Samsung Looks to Erase its Mistakes; A Not-So-New Chapter for American Apparel; Hedge Fund to Kate Spade: Sell off!

Exploding cell phones need not apply…

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Image courtesy of Pansa/FreeDigitalPhotos.net

There were no over-heating phones in sight as Samsung plunked down $8 billion to acquire Connecticut-based Harman International Industries. In case you have no idea who – or what – Harman is, it’s a company best-known for making premium audio systems for cars. But that’s not all. The company also makes plenty of other hardware for vehicles to connect, which makes it a very good fit for Samsung, as there will be very little overlap. Its products can be found in over 30 million vehicles, including BMW, Toyota and Volkswagen. This acquisition is an excellent opportunity for Samsung to break into the automotive industry where it barely exists. For now, anyway. It will also give the South Korean company a strong foothold in a rapidly growing industry that is expected to experience major growth in the next ten years. And who doesn’t like massive growth, right? By the way, this is the biggest overseas acquisition by a South Korean company. Ever. Samsung is paying roughly $112 per share, a 28% premium to Friday’s closing price.

The final chapter?

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

American Apparel is filing for chapter 11 bankruptcy protection. Again. For the second time in a year. After just exiting that protection in February. To be cute, some people call it Chapter 22 because it’s the second time it happened. Get it? Hilarious. In any case, I’m pretty sure American Apparel did set some type of record for earning its second bankruptcy in twelve months. The apparel company will be picked up by Canadian company Gildan Activewear for the bargain price of $66 million. If you recall – and it’s okay if you don’t – American Apparel, arguably best known for its racy ads, first filed for bankruptcy protection back in October 2015, roughly a year after it ousted founder and CEO Dov Charney for a litany of sexual harrassment problems. Charney, who said that the company had been taken from him in a coup, did try to regain control of his company only to have a court put the kibosh on his attempts. Later on, CEO Paula Schneider left after failing to turn the company around. The company, which went from 230 stores down to 110, saw a 33% decline in year over year sales, has $215 million in debt, tons of legal bills courtesy of Dov Charney and took in only $497 million in net sales for 2015. American Apparel will continue to run its normal U.S. operations though, the stores will eventually be put on the auction block. In the meantime, its stores across the pond have already started to experience the trauma and drama of liquidation.

Bag it…

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Image courtesy of lekkyjustdoit/FreeDigitalPhotos.net

Kate Spade is not feeling the love from hedge fund Caerus Investors, who whipped out a letter today asking, or rather urging, the lifestyle brand to sell itself. What Caerus neglected to mention in that letter was what it plans to do should such a sale occur. As for Caerus’ stake in Kate Spade, well, if you find out what it is, feel free to share that information as no one seems to know for sure. In any case, Caerus, according to its letter, has become “increasingly frustrated” with Kate Spade brass who have yet to make the company churn out a profit that would be on par with other companies like it.  Caerus doesn’t care for Kate Spade’s profit margins either, which are apparently lower than its peers, besides the fact that its stock also trades at a discount to other companies in the same category. There is something to be said for Caerus’s “frustration” seeing as how there was a whopping 63% decline since Kate Spade’s intraday high back in August of 2014.  Add that to the fact that Kate Spade’s third quarter revenue missed estimates and the stock is down 7% for the year and maybe you might be wondering if Caerus might be onto something. But then, lo and behold, Jana Partners announced that it owns a hefty .85% stake in Kate Spade, which conveniently sent shares up to $17.80 and gave it a very generous $2.28 billion valuation.  So maybe the answer to Caerus’ issues with Kate Spade lays in Jana Partners stake.

American Apparel Gets Offer with Strings; Another US Company Heads to the Emerald Isle; The Yogurt Wars. Enough Said.

Down but not out…

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Image courtesy of jesadaphorn/FreeDigitalPhotos.net

American Apparel might be bankrupt but that are still a few investors who would like to help revive the company. And it’s the latest offer that’s got people talking. Hagan Capital Group, along with Silver Creek Capital Partners, want to scoop up American Apparel for a sweet $300 million. And one more thing…they want Dov Charney reinstated. It’s the same Dov Charney who is also the founder and former CEO of American Apparel, and who was booted following some sexual misconduct allegations, not to mention other allegations involving the misuse of corporate funds. Just saying. Incidentally, Dov Charney hired Cardinal Advisors to help him line up investors who would see to it that he would be reinstated at the company he founded. How clever indeed. Several backers strongly feel that the company’s performance went down after Charney was shown the door.  Chad Hagan of Hagan Capital Group feels Charney was wronged adding, “We are willing to be friendly and genteel, but the fact is we want this company and we want Dov back in…We are deadly serious.” Not sure what he means about the deadly serious part but that is still nothing short of a ringing endorsement for Mr. Charney.

Invert this…

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Image courtesy of jesadaphorn/FreeDigitalPhotos.net

After six long months, pharmaceutical company Baxalta International Inc. finally said yes. Of course that yes comes with a $32 billion check but hey, it’s still a yes. The lucky suitor is Ireland-based pharmaceutical company, Shire Plc., which is offering Baxalta shareholders approximately $45.57 in cash and stock – an offer that represents an approximately 38% premium. The two companies expect to crank out $20 billion in revenues in the next year.  It’ll be helped by that fact that Baxalta’s corporate tax rate will drop from a very onerous 23%-24% in the United States, to a more corporate friendly tax rate of 16%-17% in Ireland. Gotta love an inversion. Shire’s main product is Vyvanse, used to treat symptoms related to ADHD.  But it’s Baxalta’s drug treatments that has corporate pharmaceutical tongues wagging. The company’s treatments focus on rare blood conditions, cancer and immune system disorders. While a relatively small population requires those treatments, those treatments are insanely lucrative, bringing in mega bucks for drug companies that offer them. In fact, 65% of Baxalta’s revenues come from treatments for rare blood disorders.

Not so good bacteria…

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Image courtesy of Master isolated images/FreeDigitalPhotos.net

Believe it or not it’s a yogurt smack down as Greek yogurt churner Chobani took aim at its competition last week. But now that competition is fighting back. Just three years ago, the Greek yogurt industry was growing at a rate of 60%. How ironic that the opposite is true for Greece. But I digress. In any case, the industry is now only growing at about 5%, with Chobani being the largest Greek yogurt seller in the world. The competition to differentiate is fierce – that is, if such a term can be applied to yogurt. Chobani launched an ad campaign on January 6 targeting Dannon’s use of sucralose – an artificial sweetener that has been FDA approved for food for the last 15 years. Sucralose apparently has chlorine in it and should therefore cause a potential yogurt enthusiast to purchase a container just to go ahead and chuck it – just like in Chobani’s ad. Which is weird because wouldn’t you first read the ingredients before shelling out money for the product? Just saying. Chobani also goes after Yoplait Greek 100 over its use of potassium sorbate, an ingredient that Chobani’s commercial actor points out is also used to kill bugs. Yum. Dannon wasted no time in sending out a cease and desist to Chobani charging that its claims are “false, misleading, disparaging and deceptive.” Chobani filed a complaint against that cease and desist letter arguing that its campaign for it “is not false, misleading…” Well, you get the picture.

A New Chapter for American Apparel; U.S. Scores a Perfect Triple “A”; Will Italy Say Bonjourno to Domino’s Pizza?

Bust…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

While American Apparel brass continues to tussle with ousted founder Dov Charney, the company still found quality time to file for chapter 11 bankruptcy protection. Not that this bankruptcy announcement is surprising. The company was bleeding cash for a while now, with Mr. Charney’s questionable behavior and sexual misconduct allegations just one slice of the sloppy fiscal pie. But not to worry over that American Apparel tank top you’ve been meaning to get. The stores, over 200 of them worldwide, won’t be closing there doors anytime soon. Well, at least that’s not part of the plan. In 2014 those stores hauled in $600 million in net sales. So clearly, not everybody was so grossed out by Mr. Charney’s alleged exploits and ad campaigns. The company is hoping to reduce its debt from a staggering $300 million to about $135 million and pinning its hopes on some major cash infusions from creditors is just the start. From there, American Apparel hopes to swap out some of that debt in exchange for company stock. America Apparel also wants to amp up its e-commerce by hiring some talent who can pull off such a feat. Add to that some brand rebuilding and a new look, because, let’s face it, America Apparel hasn’t really changed since, well, ever. There’s also lots of talk about whether it’s in the company’s best interests to keep its manufacturing base in the United States, specifically, California. It’s not exactly cost effective and it’s the reason why almost every other American company sets up shop somewhere in Asia. But bankruptcy or not, American Apparel is adamant that its brand be American-made. Otherwise it might have to change it’s name to Asian Apparel. Duh. If you were thinking of scooping up some shares, don’t bother. Trading of the company’s stock has officially been suspended.

AAA is for awesome…

Image courtesy of fantasista/FreeDigitalPhotos.net

Image courtesy of fantasista/FreeDigitalPhotos.net

In yet another un-shocking story, Moody’s Investor Service announced that the United States really truly deeply deserves its AAA rating. Unshocking, if only because Moody has never changed that rating. But maybe one day, the ratings service warned. Potential threats could knock down one of those pristine A’s. The insane amount of spending that goes into social programs has Moody’s singing the ratings blues. The company doesn’t care for that habit and is hoping Uncle Sam will figure out soon how to curb that spending. Also, Moody’s wasn’t pleased about that government shut down that almost happened weeks ago. Stuff like that do not a triple “A” rating make. And if Moody’s should someday decide that, alas, a prestigious rating is no longer deserved, it wouldn’t (couldn’t? shouldn’t?) happen before 2020. But that’s a big IF. Because however menacing those threats might seem, it’ll still be difficult to diminish the awesomeness of the United States’ gross domestic product growth, (as in GDP). In fact, growth in the U.S. surpassed that of other triple “A” rated economies (yes, it’s hard to believe but there are other triple “A” rated economies). Awesomeness also abounds because U.S. dollars and treasuries are the global reserve currency and bond market benchmark.  And if that’s not triple “A” worthy, then I don’t know what is.

The ultimate litmus test…

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

Domino’s Pizza, believe it or not, still has yet another market to crack: Italy. While to some, opening a Domino’s Pizza shop in Italy, is tantamount to bringing your own sandwich to a restaurant, this Domino’s franchise is aiming for some Italian authenticity. Franchise owner Alessandro Lazzaroni plans to use his own genuine Italian pizza recipe, replete with locally sourced wheat and other native Italian ingredients. A novel approach to pizza, no? After all, according to Domino’s research, Italians chow down on pizza approximately seven times a month and 70% of Italians prefer Margherita pizza (which is plain pizza, mind you). But the pizza company still has a long road ahead as no major American pizza brand has succeeded in the pizza motherland we call Italy. Just make sure that if you absolutely need to eat Domino’s Pizza – in Italy – you’ll have to be in Milan to do so. And how does Wall Street feel about Domino’s latest move? Well earnings are out tomorrow but the stock closed up at $108.03 per share.

Is a Fiscal Greek Tragedy Looming?; American Apparel’s Un-Trendy Legal Woes; Curing the Black Friday Blues

What would Socrates say?

Image courtesy of koratmember/FreeDigitalPhotos.net

Image courtesy of koratmember/FreeDigitalPhotos.net

The Greeks let its creditors know exactly how they feel about their austerity measures and voted resoundingly against them. But at least Greece’s Foreign Minister, Yanis Varoufakis, resigned announcing via his blog “Minister No More,” much to the delight and merriment of many a Eurozone finance minister. This resignation has even got some folks mildly optimistic that the financial crisis in Greece isn’t completely unsalvageable. But these very same finance ministers are all still in a tailspin about how to avoid a fiscal disaster as Greece already defaulted on a 1.5 billion euro payment to the International Monetary Fund while another payment is due to the European Central Bank for 3.5 billion euros on July 20. If a sovereign, in this case Greece, defaults on its loans, well then, bad things will just get worse as the banks become insolvent – as in, tapped out, dry etc – and then get nationalized. Once they get nationalized a brand new currency is introduced – a change which would be very bad for so many reasons. As for those Greek banks which are staring down the wrong end of nationalization and insolvency, they’re likely to run out of cash by the weekend.  In case you haven’t noticed, Greece’s fiscal turmoil has been causing even more turmoil in the global markets. So yeah, it’s in everybody’s best interest that Greece gets its fiscal act up and economically running.

Clearance…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Things are looking pretty ugly for embattled clothing retailer American Apparel. The company has a $30 million cost-cutting plan in the works and that could mean an under-performing American Apparel store near you might be closing its doors forever.  The chain has 239 stores and 10,000 employees whose heads are currently on the chopping block. American Apparel is also undergoing an image makeover after ousting founder and CEO Dov Charney. New CEO Paula Schneider would like to see the company sell actual clothes, as opposed to body parts. Sounds fair. This $30 million plan will hopefully rectify some of the other problems afflicting the clothing line and reverse those “steep losses.” However, many think it’s going to take a lot more cash than that. Some of that might have to do with the over 20 lawsuits looming courtesy of the booted Dov Charney and his associates. Of course, the brass at American Apparel has called the lawsuits “meritless.” The stock, which is down over 55% for the year and is currently hovering at a dismal 45 cents per share, has a market value of about $90 million. That’s a far cry from its $540 million market value it enjoyed just five years ago.

Prime deal…

Image courtesy of Iamnee/FreeDigitalPhotos.net

Image courtesy of Iamnee/FreeDigitalPhotos.net

If you are eagerly pining away for the chaos that comes with Black Friday that is still an endless five months away, then you’re gong to love this next one. Amazon is throwing its very own birthday party on July 15, dubbed “Prime Day,” and has invited you to come. Amazon wants presents. It wants you to spend your hard-earned money on deals that will be featured on Amazon – deals that you usually only see on Black Friday, and as the case may be, cyber-Monday. And while you don’t necessarily need to rsvp, you won’t walk away with any ridiculously-reduced items unless you subscribe to Amazon Prime – which by the way, will set you back $99 a year. But hey, at least you’ll get instant video streaming, free two-day shipping, Prime music and maybe even some really great bargains.

American Apparel Just Can’t Seem to Get it Together; Lululemon’s Un-zen-like Projections; Population Popularity

Overpaid…

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

Looks like American Apparel has some legal troubles, yet again. Only this time it’s not because of ex-CEO and founder, Dov Charney (sort of), who is apparently still trying to get his job back. The SEC launched an internal investigation into the apparel company over a very pricey review of the ousting of  Mr. Charney and all the unpleasant accusations against him, including several sexual misconduct allegations. However, to be fair, Mr. Charney’s lawyer called the allegations…don’t laugh now…”baseless.” So just how pricey was this review? Like $10.4 million pricey. Which seems expensive  considering the company’s stock was precipitously tanking, is hard up for $27.6 million with unpaid long-term loans, and has just about $8 million in cash. The price tag certainly got the SEC wondering if this major expense helped send the company into debt. The SEC wants to determine if any laws were broken during the review. But don’t hold your breath for any juicy details as the investigation is “non-public.”

Namaste…

Image courtesy of Master isolated images/FreeDigitalPhotos.net

Image courtesy of Master isolated images/FreeDigitalPhotos.net

Things are looking sort of zen at Lululemon Athletica as it announced its earnings with some decent numbers reported. The fitness apparel company took in profits of $111 million at 78 cents per share when analysts only predicted 73 cents a share. Last year the yoga apparel maker took in $109.7 million and 75 cents a share. But here’s where things aren’t so zen: Lululemon’s profit projections for the year are $1.85 – $1.90 – much less impressive than what analysts would prefer to see: $2.07 per share. It is kind of odd that Lululemon’s projections would be so much lower than analysts’ predictions considering the retailer has all these big revamping and expansion plans. So, it kind of got Wall Street wondering how much growth can they really expect to see from Lululemon following its successful holiday season. Hence, shares went down over 3%.

Booms and bummers…

Image courtesy of Craftyjoe/FreeDigitalPhotos.net

Image courtesy of Craftyjoe/FreeDigitalPhotos.net

Florida is where it’s at. At least according to the latest stats from the U.S. Census Bureau. Florida becomes the third most populous state, knocking New York off that perch. But a lot of that growth is coming from a place called The Village, Florida, ranked as the fastest growing city with a 5.4% population increase last year to 114,000 people. And with a name like that, of course tons of people are setting up house over there. Wish I was. But that was just one of the many cities experiencing major growth in the Sunshine State. Interestingly enough, and even a bit macabre, is the fact that these new residents helped offset the number of deaths of the many retirees who migrate to the state for their golden years, propelling Florida to a population of of 19.9 million people. New York only has 19.7 million. But California is the number one most populous state with 38.8 million folks.  Some of the other big winners, or rather gainers, were Williams County and Stark County, both in North Dakota, which earned the top spots for fastest growing counties. Of course, the booming oil industry and surplus of jobs can be thanked for that. A big loser? Wayne County, Michigan which took a population loss of about 11,000 people.

American Apparel Drama Round 2. Or is it Round 3?; Very Merry Gas Pumping Days; Housing: What’s Up or Rather Down With it?;

Change can be good…

Image courtesy of jscreationzs/FreeDigitalPhotos.net

Image courtesy of jscreationzs/FreeDigitalPhotos.net

Someone – make that some entity – actually wants to buy embattled retailer American Apparel, drama and all. In the meantime, co-chairmen Allan Mayer and David Danziger stepped down to be replaced by Colleen Brown. Rumors of a takeover began swirling last week, sending shares of the stock up. Private equity firm Irving Place reportedly put in a very generous offer of between $1.30 – $1.40 per share, or between $227 million – $245 million. The offer was especially generous because the stock is currently hovering around  $1.10 a share as I write this. Yet its price is still a distant memory from the $15.00 stratosphere where the stock was trading back in 2007. And the company is on track to post its fifth straight year of losses. What’s even more interesting about this takeover offer is that Irving Place would like to see alleged sexual harrasser, Dov Charney, back in the corporate mix, even though he was unceremoniously ousted last week, much to the chagrin of over 30 executives. Charney, however, still remains the largest shareholder in the company, with a hefty 43% stake in it.

Come all ye’ gas guzzlers…

Image courtesy of Rawich/FreeDigitalPhotos.net

Image courtesy of Rawich/FreeDigitalPhotos.net

These days are looking very merry at the pumps as gasoline prices are, on average, at their lowest prices since May 15, 2009. Head on over to Tulsa, Oklahoma and you might just find yourself filling up your tank to the very merry tune of less than $2.00 per gallon. Other cities where miracles like that are happening are in Lubbock, TX and Kansas City, MO. But don’t get too giddy as the average price is hovering above the $2.00 mark in most parts of the country. It’d probably be best to steer clear of Long Island, where you’ll be paying over $2.80 per gallon, on average. Still, these prices are better than they were last year when we were shelling out approximately $0.79 more per gallon than we are now. If you’re holding out hope for these prices to fall even more, they just might. But only by a few cents. There is a dark side, though,  to falling gas prices, particularly in Texas, whose economy relies heavily on the energy industry. The Texas economy could actually take a brutal beating from these decreasing prices, losing perhaps billions of dollars in revenue, but more importantly, hundreds of thousands of jobs.

No home for the holidays…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Seeing as you’re saving all this money because of falling gas prices, perhaps as much as a whopping $550.00 a year, then maybe you ought to consider looking for a new home. Well, someobody ought to anyway, considering that purchases for previously-owned homes took a nasty little 6.1% dive with only 4.93 million homes being sold in the month of November. Forecasts, sadly enough called for a decline from October’s 5.25 million, but only to 5.2 million. So that 4.93 million figure was an unwelcome surprise being the weakest number posted since May. But it’s not all bad and gut-wrenching since that number is still a 2.1% increase over the same time last year. Yet a bit perplexing since mortgage rates are so low right now, with the average rate on a 30 year fixed topping off at 3.8% last week. Experts, me not being one of them, also say that the decrease could just mean that there are a lot of prospective buyers out there who just don’t like the current batch of housing inventory and are holding out for more properties to come on the market. Let’s hope that’s the case. The next few months ought to provide us with a few clues.

American Apparel Battles; Not So FedEx-cellent Earnings; Cheerie-Woes

Gone but not forgotten…

Image courtesy of biosphere/FreeDigitalPhotos.net

Image courtesy of biosphere/FreeDigitalPhotos.net

Dov Charney may be officially ousted from American Apparel but wouldn’t you know it…the former CEO, who was booted over a number of misconduct allegations,  still has more than a few friends left at the company he founded. Thirty American Apparel executives just can’t bear the thought of manufacturing retail with provocative ad campaigns without Mr. Charney’s particular skill set. They are a bit peeved that their feelings were not taken into consideration and, in a carefully penned letter, asked the board to reconsider its decision adding, “he makes this thing tick.” A beautiful sentiment for a man who had a slew of sexual harassment allegations against him. Incoming CEO Paula Schneider will become Charney’s official replacement and she gets to plod through the mammoth task of trying to reverse the $300 million in net losses the company racked up since July of 2010. Charney, though, won’t be totally on the outs seeing as how he remains the largest shareholder in the company with a 43% stake in it. He does, however, have to share those voting rights with a hedge fund, presumably to keep him from exercising those rights exclusively for his  questionable benefits.

Shipping dipping…

Image courtesy of Mister GC/FreeDigitalPhotos.net

Image courtesy of Mister GC/FreeDigitalPhotos.net

FedEx had a good quarter. Just not good enough for Wall Street. Earning’s for the shipping company were up a very merry 23% thanks in part to a drop in fuel prices. The company earned $616 million and $2.14 per share. That figure was up from $500 million and $1.57 per share the year before. Revenue was even up 5% to $11.94 billion. But the hardly-ever-content Wall Street analysts wanted to see $2.22 per share and revenues of $11.97 billion. Next quarter should be more telling as this is the company’s busiest time of year. Here’s hoping that FedEx won’t repeat last year’s shipping debacle when over 2 million packages failed to make it to their recipients by Christmas Eve – a gaffe that was attributed to some icy weather and an unforeseen rise in shipping demand. Which I suppose is the one of the reasons an additional 50,000 employees were added to its workforce this season.

Soggy…

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

General Mills, like many of its breakfast-oriented peers/competition, posted second quarter earnings that were nothing to crunch about. Profit for the maker of one the world’s most arguably famous cereals, Cheerios, dropped by a whopping 37%. With consumer tastes  changing, shoppers aren’t exactly spending as much time and money on cereals and other products from the company. But at least its Yoplait and snack divisions are up. A bit. General Mills earned $346 million and $0.80 per share. But Wall Street wanted to see $0.03 more on those shares. The company pulled in sales of $4.71 billion, which seems like a lot of Cheerios, except that Wall Street was gunning for $4.79 billion. Sales in the US alone came in at $2.86 billion but it was still a 4% drop.