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Fallen angels? Victoria's Secret sales plunge

Sex apparently didn't sell for Victoria's Secret on Valentine's Day. The company that owns the lingerie and intimate apparel chain -- and is famous for its models wearing angel wings -- warned that this month's sales are not going to set investors' hearts aflame.

L Brands, which also owns Bath & Body Works and PINK, said late Wednesday that same-store sales at Victoria's Secret may plunge 20% this month compared to a year ago. (Same-store sales measure the performance at stores open at least a year.)

Part of this big decline is due to the fact that Victoria's Secret killed off its swimwear line last May. It also got rid of its famous catalog in an attempt to save costs.

But L Brands said that the lack of swimwear contributed to just 6 percentage points of the overall drop this month. So it's clear that Victoria's Secret has bigger problems than the absence of bikinis in its stores.

Shares of L Brands plunged 16% on the news Thursday, making it the worst performer in the S&P 500. The stock is now down more than 25% so far this year and more than 40% over the past 12 months.

The company may soon face a tougher challenge from Amazon too.

Amazon has already started selling bras from other retailers on its site, but The Wall Street Journalreported earlier this month that Amazon is looking to launch its own line of affordable intimate apparel for women. That could be terrible news for L Brands.

Many retailers had a tough holiday season -- and Amazon is largely to blame for that. Macy's  and Kohl's recently reported weak sales too.

Investors will be keeping a close eye on Nordstrom -- who Donald Trump has bashed on Twitter for dropping his daughter Ivanka's line -- as well as JCPenney too.

Nordstrom's results are due out after the market closes Thursday while JCPenney will release its earnings on Friday morning.

But Walmart and Home Depot  just reported solid numbers, proving that Amazon isn't the only retail game in town for shoppers -- or investors.


How Donald Trump Is Helping and Hurting Obamacare at the Same Time

While the Trump administration pursues plans to repeal and replace Obamacare, it is making some seemingly conflicting moves aimed at the current system.

One federal agency has proposed changes to shore up the Obamacare health-insurance marketplaces, while a separate decision by the Internal Revenue Service weakens an incentive for consumers to enroll in coverage.

The clashing positions have raised concerns from some who study the health insurance market. “It’s a bit disingenuous to put out proposals from one agency to stabilize the market while sending signals through another that take away a major incentive for people to sign up," said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

How Trump Is Helping Obamacare

Rules proposed Wednesday by the Department of Health and Human Services would make it harder for consumers to game the system by signing up for health insurance only when they need it. Insurers had lobbied for some of the proposed changes during the Obama administration, says Karen Pollitz, senior fellow at the Kaiser Family Foundation.

If the proposals are adopted, more carriers may stick around amid the current uncertainty. Insurers’ contracts are set for 2017, and carriers are currently evaluating whether to continue their participation in the marketplaces for 2018 and beyond.

Many Republicans don’t want insurers to bail out of the exchanges before they can come up with a replacement plan for Obamacare, formally known as the Affordable Care Act. It's unclear when a replacement plan will be ready. Earlier this month, Trump appeared to walk back campaign promises to quickly repeal and replace the law, saying that a replacement might not be ready until next year -- although at a press conference on Thursday, the president shifted gears again, saying a plan would be available by mid-March.

The changes proposed Wednesday include stricter documentation requirements for the special enrollment periods that allow eligible consumers to enroll in coverage outside the annual open enrollment period. The proposed regulations would require pre-enrollment verification of eligibility for a special enrollment period. Today, people can self-attest to their eligibility and obtain coverage at their next eligible date. While some today might be asked to provide documentation in one of the periodic spot checks the marketplaces conduct, it isn't required to start coverage.

Another proposed change would shorten the annual open enrollment period starting in 2018, narrowing it from the currently scheduled Nov. 1, 2017 through Jan. 31, 2018 to Nov. 1, 2017 through Dec. 15, 2017. This would reduce the opportunity for people who find out they need medical services late in the year to sign up for coverage, the proposal says.

Corlette, of Georgetown, questions the ultimate motivation of the proposed regulations. While the stated goal is to stabilize the insurance markets, in practice many of the proposals could make it more onerous for consumers to enroll, causing those who don’t think they need the coverage—in other words, the very young, healthy people whom insurers most covet—to give up.

Humana on Tuesday announced that it would exit the marketplaces for 2018. Humana was a relatively small player, participating in 11 state exchanges. Still, if too many other carriers follow suit, the marketplaces could effectively disappear and people would lose coverage. This would create a political nightmare for Republicans who have promised they will not rip the rug out from the 22 million consumers with Obamacare coverage.

How Trump is Hurting Obamacare

Meanwhile, the IRS has said it won't make taxpayers disclose their health insurance status, reversing plans to begin rejecting tax returns that failed to indicate whether the consumer had coverage or qualified for an exemption, the San Francisco Chronicle first reported. "This was another tweak that would have encouraged more Americans to enroll in health insurance," says Sara R. Collins, vice president, health care coverage and access at the Commonwealth Fund, over email. "So by not implementing the change, we will not see the improvement in nationwide coverage that we might have seen otherwise."

The IRS changed course following President Donald Trump’s executive order in January intended to minimize the “fiscal burden” of Obamacare. In a statement for tax professionals on its website, the IRS said it “will continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.”

This doesn’t eliminate the penalty that the uninsured must pay. The executive order didn’t undo that, and people who don’t qualify for an exemption still owe $695 per adult or 2.5% of household income, whichever is higher, for going without coverage for 2016 or 2017.

Nonetheless, the IRS action creates “a public perception issue,” Georgetown's Corlette says. If people mistakenly think they won't be on the hook for the penalty, they won’t have as much incentive to sign up for coverage. In a 2014 survey for Enroll America, as many as 40% of respondents said they might not have enrolled without the individual mandate requiring people to do so.

Trump has said Obamacare is a disaster, and his administration’s actions could create a self-fulfilling prophecy, Corlette says.



Where coal is still king

Where coal is still king

WAYNESBURG, Pa. — Two weeks after Derek Cisar's wife gave birth to their son, the 36-year-old coal miner had to tell her he'd lost his job.

"It wasn't because there wasn't any work," he said, moments after emerging from the underground mine. "Things in the industry in our area had started looking pretty stable for the past few months.

"It all came down to a ruling by a judge ... with pressure from two climate-change groups. They effectively upended my life, my family's life, and the lives of 202 other coal miners who were laid off because of his ruling."

The layoffs at the Bailey mine turned out to be temporary; Consol Energy changed its mining plan, for now, to abide by a state Environmental Hearing Board order that bars mining under Ryerson Station State Park.

A few weeks after losing his job, Cisar went back to work, still shaken by the experience. As the site's underground mining coordinator, he worries about his team as well as himself.

"Look, you form really close bonds working the mines," he explained. "We know everything about each other. When someone has a member of the family who is sick, or someone is asking for advice about buying a new car, whatever it is, whether we like or not, we are tight."

The uncertainty brought on by political activism is chipping away at them all, he said.

"I'm college-educated, played baseball for West Virginia University and graduated with a degree in criminal justice. I chose this lifestyle because it pays well, I can live by the rest of my family and friends (and) do a job I am very proud of.

"You know, it means something to me and the rest of us that we provide the energy to light your home or a manufacturing plant ... a shopping center or a school."

Blair Zimmerman is one man who understands the impact of the mine closing permanently. It would be "devastating," the chairman of the Greene County Commissioners says, adding: "For every one job lost in a coal mine, another five are lost in the community."

In other words, those 203 miners and their 600-plus family members wouldn't be buying cars at Ron Lewis's dealership, or enjoying the incredible smoked wings and brisket at Hot Rod's House of Bar-b-que on South Morris Street.

"It goes beyond that," said Zimmerman, a Democrat. "You get to the point where you have to start closing schools if there is no tax base."

On one side you have the Sierra Club and the Center for Coalfield Justice, which believe that putting a halt to mining will save the country. On the other, you have community residents whose jobs are at risk.

"Let's be very frank here, coal is king in Greene County," said Zimmerman. Not only is it the biggest employer, but 30 percent of the county's budget comes from coal severance taxes.



Target's Lackluster Holiday Sales Signal Broad Industry Changes Ahead

Target, TGT, FBN

Consumers gleefully reached deep into their pocketbooks during the critical holiday-shopping season last year, but more evidence is surfacing that cheer was on short supply at many traditional retailers. Target (TGT) on Wednesday said sales in November and December at stores open for at least a year fell 3% thanks to lower-than-expected in-store traffic and deeper discounting to compete against online giants like Amazon (AMZN). While online sales grew more than 30% over the period for Target, that segment accounts for only a portion of the company’s business, so overall fourth-quarter sales expectations were revised lower. The discount retailer now sees a decline in same-store sales in the range of -1.5% to -1%, from a previous forecast for -1% to 1% sales growth.

“The costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth-quarter margins and earnings per share,” said Target Chairman and CEO Brian Cornell in a statement. 

Still, he noted full-year 2016 earnings are expected to reach an all-time high of $5, though that is lower than the company’s prior guidance for profits per share of between $5.10 and $5.30.  Target is set to report its 4Q results on February 28.

Investors punished the stock, sending it down more than 5% as the broader consumer discretionary sector declined as well.

Target isn’t alone in its sales struggles. Despite a 4% overall bump in holiday sales from a year ago as calculated by the National Retail Federation, Target’s announcement is just the latest in a string of disappointing Christmas-season sales figures from a range of retailers including Macy’s (M), Toys R Us, Khol’s (KSS) and J.C. Penney (JCP) all of which are struggling to attract in-store customers and continue to face stiff competition from strong players in e-commerce.

The pain isn’t over just yet, according to research analysts at Credit Suisse, who reported Wednesday they expect e-commerce to take as much as 40% of overall industry sales over the next five to 10 years, compared to its current 15% to 20% share.  That’s likely to come alongside continued growth in deep-value retail, which includes fast-fashion stores like Forever 21, Zara, and H&M. That segment could grow from 20% of industry sales to more than 30%.

“In short, we are at (or even past) a tipping point for the traditional full-price mall environment,” the Credit Suisse analysts said. “The transition to e-commerce and deep value has already disrupted store productivity, eroded profitability, and perhaps more important, shifted the marginal productivity of capital investments.” 

 As that shift happens, consumers can expect to see continued store closures – especially in the department-store category. Already announcements from Macy’s and Nordstrom have lead the way as they look to reduce their bricks-and-mortar footprint, and dedicate more resources toward online and tech-forward options for consumers. 

Alongside the development of critical e-commerce platforms, Credit Suisse research showed traditional retailers also stand to benefit from offering unique brands to drive foot traffic in still-standing bricks-and-mortar locations. 

“If the 90s model was ‘our store environment is better than yours, so we’ll take the traffic,’ today’s model has to be predicated on ‘we have the brands you need, no one else does,’” the analysts said noting attractive displays and sales alone are no longer enough to drive shoppers into the store.

As a tidal wave of change looms over the retail industry, consumers have benefitted from lower costs as retailers lure shoppers in with steep discounts nearly all-year round. That promotional environment, combined with the promise of lower taxes under the incoming Trump administration, will likely provide more room for retail sales to grow in 2017. The question is whether certain retailers can adapt quickly enough to capture any momentum.  


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