VW’s China Redemption; Fitbit Numbers Way too Skinny; Deal Drama: Walgreens/RiteAid vs. Regulators

Emissions Scandal? What Emissions Scandal?

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Image courtesy of pixtawan/FreeDigitalPhotos.net

Volkswagen is in the news yet again. And this time it has nothing to do with poisoning the air we breathe. I know. Hard to believe, right? VW is making headlines because it has been crowned the world’s largest automaker, easily besting Toyota, after reporting that it shipped 10.3 million cars in 2016, a 3.5% increase from the year before. Toyota only managed to sell about 10.2 million cars, giving it just a .2% boost over the previous year. T’was a brutal blow dealt to Toyota’s ego – not that it’ll never admit it – since the Japanese automaker held that top spot for seven out of the last eight years.  Toyota says it’s not concerned with being in in the number one spot as long as it’s making good cars.  Toyota definitely makes good cars but I doubt anybody would believe that it’s not itching to reclaim the top spot next year. So what part of this great big planet was scooping up all those VW’s that helped the German automaker earn this dubious distinction? It certainly could not have been in the United States, where the car company isn’t exactly popular following “diesel-gate” and the on-going saga we call the “emissions scandal.”  Well, look no further than China, which stands as the primary reason for VW’s fiscally historic achievement, despite the negative sentiment against it in the rest of the world. It’s not that China is a smog-loving country filled with emission worshippers. However, it must have helped that VW sold almost no diesel cars to the country. Which probably explains the country’s on-going enthusiasm for Volkswagen. The Chinese just really dig VW’s. And in case you were wondering, GM rounded out the third spot. In fact, GM used to regularly claim the top spot, but along came 2008 and burst that bubble when the US carmaker faced the wrong end of bankruptcy and a federal bailout.

Fit to be tied…

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Image courtesy of vectorolie/FreeDigitalPhotos.net

Fitbit is looking anything but fit these days as the company released a preliminary earnings report, ahead of its February date, showing that the hype for its wearable devices is wearing…thin. For the full year Fitbit expects to pull down revenue for 2017 between $1.5 and $1.7 billion, and is expecting a reorganization to cost approximately $4 million. That reorganization, by the way, involves getting rid of about 110 jobs, or roughly 6% of its workforce. The company has been struggling to find ways to keep sales momentum for the wearable device. CEO James Park is hoping to turn Fitbit into a bona fide digital health company. And that’s a noble endeavor, indeed. However, that plan could literally take years that Fitbit may not have.  The company had slashed forecasts for the holiday season, but a move like that never ever bodes well. Competition from Apple, not to mention companies offering cheaper alternatives, have put a major damper on Fitbit’s sales, with 6.5 million devices sold during the fiscally critical holiday season. Apparently, that number just wasn’t good enough and the data only gets worse. Fitbit is reporting estimated revenue of between $572 million to $580 million. While that number might seem respectable, it’s actually disastrous, if only because the company had initially predicted that it would pull down as much as $750 million in revenue, with analysts forecasting $736 million. As for growth, Fitbit can now expect that figure to come in at around 17%, when initial expectations had been closer to 25%. As for shares, they didn’t just fall – they plummeted. They plummeted the most in three months, hitting its lowest intraday price. Ever.

Deal or no deal…

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Image courtesy of adamr/FreeDigitalPhotos.net

A deal has finally been struck between RiteAid and Walgreens. Again. If you recall, and it’s okay if you don’t, this deal has been in the works for the better part of fifteen months. Apparently, RiteAid’s new price tag is now coming in at $2 billion cheaper than its previous $9.4 billion price tag, and the official deadline for the deal has been extended as well. The deal was supposed to have closed back in 2016. But, details, mostly those involving regulatory approval, still need to be hammered out. So now, the new official deadline is July 31. In order for the deal to go through, Walgreens needs to sell off stores in certain regions where competition issues might complicate matters. The company needs to dump between 1,000 and 1,200 stores, but at least it will now only have to shell out between $6.8 billion and $7.4 billion, or roughly $6.50 to $7.oo per share, depending on the amount of stores it ultimately sells.  Once those are sold off, regulatory approval should come swiftly. Naturally, shares of RiteAid took a nasty tumble once investors realized they were losing significant bang on their mega bucks.

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