Closing of Wells Street Bridge creates uncertainty for CTA riders

The shutdown of the Wells Street Bridge has the impact of a blocked artery, straining the circulation of much of the CTA rail system.

The lower tier of the 91-year-old bridge was closed to vehicles and pedestrians in November for repairs, and now it's CTA riders' turn.

Even though only Brown Line and Purple Line/Evanston Express trains normally travel across the Wells bridge connecting the Loop elevated structure to tracks north of the Chicago River, service on six of the eight CTA rail lines is being affected by bridge and track work continuing through the week, transit officials said.

Weekday rush hours are expected to pose the biggest challenge to the transit agency and its customers. Brown Line trains will operate much less frequently during most of the day — running every 10 to 12 minutes, officials said. And Evanston Express service is canceled until March 11. Purple Line local service will continue to operate between Howard Street in Chicago and Linden Avenue in Wilmette.

On weekends, Green, Pink and Orange Line trains will terminate their runs at certain stations in the downtown area, officials said. A weekend free shuttle bus will operate to link the Chicago/Franklin, Merchandise Mart, Clark/Lake, Washington/Wells and Clinton/Lake stations, officials said.

Riders are being told to plan for longer, slower commutes starting Monday on trains that will be more crowded than usual. The frequency of trains on the Brown Line is being reduced because of the need to operate more trains than usual on the Red Line tracks, including in the State Street subway, officials said.

"Experience has taught me to become a little nervous any time the CTA changes service," Rick Gordon, 41, a Brown Line rider who commutes between the Western station and the Washington/Wells stop in the Loop, said Friday morning after getting off the train downtown.

Gordon, an investment counselor, said he still plans to ride the Brown Line on Monday. But because he won't be able to ride across the Wells bridge to his normal stop, he will instead take advantage of the free CTA shuttle bus that will operate between the Chicago Avenue station and the Loop "L," stopping at the Merchandise Mart, the Clark/Lake and Washington/Wells stations.

During rush hours, two of every three southbound Brown Line trains will travel through the Red Line subway tunnel, making all stops to the Roosevelt station, officials said. They will then head north through the subway and up to Fullerton Avenue, then will continue making all Brown Line stops to the Kimball Avenue terminal, officials said.

One of every three Brown Line trains will remain on the regular Brown Line route south of Fullerton but will make the last stop at the Merchandise Mart station, near the north end of the Wells bridge.

Extra service will be provided on the Red Line, in part to accommodate heavier passenger loading caused by the suspension of all Purple Line service south of Howard through the week, officials said. Commuters who normally ride the Purple Line/Evanston Express service might consider budgeting up to an extra hour travel time if they will ride the all-stop Red Line to downtown.

Also, the transit agency will introduce free shuttle trains that circle the Loop and alternative bus service to provide options for the thousands of riders affected over the roughly nine-day bridge closing, which began Friday night.

CTA officials predicted that the commutes of many rail customers will be only several minutes to 15 minutes longer than normal travel times during the service interruptions. But in light of the unpredictability of CTA service even under normal cases, allowing extra time would help commuters ensure they arrive at their destinations on time.

"We urge customers to think about their options because this will not be a typical commute for most Brown and Purple Line commuters," CTA spokesman Brian Steele said, adding that delays are likely on other lines too because of expected ridership shifts.

With some commuters taking Monday off for the Casimir Pulaski Day holiday, the first full test of the CTA's alternative service plan will likely be on Tuesday.

The service disruptions will last until completion of the Wells bridge replacement project, upgrades to the busy downtown rail junction at Lake and Wells streets, and track replacement around the curves at Hubbard and Kinzie streets. Regular CTA service resumes in time for the morning rush period on March 11, following the first phase of bridge reconstruction, officials said.

A second closing of the Wells bridge will occur April 26 through May 5, when the $41.2 million overhaul project is scheduled to be completed, the Chicago Department of Transportation said.

The Wells bridge's trusses, steel framing, railings, bridge houses, major structural parts and mechanical and electrical parts are being replaced, but the original 1920s-era appearance of the double-deck bridge will be maintained, CDOT officials said.

Full details on the CTA service changes are available at transitchicago.com/wellsbridge.

jhilkevitch@tribune.com Twitter @jhilkevitch

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Jane C. Wright, Pioneering Oncologist, Dies at 93

Dr. Jane C. Wright, a pioneering oncologist who helped elevate chemotherapy from a last resort for cancer patients to an often viable treatment option, died on Feb. 19 at her home in Guttenberg, N.J. She was 93.

Sophia Smith Collection, Smith College

Dr. Jane C. Wright was the only woman among seven physicians who founded the American Society of Clinical Oncologists.

Her death was confirmed by her daughter Jane Jones, who said her mother had dementia.

Dr. Wright descended from a distinguished medical family that defied racial barriers in a profession long dominated by white men. Her father, Dr. Louis T. Wright, was among the first black graduates of Harvard Medical School and was reported to be the first black doctor appointed to the staff of a New York City hospital. His father was an early graduate of what became the Meharry Medical College, the first medical school in the South for African-Americans, founded in Nashville in 1876.

Dr. Jane Wright began her career as a researcher working alongside her father at a cancer center he established at Harlem Hospital in New York.

Together, they and others studied the effects of a variety of drugs on tumors, experimented with chemotherapeutic agents on leukemia in mice and eventually treated patients, with some success, with new anticancer drugs, including triethylene melamine.

After her father died in 1952, Dr. Wright took over as director of the center, which was known as the Harlem Hospital Cancer Research Foundation. In 1955, she joined the faculty of the New York University Medical Center as director of cancer research, where her work focused on correlating the responses of tissue cultures to anticancer drugs with the responses of patients.

In 1964, working as part of a team at the N.Y.U. School of Medicine, Dr. Wright developed a nonsurgical method, using a catheter system, to deliver heavy doses of anticancer drugs to previously hard-to-reach tumor areas in the kidneys, spleen and elsewhere.

That same year, Dr. Wright was the only woman among seven physicians who, recognizing the unique needs of doctors caring for cancer patients, founded the American Society of Clinical Oncologists, known as ASCO. She was also appointed by President Lyndon B. Johnson to the President’s Commission on Heart Disease, Cancer and Stroke, led by the heart surgeon Dr. Michael E. DeBakey. Its recommendations emphasized better communication among doctors, hospitals and research institutions and resulted in a national network of treatment centers.

In 1967, Dr. Wright became head of the chemotherapy department and associate dean at New York Medical College. News reports at the time said it was the first time a black woman had held so high a post at an American medical school.

“Not only was her work scientific, but it was visionary for the whole science of oncology,” Dr. Sandra Swain, the current president of ASCO, said in a telephone interview. “She was part of the group that first realized we needed a separate organization to deal with the providers who care for cancer patients. But beyond that, it’s amazing to me that a black woman, in her day and age, was able to do what she did.”

Jane Cooke Wright was born in Manhattan on Nov. 30, 1919. Her mother, the former Corinne Cooke, was a substitute teacher in the New York City schools.

Ms. Wright attended the Ethical Culture school in Manhattan and the Fieldston School in the Bronx (now collectively known Ethical Culture Fieldston School) and graduated from Smith College, where she studied art before turning to medicine. She received a full scholarship to New York Medical College, earning her medical degree in 1945. Before beginning research with her father, she worked as a doctor in city schools.

Dr. Wright married David D. Jones, a lawyer, in 1947; he died in 1976. In addition to their daughter Jane, she is survived by another daughter, Alison Jones; and a sister, Dr. Barbara Wright Pierce.

As both a student and a doctor, Dr. Wright said in interviews, she was always aware that as a black woman she was an unusual presence in medical institutions. But she never felt she was a victim of racial prejudice, she said.

“I know I’m a member of two minority groups,” she said in an interview with The New York Post in 1967, “but I don’t think of myself that way. Sure, a woman has to try twice as hard. But — racial prejudice? I’ve met very little of it.”

She added, “It could be I met it — and wasn’t intelligent enough to recognize it.”

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Next Groupon CEO will have experience, Lefkofsky says

Groupon has fired its chief executive and the money-losing company faces several challenges, but Executive Chairman Eric Lefkofsky is undeterred. The Chicago-based e-commerce site, he said, is "inches away from greatness."

Lefkofsky, Groupon's co-founder and largest shareholder, speaking to the Tribune in his first public comments since Thursday's ouster of Andrew Mason, declined to discuss specific reasons for replacing Mason, though he pointed out at least one recent management error.

He also sounded as if he now agrees with the widespread sentiment that Mason didn't have the right skills to deal with the company's unique problems: It is global, large, technology-driven and growing fast, but it's also unprofitable, dogged by competitors and under intense scrutiny for its missteps.

Lefkofsky said he looked forward to hiring a CEO "who has experience dealing with the issues we're dealing with … who has been there and done that."

In spite of Groupon's troubles, "the long-term horizon of the company is fantastic," Lefkofsky said.

He'll have to forgive Wall Street if it casts a skeptical eye at his optimism. Even though it's less than 5 years old, Groupon popularized the idea of using the Internet to match local merchants and customers and it is now an established business. A new CEO isn't going to make the company's problems magically disappear.

Groupon is at a crossroads, not just because it has to find a replacement for Mason, the co-founder whose playful, irreverent style set the tone for the company's culture. Groupon faces shrinking consumer interest in its daily deals business that sends online coupons for everything from restaurants to pedicures to inboxes every day. And it has huge problems in its European operations.

Groupon is attempting to evolve its business model beyond daily deals into an ongoing, search-driven local marketplace. But the investment has been expensive. To boost growth, the company launched a separate business selling products at steep discounts. But that retail business has dragged down profit margins.

"While a new CEO may bring better skill sets (particularly in technology or online commerce), we believe that the challenges Groupon faces will only increase," wrote Edward Woo, an analyst at Ascendiant Capital Markets.

Lefkofsky supports the new course Mason had charted with input from him and other members of the board of directors.

In North America, email now drives less than 50 percent of Groupon's transactions. Half of local transaction volume comes from what the company calls its "deal bank," its searchable inventory of deals that are active for longer periods of time.

"This isn't about 'Oh, my God, we're going down the completely wrong road,'" Lefkofsky said. "Largely, the strategy and the business is going to continue down the exact same path it has been on."

He described Groupon as a "pioneer of curated commerce. We're selecting a certain number of deals every day, and then we're serving them out to people, sometimes via email, sometimes via mobile."

But the board decided that as the company enters the next stage of its evolution, the time was right to find "a new CEO that had some of those skills we need long term," Lefkofsky said.

In the interim, Lefkofsky and another director, former AOL Inc. executive Ted Leonsis, will run the company.

"Both (Ted) and I felt the company was inches away from greatness," Lefkofsky said.

That's a stretch judging by the stock market. Groupon's shares are down 75 percent in the 15 months since it went public at $20 a share. On Friday, in reaction to Mason's exit, the stock jumped more than 12 percent to close at $5.10.

While Groupon caught fire as a startup, it has stumbled repeatedly as it has grown. The company made embarrassing mistakes during the process of going public and then faced scrutiny over its accounting methods.

Since going public, Groupon has turned a quarterly profit only once.

In the fourth quarter, its net loss grew to $81.1 million, and the company projected weaker-than-expected operating income for the current quarter.

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New budget crisis begins after Washington fiscal talks fail

WASHINGTON -- President Barack Obama formally ordered broad cuts in government spending on Friday night after he and congressional Republicans failed to reach a deal to avert automatic reductions that could dampen economic growth and curb military readiness.

As the United States staggered into another fiscal crisis, the White House predicted that the spending cuts triggered by the inability of Obama and lawmakers to forge a broader deficit-reduction agreement would be "deeply destructive" to the nation's economic and national security.

"Not everyone will feel the pain of these cuts right away. The pain though will be real. Beginning this week, many middle-class families will have their lives disrupted in significant ways," Obama told journalists after his meeting with Republican and Democratic congressional leaders.

Late on Friday, Obama signed an order that put in effect the across-the-board government spending cuts known as "sequestration." Government agencies will now begin to hack a total of $85 billion from their budgets between Saturday and October 1.

Half of the cuts will fall on the Pentagon. Defense Secretary Chuck Hagel said the reductions put at risk "all of our missions.

Congress and Obama could still halt the cuts in the weeks to come, but neither side has expressed any confidence they will do so. Both Democrats and Republicans set the automatic cuts in motion during feverish deficit-reduction efforts in August 2011.

MARKETS SHRUG OFF CRISIS

Friday's events marked the first budget showdown in Washington of many in the past decade that was not somehow resolved at the last minute - often under pressure from rattled financial markets. Markets in New York shrugged off the stalemate in Washington on Friday as they have for months.

Democrats predicted the cuts could soon cause air-traffic delays, meat shortages as food safety inspections slow down, losses to thousands of federal contractors and damage to local economies across the country, particularly in the hardest-hit regions around military installations.

At the heart of Washington's persistent fiscal crises is disagreement over how to slash the budget deficit and the $16 trillion national debt, bloated over the years by wars in Iraq and Afghanistan and government stimulus for the ailing economy.

Obama wants to close the fiscal gap with spending cuts and tax hikes. Republicans do not want to concede again on taxes after doing so in negotiations over the "fiscal cliff" at the New Year.

Public outrage, if it materializes, would be the most likely prod for a resolution as the impact of the spending cuts starts to be felt in the coming weeks and months.

As a percentage of total government spending every year, $3.7 trillion, the actual spending reductions are small. But because safety-net programs such as Social Security and Medicare will be untouched, the brunt falls mostly on federal government employees rather than direct recipients of aid.

The U.S. government is the nation's largest employer, with a workforce of roughly 2.7 million civilians spread across the country. If the cuts stay in place, more than 800,000 of those workers could see reduced work days and smaller paychecks between now and September.

Furlough notices warning employees and their unions started to go out earlier this week and the pace picked up on Friday after it became clear that talks at the White House between Obama and congressional leaders would be fruitless.

While the International Monetary Fund warned that the belt-tightening could slow U.S. economic growth by at least 0.5 of a percentage point this year, that is not a huge drag on an economy that is picking up steam.

'THE SPENDING PROBLEM'

Many Republicans accuse the Obama administration of overstating the effects of the cuts in order to pressure them into agreeing to a solution to the White House's liking.

A deal proved elusive as Obama met at the White House with House of Representatives Speaker John Boehner, the top Republican in Congress, and Senate Republican leader Mitch McConnell, as well as the top two Democrats in Congress, Senate Majority Leader Harry Reid and House Democratic leader Nancy Pelosi.

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Well: A Rainbow of Root Vegetables

This week’s Recipes for Health is as much a treat for the eyes as the palate. Colorful root vegetables from bright orange carrots and red scallions to purple and yellow potatoes and pale green leeks will add color and flavor to your table.

Since root vegetables and tubers keep well and can be cooked up into something delicious even after they have begun to go limp in the refrigerator, this week’s Recipes for Health should be useful. Root vegetables, tubers (potatoes and sweet potatoes, which are called yams by most vendors – I mean the ones with dark orange flesh), winter squash and cabbages are the only local vegetables available during the winter months in colder regions, so these recipes will be timely for many readers.

Roasting is a good place to begin with most root vegetables. They sweeten as they caramelize in a hot oven. I roasted baby carrots and thick red scallions (they may have been baby onions; I didn’t get the information from the farmer, I just bought them because they were lush and pretty) together and seasoned them with fresh thyme leaves, then sprinkled them with chopped toasted hazelnuts. I also roasted a medley of potatoes, including sweet potatoes, after tossing them with olive oil and sage, and got a wonderful range of colors, textures and tastes ranging from sweet to savory.

Sweet winter vegetables also pair well with spicy seasonings. I like to combine sweet potatoes and chipotle peppers, and this time in a hearty lentil stew that we enjoyed all week.

Here are five colorful and delicious dishes made with root vegetables.

Spicy Lentil and Sweet Potato Stew With Chipotles: The combination of sweet potatoes and spicy chipotles with savory lentils is a winner.

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Roasted Carrots and Scallions With Thyme and Hazelnuts: Toasted hazelnuts add a crunchy texture and nutty finish to this dish.

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Carrot Wraps: A vegetarian sandwich that satisfies like a full meal.

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Rainbow Potato Roast: A multicolored mix that can be vegan, or not.

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Leek Quiche: A lighter version of a Flemish classic.

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Incomes see largest drop in 20 years

U.S. consumer spending rose in January as Americans spent more on services, with savings providing a cushion after income recorded its biggest drop in 20 years.

Income tumbled 3.6 percent, the largest drop since January 1993. Part of the decline was payback for a 2.6 percent surge in December as businesses, anxious about higher taxes, rushed to pay dividends and bonuses before the new year.

A portion of the drop in January also reflected the tax hikes. The income at the disposal of households after inflation and taxes plunged a 4.0 percent in January after advancing 2.7 percent in December.

The Commerce Department said on Friday consumer spending increased 0.2 percent in January after a revised 0.1 percent rise the prior month. Spending had previously been estimated to have increased 0.2 percent in December.

January's increase was in line with economists' expectations. Spending accounts for about 70 percent of U.S. economic activity and when adjusted for inflation, it gained 0.1 percent after a similar increase in December.

Though spending rose in January, it was supported by a rise in services, probably related to utilities consumption. Spending on goods fell, suggesting some hit from the expiration at the end of 2012 of a 2 percent payroll tax cut. Tax rates for wealthy Americans also increased.

The impact is expected to be larger in February's spending data and possibly extend through the first half of the year as households adjust to smaller paychecks, which are also being strained by rising gasoline prices.

Economists expect consumer spending in the first three months of this year to slow down sharply from the fourth quarter's 2.1 percent annual pace.

With income dropping sharply and spending rising, the saving rate - the percentage of disposable income households are socking away - fell to 2.4 percent, the lowest level since November 2007. The rate had jumped to 6.4 percent in December.

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Tax on pack of cigarettes sold in Chicago up $1 to $6.67

On the eve of a $1-per-pack Cook County cigarette tax increase, County Board President Toni Preckwinkle stood in the glow of X-rays showing damaged lungs, surrounded by some of Stroger Hospital's top pulmonary specialists as she discussed how smoking shortens people's lives.

The setting and talking points made clear the message Preckwinkle wanted to convey Thursday: This is a public health problem, one she plans to fight by giving smokers an incentive to quit and teens a reason not to start.

But the county's tax increase is more than just a campaign to protect people from emphysema and lung cancer. Preckwinkle is counting on $25.6 million this year from the move to help balance the budget. The history of cigarette tax increases suggests the county will be lucky to get that much in 2013 and should expect diminishing returns in the years ahead.

Smokes are a financial well that public officials have gone to repeatedly to shore up shaky finances at the local and state level. When the county tax increase takes effect Friday, a pack of cigarettes purchased in Chicago will come with $6.67 tacked on by the city, county and state. That's just behind New York City's nation-leading $6.86 in taxes per pack. It will also push the cost of a pack of cigarettes in Chicago to as much as $11.

Recent cigarette tax increases have had only a short-term benefit to the government bottom line. Some people quit, while others buy cigarettes online or outside the county or state.

When the county last raised the cigarette tax — by $1 per pack in 2006 — collections initially shot up by $46.5 million, hitting $203.7 million, county records show. But by 2009, the county collected $20.4 million less than it had in 2005.

Mayor Richard M. Daley bumped up the city of Chicago's share of the cigarette tax by 32 cents in 2005 and another 20 cents in 2006, to 68 cents per pack. He saw collections rise from $15.6 million in 2004 to $32.9 million in 2006, according to a city report. But city cigarette tax revenue fell to $28.4 million in 2007, and continued dropping to $18.7 million by 2011, records show.

At the state level, Quinn pushed through a $1-a-pack hike in June.

Before that, state lawmakers and Gov. George Ryan agreed on a 40-cent increase in 2002. Cigarette tax proceeds went up by more than $178 million in 2003, to $643.1 million, and rose to $729.2 million in 2004. The revenue then fell steadily to $549 million by 2010 before edging back up to $580 million last year, according to state records.

The county is preparing for the windfall from the $1 increase to be strong this year, then decline. County officials project that after bringing in $25.6 million for the remainder of this budget year, the increase will net about $29 million for 2014, $21 million in 2015, $15 million in 2016 and just $9 million in 2017.

Preckwinkle says that's OK with her.

"My hope would be that over the long run this is no longer a way in which governments look to raise money, because fewer and fewer people are smoking," she said. "So I would hope that we have the effect of reducing our revenue because more people quit."

The county could end up saving money as cigarette tax revenue falls because uninsured people with ailments related to smoking are such a heavy financial burden to the public hospital system, Preckwinkle said.

In the meantime, Preckwinkle pledged to hire more staff this year to crack down on stores selling untaxed packs and large-scale tobacco smuggling from surrounding states. "We anticipate that there may be some noncompliance, as there always is when you institute an increase like this," she said.

Preckwinkle also acknowledged that the higher tax rate will push some smokers into surrounding counties or Indiana to pick up their packs, but she predicted such cross-border runs will not last.

"While people may initially, when the prices rise, go to other states — Indiana, Wisconsin or wherever — over time that trek gets very tiresome and time-consuming, and they return to their former habits of buying their cigarettes nearby," Preckwinkle said.

But David Vite, president of the Illinois Retail Merchants Association, said he thinks the cigarette taxes in Cook County are now so high compared with surrounding areas that smokers will continue to make the longer drive, and Illinois stores near jurisdictions with lower taxes will struggle even more.

"You might see people return to their old patterns if we were talking about a slight disparity, say 25 cents a pack," Vite said. "But now we're talking about a difference of nearly $3 a pack compared to Indiana, almost $30 a carton. You're going to see guys working in factories saying, 'It's my week to make a run,' heading to Indiana and coming back with $1,500 worth of cigarettes for all their co-workers."

jebyrne@tribune.com

Twitter @_johnbyrne

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Global Health: After Measles Success, Rwanda to Get Rubella Vaccine

Rwanda has been so successful at fighting measles that next month it will be the first country to get donor support to move to the next stage — fighting rubella too.

On March 11, it will hold a nationwide three-day vaccination campaign with a combined measles-rubella vaccine, hoping to reach nearly five million children up to age 14. It will then integrate the dual vaccine into its national health service.

Rwanda can do so “because they’ve done such a good job on measles,” said Christine McNab, a spokeswoman for the Measles and Rubella Initiative. M.R.I. helped pay for previous vaccination campaigns in the country and the GAVI Alliance is helping to finance the upcoming one.

Rubella, also called German measles, causes a rash that is very similar to the measles rash, making it hard for health workers to tell the difference.

Rubella is generally mild, even in children, but in pregnant women, it can kill the fetus or cause serious birth defects, including blindness, deafness, mental retardation and chronic heart damage.

Ms. McNab said that Rwanda had proved that it can suppress measles and identify rubella, and it would benefit from the newer, more expensive vaccine.

The dual vaccine costs twice as much — 52 cents a dose at Unicef prices, compared with 24 cents for measles alone. (The MMR vaccine that American children get, which also contains a vaccine against mumps, costs Unicef $1.)

More than 90 percent of Rwandan children now are vaccinated twice against measles, and cases have been near zero since 2007.

The tiny country, which was convulsed by Hutu-Tutsi genocide in 1994, is now leading the way in Africa in delivering medical care to its citizens, Ms. McNab said. Three years ago, it was the first African country to introduce shots against human papilloma virus, or HPV, which causes cervical cancer.

In wealthy countries, measles kills a small number of children — usually those whose parents decline vaccination. But in poor countries, measles is a major killer of malnourished infants. Around the world, the initiative estimates, about 158,000 children die of it each year, or about 430 a day.

Every year, an estimated 112,000 children, mostly in Africa, South Asia and the Pacific islands, are born with handicaps caused by their mothers’ rubella infection.

Thanks in part to the initiative — which until last year was known just as the Measles Initiative — measles deaths among children have declined 71 percent since 2000. The initiative is a partnership of many health agencies, vaccine companies, donors and others, but is led by the American Red Cross, the United Nations Foundation, the Centers for Disease Control and Prevention, Unicef and the World Health Organization.

This article has been revised to reflect the following correction:

Correction: March 1, 2013

An article on Tuesday about a coming measles-rubella vaccination campaign in Rwanda misstated the source of the vaccine and some financing for the campaign. The vaccine and financing are being provided by the GAVI Alliance, not by the Measles and Rubella Initiative.

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Economic expansion weakest since 2011

The U.S. economy barely grew in the fourth quarter although a slightly better performance in exports and fewer imports led the government to scratch an earlier estimate that showed an economic contraction.

Gross domestic product expanded at a 0.1 percent annual rate, the Commerce Department said on Thursday, missing the 0.5 percent gain forecast by analysts in a Reuters poll.

The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate.

However, much of the weakness came from a slowdown in inventory accumulation and a sharp drop in military spending. These factors are expected to reverse in the first quarter.

Consumer spending was more robust by comparison, although it only expanded at a 2.1 percent annual rate.

Because household spending powers about 70 percent of national output, this still-lackluster pace of growth suggests underlying momentum in the economy was quite modest as it entered the first quarter, when significant fiscal tightening began.

Initially, the government had estimated the economy shrank at a 0.1 percent annual rate in the last three months of 2012. That had shocked economists.

Thursday's report showed the reasons for the decline were mostly as initially estimated. Inventories subtracted 1.55 percentage points from the GDP growth rate during the period, a little more of a drag than initially estimated. Defense spending plunged 22 percent, shaving 1.28 points off growth as in the previous estimate.

There were some relatively bright spots, however. Imports fell 4.5 percent during the period, which added to the overall growth rate because it was a larger drop than in the third quarter. Buying goods from foreigners bleeds money from the economy, subtracting from economic growth.

Also helping reverse the initial view of an economic contraction, exports did not fall as much during the period as the government had thought when it released its advance GDP estimate in January. Exports have been hampered by a recession in Europe, a cooling Chinese economy and storm-related port disruptions.

Excluding the volatile inventories component, GDP rose at a revised 1.7 percent rate, in line with expectations. These final sales of goods and services had been previously estimated to have increased at a 1.1 percent pace.

Business spending was revised to show more growth during the period than initially thought, adding about a percentage point to the growth rate.

Growth in home building was revised slightly higher to show a 17.5 percent annual rate. Residential construction is one of the brighter spots in the economy and is benefiting from the Federal Reserve's ultra easy monetary policy stance, which has driven mortgage rates to record lows. (Reporting by Jason Lange; Editing by Andrea Ricci)
 

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Groupon shares plummet nearly 25% on weak results, forecast

Groupon Inc., the Chicago-based daily deals website, offered up an earnings disappointment Wednesday after the market closed, and its stock price tumbled about 25 percent in after-hours trading.

The company posted a fourth-quarter net loss of $81.1 million, or 12 cents a share, missing consensus analyst estimates, which called for the company to earn 3 cents a share. Revenue for the quarter came in at $638 million, up 30 percent year-over-year and in line with estimates.

Lower margins associated with its Groupon Goods sales and higher marketing costs — taking a smaller cut from merchants to attract new business — were cited as factors contributing to the quarterly loss.

Andrew Mason, co-founder and chief executive of Groupon, pointed a finger overseas as the primary cause.

"It was continued volatility in our international business that drove the weaker-than-expected profitability in the quarter," Mason said during the earnings call Wednesday. "We still have much work to do to bring our international operations to the same level of those in North America."

The company lost $67.4 million for the year, or 10 cents a share, on revenue of $2.33 billion. Projections for first-quarter revenue between $560 million and $610 million fell below consensus estimates of $655 million. The disappointing earnings and tepid forecast sent Groupon's share price plunging from nearly $6 down to about $4.40 in after-hours trading.

Launched in 2008, Chicago-based Groupon created its own e-commerce niche with heavily discounted daily deals blasted out to subscribers via email. While targeting has become more sophisticated, growth has slowed and with it, investor enthusiasm.

The company has set out to reinvent itself, introducing search-driven deals stockpiled with ongoing offerings, and continuing to build out its own store, Groupon Goods, which sells everything from orthopedic pet beds to diamond tennis bracelets at a discount. Those initiatives have yet to make much of a dent on the bottom line.

Groupon shares hit an intraday low of $2.60 in November but rebounded after Tiger Global Management, a New York-based hedge fund, acquired a 10 percent stake in the company.

That same month, Groupon rolled out its local marketplace in Chicago and New York, a bank of thousands of ongoing deals that the company called an "evolutionary step" toward demand shopping. Customers who search online for everything from Mexican restaurants to Brazilian waxes will see relevant active deals offered by Groupon, hopefully pulling them to the site to fulfill their purchases.

While still a small part of Groupon's sales, it represents a big shift from its familiar push model, where daily deal emails fill inboxes with hit-or-miss offerings, to a pull dynamic where customers come to its sites in search of a variety of products and services.

Mason said Wednesday that the shift will ultimately pay dividends for Groupon and its investors.

"We just believe that the potential of a local marketplace business, where you can fulfill demand instead of shocking people into buy(ing) something they had no intention to buy when they woke up in the morning … it's just a much larger business opportunity," Mason said.

Analysts remain mixed about Groupon's prospects to evolve the business model beyond its core daily deals.

Edward Woo, senior research analyst at Ascendiant Capital Markets, has a "sell" rating and a $2.50 price target on the stock. He remains cautious because of slowing growth in the company's daily deals business, and he is not convinced that Groupon Goods, which accounted for $225 million in fourth-quarter revenue, is such a good idea.

"There's only a couple really big, successful e-commerce companies out there, Amazon being the biggest," Woo said Tuesday. "If you were to place your bets, do you really think that Groupon can take on Amazon? Most people would say no."

While not quite bullish, Evercore Partners analyst Ken Sena sees encouraging signs from Groupon's new searchable local marketplace and improving mobile engagement, upgrading the stock two weeks ago from "conviction sell" to "underweight," with a $5 price target, before the earnings report Wednesday.

"There are a couple of things we're encouraged by as we look at the overall story," Sena said Tuesday. "The fact that traction on mobile seems to be really strong, and growth within (their) local marketplace. I think that's an important overall business model evolution as the company moves from a push-based model to a pull-based model."

Arvind Bhatia, senior research analyst at Sterne Agee, recently upgraded Groupon to a "buy" with a $9 price target, citing the local marketplace initiative as a driver for long-term growth.

"Groupon has become synonymous with discounts," Bhatia said Tuesday. "The initial years were all about sending that email and letting you know there's a hot deal and it's going to expire soon. I don't think it's a bad thing to combine the push email with the pull."

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