Seeking a leader for the next leg of its turnaround, Kmart (KMRT) on Oct. 18 named restaurant industry veteran Aylwin Lewis, 50, as chief executive. Lewis, a marketing expert, replaces Julian Day, whose finance skills helped guide the company through bankruptcy. Since January, 2003, Lewis had been president and chief operating officer at Yum! Brands (YUM), which runs KFC, Taco Bell, Pizza Hut, and other restaurants. At Yum, he was credited with expanding multibrand outlets and fostering teamwork. Edward Lampert, Kmart's controlling shareholder and chairman, said Lewis' brand expertise will help better position Kmart against No. 1 Wal-Mart Stores (WMT) and No. 2 Target (TGT). "He will be able to define and communicate what Kmart stands for," Lampert says.
Since Kmart emerged from bankruptcy in 2003, it has returned to profitability. But it has yet to reverse falling sales. Analysts expect Lewis to capitalize on Kmart's strong presence in urban markets. Pulling that off could be far more difficult than selling pizza.
Motorola's hot streak continued, with its third consecutive quarter of impressive earnings on Oct. 19. The communications giant said net income quadrupled in the third quarter to $479 million, up from $116 million last year. Motorola has aggressively cut costs, in stark contrast to rival Nokia (NOK), which is seeing profits shrink. Higher selling prices at Motorola's flagship cell-phone unit translated into a 26% hike in revenues vs. Nokia's 1% rise. But volume hasn't kept pace, so Motorola's 16% market share in phones isn't growing. Worse, investors frowned on Motorola's forecast of $9.3 billion to $9.6 billion in sales for the fourth quarter, sending its shares down 8%, to $17.09, on Oct. 20.
3M (MMM) Chief Executive W. James McNerney Jr.'s worries about whether global demand will remain strong, combined with third-quarter earnings per share that fell a penny short of expectations, weighed on 3M's stock. After 3M released results on Oct. 18 and McNerney expressed caution about the world economy, shares dropped 3.3% over two days, falling below $76. With more than half its sales coming from overseas, the maker of films and components used in computers, cell phones, and other gear is vulnerable to any hiccup in global demand. 3M reported a 17% rise in quarterly profits, to $775 million, on a 7.6% gain in sales, to $4.97 billion.
The auto and airline industries have been targeted by a Securities & Exchange Commission investigation of accounting for pension and retiree medical plans. General Motors (GM), Ford Motor (F), auto-parts maker Delphi (DPH), and Northwest Airlines (NWAC) have disclosed requests from the SEC for documents, including e-mails, relating to estimates the companies used to calculate pension expenses and obligations. As first reported in BusinessWeek (BW -- Oct. 25), the SEC wants to see whether corporate managers tinkered with assumptions, including the expected rate of return, to enhance earnings and balance-sheet numbers. The SEC has not found evidence of wrongdoing by any of the companies it contacted.
Heads are rolling at Citigroup (C). A month after Japanese authorities shut down the Citi's private banking operations for lax money-laundering controls, CEO Charles Prince III has cleaned house. On Oct. 19, three of his top lieutenants resigned -- including Deryck Maughan, chairman of Citigroup International, who is credited with achieving a 30% gain in international earnings last year. Prince also pushed out Thomas Jones, head of the bank's asset-management business, and Peter Scaturro, head of Citigroup Private Bank. The three resigned after an independent probe by former U.S. bank regulator Eugene Ludwig. The trio could not be reached for comment. Citi declined to discuss the departures.
-- J. P. Morgan Chase's quarterly profit fell 13% after its Bank One purchase.
-- IBM's (IBM) quarterly revenues gained 9%, as profits rose 12%, excluding special items.
-- eBay (EBAY) reported a 77% gain in quarterly profit.
Shares of Eastman Kodak (EK), which have had a fine run, fell 9% on Oct. 20, to $29.60. The culprit: third-quarter revenue growth of just 1%. Even a 39% surge in digital products couldn't offset a 13% decline in Kodak's much larger traditional film-based business.