Discover’s profit declines as cardholders pay bills

LOS ANGELES — Despite concerns about the economy, Discover’s customers are using their cards more often and paying their bills on time at record rates.

The company’s profit fell 10 percent in its March-to-May quarter, as the credit card issuer freed up less money from reserves set aside to cover customers’ unpaid bills than a year earlier as its loans increased.

But credit conditions are improving. Late payment rates and customers’ loan defaults dropped sharply, reaching historic lows. Discover’s management expects that charge-offs, or loans written off as unpaid, will modestly increase over the next 12 months as the company widens its pool of borrowers.

Discover Financial Services said sales volume on its namesake cards rose 5 percent during the March-to-May period to $26.1 billion, reflecting more card use by customers, as total retail sales rose 5.7 percent in the same period according to government figures.

 

Penney’s stock loses $2.08 with executive’s departure

NEW YORK — J.C. Penney’s shares are tumbling a day after the department store chain announced the sudden departure of Michael Francis, a top Target executive brought in last October to help redefine the store’s brand.

In a terse statement issued late Monday, Penney gave no reason for the abrupt departure of Francis, who was its president.

The move comes as Penney is trying to reverse a sharp drop in traffic and plummeting sales after its new pricing strategy spearheaded by new CEO Ron Johnson confused shoppers.

Shares fell $2.08 to close at $22.25 on Tuesday.

 

Walgreen Co. buys stake in Europe’s Alliance Boots

Walgreen Co. will pay $6.7 billion in cash and stock to buy a stake in European health and beauty retailer Alliance Boots, a deal that would give global clout to a U.S. drugstore chain struggling with slipping sales in its home market.

The combination would create the largest single purchaser of prescription drugs in the world and give Walgreen access to emerging markets like China and Egypt, company officials said Tuesday in announcing the deal.

However, it also will plant the biggest U.S. drugstore chain in a continent beset by debt worries in Greece, Spain and other nations.

But Walgreen said Alliance Boots brings in revenue from some of the most stable countries in Europe.

CEO Greg Wasson told analysts the acquisition is “a truly game changing step” for his Deerfield, Ill., company.

Investors weren’t so sure about the deal. Walgreen shares slid nearly 6 percent, or $1.88, to $30.08 in afternoon trading, while the Standard & Poor’s 500 index rose slightly.

 

Spotify offering free radio for iPhones, iPads in U.S.

LOS ANGELES — The music-subscription company Spotify is joining Pandora, Slacker and Songza in offering a free radio service for mobile devices in the U.S.

Until now, the company charged people $10 per month to use its mobile app.

The free service, which comes with audio ads, is a way for Spotify to entice people to sign up for a paid subscription, which strips out the ads and enables users to choose songs.

The new feature is available only on iPhones and iPads for now; the app for other devices requires paid subscriptions.

Non-payers will be able to listen to genres of music based on similarities to an artist, album, song or playlist they’ve created within Spotify. They will also be able to give songs a “thumbs up” for playback on computers later on.

Spotify began offering the radio service on computers in December and discovered that people wanted to use it on mobile devices, too.

 

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