Gasoline Prices Heading North In Time for Labor Day, Election
WALL STREET WEST
Oil prices climbed above $48 a barrel last week, so consumers can brace themselves for steep cost increases during the Labor Day weekend and beyond.
“Preliminary indications are that we’re going to see some tightening up before the holiday,” said Bob van der Valk, bulk fuels manager for Cosby Oil, a Santa Fe Springs wholesaler.
Nationwide, regular unleaded gasoline prices jumped more than 35 percent earlier this year, to a May 5 high of $2.06 per gallon, according to the Energy Information Administration. In California, the high of $2.33 per gallon was hit during the week of May 31.
Increased imports and domestic production helped stabilize gas prices this summer, as prices dropped to $1.87 a gallon in the U.S. and $2.05 in California.
U.S. inventories are now 4 percent higher than they were a year ago. But several factors have caused crude to skyrocket: Greater demand from China, fears that Russian oil giant Yukos could plunge into bankruptcy, and lower exports from Iraq after the country’s southern pipeline was partly shut down last week.
Economists now believe high energy prices and fears of inflation will be a factor in the upcoming presidential election.
Already, there are fears of the kind of “stagflation” of the oil-shocked 1970s, although inflation comes nowhere near the double-digit levels that were seen then.
In June, the inflation rate rose to 3.3 percent, even as American consumers pulled back on spending and consumer confidence plummeted. Retail sales fell 1.1 percent for the month, the largest drop in 16 months.
Kate Berry
Downgrade for Tribune Co.
A decline in revenue from political advertisements has cut into earnings of Tribune Co., publisher of the Los Angeles Times, prompting Merrill Lynch to lower its 2005 earnings and price target on the Chicago media company.
In an analyst note, Merrill said Tribune is “currently fighting some headwinds (circulation misstatements, lower-than-projected TV political spending),” and cut its price target on the stock to $50 a share, down from $56 a share. As of Aug. 19, Tribune shares were trading at $41.75, down 18.7 percent since the beginning of the year adjusted for dividends.
“There should be no long-term detriments to its franchise value, although we admit our patience is running a little thin,” the analyst note stated.
Newspapers’ share of political advertising revenue is expected to drop this year for the first time in a presidential election year, even though total political spending will set a record $2.68 billion, up 123 percent from the $1.2 billion spent in the 2000 presidential election, according to PQ Media LLC, a media research firm.
Though TV and radio stations will get the bulk of election dollars, cable and satellite companies have overtaken newspapers for additional political ad dollars. Cable and satellite firms will collect 2.9 percent of all election-related media spending this year while newspapers’ share will be flat at 2.1 percent, PQ Media projects.
“This is a record year for political spending and political candidates have spread out their spending with cable and the Internet picking up a lot of that new money,” said Patrick Quinn, president of PQ Media in Stamford, Conn. He also sees a shift to more direct mail and promotional spending as candidates try to reach target niche audiences.
Kate Berry
Army Investigates
The U.S. Army and state officials in Alabama have launched an investigation into Tetra Tech FW, a subsidiary of Tetra Tech Inc., of Pasadena, after state regulators discovered unexploded mortar rounds in a wooded area at Fort McClellan, an abandoned military base in Anniston, Ala.
Tetra Tech said it has launched its own investigation into the incident and is cooperating with the Army and the Alabama Department of Environmental Management.
The U.S. Army Corp of Engineers said state regulators uncovered 13 rounds of mortar shells on July 21 that were hidden under leaves and soil and had not been destroyed by the Army contractor.
Tetra Tech has completed $34 million of work under a five-year $50 million contract to remove unexploded shells from the area, which was once used for weapons practice.
In a statement, the company said that, “safety is Tetra Tech’s first priority, especially the protection of its workforce and the public.”
Kate Berry
Lloyd’s Lands
Lloyd’s of London, the specialized insurance company that earned fame for insuring Betty Grable’s legs for $1 million, has opened its first office in Los Angeles with the intention of increasing its presence on the West Coast.
The property, casualty and reinsurance firm provides coverage to the Napa Valley wine industry and several Hollywood stars. It currently has U.S. offices in New York, Chicago, and Kentucky.
Kate Berry
Gathering Storm
Who’s catching the next wave of consolidation in the close-knit surf industry?
The most recent move was New York-based Warnaco Group Inc.’s $41 million offer three weeks ago for Irvine-based Ocean Pacific Apparel Corp.
Warnaco, with annual sales of $1.2 billion, makes clothes under the Calvin Klein, Speedo and Chaps by Ralph Lauren names.
Greensboro, N.C.-based VF Corp. in June bought Santa Fe Springs-based Vans Inc. for $396 million. Earlier this year, Huntington Beach-based Quiksilver Inc. gobbled up Vista-based DC Shoes Inc. for $87 million in cash and stock.
Decades ago, the surfwear landscape was dominated by upstarts. Today, the many upstarts are overshadowed by a handful of hip brands that have either grown to be large or been acquired by deep-pocketed parents.
“Some of the ‘outsiders’ of the action sports world who dominate the apparel sector, such as Liz Claiborne, have announced publicly their enthusiasm for the sector,” said Paul Altman, vice president of Los Angeles-based investment bank Sage Group LLC, which represented Ocean Pacific in the Warnaco deal. “The fundamentals of the youth culture demographic are simply too compelling to stay on the sidelines.”
Companies believe it’s often easier to buy credibility in the market than build it from scratch, said Christy Lowe, managing director of Santa Monica-based USBX Advisory Services.
Of course, buying a cool brand isn’t a slam-dunk for mainstream clothing makers. They risk looking like the square dad who’s adopted new lingo.
The result of consolidation is that it’s getting harder for the smaller companies to survive, said George Wall, senior partner at Costa Mesa-based law firm Rutan & Tucker LLP, which also represented Ocean Pacific.
Orange County Business Journal
