The Hostess with the Mostess is Baaaack; Airlines Take a Fiscal Hit, Yet Consumers Shed No Tears; Starbucks Set to Raise You Up

 

Sugar high…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

No need to get all sentimental here, but Hostess has arrived. Again. The Twinkie maker is set to go public in the fall, following a deal with Gores Holdings which picked up a huge stake in the company. It seems like only yesterday when Hostess rode a fiscal roller-coaster that almost had the sweets maker go bust four years ago. But those days are now far behind, as the Ding-Dongs proprietor boasts a $2.3 billion valuation. The folks who bought the company, Metropoulos & Co. together with Apollo Global Management LLC, were the same ones who restored Pabst to its original glory. They picked up Hostess for $185 million and borrowed another $500 million to basically rebuild the company from the ground up. They did just that, but smaller. Much smaller. Almost all union workers were ousted, equipment was upgraded and even robots were brought in for some labor. Just like “The Jetsons.” Sort of.  Before Twinkies disappeared from shelves for those dark seven months, the company employed 19,000 people, most of them union. Now there are closer to 1,200 employees – not including robots, and more than 95% of them are NOT union workers. Top brass also unloaded Wonder Bread and Nature’s Pride, got products into movies theaters and restaurants, launched a new marketing campaign with celebs, including the illustrious Will Ferrell and threw in a countdown clock in New York’s Times Square for New Year’s. Hostess also doubled the shelf life of its products to 65 days. You might not find that especially appetizing, but investors sure did. And in case you were skeptical about the Will Ferrell choice, then consider that Hostess’s market for sweet-baked goods is up over 16% and posted $650 million in revenue for 2015. The company is now poised to hit $772 million in revenue for 2016 and by 2017, profit is expected to grow to $101.8 million.  If you’re still not convinced that the Hostess tide is turning, then look out for frozen fried Twinkies, making their coronary debut in a few weeks. Then we’ll talk.

Karma, I tell you…

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Image courtesy of Iamnee/FreeDigitalPhotos.net

Looks like the airlines have taken a hit and I suspect no one feels too sorry for the industry’s top players. Delta,  American Airlines, United Airlines and even Southwest posted declines between 12% and 31%. So sad, no? The demand just wasn’t enough for air travel and that, coupled with some other factors, made for some very unpleasant earnings and share declines. But cry me a river. These are, after all, airlines we are talking about. In my most humble opinion, it sometimes feel that they make a sport out of fleecing travelers. Just saying. Delta shares fell on the news that its revenue per each seat flown one mile dipped by 5%. Despite the wordiness of that calculation, it is how airlines measure their success. It also them helps determine just how much pricing power they have. And wouldn’t ya know it. They currently don’t have as much as they’d like. For now anyway. And that’s welcome news for travelers who aren’t too happy shelling out big bucks for uncomfortable seats. Delta, the second largest airline, actually had been expecting the decrease, but a smaller one of no more than 4.5%. The airline also ate a $450 million loss because they bet against fuel prices. Actually, Delta bet that fuel prices would jump and locked in some fuel purchase contracts called hedge contracts. Prices did, in fact, jump. Just not as much as Delta had hoped they so Delta ditched the contracts and ate a half billion dollars on them. So sad, no?

Nothing to buzz about…

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Image courtesy of zirconicusso/FreeDigitalPhotos.net

It’s July, oh faithful Starbucks drinker and do you know what that means? It means that it’s time for the price of your caffeine fix to go up. After all, it’s tradition. Actually, the tradition is to raise the prices during the first week of July, yet here were are and no increase. But fear not because Starbucks already made a statement that a price increase is on the horizon. Besides, due to a pricing glitch, some loyal drinkers were already charged that increase. Oops. However, those unfortunate consumers could have only been overcharged by, at most, 30 cents. There’s no official word yet on which drinks will be getting pricier, but  the ones that do go up will only go up by as much as – you guessed it – 30 cents. There is one more caveat, though. The amount of money a drink increases varies by region. So perhaps a move might be in order. Just saying. The fact is coffee futures keep going higher and are up over 10% just this year. Even if you are annoyed that your coffee habit is about to eat a bigger chunk out of your bank account, Starbucks knows that you’re still gonna keep whipping out the cash for it. In any case, if you think you did get overcharged on your recent Starbucks purchase, you can call the customer service hotline at 1-800-782-7282 to request your refund.

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One response to “The Hostess with the Mostess is Baaaack; Airlines Take a Fiscal Hit, Yet Consumers Shed No Tears; Starbucks Set to Raise You Up

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