The Washington Post - 09.11.2019

A12 eZ su THE WASHINGTON POST.SATURDAy, NOVEMbER 9 , 2019

Economy & Business

rETAIL

New owner to close 96

Sears, Kmart stores

The owner of Sears and Kmart
is closing almost a third o f its
remaining stores j ust months
after b uying the s truggling
retailer out of bankruptcy.
Transform Holdco’s shutdown
of 96 locations will leave j ust 182
outlets for the company, w hich
was o nce America’s b iggest
department store chain. The
merchant “has f aced a difficult
retail environment a nd other
challenges” and is “ pruning
operations that have struggled
due t o increased competition and
other factors,” Transform said in
an emailed statement Thursday.
The company is g etting
$250 million of n ew c apital from
its o wners, led by Eddie
Lampert’s hedge fund ESL
Investments, along with a third-
party i nvestor.
“This is an a cceleration of the
death march that Eddie Lampert
began when he combined Sears
and K mart over a decade ago,”
said Burt Flickinger, managing
director o f the retail advisory firm
Strategic R esource G roup. “It is a
classic illustration of h ow most

Wall S treet types have a deficient

understanding o f what’s r equired

for a Main S treet retail company

to be effective.”

The announcement s hows t hat

Sears, w hich narrowly escaped

liquidation a fter its 2018

bankruptcy, i s withering a s

consumers m ove on f rom the

chain. Lampert bought Sears’s

assets out o f bankruptcy e arlier

this year, expressing faith i n its

future and vowing to preserve

jobs, b ut it’s s till facing t he same

fundamental p roblems that led it

to seek court protection last year.

— Bloomberg N ews

CryPToCUrrEnCy

International group

targets cybercriminals

The Internal Revenue Service’s

criminal division identified

“dozens” of potential

cryptocurrency tax e vaders or

cybercriminals after a meeting

this week with tax authorities

from four other countries.

Officials f rom the United

States, the United Kingdom,

Australia, Canada and the

Netherlands — known as the

Joint Chiefs of Global Ta x

Enforcement — shared data, t ools

and t ax enforcement s trategies to

find new leads in a quest to

mitigate cross-border m oney-

laundering, tax evasion and

cybercrime.

The IRS’s cybercrime unit has

developed expertise i n “who is

moving the m oney and where i t’s

going,” Ryan Korner, a senior

special agent in the IRS’s

Criminal Investigations office in

Los Angeles, said in a call with

reporters Friday. “ We h ave tools

in p lace that w e didn’t have six

months or a year ago.”

The effort is part of t he IRS’s

renewed focus on f ighting t ax

evasion tied t o cryptocurrency as

digital currency h as become m ore

popular and g ained in v alue. The

agency has struggled in recent

years t o enforce tax laws and keep

up with c riminals as technology

has advanced.

“Tax fraud is n ot a new crime,

but t he sophistication with which

criminals commit tax fraud has

significantly increased through

cyber-related activities in recent

years,” t he j oint chiefs said in a

statement. “ Data breaches,

intrusions, takeovers and

compromises are the n ew t ools

that criminals u se to commit tax

crimes.”

— B loomberg News

ALso In BUsInEss

The U.S. Supreme Court on

Friday agreed t o consider a bid by

a federal agency to prevent the

popular hotel reservation website

Booking.com, a unit o f Booking

Holdings, from trademarking the

site’s name, contending that i t is

too g eneric to deserve legal

protection. T he j ustices will hear

an appeal by the U.S. Patent a nd

Trademark O ffice of lower court

rulings that the addition of “.com”

to the g eneric word “booking”

made it eligible for a trademark.

BB&T and SunTrust Banks h ave

won U.S. antitrust approval to

merge o n condition t hat they

divest 28 branches in three states,

the Justice D epartment said o n

Friday. T he m erger of equals,

announced in February, w ill

create the sixth-largest U.S. bank

holding company, S unTrust has

said. It s till needs approval from

the Federal Reserve System and

the Federal Deposit Insurance

Corporation.

T he Federal Communications

Commission on Friday s aid i t was

directing nine broadcast station

groups t o return to the

negotiating t able over whether to

allow l ocal stations to air on

AT&T’s D irecTV a fter s ome

consumers h ave been without

access for f ive months. In June,

AT&T f iled a bad-faith complaint

against t he nine i ndividual

station owners, w hich collectively

pulled 20 stations in 20 cities

from DirecTV, D irecTV NOW

and/or U-verse. The nine station

groups a re either m anaged or

controlled by Sinclair Broadcast

Group.

— F rom news services

DIGEsT

seBAstIen nogIer/ePA-eFe/sHutterstocK

A farmer uses a olive-picking machine during harvesting for olive oil

production at the olive groves of Jean-Philippe Frère in the town of

Grasse in southern France on Friday. After the heat wave of last

summer, this year’s olive harvesting has been catastrophic, with

production reduced by about 50 percent.

ment to remove any existing tar-

iffs as a condition of signing a

Phase One deal,” Navarro wrote.

Chinese officials have insisted

any deal must include the i mmedi-

ate removal of some tariffs and a

path toward the elimination of all

of the levies Trump has imposed

since March of last year.

The president turned to tariffs

last year t o force China t o abandon

trade practices, especially in the

high-technology area, that disad-

vantaged American companies.

The United S tates currently lev-

ies tariffs on roughly $360 billion

in Chinese imports and plans to

extend the import fees to every-

thing Americans buy from China

starting D ec. 15.

Many administration officials

opposed Trump’s decision to im-

pose those tariffs on roughly

$160 billion in products, includ-

ing popular consumer goods such

as smartphones and laptops. The

president now i s seen a s willing to

scrap t hem.

Chinese officials also want the

United States to lift the 15 percent

tariff Trump imposed Sept. 1 on

about $112 billion in imports. In

return, the administration is de-

manding that Beijing agree to

more extensive intellectual prop-

erty safeguards, according to two

people familiar with the talks, who

spoke on t he c ondition of a nonym-

ity because they weren’t autho-

rized to discuss the t alks.

Trump’s whirlwind morning

left unclear the state of the talks

four weeks after he had an-

nounced an “agreement in princi-

ple” o n an initial d eal. S peaking in

the Oval Office during a meeting

with Chinese Vice Premier Liu H e,

the president on Oct. 11 called the

partial deal “substantial” a nd said

it would pave the way for addition-

al agreements in subsequent t alks.

In return for canceling a

planned Oct. 15 increase in tariffs

on Chinese products, Trump said

he had secured Beijing’s promise

to make annual purchases of

$40 billion to $50 billion worth of

American crops.

China a lso had a greed to tough-

en protections for intellectual

property, o pen i ts financial servic-

es market to foreign companies,

and f oreclose d epressing the value

of its currency to gain a trade

advantage, administration offi-

cials s aid.

“I don’t think it should be a

problem, getting it papered,” t he

president said at the time, adding

that he expected that to occur o ver

the n ext four w eeks.

Four weeks later, the talks are

shrouded in uncertainty. Initial

plans for Trump and Chinese Pres-

ident X i Jinping to sign the “phase

one” deal on the sidelines of an

Asian-Pacific summit in Santiago,

Chile, next weekend have been

abandoned.

The president Friday repeated

his claim t hat any signing ceremo-

ny will be held in the United

States, possibly in Iowa or else-

where i n “farm country,” h e said.

The latest exchange over tariffs

began with a Chinese Commerce

Ministry statement Thursday in

Beijing.

“If the two parties reach the

first-phase agreement, they

should, in accordance with the

contents of the agreement, simul-

taneously a nd proportionally c an-

cel the tariffs that were already

raised,” s aid Gao Feng, a ministry

spokesman.

Robert E. Lighthizer, the U.S.

trade representative, is pushing

China to accept an enforcement

mechanism that would condition

tariff reductions on Chinese im-

plementation of the agreement.

Ta riffs would fall — or rise — de-

pending on whether Beijing com-

plied with specific terms, said one

person f amiliar with the talks who

spoke on t he c ondition of a nonym-

ity because the person wasn’t au-

thorized to discuss the t alks.

[email protected]

BY DAVID J. LYNCH

President Trump suggested on
Friday that the United States and
China may not complete a partial
trade deal this year, raising fresh
doubts about prospects for a com-
mercial truce that once was ex-
pected t o be s igned next weekend.
“We’ll see what happens,” the
president replied when a reporter
asked if the agreement would be
concluded in 2019.
Speaking on the south lawn of
the White House, the president
added to confusion over the state
of the roller coaster talks. He de-
nied reports — which the White
House had c onfirmed one d ay e ar-
lier — that he had agreed to re-
move some tariffs as part of an
initial d eal.
“I haven’t agreed to anything,”
Trump told reporters. “China
would like to get somewhat of a
rollback, not a complete rollback
because they know I won’t d o it.”
The president’s remarks ap-
peared to c onflict w ith those of his
National Economic Council direc-
tor, Larry Kudlow. On Thursday,
Kudlow confirmed the Chinese
Commerce Ministry’s claim of a
tariff accord, telling Bloomberg
News: “If there’s a Phase 1 trade
deal, there are going to be tariff
agreements a nd c oncessions.”
But reflecting administration
divisions, Peter Navarro, one of
Trump’s closest trade advisers,
emailed reporters a few hours af-
ter the president’s remarks to
complain that media reports had
been wrong. “There is no agree-

Trump:

China trade

pact is not

imminent

BIll o’leAry/tHe WAsHIngton Post

President Trump on Friday denied reports that he had agreed to remove some tariffs as part of an initial trade deal with China.

○

Dow 27,681.

uP $6.44, 0.02% ○

nAsDAQ 8,475.

uP $40.80, 0.5% ○

s&P 500 3,093.

uP $7.90, 0.3% ○

GoLD $1,462.

DoWn $3.50, 0.2% ○

CrUDE oIL $57.

uP $0.09, 0.2% ○

10-yEAr TrEAsUry

DoWn $1.80 Per $1,000, 1.94%

yIelD

CUrrEnCIEs

$1= 109.24 y en, 0.91 euros

BY ABHA BHATTARAI

The retail industry, already
reeling from high-profile bank-
ruptcies and thousands of store
closures in recent years, is facing
a new challenge — churn at the
top.
Gap chief executive Art Peck
abruptly stepped down this week
after six straight quarters of de-
clining sales for its flagship brand
and a steep drop-off in the retail-
er’s stock price. Nike, Under Ar-
mour and Bed Bath & Beyond
announced similar shake-ups re-
cently, extending the run of
C -level departures that have
touched more than a dozen major
retailers this year, including Best
Buy, eBay, Calvin Klein and Over-
stock.
The turmoil comes as tradi-

tional retailers struggle to keep

pace with online competitors.

Corporate boards, experts say, a re

less willing to wait for large-scale

turnarounds. That could become

even more pronounced, they said,

if the economy sours.

“Boardrooms are much less pa-

tient than in the past,” said Mi-

chael Useem, director of the Cen-

ter for Leadership and Change

Management at the University of

Pennsylvania’s Wharton School.

“Directors are asking: Do we have

the right CEO to weather the

rough seas ahead? And increas-

ingly, they’re finding that the an-

swer is no.”

A record 172 chief executives

left their jobs across all sectors in

October, a 15 percent increase

from the year-ago period, accord-

ing to global outplacement firm

Challenger, Gray & Christmas.

CEO turnover at publicly trad-

ed retailers rose to 23 percent in

2017, the last year for which

s ector-specific numbers are avail-

able, versus 16 percent the year

before, according to a study of

Standard & Poor’s 500 companies

by the Conference Board. By com-

parison, the industry’s historical

average is 10.5 percent.

Analysts say Peck’s departure

from the Gap wasn’t particularly

surprising — sales had been slip-

ping for years, and the company’s

stock had lost nearly 60 percent of

its value since he took over in

February 2015. On Thursday, the

company said it was revising

down its forecasts for the year,

after sales declines at Gap, Ba-

nana Republic and Old Navy

stores.

Robert J. Fisher, the company’s

nonexecutive chairman and the

son of its founders, is taking over

for the interim. Shares of the

company’s stock fell nearly 8 per-

cent Friday after the news.

“With the CEO gone, that cre-

ates a vacuum of permanent lead-

ership and a number of ques-

tions,” Randal Konik, an analyst

for Jefferies, wrote in a note to

clients.

The Gap, founded 50 years ago

in San Francisco, started as a

one-store operation that sold only

Levi’s jeans and vinyl records. But

the company grew quickly, add-

ing its own line of clothing and

establishing itself as a go-to for

jeans and T-shirts. It bought Ba-

nana Republic in 1983 and found-

ed Old Navy in the mid-1990s.

In recent years, sales have hit a

wall. Shoppers have grown bored

with its inventory, and the com-

pany has relied on a never-ending

cycle of discounts to get people

into its stores. Earlier this year,

Peck announced that the compa-

ny would spin off its successful

Old Navy brand into a separate

company. Analysts said it now is

unclear whether that split will

take place, or who would perma-

nently run the company.

Finding new executives who

understand the fast-changing in-

dustry, they said, has become in-

creasingly challenging. Although

boards say they are looking to

shake things up with fresh per-

spectives and new ideas, they of-

ten dip back into the same pool of

candidates in what amounts to a

game of executive musical chairs.

“CEOs of major companies

don’t grow on trees,” said Paula

Rosenblum, managing partner at

the retail consulting firm RSR.

“There is a lot of pressure to find

new CEOs, but there are only so

many options out there.”

Under Armour, Best Buy, Over-

stock and Pier 1 have all filled

their top posts internally. Others,

though, are looking to competi-

tors: John Donahoe, the former

CEO of eBay, will soon lead Nike.

Bed Bath & Beyond is replacing

its longtime chief executive with

Mark Tritton, Ta rget’s former

ch ief merchandising officer.

“It’s becoming harder than

ever to find a CEO with a golden

touch,” said Neil Stern, a senior

partner at retail consulting firm

McMillanDoolittle.

And while high turnover rates

are common during economic

downturns, he said recent depar-

tures are particularly striking giv-

en the relatively strong economy.

The unemployment rate is low,

wages are inching up, and con-

sumers are still spending. But,

analysts warned, any change to

that equation, such as new tariffs

or pullbacks in hiring, could fur-

ther challenge retailers.

“If we have this kind of CEO

exodus in a robust consumer

economy, what happens when

things sour?” Stern asked. “This

isn’t a good sign.”

[email protected]

Already struggling, retailers face another challenge: Replacing their CEOs

Gap chief Art Peck adds

to list of high-profile

industry departures

“Directors are asking: Do we have the right CEO to

weather the rough seas ahead? And increasingly,

they’re finding that the answer is no.”

Michael Useem, director of the center for leadership and change

Management at the university of Pennsylvania’s Wharton school