Hasbro’s Singing the Toys “R” Us Blues; It’s Good to Be Amazon; Target Goes on Holiday Offense With New Shopping Strategies

Don’t toy with me…

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Hasbro’s getting burned and it’s blaming Toys “R” Us. The toy company gave some abysmal holiday forecasts which sent shares down about 8%. Toys “R” Us owes creditors some $5 billion.  Among them is Hasbro which was left with a $60 million hole now that all those toys from the company aren’t headed to the toy store’s shelves.  It’s worth noting, however, that Hasbro only sold about 9% of its total inventory through Toys “R” Us.  But it isn’t just Hasbro that’s feeling the heat. Shares of Mattel also took a 4% hit today since a Toys “R” Us bankruptcy affects the entire toy industry, in some instances worse than others.  Incidentally, Hasbro’s third quarter profit went up 3% to $267 million and $2.09 per share, while its quaterly revenue increased 7% to $1.79 billion over the same time last year. Expectations were for $1.78 billion in revenue with just $1.94 per share. Hasbro has “The Last Jedi” to thank for some of this quarter’s gains, along with perennial favorites Monoply and My Little Pony.

Carrot dangling…

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Dignity be damned as 238 cities found themselves swooning and doing whatever they could to lure Amazon’s $5 billion HQ2 project to their part of the country. NYC Mayor Bill DeBlasio had major New York City landmarks lit up in “Amazon orange” while Newark, New Jersey shrewdly offered the e-commerce giant $7 billion in tax breaks. Because after all, who more so than Amazon should be entitled to receive a $7 billion tax break? But hey, who can blame any of these cities or their savvy leaders for trying to woo Amazon to their neck of the woods. Just ask Seattle, a city that experienced a $38 billion boost to its economy because each dollar that Amazon invested into the city between 2010 to 2016 resulted in an additional $1.40 for the city. Not sure who figured out that formula but its easy to see why everyone wants in on that action. And while Newark’s offer must be awfully enticing, word on the street is that the current front runners are Boston, Chicago, Atlanta and Detroit.

Target acquired…

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Target’s got some new tricks up its sleeve this holiday season and is going with the “less is more approach.” What there will be less of are promotions. At least the constant bombardment of them. Apparently that tactic didn’t work so well for the retailer last year and only resulted in a 1.3% decline for the company.  But there’s no need to freak out that Target wont be offering any special deals. It’s just going for a more streamlined approach. Instead of constant deals and promotions, it plans to offer special weekend deals while remaining focused on pricing its merchandise correctly and competitively from the start. The company’s 1,800 stores will also offer a much bigger variety of gifts priced under $15. Expect to see around 1,700 offerings in that category. Perennial favorite, “free shipping  with no minimum” will once again resurface from November 1 – December 23 because, hey,  who doesn’t like free shipping. But perhaps Target’s most exciting new feature is the one dubbed “Gift Now.” Shoppers buy gifts and their (un)lucky recipients open them virtually via email. If  the recipient likes the gift, they enter their shipping address in order to receive the item. If not, they get to pick out something else for the same value. If that’s not novel, I don’t know what is.

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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.

Japanese Airbag Maker Goes Bust; Pandora CEO Sings the Blues; ‘Pharma Bro’ Goes on Trial

Deflated…

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Japanese airbag maker, Takata Corp has filed for bankruptcy.  In the United States. Sure  companies file for bankruptcy almost everyday. But what makes this one unique is that Takata has the dubious distinction of issuing the largest auto-industry recall. Ever. With over 40 million vehicles in the U.S. possessing the potentially deadly airbags, some 125 million vehicles have been and will be recalled by 2019. It’s also the largest bankruptcy of a Japanese manufacturer, and one that finds itself staring down the wrong end of billions of dollars worth of losses over recalls that lasted the better part of a decade. From paying settlements to individuals who were harmed, to paying car makers, including Honda, BMW and Toyota – to name just a few – Takata’s fiscal trouble will take years to reverse. It seems that Takata’s faulty products were the cause for at least 16 deaths – that we know of. Fortunately a Chinese company had the good sense to swoop in and acquire Takata for a whopping $1.6 billion. Although, that is apparently a thorn in the side of the Japanese, since selling off to foreigners is something the country would rather like to avoid. Incidentally, the Chinese company that bought Takata is called Key Safety Systems and is based right here in the U.S. Go figure.

Cue the goodbye music…

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Looks like the music’s gone for Pandora CEO and Co-founder Tim Westergren. His departure may – or may not – have something to do with Sirius XM’x recent purchase of a $480 million, 16% stake in Pandora. But rumor has it that investors are bummed because they wanted Sirius to buy up the whole operation. If you recall, and it’s okay if you don’t, Howard Stern makes his radio home at Sirius. Not that this has anything to do with Westergren’s exit either. To add insult to injury, shares jumped a little on the news of Westergren’s impending departure, signaling that investors are stoked about his exit.  That itty bitty jump must have been especially welcome since Pandora’s stock has been down over 35% this year.  After all, Pandora is staring at some fierce competition from Spotify, Apple and JZ’s Tidal, to name just a few. As of yet, no replacement has been named so if you’re looking to throw your hat into the ring, now might be your chance.

What a pill…

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The time has come for everyone’s least favorite Pharma bro’ to head to court. And thus Monday begins with Martin Shkreli finding himself in a Brooklyn Fraud courthouse instead of a beach mansion in the Hamptons. But considering he raised the price of a life-saving drug by 5000%, he might very well go down as the least sympathetic defendant to ever sit in that courtroom. And just so ya’ know, being an a–hole isn’t crime and it’s not the reason why pharma-gazillionaire Shkreli is sitting in a courtroom on this fine summer day.  Rather ‘Pharma bro’ is on trial because prosecutors charged him with “widespread fraudulent conduct” and running a ponzi-like scheme that had him lying to investors while working at a hedge fund and his drug company.  Fun-fact: Shkreli was banned from Twitter back in January after harassing a female journalist who wrote an op-ed criticizing Donald Trump. Oh, the irony.

Uber Drama Revs Up; Gymboree’s Next Chapter in Life: 11; Aldi Ready to Feed You For Less. Much Less

These are the days of Uber’s life…

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The Silicon Valley soap opera we call Uber is making awkward, unpleasant headlines again. This time it’s because the rumor mill is swirling with talk that Uber CEO, Travis Kalanick, is about to take a leave of absence. Which begs the question about how this new development will affect Uber, if at all. Then we turn our attention to the now ex-number two honcho at the ride-sharing company, Emil Michael, who has left the Uber building. It’s doubtful he’ll be missed that much since he was apparently pressured to step down. In fact, Kalanick was advised to let Michael go earlier this year, however he declined to entertain that suggestion – a decision that eventually bit him in his corporate butt. Perhaps had Kalanick let Michael go when asked to do so, he might not find himself figuring out how to spend all his newfound free time. All this unpleasantness – well for Kalanick and Michael, anyway – ensued following a meeting with Eric Holder’s law firm. You remember him, dontcha? He’s the former U.S. Attorney General and if he’s got some recommendations, it’s prudent to follow them. Holder’s firm was retained by Uber to conduct internal investigations following accusations of sexual harassment and gender bias. The findings, his firm reported, were “ugly.” That doesn’t bode well for the world’s most valuable privately held company, now does it?

Another one bites the dust…

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Today’s Chapter 11 bankruptcy filing is brought to you by Gymboree, the children’s clothing store chain which can be found in just about any mall in the United States. Well, maybe not for much longer. The company still plans to remain in business, it’s just going to be shuttering anywhere from 375 to 450 of its stores. But rest assured, if you’re a frequent patron of the chain, there will still be well over 800 stores left from which to do your kids’ clothes shopping. If you are at all shocked about the store closures and bankruptcy filing, then clearly you aren’t one of the many creditors Gymboree refused to pay in the last few months. With increasing online competition and a major slowdown in mall traffic, it’s no wonder Gymboree just couldn’t make bank. The company is staring down the wrong end of $1.4 billion worth of debt and hopes to nail down a plan to help it shed about $1 billion of it.  The kicker, though, is that the company is still profitable, a bonus that a lot of analysts think will help propel Gymboree towards a bright, shinier fiscally nourishing future.

Grab your cart…

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Grocery chain Aldi has got some lofty goals. And if you’re thinking you’ve never heard of the chain, then just wait. The company just announced a $3.4 billion plan to make sure you do. Aldi has set its grocer sights on becoming the third largest grocery chain behind Kroger and Walmart. The grocery store chain currently boasts 1,600 locations from which to purchase your groceries, but by 2022, it expects to have 2,200 stores gracing the country.  Some 1,300 of its pre-existing stores are also being treated to a $1.6 billion remodel. And who doesn’t love a little remodel? However, the biggest thrill of all is that Aldi is going to attempt to price its merchandise over 20% lower than its rivals while adding 25,000 jobs in the process. If that doesn’t sound appetizing, the I don’t know what does.

Tesla Execs Make a “Break” For It; Aeropostale is Down and Out, Almost; Two Executives Are So Over Under Armour

Awkward…

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Two major executives at Tesla are making a break for it just as the car company is about to (finally) unveil its Model 3. Today’s departure announcements particularly unnerved Wall Street, sending Tesla’s stock down 4% on the news. One of the departing execs is Greg Reichow, the global VP of productions, who was also one of the highest paid executives in the company, taking home a package reportedly valued at $6.4 million. Reichow, who arrived at Tesla in 2011, will graciously stay on until his replacement is properly ensconced in his or her ergonomically designed executive desk chair. But what’s weird is that Reichow’s departure is being called a leave of absence, a classification that doesn’t typically necessitate successors. Also making a not-so-fond farewell is VP of manufacturing, John Ensign. Apparently the executive exits have to do with delays and other assorted hiccups that have been plaguing Tesla. But that’s not the official word coming out of the company. What is official is that a whopping five vice presidents have left Tesla just this year and mind you, it’s only May. In the meantime, Tesla’s Elon Musk is calling these exits a “well earned break.” Hmmm. Not the way I would have phrased it.

Market slap…

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Malls all over the United States and Canada are about to lose a neighbor. Aeropostale, purveyor of apparel that appealed primarily to teenagers, is closing over 100 of its stores for being not profitable. In fact, those stores were so not profitable that the company lost $17 million from them just in 2015. But at least the company expects to make $21 million in revenue from liquidation, which should last from six to eight weeks. No worries if you miss your Aeropostale location as there will still be over 600 left from which to shop. Just don’t bother shopping in Alaska, or Hawaii, or Times Square in New York, or…well, you might want to check before you head out to see if your preferred Aeropostale location is still standing. It may be hard to believe now, but once upon a time, Aeropostale’s market cap was worth $2.6 billion, with shares above $30. Those days, however, are long gone as its market cap might be scratching at $2 million and the stock has been delisted from the New York Stock Exchange after trading under 3 cents this week.

A chink in the armor…

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Under Armour has its own share of departures, bidding a (fond?) farewell to Chief Merchandising Officer, Henry Stafford, and Chief Digital Officer Robin Thurston. The company, who has endorsement deals with NBA’s Stephen Curry and golfer Jordan Spieth, generated $4 billion in sales last year, yet news of these departures spooked investors enough to send the stock down 6%. After all, a Chief Merchandising Officer’s role is integral to a brand that sells footwear and apparel considering their vision sets the look and feel. No minor details. Apparel, by the way, is Under Armour’s largest category. Just saying. Thurston had been with the company since 2013, when the company he co-founded, MapMyFitness, was acquired by Under Armour to the tune of $150 million. The company says that it’s just a coincidence that the two executives are making a break for it at the same time, at least that’s what a company memo said. But it’s a good thing that those two executives also have non-compete clauses in their contracts because it would be kind of awkward if they found themselves working for the competition. Well, awkward for Under Armour, I suppose.

Bit-drama; Sports Authority Strikes Out; Uber’s New Bosses

Bit-scam?

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An Australian man by the name of Craig Wright is claiming to be Bitcoin’s illustrious creator. But as much as he wants people to believe him and embrace him as creator-extraordinare of the crypto-cuurency, there’s plenty of reason not to bite. Insisting he’s Satoshi Nakamoto, the pseudonym behind the currency’s creator, Wright, a computer scientist, decided that it was time for him to reveal his true identity and correct all of the misinformation out there. Wright explained, “I didn’t take the decision lightly to make my identity public and I want to be clear that I’m doing this because I care so passionately about my work and also to dispel any negative myths and fears.” How…gallant. According to Wright, he substantiated his own claim by showing that he had access to blocks of bitcoin that could only have been created by the actual bona fide creator. How very convenient. But naysayers say he’s nothing more than a con man who used some blocks that had already been around and just copied them. Incidentally, Wright’s home was raided by police back in December as a result of a tax investigation conducted by the Australian Tax Office. Though Bitcoin launched in 2009, its creator, who is reported to hold about $450 million worth of bitcoin, fell off the virtual grid in 2011. There are a reported 15 million plus Bitcoins currently in circulation. Wright said he believes that Bitcoin can be used to make the world a better place and is set to release research on the massive potential of the crypto-currency. Awww! Can it cure cancer too?

Game over?

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Looks like it’s game over for Sports Authority, as the retailer will shutter its 463 stores after failing to reorganize itself following its Chapter 11 bankruptcy filing back in March. Initially, the chain had big plans to shut down just 140 of its stores. But now the chain will liquidate and very unglamorously auction itself off. There’s a hearing scheduled for May 16 but in the meantime, the flailing company is hoping somebody shows a little fiscal mercy in the way of a generous offer. Problem is, the offers it already had wouldn’t even be enough to cover the $100 million worth of administration and liquidation costs. Of course, there’s also the whopping $1.1 billion that Sports Authority owes to its creditors. Apparently Dick’s Sporting goods was catering the thought of scooping up Sports Authority, but don’t bother checking to see if Dick’s would keep the old sign in place. Because it wouldn’t. It has no intention of bringing on any negative associations. Fact is, Sports Authority and Dick’s were rivals with Sports Authority having the upper hand. But then Dick’s brought its “A” game and began presenting its merchandise better while also offering way more in the tech arena. Hence, Dick’s is not in the downward spiral in which Sports Authority finds itself with one analyst even calling it the only game in town now. Ouch. Perennial brick-and-mortar killer Amazon and friends also had a passive hand in Sports Authority’s demise. But ironically enough, deeply discounted merchandise at Sports Authority, as a result of liquidation attempts, have been hurting sales at Dicks and other sporting goods chains. Lately, anyway. But that fiscal dent will be minor and short-lived, especially when you consider that shares of Dick’s surged a bit today on the news of Sports Authority’s losing uphill battle.

Riding it out…

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About 1,000 Uber drivers in New York are going all out by forming an association (read: union) to take on Uber management. Calling itself the Amalgamated Local of Livery Employees in Solidarity, or Alles for short, this new association is, ironically, forming just as Uber celebrates its fifth anniversary this week in the Big Apple, where there are some one million active Uber riders. Alles was formed to protect and provide security for its members against all sorts of entities including insurance firms and car companies, just like unions protect employees. Except that Uber drivers are not considered employees but rather contractors. This comes after the ride-sharing app agreed to a $100 million settlement over expense claims in Californian and Massachusetts. The money, if approved by a San Francisco Federal judge, will be divided according to how many miles each Uber driver drove for the company. And while the $100 million settlement is still waiting approval from a San Francisco fedeal judge, lawyers in Florida and Illinois have filed two more class-action lawsuits against Uber claiming that the ride-sharing app violated the Fair Labor Standard Act. That’s in addition to the numerous other lawsuits staring down Uber all over the country.

Economy Cools on Coal; Saving Chipotle One Burrito at a Time; Morgan Stanley Made a Mistake and Admits It!

Hot or coal?

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Feel free to play it naughty this year as Santa may not be able to scrounge up some coal to put in your stocking anyway. That’s because Peabody Energy, the largest American coal miner, might just be going bust, joining a slew of other coal companies. The company announced that it will be delaying a $71 million interest payment that’s due this week – and that, my friends, often signals that a company could be on the brink of filing for Chapter 11 bankruptcy protection. Not that this would come as any great surprise since the stock lost over 95% of its value in the last twelve months and today tanked over 40%. Two years ago the company’s stock hit a high of $299.10. Now it’s barely hanging on as it closed at $2.20 today. The fact is that the global economy is slow enough to wreak havoc on major industries, in this case, coal. Only 33% of power came from coal in 2015. The coal industry has had to contend with stricter environmental standards that have put a major crimp in production. With natural gas being used more and more, seeing as how its cheaper and less polluting, several other coal companies have already gone under. And while nobody is crying over less pollution, it does mean that thousands of people will be out of jobs. Tens of thousands. As for Peabody Energy, the company has thirty days to make that $71 million or face default.

Burritos for all….

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It appears all is not lost at Chipotle as the food joint managed to recoup about 30% of its sales with the help of some free food – burritos, in fact. There is a lot of irony at work here. According to Chipotle CFO Jack Hartung, “Free burritos—turns out it works. It brings people into the restaurants.” It’s a good thing something is bringing folks back into the restaurants after that ugly E.Coli outbreak that sent millions of customers scrambling as far away from the restaurants as possible. As part of the company’s turnaround plan, Chipotle sent out coupons for free burritos to about 7 million customers. Then it decided that maybe sending out 21 million more coupons might not be such a bad idea. It wasn’t since 5.3 million customers already downloaded the first coupon and then, 2.5 million actually walked into a Chipotle, picked up their free burrito and, presumably, purchased a couple of other items off the menu as well. Hey, once you get ’em in the door…In any case, this quarter marked the first time that Chipotle actually forecasted a quarterly loss. Ever. Naturally, the company is still reeling from the losses over the outbreak. However, it’s also expecting to incur some heavy expenses for marketing and, of course, free burritos.

Um, about that price target…

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Wall Street insiders made a mistake and they are actually admitting it. Analysts at Morgan Stanley used to just love LinkedIn and thought the world of the platform. But that love has waned and thus the brokerage has downgraded the stock, savagely slashing the price target from $190 to $125. After all, LinkedIn’s earnings didn’t impress. Far from it, in fact, and the stock has gone down a whopping 54% in just the last three months. Morgan Stanley analyst Brian Nowak eloquently said of LinkedIn, “With its current product offering, LinkedIn isn’t likely to be as big of a platform as we previously thought.” That was harsh, I tell you. And just like that, shares of the company went down on all because the brokerages had a fiscal change of heart.