RETAIL

WAL-MART PROFIT HAS SMALLEST GAIN IN FOUR YEARS

American retailers reported mixed results, with Wal-Mart Stores reducing its annual profit forecast and Home Depot and J.C. Penney raising their outlooks. Shares of Wal-Mart had their biggest decline in eight months.

Wal-Mart, the world’s largest retailer, said yesterday that its second-quarter profit rose 5.8%, the smallest quarterly gain in four years, hurt by record gasoline prices. Home Depot’s income jumped 14% on sales of high-end products such as $900 gas grills. J.C. Penney’s earnings climbed to $131 million, helped by demand for exclusive apparel brands.

Home Depot and J.C. Penney had bigger same-store sales gains than Wal-Mart. Wal-Mart Chief Executive H. Lee Scott, who’s adding merchandise such as $2,220 plasma televisions to attract higher-income shoppers, pinned the retailer’s sluggish sales on gasoline prices that reached almost $2.33 a gallon in July.

Retailers “don’t want to be at the lower end where shoppers make sacrifices,” said Kevin McCreadie, chief investment officer at Baltimore-based Mercantile Bankshares Corporation.

– Bloomberg News

FINANCIAL SERVICES

MORGAN STANLEY HIRES MERRILL EXECUTIVE

Morgan Stanley, the world’s largest securities firm, named Merrill Lynch & Company’s James Gorman to run its retail brokerage, a business whose slumping profits spurred the firm to begin cutting 1,000 jobs earlier this month.

The 47-year-old Mr. Gorman starts in February, replacing John Schaefer, 53, who will leave Morgan Stanley by the end of the year. Mr. Gorman will join Morgan Stanley’s management committee and report to the acting president, Zoe Cruz, the firm said in a statement yesterday.

He will try to revive the business after pretax profit dropped 11% in the second-quarter, compared with a 5.1% increase at Merrill Lynch. The brokerage, which became part of Morgan Stanley when Dean Witter Discover & Company bought the firm in 1997, trails competitors in revenue per broker, costs, and almost every measure of profitability.

“James Gorman’s depth of experience and expertise are unmatched in the industry, making him uniquely qualified to lead the transformation of Morgan Stanley’s retail brokerage business,” the chief executive of Morgan Stanley, John Mack, said in yesterday’s statement.

Mr. Gorman was named head of Merrill’s U.S. brokerage force in May 2000 and became president of the unit in December 2002. He wasn’t immediately available for comment.

He oversaw Merrill’s 14,420 brokers as head of the firm’s private-client unit until June, when Chief Executive Officer Stanley O’Neal named him head of corporate acquisitions, strategy, and research, a new position.

– Bloomberg News

FOUR FIRMS INVEST IN PHILADELPHIA EXCHANGE

Morgan Stanley, Citigroup, UBS AG, and Credit Suisse First Boston agreed to invest almost $20 million in the Philadelphia Stock Exchange, giving Wall Street firms control of the fourth-biggest American options market.

Morgan Stanley, the world’s biggest securities firm by market value, is paying $7.5 million for 10% of the exchange, plus an option to almost double its stake. For $3.75 million each, Citigroup, CSFB, and UBS receive 5% stakes.

They’ll have the right to increase that to 9.9%.

As investors, the firms may profit from lower costs and the increasing value of a market that’s growing 30% a year.

Together with Merrill Lynch & Company and Citadel Investment Group LLC, which made similar investments in June, the firms may end up owning almost 90% of the money-losing Philadelphia exchange as early as June 2006.

“The attitude of the big investment banks is if they do most of the trading in these big exchanges, why not own the exchange itself?” said Peter Thorne, a London-based analyst at Helvea SA who has a “positive” rating on UBS and CSFB parent Credit Suisse Group. “Why do they have to go through someone else’s computers and let them earn a bit of money?”

The exchange’s chief executive officer, Meyer “Sandy” Frucher, said in April that it needed a partner to survive as rivals such as the New York Stock Exchange made acquisitions.

– Bloomberg News

IN THE COURTS

JPMORGAN TO PAY $350M TO SETTLE ENRON CLAIMS

JPMorgan Chase & Company, the third-largest American bank, and Toronto-Dominion Bank settled claims they helped the former management of Enron engage in fraud, agreeing to pay a total of $480 million in cash.

Enron said yesterday that JPMorgan will pay $350 million and drop claims against the company valued at $660 million. Toronto-Dominion, Canada’s second-largest bank, said it will pay Enron $70 million in cash and an additional $60 million for claims against Enron the bank sold to other investors. The settlements bring JPMorgan’s Enron costs in cash and foregone recovery of debt to $3.2 billion, including a $2.2 billion agreement two months ago in a separate investor lawsuit.

Citigroup, the biggest American bank, Deutsche Bank AG, and Merrill Lynch & Company still are negotiating claims they also helped Enron hide debt and inflate revenue.

– Bloomberg News

TRADE

CANADA SUSPENDS LUMBER TALKS WITH AMERICA

TORONTO – Canada suspended talks with America yesterday on their ongoing lumber dispute to protest Washington’s refusal to heed a NAFTA panel ruling that sided with the Canadian position.

A meeting that had been scheduled for next Monday to start the next round of talks in the dispute has been canceled, the trade minister of Canada, Jim Peterson, announced.

Last week, a NAFTA panel dismissed Washington’s claims that Canadian softwood exports are subsidized by Ottawa and damage the American lumber industry.

Ottawa called on Washington to immediately return about $4.1 billion in anti-dumping duties collected from Canadian lumber companies since 2002. American builders say the duties drive up the cost of constructing or remodeling homes.

Washington refused, saying the ruling didn’t end the matter because it did not deal with a 2004 decision by the U.S. International Trade Commission, which supported the American case. U.S. Trade Representative Rob Portman pledged to keep in place punitive tariffs on Canada and seek a negotiated settlement.

– Associated Press