The Lede: Updates on the Winter Storm

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LinkedIn shares soar after stellar results

(Reuters) - Shares of LinkedIn Corp climbed nearly 21 percent in midday trading on Friday on results that beat analysts' estimates for the seventh quarter in a row.

The social networking website for professionals reported on Thursday an 81 percent increase in fourth-quarter revenue and raised its forecast for the current first quarter.

Several research firms raised their price targets for the company.

"If execution continues, we struggle to see how margin expansion can't approach (and possibly exceed) 2012 levels," wrote Macquarie analyst Tom White in a note to investors.

White raised his forecast for 2013 adjusted earnings before interest, taxes, depreciation, and amortization margin to 25.4 percent from 24.7 percent.

In contrast to widely watched consumer Internet companies like Facebook Inc, Groupon Inc and Zynga Inc, all of which went public not too long ago, LinkedIn continues to trade well above its debut price of $45.

LinkedIn was co-founded in 2002 by Reid Hoffman, who serves as the company's executive chairman. His stake in LinkedIn is now worth about $2.6 billion, according to company filings.

Shares of the company were up 20.9 percent at $150.00 on the New York Stock Exchange in early afternoon.

(Reporting by Jennifer Saba in New York; editing by Matthew Lewis and David Gregorio)

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Rock pioneer Patti Smith receives Hepburn medal

BRYN MAWR, Pa. (AP) — Rock musician and writer Patti Smith is being honored by Bryn Mawr College with a medal named after the late actress Katharine Hepburn.

Smith received the 2013 Katharine Hepburn Medal on Thursday night in a ceremony at the women's liberal arts school in suburban Philadelphia.

Smith is recognized as a rock 'n' roll trailblazer whose work as a musician, writer, performer and visual artist influenced multiple generations. Her 1975 debut album, "Horses," is considered one of rock's greatest albums and she received the 2010 National Book Award for non-fiction for her memoir, "Just Kids."

Smith said when the college approached her about receiving the award, "I enthusiastically accepted without hesitation."

"Bryn Mawr is helping shape the futures of young women and providing them with the tools to be dominant forces in our society," Smith said.

College President Dr. Jane McAuliffe said Smith "conveys enormous passion and continues to transform herself throughout her artistic journey."

The college comprises 1,300 female undergraduates, two co-educational graduate schools and a co-educational pre-medical program.

The medal named after Hepburn, a Bryn Mawr alumna, honors women who change their worlds and whose work and embodies the intelligence and independence of the four-time Oscar winner.

It was awarded by the college's Katharine Houghton Hepburn Center, which memorializes Hepburn and her mother, an early feminist activist who share the same name, with programs focusing on the arts and theatre, civic engagement, and women's health.

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The New Old Age: The Executor's Assistant

I’m serving as executor for my father’s estate, a role few of us are prepared for until we’re playing it, so I was grateful when the mail brought “The American Bar Association Guide to Wills and Estates” — the fourth edition of a handbook the A.B.A. began publishing in 1995.

This is a legal universe, I’m learning, in which every step — even with a small, simple estate that owes no taxes and includes no real estate or trusts — turns out to be at least 30 percent more complicated than expected.

If my dad had been wealthy or owned a business, or if we faced a challenge to his will, I would have turned the whole matter over to an estate lawyer by now. But even then, it would be helpful to know what the lawyer was talking about. The A.B.A. guide would help.

Written with surprising clarity (hey, they’re lawyers), it maps out all kinds of questions and decisions to consider and explains the many ways to leave property to one’s heirs. Updated from the third edition in 2009, the guide not only talks taxes and trusts, but also offers counsel for same-sex couples and unconventional families.

If you want to permit your second husband to live in the family home until he dies, but then guarantee that the house reverts to the children of your first marriage, the guide tells you how a “life estate” works. It explains what is taxable and what isn’t, and discusses how to choose executors and trustees. It lists lots of resources and concludes with an estate-planning checklist.

In general, the A.B.A. intends its guide for the person trying to put his or her affairs in order, more than for family members trying to figure out how to proceed after someone has died. But many of us will play both these parts at some point (and if you are already an executor, or have been, please tell us how that has gone, and mention your state). We’ll need this information.

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Paula Span is the author of “When the Time Comes: Families With Aging Parents Share Their Struggles and Solutions.”

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Media Decoder Blog: Macmillan Settles With Justice Department on E-book Pricing

11:58 a.m. | Updated Macmillan said on Friday that it had agreed to settle a lawsuit brought by the Department of Justice over the pricing of e-books, asserting that the potential costs of continuing to fight the action were too high.

The agreement means that all five major publishing houses have settled the charges brought by the government last spring.

Apple, which is also a defendant, will continue to trial in June, according to the Department of Justice. A company spokeswoman declined to comment on Friday.

In a letter addressed to authors, illustrators and agents, Macmillan’s chief executive, John Sargent, said that the risks were too great to go it alone.
“Our company is not large enough to risk a worst case judgment,” he said. “In this action the government accused five publishers and Apple of conspiring to raise prices. As each publisher settled, the remaining defendants became responsible not only for their own treble damages, but also possibly for the treble damages of the settling publishers (minus what they settled for). A few weeks ago I got an estimate of the maximum possible damage figure. I cannot share the breathtaking amount with you, but it was much more than the entire equity of our company.”

In a suit filed last April, the Justice Department accused the publishers and Apple of conspiring in e-mails and over lavish dinners to set the price of e-books at an artificially high level. The publishers had moved from a wholesale pricing model, which allowed retailers to charge what they wanted, to a system that allowed publishers to begin setting their own e-book prices, a model known as “agency pricing.”

The defendants said they were trying to protect themselves from Amazon, which was pricing e-books below their actual cost, putting financial pressure on the publishers that they said would drive them out of business.

Nevertheless, three publishing houses, HarperCollins, Simon & Schuster and Hachette, settled with the government immediately. Penguin, Macmillan and Apple decided to fight the charges. But in December, to clear the way for its merger with Random House, Penguin settled too.

The terms of the Macmillan settlement mirrors that agreed to by the other publishers. Macmillan will immediately lift restrictions it has imposed on discounting and other promotions by e-book retailers and will be prohibited until December 2014 from entering into new agreements with similar restrictions. The publisher must also notify the government in advance about any e-book ventures it plans with other publishers.

Macmillan had been holding firm that it wouldn’t settle, and analysts offered varying explanations for the sudden turnabout. James McQuivey, an analyst for Forrester Research, said that potential merger talks might be one motivation. The publishing industry has begun to consolidate to respond to the threat from Amazon, and when Penguin and Random House announced last October that they would merge, it fueled speculation that more alliances would follow.

“This was a fight not worth fighting in the first place,” Mr. McQuivey said of the lawsuit, “and given the likely nature of merger conversations behind the scenes, that’s where you finally decide the litigation is an obstacle to those talks, which are much more important.”

But Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a publishing consultant, downplayed the role of a potential merger. “There have been no rumors and no signs that Macmillan is merging,” he said. “I would actually take their statement at face value.”

He said he thought it was more likely that Macmillan realized that their stand on pricing was having no effect on the market. E-book prices have been declining steadily but not precipitously since the settlement with the first three publishers went into effect last September. “Their settling doesn’t change the overall market, and it looks much more that way to them now than when they were originally fighting,” Mr. Shatzkin said.

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Massive Manhunt On for Ex-Cop Accused of Killing 3

LOS ANGELES (AP) — Thousands of police officers throughout Southern California and Nevada hunted Thursday for a former Los Angeles officer who was angry over his firing and began a deadly shooting rampage that he warned in an online posting would target those on the force who wronged him, authorities said.

Authorities issued a statewide "officer safety warning" and police were sent to protect people named in the posting that was believed to be written by the fired officer, Christopher Dorner, who has military training. Among those mentioned were members of the Los Angeles Police Department.

"I will bring unconventional and asymmetrical warfare to those in LAPD uniform whether on or off duty," said the manifesto.

The search for Dorner, who was fired from the LAPD in 2008 for making false statements, began after he was linked to a weekend killing in which one of the victims was the daughter of a former police captain who had represented him during the disciplinary hearing. Authorities believe Dorner opened fire early Thursday on police in cities east of Los Angeles, killing an officer and wounding another.

Police said Dorner, 33, implicated himself in the killings with the multi-page "manifesto."

In a Facebook post, Dorner said he knew he would be vilified by the LAPD and the news media, but that "unfortunately, this is a necessary evil that I do not enjoy but must partake and complete for substantial change to occur within the LAPD and reclaim my name."

As police searched for him, the packed Los Angeles area was on edge. The nearly 10,000-member LAPD dispatched many of its officers to protect potential targets. The department also pulled officers from motorcycle duty, fearing they would make for easy targets.

Nevada authorities also looked for Dorner because he owns a house nine miles from the Las Vegas Strip, according to authorities and court records.

Authorities said the U.S. Navy reservist may be driving a blue 2005 Nissan Titan pickup truck.

Los Angeles officers guarding a "target" named in the posting shot and wounded multiple people in Torrance who were in a pickup but were not involved, authorities said. The extent of their injuries was not released. It's not clear if the target is a person or a location.

The Daily Breeze in Torrance also reports (http://bit.ly/YWhBLi) that there was another police shooting nearby involving another pickup truck, but the driver wasn't hurt.

"We're asking our officers to be extraordinarily cautious just as we're asking the public to be extraordinarily cautious with this guy. He's already demonstrated he has a propensity for shooting innocent people," said LAPD Cmdr. Andrew Smith.

Dorner is wanted in the killings of Monica Quan and her fiance, Keith Lawrence. They were found shot in their car at a parking structure at their condominium on Sunday night in Irvine, authorities said.

Quan, 28, was an assistant women's basketball coach at Cal State Fullerton. Lawrence, 27, was a public safety officer at the University of Southern California. There was disbelief at three college campuses, Fullerton, USC, and Concordia University, where the two met when they were both students and basketball players.

Dorner was with the department from 2005 until 2008, when he was fired for making false statements.

Quan's father, a former LAPD captain who became a lawyer in retirement, represented Dorner in front of the Board of Rights, a tribunal that ruled against Dorner at the time of his dismissal, LAPD Capt. William Hayes told The Associated Press Wednesday night.

Randal Quan retired in 2002. He later served as chief of police at Cal Poly Pomona before he started practicing law.

According to documents from a court of appeals hearing in October 2011, Dorner was fired from the LAPD after he made a complaint against his field training officer, Sgt. Teresa Evans. Dorner said that in the course of an arrest, Evans kicked suspect Christopher Gettler, a schizophrenic with severe dementia.

Richard Gettler, the schizophrenic man's father, gave testimony that supported Dorner's claim. After his son was returned on July 28, 2007, Richard Gettler asked "if he had been in a fight because his face was puffy" and his son responded that he was kicked twice in the chest by a police officer.

Early Thursday, the first shooting occurred in Corona and involved two LAPD officers working a security detail, LAPD Sgt. Alex Baez. One officer was grazed.

Later, two officers on routine patrol in neighboring Riverside were ambushed at a stop light, said Riverside Lt. Guy Toussaint. One died and the other was in surgery. The officers shot were not actively looking for Dorner, Toussaint said.

Dorner's LAPD badge and an ID were found near San Diego's airport and were turned in to police at early Thursday, San Diego police Sgt. Ray Battrick said.

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Associated Press writers contributing to this report include Jeff Wilson, Bob Jablon, Greg Risling and John Antczak in Los Angeles and Ken Ritter in Las Vegas

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Greenlight's Einhorn sues Apple, seeks bigger payout

(Reuters) - David Einhorn wants Apple to "think different" ... about its cash.

The hedge fund manager's Greenlight Capital sued Apple Inc on Thursday, saying the company should give stockholders a bigger share of its huge cash pile.

Apple shares, which had fallen 35 percent from mid-September through Wednesday, were up 0.9 percent at $458.70 in morning trading.

Einhorn, a well-known short seller, is long on Apple shares. In a television interview on Thursday, he said that while he admires the company, it has a "cash problem" that it needs to fix by giving away perpetual preferred stock with a 4 percent yield.

"The idea is powerful, and when I have a chance to explain it to the shareholders, most will see it as an enormous win-win," Einhorn told Reuters.

Apple was not immediately available for comment.

One analyst said there were merits to Einhorn's proposal.

"He's a huge holder in the stock, the shares are down and it's natural for a person like that to try and reverse that," said BGC Partners analyst Colin Gillis. "Other shareholders may join, but whether it will change the tide remains to be seen."

Analysts have said stockholder pressure would increase as Apple's share price and clout declines, and investors have persistently called on the company to be more proactive in using its massive cash and capital hoard.

As recently as last month, Chief Financial Officer Peter Oppenheimer told analysts on a post-results conference call that the company, which has the largest cash balance in the tech industry at more than $100 billion, was considering various ways to be more active on that front.

Money managers have also said that Apple's cash pile was underperforming the results peers had been able to achieve with their own money.

'UTTERLY MISVALUED'

Calling Apple shares "utterly misvalued" at current levels in a CNBC interview, Einhorn said the company no longer needs to grow at the near-triple digit rates of the past.

For every $50 billion in preferred stock that Apple gives away to shareholders, it could unlock $32 a share in value for investors, Einhorn said, without elaborating on how he arrived at that number.

In a statement, Greenlight said it spent part of 2012 in discussions with Apple on the idea of perpetual preferred stock, but that the company rejected it last September.

"We understand that many of our fellow shareholders share our frustration with Apple's capital allocation policies," Greenlight said in an open letter to other investors. "Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money."

Greenlight also filed a lawsuit in federal court in New York on Thursday to force Apple to modify a proposal in its proxy, which the hedge fund believes does not conform to regulatory rules.

Greenlight said it is opposed to the proposal, No. 2 on Apple's proxy, which the firm said would remove the company's ability to issue preferred stock from its charter.

(Writing by Ben Berkowitz; Editing by Gerald E. McCormick and Lisa Von Ahn)

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Afghan boys from nominated film to walk red carpet

KABUL, Afghanistan (AP) — Fawad Mohammadi has spent half his life peddling maps and dictionaries to foreigners on a street of trinket shops in Kabul. Now the 14-year-old Afghan boy with bright green eyes is getting ready for a trip down the red carpet at the Oscars.

It will also be his first time out of the country and his first time on a plane.

Mohammadi was plucked from the dingy streets of the Afghan capital to be one of the main stars of "Buzkashi Boys," a coming-of-age movie filmed entirely in a war zone and nominated in the Best Live Action Short Film category.

The movie is about two penniless young boys — a street urchin and a blacksmith's son — who are best friends and dream of becoming professional players of buzkashi, a particularly rough and dangerous game that somewhat resembles polo: Horseback riders wrangle to get a headless goat carcass into a circular goal at one end of the field.

It's also part of an American director's effort to help revive a film industry devastated by decades of civil war and by the Taliban, an Islamic fundamentalist movement that banned entertainment and burned films and theaters during its five years in power.

Sam French, a Philadelphia native who has lived in Afghanistan for about five years, said his 28-minute movie was initially conceived as a way of training local film industry workers — the first installment in his nonprofit Afghan Film Project.

"We never dreamed of having the film come this far and get an Oscar nomination," French, 36, said in a telephone interview from Los Angeles, where he is preparing for the Feb. 24 Academy Awards and raising money to fly the two young co-stars in for the ceremony.

The two boys playing the main characters — Mohammadi and Jawanmard Paiz — can barely contain their excitement about going to the Oscars.

"It will be a great honor for me and for Afghanistan to meet the world's most famous actors," said Mohammadi, whose real-life dream is to become a pilot. He's also hoping to go see the cockpit during the flight.

The farthest Mohammadi has ever traveled was to the northern Afghan city of Mazar-i-Sharif when he was younger.

Mohammadi's father died a few years ago, leaving him with his mother, five brothers and a sister. He started selling chewing gum when he was about 7 years old and soon expanded his trade to maps and dictionaries.

He learned to speak English hustling foreigners on Chicken Street, the main tourist area in Kabul with shops selling multicolor rugs, lapis bowls and other crafts and souvenirs, and gained a reputation for being polite, helpful and trustworthy. He was even able to enroll in a private school, thanks to the generosity of some other foreigners unrelated to the film project.

In the movie Mohammadi plays the blacksmith's son, Rafi, whose father wants him to follow in his footsteps.

"His life was so much harder than mine," Mohammadi said. "The blacksmith made him go out on the streets. I came myself here (to Chicken Street). My family didn't make me come. I wanted to make money to feed myself and to feed my family. He didn't have a home. They lived in the blacksmith shop."

Ironically it's not Mohammadi but Paiz, the youngest son of a well-known Afghan actor, who plays the homeless boy Ahmad.

Paiz, also 14, already was an experienced actor: He's appeared in films since the age of 5 and has gone to the Cannes Film Festival.

Paiz and Mohammadi had a lot to learn from each other and became friends. He gave Mohammadi tips for acting and handling himself in live interviews, while Fawad taught him about life outside his sheltered surroundings.

"When I saw Fawad was such a good actor even though he was a street boy and he was so brave in acting, I was very surprised and I said to myself, 'Everybody can achieve what they desire to do,'" Paiz said during an interview this week, shivering in the snow-covered courtyard of the Afghan Film Institute while a local TV series was being filmed nearby.

French, who co-wrote the script and produced "Buzkashi Boys" with Martin Roe of the Los Angeles-based production company Dirty Robber, launched a fundraising drive that's raised almost $10,000 so far to help bring the boys to Los Angeles for the ceremony. Any extra money will be placed in a fund to provide for Mohammadi's education and help his family. The boys will travel with an escort and will stay with the extended Afghan family of one of the film's producers, French said.

French said he's aware of the pitfalls in working with child actors from developing countries.

The makers of "Slumdog Millionaire," the rags-to-riches blockbuster about three poor Indian children, have struggled to make a better life for the young stars, and four boys who acted in "The Kite Runner" had to leave Afghanistan out of concern they could be ostracized or subject to violence because of a rape scene in the movie.

French said he and others involved in the "Buzkashi Boys" took pains to involve the community and made sure to avoid any scenes that could be offensive.

"We're not filmmakers who just do a film and leave. We remain there and present," he said. "We had lots and lots of tea with lots and lots of people."

The Academy of Motion Picture Arts and Sciences says there have been three documentary features nominees filmed at least in part in Afghanistan since 2007 — all about the U.S. military. The Kite Runner, which was nominated for original score in 2007, was set in Afghanistan but not filmed there.

Afghanistan had a burgeoning film industry starting in the early 20th century, but it suffered from fighting during the civil war and the Taliban campaign to stamp out entertainment. Actors and film industry workers like Paiz's father and the actor who plays the blacksmith, Wali Talash, fled the country. They returned only after the 2001 U.S.-led assault that ousted the Islamic movement and its al-Qaida allies.

Talash, 56, said he hopes the "Buzkashi Boys" will show the world the rich culture of Afghanistan, which too few in the world know beyond reports of roadside bombs and suicide attacks.

"I hope if this movie wins that it will be an earthquake that will shake the industry and help Afghan filmmakers get back on their feet," he said.

Mohammadi, meanwhile, says he knows the money and fame he earned from the movie can carry him only so far. He still sells maps, though not so often as before, because he has school.

"For my work I used to know a lot of foreigners and I still do, but before they used to know me as a map seller. Now they know me as an actor," he said, waving a plastic-covered map as weary Afghans walked by on the muddy street. "Most of them take pictures with me and sometimes they buy maps from me even if they don't need any just because they spotted me in the movie."

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Associated Press writer Steve Loeper in Los Angeles contributed to this report.

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Online:

Fundraising site — https://rally.org/buzkashiboys/c/h95pGSpJAiE

Film website — http://www.buzkashiboys.com/

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Well: Expressing the Inexpressible

When Kyle Potvin learned she had breast cancer at the age of 41, she tracked the details of her illness and treatment in a journal. But when it came to grappling with issues of mortality, fear and hope, she found that her best outlet was poetry.

How I feared chemo, afraid
It would change me.
It did.
Something dissolved inside me.
Tears began a slow drip;
I cried at the news story
Of a lost boy found in the woods …
At the surprising beauty
Of a bright leaf falling
Like the last strand of hair from my head

Ms. Potvin, now 47 and living in Derry, N.H., recently published “Sound Travels on Water” (Finishing Line Press), a collection of poems about her experience with cancer. And she has organized the Prickly Pear Poetry Project, a series of workshops for cancer patients.

“The creative process can be really healing,” Ms. Potvin said in an interview. “Loss, mortality and even hopefulness were on my mind, and I found that through writing poetry I was able to express some of those concepts in a way that helped me process what I was thinking.”

In April, the National Association for Poetry Therapy, whose members include both medical doctors and therapists, is to hold a conference in Chicago with sessions on using poetry to manage pain and to help adolescents cope with bullying. And this spring, Tasora Books will publish “The Cancer Poetry Project 2,” an anthology of poems written by patients and their loved ones.

Dr. Rafael Campo, an associate professor of medicine at Harvard, says he uses poetry in his practice, offering therapy groups and including poems with the medical forms and educational materials he gives his patients.

“It’s always striking to me how they want to talk about the poems the next time we meet and not the other stuff I give them,” he said. “It’s such a visceral mode of expression. When our bodies betray us in such a profound way, it can be all the more powerful for patients to really use the rhythms of poetry to make sense of what is happening in their bodies.”

On return visits, Dr. Campo’s patients often begin by discussing a poem he gave them — for example, “At the Cancer Clinic,” by Ted Kooser, from his collection “Delights & Shadows” (Copper Canyon Press, 2004), about a nurse holding the door for a slow-moving patient.

How patient she is in the crisp white sails
of her clothes. The sick woman
peers from under her funny knit cap
to watch each foot swing scuffing forward
and take its turn under her weight.
There is no restlessness or impatience
or anger anywhere in sight. Grace
fills the clean mold of this moment
and all the shuffling magazines grow still.

In Ms. Potvin’s case, poems related to her illness were often spurred by mundane moments, like seeing a neighbor out for a nightly walk. Here is “Tumor”:

My neighbor walks
For miles each night.
A mantra drives her, I imagine
As my boys’ chant did
The summer of my own illness:
“Push, Mommy, push.”
Urging me to wind my sore feet
Winch-like on a rented bike
To inch us home.
I couldn’t stop;
Couldn’t leave us
Miles from the end.

Karin Miller, 48, of Minneapolis, turned to poetry 15 years ago when her husband developed testicular cancer at the same time she was pregnant with their first child.

Her husband has since recovered, and Ms. Miller has reviewed thousands of poems by cancer patients and their loved ones to create the “Cancer Poetry Project” anthologies. One poem is “Hymn to a Lost Breast,” by Bonnie Maurer.

Oh let it fly
let it fling
let it flip like a pancake in the air
let it sing: what is the song
of one breast flapping?

Another is “Barn Wish” by Kim Knedler Hewett.

I sit where you can’t see me
Listening to the rustle of papers and pills in the other room,
Wondering if you can hear them.
Let’s go back to the barn, I whisper.
Let’s turn on the TV and watch the Bengals lose.
Let’s eat Bill’s Doughnuts and drink Pepsi.
Anything but this.

Ms. Miller has asked many of her poets to explain why they find poetry healing. “They say it’s the thing that lets them get to the core of how they are feeling,” she said. “It’s the simplicity of poetry, the bare bones of it, that helps them deal with their fears.”

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Have you written a poem about cancer? Please share them with us in the comments section below.

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Retailers' Sales Beat Forecasts, but Worries Remain

(Reuters) - Many top retailers reported strong January sales on Thursday after offering merchandise and deals that drew in shoppers in spite of higher payroll taxes.

But shares of many retailers fell as investors worried that the sales owed too much to margin-sapping discounts and that the tax hit to take-home pay would hurt spending in coming months.

Macy's Inc, whose shares rose 0.4 percent, was an exception. Its sales at stores open at least a year jumped 11.7 percent, in part because it got new merchandise into stores quickly. The results easily beat Wall Street forecasts, and the department store chain raised its profit forecast.

In contrast, Kohl's Corp, reported a 13.3 percent jump, but that came in large part from clearing out merchandise at a discount ahead of spring. The department store operator left its profit outlook unchanged, and its shares fell 1.8 percent.

"January sales don't give you much of a sense what's coming," said Dan Hess, chief executive of Merchant Forecast, which provides financial research on the retail sector. "How much of it was clearance; how much of it was new merchandise?"

Besides Macy's, low-priced retailers TJX Cos Inc and Ross Stores Inc as well as teen chain Zumiez Inc raised their outlooks. Department store operator Stage Stores Inc, said it would hit or beat the high end of its earlier estimate.

Overall, same-store sales rose 5 percent in January across 20 retailers, according to Thomson Reuters I/B/E/S. That was above both analysts' estimates of a 3.1 percent increase and the year-earlier 2.8 percent gain.

Gap Inc's sales came in slightly above Wall Street forecasts, as the company's affordable Old Navy chain offered colored denims, coats and dresses that were a hit with shoppers. But Janney Capital Markets said in a note that investors would view Gap's modest profit estimate for the fourth quarter ended on February 2 as "not good enough." The company's shares were down 4.5 percent.

Costco Wholesale Corp, Target Corp and Victoria's Secret parent Limited Brands Inc also reported stronger-than-expected January sales.

Analysts said a number of factors gave January an artificial boost: Unusually cold weather mid-month in big parts of the country helped clear out winter merchandise, and a long weekend before New Year's Day helped. January is also a low-volume month, so the numbers are less important than, say, those for November and December.

The International Council of Shopping Centers said it expects February same-store sales to rise 2.8 percent to 3 percent.

The Standard & Poor's Retail Index was down 1 percent in midday trading, compared with a 0.8 percent decline for the broad S&P 500.

LITTLE TAX EFFECT, SO FAR

The mood of U.S. consumers improved in January after a deal in Washington at the start of the month averted the country going over the "fiscal cliff" that could have raised taxes significantly, a survey released last week showed.

At the same time, the take-home pay of millions of Americans fell in January because of a 2-percentage-point increase in payroll taxes.

That higher tax could pinch shoppers in coming months as relief about the "fiscal cliff" gives way to the reality of smaller paychecks.

"The amount of money that is being taken out (from the tax increase) is a real amount of money, and you may see more paycheck-to-paycheck cycles," said Kurt Kendall, a retail strategist at consulting firm Kurt Salmon.

Cato Corp, a specialty retailer offering low-price fashion, reported a 12 percent drop in same-store sales and pinned part of the blame on the payroll tax.

Target CEO Gregg Steinhafel said in a statement that customers are showing "discipline in the face of a slow economic recovery and new pressures," including payroll tax increases.

In that environment, retailers have little room for error.

Ann Inc said the brightly colored clothes it sold at its Loft chain failed to catch on with shoppers, and its sales estimate for the fourth quarter ended on January 31 disappointed Wall Street, sending its shares down 7 percent.

Department store operator Bon-Ton Stores Inc and teen chains Buckle Inc and Wet Seal Inc also reported disappointing sales.

At the higher end, Nordstrom Inc reported an 11.4 percent jump in same-store sales, probably buoyed by a stock market run-up.

"The stock market has also helped - it frees higher-end individuals to go shopping," said David Bassuk, head of AlixPartners' global retail practice.

The same-store sales retail index offers only a glimpse of retail spending as major chains like Wal-Mart Stores Inc, Sears Holdings Corp and Best Buy Co Inc do not report monthly sales.

(Reporting by Phil Wahba in New York, and Nivedita Bhattacharjee and Jessica Wohl in Chicago; Editing by Lisa Von Ahn)

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