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.

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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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Image courtesy of zirconicusso/FreeDigitalPhotos.net

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.

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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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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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.

AmEx Wants to Know What Your Loyalty is Worth; How Do You Say Opel-ease in Russian?; FedEx’s Hit and Miss

Where’s your loyalty?

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Maybe membership does still have its privileges. AmEx is trying to make a comeback following its breakup with powerhouse retailer, Costco, and rumors of an impending break-up with JetBlue. To soothe it’s broken fiscal heart, the company is making plans to offer a rewards program called “Plenti.” Catchy, huh? Joining forces with Macy’s, Exxon, RiteAid, AT&T and a few other companies, AmEx is offering a loyalty program where American consumers get to cash in points earned on their AmEx cards, and then redeem the points at these retailers. I say Americans, because AmEx already has loyalty programs in other parts of the world, including Germany and Italy. Fill up your car at Exxon and then run over to Macy’s and buy yourself a shirt. Or some vitamins at RiteAid. Or insurance. Yes, I did say insurance since Nationwide Insurers is one of the partners. As is Hulu. Cool, huh? . Noticeably absent from the list of participants is a national grocer and home improvement retailer. But fear not, oh faithful spender, as rumor has it those slots are just about to be filled. If you’re wondering how AmEx benefits, it’s simple: AmEx gets a fee from its partners-in-retail. Clever indeed.

No more vroom…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

GM is coming to a screeching halt in Russia after taking a 74% hit in sales there with an 86% hit on its Opel brand alone. Hence, GM has put the kibosh on Opel production altogether and will be drastically slowing down production on its Chevy lines, chalking it all up to a $600 million loss. The collapsed ruble and dropping oil prices have dealt a major blow to the Russian economy, with car sales especially down 38%. So GM decided to make a run for it. However, if you find yourself in Russia and jonesing for a Corvette, then no worries. Because Corvettes are imported, they will still be making their way into the country, together with Tahoes and Camaros. Can’t you just picture Putin cruising the Kremlin in a Camaro? Oddly enough, or not, the automobile company is still looking to up its Cadillac game in Russia. The luxury auto has yet to catch up to the popularity of European automobiles BMW and Audi. Tragically, only 72 of them have been sold in Russia in the first two months of the year.

Special delivery…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

FedEx released its earnings report, regaling Wall Street and the world with news of its prosperous third quarter. One of the fiscal highlights was the $11.7 billion in revenue the company took in. Not a major difference than what experts forecasted, and a modest 4% gain over last year, but the number did hit its target so nobody was necessarily complaining on that front. The big exciting numbers, though, came courtesy of FedEx’s impressive profits. At $580 million and $2.01 per share, the company’s net income was a whopping 63% higher than last year at this time. Analysts only predicted a profit of $1.88. It’s kind of nice when analysts are wrong. Just saying. And for that very impressive feat, FedEx can thank low fuel prices. Of course there were a few other reasons too, but fuel could definitely be crowned the star of this one. But then its shares took a bit of dip today on the news of its less than impressive outlook. The company expects to pull in between $8.80 – $8.95 per share for the year but analysts much prefer to see $8.98 per share. FedEx’s performance tends to hint to Wall Street what we can expect from our fickle economy. So if FedEx is feeling a bit too fiscally modest and only moderately ambitious, it makes The Street a little edgy.

GM Says Nyet to Russia Deliveries; Start Spreading the News: Gov Cuomo Bans Fracking; Kraft-y New CEO

Rubles the wrong way…

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Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Russian President Vladimir Putin gave his annual hours long press conference where he discussed the plunging ruble. He said the economic recovery could take up to two years and, of course, he made sure to point his country’s finger (presumably the middle one) at the US and the EU because he says plunging oil prices and economic sanctions are to blame. Oh and also the central banks messed up too because they apparently didn’t respond fast enough to economic issues as they arose. Darn central banks! Then GM went ahead and suspended deliveries to Russia, becoming one of the latest western companies to do so. And who can blame them. After all, when currencies drop, the companies lose big bucks.  But considering GM only sold 170,000 vehicles in Russia so far this year  – it sells more than that in a single month over here – its sure not to put any major crimp in their business. Apple also shut down operations while other companies, like BMW, took the route of raising their prices to make up for the drop in the ruble rate. Why his love life came up during the press conference is a mystery, but at least now we know that Vladimir Putin is in love –  and somebody even loves him back –  according to him anyway.

Frack off…

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Image courtesy of xedos4/FreeDigitalPhotos.net

Governor Andrew Cuomo (D) has made it official: New York has become the first state to ban the ever-controversial fracking process, a decision that puts a major chink in the oil and gas industry. The process, which involves tapping into natural gas by using high-pressure water blasts and, of course, chemicals, has been under a moratorium in New York State since 2008 after it was felt that more research was needed to see just how bad the process is for the environment and our health. At a press conference, Governor Cuomo handed the reins over to health and environmental officials who said the issues are too great to allow it to happen and conveniently had several studies on hand to back up their claims. Now if they could just do something about those traffic jams…

Nothing cheesy about it…

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Image courtesy of digitalart/FreeDigitalPhotos.net

In a move that shocked analysts, who generally make it a habit of predicting things, Kraft CEO Tony Vernon, who is but 58 years young, announced that his retirement from the company will officially take place on December 27. Vernon has been at the post since October of 2012 and will stay on as an adviser until March. His replacement will be John Cahill, who already has Pepsico  gracing his resume. Kraft, the intrepid force behind Velveeta cheese and the ever-malleable Jell-O, said that it needs to make big changes quickly if it wants to keep up with the constantly changing needs of the food industry. Sounds fair, considering Kraft saw an 11% drop in its third quarter profits.

 

President Obama Tells CEO’s How to Invest (it’s true); Tesla Electrified Owners; Hershey Welcomes Back Sugar

 Oh and by the way…

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Image courtesy of cooldesign/FreeDigitalPhotos.net

As I mentioned yesterday, the Business Roundatble got together to dish out its thoughts and projections for the economy. If you recall, the BRT is a group of CEO’s “of leading U.S. companies working to promote sound public policy and a thriving U.S. economy.” I’m down with that. Not to be outdone, President Obama, who is not a CEO, told the BRT group, who by the way, represent around $7.4 trillion in annual revenue, that they should invest in infrastructure which apparently is a fabulous “foundation for growth.” It should be duly noted that this business advice is coming from the same person who is responsible for the very unaffordable Affordable Healthcare Care Act. Just saying. President Obama also went on to say that the thorn in his executive side, the bane of his Presidential existence, also known as Republicans, would be sure to challenge any source of funding if it meant new taxes. And just when I was looking forward to paying more taxes together with my unaffordable health care, darn it! Hence, according to Mr. President, you needn’t hold your breath for any new infrastructure bill to pass. And while private investment in infrastructure is no new concept, especially in other countries, here in the United States, legal and tax issues don’t exactly scream, “Invest in infrastructure!”

Zap to it…

Image courtesy of Danilo Rizzuti/FreeDigitalPhotos.net

Image courtesy of Danilo Rizzuti/FreeDigitalPhotos.net

Can Tesla do no wrong? Well it can but apparently not when it comes to Consumer Reports, which just reported that the Tesla Model S is so beloved amongst its owners that 98% of them would repurchase the vehicle (But what of the other 2%?). The car which goes for close to $70,000 is even a fave with the team over at Consumer Reports. Other cars that owners loved were the Chevrolet Corvette Stingray and the Subaru Forester. Apples and oranges, I know. The Kia Rio, sad to say (actually ambivalent) failed to impress its owners. However, it was the Nissan Versa that found itself at the bottom of the list. And while life is good at the top for Tesla, it best be warned: BMW is nipping at its shiny bumper. Especially with its i3.  While Tesla’s superchargers across the country (and beyond) can be used only with Teslas, BMW is about to put out its own series of superchargers that will be compatible with other models. Except for Teslas. And Nissans (especially that Versa).

I know this sounds corny but…

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Image courtesy of artur84/FreeDigitalPhotos.net

High-fructose corn syrup beware! You’re on the chopping block having gotten a bad rep over the last several years by getting blamed for a rise in obesity and diabetes. While there isn’t enough evidence that corn-syrup is exclusively to blame,  The Hershey Co. has still decided to kick that ingredient out of its delectable confections.  Instead it will once again use perennial favorite , and old time classic, sugar, instead of the high-fructose corn syrup/sugar cocktail it had been using for so many years. Sugar, that formidable staple which holds a prominent place in my own personal food pyramid, will once again reign supreme for Hershey confections.  However, there is no official time-frame for the switch –  only an acknowledgement that consumers, my self included, much prefer sugar over high-fructose corn syrup.  One of the many groups not pleased by this turn of events are those involved in corn futures. Refiners have even cut costs just to compete with sugar. But seriously, can you really compete with…sugar?

Crumbs Has Gone Stale, Rolls Royces Are Everywhere (Almost) and Banks Behaving Badly (Again)

Crumbled…

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Image courtesy of YaiSirichai/FreeDigitalPhotos.net

America just isn’t that into them anymore…cupcakes, that is. A sure sign the cupcake craze has officially arrived at a screeching halt comes with the news that Crumbs Bake Shop has shuttered all of its 65 bakes shops. All. Of. Them. The first store opened in March 2003 and  the company then went public in 2011. But a taste for the confection went south, as did the bakery’s sales. In 2013, the company choked down close to $20 million in losses. Last week Nasdaq suspended trading of the not so sweet stock after it failed to meet the minimum $2.5 million in shareholder equity. And it is with bitter and not at all sweet sorrow, that the stock has been officially de-listed.

Rolls with it…

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

If you were wondering why you keep seeing Rolls Royces wherever you go (or maybe you don’t wonder about it, or even see them all over the place), there’s a very reasonable explanantion. Lots more people are buying them. Sales for the car (but is it really just a car?) which can go for several hundred thousand dollars are up 33%. But just who are these people that are buying them, since you, unfortunately, are not one of them (or maybe you are). Well if we take peek over the pond, sales of the ultra-luxurious automobile are up in Europe over 60%. Motorists really seem to dig the Rolls in the Middle East and the Asian Pacific too. Even in the good old U.S. of A, sales climbed well into the double digits. Over 1900 Rolls Royces were sold since the beginning of the year. BMW, which owns Rolls Royce also went up about 10%.

Next up…

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Image courtesy of anankkml/FreeDigitalPhotos.net

Move over BNP Paribas, there’s a new naughty bank in town. Actually two. Commerzbank and Deutsche Bank have become the latest European banks to face the wrath and pricey penalties from the United States Department of Justice. Both banks are accused of playing nice with countries blacklisted by the US government, including Iran and Sudan. The banks allegedly transferred money for the offending and offensively ruled countries through US operations. Deutsche Bank, which already had to pay about 500 million euros in fines swears that all its dealings with Iran were totally legit. After all, how could they not be when dealing with Iran and Sudan? Commerzbank is Germany’s second largest bank and is 17% government owned. However some are wondering and concerned that this not-so-little issue is going to put a crimp in the beautiful and somewhat harmonious relationship between the US and Germany. Let’s hope the expected $500 million settlement to forego criminal charges will assuage that.