Amazon Beats Expectations; New Home Sales Dismal

Ten years ago, futurists were predicting that online retail would threaten the prosperity of bricks-and-mortar retail, a prognostication about as accurate as the coming of the paperless office. On the other hand, online retail–at least in the form of Amazon–has managed to do unexpectedly well in the face of the current recession. For the quarter that ended on Dec. 31, the company’s net profit rose 9 percent to $225 million, or 52 cents a share, up from 48 cents in the same quarter last year.Amazon executives chalked it up to “focusing on a better customer experience through price, selection and convenience,” though other observers said that popularity of the portable electronic book reader known as the Kindle helped drive revenues for the company even as customers pulled back on other spending. The retail industry might have seen a spot of good news with Amazon, but the housing industry had no such luck. According to the U.S. Census Bureau, new home sales are the lowest they have ever been since the bureau starting keeping track in 1963: a seasonally adjusted annual rate of 331,000 in December. The figure was down 15 percent from November, and 45 percent below December 2007. The median sales price for those new houses that did sell was $206,500, down 9 percent from a year earlier. The markets seemed to take their cue from this poor showing and made their own poor showing Thursday. The Dow Jones Industrial Average fell 226.44 points, or 2.7 percent, which was a little more than it gained the day before. The S&P 500 was down by 3.31 percent and the Nasdaq was down 3.24 percent. Late Wednesday, New York Comptroller Thomas DiNapoli reported that Wall Street bonuses paid in 2008 were roughly half of what they were in 2007: $18.4 billion, as opposed to $33 billion. That affects the employees at the receiving end of the bonuses, but also the state of New York and neighboring states that collect taxes on the payouts. New York, according to DiNapoli, will lose about $1 billion in revenue because of the decline in bonuses. The next day, in the wake of the passage of his stimulus proposal by the House of Representatives, President Obama took to his bully pulpit and called the recent Wall Street bonuses “the height of irresponsibility. There will be time for them to make profits, and there will be time for them to get bonuses–now is not that time.” New York Attorney General Andrew Cuomo, who has more than a bully pulpit at his disposal when it comes to this issue, is reported by the Wall Street Journal to be expanding his probe into the $4 billion worth of bonuses paid by Merrill Lynch even as it was about to crash and burn Hindenburg-style late in 2008. In a statement, the AG said that Bank of America faces a “$4 billion question” about “why it failed to stop Merrill Lynch from issuing year-end bonuses as it was taking over the company.” It might behoove the recipients of these bonuses to hold off on big purchases, in case Mr. Cuomo comes looking for it. Wall Street isn’t the only place where executive pay is an issue. Some non-financial companies are reconsidering the matter of executive pay and taking action, such as the C-suite pay cuts at places such as Federal Express and Motorola last month (cuts in base salary, but maybe not other forms of compensation–yet).On Thursday, department store operator Bon-Ton Stores Inc., which runs 281 stores in the Midwest and Northeast, cancelled its 2008 executive bonuses while simultaneously cutting roughly 1,150 jobs. The company said that the moves, taken to cope with the recession, will save it about $70 million this year. Additionally, it is also cutting capital spending and suspending company contributions to employee 401(k) plans.