- Created on 21 October 2013
A McDonald's Corp. logo shines in front of a restaurant on 42nd Street in Times Square in New York, U.S., on Saturday, October 20, 2013. Photographer: Michael Nagle/Bloomberg via Getty Images | Getty
McDonald's announced Monday that it raked in $1.5 billion in profits in the third quarter, up 5 percent from last year.
The number is strikingly close to the $1.2 billion taxpayers are shelling out to help pay public assistance to the McDonald's work force, according to a report released last week by the National Employment Law Project.
The echoing numbers are simply a coincidence, but underscore the immense profits that the chain continues to pull in while its workers simply struggle to afford food, medical help and housing. The public assistance McDonald's workers receive comes via food stamps, welfare, Medicaid and other federal programs, according to the NELP report.
In a statement to The Huffington Post, McDonald's emphasized that workers get training and the opportunity for career advancement. The company also said that its franchisees pay competitive wages that are based on "local wage laws."
Those wages are stunningly low. Frontline fast-food workers make a median wage of $8.94 an hour, according to a recent Reuters report. "Fast-food workers work only 24 hours a week on average — at $8.94 an hour, this adds up to barely $11,000 a year," wrote Christine Owens for Reuters in August.
With wages that low, front-line fast food workers are more than twice as likely as the typical worker to participate in a government assistance program, according to the NELP report.
The National Restaurant Association, an industry trade group, last week labeled the NELP report, and the data on which it was based, "misleading," since they "fail to recognize that the majority of lower-wage employees works part-time to supplement a family income."
There's ample evidence that an increasing number of workers primarily rely on fast-food wages. Roughly one-quarter of fast-food workers are raising a child, and approximately 70 percent are adults between the ages of 20 and 64, according to the left-leaning Center for Economic and Policy Research.
While there's been a dearth of so-called middle-class jobs since the recession ended, the fast food industry's been hiring. Since the recession ended, almost 70 percent of all jobs created have been in historically low-wage sectors like fast food.
Defenders of the fast food industry point out that many chains heavily rely on franchisees working on small margins to turn a profit, which makes any potential wage increase difficult.
But altogether, the fast food industry is annually costing American taxpayers nearly $7 billion, while taking in hundreds of billions year after year:
McDonald's attributed its growing profit to a U.S. Monopoly promotion and recent successes in the U.K. and Russia, according to the AP.
- Created on 18 October 2013
NEW YORK (AP) -- Will Washington be the Grinch who stole Christmas?
After weeks of bickering between Congress and the White House, President Barack Obama on Wednesday signed into law a plan that ended a partial 16-day government shutdown and raised the nation's debt limit until early next year.
But the measure, which comes a couple weeks ahead of the holiday shopping season, only temporarily averts a potential default on U.S. debt that could send the nation into a recession.
Retailers hope that short-term uncertainty won't stop Americans from spending during the busiest shopping period of the year, but they're fearful that it will.
"I am not nervous, but I am mindful," said Jay Stein, chairman of Stein Mart, a 300-store chain that sells name-brand home goods and clothing at discounts of up to 60 percent. "The biggest enemy of consumer confidence is uncertainty."
Indeed, retailers and industry watchers say Washington gridlock already has caused some shoppers to hold back on purchases.
Men's clothier Jos. A. Bank Clothiers and furniture chain Ethan Allen have noted that their customers cut back in recent weeks. And auto sales, which had been strong, trailed off last week, with experts blaming Washington lawmakers.
Retailers say the agreement that lawmakers approved, which funds the government until Jan. 15 and gives the Treasury the ability to borrow above its limit until Feb. 7, may not be enough to alleviate shoppers' concerns.
Robert N. Wildrick, chairman of Jos. A. Bank Clothiers, which has 623 stores nationwide, said retailers can't afford more uncertainty during the holiday shopping season, which is six days shorter than a year ago. "The more this nonsense goes on .... the more scared (consumers) become," he said.
Even before the stalemate in Washington, retailers had reasons to be cautiously optimistic about the holiday season, which accounts for up to 40 percent of retailers' annual revenue. While the job and housing markets are improving, that hasn't yet translated into sustained spending increases among shoppers.
But retailers spend money on advertising, order additional inventory and add sales staff during the holiday season in hopes that shoppers will spending freely. If shoppers don't, stores may have to discount heavily, which eats away profits.
The National Retail Federation, the nation's largest retail group, had forecast in early October that sales would climb 3.9 percent in November and December to $602.12 billion, higher than last year's 3.5 percent gain. But the forecast didn't account for the prolonged shutdown.
Jack Kleinhenz, chief economist for the Washington, D.C.-based group, told The Associated Press that he may lower the projection after he sifts through retail sales and jobs data, reports that had been delayed because of the shutdown. The uncertainty could hurt sales, he said.
"It's like having an ongoing fever that you would like to shake but just doesn't go away," Kleinhenz said. "That causes a backup in decision-making from consumers and businesses."
Take Nino Rodriguez, who was already planning to cut back spending on gifts for his four children ages 3 to 21 by about 25 percent to $1,500 as he juggles stagnant wage gains with college tuition costs.
Now, the Chicago resident plans to cut another $500 from the holiday budget because of uncertainty. In particular, he's concerned about having government aid checks suspended for his 19-year-old and 13-year-old sons who have special needs.
"The doomsday clock is just one second less than what it was before," said Rodriguez, who works in the hospitality business. "All this just heightens our awareness of spending."
This isn't the first time that debt-and-spending stalemates have hurt shoppers' mood during the holidays. Last year, many Americans worried about tense negotiations in Washington to resolve the fiscal cliff, a simultaneous increase in tax rates and a decrease in government spending.
Congress and the White House reached a deal on Jan. 1 that prevented income taxes from rising for most households, but many store executives blamed the uncertainty for a slowdown in sales in December. In November 2012, sales were up 4.7 over the year ago period, but were up only 2.4 percent in December.
And in August 2011 when there was market turmoil and political strife over raising the federal debt ceiling, consumer sentiment fell to a 31-year low, according to the Thomas Reuters/University of Michigan survey.
Jeff Landis of Chicago-based Montopoli Custom Clothiers recalls those days when business was quiet and he had to delay ordering fabric and call his wealthy customers. He said he's seeing the same scenario play out now.
"This is a buzz kill," he said.
- Created on 17 October 2013
LOS ANGELES (AP) -- EBay said the growth rate of e-commerce in the U.S. is slowing as it delivered a weaker-than-expected profit and revenue outlook for the current quarter through December. The company's third-quarter earnings edged past analysts' expectations, but revenue rose just short of estimates.
Following the release of the financial results Wednesday, eBay Inc.'s stock fell 5.3 percent to $50.70 in after-hours trading.
The San Jose, Calif.-based online auctioneer, marketplace host and payments processor said U.S. e-commerce had been growing at an annual 15.5 to 16 percent pace, but it slowed to around 13 percent by the July-September quarter. That softening, plus a weaker U.S. dollar affecting its overseas transactions, led the company to say its annual profit and revenue would come in at the low end of its outlook.
EBay Inc. CEO John Donahoe suggested that the 16-day partial U.S. government shutdown was partly to blame, citing "uncertainty about the government."
"Those uncertainties, frankly, we can't control," he told analysts on a conference call.
In an interview, he said the government shutdown wasn't entirely at fault for the depressed consumer psyche since the deceleration started in July and August. He said he hopes a last-minute resolution ending the gridlock gets passed. "Hopefully that'll have a positive impact," he said.
EBay's forecast for the current quarter through December predicts adjusted earnings of 79 cents to 81 cents per share, below the 83 cents analysts were looking for. The company also said it expects quarterly revenue of $4.5 billion to $4.6 billion, while analysts were estimating revenue of $4.64 billion.
Its annual outlook for adjusted earnings between $2.70 and $2.75 per share and revenue of $16 billion to $16.5 billion was unchanged.
The muted fourth-quarter earnings outlook was partly the result of the company's plans to invest more in a free-shipping pilot that began this month with nine retailers including Levi's, Kenneth Cole and Aeropostale, Donahoe said. The company subsidizes the cost of shipping to a U.S. address if customers pay using PayPal, eBay's payment processing unit, and it is examining adding more retailers to the program.
"We're very encouraged by the early results," he said.
For the quarter through September, eBay's net income grew 15 percent to $689 million, or 53 cents per share, from $597 million, or 45 cents per share, a year ago.
Revenue rose 14 percent to $3.89 billion, thanks to increasing mobile transactions in its online marketplaces eBay and StubHub. It also cited growth in the number of people using PayPal. Revenue was slightly below the $3.91 billion analysts were looking for.
Excluding special items, adjusted earnings came to 64 cents per share, a penny better than expected by analysts polled by FactSet.
Kerry Rice, an analyst with investment banking firm Needham & Co., said the weak outlook might mean weaker-than-expected results at online rival Amazon.com Inc.
He also said eBay's payments revenue came in below forecast because it discounted fees to large clients who agreed to accept PayPal payments. That could mean it is having to cut rates to deal with upstart competitors, he said.
EBay last month agreed to spend $800 million to purchase one such competitor, Chicago-based Braintree, whose success was driven partly by its relatively low fees and high-tech clients such as Airbnb, the vacation rentals site.
- Created on 17 October 2013
WASHINGTON -- WASHINGTON (AP) — Federal officials have received more than 3,800 complaints in the last year from borrowers of private student loans, with common problems related to payment processing and requests for loan modifications.
The complaints against lenders were documented in a report released Wednesday by the federal student loan ombudsman, Rohit Chopra, of the Consumer Financial Protection Bureau.
The complaints represent a tiny fraction of the millions of private student loans outstanding. About 13.7 million private student loans were outstanding at the end of 2011, the bureau and the Education Department estimated.
Many of the repayment problems occurred when borrowers attempted to pay off their loans early or in a certain sequence to lessen the impact of higher interest rates, Chopra said.
"The inability of lenders and servicers to initiate alternative repayment plans that would benefit both the creditor and the borrower continues to be a sign that this market functions poorly," the report said.
Chopra said in a conference call with reporters, however, that he's seeing signs that companies are showing more of a willingness to work with borrowers and he'll be tracking that closely in coming months.
Private student loans generally have higher interest rates than federal student loans and the options to re-finance them are much more limited. Private loans aren't issued as much as they were before the financial meltdown of 2008, but many borrowers still owe money on them.
The bureau estimates that for borrowers graduating at the time of the financial crisis with more than $40,000 in student loan debt, about 80 percent used private loans.
Other common problems commonly received by the ombudsman related to private student loans:
—When borrowers paid what they could afford but the payment was less than what they owed, lenders applied it in a way that maximized penalties for the borrower.
—Late fees were charged even after payments were submitted before the due date.
—Online sites didn't reflect payments made by phone or through the mail.
—Lost paper checks created some obstacles.
—Some borrowers had trouble obtaining accurate payoff information.
—Servicing interruptions after a change in servicers were reported.
Richard Hunt, president and CEO of the Consumer Bankers Association, said the report "skews the reality of today's private loan market" by relying on "sweeping characterization of the market based on 3,800 unverified complaints from 0.002 percent of customers."
The report said the most complaints were lodged against student loan giant Sallie Mae but added that wasn't a surprise because of the company's large volume of customers.
Patricia Christel, a spokeswoman for Sallie Mae, said in an email that 90 percent if its customers manage payments successfully and for others it offers assistance such as loan modifications.
"We're continually seeking ways to improve our customers' experience," she said.