Cost of new home not included in record buy
By Noelle Knox
USA TODAY
Ron Baron, founder of the Baron Funds investment company, has paid a record $103 million for a residential property in East Hampton, N.Y. And get this: That price doesn't even include the cost of the house he wants to build.
The price — equal to what Texas plans to spend on border security this year — tops a record set in 2004, when Revlon Chairman Ronald Perelman sold his estate in Palm Beach, Fla., for $70 million to Dwight Schar of builder NVR.
But Baron's bragging rights might not last long. Three homes — well, estates — for sale are asking even dizzier prices.
In December, real estate baron (with a small b) Tim Blixseth boasted that he'd start building the world's most expensive house. His $155 million asking price tops the high of $149 million for Updown Court in Windlesham, England, still on the market.
"It's amazing how much growth there is in the very high end of the market in terms of wealth," says Rick Goodwin, publisher of Ultimate Homes magazine.
Overall in the USA, home sales slid 8.4% last year, in part because prices in many areas had climbed out of reach for the middle class. But for residences priced at $5 million or more, sales soared 18% for 2006 and 31% in the first quarter of this year — both record highs, according to DataQuick.
"Properties over $10 million are becoming very commonplace," says Jonathan Miller of Miller Samuel, a Manhattan appraiser. "When you compare it to the national median, which is hovering around $215,000, there's a lot of disparity."
Blixseth envisions his project, called The Pinnacle at Yellowstone Club, in Big Sky, Mont., as a 32,000-square-foot home on 160 acres. He says it will include an 8,000-bottle wine cellar, a 26-seat cinema, a hair and nail salon, a private gondola to ski lifts, a fleet of Suburban SUVs for the underground garage, and a helipad with pilot's quarters.
As for Baron, his 40 acres of oceanfront property are vacant. He bought the land from Adelaide de Menil, heiress to the Schlumberger oil fortune, and her husband, Ted Carpenter.
Four antique houses had stood on the property. But the sellers donated them to the town, which moved the buildings and plans to use them as a new town hall.
Baron declined to comment on the deal, which was hush-hush and sold without a broker, says Judi Desiderio of Town & Country Real Estate in East Hampton, who confirmed the sale and price.
Friday, May 25, 2007
Profit slides as Gap reinvents itself (San Francisco Cronicle)
S.F. retail chain sees same-store sales decline, reveals new strategies for two largest brands
Pia Sarkar, Chronicle Staff Writer
Gap Inc.'s profit slid 26 percent in its fiscal first quarter as the company struggled to define itself to customers who have lost interest in its products.
The San Francisco retailer reported a profit of $178 million in the first quarter (22 cents per share), down from $242 million (28 cents) in the same period last year. The numbers include a $45 million loss from the planned closure of Forth & Towne, a brand created for women 35 and older that flopped after just 18 months.
Excluding Forth & Towne costs, Gap would have earned 25 cents per share -- a penny above the average estimate among analysts surveyed by Thomson Financial.
Revenue grew to $3.56 billion in the first quarter, a 3 percent increase from $3.44 billion last year. But same-store sales -- sales at stores open at least a year, considered an accurate barometer of a company's health -- fell by 4 percent, after a 9 percent decrease in the same period a year ago.
Same-store sales at the namesake Gap brand dropped by 4 percent, after an 8 percent decline last year. Same-store sales at Old Navy dropped by 5 percent, compared with an 11 percent decline last year. And same-store sales at Banana Republic, which up until recently had been posting gains, fell by 2 percent, after a 5 percent decline last year.
Online sales continued to be the bright spot for the company, growing to $195 million in the first quarter, compared with $159 million the year before.
Bob Fisher, interim chief executive officer for the company founded by his parents, said Gap is sticking to plans set out earlier this year calling for a simplified hierarchy among management as well as a focus on lowering expenses. It is in the middle of a search for a permanent CEO.
"There's more work to be done, but I feel good about the progress we're making," Fisher said during a conference call on Thursday.
As he has in the past, Fisher acknowledged that the Gap brand -- the company's oldest and second-largest division behind Old Navy -- has had a hard time defining itself to customers. It has been aiming at a broad range of people 18 to 34 years old. On Thursday, Fisher said the brand will stop chasing 18-to-23 year olds, a demographic that is aggressively courted by competitors. Instead, Gap will focus on 24-to-34 year olds, reducing its merchandise selection by 30 percent.
Old Navy president Dawn Robertson, who has held the position for six months, outlined for the first time strategies for the brand, which include getting merchandise into stores much faster than in the past. She also said Old Navy will try to strike more of a balance between value and fashion with its offerings.
Both Old Navy and Gap stores at key locations will be extensively remodeled throughout the year -- something the company has fallen behind on, according to Gap's chief financial officer, Byron Pollitt.
Richard Jaffe, an analyst for Stifel Nicolaus, said that while Old Navy can benefit from a more-efficient sourcing structure to keep it competitive, its bigger problem is the merchandise, which also ails Gap.
"Fixing the product is more important," he said.
As for plans to narrow the Gap brand's audience, Jaffe questioned the logic. "It's not clear to me how fewer choices will make a difference," he said. "It's about better choices."
Gap stock closed at $18.20 at the end of trading Thursday, off 8 cents for the day, with 6,258,603 shares traded.
Pia Sarkar, Chronicle Staff Writer
Gap Inc.'s profit slid 26 percent in its fiscal first quarter as the company struggled to define itself to customers who have lost interest in its products.
The San Francisco retailer reported a profit of $178 million in the first quarter (22 cents per share), down from $242 million (28 cents) in the same period last year. The numbers include a $45 million loss from the planned closure of Forth & Towne, a brand created for women 35 and older that flopped after just 18 months.
Excluding Forth & Towne costs, Gap would have earned 25 cents per share -- a penny above the average estimate among analysts surveyed by Thomson Financial.
Revenue grew to $3.56 billion in the first quarter, a 3 percent increase from $3.44 billion last year. But same-store sales -- sales at stores open at least a year, considered an accurate barometer of a company's health -- fell by 4 percent, after a 9 percent decrease in the same period a year ago.
Same-store sales at the namesake Gap brand dropped by 4 percent, after an 8 percent decline last year. Same-store sales at Old Navy dropped by 5 percent, compared with an 11 percent decline last year. And same-store sales at Banana Republic, which up until recently had been posting gains, fell by 2 percent, after a 5 percent decline last year.
Online sales continued to be the bright spot for the company, growing to $195 million in the first quarter, compared with $159 million the year before.
Bob Fisher, interim chief executive officer for the company founded by his parents, said Gap is sticking to plans set out earlier this year calling for a simplified hierarchy among management as well as a focus on lowering expenses. It is in the middle of a search for a permanent CEO.
"There's more work to be done, but I feel good about the progress we're making," Fisher said during a conference call on Thursday.
As he has in the past, Fisher acknowledged that the Gap brand -- the company's oldest and second-largest division behind Old Navy -- has had a hard time defining itself to customers. It has been aiming at a broad range of people 18 to 34 years old. On Thursday, Fisher said the brand will stop chasing 18-to-23 year olds, a demographic that is aggressively courted by competitors. Instead, Gap will focus on 24-to-34 year olds, reducing its merchandise selection by 30 percent.
Old Navy president Dawn Robertson, who has held the position for six months, outlined for the first time strategies for the brand, which include getting merchandise into stores much faster than in the past. She also said Old Navy will try to strike more of a balance between value and fashion with its offerings.
Both Old Navy and Gap stores at key locations will be extensively remodeled throughout the year -- something the company has fallen behind on, according to Gap's chief financial officer, Byron Pollitt.
Richard Jaffe, an analyst for Stifel Nicolaus, said that while Old Navy can benefit from a more-efficient sourcing structure to keep it competitive, its bigger problem is the merchandise, which also ails Gap.
"Fixing the product is more important," he said.
As for plans to narrow the Gap brand's audience, Jaffe questioned the logic. "It's not clear to me how fewer choices will make a difference," he said. "It's about better choices."
Gap stock closed at $18.20 at the end of trading Thursday, off 8 cents for the day, with 6,258,603 shares traded.
Best Buy sued over Web price quotes
Connecticut goes to court; retailer denies misleading customers at in-store kiosks
BY GITA SITARAMIAH (Pioneer Press)
Electronics giant Best Buy Co. is being sued by the Connecticut attorney general after consumers complained they'd been quoted higher prices in stores for merchandise advertised at lower prices online.
The lawsuit alleges that since 2005, the company's stores have pledged to match any lower online price, including from its own Internet site. But customers tapping into in-store kiosks to check prices were misled by salespeople into believing they were tapping into the retailer's online Web site Bestbuy.com when they were actually connected to an internal company site, the suit contends.
When the kiosks displayed a higher price, the salespeople allegedly suggested that consumers had previously misread the lower online price or that the online price had expired.
"We intend to vigorously defend ourselves," Best Buy spokeswoman Susan Busch said in a statement. "The future of our company depends on our ability to build trusted relationships with our customers."
However, the Richfield-based company acknowledged that a small percentage of customers didn't receive the best price when they should have. It said once the issue was brought to the company's attention, it provided employee training to ensure that customers receive the best price and more changes are being made to eliminate further confusion.
The lawsuit filed in Connecticut Superior Court seeks civil penalties and restitution for "customers who purchased products at a higher price because they were deceived by Best Buy's misrepresentations."
George Rosenbaum, chairman of Chicago-based consumer research firm Leo J. Shapiro Associates, said he believes Best Buy made an operational error and isn't intentionally pricing the same products differently online versus in stores.
The company is probably moving fast to fix the problem because a good online presence is critical for drawing customers into stores with high-ticket items, Rosenbaum said.
"They're highly dependent on their Web site for traffic generation," Rosenbaum said. "This kind of an error, and I call it an error instead of a deliberate strategy, can badly hurt their customer relations if it isn't corrected."
Rosenbaum also believes the company still can do crisis control to avert damage to its image.
Best Buy has maintained its dominant position as the largest electronics retailer in the country while others have faltered recently. Chief rival Circuit City has closed stores, cut 3,400 workers and hired replacements at cheaper pay. Another rival, Comp USA, also is closing many stores nationally, including all of its Twin Cities locations.
Meanwhile, Best Buy posted a 22 percent increase in profit in its most recent quarter and saw the biggest improvement among retailers in the latest University of Michigan American Customer Satisfaction Index.
Connecticut Attorney General Richard Blumenthal said his office received at least 20 complaints after the Hartford Courant newspaper in February reported the experience of one frustrated Connecticut shopper.
The man found a laptop computer advertised for $729.99 on BestBuy.com, then went to a Best Buy store where an employee who seemed to check the same Web site told him the price was actually $879.99. (The shopper eventually did purchase the laptop at the discount after bringing in a copy of the online sale price to another store that had them in stock.)
Within days of the newspaper report, Blumenthal announced the investigation. On March 8, an open letter was posted at the retailer's Web site by Best Buy Chief Operating Officer Brian Dunn to "clear the air" regarding the investigation. Dunn wrote that the kiosks weren't to be used by employees to check Web prices, but that this process had not been followed consistently. He offered a toll-free number so the company could address customer concerns.
In a separate case, the Florida attorney general has done a three-year investigation into Best Buy for allegations including sale of used merchandise as new and restocking fees assessed on the price of merchandise returned including the taxes charged. Best Buy didn't offer comment Thursday on those allegations.
Best Buy operates more than 820 stores in 49 states, as well as stores in Canada and China. On Wall Street, Best Buy stock closed at $46.67, down 86 cents.
BY GITA SITARAMIAH (Pioneer Press)
Electronics giant Best Buy Co. is being sued by the Connecticut attorney general after consumers complained they'd been quoted higher prices in stores for merchandise advertised at lower prices online.
The lawsuit alleges that since 2005, the company's stores have pledged to match any lower online price, including from its own Internet site. But customers tapping into in-store kiosks to check prices were misled by salespeople into believing they were tapping into the retailer's online Web site Bestbuy.com when they were actually connected to an internal company site, the suit contends.
When the kiosks displayed a higher price, the salespeople allegedly suggested that consumers had previously misread the lower online price or that the online price had expired.
"We intend to vigorously defend ourselves," Best Buy spokeswoman Susan Busch said in a statement. "The future of our company depends on our ability to build trusted relationships with our customers."
However, the Richfield-based company acknowledged that a small percentage of customers didn't receive the best price when they should have. It said once the issue was brought to the company's attention, it provided employee training to ensure that customers receive the best price and more changes are being made to eliminate further confusion.
The lawsuit filed in Connecticut Superior Court seeks civil penalties and restitution for "customers who purchased products at a higher price because they were deceived by Best Buy's misrepresentations."
George Rosenbaum, chairman of Chicago-based consumer research firm Leo J. Shapiro Associates, said he believes Best Buy made an operational error and isn't intentionally pricing the same products differently online versus in stores.
The company is probably moving fast to fix the problem because a good online presence is critical for drawing customers into stores with high-ticket items, Rosenbaum said.
"They're highly dependent on their Web site for traffic generation," Rosenbaum said. "This kind of an error, and I call it an error instead of a deliberate strategy, can badly hurt their customer relations if it isn't corrected."
Rosenbaum also believes the company still can do crisis control to avert damage to its image.
Best Buy has maintained its dominant position as the largest electronics retailer in the country while others have faltered recently. Chief rival Circuit City has closed stores, cut 3,400 workers and hired replacements at cheaper pay. Another rival, Comp USA, also is closing many stores nationally, including all of its Twin Cities locations.
Meanwhile, Best Buy posted a 22 percent increase in profit in its most recent quarter and saw the biggest improvement among retailers in the latest University of Michigan American Customer Satisfaction Index.
Connecticut Attorney General Richard Blumenthal said his office received at least 20 complaints after the Hartford Courant newspaper in February reported the experience of one frustrated Connecticut shopper.
The man found a laptop computer advertised for $729.99 on BestBuy.com, then went to a Best Buy store where an employee who seemed to check the same Web site told him the price was actually $879.99. (The shopper eventually did purchase the laptop at the discount after bringing in a copy of the online sale price to another store that had them in stock.)
Within days of the newspaper report, Blumenthal announced the investigation. On March 8, an open letter was posted at the retailer's Web site by Best Buy Chief Operating Officer Brian Dunn to "clear the air" regarding the investigation. Dunn wrote that the kiosks weren't to be used by employees to check Web prices, but that this process had not been followed consistently. He offered a toll-free number so the company could address customer concerns.
In a separate case, the Florida attorney general has done a three-year investigation into Best Buy for allegations including sale of used merchandise as new and restocking fees assessed on the price of merchandise returned including the taxes charged. Best Buy didn't offer comment Thursday on those allegations.
Best Buy operates more than 820 stores in 49 states, as well as stores in Canada and China. On Wall Street, Best Buy stock closed at $46.67, down 86 cents.
Bausch & Lomb doesn't see layoffs from going-private deal
By Yogita Patel (Market Watch)
Bausch & Lomb Inc. (BOL : Bausch & Lomb Incorporated) said Thursday that it doesn't anticipate layoffs from its $4.5 billion acquisition by private-equity firm Warburg Pincus LLC.
In a communication to employees that was disclosed in a Securities and Exchange Commission filing, the Rochester, N.Y., eye-care company said it doesn't expect the transaction to affect its day-to-day operations, including its business sites worldwide.
Warburg Pinus, of New York, agreed earlier this month to buy Bausch & Lomb for $65 a share in cash.
Shares of Bausch & Lomb closed Thursday at $70.21.
Bausch & Lomb Inc. (BOL : Bausch & Lomb Incorporated) said Thursday that it doesn't anticipate layoffs from its $4.5 billion acquisition by private-equity firm Warburg Pincus LLC.
In a communication to employees that was disclosed in a Securities and Exchange Commission filing, the Rochester, N.Y., eye-care company said it doesn't expect the transaction to affect its day-to-day operations, including its business sites worldwide.
Warburg Pinus, of New York, agreed earlier this month to buy Bausch & Lomb for $65 a share in cash.
Shares of Bausch & Lomb closed Thursday at $70.21.
EU probes Google grip on data
By Maija Palmer in London (Financial Times)
European data protection officials have raised concerns that Google could be contravening European privacy laws by keeping data on internet searches for too long.
The Article 29 working party, a group of national officials that advises the European Union on privacy policy, sent a letter to Google last week asking the company to justify its policy of keeping information on individuals’ internet searches for up to two years.
The letter questioned whether Google had “fulfilled all the necessary requirements” on data protection.
The data kept by Google includes the search term typed in, the address of the internet server and occasionally more personal information contained on “cookies”, or identifier programs, on an individual’s computer.
This is separate to the personal information Google has begun collecting over the past two years from people who give the group explicit permission to do so.
Standard search information is kept about everyone who uses the search engine, and privacy groups are concerned that even this ostensibly non-personal data can be used to identify individuals and create profiles of their political opinions, religious beliefs and sexual preferences.
Google previously kept such data indefinitely, but in March announced it would limit the storage time to two years, in an attempt to assuage concerns.
But many members of the working party feel that even two years is too long to keep data, and the group has asked Google to justify its policy.
Separately, the Norwegian Data Inspectorate began an investigation into Google and other search engine companies last October and has stated that the 18- to 24-month period proposed by Google was too long.
“After the service is finished we cannot see reasons why the company should keep the addresses for a longer period. Of course there can be reasons like security, but 18 to 24 months is to our point of view far to long,” the inspectorate said.
Peter Fleischer, European privacy counsel for Google, said the company needed to keep search information for some time for security purposes – to help guard against hacking and people trying to misuse Google’s advertising system.
Mr Fleischer is set to respond to the working party before their next meeting in June.
He said other companies such as Yahoo and Microsoft had not yet declared a limit to the information they keep.
European data protection officials have raised concerns that Google could be contravening European privacy laws by keeping data on internet searches for too long.
The Article 29 working party, a group of national officials that advises the European Union on privacy policy, sent a letter to Google last week asking the company to justify its policy of keeping information on individuals’ internet searches for up to two years.
The letter questioned whether Google had “fulfilled all the necessary requirements” on data protection.
The data kept by Google includes the search term typed in, the address of the internet server and occasionally more personal information contained on “cookies”, or identifier programs, on an individual’s computer.
This is separate to the personal information Google has begun collecting over the past two years from people who give the group explicit permission to do so.
Standard search information is kept about everyone who uses the search engine, and privacy groups are concerned that even this ostensibly non-personal data can be used to identify individuals and create profiles of their political opinions, religious beliefs and sexual preferences.
Google previously kept such data indefinitely, but in March announced it would limit the storage time to two years, in an attempt to assuage concerns.
But many members of the working party feel that even two years is too long to keep data, and the group has asked Google to justify its policy.
Separately, the Norwegian Data Inspectorate began an investigation into Google and other search engine companies last October and has stated that the 18- to 24-month period proposed by Google was too long.
“After the service is finished we cannot see reasons why the company should keep the addresses for a longer period. Of course there can be reasons like security, but 18 to 24 months is to our point of view far to long,” the inspectorate said.
Peter Fleischer, European privacy counsel for Google, said the company needed to keep search information for some time for security purposes – to help guard against hacking and people trying to misuse Google’s advertising system.
Mr Fleischer is set to respond to the working party before their next meeting in June.
He said other companies such as Yahoo and Microsoft had not yet declared a limit to the information they keep.
Thursday, May 24, 2007
House OKs bill to curb gas gouging (Washington Times)
By Patrice Hill
The House yesterday passed a bill that would make price gouging by gas stations and oil companies a federal crime as prices at the pump surpassed a 1981 record reached at the height of the Iranian oil crisis. The White House, which has threatened to veto the bill, warned the legislation amounts to price controls and would lead to gas shortages and lines like in the 1970s.
The cross over the threshold of $3.23 a gallon reported by GasBuddy.com equals the inflation-adjusted record high for gas prices and heralds a new era of high energy prices and scarcity of fuel as growing demand in China, India and the U.S. collides with scarce new sources of oil and sluggish increases in gasoline production worldwide. Economists say the House bill will not help to ease those shortages or bring down high prices.
Business groups said the bill would be difficult to enforce and would set a dangerous precedent by opening the floodgates to frivolous lawsuits, further driving away any hopes of increased energy production that would take the pressure off prices.
"This is a first step in addressing the outrageous prices we are seeing at the gas pump," said bill sponsor Rep. Bart Stupak, Michigan Democrat. Prices in recent years have peaked at about the Memorial Day start of the summer driving season, but they could climb higher this year if hurricanes or conflicts in the Middle East or Nigeria disrupt supplies.
"This bill is all bark and no bite, and will do nothing to lower gas prices," said House Minority Leader John A. Boehner, Ohio Republican. "No American likes paying high prices at the pump. ... This bill could make the pain felt by consumers at the pump considerably worse."
The supply pressures that have driven up gas prices this year eased somewhat yesterday as the Energy Information Administration reported an increase in output at U.S. refineries and a 1.5 million-barrel increase in gasoline stocks, which are about 7 percent below average for this time of year. That helped to reduce wholesale gas prices, though demand for gas remained strong, growing at a 1.2 percent pace.
In coming years, Americans face sharply higher prices for energy as they compete with burgeoning demand for gasoline to power cars in emerging giants such as China, India and Russia. A separate report from the energy agency Monday said energy demand worldwide will soar 57 percent by 2030. To keep pace with that demand, production of oil would have to grow more than 40 percent to 118 million barrels a day.
But because of dwindling reserves and production of petroleum, the report projects that other liquid fuels such as biodiesel and liquefied coal will meet about one-quarter of the increased demand. Economists say oil and gasoline prices will have to rise significantly higher for that to happen, since expensive technologies are needed to tap into the alternative fuel sources and make mass production possible.
The sobering outlook for energy resources was not discussed much yesterday as the House entertained a perennial favorite among lawmakers and the public: legislation enabling the Federal Trade Commission and Justice Department to impose on oil companies, traders and retail operators jail sentences and fines of up to $150 million a day for charging "unconscionably excessive" prices or taking "unfair advantage" of consumers.
The bill's enforcement provisions would be triggered if the president declared an energy emergency such as might occur if hurricanes disabled Gulf Coast oil fields and refineries as they did in 2005 after Hurricanes Katrina and Rita. The bill could be enforced by state attorneys general and class-action lawsuits.
The White House warned lawmakers that the bill would create a "vague and arbitrary regulatory regime," which would spur lawsuits and maybe even "bring back long gas lines reminiscent of the 1970s." The Federal Trade Commission has testified against the legislation, having found little evidence of price gouging in its many studies of the gasoline market.
"Price-gouging legislation is a solution in search of a problem and totally contradicts the advice given by the Federal Trade Commission," said National Petrochemical & Refiners Association official Charles Drevna. "We'd strongly encourage the Senate to consider the unintended consequences should it debate this or a similar bill."
"The bill represents an open invitation to ambitious state attorneys general to try their hand at suits against Big Oil," says Iain Murray, senior fellow at the Competitive Enterprise Institute, saying the bill's legal mechanisms would distort the market mechanisms that set gas prices in response to supply and demand.
"This is sheer populism and displays an outrageous ignorance of basic economics."
Dell to sell 2 desktop PC models in 3000 Wal-Marts
BOSTON (Reuters) - Computer marker Dell Inc. plans to start selling personal computers at 3,000 Wal-Mart stores in the United States and Canada as of June 10, launching a major drive to sell its PCs through retailers, a company spokesman said on Thursday.
The move represents Dell's first attempt to sell its PCs through traditional retailers, in an effort to recover its position as the world's No. 1 maker of PCs, which it lost to Hewlett-Packard Co . It currently relies on a direct sales model via the Internet, mail or phone orders.
"While we can't get into specifics, in the coming quarters there will be additional activity in support of this move into global retail," company spokesman Bob Pearson said. "Today's announcement with Wal-Mart represents our first step. Stay tuned."
The move represents Dell's first attempt to sell its PCs through traditional retailers, in an effort to recover its position as the world's No. 1 maker of PCs, which it lost to Hewlett-Packard Co . It currently relies on a direct sales model via the Internet, mail or phone orders.
"While we can't get into specifics, in the coming quarters there will be additional activity in support of this move into global retail," company spokesman Bob Pearson said. "Today's announcement with Wal-Mart represents our first step. Stay tuned."
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