Gem – Truly Outrageous Auction Price; Macy’s Needs a Miracle on 34th Street and on Wall Street; Rolls Royce Profits Sputter

Just brilliant…

Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

One Hong Kong billionaire went shopping recently and dropped $77 million…on just two items…for his seven year old daughter. Is your head still attached? Just checking. Joseph Lau, scooped up two large stones at a Geneva auction which was probably way more fun than sitting in a Macau prison where the billionaire is appealing a conviction for corruption and money-laundering. One of the gems Lau bought for $48.5 million is a 12.03 carat “Blue Moon” – as in once in a Blue Moon does a gem like this come around – which set a record for the amount of money paid per carat in a gem. If you do the math, that comes out to approximately $4 million per one brilliant carat. But Lau can afford it since his net worth is estimated to be about $10 billion. Besides, he coincidentally set a second record  – in less than 24 hours – when his company sold a Hong Kong office tower for $1.6 billion. It set a record because it was double the amount of the previous record commercial real estate sale. Some guys – and seven year old girls – have all the luck I tell you.

Let it snow, now!

Image courtesy of Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net

Image courtesy of Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net

Macy’s could use a miracle right about now. Except this time on Wall Street where shares of the company took a 14% hit as it experienced its biggest one day fall in seven years. The company announced that it would be cutting its annual profit forecast as sales and traffic have been anything but miraculous, with quarterly sales that took a 5.2% hit. Revenue dropped to $5.87 billion when analysts thought Macy’s would pull in $6.15 billion. Macy’s profit dropped 45%, falling to $118 million, coming in at 56 cents per share. Analysts thought that would be just 54 cents per share.  First, Macy’s brass blamed the weather. Only this time it was blamed for being too hot instead of too cold explaining why shoppers haven’t been rushing into stores to buy warm-weather apparel. Then Macy’s blamed tourists for not spending enough money in its stores. Macy’s is also pointing the finger at off-price, aka discount, stores like Marshall’s and Nordstrom Rack. Those types of retailers have seen a 44% increase between 2009 and 2014 and have been taking away a big chunk of sales from Macy’s. Together with slow growth and weaker demand for some of Macy’s biggest brands and you get…a big hot fiscal mess. That’s on top of the fact that Macy’s already announced it would be closing 35 – 40 underperforming stores back in September. Too bad the numbers make it seem like all the stores are under-performing. Then investors were bummed that Macy’s nixed the idea of making a Real Estate Investment Trust (REIT) out of its properties. Investors like REIT’s for their liquidity, special tax incentives and the big dividends they yield. Macy’s has got about $21 billion worth of property that could have the potential to trade at a much better value. Instead the retailer will start offering some major discount action in an attempt to get shoppers into its stores just in time for the holiday season.

Not revved up…

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

While visions of Rolls Royce might have you thinking about royalty and James Bond, the heart of its business is in its engines, especially those used for aircraft, ships and industrial use. Unfortunately, the heart of the business is currently undergoing some fiscal coronary issues as new-ish CEO Warren East issued yet another profit warning for Rolls Royce today. Then things got ugly. Shares of Rolls Royce took a 20% beating after Mr. East said that  profits will be 30% lower than what even the analysts were predicting for the famous engine company. To add insult to injury, shares of Rolls Royce suffered their biggest single day drop in fifteen years. The 131 year old, British-based company also reported weak demand for spare parts and services for its existing engines. Now, its executive board is considering scrapping the company’s dividend. Stay tuned…

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One response to “Gem – Truly Outrageous Auction Price; Macy’s Needs a Miracle on 34th Street and on Wall Street; Rolls Royce Profits Sputter

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