Business briefing

The daily business briefing: July 25, 2017

Fashion brand Michael Kors agrees to buy Jimmy Choo, Democrats unveil new economic agenda, and more

1

Michael Kors to buy Jimmy Choo for $1.2 billion

U.S. fashion brand Michael Kors announced Tuesday that it had agreed to buy luxury shoemaker Jimmy Choo for $1.2 billion. The shoe company, launched in the 1990s in the east end of London, is known for its stiletto heels and famous fans. Jimmy Choo put itself on the market in April as majority shareholder JAB said it wanted to focus more on consumer goods. Michael Kors, once the dominant leader of the "accessible luxury market," is the latest retailer to seek deals offering new sources of growth as retail sales decline. It downgraded its 2017 sales forecast in May and said it would close up to 125 of its stores.

2

Democrats release new economic agenda

House and Senate Democratic leaders on Monday unveiled their party's new economic agenda, "A Better Deal: Better Jobs, Better Wages, Better Future." The plan is a response to Democrats' disappointing performance in 2016; Senate Minority Leader Chuck Schumer (D-N.Y.) has admitted "the number one thing that we did wrong is we didn't tell people what we stood for." The agenda promotes the middle class and prioritizes fighting corporate overreach. It includes an extensive infrastructure plan, paid family leave, more federal funding for job training, and an independent agency to monitor prescription drug prices.

3

Alphabet revenue rises, but costs rise faster

Google's parent company, Alphabet, reported quarterly earnings that beat Wall Street expectations, although it warned that its costs were increasing at a faster pace than sales. Revenue rose by 21 percent, but the cost of revenue increased by 28 percent. The company also said that spending would remain high as search traffic continues to shift from home computers to mobile devices. "This could be problematic going forward," said Doug Kass, president of Seabreeze Partners Management.

4

Fed starts meeting with no interest-rate hike expected

Federal Reserve starts its two-day July meeting on Tuesday, and economists expect it to hold off on raising interest rates again while it waits to see whether inflation bounces back from a slowdown. The latest data showed that a key inflation gauge monitored by the Fed had risen just 1.4 percent in the last 12 months, down from 1.9 percent in January and considerably short of the Fed's goal of 2 percent. When inflation gets too low, consumer spending can slow because people often hold off on key purchases to see if prices go down. That deprives the economy of its main fuel.

5

Drug-test failures hurt hiring and manufacturing

So many workers are failing drug tests that it is beginning to hurt the economy. The problem is hitting manufacturers especially hard, The New York Times reported Monday. Due to the abuse of prescription opioids and growing use of marijuana, employers in the upper-Midwest rust belt find that sometimes a quarter, even half of the people applying for factory jobs fail their drug tests, sometimes depriving manufacturers of workers and forcing them to lose orders to foreign rivals with what one CEO called "a better labor pool." The Federal Reserve's Beige Book surveys of economic activity noted the problem in April, May, and July, and Fed Chairwoman Janet Yellen told Congress this month that increased opioid abuse was hampering labor-force participation by prime-age workers.

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