Layaway an old friend to shoppers

Maryann Rengers walked out of a Kmart on McKnight Road having paid just $15.59 for Christmas gifts that cost more than $150.

She's not a bargain-hunting genius. Rather, like many Americans this year, Rengers, 48, of Hampton is taking advantage of Kmart's layaway purchasing program, allowing her to pay for goods in manageable installments before taking them home.

"I haven't bought on layaway for a long time, but this year, with the economy so bad, it gives me peace of mind," Rengers said last week at the North Hills Kmart. "I can make the payments in smaller amounts, not one big sum."

She has eight weeks to pay off her balance. She made her first payment on gifts for her three kids-- including dresses, toys and video games -- and will return every two weeks to make payments that amount to little more than $1 a day. Once the balance is paid off, she'll take the gifts home, wrap them and place them under the Christmas tree.

"This helps," she said. "It honestly and truly does."

Others apparently agree. Layaway gained popularity during the Great Depression, then gradually lost favor among the purchasing masses as a culture of credit cards and instant gratification set in. But that appears to be changing -- at least temporarily.

"In this country, there's been an attitude, a culture, of satisfaction now," said James Craft, a professor at the University of Pittsburgh's Joseph Katz Graduate School of Business. "But now, we're being forced to really look and say, 'Can I afford this?' The attitude of enjoy now and to heck with the future isn't as prevalent."

This newfound culture of frugality can hurt retailers, especially during the holiday season: The National Retail Federation is projecting sales to rise 2.2 percent this year, well below the 10-year average of 4.4 percent holiday sales growth and the slowest growth since 2002. Offering layaway plans is an attempt to lure consumers who are loathe to fall into debt and reluctant to spend during uncertain times.

"It's a rational response on the part of retailers to maintain a flow of sales, but at the same time adjust to meet the needs a customer might have," Craft said.

Kmart is one of the largest national retailers offering layaway plans. TJ Maxx, Marshalls and Burlington Coat Factory have layaway options. Wal-Mart discontinued the practice in 2006.

Demand for layaway plans has soared at local Kmart stores. Although corporate spokeswoman Kimberly Freely would not reveal national statistics, a store manager at a Kmart in North Versailles said layaway purchases are up 35 percent this year.

"We are getting killed with it," the store manager said. "It's been tremendous."

Layaway's resurgence has reached the Internet.

The Web site eLayaway.com went online in August 2006, and the site's senior vice president of business development said the business is growing exponentially.

"We had 10,000 registered members by January, and 75,000 to date -- including 10,000 new members in the last 10 days," eLayaway.com's Michael Bilello said. "We expect to have over 100,000 members by November."

Bilello said the most popular items purchased at the Web site include iPods, video games, golf clubs and jewelry.

Some of the more exotic virtual layaway purchases include hip replacement and hair transplantation surgeries, he said.

Layaway plans are not free. At Kmart, customers must make a down payment, pay a small fee, and keep up their payments for eight weeks until the merchandise is paid off. If the customer defaults, they receive a refund, minus a penalty fee.

At eLayaway.com, the handling fee is 1.9 percent of the total, including taxes and shipping. The average price of merchandise bought at the Web site is $600, Bilello said.

He predicted that layaway purchases will continue to gain in popularity, especially online.

"People did not forget about layaway -- retailers abandoned it," he said. "But there's an entire population of consumers who were very comfortable with it. They still are."

Perhaps, but although consumers are "postponing gratification" for the time being, Craft predicts a return to old habits once the economy improves.

"We have an immediate gratification culture -- I want it now and I'll pay later," he said. "That's not possible right now -- but as soon as (consumers) get the chance again to buy whatever they want, they will."

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Hotel construction thrives here, but failing economy could change all that

From Downtown to the North Shore, South Side and Strip District, hotel construction has been booming in Pittsburgh.

In those areas and other city neighborhoods, 17 hotels that are under construction or planned could add more than 2,400 rooms to the existing inventory by 2010, according to a Tribune-Review review of projects announced by developers, property owners and others.

That doesn't include a long-stalled 500-room convention center hotel in the Strip District that still hasn't been able to get off the drawing board.

But the weakening national economy, tightened credit and the realities of increased competition eventually could derail the ongoing march of hospitality industry construction, some experts say.

It may not happen this year, but lenders and hotel operators may soon start to think twice about continuing to support some projects, experts believe.

"If you are asking if hotel construction is due to slow down, the answer, unfortunately, is yes," said Jeff Burd, president of the Tall Timber Group, a Ross-based construction market tracking firm.

"In the downward economic cycle, the next level of erosion is going to be travel," Burd said. "Travel already is being restricted by businesses, and travel plans also are going to be set aside by consumers. It's probably going to be that way for 15 or 18 months."

"We look for things to get tougher before they get better," said Randy Smith, CEO of Smith Travel Research in Henderson, Tenn.

Smith Travel's most recent projections show hotel occupancy nationally will end 2008 at 61.2 percent, down 3 percent from year-end 2007, and continue on a downward slope through 2009.

Another 3.5-percent year-over-year decline next year would send occupancy to 59.1 percent -- the lowest level since 2003, it said.

Surprisingly, occupancy in the Pittsburgh area marketplace is holding up very well, according to Smith Travel's statistics.

"In fact, so far this year it's been the No. 5 market in the country as far as occupancy growth," said Bobby Bowers, Smith Travel's senior vice president-operations.

Through Sept. 30, occupancy in the 22,014 rooms the company tracks in the seven-county Pittsburgh region stood at 65.7 percent, up 1.7 percentage points, or 2.6 percent year-to-date, over 64 percent at the same time last year.

Pittsburgh's occupancy to date has trailed only Lousiville among the 12 cities considered its peer competitors for conventions, meetings and other events, said Craig Davis, vice president, sales and marketing for VisitPittsburgh, the local convention and visitors bureau.

The others are Milwaulkee, Cincinnati, Detroit, Charlotte, Philadelphia, Columbus, Indianapolis, Memphis, Cleveland and Baltimore.

"Group business is way up this year, and until we've had these issues with the national economy and banking market, business travel has been strong," Davis said.

For group meetings, the bureau has helped book 14,000 more hotel rooms in the city this year than in 2007, which was a record for those events, he said.

Market conditions aren't discouraging Harmar-based Kratsa Properties, one of the region's most active hotel developers.

Its current projects include a 177-room Marriott Residence Inn at Mazeroski Way on the North Shore and a 156-room HIlton Garden Inn at the former Allegheny County jail annex and Jones Law building site on Ross Street, Downtown.

"We have financing secured for both," said William Kratsa Jr., general partner.

The company's Downtown site is near government offices and major office buildings, and North Shore location is not only near PNC Park and Heinz Field, but the new gambling casino under construction near Carnegie Science Center.

Continental Real Estate Cos. is targeting the North Shore area for a hotel, a 178-room Hyatt, near Del Monte Foods local headquarters.

"The Pittsburgh hotel market still is strong as compared to other cities in the U.S., which have been impacted by the economy," said Keith McGraw, partner with Raleigh, N.C.-based Concord Hotels.

Concord has 55 hotels in operation in the United States and Canada, including eight Marriott brand hotels in Pittsburgh. It just recently started to build 124-room Courtyard by Marriott in Robinson, and will soon start construction of a 112-room hotel at Walnut Capital Partners' $113-million Bakery Square project in Larimer near East Liberty.

"We had a $440 million hotel portfolio sale last year so we have been able to sustain growth even with the problems in the credit market," McGraw said. The company has a strong capital position and a positive track record with lenders, he said.

"We anticipate that 2009 in the Pittsburgh hotel market will be challenging because of the economy and impact on corporate and leisure budgets," he said. "Hotel demand will diminish with the economy and with hotel supply increasing, the hotel market will be impacted."

Nonetheless, a number of hotels targeting specific segments of the market will likely be built no matter what happens in the overall market, said Burd of the Tall Timber Group.

"We've got some uniqueness here in that we've got several hotels planned for very specific under-served points," he said.

An example is a 142-room hotel planned Uptown near the site of the Pittsburgh Penguins' new $290 million hockey arena Uptown. That project likely will be built no matter what happens in the national economy, he said.

"Also on the North Side, I think developers know with a high degree of certainty that is an under-served neighborhood," Burd said.

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Reliable credit customers shocked by higher rates

Get ready for tougher terms on credit cards.

As the nation's economy and consumers struggle, card issuers are losing money. So, they are raising interest rates, cutting credit limits and tightening other terms, industry experts said.

Even careful card users -- not just slow-payers and deadbeats -- are getting nasty surprises in the mail.

Maryann Montgomery and her husband paid off virtually each monthly J.C. Penney bill on time and in full for many years. Yet, the Gibsonia couple got a notice the retailer is raising their annual percentage rate to 23 percent from 20.8 percent, hiking late-payment fees and shrinking the "float time" to pay from 30 days to 23.

"We've been good customers for 43 years," said Montgomery, a nurse. "When my husband called to cancel, he told them it was because we don't like the new terms. And they just said, 'Oh, OK.' "

"Consumers are contacting us and saying, 'What's the deal? My APR is going up, and I haven't done anything different,' " said Bill Hardekopf, CEO of Lowcards.com in Birmingham, Ala., which tracks terms for the nation's 1,260 types of credit cards.

J.C. Penney cards are financed by GE Money Bank of Stamford, Conn., which sets card terms.

"Cardholders always have the option of opting out," said spokeswoman Dori Abel about the miffed Montgomerys. She confirmed card terms were stiffened recently, but would not comment about J.C. Penney card losses.

"Card issuers are tightening. And with the economy in recession, it's something that's going to continue for months to come," said Greg McBride, senior financial analyst for Bankrate.com, a North Palm Beach, Fla., firm that tracks financial rates.

American Express cardholders will get notices this month about tighter terms. Interest rates will go up 2 to 3 percentage points, as part of "a broad base of changes to our lending products," said spokeswoman Desiree Fish. For example, a card charging 14.99 percent could jump to 17.99 percent.

"The bottom line is that this is a difficult environment. Because of that, we need to do a number of cost reductions and revenue-building actions," AmEx CEO Ken Chenault recently told analysts.

About 164 million Americans carried a total of 1.39 billion credit cards in 2005, said most-recent data from the U.S. Census Bureau. They racked up $2.05 trillion of charges on those cards that year -- an annual tab the agency projects will swell to nearly $3.38 trillion in 2010.

Card issuers are getting stung by bad credit-card accounts. The industry will post a record $11.6 billion in losses for the summer quarter -- or nearly twice the charge-offs from two summers ago -- estimates Innovest Strategic Value Advisors, an investment research firm in New York.

Charge-offs -- uncollectible amounts that card issuers write off -- could jump to $13.5 billion in the current fall quarter and spiral to $18.6 billion in the winter quarter, when the trend should reach its peak, estimated Innovest consumer finance analyst Laura Nishikawa.

"Charge-offs could continue to rise throughout 2009, depending on how the economic situation pans out," she said.

With rising unemployment and living costs, consumers are having a more difficult time managing card debt. A Standard & Poor's survey of 1,000 cardholders in August showed 13 percent found it much harder to keep up credit card payments than the year earlier, and 25 percent found it somewhat more difficult.

"And more people are taking out money as cash advances" on cards, said S&P Chief Economist David Wyss. "That's significant because that's a really lousy, expensive way to get money."

Delinquencies and charge-offs start to climb when the economy cools off, said analysts. Delinquent payments, or those at least 30 days late, rose to 4.6 percent of outstanding credit card balances in August, up from 3.8 percent the year earlier, said Moody's. That's a 21 percent increase.

"When delinquencies and unemployment are on the rise, card issuers play defense," said McBride. "They scale back credit lines and slice the pie thinner in terms of who gets the lowest rates."

Changes unfolding in credit cards are an aftershock of subprime lending, say experts. Financial institutions chastened by huge losses from risky mortgage loans will defend against losses from credit cards.

"If a financial institution lost money from subprime lending, their appetite for (credit-card) risk is waning," said Bruce Cundiff, director of payment research at Javelin Strategy and Research of Pleasanton, Calif.

"So, for a card holder that might have had a line of credit that was $10,000, now it's $7,000," said Cundiff.

"The general long-term trend of rising charge-offs is expected to persist," said William Black, senior vice president of Moody's Investors Service. The New York firm reviews more than $435 billion worth of credit card portfolios, or 80 percent of the total, and the securities they back.

"Credit card charge-off rates are highly correlated with the unemployment rate, especially when unemployment is on the rise," said Black. He noted the 6.1 percent jobless rate in September was the nation's worst in nearly five years, and expects unemployment to peak at 7.3 percent a year from now.

"What you're going to see going forward is that all credit card issuers will be more selective about who gets credit and at what rate," said McBride.

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Allegheny Technologies layoffs to affect hundreds

Allegheny Technologies Inc. will lay off several hundred workers at three local plants and a research center beginning Sunday because of falling demand for stainless steel from automotive, housing and appliance producers, the company said Friday.

The layoffs at the Allegheny Ludlum Steel plants will remain in effect on a week-to-week basis as the company adjusts production to meet demand, spokesman Daniel Greenfield said. He said the layoffs will affect 20 percent of the workers, but declined to give an exact number or say when they might be recalled.

The layoffs affect the specialty steelmaker's plant in Brackenridge, and its adjacent plant in Natrona in Harrison, where steel scrap is melted for steelmaking. Those plants have about 1,100 workers. It affects a cold-rolled stainless steel plant in Vandergrift, Westmoreland County.

The research facility affected is located in Harrison.

One plant not affected by the layoffs is a mill in Bagdad, Armstrong County, because it finishes electrical steel used in the power industry, Greenfield said.

The layoffs will not alter Allegheny Technologies' plans to build a $1 billion state-of-the-art hot strip mill at its Brackenridge mill, he said.

"The whole stainless (steel) market is down," Greenfield said. Not only are the end-markets down in terms of demand for autos and appliances, but inventories at service centers are low and are not being replenished, he said. Service centers buy steel from mills, then process and resell it to manufacturers.

"This is a week-by-week thing," Greenfield said. "It's based on the U.S. economy: less demand for steel in cars and refrigerator doors."

In March, Allegheny Technologies had 2,050 employees in four steel mills in northern Allegheny and Westmoreland counties and southern Armstrong County.

Allegheny Technologies Chief Executive L. Patrick Hassey told analysts last week when the company announced results for the July-September quarter that he expected slower demand in the October-December period because of the slowing economy. He did not mention possible layoffs.

The company reported third-quarter profit fell 26 percent because of lower metals prices and demand, and warned that fourth-quarter earnings will be well below a year ago. Profit for the third quarter was $144.1 million, or $1.45 a share, on sales of $1.39 billion, compared to $193.9 million, or $1.88 a share, on sales of $1.33 billion, a year ago.

The company said it expects fourth-quarter results to be in the range of $1 to $1.10 per share, compared to $1.45 per share a year ago.

The layoffs will not affect the work force at Allegheny Technologies' stainless steel plant in Washington, Pa., where about 250 hourly employees work, said Brian S. Ashmore, president of USW Local 7139.

"It has slowed, but right now there's no layoffs," he said.

Allegheny Technologies this spring completed a $60 million upgrade to its titanium and specialty plate plant in Washington County by expanding capabilities and improving productivity. The plant uses specialty steel made at several plants, including Brackenridge, Latrobe and Midland.

Walter Hill, president of USW Local 1196, which represents steelworkers at the Brackenridge plant, and Steve Clutter, president of USW Local 1212 at Midland, could not be reached for comment.

Automotive and appliance steel accounts for 15 percent of Allegheny Technologies' business, according to a report this week by Morningstar Co. analyst Min Ye, who said "commodity-like" stainless steel accounts for about 20 percent of the company's sales.

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Some folks obsessed with tracking volatile stocks

Pam Toubo calls it an "obsession."

Since the federal government a month ago began promising billions of taxpayers' dollars to bail out the country's financial system, Toubo, 51, of Imperial, rises before 7 a.m., and immediately heads for her computer.

Toubo wants -- needs -- to see what's happened overnight in Far East markets, what's happening in Europe, all before U.S. markets open at 9:30 a.m.

"I feel a need to watch, intensely. That began when the bailout began and everything became just so volatile," Toubo said.

Toubo's passion to stay on top of the financial markets is not isolated. Numerous investors feel the need to stay close to their computer or television, to see how much the market rises or falls, to try to understand the factors influencing what's happening.

"I think there are a lot of intense, hard-core market watchers today because the market affects everybody out there, in 401(k)s and other retirements. Plus, the evening news story usually starts out with the market. So I think now people who really didn't care watch more than ever," said Mike Samuels, financial consultant for BPU Investment Management Inc., Downtown.

Samuels, a consultant for 27 years, has never seen people as scared. "Yet, this is just a great time to buy," he added.

Some might call needing to watch a market that lately has been five times more volatile as the norm the same fascination people have when passing a car wreck: They can't take their eyes off the carnage.

Friday was a prime example, as the stock market closed out a horrendous October, its worst month in 21 years, with a big advance as more investors took chances on stocks turned into bargains by waves of intense selling. The Dow Jones industrials rose 144 points on the day after rising as much as 274 and falling 62 -- but ended the month down 14.1 percent at 9,325.01.

"I try to be as informed as I can be," said Rich Sanderson, 78, of Shaler. "I learned when I was in the military, the Marines, to observe, and I learned playing football in school to know where you are at all times."

Sanderson satisfies his need to know by reading, watching television and listening to the radio, adding the worst group to watch or listen to is politicians.

"We've been through this before, many times, including the Great Depression," Sanderson said. "The thing to do now is to hang in there -- we'll come back. It might take six months or a year to get back to what's normal, but where we go from here is up."

Personal trainer Mark Selekman runs Mark Selekman and Associates, a "successful fitness business," and he expects his investments to be just as successful. They must be money makers.

"I'm a computer watcher, have been since the market started to go kafluey, diligently watching the market within the last year or so," said Selekman, of Mt. Lebanon. "I watch my funds very closely, I take stock of my positions, watch the flow of money in and out. I'm very attuned to where the money goes and where it comes from."

Toubo admitted the stress is high. "It's hard watching your net worth drop, but if you're going to be in the market, you have to be able to take the ups and downs," she said.

Sanderson and Toubo said they're anxious to invest more in the market, once the volatility eases. "The old cliche, you buy on bad news is an opportunity," Toubo said. "It's a buyers' market."

Selekman said some of market-related things he sees on his computer "freaks me out," that he's always trying to figure out why traders are ultra-sensitive, to "what's driving the market down 300 points before noon."

"I feel like grabbing some financial advisors and throwing them on the floor; I'm mad at greedy CEOs for what's happened," Selekman said "Today, the sky is slightly falling."

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LeNature's trustee files suits seeking $46M

LeNature's Inc.'s former CEO Gregory Podlucky funneled more than $7.7 million from the bankrupt company to a nonprofit corporation that he created to honor the memory of his late daughter, according to a lawsuit filed Friday in U.S. District Bankruptcy Court in Pittsburgh.

The lawsuit was one of 70 filed this week by trustee Marc Kirschner in U.S. Bankruptcy Court in Pittsburgh against the Melissa Morgan Capital Corp. and a host of other defendants by which he seeks to recover a total of more than $46 million.

Podlucky's daughter, Melissa Morgan Podlucky, was killed in a 2001 auto accident in Ligonier.

Kirschner is the liquidating trustee who has been tasked with recovering money owed creditors when the company plunged to more than $800 million in debt.

The defendants include contractors, plumbers, electricians architects, roofers, engineers, consultants, banks and other financial institutions. The suits seek the recovery of millions that Kirschner is alleging was fraudulently transferred by Podlucky before his beverage and bottling company was forced into bankruptcy on Nov. 1, 2006.

More lawsuits are expected.

Kirschner said LeNature's "was insolvent or became insolvent as a result of each transfer."

One of the defendants, AIG Commercial Equipment Finance -- a unit of troubled insurance giant American International Group Inc. -- loaned LeNature's more than $26 million that was deposited with another company to build bottling equipment for a Florida bottling plant that Podlucky never built.

The manufacturer returned more than $20 million to AIG -- or at least the manufacturer thought it was AIG -- after it received a letter requesting the refund.

However, it was later learned that the AIG letter was a forgery, according to a court filing, and the company had not sought a refund.

Peter Tulupman, a spokesman for AIG, said the company had no comment.

Podlucky wanted to build a nondenominational church and conference center along Route 30 in Ligonier Township to honor his daughter. He formed Missy's Place Foundation and the Melissa Morgan Capital Corporation to fund the project.

Podlucky, according to the filings, spent more than $1 million on the project that was never built.

He reportedly spent millions more building an ornate, 25,000-square-foot mansion in Ligonier that he claimed was to be a training center for his employees.

The house has seven fireplaces, a guest house, a five-car garage and an auditorium wired with the latest electronic devices. He had planned to build a swimming pool and placed a $14,000 deposit with a pool company that Kirschner is trying to recover. The custom-made cabinets alone cost more than $1.1 million, according to the lawsuits.

Chief U.S. Bankruptcy Court Judge M. Bruce McCullough Thursday blocked the sale of the properties that are owned by Podlucky, his wife and sons.

McCullough ruled that two parcels in Ligonier cannot be sold by Podlucky, his wife, Karla, or sons, Jesse, Jordan and Jared because Kirschner is in the process of trying to recover debts for creditors and may sue the Podluckys to get title to the lands.

Another asset Kirschner will use to pay creditors is a cache of gems and jewelry that federal agents discovered in safes located in a hidden room within LeNature's Latrobe headquarters. The items have been turned over to Kirschner.

The collapse of LeNature's triggered a federal grand jury investigation into allegations of money laundering, bank, wire and mail fraud involving Podlucky and several former executives.

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Marcellus gas estimate swells

The Marcellus Shale region of Western Pennsylvania and bordering states could contain more than double the amount of recoverable natural gas than initially thought, a Pennsylvania State University professor who is a nationally known authority on the topic said Friday.

Terry Engelder's revised outlook is sure to expand the level of strong interest in what lies beneath the Allegheny Mountain area. Dozens of locally based and out-of-town energy producers are leasing acreage in the region and drilling into land that was an inland sea 350 million to 400 million years ago.

Engelder based his new estimate that up to 392 trillion cubic feet of the fuel could be captured over the next few decades on numbers from Chesapeake Energy Corp., one of the largest stakeholders in the Marcellus area.

"Geologists are still attempting to size this play. We don't know yet how much gas is there, and how much can be recovered," said Engelder, a professor of geologic science who has studied Appalachian shale formations for more than 30 years. He first gave his new numbers this week in Pittsburgh, at a conference on Appalachian gas sponsored by energy information firm Platts.

Oklahoma-based Chesapeake Energy, in a recent meeting with investors, said each square mile in the Marcellus area could contain 30 billion to 150 billion cubic feet of gas. Engelder used an average of that range, 90, to figure the entire 31-million-acre region might hold 4,359 trillion cubic feet of gas.

If 30 percent of that gas were brought out of the ground, as Chesapeake anticipates, he said, that would be 1,307 trillion cubic feet from the entire region. And because another gas producer, Range Resources Corp. of Fort Worth, Texas, points out that not all the Marcellus acreage contains gas, even if just 30 percent of it proves productive, that's 392 trillion cubic feet.

To put it all perspective, that's more than 13 times the 30 trillion cubic feet produced each year across the United States.

Engelder and another geoscientist, Gary Nash of the State University of New York at Fredonia, first stirred the industry early this year with their estimate that 10 percent of a total 516 trillion cubic feet might be recovered.

A 30 percent recovery figure may be more reasonable over time, based on petroleum industry figures, he said, but in any case the new estimate "is a whole heck of a lot larger" than the initial one.

Producers working in the region will provide a more accurate picture over time, he said, adding he's trying to keep his estimates conservative. "The one thing we don't want to do is exaggerate what is there," he said.

Richard Weber, CEO of Atlas Energy Resources LLC, told an audience at an Airport Area Chamber of Commerce event yesterday about the natural gas producers "flooding in" to the Marcellus regions. Atlas of Moon announced yesterday it has drilled 98 wells there.

Equitable Resources Inc. is drilling 20 Marcellus wells this year, and plans 75 next year. "We believe Marcellus easily holds a 10- to 20- year supply of natural gas -- that's for the nation, based on current consumption," said Dave Spigelmyer, spokesman for the North Shore-based company.

Range Resources and a partner opened a refrigerated gas processing plant last week in Chartiers, Washington County, and, "that starts to demonstrate that it's all for real," spokesman Matt Pitzarella said.

Range estimates 15 trillion to 22 trillion cubic feet of recoverable gas are in its acreage, he said.

While natural gas has fallen in price since June, "The people we are talking with have not reduced the wells they are looking at," said Bob Garland, Northeast regional sales manager for Superior Well Services of Indiana, Pa.

He attended the Platts event where Engelder spoke. "There was a lot of excitement at the meeting," Garland said.

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