Housing Weakness Spreads: Some Examples
CNBC "On-Air Stocks" Editor
We are now seeing the weakness in the U.S. housing business spread into other areas:
1) Financials are under pressure because credit quality continues to deteriorate, largely around weakness in home and commercial mortgages.
2) Primedia yesterday lowered it 2007 forecast, hurt by reduced ad spending around the housing slowdown.
3) Wood furniture maker Stanley Furniture missed for the quarter and lowered earnings expectations, whose CEO said "We do not foresee any improvement in the demand environment any time soon." Remember competitor Furniture Brands lowered its outlook last month.
Meantime, the inflation issue is also present in earnings commentary. Look at Domino's , down 12% as earnings came in below expectations. CEO David Brandon cited "unprecedented cost pressures and a weak consumer environment."
In other words, Domino's and other fast food companies are caught between a rock and a pepperoni pizza: food costs are going up, but they cannot raise prices too much or the consumer walks. As a result, their profit margins get squeezed.
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