Amazon Shatters Sales Records. Again.; Apple Plays Nice With China’s New Laws; U.S. Gov’t Says Nyet to Cybersecurity Company

Primed for purchase…

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If you haven’t heard by now, yesterday was Prime Day, which is basically Amazon’s answer to Black Friday deals in the middle of summer. Laugh and poke fun all you want. But if you do, the joke’s on you. Because according to preliminary figures from Amazon, not only were sales up 60% over last year’s Prime Day, but “Prime” sales for July 11 even blew past 2016’s Black Friday and Cyber Monday. In fact, Amazon called it it’s “biggest day ever.” To be fair, this year’s Prime Day was 30 hours long, compared with last year’s 24 hours. But it wasn’t just about the deals that has Amazon all giddy today. Prime Day also brought in a significant amount of brand-spanking new Prime members.  Because as everyone on Amazon already knows, if you want those super deals, you need to be a Prime member, and yesterday saw more Prime membership sign-ups than any other time in Amazon’s history. As for the most popular Prime purchase, that would be the Echo Dot for the ultra-bargain price of $34.99, which usually sells for around $50. The most popular non-Amazon item sold in the U.S. on Prime Day was an Instant Pot Pressure Cooker. I could not make that up if I tried.

Apple of China’s eye….

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Leave it to Apple to not let some vague, burdensome, newly enacted cyber-security legislation get in the way of setting up a data center in China. China’s new cyber-security laws require that any data collected on its citizens needs to be stored on servers in China. If companies want to transfer any of that information, they need to go through regulatory review and approval…in China. For Apple, complying with Chinese law means an opportunity to improve the speed and reliability of the company’s products and offerings. While other foreign firms are still busy complaining about these new regulations, calling them a burden and a threat to proprietary data, Apple gets to become the very first of those foreign companies to make the necessary changes and set up shop. The province of Guizhou will play host to the tech giant, and Apple is making down a $1 billion investment to hunker down in that region of China. However, in order for any company to do legit business in China, it needs to team up with a local entity.  So Apple will be partnering up with the Guizhou-Cloud Big Data Industry firm, where all kinds of personal information, belonging to people who own Apple devices, will be stored.

Nyet so fast…

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It seems like just yesterday when you would walk into your local big box electronics retailer and have salespeople urging you to get Kaspersky Labs security for your computer. The company already has some 400 million users worldwide and generated $374 million in sales in 2016 just from the U.S. and Western Europe. But it looks like those days are about to go buh-bye now that the U.S. government is moving to block federal agencies from buying the cyber-security software from the Russian-based company. It seems that Kaspersky may have enjoyed a much much cozier relationship with Russia’s intelligence agencies than it was letting on, and apparently even helped develop security technology for Russia’s spy agency, FSB. However, Kaspersky Labs is calling foul and said it is being unjustly accused. The company also voiced its complaint that there’s an inherent assumption that because it’s a Russian company, that it must be tied to the Russian government. Besides calling the claims “unfounded conspiracy theories” and “total BS,”  CEO Eugene Kaspersky also said “…as a global company, does anyone seriously think we could survive this long if we were a pawn of ANY government?”  But it seems that the U.S. intelligence and law enforcement agent seriously do think that and said as much at an open Senate hearing.

 

Abercrombie & Fitch Sale Ditch; Wells Fargo Still Has More Amend$ to Make; Treasury Sec’y: Tax Break? What Tax Break?

No sell-outs here…

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Beleaguered retailer Abercrombie & Fitch decided that it is not going to sell itself off after all. That bit of news sent shares of the company plummeting as much as 20% today because apparently Wall Street doesn’t think the company has what it takes to pull itself out of its fiscal mess all by itself. Judging by Abercrombie & Fitch’s last several quarters of declining sales – going back to 2014, in fact – Wall Street might be onto something. A&F’s efforts to ditch its logo and start fresh with a whole new campaign for the brand earlier this year didn’t do much to move sales. Then of course, A&F had to contend with competition from fast-fashion rivals like Zara and H&M, which seemed to make matters precipitously worse, and not just for A&F. But it’s not as if A&F didn’t have a few good suitors that were gearing up to help it turn its fiscal tide. Word on the Street was that American Eagle Outfitters, together with private equity firm Cerberus Capital, was in talks with the retailer to acquire it. Unfortunately, for A&F anyway, the two sides couldn’t seem to agree on the terms of a sale and the deal is officially on ice.

Cough it up…

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Just when you thought Wells Fargo was done paying through its corporate nose for its actions that led to its mammoth fraudulent account scandal, along comes another class action settlement. This time to the tune of $142 million, an amount that a federal judge deemed “fair, reasonable and adequate.” But I guess that depends on whom you ask. In any case, the recipients of this latest settlement include customers who had fake accounts opened in their names and whose credit scores may have become negatively affected as a result of the fake account openings. While the actual payment per customer has yet to be established, rumor has it that the payments will be based on how much a customer’s credit score dropped, among other factors. Unfortunately, it probably wont be until after 2018 that customers can expect to see any sort of compensation. This latest settlement is in addition to the $185 million fine levied by state and federal regulators last year and the $3.26 million that the bank had to pay back to customers for fees wrongly accrued from those fraudulent accounts.Wells Fargo, believe it or not, is still undergoing investigations from several states, and that’s even with ten more class action suits in the wings.

 Break for it…

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In case you were hoping for a tax increase on the wealthy, then forgive me for dashing those hopes. According to Treasury Secretary Steven Mnuchin, while discussing the tax overhaul proposal – which the White House is very committed to getting passed by the end of the year, fyi –  that increase was never on the table. And if you happen to be in that wealthy tax bracket, well then, lucky you on so many levels. It seems there was this “sort of” rumor that a 40% tax increase would be levied on the wealthy that would allow for some nifty tax breaks for the middle class. But alas, it’s not happening. Well, the tax breaks are expected to happen for the middle class, but without imposing a higher rate on those fortunate enough to find themselves in a higher bracket. Mnuchin also assures us that there are no increases in store for the middle class either. Which seems like the decent thing to do.

Look Out Tesla! Volvo Plans to Disrupt Electric Car Industry; Plus Tesla’s Major Q2 Miss; Losing My Religion: Denim Company Goes Bust

Tesla disrupt…

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With all the attention Tesla has been getting – and seeking – lately, a major company just threw down the automotive gauntlet in the electric car arena. Enter Volvo, the perennial boxy but safe, Swedish import, which just announced that come 2019, it will only sell hybrid or electric vehicles. That’s right. The ultra-reliable, ever dependable Volvo will likely be giving Tesla a serious run for its money. The fact that its got a solid, dependable reputation to back it up only sweetens the pot. Lucky for Volvo, its parent company Geely Automobile Holdings of China has already sold tons of electric vehicles and now Volvo gets to tap into all those tech resources. And it’s not just Tesla that should be worried. Toyota, Honda and BMW, to name a few, should also look to up their game now that Volvo has entered the field. This announcement is epic since it means that Volvo becomes the very first major automobile manufacture to make the decision to completely kick internal combustion engines to the curb. Interestingly enough, hybrids accounted for only about 2% of auto sales in the U.S. last year, in part because gas prices have fallen so much, that people don’t mind getting cars with traditional gas-guzzling engines.

Speaking of which…

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Shares of Tesla took a nasty little drop today after the company reported that its second quarter sales were flat as a pancake. To add insult to fiscal injury, the company also reported that it delivered just 22,000 vehicles. That seems like a good thing except for the fact that Tesla had built over 25,000 cars. Demand is good. Oversupply is not so good. At all. And the fact that consumers have stopped demanding the Model S sedans and the Model X utility cars leaves Wall Street feeling less than stoked about Tesla. Especially Goldman Sachs, which just released a report documenting its concern over Tesla’s slow growth. It’s never good when Goldman Sachs is concerned about you. Naturally, Tesla pointed its finger at the ever-reliable and handy excuse of “production issues” to explain the shortfall of deliveries. Too bad Wall Street didn’t seem to care what excuse Tesla used.

Another one bites the dust…

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Today’s Chapter 11 bankruptcy filing is brought to us by True Religion, purveyor of super-pricey denim. True Religion brass is pointing the finger at e-commerce and the shift in consumer spending habits, since customers are choosing to purchase their goods from their devices instead of heading into actual stores where True Religion merchandise is typically sold. Fortunately, the company was able to come up with a restructuring agreement with several of its lenders that should get rid of approximately $350 million of its debt, while its creditors would get paid in full, at least the ones critical to the company’s operations. In the meantime, with 140 stores still under its belt, the company is going to explore ways to “reinvigorate the brand.” In other words, it is going to try to figure out how to get people to spend hundred of dollars on True Religion’s pricy merchandise once again.