared to the third quarter a year ago. But sequentially, the average profit margins trailed those recorded in the second quarter when oil prices hit their peak for this year.

For the major integrated oil companies, most of the profit came in the so-called upstream segment, which includes exploration and production. Downstream segments, which include the business of refining oil into fuels like gasoline and diesel, did not perform as well.

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Photo: Occidental headquarters in Westwood. The company's earnings were boosted by record domestic oil production in the third quarter. Credit: Kevork Djansezian / Associated Press

Lap-Band sales fell 16% in third quarter, Allergan says

Sales of Allergan Inc.’s Lap-Band weight-loss device dropped 16% in the third quarter of the year, the company said.

The Lap-Band is familiar to many Southern California residents because it is marketed extensively by a company called 1-800-GET-THIN on freeway billboards, television, radio and the Internet. The ad company is not affiliated with Allergan.

In a Wednesday conference call with analysts, Allergan Chief Executive David E.I. Pyott blamed the slump in Lap-Band sales on the sluggish economy, high unemployment and steep insurance co-payment requirements. In a statement, the company said it “remains committed to the Lap-Band business, as we strongly believe it represents an important tool in addressing the obesity epidemic.”

Since 2009, five Southern California patients have died after undergoing Lap-Band procedures at clinics affiliated with the 1-800-GET-THIN ads, according to lawsuits, coroner’s records and interviews.

Several lawsuits have been filed against the advertising company, clinics at which the surgeries were performed and the doctors involved in the surgeries. Through their attorneys, the marketing company and surgery centers have denied wrongdoing.

The Lap-Band represents just a small fraction of Allergan’s sales. The Irvine company also markets Botox wrinkle treatment, breast implants, an eyelash lengthening drug and a number of eye medications. Allergan reported $1.31 billion in sales for the third quarter, down slightly from the $1.33 billion that analysts had expected. Its shares fell $3.22, or 3.7%, to $83.74 on Wednesday.

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Panera income up 27%, stock hits record high

Strong third-quarter earnings at Panera Bread Co. helped push the bakery café chain’s stock to a record high.

The fast-casual company said its revenue soared 22% to $453 million in the quarter ending Sept. 27, up from $371 million in the same period a year prior. Net income spiked 27% to $28.8 million from $22.7 million, sending the chain’s stock to a midday high of $133.80.

It closed at $115.72 on Tuesday.

Diluted earnings per share for the quarter settled at 97 cents apiece, up 29% year over year from 75 cents a share.

Sales at company-owned branches opened more than a year spiked 6%, while franchisees said their revenue collectively increased more than 3%.

Breakfast sandwiches were up 18% year over year. The new turkey artichoke panini sparked a 35% boom for the Signature Panini category. Cookie sales boomed 41% on the strength of Panera’s iced pumpkin cookie.

The chain plans to reintroduce its salmon salad and Cuban panini next year along with new items such as a turkey cranberry panini.

St. Louis-based Panera now has 1,504 locations open and plans to open up to 115 more next year.

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Despite doubts, stocks keep rallying; Dow at highest since Aug. 1

The risk-takers are back on Wall Street. The question now is how long they’re willing to stay and play.

Stocks rallied broadly on Monday, continuing the surprising October rally and lifting more key indexes to their highest levels since early August.

While the blue-chip Dow Jones industrial average rose 104.83 points, or 0.9%, to 11,913.62 -- the highest close since the index was last above 12,000, on Aug. 1 -- the hot action was in small and mid-size stocks.

The Russell 2,000 small-stock index jumped 23.61 points, or 3.3%, to 736.03. That lifted it out of the trading range where it has been stuck for the last two months, following the plunge of late July and early August on global recession fears.

Investors who have been skeptical about this month’s rebound have been waiting to see whether it would continue to broaden. Demand for smaller stocks indicates that buyers’ appetite for risk-taking is growing. “It says they’ve put aside, for now, worries about recession,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, N.J.

Stocks advanced even though markets still are waiting on a definitive plan from European authorities to contain their government-debt crisis and bolster the continent’s weak banks. An announcement is expected on Wednesday.

In the meantime, bullish investors and traders have been pleasantly surprised in recent weeks by data suggesting that the U.S. economy continues to expand, if moderately. (See here, here and here.)

That also has been the message in most blue-chip companies’ third-quarter earnings reports, said Marc Pado, U.S. market strategist at brokerage Cantor Fitzgerald.

Caterpillar, one of the 30 Dow stocks, wowed investors Monday by reporting third-quarter profit up 44%, beating analysts’ expectations. The stock surged $4.38, or 5%, to $91.77.

The October turnaround in stocks, Pado said, reflects that “the bears woke up and found out that earnings are great. And earnings are what matters.”

In another encouraging economic sign Monday, a report showed that China’s manufacturing sector expanded in October after contracting for three months. That helped light a fire under still-depressed prices of commodities, which China consumes in mass quantities. The ThomsonReuters/Jefferies CRB index of 19 major commodities jumped 2.4% to its highest level since Sept. 21.

On Wall Street, the Dow now is up 11.8% from the market’s low point on Oct. 3. The Russell 2,000 index, which has surged 7% just in the last week, is up 20.8% since Oct. 3.

Of course, given the wild swings of the last two months, many investors remain suspicious of the rally’s staying power. But if the market reacts well to whatever the Europeans announce on Wednesday, that could clear away more doubts.

And as the bulls are quick to remind, hedge funds and other big players know that November and December historically are the stock market’s best two months of the year. If they think prices are going higher they can’t afford to be left behind.

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Photo: On the New York Stock Exchange floor on Monday. Credit: Richard Drew / Associated Press