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Closing Bell: Williams-Sonoma


Will Toys 'R' Us (TOY) keep its first name? That's what Chief Executive John Eyler Jr. has to decide. After announcing on Aug. 11 that he may spin off the company's Babies 'R' Us unit and sell its core toy business, Eyler told analysts on Aug. 24 that talk of selling may be premature. "The past few months have been a time of rigorous reevaluation for Toys 'R' Us," Eyler said. "The next 120 days are key."

When it released its second-quarter results on Aug. 24, Toys 'R' Us topped Wall Street's estimates. But margins are miserable thanks to intense competition from Wal-Mart Stores (WMT) and others. In the first half of the year, Toys 'R' Us lost $207 million, on $4.1 billion in sales.

To turn things around, analysts say Eyler is working on a last-ditch strategy. One idea: Adding food and arcade games in some of its 684 stores, creating a "toy fair" environment. Such an idea couldn't be implemented until next year. Meantime, the holiday selling season is just around the corner and Eyler needs strong sales to buy time.

Is the worst over for Royal Dutch/Shell Group (RD)? On Aug. 24, Britain's Financial Services Authority said it was fining Shell about $31 million for "committing market abuse" by misstating its proven reserves between 1998 and 2003. It's the largest fine ever imposed by the FSA and comes on top of the $120 million settlement that Shell has agreed to pay the Securities & Exchange Commission. Shell settled without admitting or denying regulators' claims. Jeroen van der Veer, chairman of Shell's committee of managing directors, said the settlements represent "another significant step for Shell in putting the reserves issues behind us." But regulators on both sides of the Atlantic are still probing. The SEC is investigating the individuals involved, while the FSA says it is looking into "other aspects" of the matter.

Singapore Airlines dealt Boeing (BA) a blow by deciding not to order the new 7E7 aircraft. With most U.S. airlines hobbled financially, Boeing is looking for foreign customers for the 7E7, a midsize jet that promises 20% better fuel efficiency than existing planes. But after securing a launch order of 50 7E7s from Japan's All Nippon Airways (ALNPY) earlier this year, Boeing has logged no other firm orders for the plane. Singapore said that the 7E7 "did not meet [its] financial criteria." Singapore is considered a trendsetter, and carriers such as Malaysia Airlines and Cathay Pacific Airways were waiting to see whether it would pick the 7E7. Boeing got a consolation prize, though, as Singapore ordered 13 Boeing 777s, giving it a victory over arch-rival Airbus.

Moving to bolster its digital photography business, Eastman Kodak (EK) on Aug. 24 announced it was buying a National Semiconductor (NSM) unit that develops and makes image sensors. The deal, terms of which were not disclosed, represents another step in Kodak's move away from traditional film. National Semi's image-sensor chips could help Kodak break into the market for cameras in cellular phones and other handheld devices. Kodak plans to spend $3 billion by 2006 to capture more share in the growing digital imaging business.

Higher interest rates are taking a toll on housing demand. On Aug. 25, the Commerce Dept. reported that July sales of new homes fell 6.4%, to a 1.13 million annual pace. Although still high by historical standards, that marks the lowest rate since December. The Mortgage Bankers Assn., meanwhile, said that new applications for home loans fell 6.3%. "There is some inevitable cooling off from the second quarter, which was an all-time high," said David Seiders, chief economist at the National Association of Home Builders. He still expects new home sales to hit a record this year, up 7% from 2003 to 1.16 million.

-- The founding family will lose a controlling interest in winemaker Robert Mondavi (MOND) under a reorganization plan.

-- H&R Block (HRB) posted a $44.1 million first-quarter loss.

-- General Motors (GM) pulled an ad showing a boy driving a Corvette following protests by consumer safety groups.

Sales are cookin' at Williams-Sonoma (WSM). Shares of the kitchenware and furniture retailer jumped 10%, to $34.64, on Aug. 25 after it reported strong quarterly results, due largely to strength at its Pottery Barn chain. The retailer also raised its forecast for the year.


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