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Westlake Legal Group > Posts tagged "Company Reports"

Barclays C.E.O. Faces U.K. Inquiry on Jeffrey Epstein Ties

British banking regulators want to know if the chief executive of Barclays has been honest about his relationship with Jeffrey Epstein.

Barclays said on Thursday that regulators were investigating how its chief executive, James E. Staley, had described to bank officials his ties with Mr. Epstein, the financier who killed himself in August after facing new allegations of sex trafficking of underage girls.

Mr. Staley, one of a handful of prominent Wall Street financiers who have been linked to Mr. Epstein, said he had been fully forthcoming about their relationship, which he said had ended before he arrived at the bank five years ago.

“I feel very comfortable, going back to 2015, I have been transparent and open with the bank,” he said on a conference call with analysts on Thursday. Mr. Staley did not respond to messages seeking comment.

The bank’s announcement of an investigation by regulators including the Financial Conduct Authority, the main overseer of banks in Britain, was another black eye for Mr. Staley, who is the latest Barclays chief to have regulatory troubles. John S. Varley faced regulatory and legal charges over capital infusions from the Persian Gulf nation of Qatar, and Robert E. Diamond Jr. was caught up in the LIBOR-rigging scandal.

Even as Mr. Staley has cut costs and bolstered the company’s commitment to investment banking, his tenure has been marked by a series of questions over his judgment. The bank and Mr. Staley were both fined by regulators over a whistle-blower scandal, and other stumbles have prompted some shareholders to demand his resignation.

In a statement, Barclays said it believed that “Mr. Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr. Epstein.” Mr. Staley, the bank said, retained the full confidence of its board.

The inquiry began sometime last year when the Financial Conduct Authority contacted Barclays with questions about Mr. Staley’s relationship with Mr. Epstein, according to the bank’s annual report, which was published Thursday.

Barclays responded to the regulator’s questions, but some element of that response raised questions within the agency, according to a bank official who spoke on the condition of anonymity. A more formal investigation then began in December.

Thursday’s announcement undercut a positive earnings report from the bank. Total income for 2019 rose 2 percent, and profit after taxes rose 30 percent for the year. Barclay’s shares ended the day down 1.7 percent.

ImageWestlake Legal Group 13barclays2-articleLarge Barclays C.E.O. Faces U.K. Inquiry on Jeffrey Epstein Ties Staley, James E Sex Crimes London Stock Exchange Financial Conduct Authority (Great Britain) Epstein, Jeffrey E (1953- ) Company Reports Barclays PLC

Mr. Epstein referred dozens of wealthy clients to Mr. Staley and JPMorgan. Credit…New York State Sex Offender Registry, via Associated Press

Mr. Epstein portrayed himself as indispensable to corporate executives and built up a small but powerful finance network, which Mr. Staley remained a part of even after Mr. Epstein’s 2008 guilty plea to a charge of soliciting prostitution from a teenage girl. The men had known each other since at least 1999, when the future Barclays chief was running the private banking business of JPMorgan and using Mr. Epstein to connect with potential clients.

The relationship was close enough that Mr. Staley visited Mr. Epstein about 10 years ago, while he was serving time in Florida for soliciting prostitution from a minor. The visit occurred at Mr. Epstein’s Palm Beach office, where he was allowed to serve part of his 13-month sentence. They were still close enough in April 2015 for Mr. Staley and his wife, Debora, to sail their boat to Little St. James, Mr. Epstein’s private island. Mr. Staley was named chief executive of Barclays that December.

Among others, Mr. Epstein connected Mr. Staley with Glenn Dubin, who ran Highbridge Capital Management, a hedge fund in which JPMorgan bought a majority stake in 2004. The deal elevated the asset management division that Mr. Staley ran at JPMorgan into a major player in the hedge-fund world. (Mr. Dubin, who married a former girlfriend of Mr. Epstein’s, Eva Andersson, left JPMorgan in 2013. He left his most recent venture, the hedge fund Engineers Gate, last month, saying he wanted to focus on his family office.)

Mr. Epstein invoked his relationship with Mr. Staley as part of his own business maneuvers. He listed Mr. Staley and JPMorgan as references when he applied for a license to set up a bank, Southern Country International, in the Virgin Islands in 2013. Mr. Staley’s spokesman said he was unaware of this at the time.

Until Thursday, Mr. Staley’s history with Mr. Epstein had not appeared to pose a serious threat to his leadership. (Indeed, their ties were known as of the middle of 2015, when Mr. Staley was merely a contender for the Barclays position.)

But Mr. Staley’s tenure has faced other bouts of turmoil.

In 2016, he tried to unmask a whistle-blower who had criticized one of his senior hires. That led to a fine of $15 million for Barclays from New York’s banking regulator, which said that it had uncovered “shortcomings in governance, controls and corporate culture” at the bank. British bank regulators also fined Mr. Staley about $1.5 million and required the bank to submit reports on parts of its whistle-blowing program.

Mr. Staley also upset a big client, Kohlberg Kravis Roberts, in 2016 after trying to help his brother-in-law’s business interests.

His conduct is now under scrutiny by the Financial Conduct Authority, whose responsibilities include assessing the “fitness and propriety” of senior executives at financial institutions. Among the qualities the regulator looks at, according to its website, is honesty, “including openness with self-disclosures, integrity and reputation.”

In August, Mr. Epstein killed himself while in a Manhattan jail, where he was being held awaiting trial on federal sex trafficking and conspiracy charges. He had been charged by Manhattan prosecutors in July with sexually exploiting dozens of women and girls in New York and Florida.

Those accusations involved actions up to 2005. A lawsuit filed last month by Denise N. George, the attorney general of the Virgin Islands, cited further evidence that Mr. Epstein had sexually abused and trafficked hundreds of young women and girls on his private Caribbean island, some as recently as 2018.

A judge in the Virgin Islands who is overseeing the administration of Mr. Epstein’s $635 million estate is considering a proposal to establish a compensation fund for his accusers. Ms. George is seeking to block that effort, contending the executors of the estate are conflicted because they were longtime business advisers to Mr. Epstein.

Michael de la Merced, Kate Kelly and Matthew Goldstein contributed reporting.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

As Boeing Jets Sit Idle, Airbus Can’t Make Planes Fast Enough

Westlake Legal Group 13airbus-1-facebookJumbo As Boeing Jets Sit Idle, Airbus Can’t Make Planes Fast Enough Faury, Guillaume Factories and Manufacturing Company Reports Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes Airbus Industrie

PARIS — The troubles plaguing Boeing after the yearlong grounding of its 737 Max plane have created an unusual opening for its chief rival, Airbus, to swoop in and grab business. There’s just one hitch: Airbus is in no position to benefit.

The European aerospace giant, which last year took the title from Boeing as the world’s biggest plane maker, has such a large backlog of orders to fill that it cannot immediately produce more of its popular narrow-body jets that airlines view as an alternative to the Max.

“It might look like a paradox, but in the short term, we don’t benefit from the situation with our competitor,” Airbus’s chief executive, Guillaume Faury, said Thursday at a news conference in Toulouse, France, announcing the company’s 2019 annual results.

Airbus has been unable to take advantage of the shortfall at Boeing partly because it can’t build planes fast enough. Production of Airbus’s A320 jets — the main competitor to the 737 Max and the bulk of Airbus’s commercial business — is months behind schedule because of slowdowns at some of its European factories.

As it is, the company’s A320 jets are sold out through 2025, Mr. Faury said, making it “difficult if not impossible” to make new planes quickly for airlines that have been left scrambling to find an alternative since Boeing stopped producing the Max.

Even so, in the long-running duel between the two rivals for the top spot in commercial aviation, Airbus is riding high.

In the year since Boeing’s most important plane was grounded after two deadly crashes killed 346 people, orders for the Max have dried up, and Boeing has been unable to deliver the roughly 400 Max planes it built since the grounding began in March.

Last month, Boeing said the costs associated with the Max grounding were likely to exceed $18 billion. Those costs may rise further, with airlines that were counting on the Max continuing to lose money and the 737 factory in Renton, Wash., still shut down.

Boeing said this week that it did not record any new orders for commercial airplanes in January, and that it delivered just 13 planes in the month. Though the start of the year is usually a slow time for orders, and the deliveries were dented by the Max grounding, the dismal numbers were a reminder of the depths of Boeing’s problems. It was the first time in decades that Boeing failed to record any commercial orders in January.

Airbus has won several competitive orders in recent months. In December, Qantas picked Airbus over Boeing to supply jets for what will be the world’s longest nonstop commercial routes, from Australia to the New York area. Also last year, United Airlines ordered 50 Airbus jets.

Still, on Thursday, Airbus reported an overall loss of 1.36 billion euros, or $1.48 billion, for 2019. The main reason for the shortfall was an agreement to pay $4 billion in fines to France, Britain and the United States to settle a lengthy global corruption investigation, removing a legal cloud as it sought to keep ahead of Boeing.

Despite the hit, Airbus reported record deliveries in 2019 of 863 commercial aircraft, up from 800 in the year before, and an increase in orders to 768 jets, from 747, as Boeing stumbled. With the Max grounded, Airbus also sought to shore up its advantage in the narrow-body market by raising its stake in the A220, a jet developed by Bombardier, a Canadian plane maker.

Delivering on orders is Airbus’s biggest challenge. Mr. Faury said the company planned to ramp up production of the A320neo, its best-selling single-aisle jet and an alternative to the Max, to around 67 a month in 2023, up from a target of 63 a month in 2021. Suppliers had balked when Airbus sought to accelerate the timetable further, he noted.

But analysts said splashing money on increasing production might be a problem if it made the planes more expensive, or if Airbus had to slow production again.

“They’re going to end up effectively over-geared,” said Andrew Charlton, the managing director at the consulting firm Aviation Advocacy. “They’re going to have all these people, factory lines that they’re going to have to shut down again.”

For now, however, even if Airbus continued to produce planes at the same rate, it is likely to stay ahead of Boeing, said Richard Aboulafia, vice president for analysis at Teal Group. “By doing nothing, they’re doing a great deal,” he said. “Market trends are benefiting them hugely.”

Airlines have focused on flying point to point, rather than routing through giant hubs, a shift that led to the sunsetting of the Airbus A380, one of the world’s largest jets. For these sorts of flights, airlines prefer to use planes from the Airbus A320 family or the Boeing 737 Max 8 — and at the moment, all the orders are for Airbus A320-type planes, Mr. Aboulafia said.

“This is the best of all worlds for Airbus,” he said. “It’s an enviable position.”

The Max crisis is also affecting Boeing in ways that go beyond immediate costs, lost orders and delayed deliveries. Plans for the company’s next major commercial airplane have effectively been put off.

“There is a benefit to Airbus from the Max grounding,” said Scott Hamilton, managing director of Leeham, an aviation consultancy. “It has delayed any decision by Boeing for a new midmarket airplane.”

Still, the Max could be flying soon. The head of the Federal Aviation Administration said last week that a critical test flight could happen in the next few weeks, setting in motion the complex process of clearing the plane’s return to service. If no other major problems with the Max are found, airlines could be using the plane for commercial flights this summer.

And when that happens, Boeing can start delivering its stockpiled jets, and could start logging new orders for the Max again.

“When the 737 Max is released and cleared for flying, it’s going to be the safest airplane in the world,” Mr. Charlton said, pointing out that British Airways placed an order for 200 Max planes in June after the second fatal crash. “There’s going to be no bit of that airplane that hasn’t been crawled over a million times.”

If Boeing then opts to offer heavy discounts, Airbus could be forced to do the same. Airlines can seek discounts after their planes have been ordered.

“Suddenly, their order book becomes a burden, not an asset,” he said.

Liz Alderman reported from Paris, and David Gelles from New York. Amie Tsang contributed reporting from London.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Tesla Faces a New S.E.C. Investigation

Westlake Legal Group 13tesla-facebookJumbo Tesla Faces a New S.E.C. Investigation Tesla Motors Inc subpoenas Stocks and Bonds Securities and Exchange Commission Musk, Elon Finances Company Reports

Tesla received a subpoena in December from the Securities and Exchange Commission asking the electric-car maker to turn over information about its financial data and contracts, the company said in a filing with the agency on Thursday.

In the filing, Tesla also said that the S.E.C. had closed a separate investigation into projections and statements the company made in 2017 about production rates of its Model 3 sedan.

It said the scope covered by the December subpoena included “Tesla’s regular financing arrangements.”

The S.E.C. had previously investigated statements from Elon Musk, Tesla’s chief executive, about plans to take the company private. That investigation ended in 2018 with Tesla and Mr. Musk each paying a $20 million fine and Mr. Musk stepping down as chairman for three years.

The agency declined to comment, and Tesla did not immediately respond to a request for comment.

Tesla also announced on Thursday that it planned to issue about $2 billion in new common stock, just two weeks after Mr. Musk told investors on a call that it “doesn’t make sense to raise money.”

“We’re actually spending money as quickly as we can spend it sensibly,” he said at the time.

Mr. Musk plans to buy up to $10 million of stock from the new offering, the company said. Larry Ellison, a Tesla board member, plans to buy up to $1 million.

Since announcing its fourth-quarter earnings late last month, Tesla’s share price has risen by more than 30 percent, giving it a market value of about $137 billion. The stock’s price has risen about 80 percent since the beginning of the year.

After opening lower on Thursday, Tesla shares were up almost 3 percent in midday trading.

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Barclays C.E.O.’s Ties to Jeffrey Epstein Provoke U.K. Inquiry

Barclays said on Thursday that British financial regulators were investigating the relationship between James E. Staley, its chief executive, and Jeffrey Epstein, the financier who killed himself last August after facing new allegations of sex trafficking of underage girls.

Mr. Staley is one of a handful of prominent Wall Street financiers who have been linked to Mr. Epstein, who portrayed himself as indispensable to corporate executives and built up a small but powerful finance network. He had known Mr. Epstein since at least 1999, when the future Barclays chief was running the private banking business of the Wall Street bank JPMorgan.

“As has been widely reported, earlier in his career, Mr. Staley developed a professional relationship with Mr. Epstein,” Barclays said in a statement. It added that Mr. Staley, who is known as Jes, had told the bank that he had had no contact with Mr. Epstein after taking the top position at the lender in December 2015.

Barclays said regulators including the Financial Conduct Authority, the main overseer of banks in Britain, were examining how Mr. Staley characterized the relationship with Mr. Epstein to the company, as well as what the company subsequently told the financial conduct agency.

Barclays, the statement said, “believes that Mr. Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr. Epstein.” It added that Mr. Staley retained the full confidence of the bank’s board.

The bank’s shares were trading about 1.6 percent lower on Thursday.

Over the years, Mr. Epstein referred dozens of wealthy clients to Mr. Staley and JPMorgan.

ImageWestlake Legal Group 13barclays2-articleLarge Barclays C.E.O.’s Ties to Jeffrey Epstein Provoke U.K. Inquiry Staley, James E Sex Crimes London Stock Exchange Financial Conduct Authority (Great Britain) Epstein, Jeffrey E (1953- ) Company Reports Barclays PLC

Jeffrey Epstein referred dozens of wealth clients to Mr. Staley and JPMorgan. Credit…New York State Sex Offender Registry, via Associated Press

The relationship was good enough that Mr. Staley visited Mr. Epstein about 10 years ago, while he was serving time in Florida for soliciting prostitution from a minor. The visit occurred at Mr. Epstein’s Palm Beach office, where he was allowed to serve part of his 13-month sentence.

Among others, Mr. Epstein connected Mr. Staley with Glenn Dubin, who ran Highbridge Capital Management, a hedge fund in which JPMorgan bought a majority stake in 2004. The deal elevated the asset management division that Mr. Staley ran at JPMorgan into a major player in the hedge-fund world.

Mr. Staley was named C.E.O. of Barclays in 2015, becoming the fifth chief executive in about seven years at a bank that had suffered from regulatory troubles and involvement in the Libor-rigging scandal.

He has reshaped the bank, cutting costs and bolstering the company’s commitment to investment banking. But his tenure has also been marked by a series of questions over his judgment.

In 2016, he tried to unmask a whistle-blower who had criticized one of his senior hires. That led to a fine of $15 million from New York’s banking regulator, which said that it had uncovered “shortcomings in governance, controls and corporate culture” at the bank. British bank regulators also fined Mr. Staley about $1.5 million and required the bank to submit reports on parts of its whistle-blowing program.

Mr. Staley also upset a big client, Kohlberg Kravis Roberts, after trying to help his brother-in-law’s business interests. That and other stumbles have spurred some shareholders to demand his resignation along the way.

In August, Mr. Epstein killed himself while in a Manhattan jail, where he was being held awaiting trial on federal sex trafficking and conspiracy charges. He had been charged by Manhattan prosecutors in July with sexually exploiting dozens of women and girls in New York and Florida.

Those accusations involved actions up to 2005. A lawsuit filed last month by Denise N. George, the attorney general of the Virgin Islands, cited further evidence that Mr. Epstein had sexually abused and trafficked hundreds of young women and girls on his private Caribbean island, some as recently as 2018.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Tesla Faces a New S.E.C. Investigation

Westlake Legal Group 13tesla-facebookJumbo Tesla Faces a New S.E.C. Investigation Tesla Motors Inc subpoenas Stocks and Bonds Securities and Exchange Commission Musk, Elon Finances Company Reports

Tesla received a subpoena in December from the Securities and Exchange Commission asking the electric-car maker to turn over information about its financial data and contracts, the company said in a filing with the agency on Thursday.

In the filing, Tesla also said that the S.E.C. had closed a separate investigation into projections and statements the company made in 2017 about production rates of its Model 3 sedan.

It said the scope covered by the December subpoena included “Tesla’s regular financing arrangements.”

The S.E.C. had previously investigated statements from Elon Musk, Tesla’s chief executive, about plans to take the company private. That investigation ended in 2018 with Tesla and Mr. Musk each paying a $20 million fine and Mr. Musk stepping down as chairman for three years.

The agency declined to comment, and Tesla did not immediately respond to a request for comment.

Tesla also announced on Thursday that it planned to issue about $2 billion in new common stock, just two weeks after Mr. Musk told investors on a call that it “doesn’t make sense to raise money.”

“We’re actually spending money as quickly as we can spend it sensibly,” he said at the time.

Mr. Musk plans to buy up to $10 million of stock from the new offering, the company said. Larry Ellison, a Tesla board member, plans to buy up to $1 million.

Since announcing its fourth-quarter earnings late last month, Tesla’s share price has risen by more than 30 percent, giving it a market value of about $137 billion. The stock’s price has risen about 80 percent since the beginning of the year.

After opening lower on Thursday, Tesla shares were up almost 3 percent in midday trading.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

James Staley, Barclays C.E.O., Faces U.K. Probe on Jeffrey Epstein Ties

Westlake Legal Group 13barclays-1sub-facebookJumbo James Staley, Barclays C.E.O., Faces U.K. Probe on Jeffrey Epstein Ties Staley, James E Sex Crimes London Stock Exchange Financial Conduct Authority (Great Britain) Epstein, Jeffrey E (1953- ) Company Reports Barclays PLC

Barclays said on Thursday that British financial regulators were investigating the relationship between James E. Staley, its chief executive, and Jeffrey Epstein, the financier who committed suicide last August after facing new allegations of sex trafficking of underage girls.

In a statement filed with the London Stock Exchange, the British bank said the Financial Conduct Authority and the Prudential Regulation Authority had begun an investigation into the relationship, which is ongoing.

“As has been widely reported, earlier in his career Mr. Staley developed a professional relationship with Mr. Epstein,” the statement said. Barclays added that Mr. Staley, who is known as Jes, has told the bank that he had no contact with Mr. Epstein after taking the top position at the bank in December 2015.

In its filing, Barclays said regulators were examining how Mr. Staley characterized the relationship with Mr. Epstein to the company, as well as what the company subsequently told the Financial Conduct Authority about it.

Barclays, the statement said, “believes that Mr. Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr. Epstein.” It said Mr. Staley retains the full confidence of the bank’s board.

Mr. Staley had known Mr. Epstein since at least 1999, when the future Barclays chief was running the private banking business of JPMorgan, the Wall Street bank.

In August, Mr. Epstein hanged himself while in a Manhattan jail, where he was being held awaiting trial on federal sex trafficking and conspiracy charges. He had been charged by Manhattan prosecutors in July with sexually exploiting dozens of women and girls in New York and Florida.

Those accusations involved actions up to 2005. A lawsuit filed last month by Denise N. George, the attorney general of the Virgin Islands, cited further evidence showing Mr. Epstein sexually abused and trafficked hundreds of young women and girls on his private Caribbean island, some as recently as 2018.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

U.K. Regulators Examine Ties Between Barclays C.E.O. James Staley and Jeffrey Epstein

Westlake Legal Group 13barclays-1-facebookJumbo U.K. Regulators Examine Ties Between Barclays C.E.O. James Staley and Jeffrey Epstein Staley, James E Sex Crimes London Stock Exchange Financial Conduct Authority (Great Britain) Epstein, Jeffrey E (1953- ) Company Reports Barclays PLC

Barclays said on Thursday that British financial regulators were investigating the relationship between James E. Staley, its chief executive, and Jeffrey Epstein, the financier who committed suicide last August after facing new allegations of sex trafficking of underage girls.

In a statement filed with the London Stock Exchange, the British bank said the Financial Conduct Authority and the Prudential Regulation Authority had begun an investigation into the relationship, which is ongoing.

“As has been widely reported, earlier in his career Mr. Staley developed a professional relationship with Mr. Epstein,” the statement said. Barclays added that Mr. Staley, who is known as Jes, has told the bank that he had no contact with Mr. Epstein after taking the top position at the bank in December 2015.

Barclays, the statement said, “believes that Mr. Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr. Epstein.” It said Mr. Staley retains the full confidence of the bank’s board.

Mr. Staley had known Mr. Epstein since at least 1999, when the future Barclays chief was running the private banking business of JPMorgan, the Wall Street bank.

In August, Mr. Epstein hanged himself while in a Manhattan jail, where he was being held awaiting trial on federal sex trafficking and conspiracy charges. He had been charged by Manhattan prosecutors in July with sexually exploiting dozens of women and girls in New York and Florida.

Those accusations involved actions up to 2005. A lawsuit filed last month by Denise N. George, the attorney general of the Virgin Islands, cited further evidence showing Mr. Epstein sexually abused and trafficked hundreds of young women and girls on his private Caribbean island, some as recently as 2018.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

SoftBank Takes Another Multibillion-Dollar Hit From Bad Bets

Westlake Legal Group 12softbank-1-facebookJumbo SoftBank Takes Another Multibillion-Dollar Hit From Bad Bets WeWork Companies Inc T-Mobile US Inc. Stocks and Bonds Sprint Nextel Corporation Son, Masayoshi SOFTBANK Corporation Elliott Management Corp Company Reports Cellular Telephones

SoftBank Group has taken another multibillion-dollar hit from its ambitious but costly bets on once high-flying companies like Uber and WeWork, putting growing pressure on the Japanese conglomerate to get its financial house in order.

The company, which has used its $100 billion Vision Fund to dominate the world of technology investment, has become a target for hedge fund giant Elliott Management, which has been urging changes at the Japanese firm, including governance overhauls and stock buybacks.

On Wednesday, SoftBank may have given Elliott another reason to complain. It said the Vision Fund and other investments cost its bottom line 225.1 billion yen, or about $2 billion, in the final three months of last year.

Overall, SoftBank reported a profit of about $501 million for the quarter, well short of what investors had expected. Its profit was less than one-tenth of what it had posted one year earlier. Its operating profit fell 99 percent.

In November, SoftBank said it had lost $4.6 billion on its investment in WeWork, the office space tech company whose initial public offering imploded spectacularly last fall after the revelation of serious governance issues, including allegations of self-dealing by the company’s chief executive.

The results came one day after a judge in the United States approved a merger between Sprint, which SoftBank controls, and T-Mobile, another American wireless carrier.

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Under Armour, Already Struggling, Says 2020 Will Be Rocky

Westlake Legal Group 11underarmour-facebookJumbo Under Armour, Already Struggling, Says 2020 Will Be Rocky Under Armour Inc Shopping and Retail Plank, Kevin A (1972- ) North America Frisk, Patrik Company Reports

For the sportswear giant Under Armour, 2020 is off to a rocky start.

Shares in the company tumbled on Tuesday after it released disappointing earnings for 2019 and warned that this year may not be much better.

The company warned that overall revenues were likely to grow at a low single-digit rate in 2020, and that it expected further declines in North America, its biggest market. It also said that its revenues in the first quarter — and potentially beyond — would take a hit of $50 million to $60 million because of the coronavirus outbreak in China.

Under Armour, which has already undergone waves of restructuring over the last two years to improve its profitability, also announced yet another potential plan that could result in a charge of $425 million. Roughly half of that would be related to giving up plans to open a flagship store in New York. (In the summer of 2016, Under Armour signed a lease to take over a 53,000-square-foot store on Fifth Avenue that was the former flagship for the toy store F.A.O. Schwarz.)

The weak earnings reflect the company’s continued struggles to attract consumers to its once-thriving brand. For 2019, the company’s revenues grew only 1 percent, to $5.3 billion.

Camilla Yanushevsky, an analyst at CFRA Research, called the North American outlook “abysmal” in a note to investors. She noted that Under Armour has “largely missed out in the athleisure trend and continues to lose share to the likes of Nike and Lululemon.”

Despite that criticism, Under Armour executives reiterated in a call with Wall Street analysts that the company remained focused on athletic-performance gear.

“There are those who believe our focus on athletic performance may currently be too narrow,” said Patrik Frisk, Under Armour’s chief executive. “We disagree. We see an even greater opportunity to drive harder towards our vision and mission. Of course, being in athletic performance requires us to make innovative, highly functional products but it must also be great looking and on trend.”

In trading, the company’s stock slumped more than 16 percent to $16, well off its high of more than $50 in 2015. That price came during a streak of 26 consecutive quarters of 20 percent or greater year-over-year revenue growth.

Various cost-cutting and restructuring moves over the last two years have improved profit margins at the company, which has also gained some control over issues involving inventory and expenses.

There has also been change in the company’s leadership. Last month, Kevin Plank, who founded Under Armour, stepped down as chief executive. Mr. Plank now holds the titles of executive chairman and brand chief, and Mr. Frisk reports directly to him.

Under Armour continues to fall short, however, in attracting consumers to its shoes and apparel. That is particularly true in North America, where revenues slipped 2 percent last year to $3.7 billion.

The Asia-Pacific region made up about 12 percent of Under Armour’s total sales in 2019 and has been one of its faster-growing markets. “Given the significant level of uncertainty with this dynamic and evolving situation, full-year results could be further materially impacted,” the company said.

Mr. Frisk said, like other corporations, Under Armour is monitoring the situation in China, which could affect its ability to obtain materials like trim and fabric that come from the region.

“With respect to factories, we are continuing to see closures and changing timelines of when they might reopen and trying to assess what it means for production fulfillment, capacity and the prioritization of which products to make,” Mr. Frisk added.

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What Big Business Is Saying About the Coronavirus

Westlake Legal Group 07virus-roundup-1-facebookJumbo What Big Business Is Saying About the Coronavirus Yum Brands Inc Wynn Resorts Ltd Walt Disney Company Travel and Vacations Tesla Motors Inc Tapestry Inc Starbucks Corporation Qualcomm Inc Nintendo Co Ltd NIKE Inc McDonald's Corporation IMAX Corporation Hyundai Motor Co Ford Motor Co Fiat Chrysler Automobiles NV Fast Food Industry Factories and Manufacturing Epidemics Economic Conditions and Trends Coronavirus (2019-nCoV) Company Reports China casinos Burberry Automobiles Apple Inc Amusement and Theme Parks

Disney. Apple. Nike. McDonald’s. Hyundai.

Since the outbreak of the coronavirus in January, major brands across virtually every sector of the world economy — from food to fashion to entertainment to technology — have seen their business in China suffer.

Those companies have come to rely on China for its efficient factories, increasingly affluent consumers and years of hard-charging economic growth.

Now the coronavirus is forcing them to restrict corporate travel to mainland China or temporarily shutter stores, offices, restaurants and theme parks. And the disruption to Chinese manufacturers has rippled through global supply chains, making it difficult for companies to obtain parts for everything from cars to video-game consoles.

It’s too early to assess the full financial impact of the outbreak. Much remains unknown, including when Chinese businesses will reopen and whether the spread of the virus will cause similar disruptions in other parts of the world.

But over the last few days, big companies have revealed, with varying degrees of specificity, how the virus has affected them.

Here’s what we know so far:

Disney has offered one of the more detailed assessments of how the coronavirus is affecting business.

For more than a week, its theme parks in Shanghai and Hong Kong have been shut. The closures are expected to reduce the company’s operating income by $175 million in the second quarter, Christine McCarthy, the chief financial officer, said on an earnings call.

The Canadian film company IMAX was forced to postpone the release of five films it had planned to showcase in China during the Lunar New Year holiday period.

In Japan, Nintendo, which makes video games and gaming devices, said that shipments of its Switch game console to Japanese customers would be delayed.

  • What do you need to know? Start here.

    Updated Feb. 5, 2020

    • Where has the virus spread?
      You can track its movement with this map.
    • How is the United States being affected?
      There have been at least a dozen cases. American citizens and permanent residents who fly to the United States from China are now subject to a two-week quarantine.
    • What if I’m traveling?
      Several countries, including the United States, have discouraged travel to China, and several airlines have canceled flights. Many travelers have been left in limbo while looking to change or cancel bookings.
    • How do I keep myself and others safe?
      Washing your hands is the most important thing you can do.

And this week, officials in the Chinese city of Macau asked its 41 casinos to close for half a month. The move will hit American casino operators in the region.

Wynn Resorts is losing $2.4 million to $2.6 million every day that its casino in Macau remains closed because of the coronavirus, the company’s chief executive said.

Tim Cook, the chief executive of Apple, told analysts in January that the company’s suppliers could be disrupted and that traffic to its stores in China had dropped.

Apple has a large sales presence in China and assembles most of its products there. Mr. Cook said that some Apple suppliers would remain closed and that traffic into its stores in the country had fallen off.

Qualcomm, which makes smartphone chips, is also hurting. Last year, nearly half its revenue came from China, a major hub for smartphone manufacturing and sales.

The company’s chief financial officer, Akash Palkhiwala, told investors this week that the company had reduced the low end of its earnings guidance for the next three months because of the uncertainty created by the outbreak.

Many auto plants have shut down in China because of the virus, including factories run by Tesla, Ford and Nissan.

Hyundai, the world’s fifth-largest automaker, said it would temporarily stop production lines at its factories in South Korea because of shortages of Chinese parts, while other auto companies, like Volkswagen and Daimler, said they planned to reopen their factories in China next week if they received government authorization.

Fiat Chrysler warned that the outbreak could disrupt production at one of its European plants in the next few weeks, Reuters reported. But the company’s chief executive said it wasn’t changing its financial guidance for 2020.

Over the last couple of weeks, a series of major airlines have canceled flights to China, including Delta, United and American. But the airlines have said little about how the cancellations will affect their bottom lines. Analysts estimate that the impact should be relatively small.

United draws only about 4 percent of its revenue from service to China, while it counts for just 3 percent of Delta’s revenue and 2 percent at American, according to Helane Becker, an airline analyst with Cowen Research.

Also cutting back sharply is Air China, the largest operator of nonstop U.S.-China flights by passengers flown. On Thursday it was granted permission to severely limit service between the two countries, the Transportation Department said.

Air China intends to operate seven flights per week, in both directions. In 2018, it operated an average 129 flights per week into and out of the United States, according to federal data.

The spread of the virus has also taken a toll on the cruise industry. On Friday, Royal Caribbean banned all people holding Chinese, Hong Kong or Macau passports from boarding its ships. The vast majority of those passengers would be on ships leaving China, which account for only 6 percent of the company’s business, according to Rob Zeiger, a spokesman for Royal Caribbean.

Several hundred of the approximately 3,300 McDonald’s restaurants in China have closed. But the company’s chief executive, Chris Kempczinski, said the overall impact on profits would be “fairly small” if the virus stayed contained.

Starbucks has closed more than half its 4,300 stores in China and delayed a planned update to its 2020 financial forecast, saying it expects a material but temporary hit.

And Yum Brands, the operator of the KFC and Pizza Hut franchises in China, said that nearly one-third of its restaurants were closed because of the outbreak. The remaining stores have seen a major drop in sales.

About half the Nike stores in China have shut, and those that remain open have shortened hours, the company said. Nike has not released a precise estimate of the financial repercussions, but told investors that it expects “the situation to have a material impact on our operations in Greater China.”

Canada Goose Holdings said the impact would be substantial enough that it had to lower its profit outlook for the year, saying that customer traffic in China and in “international shopping destinations in North America and Europe” have been affected. “No supply chain interruptions have occurred,” the company said in a statement on Friday.

Burberry also warned investors that the outbreak was having a “material negative effect on luxury demand.” Twenty-four of its 64 stores in mainland China are closed, and those that remain open, with reduced operating hours, are seeing fewer shoppers than usual, the company said.

Tapestry, the American luxury giant that owns Kate Spade, Coach and Stuart Weitzman, said the outbreak could reduce its sales by up to $250 million in the second half of the year.

And Estee Lauder, the luxury cosmetics company, warned that the outbreak would hurt its financial results “in the near term,” predicting that sales in the third quarter of 2020 would be the most affected. The spread of the virus has slowed air travel and tourism, reducing store traffic in key global shopping areas, it told investors.

Ian Austen, Niraj Chokshi and Carlos Tejada contributed reporting.

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