FINANCE

Report: Consumption looks constrained in 2014

BY Dan Berthiaume

New York – Factors including the permanency of the 2013 payroll tax increase, uneven job creation and uncertainty caused by the autumn partial government shutdown are expected to continue constraining consumer spending in 2014. According to a new economic insight report from Sterne Agee, lower gas prices, a lingering wealth effect from home price appreciation and record highs in equities helped boost holiday spending, but will not be enough to counteract a trend toward weak consumption that has been in place since the beginning of this year.

Sterne Agee analysis shows consumer spending declined from 2.3% in first quarter 2013 to 1.8% in the second quarter, and gained just two-tenths to 2% by the third quarter. The majority of the weakness was centered around service consumption. Goods consumption increased near 3.5% throughout the year in part benefiting from a heightened appetite for autos as the average age of the nation’s light-vehicle population remains near a record high.

Going forward, further improvement in the household balance sheet, coupled with modest income growth, is expected to help advance or at minimum sustain consumption growth at a pace between 1.5%-1.75%. Higher interest rates will likely limit consumers’ ability to supplement income shortfalls with credit.

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FINANCE

Tiffany ordered to pay Swatch $449 million

BY Dan Berthiaume

New York – A Dutch arbitration panel has ordered Tiffany & Co. to pay Swatch damages of about $449.5 million plus interest in a breach of contract case dating back to 2011. The dispute stems from Swatch’s claim that Tiffany failed to honor its obligation to develop and sell Swatch watches under the Tiffany name and split the profits.

The amount is 8.8% of the total damages sought by Swatch. Tiffany will also have to pay about $8.8 million in fees, expenses and other arbitration costs. One arbitrator on the three-arbitrator panel did not rule in favor of Swatch.

“We were shocked and extremely disappointed with the decision of the majority of the arbitral panel,” said Michael J. Kowalski, chairman and CEO of Tiffany. “We firmly believe the panel’s ruling is not supported by the facts of this case or the various agreements between the Swatch parties and the Tiffany parties. While we are reviewing our options with our legal counsel, I want to assure you that we do have sufficient financial resources to pay the full amount. We will record a charge for the after-tax impact of the award, which we estimate to be approximately $295 – 305 million, in the fourth quarter. However, we do not believe that the award will impact our ability to realize our existing business plans in the short or long term, and we are extremely pleased to be moving forward with our plans to design, produce, market and distribute our own Tiffany & Co. brand watches.”

Tiffany intends to fund any amounts to be paid from immediately available cash on hand and funds available under its existing debt facilities. The company has lowered its earnings per share guidance for fiscal 2014 to $2.30 – $2.35 from $3.65 – $3.75.

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OPERATIONS

Report: Costco, Nordstrom tops in returns

BY Dan Berthiaume

Los Angeles – Costco and Nordstrom were the number one and two ranked retailers in terms of their return policies, according to a new report from personal finance site GoBankingrates.com. Costco received kudos for having no time limit and full cash or check refunds, while Nordstrom got credit for having no formal return policy or time limit.

Meanwhile, Sears was ranked last for having a tiered system with 90-day maximum; original packaging, receipt or packaging slip required, and Best Buy was ranked next to last for basing time limits on how much the customer spent. Zappos had the third-best return policy and American Apparel had the third-worst return policy.

"Not everyone is good at gift giving," said Jennifer Calonia, editor of GoBankingRates.com. "If you’re worried about finding the perfect gift for a loved one, consider a store with a great return policy. A return policy can truly make or break a purchase; many major retailers carry the same brands."

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