The warehouse club operator's same-store sales slipped 6%, still matching the Street's view. Same-store sales contracted 6% in US locations, while it fell by 3% in international markets.

The company attributed the sluggish performance to weak discretionary spending by consumers amid recessionary conditions, partially offset by growth in food items and sundries.

Costco also said that average transaction in June slipped 9.5% year over year, including the negative impact of lower gas prices as well as a stronger dollar.

Analysts, on average, have lowered expectations for the year ending August 2009, sending the consensus down by a penny to $2.48 per share over the past 2 months.

Shares of Costco are down about 1% on volume of approximately 4.1 million, compared to the average daily volume of about 4.5 million.

COST is a Zacks #3 Rank ("Hold") stock.

Partnership with Conair Corp. (Cuisinart)

The agreement between Keurig, Inc., the wholly-owned subsidiary of GMCR, and Conair will allow the latter company to develop, market and sell single-cup coffeemakers under the Cuisinart brand in the U.S. and Canada. They will be designed to work with Keurig's patented K-Cup portion packs.

This is a significant deal for GMCR since Cuisinart is the number one brand in the coffeemaker category.

"We believe that having Cuisinart develop, market and sell a co-branded brewer using Keurig's K-Cup technology platform will help speed the adoption of single-cup brewing into homes in the U.S. and Canada," said John Whoriskey, Vice President and General Manager of the Keurig At Home Division.

"Consumers will now have more brands and models from which to choose as the number of coffeemakers utilizing Keurig's technology platform expands," he continued.

The launch is planned for spring 2010.

Still Beating Expectations

Through this deal, GMCR now has a greater chance to get its single-cup brewing products into more homes, but it means even more since it comes from a position of strength for the company.

GMCR has been topping Wall Street's quarterly earnings estimates for a while now, putting together an average positive surprise of nearly 30% over the past 4 quarters.

In its fiscal second quarter, the company earned 50 cents per share, while analysts were anticipating 36 cents. That marks a 39% surprise and a solid year-over-year advance from 23 cents.

Net sales jumped 60% to $193.4 million from $120.9 million. GMCR shipped 432 million K-Cup portion packs during the quarter, up 62% from last year. Shipments of Keurig brewers were up 148% to 479,000.

Fiscal third-quarter results will come out at the end of July. Analysts currently expect EPS of 40 cents, which is up a penny from 2 months ago.

Earnings Estimates on the Rise

The past 2 months have seen an advance in earnings estimates for the year ending September 2009 of 15.4% to $1.50.

The consensus for the next fiscal year is up 3.5% in the past 7 days, perhaps reflecting the Cuisinart deal. The past 2 months has seen a gain of 21.3%. At the moment, analysts are expecting a more than 36% advance in profit for the year ending September 2010 over this year.

An Industry of Its Own ... on the Zacks #1 Rank List

GMCR is the only company from the food items - wholesale industry on today's Zacks #1 Rank List, which includes 227 stocks. The company is trading today on high volume of 1 million shares, versus its average of 691,000.

Zacks Investment Research

In one of the most high-profile proxy battles in US corporate history, billionaire investor William Ackman will introduce his slate of alternative directors to shareholders of Target Corp. (TGT) on Monday and ask them to overthrow the discount retailer's present board at the annual general meeting later this month.

Ackman has been pushing Target for the last two years to bring about a radical change in strategy. He claims that the Minneapolis, Minnesota-based company's directors lack relevant expertise to make critical decisions that could navigate Target through the ongoing economic crisis.

While Target has no past record of poor governance, its investors might support Ackman's activism in light of the company's underperformance in terms of key retail metrics in the recent past. Shares of Target have shed nearly 40% of their value since a July 2007 high of about $70. Rival retailer Wal-Mart that once lagged behind Target, has long surpassed the company by selling cheap basics and a wider choice of food items.

In addition to Ackman himself, his hedge fund Pershing Square has nominated Winthrop Realty Trust (FUR) chairman and Chief Executive Michael Ashner, former Starbucks Corp. (SBUX) CEO Jim Donald, law professor Ronald Gilson, and Richard Vague, the ex-chairman and CEO of Visa credit card issuer First USA. The New York-based investor believes his nominees are "better prepared than the incumbent slate to help management navigate through a challenging economic environment that may last for several years."

Even a few years back, Ackman had congenial relations with Target. Last year, he managed to persuade the company in to selling a large stake in its credit-card portfolio. However, when Target rejected his proposal of spinning off the land it owns under its stores as a publicly traded real estate investment trust, Pershing Square nominated five independent directors for the open seats on Target's board last March.

While Target has staunchly defended its board, it now remains to be seen if shareholders can keep their faith and snub Ackman's ambitions for more control in the company.

Investors distanced themselves from emerging-market debt as the evidence mounted that major economies - the U.S., the UK, Japan and the Eurozone - are sliding into recession and this triggered a major exit from commodities, which is a significant source of export revenue for a large number of developing nations. In particular bonds extended losses on the perception that the $700 billion U.S. bank bailout would not work miracles and thus many developed economies will be struggling to digest the impact of the credit blow-out for some time to come.


Until credibility is restored, we will not see people investing in the numbers that emerging economies like India and Brazil badly need to see. In the present environment people are not simply not willing to take assume what is perceived as "risky" without being paid a large - and from the emerging economy point of view - damaging premium. As a result the cost of protecting developing nations' bonds against default has been steadily rising. Five-year credit-default swaps based on Argentina's debt climbed 44 basis points to 12.55 percentage points last week, the highest since at least June 2005. That means it costs $1.255 million to protect $10 million of the country's debt from default. Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.


Emerging Market Stocks

Emerging-market stocks had the biggest weekly decline in seven years last weeks, led by banks and energy companies. The MSCI Emerging Markets Index dropped 2.3 percent on Friday to 741.73, following a 3.4 percent decline on Thursday. The index lost 10 percent on theweek, the most since the September 2001 terrorist attacks.


Turkey's benchmark index fell the most in three weeks, losing 4.2 percent to 34,553 in the first trading day since Sept. 29. Russia's Micex Index slumped 5.3 percent, extending its annual loss to 51 percent. India's Sensex index slid 4.1 percent to 12,526.32. Reliance Industries Ltd., India's biggest company by market value, slumped 7.6 percent, to its lowest in a year.

Inflation Falls

But while India's financial system has been taking a beating, Indian inflation, almost un-noticed -slipped back to a 13-week low in late September, giving the central bank some breathing space to keep interest rates unchanged and lossen the liquidity strings when it next meets at the end of this month. Wholesale prices rose 11.99 percent in the week to Sept. 20 from a year earlier after gaining 12.14 percent in the previous week, the commerce ministry said in a statement in New Delhi on Thursday.



Reserve Bank of India Governor Duvvuri Subbarao is under pressure to boost money supply as a local stock sell-off triggered by the global credit crunch has drained funds from the banking system, increasing borrowing costs. Subbarao will undoubtedly seek to steer a middle course, since given that inflation is still double the central bank's target he will not want to seem to be "soft", while on the other hand he will want to be prudent and will try to head off an excessively rapid credit tightening on the backs of the global crunch. In addition, the peak of global inflation has now undoubtedly past, and we are now likely to see growing deflationary headwinds as capacity levels exceed demand across the whole global economy, as Claus Vistesen explains in this excellent and timely post.

The central bank has raised the cash reserve ratio, or the proportion of deposits that lenders maintain with it as reserves, by 400 basis points to 9 percent since December 2006 to contain inflation. The bank will make the outcome of its next meeting in Mumbai known on Oct. 24.

The rate at which Indian banks lend to each other climbed to an 18-month high of 17.5 percent on Oct. 1 as investors hoarded cash. Indian banks borrowed an average 413 billion rupees a day from the central bank in September, almost twice the amount in August, further indicating a shortage of funds in the banking system.

Essentially the wholesale price index fell because of a decline in the prices of farm products such as cereals, fruits and vegetables. The index of primary articles, that includes food items, dropped 0.2 percent, while the indices of manufactured and fuel were unchanged in the week to Sept. 20, today's report said.

Commodities Down

Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, tumbled 9.9 percent last week, the most since at least 1956.

Crude oil has lost 12 percent during the week, the most since 2004. The contract for November delivery traded at $94.47 a barrel, up 0.5 percent, as of 12:11 p.m. London time. Copper fell as much as 3.1 percent to $5,670 a ton on the London Metal Exchange, the lowest since February 2007 and was down 12% on the week.

Such downward movement in commodity prices have a double edged impact on emerging economies. On the one hand inflation, which has in large part been driven up by rising commodity prices, will reduce significantly, but on the other hand many emerging economies are dependent on revenue from commodity sales to finance growth and development.


Stocks Down

Indian stocks fell during the week, with the benchmark Sensex stock index declining to its lowest in 18 months. The Bombay Stock Exchange's Sensitive Index, dropped 529.35, or 4.1 percent, to 12,526.32, its lowest since April 2, 2007. The index posted its second weekly decline, falling 4.4 percent. The S&P CNX Nifty Index on the National Stock Exchange fell 3.4 percent to 3,818.30. The BSE 200 Index declined 3.8 percent to 1,515.29. Nifty futures for October delivery fell 2.9 percent to 3,853.


Overseas investors bought a net 845 billion rupees ($18 million) of Indian stocks on Sept. 30, trimming their net outflow this year from equities to $9.1 billion, the nation's stock market regulator said.


Forex Reserves

India's foreign exchange reserves fell marginally by USD 153 million to USD 291.819billion for the week ended September 26 from USD 291.972 billion in the previous week. Reserves had jumped by USD 2.511 billion in the previous week. Foreign currency assets (FCA), during the week, dropped to USD 282.652 billion from USD 282.811 billion a week ago, according to data issued by the RBI on Friday.

Rupee

India's rupee slumped to the lowest since 2003, adding to speculation investors will take continue taking money out of the currency. The currency completed its eighth weekly loss, the longest drop since December 2005. The rupee was down 1 percent on the day to 47.085 per dollar, the lowest since June 2003, as of the 5 p.m. close in Mumbai on Friday. The currency lost 1.15 percent this week.

September Global Manufacturing PMI Shows Sharp Contraction

September seems to have been the ultimate "mensis horribilis" for industrial output internationally, with global manufacturing activity contracting for the fourth consecutive month, and output falling to its weakest level in over seven years according to the JP Morgan Global Manufacturing PMI, which at 44.2 hit its strongest rate of contraction since November 2001, down from 48.6 in August (Please see the end of this post for some information about countries included and the JP Morgan methodology).


According to the JP Morgan report the retrenchment of the manufacturing sector mainly reflected marked deteriorations in the trends for production, new orders and employment. The declines in output and new work received were the second most severe in the survey history, while staffing levels fell at the fastest pace for over six-and-a-half years. The Global Manufacturing Output Index registered 42.7 in September, well below the 48.5 posted for August.

The sharpest decline in production was recorded for Spain, followed by the US, Japan and then the UK. Although the Eurozone Output Index sank to its second-lowest reading in the survey history, it was above the global average for the first time in four months. Within the euro area, France and Spain saw output fall at survey record rates, while in Italy and Ireland the contractions were the second and third most marked in their respective series. Germany, which until recently was the main growth engine of the Eurozone, saw production fall for the second month running and to the greatest extent for six years. Manufacturing activity in Japan fell to the lowest in over 6- years with the Nomura/JMMA Japan Purchasing Managers Index declining to a seasonally adjusted 44.3 in September from 46.9 in August.

At 40.8 in September, the Global Manufacturing New Orders Index posted a reading well below the neutral 50.0 mark. JP Morgan noted that the trends in new work received were especially weak in Spain, the UK, France and the US, with the all bar the latter seeing new orders fall at a series record pace (for the US it was the strongest drop since January 2001). The downturn of the sector led to further job losses in September, with the rate of reduction in employment the fastest since February 2002. Conditions in the Spanish, the UK and the US manufacturing labour markets were especially weak.

Russian manufacturing shrank for a second month in September, and in so doing registered its first back-to-back contraction since November 1998, as companies cut jobs and growth in new orders slowed, according to the latest VTB Bank Europe Purchasing Managers Report. The PMI came in at a seasonally adjusted 49.8, compared with 49.4 in August. The August reading was the lowest figure in three and a half years, according to the bank statement. On such indexes a figure above 50 indicates growth while one below 50 indicates a contraction.

Manufacturing in China contracted for a second month in August, underscoring the risk of a slump in the world's fourth-biggest economy. The Purchasing Managers' Index was a seasonally adjusted 48.4, unchanged from July, the China Federation of Logistics and Purchasing said today in an e-mailed statement.




Brazil's industrial output fell a seasonally-adjusted 1.3 percent in August, the largest monthly drop this year, bolstering expectations the central bank will ease monetary tightening in response to slowing economic growth. On an annual basis, output rose 2 percent, the slowest pace since March, according to data from the national statistics agency in Rio de Janeiro.




So basically this is where we get to learn what a global credit crunch means in terms of output and economic growth.




Current Account and Trade Deficit

The Rupee has also been dropping in reaction to India's deteriorating current account situation. The current account deficit increased to $10.7 billion in the second quarter of 2008 from a $1.04 billion gap in the previous quarter,according to data from the Reserve Bank of India last week.

India's trade deficit almost doubled to a record in August as a surge in crude oil prices increased the import bill and overseas sales of goods slowed. The trade deficit widened to $13.9 billion from $7.2 billion a year earlier, according to data from the Ministry of Commerce and Industry. Imports grew 51 percent, the fastest gain in seven months, to $29.9 billion, while exports expanded 27 percent to $16 billion.

A near doubling of oil prices has boosted import costs, since India relies on overseas purchases for three-quarters of its energy needs. India paid an average $8 billion a month this year for oil imports, up from $5.5 billion in 2007, as crude oil costs surged to a record $147 a barrel on July 11. In India, the 35 percent drop in oil prices since July has been partially offset by the decline in the rupee to a five-year low. India's oil imports in August rose 77 percent to $10.9 billion as refiners paid more for crude oil purchased overseas. Non-oil imports gained 40 percent to $18.9 billion. Imports in the five months ended August 31 rose 38 percent to $130.3 billion from $94.6 billion a year ago. That took the trade deficit to $49.2 billion, compared with $34.5 billion in the same period a year earlier.

Overseas sales of Indian goods in the five months to August 31 grew 35 percent to $81.2 billion, compared with $60.1 billion, the statement said.


Overseas sales of Indian goods in the five months to August 31 grew 35 percent to $81.2 billion, compared with $60.1 billion, the statement said.

India's current account deficit widened to a record in the three months to June as a surge in crude oil prices increased the nation's import bill. The shortfall, the amount by which imports exceed exports, remittances and other income from abroad, increased to $10.72 billion from a $1.04 billion gap in the previous quarter, the Reserve Bank of India said in a statement in Mumbai. Analysts expected a deficit of $11.52 billion.

What most people just don't get, says Chuck Butler is that the bailout "constitutes the single greatest case of ignoring the free market in modern history." And there is actually little justification for it.

"On a historical basis, many parts of the US economy are in awfully good shape," according to Chuck

This from The Sovereign Society:

We're told to believe otherwise because doom and gloom dominates what the mainstream media consistently reports.

One of the biggest fear indicators they use: Employment numbers. After all, Americans don't want to lose their jobs.

But look at the current employment situation on a historical basis: While U.S. job losses are on the upswing, they are fairly modest ... and should be expected in a self-cleansing market.

As my chart shows, taking into account only the last 40 years, today's unemployment rate sits relatively low compared to 1975, 1983, and 1993.

If we play our cards right we could see the current rise in unemployment top out around the same levels as it did roughly five years ago. That would be nothing to panic over.

Let's look at inflation - another economic boogeyman...

Current CPI in the U.S. sits just north of 5%. That's easily less than the roughly 6% to 7% back in 1991. And in 1980, for example, inflation reached almost 15%.

Countries, particularly emerging markets, would kill to have inflation as LOW as 5%!

More to the point, Americans can afford necessary food items as easily as ever. Here's a snippet from an article put together by the Federal Reserve Bank of Dallas last month:

Based on the average U.S. pay rate, it takes less than two hours of work to pay for 12 basic food items - tomatoes, eggs, sugar, bacon, milk, ground beef, oranges, coffee, lettuce, beans, bread, and onions.

That figure is nearly as low as it's ever been.

Consumption may finally be taking a breather, as it should, but discretionary items like computers, DVD players, cell phones, digital cameras and color TVs have become far more affordable. And that even includes those families considered "poor."

Moreover, despite my view that the U.S. government is dipping its hand way too deeply into the markets, making them increasingly less free, it's all a relative game.

Many other countries around the world are either officially in, or about to slip into, recession.

And on a relative basis, because their governments are much more entrenched in the market than Uncle Sam is in ours, their ability to recover is hampered even more.

Why is this an important part of the dollar equation? Because it means that, despite all our warts, it's quite possible the U.S. might still win the global economic beauty contest by getting judged the least ugly.

PS: There are massive changes in store for the world economic system, and currencies will be the battlefield where this change actually takes place. Join Jack as he explores one of the most profitable sub-niches of the currency world and explains how to turn those changes into triple-digit profits. Click here to find out more.

Source: What Could Have Been a $700 Billion Slap in the Face

The Reserve Bank of India this week increased its key rate to a six-year high of 8.5 percent, joining other central banks across Asia in raising borrowing costs as soaring fuel and commodity prices stoke inflation. Some analysts are speculating that Governor Yaga Venugopal Reddy may lift the Indian benchmark by as much as 100 additional base points before the end of the year.

The RBI raised the repurchase rate by 0.5 percentage point on 24 June and lifted the cash reserve ratio to 8.75 percent from 8.25 percent, to prevent money in the banking system from fanning inflation. The move followed a quarter-point increase in the benchmark interest rate to 8 percent on June 11.



Money supply in India's banking system grew 21.4 percent from a year earlier to 41 trillion rupees ($953.5 billion) in the week ended June 6, more than the Reserve Bank's target of 16.5 to 17 percent for the fiscal year ending March.


Soaring food prices are also stoking inflation in India, where more than half the population of 1.1 billion survive on less than $2 a day. Food product costs, including bread, salt, cooking oil and tea, jumped 14 percent in the week to June 14 from a year earlier, according to today's report. Fuel price inflation rose 16.4 percent in the week ended June 14 from a year earlier. India on June 4 raised retail prices of fuels for the second time this year. Higher fuel prices led to higher transportation costs, making manufactured products and food items more expensive.

The index of manufactured products, which has a 64 percent weight in the inflation basket, rose 9.7 percent.

Foreign Exchange Reserves

India’s foreign exchange reserves rose $1.8 billion during the week ended June 20 despite sustained selling by foreign portfolio investors, indicating that the Reserve Bank of India (RBI) was a net buyer of forex assets in the market. The rise in reserves comes after a sharp decline of nearly $5 billion in the previous week. According to the latest data released by RBI, forex reserves, including gold and SDR (special drawing rights) rose $1,794 million during the week ended June 20 to touch $312.5 billion. While foreign currency assets rose $1,789 million, reserves with IMF rose $5 million. The value of gold and SDR — currency with the IMF — remained unchanged during the week.



Thus $1,794-million forex worth of assets were absorbed by the central bank during the week although these assets, even if expressed in dollar terms, include the impact of movements in the value of non-US currencies (such as euro, sterling, yen) held in the reserves. The central bank obviously intervenes to buy and sell assets denominated in a variety of currencies, and even though the currency break-down of India's reserves is not made public, the central bank does reveal the break-down of the SDR-dollar, sterling, euro yen and non-SDR currencies. This data suggests that, over the years, the share of non-SDR currencies - such as the Canadian dollar, yuan and the Australian dollar - in the reserves has been going up.

The Rupee


India's rupee fell by the most in three weeks last week, after crude oil rose to a record and demand consequently rose from importers.India's oil imports have averaged $7.7 billion a month this year, compared with $5.4 billion in 2007.

The rupee seems to be heading for its worst quarter in a decade as accelerating inflation has prompted global funds to sell more Indian equities than they have bought so far this year. The rupee is in fact now the second-worst performer among the 10 most-traded Asian currencies excluding the yen this quarter, and the rally in oil lead the rupee to retreat from the three-week high it touched on Thursday following the decision by the central bank to raise its benchmark interest rate by the most since 2000.

The rupee was down 0.5 percent to 42.88 against the dollar by the 5 p.m. close in Mumbai. That is the biggest fall since June 9.