Schwab Reports 10% Decline in Earnings After Slashing Fees
Charles Schwab Corp., the biggest discount brokerage, said Friday that first-quarter profit fell 10% after it slashed fees to gain market share.
The San Francisco-based company said net income in the three months ended March 31 was $145 million, or 11 cents a share, compared with $161 million, or 12 cents, a year earlier. Schwab was expected to earn 12 cents a share, analysts polled by Thomson First Call said.
Revenue fell 4% to $1.06 billion, Schwab said in a statement.
Schwab, fighting to wrest business from competitors such as E-Trade Financial Corp. and Ameritrade Holding Corp., said in February that it would cut online trading commissions by more than a third. And last month, it announced a 32% reduction in the fee it charges on options contracts.
“We feel our turnaround is well underway,” Chief Financial Officer Christopher Dodds said. “Our focus now is shifting a bit more away from the cost structure and more toward top-line growth.”
Schwab shares fell 10 cents Friday to $10.12 on the New York Stock Exchange.
Schwab Chief Executive Charles Schwab, 67, last month declined his annual bonus for a third year, sharing responsibility for a stock price worth as much today as it was in September 2001. His bonus would have been $4.5 million, according to a regulatory filing.
“Even as we have reduced the average amount our clients pay for a trade by over 45%, revenues declined by just 4% versus a year ago due to our continued success in building non-trading revenues,” Charles Schwab said in the statement.
Excluding restructuring costs for job cuts and its exit from the capital markets business, Schwab’s first-quarter operating profit was 12 cents a share.
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In other earnings news:
* Citigroup Inc. said first-quarter earnings rose 3.2%, helped by lower credit losses at its consumer bank division. Net income climbed to $5.44 billion, or $1.04 a share, from $5.27 billion, or $1.01, a year earlier. Revenue rose 6% to $21.5 billion.
* Wachovia Corp. said first-quarter profit rose 30% to an all-time record, spurred by growth in consumer loans, deposits and debit cards. Net income for the Charlotte, N.C.-based banking giant rose to $1.62 billion, or $1.01 a share, from $1.25 billion, or 94 cents, a year earlier.
* Tribune Co., which publishes the Los Angeles Times and the Chicago Tribune, reported a 19% increase in first-quarter net income despite a 9% drop in newspaper circulation and lower broadcast revenue. Revenue fell 1% in the quarter, but a tax gain and improvements in investments and other non-operating areas resulted in higher profit.
* Knight Ridder Inc. said its first-quarter earnings rose 8% on advertising revenue. Quarterly net income was $60.5 million, or 79 cents a share, up from $55.9 million, or 70 cents, for the same period last year. Revenue rose 1.7% to $724.7 million.
* Shares of Pasadena-based Avery Dennison Corp. fell Friday, one day after the world’s biggest maker of labels said first-quarter profit was about 10 cents a share below the low end of a previous forecast because inventory reserves grew. Avery shares fell $6.87, or 11%, to $53.01 in New York Stock Exchange trading of 3.7 million shares, more than seven times the three-month daily average.
* Petco Animal Supplies Inc. said it might trim fourth-quarter net income by as much as 16% because of expense accounting errors. San Diego-based Petco said it had asked the Securities and Exchange Commission for a 15-day extension to file its annual report and was working to determine whether results for the fourth quarter ended Jan. 29 would require a restatement. The reduction would cut net income by $3 million to $4.5 million and earnings per share by 5 cents to 7 cents.
* CKE Restaurants Inc. said it would restate its previous earnings reports to include about $2.6 million in lease-related expenses. The revisions are related to an SEC rule that changed the way companies account for leases. The changes would not affect its cash flow, conditions of its credit or income statements after fiscal year 2002, Carpinteria, Calif.-based CKE said.
* Kroger Co., the largest U.S. grocer, trimmed the cost of writing down the value of two chains, reducing its fourth-quarter loss by 4 cents a share. The net loss in the quarter ended Jan. 29 was 89 cents a share rather than the 93 cents reported in a preliminary statement last month.
