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Technology | Retailers reported the first lackluster sales of the year in June, as many department stores fell far short of expectations

Issue: "UN's abuse of power," July 24, 2004

Salad days While McDonald's is firmly entrenched as the world's No. 1 restaurant chain with more than $22 billion in U.S. sales alone last year, the battle for second place is heating up this summer. An industry analyst says Wendy's and Burger King each recorded $7.3 billion in sales last year with Wendy's growing at a faster rate, making it likely that Wendy's will surpass Burger King for the No. 2 spot this year. Neither restaurant is relying on its traditional burger and fries to fire up sales. Instead, new health-conscious items are bringing more customers through the doors. Since introducing its Garden Sensations salads in 2002, Wendy's sales have steadily grown. That has led the company to announce plans to double its number of restaurants in the next 10 years. The company is also marketing itself more toward adults, emphasizing its late hours and lack of playground areas. Meanwhile, Burger King has closed more than 200 stores in the past year. CEO Brad Blum resigned this month as franchisees became increasingly discontent with the direction of the company. Burger King has changed its marketing strategy five times since 2001 under Mr. Blum: "I don't even know what they stand for anymore." Summertime sales blues Retailers reported the first lackluster sales of the year in June, as many department stores fell far short of expectations created by robust sales through the first five months of the year. "Everything from economic factors to weather pushed down sales," said Michael P. Niemira, chief economist at the International Council of Shopping Centers. Mr. Niemira's sales survey of 73 retailers was up only 2.9 percent, the weakest performance since June 2003. The International Council of Shopping Centers' tally is based on what the industry calls same-store sales, or business at stores open at least a year. From January through May, merchants had enjoyed an average same-store sales gain of 6 percent. Wal-Mart, the world's largest retailer, said same-store sales rose just 2.2 percent in June from a year ago. Others announcing lower-than-expected June sales were Target Corp., Gap, Nordstrom, Federated Department Stores Inc., and Sears. Those coming in with higher-than-anticipated sales were Limited Brands, Neiman Marcus, Saks, May Department Stores, and J.C. Penney. For the remainder of the year, Mr. Niemira predicts sales will slow to a more sustainable rate of 4 percent. Balance Sheet • Mortgage company Freddie Mac reported last week that rates on 30-year and 15-year fixed-rate mortgages fell for the third week in a row and were at their lowest levels since the spring. Those falling rates are seen as temporary. Forecasters predict rates will again start to slowly climb through next year. • McDonald's Corp. was sued in federal court for failing to switch to a lower-fat cooking oil as it had promised to do by February 2003. The company delayed those plans because of product quality and customer satisfaction concerns. • Shipping line operators and clerical workers reached a tentative agreement on a new contract last week, averting a strike that could have shut down the nation's largest port complex in Los Angeles and Long Beach. In return for pay increases and improved retirement benefits, shipping lines can update their systems with new technology so customers have more efficient access to information needed to move products. • Leonard Tow, chief executive of Citizen Communications Co., resigned on July 11 from the telecommunications company he has led since 1990. In recent months, Citizen has explored the possibility of selling the company, which serves primarily residential phone customers in Arizona, California, Minnesota, New York, and West Virginia.

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