Shares of the company, which also said it was considering
selling its service contracts business, fell 12 percent to
$51.41 in heavy trading after the bell.

The disappointing results came just months after Chairman
and controlling shareholder Eddie Lampert took over as chief
executive from Louis D’Ambrosio, who stepped down due to a
family member’s health issue.

Some on Wall Street saw D’Ambrosio’s departure as adding to
Sears’ risks, and worried that Lampert’s lack of retail sales
experience could hurt the company’s attempt to turn around its
core Sears department stores and Kmart chains.

The retailer is trying to revive itself after suffering from
declining sales since 2005, when the hedge fund manager merged
the two iconic U.S. retail chains in an $11 billion deal.

It has been closing stores, tightly managing inventory,
selling real estate and shedding assets.

“(We) intend to reduce our expenses by $200 million and did
so by $46 million in the first quarter. We plan to reduce our
inventory at peak by $500 million (in the year),” Chief
Financial Officer Robert Schriesheim said on a post-earnings
call with analysts.

BRIGHT SPOT

Under a plan to shore up liquidity by at least $500 million
by the end of 2013, the company said it was considering selling
its protection agreement unit.

The business provides customers with service contracts that
include repair services and product replacements for damaged
goods.

“These alternatives could, if successful, create additional
liquidity, in excess of our minimum target of $500 million,”
Schriesheim said in a statement.

Imperial Capital analyst Mary Ross Gilbert said she
understood Sears’ rationale behind selling the services
contracts business, calling it one of the few “bright spots” in
the company’s overall business.

“I think the unit they talked about selling is a very
profitable business, a good business, and the kind of stepping
away from that, this is the only option they have as they are
burning through so much cash,” Gilbert said

A financial entity rather than a rival would be the most
likely buyer, she said.

RESULTS DISAPPOINT AGAIN

The company reported a net loss of $279 million, or $2.63
per share in the quarter ended May 4, compared with a profit of
$189 million, or $1.78 per share, a year earlier. Analysts on
average had expected a loss of 60 cents per share.

Same-stores sales fell 3.6 percent in the United States.
Overall sales fell 9 percent to $8.5 billion, missing the
average analyst estimate of $8.74 billion, according to Thomson
Reuters I/B/E/S.

The retailer has also been facing cut-throat competition
from discounters Wal-Mart Stores Inc and Target Corp
, department stores and online rivals.

Target cut its full-year profit forecast earlier this week,
and posted disappointing sales in the first quarter as a chilly
start to spring kept shoppers from buying seasonal items like
clothing.

Wal-Mart also posted weaker-than-expected quarterly earnings
earlier this month and said its profit for this quarter might
miss analysts’ forecast.

Sears shares, which have risen 14 percent over the past
year, closed at $58.17 on the Nasdaq on Thursday.

(Reuters) – Private equity firm Apax Partners LLP has agreed to acquire rue21 Inc (RUE.O: Quote, Profile, Research, Stock Buzz) for about $1.1 billion, attracted by the teen-apparel retailer’s growth and cash flow and keen to add to a retail portfolio that includes Cole Haan and Takko Fashion.

Rue21 said on Thursday that Apax, whose old funds already own a 30 percent stake in the company, will pay $42.00 per share in cash, representing a premium of 23 percent to its Wednesday close. Shares of the company jumped to $41.90.

“The Rue21 deal confirms that private equity remains very active in the specialty retail space”, Jefferies analysts wrote in a research note on Thursday. On April 25, the analysts had highlighted the company as a potential takeover target.

In March, private equity firm Sycamore Partners agreed to buy apparel retailer Hot Topic Inc (HOTT.O: Quote, Profile, Research, Stock Buzz) for about $600 million while in February Apax completed its acquisition of Nike Inc’s (NKE.N: Quote, Profile, Research, Stock Buzz) handbag and shoe brand Cole Haan for $570 million.

Rue21 has been expanding aggressively, opening 125 stores in fiscal 2012 and aiming to open its 1,000th store in the fourth quarter of 2013 and eventually cross the 1,700 store mark. It has been generating enough free cash flow to buy back shares.

Apax is paying about 20 times rue21′s 12-month projected earnings per share, compared to a 14 times average for rue21′s peers, according to Thomson Reuters data. It will invest using buyout funds that do not currently own a stake in the company.

The retailer said it has set up a special committee of independent directors to solicit and evaluate higher bids during a 40-day go-shop period. Two Apax dealmakers who sit on rue21′s board recused themselves from the deliberations.

This is because around 30 percent of the company is owned by funds managed by Saunders Karp & Megrue, a New York-based private equity firm that merged with Apax in 2005. The company said the termination fee of about $10 million to be paid to Apax, were the private equity firm to be outbid, was low.

The special committee is being advised by Perella Weinberg Partners, as financial adviser, and Kirkland & Ellis LLP and Potter Anderson & Corroon LLP, as legal advisers.

Apax was advised by J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Goldman Sachs. Simpson Thacher & Bartlett LLP and Richards, Layton and Finger, P.A. acted as legal advisers.

(Reporting by Siddharth Cavale in Bangalore; Editing by Roshni Menon)

Shares of Occidental rose 3.7 percent to a two-month high on
Thursday, but they are still down about 3 percent in the past
year, compared with a 15 percent rise for California rival
Chevron Corp.

Occidental Chief Executive Stephen Chazen, who would not
comment on the timing of his departure while the board seeks the
66-year-old’s eventual replacement, said the lower stock price
meant there would “probably” be share buybacks in its future.

Chazen said a weaker stock value also meant he would have to
take a harder look at possibly selling parts of the company or
hiving assets off into tax-favorable master limited partnerships
(MLP), though he wanted any such deals to move the needle.

“I do not want to go down the path of a sort of delicatessen
approach to this where you slice a piece of baloney off and
throw it to the wolves,” he told analysts on a conference call.

Besides the United States, which accounts for nearly
two-thirds of Occidental’s production, the company has assets in
Latin America and the Middle East.

Asked by one analyst about a potential move with its Middle
East business as an example, Chazen talked hypothetically of
splitting the entire thing as being easier than selling off one
country at a time, which would require approvals. There was “no
shortage of suggestions” for deals to make, he added.

“You start looking for things that move the needle a lot,
rather than things to fine-tune,” Chazen said, characterizing an
MLP as fine-tuning.

Breakingviews story on potential Oxy moves

The company is fending off reports of a “fight at the top”,
which led its board to publish a statement this month denying
any conflict and explaining that its search for a new CEO was
part of a succession plan.

Occidental’s first-quarter net profit fell to $1.36 billion,
or $1.68 per share, from $1.56 billion, or $1.92 per share, a
year earlier. Excluding items, it made $1.69 per share, topping
the average analyst estimate of $1.54 per share, according to
Thomson Reuters I/B/E/S.

Revenue fell 6 percent to $5.87 billion in the quarter.

Chazen said the company was ahead of schedule with its
cost-cutting program unveiled last October and aimed at reducing
U.S. drilling costs by 15 percent this year, a response to a
tough 2012 in which costs escalated along with production
increases.

U.S. operating costs fell to $14.06 per barrel in the first
quarter from $16.44 per barrel a year earlier.

Most of the cost-cutting effort is focused on California,
which accounts for about a third of its oil and gas output.

“The highlight was impressive progress on cost reduction
initiatives,” analysts at Simmons & Co wrote. “Total company
production was slightly below our expectation.”

Daily oil and gas production averaged 763,000 barrels of oil
equivalent (boe) in the quarter, up from 755,000 boe a year ago.

Oxy said oil prices rose 2 percent from the fourth quarter,
while natural gas prices fell 11 percent on the same basis.

Occidental’s stock rose 3.7 percent to $87.49 in afternoon
trading on the New York Stock Exchange on Thursday.

The deal could raise up to $1.2 billion for Caesars, which
was taken private by a consortium led by the two private equity
firms in 2008 for $30.7 billion, went public last year, and is
struggling to cope with a debt mountain in excess of $24.1
billion.

Caesars shares leaped 34 percent after the announcement to a
one-month high of $16.76 as investors welcomed the terms of the
deal.

Caesars said on Tuesday it would retain majority ownership
of a newly created entity, Caesars Growth Partners LLC, that
will raise cash from TPG, Apollo and existing Caesars
shareholders to buy assets from Caesars.

Caesars Growth Partners will own the company’s online
business, Caesars Interactive Entertainment, as well as the
Planet Hollywood Resort & Casino in Las Vegas, and Caesars’
interests in the Horseshoe Baltimore casino under development.

“The transaction enables us to raise equity capital at
attractive valuations without diluting stockholders of Caesars
and provides Caesars additional cash liquidity without incurring
new debt,” Caesars Chief Executive Gary Loveman said in a
statement.

TPG and Apollo currently own about 70 percent of Caesars.
The valuations of their funds have suffered as a result of their
investment in the company, which has been burning cash to
service its debt load while struggling to recover from a slump
in gambling revenues bought about by the 2008 financial crisis.

Caesars is now trying to position itself for a boom in
gambling on the Internet. The legalization of online gambling in
New Jersey this year, following similar legislation by Nevada
and Delaware last year, is expected to persuade other U.S.
states to change their laws.

“Maybe there’s some benefit to raising additional capital to
grow the online division, but have the prospects changed? No.
The casino market is saturated. Caesars has terrible returns,
about 3 percent return on invested capital, versus 30 percent by
Asian operators,” said Chad Mollman, an analyst with
Morningstar.

Caesars is expected to own as little as 57 percent and as
much as 77 percent of Growth Partners depending on the amount of
proceeds raised through the sale of shares, and will receive a
call option that allows it to repurchase all of the economic
interest and control of the assets in the future.

Growth Partners will get $500 million from Apollo and TPG.
If all subscription rights are exercised by Caesars
shareholders, Growth Partners should receive about $1.2 billion,
the company said.

Caesars will contribute to Growth Partners its ownership of
Caesars Interactive Entertainment and approximately $1.1 billion
face value of senior notes issued by a Caesars subsidiary.

The value of the assets to be contributed or sold was
evaluated by a valuation committee of three of Caesars’
independent directors, Caesars added. The valuation committee
received financial advice from Evercore Partners and legal
advice from Morrison & Foerster LLP.

(Reuters) – Leather goods retailer Coach Inc (COH.N: Quote, Profile, Research, Stock Buzz) reported higher-than-expected quarterly sales after expanding into clothing and shoes to compete with emerging rivals, sending its shares up 11 percent in morning trading.

Coach, which relaunched itself this year as a “lifestyle brand” after demand for its premium handbags began to sag, beat Wall Street expectations by boosting sales in North America in the third quarter.

Same-store sales in its biggest region rose 1 percent in the quarter ended March compared to a year earlier, reversing a 2 percent decline in the preceding holiday quarter.

“The two biggest positives in the quarter were North America same-store sales and gross margins being better than anticipated,” Edward Jones analyst David Yarbrough told Reuters.

Gross margins in the quarter rose 0.35 percentage points to 74.1 percent. Yarbrough attributed the margin rise to the higher sales in North America.

The New York-based company is facing competition at home from rivals such as Michael Kors Inc (KORS.N: Quote, Profile, Research, Stock Buzz) and Fifth & Pacific’s (FNP.N: Quote, Profile, Research, Stock Buzz) kate spade, whose competitively priced clothing and accessories have gained popularity and eaten into Coach’s market.

To compete, Coach unveiled a new strategy in January to expand into footwear and clothing, spooking investors with the notion that strong demand for its handbags — some of which sell for as much as $1,200 — may be easing.

“Our new footwear assortment, which launched during March in over 170 stores in North America and 60 directly operated stores internationally, has been very well received,” Victor Luis, the company’s chief commercial officer, said in a statement.

Coach’s overall sales in North America, including online sales, rose 7 percent in the quarter. North America accounted for about two-thirds of the company’s sales during the period.

“The footwear strategy is working and holding up very well, which is leading to increased traffic as well as number of transactions,” Citi analyst Oliver Chen said.

International sales rose 6 percent to $382 million in the quarter, driven by a 40 percent rise in sales in China. The company did not give a dollar figure for its Chinese sales.

Overall, the company’s revenue rose 7 percent to $1.19 billion in the third quarter, beating the average analyst forecast of $1.18 billion, according to Thomson Reuters I/B/E/S.

Net income rose to $239 million, or 84 cents per share, for the quarter ended March 30 from $225 million, or 77 cents per share, a year earlier.

Analysts on average had expected the company to report per-share earnings of 80 cents.

Coach also said it would raise its annual dividend by 13 percent to $1.35 per share.

The stock, trading at $56.12, was one of the highest percentage gainers on the New York Stock Exchange.

(Additional reporting by Maria Ajit Thomas; Editing by Sreejiraj Eluvangal and Robin Paxton)

(Reuters) – Chubby-faced American Girl dolls and the “descendants” of Dracula and Frankenstein’s monster are helping Mattel Inc (MAT.O: Quote, Profile, Research, Stock Buzz) boost sales to pre-teen girls as its iconic Barbie franchise shows signs of aging.

The No.1 toymaker reported that sales of American Girl dolls and accessories rose by a third to just over $100 million in the first quarter, helping it turn in stronger-than-expected earnings and boosting its shares to near a 15-year high.

Overall sales rose 7 percent, also beating market expectations. Mattel said on Wednesday that sales were also driven by demand for “Monster High,” dolls depicting the “descendants” of famous horror story characters.

In contrast to soaring sales of American Girl products, sales of Mattel’s flagship Barbie dolls were essentially flat in the quarter, after taking currency fluctuations into account.

“The American Girl segment provided the biggest surprise of the quarter,” MKM partners analyst Eric Handler said in research note. Handler had expected the American Girl business — which contributed 10 percent of total revenue — to show revenue growth of 6 percent instead of the 32 percent Mattel reported.

Mattel sells its American Girl toys in its own stores. Most of its other brands sell through retailers like Wal-Mart (WMT.N: Quote, Profile, Research, Stock Buzz), Target (TGT.N: Quote, Profile, Research, Stock Buzz) or Toys R Us TOYS.UL.

The American Girl line was introduced in 1986 by a company bought by Mattel in 1998.

Mattel, also known for its Hot Wheels toys, also managed to raise prices globally and cut costs by starting to make products for local consumption in countries such as Brazil and India.

Local production helps the company get its products to stores more quickly and cuts down on import duties and shipping costs.

Mattel said selling, general and administrative (SG&A) costs as a percentage of net sales fell by 30 basis points to 37.1 percent in the first quarter.

For the full year, however, the company forecast SG&A spending to be higher than last year. Expenses for the year include investments in new franchises, emerging markets and additional American Girl stores.

The company also expects higher employee and benefit costs in the year, Chief Financial Officer Kevin Farr said on a post-earnings call with analysts.

Farr said he expects gross margins in the low-to-mid 50 percent range for the full year. Mattel reported first-quarter gross margins of 54.2 percent.

PROFIT SOARS

Net income rose to $38.5 million, or 11 cents per share, in the first quarter from $7.8 million, or 2 cents per share, a year earlier. Analysts on average were expecting a profit of 9 cents per share, according to Thomson Reuters I/B/E/S.

Smaller rival Hasbro Inc (HAS.O: Quote, Profile, Research, Stock Buzz) is due to report quarterly results next week.

The first quarter is typically the least significant of the year in terms of sales for toy companies. They make more than a third of their annual revenue in the fourth quarter, which includes the all-important holiday selling season.

“This was another solid quarter for the company, albeit seasonally not important,” said Stifel analyst Drew Crum, who maintained a “hold” rating on Mattel shares, citing valuation.

Mattel’s sales rose 7 percent to $995.6 million, beating the average analyst estimate of $986.5 million.

Sales of Fisher-Price toys fell 7 percent.

Analysts such as Sean McGowan with Needham have tied some of the weakness in the Barbie brand to the rising popularity of other Mattel dolls, such as Monster High, which appeared on many hot toy lists in 2012.

Mattel shares were up 2.4 percent at $44.04 on the Nasdaq on Wednesday afternoon.

(Additional reporting by Siddharth Cavale in Bangalore; Editing by Lisa Von Ahn, David Goodman and Ted Kerr)

Cash-strapped Americans are less likely to cut spending on
liquor than on groceries, an Ipsos poll for Reuters this month
showed. Brown-Forman also reported a surge in sales of whiskey
to Russia and other emerging markets over the last nine months.

The Louisville, Kentucky-based company said sales of its
flagship Jack Daniel’s whiskeys and liqueurs rose 10 percent in
the nine months to Jan. 31. Sales of the Jack Daniel’s Tennessee
Honey Liqueur brand alone nearly doubled.

“These rates of growth will continue into the fourth
quarter, keeping us on track to deliver high single-digit
underlying net sales growth,” Chief Financial Officer Donald
Berg said on a post-earnings conference call.

Brown-Forman reported an 18 percent increase in its net
profit in the third quarter to Jan. 31. Sales rose 7 percent to
$1.03 billion in the period, the company said in a statement.

In the first nine months of the company’s fiscal year,
underlying net sales rose 8 percent, driven by premium brands
and strong global demand for its North American whiskeys.

Combined, net sales to Turkey and Russia increased by more
than 35 percent in the nine months, the company said. It also
recorded double-digit percentage growth in sales to Brazil,
Mexico, India, Thailand and Indonesia.

Berg said the company’s whiskey business, which includes the
Gentleman Jack and Old Forester brands, accounts for almost 60
percent of the cases sold by Brown-Forman around the world.

Brown-Forman said it gained share in its home market, the
United States, due to higher prices and strong demand for its
whiskeys and its Jack Daniel’s Tennessee Honey Liqueur.

Two-thirds of Americans are spending less as they cope with
higher taxes and gasoline prices, the Ipsos poll found. But
while 62 percent of respondents said they would cut back on
clothing and shoes, and 46 percent would buy fewer groceries,
only 39 percent said they would seek to cut their liquor budget.

NARROWING FORECAST

Brown-Forman, founded by George Garvin Brown in 1870, raised
prices on its alcoholic beverages last year to compensate for a
spike in the price of corn, which is used to make whiskey. But
this did not deter consumers, the company said.

The company said its gross margin in the third quarter rose
to 49.4 percent from 47.7 percent a year earlier.

However, fourth-quarter gross margins were likely to be
affected by investments in marketing and selling, general and
administrative expenses in Europe and Asia, Berg said.

To expand geographically, the company last year struck a
deal with Japanese brewer Asahi Group Holdings Ltd to
distribute its brands in Japan.

Brown-Forman, which also makes Finlandia vodka and Southern
Comfort liqueur, narrowed its full-year profit forecast to $2.60
to $2.68 per share, from $2.58 to $2.70 per share earlier.

Analysts on average were looking for earnings of $2.69 per
share for the full year, according to Thomson Reuters I/B/E/S.

Net income rose to $157.6 million, or 73 cents per share, in
the quarter ended Jan. 31 from $133.1 million, or 62 cents per
share, a year earlier.

Analysts on average expected third-quarter earnings of 70
cents per share.

Brown-Forman’s shares were down marginally at $67.67 on the
New York Stock Exchange on Wednesday.

The company’s shares fell 5.1 percent to $12.61 in early
trading.

Staples, whose largest rivals are getting ready to merge,
also raised its quarterly dividend by 9 percent to 12 cents per
share.

Earnings for the fourth quarter ended Feb. 2 came in just
ahead of Wall Street expectations, but Bernstein analyst Colin
McGranahan said the results were “fairly weak” because they were
bolstered by factors such as lower incentive compensation and
marketing spending.

Gross margins remain under pressure, McGranahan said in a
research note.

Office supply chains are struggling to fend off Wal-Mart
Stores Inc, Amazon.com Inc and other rivals
that compete on price in selling everything from pens to
furniture to government, businesses and individuals.

As a result, Office Depot Inc and OfficeMax Inc
last month decided to combine in a $976 million
all-stock deal, which is subject to investor and regulatory
approval.

Staples Chief Executive Officer Ron Sargent congratulated
the two companies on the proposed merger and said it was too
early to say how much impact it would have.

Citi analyst Kate McShane recently upgraded Staples to
“neutral” due to its potential to benefit from its rivals’ deal,
including the lift it could get if those chains close stores in
areas such as the Southeast and Midwest.

“However, we are still neutral to negative on the office
supply industry,” she said in a note, citing declines in sales
of paper products, a shift toward lower-margin technology
products, the weak European economy and intensifying online
competition.

Many investors look at office-supply retailers as a
barometer of economic health because demand for their products
is closely tied to white-collar employment rates.

SALES WEAKNESS

Sales at stores open at least a year fell 5 percent in North
America during the fourth quarter, while in Europe they
decreased 9 percent, mainly because fewer customers visited, the
company said.

In the United States, Superstorm Sandy cut into
fourth-quarter same-store sales, online sales and sales in the
commercial unit that sells to corporate clients. More
competition at the start of the holiday season also hit
same-store sales, Staples said.

Net income fell to $78.1 million, or 12 cents per share, in
the fourth quarter from $283.6 million, or 41 cents per share, a
year earlier.

Excluding charges for store closings and restructuring, the
company earned 46 cents per share, topping the analysts’ average
estimate by 1 cent, according to Thomson Reuters I/B/E/S.

Overall, sales rose 3 percent to $6.56 billion, but missed
Wall Street’s average expectation of $6.72 billion.

The company forecast full-year earnings of $1.30 to $1.35
per share, trailing analysts’ expectations of $1.43.

Staples had outlined a plan last year to cut costs by
closing stores, but that blueprint did not pass muster with some
on Wall Street, who were looking for deeper cuts in North
America and Europe.

(Reuters) – Barnes & Noble Inc (BKS.N: Quote, Profile, Research, Stock Buzz) Chairman Leonard Riggio, joining a growing list of executives lining up to buy the fading companies they founded, offered to buy the bookseller’s declining retail business, leaving it to focus on its more promising Nook e-reader and college bookstores.

Barnes & Noble’s shares rose as much as 11 percent to $15.00 in morning trading, valuing it at about $900 million.

The New York-based company’s retail business has struggled in recent years as book buyers switched to digital formats, underscored by a 10.9 percent fall in sales at its bookstores and website in the critical year-end holiday period.

The bookseller, which saw a short-lived rise in sales after the September 2011 liquidation of rival Borders Group, has said it expects to shut down as many as a third of its retail stores over the next decade.

“Riggio loves the (retail) business too much to let it go,” Morningstar analyst Peter Wahlstrom said, adding that as a slow-growing business it did not need a lot of capital to keep going.

Barnes & Noble created a separate unit in October combining its Nook e-reader and college bookstore businesses. Riggio, who owns 30 percent of the company and is its biggest shareholder, said he would not buy that business, Nook Media.

The company said in January 2012 that it might spin off its e-reader business.

The combined college book and Nook business, which includes the e-reader, digital content and accessories, contributed about 50 percent of the company’s total sales of $1.88 billion in the second quarter ended October 27.

The Nook business had an operating loss of $58.2 million in the quarter, largely because of heavy investments, while the college business had an operating profit of $75.9 million.

Barnes & Noble launched the Nook in 2009 to compete with Amazon.com Inc’s (AMZN.O: Quote, Profile, Research, Stock Buzz) market-leading Kindle, and its success with consumers attracted Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz), which invested $300 million in the business last year.

British education and media group Pearson Plc (PSON.L: Quote, Profile, Research, Stock Buzz) said in December it would take a 5 percent stake in Nook Media for $89.5 million, valuing the unit at $1.8 billion. That left Barnes & Noble with 78.2 percent of the business and Microsoft with 16.8 percent.

Barnes & Noble has poured hundreds of millions of dollars into its Nook business, but a disappointing holiday season raised questions about its growth prospects.

Revenue from the e-reader business fell 12.6 percent from a year earlier in the nine weeks ended December 29.

The company also said the loss from the Nook business would probably be bigger than expected in fiscal 2013 ending April 28 and that sales for the year would fall short of the $3 billion it had forecast.

LIBERTY MEDIA THE “WILDCARD”

The purchase price for the retail assets is expected to comprise mainly cash and include the assumption of certain debt, Riggio, said in a regulatory filing on Monday. (link.reuters.com/byc36t))

Riggio, who pioneered the book superstore format in the 1980s and 1990s, said he would provide the equity financing and arrange any debt financing for the deal.

Riggio joins the growing ranks of executives or former executives trying to buy the companies they founded, including Dell Inc (DELL.O: Quote, Profile, Research, Stock Buzz) Chief Executive Michael Dell and Best Buy Inc (BBY.N: Quote, Profile, Research, Stock Buzz) founder Richard Schulze.

John Malone’s Liberty Media Corp (LINTA.O: Quote, Profile, Research, Stock Buzz) offered to acquire Barnes & Noble for $17 per share, or $1 billion, in May 2011, but talks fell through and Liberty invested $204 million in the company instead. (link.reuters.com/med36t)

“The wildcard here is Liberty. They like Riggio but they have different interests,” Maxim Group analyst John Tinker said.

Liberty took a 16.6 percent stake in Barnes & Noble by buying preferred stock that can be converted into about 12 million shares.

The big question now is what Riggio is willing to pay for the business and whether a rival bidder emerges, Tinker said.

Barnes & Noble said it had set up a committee of three independent directors to evaluate Riggio’s proposal.

Evercore Partners will serve as financial adviser to the company and Paul, Weiss, Rifkind, Wharton & Garrison LLP will be legal advisers, the company said.

The Wall Street Journal reported the proposed deal on Sunday.

Barnes & Noble is scheduled to report third-quarter results on Thursday.

(Reporting by Siddharth Cavale in Bangalore; Additional reporting by Phil Wahba and Olivia Oran in New York; Editing by Ted Kerr)

The grocery division, which makes Spam, Dinty Moore Beef
Stew and Hormel Chili, has products that do well in an
environment where consumers are value conscious, Morningstar
analyst Kenneth Perkins said.

Perkins said the addition of new products like cheesy pasta
also helped growth in the division, which contributed about 16
percent of the total sales in the quarter.

Sales in the grocery division rose 24 percent and volumes
jumped 20 percent during the quarter, outpacing the overall
revenue growth of 4 percent.

Shares of the company were up about 2 percent at $36.52 on
the New York Stock Exchange.

Hormel, which bought Unilever Plc’s Skippy peanut
butter brand last month, raised its earnings forecast for the
year ending October by 3 cents to $1.93-$2.03 per share.

Analysts were expecting $1.96 per share on average,
according to Thomson Reuters I/B/E/S.

A drought in the U.S. Midwest last year led to higher grain
costs, making livestock feed more expensive and prompting many
meat companies to reduce the size of their herds.

Hormel had said last year it would reduce harvest levels in
its Jennie-O Turkey and pork business to counter the volatility.

“Higher grain costs and lower turkey commodity meat prices
will continue to hinder margins at Jennie-O Turkey Store in the
near term,” Chief Executive Jeffrey Ettinger said on a
post-earnings conference call.

Operating margins in its turkey division, the second largest
contributor to the total sales, fell to 15.1 percent in the
quarter from 20.6 percent a year earlier.

Ettinger said he expects a steeper decline in the margins
for the business in the current quarter, but sees them climbing
back to first-quarter levels in the second-half of the year.

Analyst Perkins said margins in the division were better
than expected, but it was still too early to make predictions
for the full year.

Volumes fell 2 percent in its refrigerated foods business,
which produces pepperoni and sliced deli meats. Margins were
squeezed by higher pork processing costs.

Overall gross margins were not affected much as the company
said it was able to keep costs down.

First-quarter net income rose to $129.7 million, or 48 cents
per share, in the quarter ended Jan. 27, from $128.4 million, or
48 cents per share, a year earlier.

Revenue was $2.12 billion, just below the $2.14 billion
analysts were looking for.