QUOTE OF THE DAY
“With the warmer weather and the ‘promise’ of higher prices, more homeowners put their homes on the market.”
Jennifer Lee,
BMO Capital Markets senior economist
Article, 1D
30-year mortgage rate falls to 4.14%
WASHINGTON — Average U.S. rates on fixed mortgages fell this week for a fourth-straight week.
Mortgage buyer Freddie Mac, the Federal Home Loan Mortgage Corp., said Thursday that the average rate for a 30-year loan declined to 4.14 percent from 4.20 percent last week. The average for the 15-year mortgage eased to 3.25 percent from 3.29 percent.
Higher spring temperatures have yet to drive up homebuying as they normally do. Rising prices and higher borrowing rates have made affordability a problem for would-be buyers.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged from a week earlier at 0.6 point. The fee for a 15-year loan declined to 0.5 point from 0.6 point.
Investor starts fight over Red Lobster sale
Darden Restaurants Inc. investor Starboard Value LP is starting a proxy battle to take over the board, seeking to block the company’s deal to sell the Red Lobster chain for $2.1 billion.
Starboard, which owns about 6.2 percent of Orlando, Fla.-based Darden, nominated a slate of 12 directors for election at the restaurant company’s annual meeting, according to a letter to shareholders Thursday. If approved, the directors would replace the entire board.
Darden drew the ire of Starboard in December when it first proposed selling or spinning off Red Lobster, a seafood chain that has suffered from declining sales. Starboard sought for shareholders to vote on the idea, only to see Darden make a deal with Golden Gate Capital last week to sell Red Lobster.
“The Red Lobster sale is unquestionably a bad deal for shareholders,” Starboard said in the letter. “Despite the current management and board’s obvious contempt for shareholder interests, a tremendous opportunity still exists to unlock substantial value at Darden. However, realizing this opportunity will require substantial change to the composition of the board.”
Darden shares rose 82 cents to close at $49.51 on the New York Stock Exchange. The stock had dropped 10 percent this year.
Best Buy posts profit after cutting costs
NEW YORK — Cost cuts helped consumer electronics retailer Best Buy record a stronger-than-expected profit in the first quarter, but sales continued to be weak as shoppers hold off for new product launches of smartphones and tablets expected in the fall. Adjusted earnings beat expectations, but sales fell short of Wall Street estimates. And Best Buy said it expects revenue in stores open at least 14 months, a key retail metric known as same-store sales, will fall in both the second and third quarters. Best Buy is grappling with a weak consumer electronics industry and increased competition from online stores, notably Amazon.com, and discounters such as Wal-Mart. Under Chief Executive Officer Hubert Joly, the company has been trying to turn around results, revamping merchandise, training employees and cutting costs. Best Buy said its net income was $461 million, or $1.31 per share. That’s a turnaround from a loss of $81 million, or 24 cents per share, a year earlier. That includes a one-time tax structure change that helped earnings by $1.01 per share. Adjusted earnings were 33 cents per share. That beat analysts’ average estimate of 19 cents per share, according to FactSet. Total revenue fell 3 percent to $9.04 billion from $9.35 billion. Analysts polled by FactSet expected $9.23 billion. Shares rose 87 cents, or 3.4 percent, to close Thursday at $26.22.
— The Associated Press
Marathon to acquire Hess gas stations
FINDLAY, Ohio — Marathon Petroleum will spend $2.87 billion to acquire the retail operations of Hess, the largest chain of company operated gas stations and convenience stores on the East Coast. The deal, which is being orchestrated under subsidiary Speedway LLC, will expand Marathon’s retail operations from nine states to 23 states along the coast and in the Southeast. Hess Corp. has been reshaping itself as a pure production and exploration company since coming under pressure from hedge fund Elliott Capital Management in 2013. It said last year it would seek a buyer for its retail operations. Hess will use proceeds from the sale for additional stock buybacks. The company increased its existing share repurchase authorization to $6.5 billion from $4 billion. The deal announced Thursday consists of $2.37 billion in cash, an estimated $230 million of working capital and $274 million of capital leases. The transaction includes all of Hess’ retail locations, transport operations and shipper history on various pipelines, including approximately 40,000 barrels per day on Colonial Pipeline that runs from New York to Houston. The acquisition is expected to close late in the third quarter. Hess stock gained 99 cents, or 1.1 percent, to close at $90.29.
— The Associated Press
EU: Holiday pay must count commissions
The European Union’s Court of Justice ruled Thursday that commissions must be part of holiday compensation, saying pay during time off can’t be based on basic salary alone.
The ruling “is likely to affect those in the banking and insurance industries where commission is often paid on the amount of sales or trades achieved over monthly periods,” said Jo Keddie, an employment lawyer at Winckworth Sherwood in London. “The financial consequences could be very significant” and businesses may decide to reduce commission and introduce more discretionary bonuses, she said.
Sales staff may be deterred from taking time off they are entitled to if they don’t get higher vacation pay, according to the ruling, that stemmed from a U.K. case involving a salesman at British Gas Trading Ltd. He argued that his vacation pay should also be based on the 60 percent of his average remuneration that he gets from commission on sales.
The case was backed by Unison, the U.K.’s largest union, which said last year that the man wouldn’t take more than five consecutive days of annual leave to avoid losing pay.
— Bloomberg News