Google’s Tax Troubles Continue in Madrid; Will Oreo Scoop Up Hershey?; Pier 1 Not Feeling the Outdoor Love

Mucho dinero…

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Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

It was just another day in the life of Google as authorities raided its offices, this time in Madrid, Spain. At issue, yet again, is the search engine giant’s corporate tax practices in Europe and the looming question as to whether or not Google, and other big corporations like it, are steering their profits legitimately, in order to score a reduced tax rate. Spanish authorities are investigating the search engine giant to see if it has been in engaging in the  dark art we know as tax evasion. Back in May, France investigated Google for “aggravated financial fraud” and “organized money laundering” which both sound awfully sinister. France is hoping to get $1 billion from its investigation. Even Italy’s authorities are in on the action and looking to see if Google underpaid its taxes there as well.  Google already forked over $175 million in back taxes to British authorities, whose politicians are still whining because they feel that the amount was too low. Expect more post-Brexit griping. Naturally, Google and its peers are calling out their innocence and are adamant that they comply fully with tax rules. But, at any rate, the investigations still seem far from over.

Yummm…

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Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

The mood is sweet on Wall Street with talk of a Hershey takeover from Oreo maker Mondelez International. Given that there’s a trend to cut back on the amount of sugar people have been consuming, the timing seemed opportune for a buyout of a company that makes the world’s most beloved -in my opinion, anyway – chocolate bar. Mondelez, which also makes Cadbury chocolates, is currently the second largest confection manufacturer in the world. If the buyout goes its way, it will become the number one sweets maker, as 90% of Hershey’s revenue comes from North America. Shares of Hershey shot up 22% on the tasty news, hitting a record high of $117.79. Shares of Mondelez also went up, just not as much. Hershey’s market value is about $21 billion, give or take. But in order for the buyout to go forward, the Hershey Trust would have to give its blessing. After all, it controls 81% of Hershey stock and voting rights. However if you’re looking for some hostile action, might I suggest you look elsewhere. Mondelez already pledged to not shed any jobs and to keep the illustrious Hershey name intact.

Missed it…

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It’s looking like a long walk off a short Pier 1 as revenue for the home store chain came in at a disappointing $418.4 million. That number might seem impressive, except that it wasn’t to analysts, who were expecting revenue closer to $420 million. The company lost $6 million in profits and 7 cents a share when predictions were for a 5 cent per share loss. If those figures weren’t depressing enough, then consider that last year at this time, Pier 1 took in revenue of $436.9 million with a $7 million profit and an 8 cents per share gain. Shares of the company are now 50% less than what they were a year ago. The big area to disappoint was outdoor furniture. Darn you, outdoor furniture. That category was supposed to bring in some boffo results, but instead proved to be a real downer. The table top category did nicely. Just not nice enough. Taking a page from Chipotle, the company will now attempt to march out a rewards program and even add a gift registry. Which is weird, because I assumed the company already had a gift registry. I even went to check just now and wouldn’t you know it? It doesn’t. In any case, the company is forging ahead with plans to close 20 stores, while it already shuttered 8 this past quarter. Pier 1 did, however, open another three stores, presumably in more economically hospitable areas.

GE is Not too Big Anymore. To Fail, That is.; Diamonds Need a New Best Friend; Kellogg’s Wants to Make Cereal Great Again;

On your own…

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You can rest easy now as GE no longer poses a systemic threat to the financial stability of the United States. Phew. Three months ago, GE officially requested to unload its “Too Big to Fail” designation and voila! Shedding close to $200 billion in assets helped it achieve that lofty goal. Unfortunately, none of those dollars made their way to me. But I digress. With the Financial Stability Oversight Council voting unanimously to remove the label, officially called “Systemically Important Financial Institution” (or SIFI if you’re nasty), GE no longer requires lots of added, and presumably unwanted, scrutiny from the Federal Reserve. So now, nobody cares if it fails. Well, maybe just its employees and shareholders. And if it does (but why would it?), the government won’t have to throw at it a $182 billion taxpayer-funded bail-out like it did for AIG. Boom.

A girl’s best friend?

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It’s called the Lesedi la Rona and is the second biggest diamond mined. Ever. Clocking in at 1,109 carats, about the size of a tennis ball, so they say, this behemoth of a stone is only second to the Cullinan diamond that was discovered more than one hundred years ago. The 3,106 carat Cullinan, however, was cut cut into several polished stones and now shares a very posh home with the British Crown jewels. The same fate could not be said for this latest find. Last night Sotheby’s tried to auction the darn thing off, but the 3 billion years old diamond couldn’t even clear its $70 million reserve price. The rock was expected, according to some estimates, to fetch about $84 million with the bidding starting at $50 million. The bidding went up – “in strained pauses” – in increments of $1 million. But after fifteen minutes, the highest bid only came in at $61 million. Lucara, the Canadian company that owns the precious rock, saw its stock fall 18%  after the news that it failed to sell. Sadly, for the diamond industry anyway, prices for rough diamonds have fallen 18%, the most its fallen since the fiscal crisis of 2008.

Snap, crackle, pop…

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With cereal sales hitting the skids, falling by 1% this year, Kellogg’s has come up with a way it hopes will make cereal great again – cereal cafes. For about double the price of your average box of Apple Jack’s you can walk into Kellogg’s Cereal Cafe in Times Square (where else?) and order yourself a hearty bowl of Froot Loops accompanied by mini marshmallows and passion fruit jam. Yeah. You read that right. Or how about some Rice Krispies doused in green tea powder, fresh strawberries and ice cream. You didn’t see that one coming did you? Sounds swanky and that’s definitely the idea. Cereal sales have gone down 2.4% in the past four years, getting overshadowed by grab-n-go foods and being shunned by that pesky group we call Millennials. Cereal sales fell to about $10 billion in 2015, which might seem impressive except that way back in 2000, cereal sales came in close to $14 billion. According to research firm Mintel, 40% of Millennials could not be bothered with the clean-up required to eat a bowl of cereal and milk. However, 82% of that group still see cereal as a great snack sans the milk. Go figure. Next time you get the urge for a bowl of Special K mixed with Frosted Flakes, pistachios, lemon zest and thyme at 8:00 at night, then you’re in luck. The cafe, which opens July 4, will serve breakfast from 7:00 am until 11:00 pm.

Branson’s Bexit Woes; IKEA is the Latest Company to Issue Recall; Airbnb Takes on San Francisco

Pound it out…

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Add Sir Richard Branson to the ever-growing list of Brexit haters. And he’s right to be hating on it. Besides the fact that global stocks took a $3 trillion hit on Friday and Monday,  Branson estimates that his own company, the Virgin Group, already lost a third of its value. Branson went on to say that, “We are heading towards a disaster. I don’t believe the public realized what a mess their vote would cost.” And considering he’s worth close to $5 billion, he probably knows a thing or two about the downsides of the Brexit. He’s convinced Britain is on the fast lane to recession territory and thinks a second vote is in order as 4 million people have already signed a petition urging a new referendum. Ironically, the billionaire has no voting rights in Britain since he doesn’t actually live there but rather in the British Virgin Islands. However, his company employs 50,000 people in the United Kingdom, most of whom do have voting rights, presumably. I hope none of them were foolish enough to vote in favor of the Brexit. I’d hate to be “that guy.” In any case, Branson feels that the British public was not adequately informed about the potentially disastrous consequences. He warned that thousands of jobs would be lost and even had to put the kibosh on one of his own deals that was in the works.

 

No words…

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There’s yet another recall in effect and this time it doesn’t even have to do with Volkswagen. Sadly, this recall comes courtesy of IKEA, which had to recall some 29 million dressers that caused the deaths of six children, all under the age of four.  Another 36 have been injured. The most recent tragedy occurred as recently as this past February. These dressers included six styles from the company’s MALM line, that cost between $70 and $200, and were manufactured between January 2002 and January 2016. The company will issue full refunds for the furniture in question but is also offering wall-anchoring repair kits and even free one-time installations upon request should consumers wish to keep their dressers. Just 30,000 repair kits have been issued which represents but 1% of the total amount of dressers that were sold and still require anchoring. Regulators had called the dressers unsafe. The recall affects about half of the dressers that IKEA sells in the US.

Home bitter home…

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It’s Airbnb v. the city of San Francisco, with the home-sharing site charging that the city is violating the “Communications Decency Act, a federal law that prevents the government from holding websites accountable for the content that is published by their users.” It all started when San Francisco lawmakers decided to impose tougher rules for Airbnb and friends, which stipulated that the site could only post listings from renters registered with the city. The problem is, according to Airbnb, home-sharers were often confused by the process, which continues to be mired in the usual mess we call bureaucracy, and takes months to complete – months that could be used earning additional incomes from their homes. San Francisco wants Airbnb to enforce its rules, that listers be removed from the site unless they are registered. If Airbnb does not comply, the company could face fines of up to $1000 per day and even jail time for some employees. Mind you, only 20% of listers who rent out their homes for less than thirty days are registered with the city. Lawmakers want Airbnb to do its dirty work for them and remove the remaining 80% of listers from the site. Airbnb operates in more than 200 countries and has a valuation of $25 billion, at least as of today.

It’s All About the Brexit; Gearing Up for Some Star Spangled Traveling; Chipotle Wants to Reward You

The British are leaving, the British are leaving…

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The Brexit vote continues to cause trouble and it probably will be awhile before it stops. Janet Yellen has canceled her appearance at a bank conference in Portugal that was organized by the European Central Bank. The Fed chief was supposed to speak on a panel with the Bank of England’s Governor Mark Carney and ECB president Mario Draghi. Carney now has more pressing matters to attend to, as does Draghi, who is now heading to Brussels for a summit with EU leaders to brief them on the impact of the Brexit vote and hash out a response to the U.K. referendum. The S&P yanked its AAA credit rating on the UK since the index feels that “this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the U.K.” Ouch. On Friday, the pound plunged to its biggest one day drop EVER, as Barclays Plc and the Royal Bank of Scotland Group Plc had their shares halted as a result of the plunge. Meanwhile, Treasury Secretary Jack Lew doesn’t get the feeling that there is a financial crisis brewing. Well, at least he said as much on CNBC recently. And if Jack Lew says it, then it’s good enough for me. I think. However, analysts aren’t as optimistic about the British economy and think the “Brexit” vote just might put the UK in a recession, besides dealing a major blow to European economic growth. Those analysts feel that the U.S. will also take a hit or two as well, but without any recession drama. And in case you were counting on a rate hike anytime soon, don’t. The Brexit vote put the kibosh on it and that’s not necessarily a good thing.

Brake for it…

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Image courtesy of Chris Sharp/FreeDigitalPhotos.net

According to AAA, 43 million Americans are expected to travel this holiday weekend, beginning Thursday, June 30 thru Monday July fourth. That number is 5 million more than the amount of travelers on Memorial Day weekend and 1.2% more than the amount of travelers from last year’s holiday weekend. 84% of those traveling – 36.3 million, if you please – will be doing it by car, and if the the thought of heavy traffic congestion makes your skin crawl, then you can thank low gas prices for the increased congestion. The national average price for a gallon of gas is coming in at just $2.31, its lowest price since 2005 and 17% and 47 cents lower than it was last year at this time. But at least the traveling and the money being spent on those trips is good for economic growth. Americans saved a whopping $20 billion on gas spending this year so what better way to make up for it than by getting out on the road and commuting at least 50 miles from their homes. On a darker note, because of the increased traffic, the National Safety Council is expecting 450 auto-related deaths and 53,600 car-related injuries. But at least airfares will be lower and maybe even a safer way to travel this holiday weekend.

Muy caliente…

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Chipotle is biting the jalapeno-laced bullet and will now be offering up a rewards program. Yeah, that’s news. Before it’s food bore the makings of e. coli, salmonella and norovirus, Chipotle was a veritable rewards program snob, refusing to implement one. But I guess a slew of food-safety scandals and the fact that shares of the company have lost more than a third of their value since October gave the fast-food chain a fresh – no pun intended – perspective on its economics. Hence, we are now introduced to the Chiptopia Summer Rewards Program. It’s not clear if Wall Street feels this move is strategic as Chipotle does as the stock went down today almost 3%, closing at 388.78.The rewards program will begin July 1 and run until September. However, should the rewards program prove rewarding for Chipotle and actually help it reclaim any of the glory it lost last year as a result of its rash of food safety issues, then expect the rewards program to stay put. But diners beware as this loyalty program is not like other loyalty programs that require you to accrue points or spend a certain amount of money. Instead, Chiptopia rewards its customers by the amount of visits that they make in a given month. There are three levels customers can reach: mild, medium and hot. I will spare you the sordid and complicated details. However, in order to get those points customers will always need to purchase an entree with their order. Should they achieve the illustrious “hot,” status having visited Chipotle  eleven times – in one month -, then they get to enjoy three free burritos, which by the way, will count towards more rewards.

Costco’s Credit Chaos; Macy’s Switches it Up with New Chief; VW’s Writing Checks

Not to their credit…

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So much for a seamless transition of the Costco Anywhere Visa cards. The club-retailer started accepting the card this week, after ending its 16 year relationship with American Express, and there has been no shortage of chaos. While American Express enjoys a hearty laugh over this new credit card debacle,  Costco customers have been flocking to Facebook to rage against Coscto and its Citigroup credit card. Since Monday, Citigroup has been flooded with phone calls from 1.5 million disgruntled callers whose issues included problems activating accounts, lengthy wait times to speak to a living human breathing customer service representative and even difficulty trying to pay off existing balances. I mean seriously, when was the last time you had a hard time getting someone to take money from you. Costco has over 80 million members worldwide and eleven million of them applied for this new card. Those cards were supposed to have arrived back in May. Unfortunately many didn’t. The card offers a generous cash-back program and has no annual fee and, which was the bone of contention between Amex and Costco, that ultimately put the kibosh on the relationship. About 25% of Costco shoppers used Amex cards for their purchases and Amex took a 6% fee that cost the retailer $180 million. Citigroup is the biggest credit card lender in the world and analysts think the new partnership is a great idea to cut down on costs. Visa’s fees will be considerably smaller, costing Costco somewhere between $60 million and $150 million. Which is great news, as long as you’re not standing on line right now trying to make a purchase with the store’s new Visa card.

Miracle on 34th Street?

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Long-time Macy’s CEO Terry Lundgren is getting set to bid a long and fond farewell to the department store he helmed for the last 14 years. While he still gets to remain chairman, succeeding him officially in 2017 will be Macy’s president and former Chief Merchandising Officer, Jeff Gennette. Lundgren might be a bit sad but Wall Street sure isn’t. Investors sent shares up on the news, which is especially reassuring since shares have gone down in value more than 50% in the last twelve months. To be fair, Lundgren’s contributions were nothing short of impressive. He made Macy’s the largest department store chain in the United States, among other shining achievements. But the time has come for a changing of the retail guard as Macy’s got hit with five straight quarters of same-store losses and its first quarter results were the worst they’ve ever been since 2008. That last bit caused a bit of panic in the retail sector as other big retailers worried that these results signaled an industry-wide problem. Some experts, me not being one of them, are convinced that Macy’s doesn’t have the chops, yet anyway, to compete with the likes of the Amazons, H&M’s and Zaras of the world. (Not that H&M’s recent results were all that impressive). With a strong dollar and falling sales, Macy’s had to close about 40 stores and cut thousands of jobs. As for Gennette, one source said, “He is going to make the radical changes” which sounds awfully ominous, but in fact, entails, at least in part, setting up an off-price store called Macy’s Backstage and making online shopping enhancements, which seem to be all the rage.

Farfegnugen…

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It’s official. Sort of. Volkswagen will cough up a settlement of about $10.3 billion to settle claims that it rigged emissions tests on some of its models. Part of the settlement includes offers to buy back about 500,000 odious vehicles which emit 40 times the allowable amount of nitrogen oxide into the air we breathe. By the way, VW is not expected, by the EPA anyway, to repair all of the offending vehicles. Some owners will receive as much as $7,000 in compensation. There’s a joke in there somewhere. Also, VW must set aside money for green energy projects besides establishing programs whose focus is to offset diesel pollution. Talk about karma. Both Volkswagen and the EPA declined to comment on the settlement, which I suppose is to be expected. This settlement is completely separate from other lawsuits suits filed by other U.S. states and is also separate from the Justice Department’s own criminal investigation into the matter. So it seems as though things are anything but settled for Volkswagen.

Elon Musk Fails to Electrify Wall Street; H&M’s Untrendy Earnings; Dell’s List for Female Entrepreneurs

It’s electric…

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Shares of Tesla took a bit of a dive today as investors attempted to illustrate how they feel about Elon Musk’s idea of buying out his other big endeavor, SolarCity. Musk, who owns about 19% of Tesla, feels that a SolarCity buyout will cut costs for both companies and magically create wonderful new lucrative opportunities. He also believes customers will be inspired to buy up a threesome of his electric cars, home batteries and solar system. Did I mention, by the way, that Musk also own 22% of SolarCity? Just saying. Investors, however, think it’s a bad move for Tesla to take in SolarCity, which would add about $2.6 billion in debt to the electric car maker.  Besides, investors aren’t feeling the love over SolarCity’s growth prospects and the increasing competition that keeps popping up. Tesla has yet to turn out a profit and isn’t even expected to do so until 2020. Of course, Musk disagrees with this analysis and is convinced that this is his year to start making some cold hard cash. Plus, he thinks a SolarCity buyout would put Tesla’s valuation at $1 trillion, and I’m guessing he likes how that sounds. SolarCity’s stock, by the way, is down 50% so far this year.

Un-trendy…

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Fast-fashion retailer H&M had a disappointing second quarter with profits falling a very un-trendy 17% to $847 million. At least sales went up, but only by 2%, to a decent $6.56 billion. But if that’s not bad enough, shares of H&M are down 17% so far this year. Naturally, the weather – the cold weather, this time – and the strong dollar took their share of the blame, as did tomorrow’s Brexit vote, I kid you not. Sales in the U.K., H&M’s third largest market, fell 7% and CEO Karl-Johan Persson thought it might have been because of the looming “Brexit” vote. Because, after all, aren’t most tweens and teens in Britain pondering that issue while they do their fast-fashion shopping at H&M? Persson, by the way, is not a “Brexit” fan. Incidentally, sales also fell in Portugal , France and Switzerland, yet there is no talk of any of those countries pulling out of the EU.

Woman up!

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There’s a new list out brought to us courtesy of Dell that ranks cities according to how good they are for female entrepreneurs. Called the Women Entrepreneur Cities Index, cities on this list are measured according to how well they attract and support female entrepreneurs of high potential who seek to grow and scale their business. In order for a city to even qualify, it first had to be categorized as a city that was already hospitable to entrepreneurs in general, regardless of sex or race. With that out of the way, the index took into account 71 different indicators – which I will not list, you’re welcome – and divided them into five different categories including, markets, talent, capital, culture and tech. The cities were given scores in these areas and the results may – or may not – surprise you. The Big Apple came in first with a score of 58.6 out of 100. The Bay Area followed second with a score of 58.3. Across the pond, London snagged the third place spot while Paris took ninth. Other U.S. cities that pulled in respectable scores included Washington DC in 7th place, Seattle, Washington in tenth place and Austin, Texas coming in twelfth. If you didn’t see your city listed then fear not as only 25 major global cities were taken into account for this particular list. And here’s a fun fact: A correlation was found between how much an area fosters and nurtures female entrepreneurs and that area’s general economic growth. They go hand in hand. How ’bout that.

Boeing’s Next Big Thing. And You Might Not Like It; Upper Middle Class Marks its Territory; To Brexit or Not to Brexit, Part Two

Coffee, tea or uranium enrichment?

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Boeing reportedly just signed an agreement with Iran Air so that the official airline of the potentially rogue nation can buy about 100 commercial aircraft from the American company. Rumor has it that the deal is worth $25 billion but there are still plenty of details that need to be hammered out before you can plan your Tehran vacay. Iran is definitely hard up for some new aircraft because it has just 250 aircraft and only 162 of them can fly, if that. The rest need spare parts. But with sanctions that have been in place for decades, those spare parts have been impossible to come by. Apparently the U.S. government feels that Iran held up its end of the dubious nuclear accord, however, the U.S. treasury still needs to give its seal of approval, along with every other human being in DC and beyond. You may not like the idea of the U.S. doing business with Iran but Boeing factory workers feel otherwise, as do Boeing shareholders who are chomping at the bit to get in on the profitable action. The fact is, the country is seen – and not just by the U.S. – as a promising growth market and there is plenty of money to be made there. European aircraft companies, Airbus and ATR, already have their agreements lined up with the Islamic Republic. Unfortunately, the Supreme Leader Ayatollah Ali Khameni is not so enthusiastic about buying aircraft from the United States and doesn’t see it an a priority. But then again, his state sponsors terrorism. So do we really care what his priorities are? Didn’t think so.

So classy!

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The upper middle class is thriving. At least that’s what the Urban Institute and economist Stephen Rose are saying. And just what makes a person upper middle class anyway? Glad you asked. If you find yourself in a three-person family that generates an annual income between $100,000 and $350,00, then you, my friend, are a thriving member of the upper middle class. Congratulations. I think. Stephen Rose argues that the true divide is not between the rich and poor, but rather it’s divided between the wealthy combined with the upper middle class, and everybody else. Warms the heart, no? The upper middle class was, once upon a time in 1979, 13% of the population. But in 2014, that class made up almost the 30% of the population. While the wealthy used to be just .1% of the population, that group is now 1.8% of the population. The middle class shrunk, presumably because some became wealthier and some…did not, and now makes up 32% of the population, compared to almost 39% back in 1979. The middle class, by the way, is defined as a family generating income between $50,000 to $100,000 annually. Just as there is an upper middle class, there is also a lower middle class which is defined as generating an annual income between $30,000 – $50,000. Generating an annual income anything less than that is probably not where you want to be. But on a high note, the standard of living has gone up for nearly all Americans, no matter what class they’re in.

 

Rate a moment…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

 

Janet Yellen appeared before the Senate Banking Committee and among the many fiscal pearls she imparted, she said that the Central Bank would go forward cautiously on its plan to gradually increase rates. Even though many experts were sure a June rate increase was in the works, “considerable uncertainty” with regard to the  U.S. economic outlook, global economic issues, a hiring slowdown and the looming “Brexit” vote in Britain nixed any thought of an increase. Janet Yellen did stress that the U.S. is not taking sides on the Brexit issue but cautioned that there will likely be economic consequences to the U.S, which sounds awfully ominous. There is concern that a Brexit would increase the value of the dollar, and that is not always a good thing, as evidenced by the dozens of companies that have lost millions of dollars in revenue and profits this year because of the strong dollar overseas. Ms. Yellen would like to see, among other things, a rebound in hiring and some growth improvement in the economy. No major surprises from the Brits would be nice too. Also during the meeting, Sen. Elizabeth Warren commented on the lack of diversity among the members of the Central Bank. Ten out of the 12 members are men, not there is anything wrong with those gentlemen. But still. Anyways, Chairwoman Yellen graciously replied: “It’s important to have a diverse group of policy makers who can bring different perspectives to bear.”Amen!