The Very Under-Performing Caterpillar; H&M’s Fashionable Earnings; Nein the Better for Volkswagen

Cocooning…

Image courtesy of Supertrooper/FreeDigitalPhotos.net

Image courtesy of Supertrooper/FreeDigitalPhotos.net

Caterpillar took a brutal hit today on Wall Street, after cutting its sales outlook and whipping out bad news for some 5,000 employees who can expect a pink slip between now and the end of 2016. By 2018, that number is expected to reach 10,000. And there will be no transformation for this Caterpillar any time soon. There’s nothing flitty nor pretty this quarter about the fiscal health of this U.S-based company, whose performance tends to mirror that of the global economy as a whole. When Caterpillar fails to dazzle Wall Street, it’s safe to say something about the economy isn’t dazzling either. Caterpillar has even managed to take the Dow down with it today. The industries the company serves, namely mining, energy and construction, have been hit hard lately, especially in places like China, taking Caterpillar along for the unpleasant ride. This downturn has affected sales and revenue for the monster machines and shares of the company haven’t been this low since April 2010. It stands to be the first time in the company’s 90 year history that sales and revenue will decrease four years in a row. Caterpillar now expects to see $48 billion in sales, $1 billion less than what it was previously hoping to score. With the looming job cuts and big plans to restructure at over twenty plants, Caterpillar thinks it can cut $1.5 billion. Until then, the company hopes the industries it serves will break free from their fiscal cocoons and once again start pollinating the global financial markets.

Trending…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Maybe Caterpillar should consider going into fast-fashion for the time being. Clothing retailer H&M raked in some boffo earnings with sales growing a stylish 20%. The second largest clothing store in the world also has big plans to make its way into China with over 200 stores set to open there, despite the fact that its economy is currently experiencing a very unpleasant slowdown. This move will put H&M’s total store count at 700 in 28 markets. Can you believe the world needs so much fashion? Apparently, the retail sector in China hasn’t been hit as hard as other sectors. Hey, if you’re gonna have an economic downturn, you may as well do it in style. But even though revenue for the company surged to 46 billion kronor ( it’s a Swedish company, after all) from 38.8 billion kronor a year before, profits hardly moved, staying at very flat 5.3 billion kronor. Apparently, some of that is being blamed on the strong U.S. dollar, which seems to be responsible for higher garment costs. That poor U.S. dollar gets blamed for everything, I tell you. The rest of the blame goes to August. As in the month. A hot month, like its cooler counterpart, can negatively affect sales. Who knew?

Das boot…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Just as Volkswagen CEO Martin Winterkorn quit his post yesterday, three more top execs at the German car company will be getting axed in the wake of the company’s escalating emissions scandal. The board doesn’t even care if these execs had knowledge about the “defeat devices.” The fact is they were still at the top of the Volkswagen food chain as the scandal started (and continues) to unravel. Germany’s transport minister got in the action and discovered that, lo and behold, the emissions scandal even affects automobiles in Europe. Not to be outdone, everybody’s favorite German Chancellor Angela Merkel also entered the fray urging the company to get it together. In German, of course. VW is also staring at the wrong end of a potentially $18 billion penalty. And that’s just in the U.S. Criminal inquiries and lawsuits also loom large for the company. Ironically, Volkswagen had a scheduled board meeting to extend WInterkorn’s contract, who in his eight years with the German car company, managed to almost triple profits there. I guess he should make other plans and start updating his LinkedIn profile. No official word yet, but Porsche top dog Matthias Mueller might start slumming it in a Volksswagen as he’s apparently in the running for the top post now at the embattled company.

Volkswagen Puts the Brakes on Farfegnugen; Will GoPro Become a No Go?; Mickey’s Magical New Venture

Auf wiedersehen…

Image courtesy of artur84/FreeDigitalPhotos.net

Image courtesy of artur84/FreeDigitalPhotos.net

Volkwagen’s stock took a big 20% hit today over a not-so-little emissions scandal that has investors screaming “Nein!” It seems that the world’s largest automaker – at least for the first six months of 2015 – used some software, that managed to mislead regulators into thinking that the German automaker was actually following rules regarding emissions when, in fact, it wasn’t. The Environmental Protection Agency and California are calling the software a “defeat device.” Catchy, huh? So now, Volkwagen wisely decided to stop selling certain diesel vehicles, including Jettas, Beetles, Golfs, Passats and even some Audis, until repairs and amends can be made. Close to 500,000 vehicles are part of this fiasco and account for about 20% of sales in the U.S. The offending vehicles emit nitrogen oxides that have a nasty little way of exacerbating respiratory conditions. If the EPA is lucky, it could fine Volkwagen a whopping $37,500 per vehicle, which is cray cray since I’m pretty sure the cars don’t even cost that much. At that rate, Volkwagen could shell out a ghastly $18 billion. However, in all likelihood, it probably won’t be that much. Of course, those fines don’t include any consumer lawsuits and false marketing accusations. How do you say “up the creek” in German?

Word up…

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

Looks like Alexander Eule can kiss his free GoPro swag good-bye. The Barron’s writer penned a scathing article on why GoPro is but a “one produce wonder.” Likening the device to the relic we call Blackberry, Eule said that GoPro’s got a ton of competition headed its way and it’ll be a miracle if the company’s stock stays above $25 a share. GoPro, once a Wall Street IPO darling, made an auspicious ticker debut back in June of 2014, jumping over 30% from its initial offering of $24 a pop. Peaking at $98 in October 2014, the stock has been losing wind pretty steadily and is currently hovering today between $32 and $33 a share. While some have wondered if Apple might pick up the company, others have said no way. Why would Apple bother with an acquisition like that when it can just dip into its vast resources and talent and make a similar product. And that is basically what its doing as evidenced by its recent patent report which sent shares of GoPro down 12%. Apple might just be the least of GoPro’s competition worries as Chinese smartphone maker Xiaomi also has a similar device in the works. In case you were wondering, GoPro has not commented on the story. Yet.

For real…

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Who better to invest on Virtual Reality technology than one of the finest purveyors of fantasy and make-believe? And so it begins that the Magical Kingdom/mega conglomerate corporation we call Disney is one of several companies throwing money at  VR start-up JauntVR. Hollywood is chomping at the bit to get in on the entertaining aspects of VR action that offers viewers a striking 360° perspective and Disney is hoping its $66 million contribution will see some exciting fiscal return action. Jaunt is hoping to emerge as the go to platform for anybody with a lot of money who uses cameras for a living. Even if they are into GoPro. There’s a whole slew of people and companies who have already used the technology, including Sir Paul McCartney and The North Face. ABC News took the tech to Syria to make a documentary featuring curators attempting to save antiquities in the war-ravaged country. Jaunt expects to use their new found cash to scale up its tech, help with growth and provide a nice welcome addition to its previously raised $100 million. If you’re at all curious what all the fuss is about, see for yourself at http://www.jauntvr.com/content/.

Beer Companies Foam Up to Take Over the World; Colorado Ditch Day for Marijuana Tax; Poor Findings from U.S. Census Bureau

Sudsy…

Image courtesy of Danilin/FreeDigitalPhotos.net

Image courtesy of Danilin/FreeDigitalPhotos.net

A frothy beer merger seems to be brewing for two of the biggest beer makers in the world. Rumor has it that ABInBev and SABMiller are throwing around the idea of possibly joining foamy forces to create the biggest beer company. Ever. The move could also result in forming one of the biggest food and beverage companies. Ever. If the merger goes through, the new company would control a mind-numbing half of the entire beer market’s total profits. The new entity will also become one of the top ten biggest companies in the world, with Procter & Gamble and Nestle SA trailing behind. How a beer company’s market cap could surpass that of companies which make toothpaste and chocolate is beyond me. But I digress. ABInBev owns a lot beers you know like perennial classics, Budweiser, Corona and Stella Artois. But it also owns a lot that you may not have heard of like Antarctica, which is brewed…wait for it…in Brazil. Together with the malodorous Cass beer from South Korea, AbInBev owns over 40 different brews from all over the world. However it’s the market in Africa that has eluded this beer behemoth all this time. Hence, it’s looking to expand with SABMiller who already has quite the handle on that continent. Even though this is still all just talk, news of the potential merger sent shares of SABMiller up 23%.

On a high note…

Image courtesy of Paul/FreeDigitalPhotos.net

Image courtesy of Paul/FreeDigitalPhotos.net

There’s nothing like a good old-fashioned accounting error to generate marijuana sales. Because of a glitch in Colorado State Tax laws an automatic suspension of new taxes was conveniently triggered. The marijuana tax was the lucky winner and was met with great enthusiasm by the state’s marijuana users who regularly shell out an extra 25% in taxes for the stuff. It all started because Colorado under-estimated tax collection from last year. When that happens…poof…25% in sales and excise taxes magically disappears for one special day. Today being that day. Mason Tvert, director of communications for the Marijuana Policy Project said, “It’s crazy how much revenue our state used to flush down the drain by forcing marijuana sales into the underground market…It’s even crazier that so many states are still doing it…” Amen. Also interesting to note (well, to me anyway) is that sales of marijuana outpaced those of alcohol and tobacco. With marijuana raking in tax revenues of $70 million, alcohol only managed to eke out a paltry $42 million in tax revenue. Marijuana users spend approximately $1,800 a year on the stuff while consumers spend $450 on alcohol and just $315 a year on tobacco.

On a low note…

Image courtesy of  Mister GC/FreeDigitalPhotos.net

Image courtesy of Mister GC/FreeDigitalPhotos.net

Just when you think things are starting to look fiscally up, the U.S. Census Bureau steps in to to ruin the day. The bad news is that the median household income has been going down. As in, not up. In 2013, median income in the United States was $54,462. That number should have gotten bigger. But alas, 2014 brought with it a median income of $53,657. Which makes no sense since the economy seems to be recovering and employment is hovering at seven year lows (even though wages haven’t been picking up any speed). If that’s not bad enough, the poverty rate has also gone up from 14.5% in 2013 to 14.8% in 2014. Apparently, the poverty rate and the median income are not considered statistically significant, at least according to the Census Bureau researchers who presumably, make more than $53,657 a year. Just saying. And because it wouldn’t be any fun not to inject some politics into this discussion, the Democrats are rejoicing since the number of people roaming the streets without health insurance fell from 42 million people to 33 million. In an attempt to sap their mojo, however, Republican Paul Ryan, who chairs the House of Representatives Ways and Means Committee, advised Dems not to pat themselves on the back just yet, since clearly their efforts to fight poverty aren’t working.

Wall Street Sours on Lululemon; Goldman Sachs Goes for the Resell; Krispy Gets Kreme’d by Wall Street

Soured…

Image courtesy of  Suat Eman/FreeDigitalPhotos.net

Image courtesy of Suat Eman/FreeDigitalPhotos.net

The mood is sour today at Lululemon Athletica as shares of the athletic apparel company tanked over 9%. Which is kind of weird since the company pulled in some rock-solid second quarter earnings. Revenue was up 16% to $453 million when analysts were only pulling for $446 million. Profits did fall to $47.7 million, earning 34 cents per share but it was still a beat, if even by just a penny. The problem was that Lulelemon’s outlook is not looking too hot, see-through yoga pants or not. For the current quarter, Wall Street had big hopes and dreams that the company would nail down earnings per share of around 43 cents. However, the number Lululemon has in mind is between 35 – 37 cents. And that’s got Wall Street thinking thoughts that are anything but…zen.  The problem is margins are shrinking because the company is spending all sorts of cash on things like its international expansion, building up its online presence and tackling its menswear. All this while Lululemon still attempts to recover from its see-through yoga pants debacle and some impolite comments from its founder, Chip Wilson.

Who wore it best?

Image courtesy of  Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Goldman Sachs just plunked down $81 million into six year-old San Francisco-based start-up thredUP. ThredUP, in case you were wondering, is an online website for buying and selling secondhand clothing and accessories for women and children. And it’s nothing like eBay. Because I know that’s what you were thinking. Instead thredUP sends sellers a pre-paid bag which they fill up with delicately used items they want to unload. If an item is priced south of $59.99, the seller gets paid upfront; if an item gets listed north of $60, then it qualifies for consignment. Sellers typically see 10%-40% of the anticipated selling price from their gently used items. While no actual sales numbers have been revealed, and thredUP has yet to churn out a profit, the company does process about a million items a month from about 25,000 brands. How much of that actually gets sold is still a mystery. Rumor has it, however, that secondhand clothing company Twice, which happens to be owned by eBay, isn’t doing so hot. Then there’s all the other secondhand competition from companies like Poshmark and The Real Real, to name but a few. ThredUP plans on using this funding infusion to expand by opening some new processing centers and hiring more employees. Who knew other people’s clothes was such a hot trend? Actually, I think eBay did. But anyways…

Kreme’d…

Image courtesy of artemisphoto/FreeDigitalPhotos.net

Image courtesy of artemisphoto/FreeDigitalPhotos.net

Krispy Kreme just released their earnings and they were anything but sweet. On revenues of $127.3 million, the company earned 15 cents per share, which seems pretty good except that Wall Street was counting on revenues of $132 million and 19 cents earned per share. That seems like an awful lot of pressure to put on a doughnut, no? The problem is that rival Dunkin’ Donuts actually gained 12%. Are Dunkin’s donuts any better? Hmmm. The problem, interestingly enough, lies not in the doughnut, but in the other products the company sells, outside of the doughnut shops. Pre-packaged Krispy Kreme products are not doing too hot in supermarkets and putting a crimp in the doughnut maker’s digits.  In fact, sales were down 12% and the stock is down 20% for the year.  So now, Krispy Kreme is going to focus on opening more stores, including international shops, and scaling back on promotions. There are even ten shops slated to open in Myanmar. That is not a joke. Myanmar. Who knew? One promotion that’s still going to happen is “Talk Like a Pirate Day” on September 19. Do your best pirate impersonation and you might just be the recipient of a free doughnut. If you decide to really channel Captain Jack Sparrow or one of his colleagues, expect to walk a way with a complimentary dozen, matey.

Divided They Fall at United; Puerto Rico’s Fiscal Plans Fall Short; Barnes & Noble is Singing the Fiscal Blues

Who me?

Image courtesy of  jesadaphorn/FreeDigitalPhotos.net

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

The airline United is anything but these days as honcho Jeff Smisek ducked out of the company he had been helming, along with two other executives. Apparently, it’s because of a Port Authority investigation that’s in full swing stemming from some events in 2011 that resulted in the “chairman’s flight.” The “chairman” refers to former Port Authority chairman David Samson, who managed to finagle United to offer twice weekly flights from Newark airport to Columbia, South Carolina. While I’m sure Columbia, South Caroline is a fabulous place, that particular flight route was initially deemed unprofitable. So what made the route become profitable all of a sudden? Coincidentally, David Samson’s weekend home is located there and that flight makes for an awfully convenient commute. See where I’m going with this? But the burning question is if those flights were a sort ahem bribe from the airline or a shakedown by Mr. Samson in exchange for some investment cash and other dispensations from the P.A. That all remains to be determined. David Samson already resigned in 2014 after a probe began over intentional lane closings on New York’s George Washington Bridge. Did I mention Samson was a close confidant of Chris Christie. Just saying. Days after stepping down, the Newark-Columbia route was shut down. I guess it wasn’t profitable anymore. As for Smisek, well he still walked away with $5 million and another $3.5 million in stock.

You debt-or believe it…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Puerto Rico thinks they finally have a plan to fix all that fiscally ails them. To address the territory’s $72 billion debt, a panel put out a five year plan to restructure $47 billion of it. With bondholders left to pick up the remainder, Puerto Rico will still be left with a $14 billion financing gap between 2016 – 2020. Lucky bondholders. Debt from the power, water and sewer companies is not included. The plan includes many reforms including a lot of cuts to education and teachers’ pensions. Why education is always the first to get spending cuts is weird since kids aren’t the ones responsible for creating debt. Know what I mean? Also, the plan calls for exploring public/private partnerships for hospitals, highway, building and transit authorities. The plan also wants to explore changes to the tax laws because, after all, why should the United States be the only place that needs to overhaul its tax code? As with any iffy fiscal plan, no timeline has been set which, in my most humble opinion, doesn’t bode well. Even then, the plan still needs approval from legislature and the governor.

What’s in store…

Image courtesy of adamr/FreeDigitalPhotos.net

Image courtesy of adamr/FreeDigitalPhotos.net

Barnes & Noble, though it may be the largest book store chain on the planet, still took a big old $35 million hit on $939 million in sales – worse than the year before when it saw a loss of $28.4 million Hey, the bigger they are the harder their sales fall. But who knows? Maybe with new CEO Ron Boire taking the reigns – as of yesterday – maybe there’s still hope for the embattled bookseller. These new earnings reflect B&N’s spin-off of its college-division, 600 stores and the Nook, B&N’s shaky attempt at putting its electronic stamp on the e-reader industry. The bookseller just can’t seem to make strides against Amazon. Well, to be fair, most companies find Amazon to pose quite the challenge. In any case, B&N lost 68 cents a share when last year at this time it only lost 56 cents a share.  $17 million of B&N’s loss was from the Nook and this was B&N’s fifth straight quarter of losses, sending shares down today over 16% at one point today.  But B&N has a plan, so they say for a new store prototype. Those stores will be considerably smaller and carry a larger assortment of merchandise, including toys and games, which incidentally saw a 17.5% increase for the chain.

Mega Media Merger; Fitbit is Overweight…And That’s a Good Thing; Some Foam for Thought

Urge to merge…

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

While you were busy navigating mall parking lots trying to find a parking space so you could do some meaningful Labor Day shopping, Media General was also busy doing some shopping of its own. The media company picked up, or merged – as it’s being called – with Meredith Media to the tune of $2.4 billion. The new company to be borne out of this merger will be called Meredith Media General – how convenient – and will take its place as the third largest television station operator in the U.S. Media General is gaining an additional 17 television stations, bringing its grand total to 88. Meredith also brings with it some great poolside reading, including Better Homes and Gardens, Shape and Parents magazine – the ultimate publication that lets parents know they are doing everything wrong. The deal was done for $51.53 per share, a generous 12% premium from Meredith’s Friday closing price of $45.94. While the boards of both companies approved the deal, the FCC must also gives its blessing for this union, which is estimated to rake in $3 billion in annual revenue. And here’s a little fun fact: Meredith Media began in 1902 as an agricultural publisher. Who knew?

Fit to be upgraded…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Nothing says fit like having your stock upgraded by Morgan Stanley to overweight. Oh the irony.  Morgan Stanley had initially classified the stock as equal weight as in, it’s right where it belongs. But alas! Morgan Stanley has been noticing how Fitbit has been performing really nicely lately, fiscally speaking of course, and expects the maker of the wearable device to outperform aka overweight. That is a finance term, I kid you not, which also can mean (and does in this instance) outperform. And who does’t love a stock that is overweight and outperforms? Hence, the stock rallied today. In fact, Fitbit had its biggest jump today since June, when it debuted at a relatively modest $20 per share. Second quarter revenue tripled from a year earlier to over $400 million, compelling Morgan Stanley to revise Fitbit’s target price from a paltry $43 per share to a handsome $58 per share. And it’s no wonder since Fitbit has a staggering 21% piece of a a $10 billion industry. As for that little company we call Apple, it appears that wondrous watch they peddle isn’t swaying those Fitbit wearers, many of whom have decided against purchasing that ever wondrous piece of technology. Fitbit’s stock price, btw, hit $34.77 and closed today at $35.49.

An ice cold one…

Image courtesy of Getideaka/FreeDigitalPhotos.net

Image courtesy of Getideaka/FreeDigitalPhotos.net

Because it’s the thing to do, Heineken is adding to its stash of beer selections by welcoming craft brewery Lagunitas Brewery to its foamy fold. Apparently craft beer is the new black and has been growing at a steady clip compared to its less craftier counterparts, whose growth rate has slowed considerably. In fact, one out of every ten beers is a craft beer. Clearly it’s all the rage. Lagunitas’ beverages, most notable for its India Pale Ale, are reputed to be so tasty, that the company shipped out 600,000 barrels just in 2014. Unfortunately, now with Heineken taking a 50% stake in Lagunitas, the California-based beer company no longer gets to sport the craft brewer status. In order to be classified in that illustrious category, a company must be less than 25% owned or controlled by a larger brewer. Oh well. But at least with Heineken buying it, Lagunitas gets to spread its foamy wings and bring its tasty ales to other parts of the world that have yet to experience the joy that is…Lagunitas.

A Green Giant Farewell; Mobile-ads: Verizon Set to Unleash Service; Everything Is Fiscally Awesome at Lego

Yo ho ho…

Image courtesy of  Mister GC/FreeDigitalPhotos.net

Image courtesy of Mister GC/FreeDigitalPhotos.net

It’s time for the Jolly Green Giant to pack his bags. Together with Le Sueur, the two brands are getting some new digs over at B&G Foods, home to favorites such as Cream of Wheat and snack sensation Pirate’s Booty (a personal fave). B&G is paying $765 million in cash for the joy of adding the oversized brand symbol to its coffers and is expecting the Giant and his 160 plus products to bring in net sales of over half a billion, adding 60 cents per share. Jolly Green Giant and Le Suer are currently under General Mills, however, the maker of  Cheerios has been noting a shift in consumer preferences and has decided now would be a good time to unload the two companies. Apparently, shoppers are preferring fresher selections, as opposed to the sauce laden and frozen offerings that Green Giant and Le Sueur crank out. General Mills, which also has Yoplait yogurt, will now focus its efforts – and of course, money – into cultivating its brands and geographical locations that have more potential. It will also put a bit more oomph into some edible health and wellness endeavors. Which basically means it will shift gears to whatever products and areas will bring in the most amounts of cash. Sounds fair.

You’ve got ad-sales…

Image courtesy of twobee/FreeDigitalPhotos.net

Image courtesy of twobee/FreeDigitalPhotos.net

AOL (remember them?) also did a little shopping today picking up Maryland-based Millennial Media Inc. to the tune of $250 million to broaden its mobile-ad market share. At that price, the company was bought for $1.75 a share, a 31% premium to its closing price on Wednesday. Millenial took in almost $300 million in sales with an $83 million net loss last year. Verizon Communications Inc picked up AOL back in June for a trifle $4 billion, in an attempt to beef up its mobile ad technology, something at which AOL apparently excels. Verizon AOL now has big plans to challenge Facebook and Google (is that even possible?) who currently reign supreme over the mobile-ad market, and unleash its own mobile streaming video service called Go90.

Brick by brick…

Image courtesy of ArtJSan/FreeDigitalPhotos.net

Image courtesy of ArtJSan/FreeDigitalPhotos.net

Lego may not be a publicly traded company, but the company sure manages to pull in some boffo numbers, even surpassing Mattel as the world’s largest toymaker. Which is particularly insane since it only makes…well, Lego.  And while Mattel’s Barbie, Hot Wheel and Fisher-Price products still have sway, those toys, can’t seem to get a plastic leg up on Lego’s mesmerizing Ninjas and elves and…well, everything else. In fact, Mattel’s revenue fell almost 5% to $1.91 billion, with unwelcome help from Barbie and company. Lego, however, benefitted from foreign currency swings, not to mention a boost from The Lego Movie. The Danish company scored 3.55 billion Danish kroner, which translates to $537.5 million in the first half of the year and took in a 31% jump in profits. The company’s revenue also rose 23% to $14.14 billion. And there’s no reason to forecast that theses numbers won’t continue to rise. With a new Star wars movie coming out, which always does a fine job of boosting Lego sales, and a new video game, Lego Dimensions, due out late September, the toy company’s outlook is nothing but rosy.