Costco’s Credit Chaos; Macy’s Switches it Up with New Chief; VW’s Writing Checks

Not to their credit…

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Image courtesy of lekkyjustdoit/FreeDigitalPhotos.net

So much for a seamless transition of the Costco Anywhere Visa cards. The club-retailer started accepting the card this week, after ending its 16 year relationship with American Express, and there has been no shortage of chaos. While American Express enjoys a hearty laugh over this new credit card debacle,  Costco customers have been flocking to Facebook to rage against Coscto and its Citigroup credit card. Since Monday, Citigroup has been flooded with phone calls from 1.5 million disgruntled callers whose issues included problems activating accounts, lengthy wait times to speak to a living human breathing customer service representative and even difficulty trying to pay off existing balances. I mean seriously, when was the last time you had a hard time getting someone to take money from you. Costco has over 80 million members worldwide and eleven million of them applied for this new card. Those cards were supposed to have arrived back in May. Unfortunately many didn’t. The card offers a generous cash-back program and has no annual fee and, which was the bone of contention between Amex and Costco, that ultimately put the kibosh on the relationship. About 25% of Costco shoppers used Amex cards for their purchases and Amex took a 6% fee that cost the retailer $180 million. Citigroup is the biggest credit card lender in the world and analysts think the new partnership is a great idea to cut down on costs. Visa’s fees will be considerably smaller, costing Costco somewhere between $60 million and $150 million. Which is great news, as long as you’re not standing on line right now trying to make a purchase with the store’s new Visa card.

Miracle on 34th Street?

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Long-time Macy’s CEO Terry Lundgren is getting set to bid a long and fond farewell to the department store he helmed for the last 14 years. While he still gets to remain chairman, succeeding him officially in 2017 will be Macy’s president and former Chief Merchandising Officer, Jeff Gennette. Lundgren might be a bit sad but Wall Street sure isn’t. Investors sent shares up on the news, which is especially reassuring since shares have gone down in value more than 50% in the last twelve months. To be fair, Lundgren’s contributions were nothing short of impressive. He made Macy’s the largest department store chain in the United States, among other shining achievements. But the time has come for a changing of the retail guard as Macy’s got hit with five straight quarters of same-store losses and its first quarter results were the worst they’ve ever been since 2008. That last bit caused a bit of panic in the retail sector as other big retailers worried that these results signaled an industry-wide problem. Some experts, me not being one of them, are convinced that Macy’s doesn’t have the chops, yet anyway, to compete with the likes of the Amazons, H&M’s and Zaras of the world. (Not that H&M’s recent results were all that impressive). With a strong dollar and falling sales, Macy’s had to close about 40 stores and cut thousands of jobs. As for Gennette, one source said, “He is going to make the radical changes” which sounds awfully ominous, but in fact, entails, at least in part, setting up an off-price store called Macy’s Backstage and making online shopping enhancements, which seem to be all the rage.

Farfegnugen…

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Image courtesy of lekkyjustdoit/FreeDigitalPhotos.net

It’s official. Sort of. Volkswagen will cough up a settlement of about $10.3 billion to settle claims that it rigged emissions tests on some of its models. Part of the settlement includes offers to buy back about 500,000 odious vehicles which emit 40 times the allowable amount of nitrogen oxide into the air we breathe. By the way, VW is not expected, by the EPA anyway, to repair all of the offending vehicles. Some owners will receive as much as $7,000 in compensation. There’s a joke in there somewhere. Also, VW must set aside money for green energy projects besides establishing programs whose focus is to offset diesel pollution. Talk about karma. Both Volkswagen and the EPA declined to comment on the settlement, which I suppose is to be expected. This settlement is completely separate from other lawsuits suits filed by other U.S. states and is also separate from the Justice Department’s own criminal investigation into the matter. So it seems as though things are anything but settled for Volkswagen.

The Labor of LIBOR; Coal Company Not Energized by Obama’s New EPA Policies; Disgraced Bitcoin-er Busted

Don’t bank on it…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

From the most hallowed banking institutions of UBS and Citigroup, disgraced banker Thomas Hayes will now make his way to the halls of a correctional institution, all thanks to his role in the LIBOR scandal. On trial in the UK, Hayes pleaded not guilty, although jurors felt otherwise and now gets to spend the next fourteen years in prison contemplating his misdeeds. The U.S. already charged Hayes back in 2012 for his misdeeds at UBS and the Royal Bank of Scotland and a number of banks already had to cough up $9 billion in penalties over their involvement in rigging the benchmarks. Hayes was found guilty on all 8 counts of conspiracy to defraud. And it’s not everyday a trader gets convicted for rigging rates on the London Interbank Offered Rates. In fact, Hayes has the dubious distinction of becoming the first person to be convicted in the scandal, which makes sense, since he was apparently the ringleader for more than a dozen other brokers and traders who participated in messing with global rates for mortgages, loans and credit cards just so that they could profit. Those misdeeds affected some $350 trillion in global financial markets. Including ours. Talk about rude.

So un-coal…

Image courtesy of dan/FreeDigitalPhotos.net

Image courtesy of dan/FreeDigitalPhotos.net

Battered and broken is just one way to describe the coal industry as President Obama just announced the latest EPA policies which are supposedly going to reduce greenhouse gas emissions 30% by 2030. And of course that is splendid news. Just not for Alpha Natural Resources who made its own announcement today: bankruptcy. The natural gas boom combined with the new EPA rules have dealt quite the blow to the second biggest coal producer. While the company has over $10 billion in assets with around 8,000 employees, it also needs to ditch some $3.3 billion in debt. The once powerful coal supplier had to close more than 80 mines since 2011 as the shale boom began to take effect. And who can blame shale? After all, it is a cheaper, less polluting energy source.

Bit-fraud…

Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Mark Karpeles, the disgraced head of collapsed Tokyo bitcoin exchange, Mt. Gox, has, un-shockingly, been arrested in Japan on suspicion of (gasp) fraud. Who would have thought. Apparently, Karpeles falsified documents and manipulated the computer system over thirty times in an effort to fatten up his bank account by about a million bucks. If the 30 year old Karpeles is found guilty, he might just become pen pals (no pen-pun intended) with Thomas Hayes, except the French-born Karpeles would be idling his incarcerated says in Japan. If you recall, 850,000 bit coins – equal to about $480 million at the time –  went missing under Karpeles’ watch. But wouldn’t ya know it, 200,000 bit coins were subsequently recovered by Karpeles, who must have remembered where he had apparently misplaced them. As for the remaining missing cyber-currency, well, Karpeles conveniently blames the theft on a “bug” from a cyber-attack. You don’t say…

Nasdaq’s Getting Crafty; Costco’s Earnings Knock it Out of the Warehouse; Labor Market Laboring

How crafty…

Image courtesy of sattva/FreeDigitalPhotos.net

Image courtesy of sattva/FreeDigitalPhotos.net

Etsy is looking to join the big kids on Wall Street. The online marketplace for all things crafty is looking to score $100 million for its IPO but that number could go much much higher. Brooklyn-based, Etsy, which would trade on Nasdaq under the ticker symbol ETSY (catchy, no?) was founded in 2005 and by 2014 it pulled in $195 million in revenue, a 56% increase over the previous year. Half of that revenue, though, comes from transaction fees. Plenty of that revenue also comes from the services it sells to its sellers, which are basically, payment processing, shipping labels and promoted listings. Impressive numbers definitely, but the company is spooking investors since it also took in a $15 million net loss last year and expects its operating expenses to “increase substantially.” Yikes. So yeah, that little tidbit puts a damper on things. Etsy currently has about 1.4 million sellers with close to 20 million buyers.

Are you even surprised?

Image courtesy of photoraidz/FreeDigitalPhotos.net

Image courtesy of photoraidz/FreeDigitalPhotos.net

Costco came out with its quarterly earnings, easily topping analysts’ predictions and if that is at all shocking to you then clearly you have never stepped foot inside one of its 671 warehouses dotting the world. News of the good earnings sent shares rising today 2.5% and why shouldn’t it? The stock went up 30% during 2014 and is already up 10% this year. And while the strong dollar has been playing some nasty little fiscal tricks with its earnings, the third largest retailer still managed to nail $598 million in profit at $1.35 a share on $27.5 billion in revenue. Analysts were only expecting $1.18 on $27.65 billion in revenue. It should be duly noted that some of that profit came courtesy of a $57 million tax benefit over a special dividend from last month. But it should also be duly noted that same store sales were up 2% and sales up 8%. These earnings come on the heels of Coscto’s AmEx breakup and its new contracts with Citigroup and Visa. Now it even has plans to sell a Kirkland Signature Chevrolet truck – a particularly handy vehicle for your average Costco run.

LinkedOut…

Image courtesy of  winnond/FreeDigitalPhotos.net

Image courtesy of winnond/FreeDigitalPhotos.net

For some not-so-pleasant news on the labor market we look no further than the Labor Department who just shared with us that the number of people seeking jobless claims for the first time rose to a seasonally adjusted 320,000 for the week ending February 28, adding an unwitting 7,000 applicants. That leaves us with close to 2.5 million people getting jobless benefits and that’s the highest number it’s been since May. Analysts actually expected that number to fall to under 300,000. Some people might even be wondering, “Hmmm. What seems to be going on with this fickle little job market of ours?” Excellent question. Naturally weather always makes a good scapegoat for this sort of thing. But otherwise, the Labor Department couldn’t really pinpoint any one reason why that offensive number reared its ugly unwanted head once again. Last week, that number also rose instead of going back down to a cozy semi-acceptable spot below the 300,000 mark. Experts were hoping that it was just a little labor market hiccup that would correct itself by this week. It didn’t.

Are You There Shareholders? It’s Me, Warren (2015); Forbes’ Magazine Names the A-Listers; Costco: AmEx Out, Visa and Citi In

Best Regards, Warren…

Image courtesy of  Boians Cho Joo Young/FreeDigitalPhotos.net

Image courtesy of Boians Cho Joo Young/FreeDigitalPhotos.net

Warren Buffet’s annual letter to Berkshire Hathaway shareholders arrived over the weekend, regaling us –  I meant them – with so many insights and wisdom about the economy and the ways of the investment Samurai. Among the many pearls, Mr. Buffet wanted to let folks know that “America’s best days lie ahead.” Things might have been a bit shaky the last few years, but darn be the naysayers  and things can and will only get better. Mr. Buffet also wished to remind people that “Market forecasters will fill your ear but will never fill your wallet.” Aw, Warren. There’s something very moving about the way the Oracle of Omaha advises people that all these financial experts surrounding us are good for nothing. He also offered some poetic words regarding his failed investment in British supermarket chain, Tesco: “In the world of business, bad news often surfaces serially: You see a cockroach in your kitchen; as the days go by, you meet his relatives.” The venture ultimately cost him a whopping $400 million and the Oracle attributes the loss, to among other things, not being decisive and fast enough about pulling out of the investment. Meanwhile, during an interview on CNBC, Warren Buffet said Sen. Elizabeth Warren (D-Massachusetts) should be “less angry and demonizing” and should be more open to compromise. Ouch. I guess those two won’t be hanging out together anytime soon.

Speaking of Warren…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Omaha’s most famous resident made it to the number 3 spot on Forbes’ list of billionaires. Microsoft’s Bill Gates claims the top spot – again –  with a net worth of $79.2 billion while Mexico’s Carlos Helu Slim comes in for second. There are 1,826 billionaires on the list who have a combined total net worth of $7.05 trillion. However, the average net worth of the billionaires is actually down by $60 million this year to $3.86 billion. I know, how sad.  Seventy-one of those billionaires are breaking onto the list of the very first time. Among those first-timers is basketball great Michael Jordan who makes his big billionaire list debut this year with a little help from having increased his ownership stake in the Charlotte Hornets. But his restaurants, deals with Nike, Gatorade, Hanes, etc…allow him to claim the 1,741st spot with a net worth of about $1 billion. Forty-six of the billionaires are under the age of 40 with Snapchat’s Evan Spiegel having the distinction of being the youngest billionaire on the list.

Well hello, pardner…

Image courtesy of stock images/FreeDigitalPhotos.net

Image courtesy of stock images/FreeDigitalPhotos.net

Club goers rejoice! Costco has officially entered into agreements with Citigroup and Visa to become the wholesaler’s partner in credit. In the meantime, the retailer is bidding a not-so-fond farewell to American Express, who for the last 16 years had an exclusive deal with the chain. Citigroup will be putting out a Costco/Citi credit card with perks and generous rewards aplenty, in keeping with the Costco spirit, of course. Unfortunately, Costco shoppers must wait until April of 2016 to whip out the new plastic. However, debit cards know no bounds – or labels – and those will continue to be warmly accepted regardless of the issuer, at Costco’s 674 warehouses worldwide. And while AmEx is expecting to take some type of beating on Wall Street for the next two years, shares of Visa hit an all-time high today over this very exciting fiscal news.

Morgan Stanley Finally Owns Up to All the Trouble It Caused; It’s a Darn Claim Unemployment Filings Are Up; Sears is Losing It

It was just a matter of time…

Image courtesy of  dream designs/FreeDigitalPhotos.net

Image courtesy of dream designs/FreeDigitalPhotos.net

Morgan Stanley is taking a bit of a beating today on Wall Street now that it has finally finally settled with the Department of Justice over its shady little role leading up to the 2008 financial crisis. Morgan Stanley reached a deal with the DOJ  that’ll have the bank paying $2.6 billion to get Uncle Sam off its back.  Attorney General Eric Holder and the DOJ will graciously end their probe into whether Morgan Stanley duped investors by telling them how very great their home loans were when in fact, they were anything but. This settlement is sure to put a major dent in MorganStanley’s 2014 profits. By major, I mean it’ll eat up nearly 50% of what MorganStanley got to take home in 2014. It officially lands Morgan Stanley on that illustrious list of banks who also had to shell out billion dollar settlements to the DOJ for their smarmy actions leading up to and during the 2008 financial crisis, including  – but not limited to –  Bank of America who reigns the top spot with a $16.7 billion payout. It’s followed by JPMorgan Chase which holds the number two spot for its $13 billion settlement. Citigroup rounds out the group with a $7 billion settlement.

Don’t stake this claim… 

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

The number of people filing jobless claims went up. Not down. But up. The number climbed to 313,000 people instead of a projected 290,000. While the news is a bit of drag, economists  – who presumably know a thing or two  – are telling us that we can’t work ourselves up into a collective panic over one month’s lousy numbers. At least for now, anyway. First, the number of people filing those claims is still relatively close to the 300,000 mark. If it were way past that number, then yeah, having a fiscal freak out might be considered almost acceptable. Two, the labor market’s rockin’, sort of, and hiring is strong, which brings us to reason number three. Because hiring is strong, wages are actually going up. Walmart, TJ Maxx, Gap…the list goes on as to how many retailers are raising its employees’ wages. All these factors allow us to almost ignore this fiscal hiccup. However, leave it to Fed Chairwoman Janet Yellen to remind us that, “wage growth remains sluggish” and that there’s always room for improvement.  You don’t say.

Loser…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Sears isn’t having a very good year. Actually it hasn’t had a good year in…well, many many years. It just reported its fourth straight year of losses with this quarter losing $159 million and $1.50 per share. Incidentally, that figure is not nearly as dismal as last year’s $358 million fourth quarter loss. So you see, there is a bright side. Sort of. Run by the The Hoffman Estates, which also runs Kmart, the company has tried just about everything to help the ailing retailer reverse its downward financial spiral. From store closures to slashing inventory, the retailer has tried countless ways to cut costs. The company closed over 230 stores in 2014 and today has over 1,700 stores, which sounds impressive. But you know what’s more impressive? The over 3,500 stores the company had five years ago. The latest plan is to spin off between 200-300 stores into a REIT, which stands for Real Estate investment trust, by the way. The idea is apparently going to allow the failing company to pick up some $2 billion and help turn the fiscal tide. But if you want to know how exactly that works you’re on your own.

Happy Über New Year; DOJ: You’re Up, Morgan Stanley; Labor Department Jobless Claims are New Year’s Bummer

Year end surge…

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

A heads up to all of you located in cities where Über is actually allowed to operate: Über is getting ready to ring in the New Year with some price surging. Of course, Über prefers the less obvious term, “dynamic pricing.” Just don’t expect to see any dynamic pricing for the rider, who might very well be paying as much as seven times the usual fare if the service is used between 12:30 am and 2:30 am. New Year’s is expected to be the busiest night of the year for the ride-sharing app, and many other services similar to it, due to the heightened demand on this particularly auspicious day. On its blog, the folks at Über said they are expecting to give more than 2 million rides in a 24 hour period and you’re best bet for the service is to call right when the ball drops or if riders are feeling especially adventurous, they should wait until after 2:30 am. Über also offered to graciously  – and economically – text riders to let them know when surge pricing – excuse me, I meant to say “dynamic pricing”  – ends.

Unsettled business…

Image courtesy of digitalart/FreeDigitalPhotos.net

Image courtesy of digitalart/FreeDigitalPhotos.net

It’s Morgan Stanley’s turn to tangle with the DOJ in an effort to reach a settlement for Morgan Stanley’s role in the 2008 financial crisis. Like its peers, including JPMorganChase, Bank of America, Citigroup, etc…Morgan Stanley is also staring down the wrong end of a DOJ investigation for its role in getting New Century Financial Corp to issue subpime mortgages. Apparently, the bank knew that homeowners would have a hard time paying mortgages but still issued them anyways. Well, that didn’t work out for anyone, now did it? Incidentally, New Century went bust following a bankruptcy filing back in 2007.

Wishing you an employment-filled New Year…

Image courtesy of nonicknamephoto/FreeDigitalPhotos.net

Image courtesy of nonicknamephoto/FreeDigitalPhotos.net

Leave it to the Labor Department to help ring in the new year with some disappointing news: namely that the number of people filing jobless claims rose last week by 17,000. While the total number of people still remains below the 300,000 mark (just barely), we are still left with 298,000 making a New Year’s resolution to get a job (we hope, anyways). Analysts actually only expected that number to hit 290,000, but, oh well. Can’t accurately predict ’em all. But we are supposed to be reassured by the fact that this time of year brings with it good tidings of volatile claims and all fiscal signs still point to a decent economic recovery and climate. Also, the four-week average, which tends to be more accurate, was only up by 250. So maybe it’s okay to breathe a little little sigh of relief.

Clydesdales No Longer On Tap at Budweiser; Citigroup’s Lack of Discipline Cost $15M; Saks Fifth Avenue Gets a Luxe New Mortgage

Put out to pasture…

Image courtesy of dan/FreeDigitalPhotos.net

Image courtesy of dan/FreeDigitalPhotos.net

The unemployment numbers may be going down lately but you can add the Budweiser Clydesdales to the list  of people – or in this case, animals – who need to brush up on their LinkedIn skills. The iconic horses, who have graced Budweiser holiday commercials since 1987 apparently haven’t been puling their weight to attract a hipper, younger beer-guzzling demographic. In fact, 44% of 21-27 year old beer drinkers/guzzlers have never even (gasp!) tried Budwesier. Can you even stand it? So the beer company will now trek out to college towns for food festivals and host parties to increase in order to woo that elusive younger, hipper crowd. As for any new ad campaigns, Budwesier will substitute Cydesdales for millenials who will stare back into the camera as they poignantly utter: “If you could grab a Bud with any of your friends these holidays, who would it be?” I’d say a Clydesdale.

Fined and fine…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Citigroup has to pay even more fines. Again. Except this time those fines have nothing to do with its dubious role in the housing collapse and fiscal nightmare of 2008. The Financial Industry Regulatory Authority, or as the cool kids say, FINRA, has fined Citigroup $15 million because the bank didn’t do enough to prevent and deter its analysts from engaging in all kinds of questionable activities. Which all sounds way more provocative than it is. From January 2005 to February 2014 Citigroup issued about 100 warnings to analysts for doing things they were’t supposed to do. Issuing those warnings was clearly the responsible thing to do. Except that there was way too much between the warning until disciplinary action took place. But then, it seems, Citi was wee bit too soft in punishing the offenders, which is perhaps why the analysts kept repeating their dubious actions. In one instance, equity research analysts hosted a dinner for employees and clients (mind you, I was not invited) where the hosts/analysts discussed their stock picks. I’m sure the topic made for fabulous dinner conversation, however the discussed stock picks did not jive with all the research conducted by the hosts/analysts. That was, of course, just one of the many (many) examples of breaches for which Citi was fined. Naturally, the bank preferred not to offer any comments on the matter except to say ,”We are pleased to have resolved and put this matter behind us.” I’ll bet. And rest assured that $15 million will do nothing to thwart Citigroup’s holiday shopping.

Is a luxury refi an oxymoron?

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Many people today refinance their mortgages and Saks Fifth Avenue is no different. Okay, it’s a lot different but I digress. Hudson Bay, the company that owns the luxury retailer, took out a 20 year mortgage for its flagship store conveniently located right on New York City’s Fifth Avenue to the whopping tune of $1.25 billion. Next year the store is getting a $250 million renovation.The building, however is valued at $3.7 billion. If that doesn’t scream prime real estate I don’t know what does. Did I mention that Hudson Bay paid $2.9 billion for the entire chain? How very lucky for them.

Citigroup Pays Its Dues…and Fines, The Tastiest Merger and Samsung Is In Hot Water

Hot in the Citi…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Citigroup was all fiscal smiles today even as it agreed to cough up $7 billion for all the aggravation it caused because of its fraudulent mortgage practices. US Attorney General Eric Holder graciously pointed out, “The bank’s misconduct was egregious…the bank has admitted to its misdeeds in great detail.” Now Holder and the FDIC needn’t bother anymore with its cumbersome civil investigation. It also frees up the AG to sit back, relax and think about how he’s going to pull billions of dollars from Bank of America’s deep coffers. Part of the settlement is supposed to provide relief. That relief could come in the form of loans for affordable housing and changes to mortgages. Too bad those innovative ideas aren’t slated to take place until 2018. And while Citi did post better than expected earnings, trouble still looms for it as a money-laundering investigation is taking place at its Mexican unit.

That’s one sweet pairing…

Image courtesy of Arvind Balaraman/FreeDigitalPhotos.net

Image courtesy of Arvind Balaraman/FreeDigitalPhotos.net

Swiss chocolatier Lindt & Sprüngli is picking up a tasty American treat by purchasing Russell Stover Chocolates. Kansas City, Missouri-based Russell Stover, which also makes Whitman’s (as in “the samplers”), has 2,700 employees and generates a yummy $500 million a year. Lindt & Sprüngli are looking forward to generating revenues of $1.5 billion with its new-found American sweetheart. While the exact price of the purchase hasn’t been disclosed, the estimated figure is $1.4 billion and will make the newly formed venture the third largest chocolate manufacturer in North America. The two companies called it “a perfect strategic fit” and I couldn’t agree more.

Ugly technology…

Image courtesy of nonicknamephoto/FreeDigitalPhotos.net

Image courtesy of nonicknamephoto/FreeDigitalPhotos.net

Things are not looking so smart over at Samsung, the world’s biggest smartphone maker. The company just suspended business with one of its suppliers in China. According to New York-based human rights watchdog group China Labor Watch (CLW), the factory in question employs under-age workers amid a litany of other offenses. Children were allegedly made to work eleven hour days and paid for only ten of them. Even though Samsung maintains a “zero tolerance policy” for such odious practices, CLW also found the factory, Dongguan Shinyang Electronics, had its employees work for excessive and unpaid overtime. This is not Dongguan Shinyang Electronics’ first brush with human right violations either. The company has been audited three times since 2013. In the meantime CLW thinks Samsung is treating its social responsibility as “just advertisements.” Ouch.

 

Banking on a Citigroup Settlement,

Big Citi blues…

Image courtesy of digitalart/FreeDigitalPhotos.net

Image courtesy of digitalart/FreeDigitalPhotos.net

The latest un-shocking revelation coming from the banking industry is that Citigroup is about to cough up $7 billion to settle charges that it sold bad mortgages. The only truly shocking aspect of the story is that the nation’s third largest bank (in assets) thought it was going to get away with lowballing the Department of Justice with a $4 billion offer to settle. The DOJ was initially seeking $10 billion. At least Citigroup now gets to shake off thoughts of a lawsuit. Besides, Citi got off relatively easy compared to JP Morgan who had to dig deep into its pockets for $13 billion – the largest settlement in US history – so far.  Proceeds from the settlement will be divided between consumer relief and government fines. Stay tuned since Bank of America is rumored to be the next bank to ride the multi-billion dollar settlement express train.

Contain yourself…

Image courtesy of supakitmod/FreeDigitalPhotos.net

Image courtesy of supakitmod/FreeDigitalPhotos.net

The Container Store (TCS) posted earnings that all but bummed Wall Street. CEO Kip Tindell attributed the disappointing earnings to a “retail funk.” There is nothing fun (or funky) about that – for The Container Store anyway, since it apparently means that consumers have been opting to spend their hard-earned money on pricier items like cars and homes instead of plastic storage solutions. The nerve. While net sales increased way over 8% from a year ago to $173.4 million, analysts wanted to see $174.21 million. The company posted a loss of $.07 a share instead of an expected $.06 loss per share. Those seemingly innocuous pennies unfortunately, caused a big drop in shares today. The Container Store currently has 60 stores and wants to open a total of 300. And while the idea is, shall we say industrious, the fact is the company reduced its fiscal guidance which tends to be a big red flag to investors.

Heir apparel… 

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

American Apparel is apparently getting a $25 million fiscal infusion from Standard General to help boost its finances and pay off a $10 million loan to investment firm, Lion Capital. It’s just the latest episode in the retail chain’s seemingly never-ending drama. Lion Capital argued that American Apparel defaulted on the credit agreement when it made some management changes, namely ousting CEO Dov Charney. The CEO, who was ousted for “alleged misconduct” signed a five year loan agreement with Standard General which does increase his stake to 43%, but forbids him from voting, that is, unless Standard General says he can. However, considering Charney already violated the terms of his ouster when he brazenly walked into a Lower East Side American Apparel store, exercising his voting rights will are the least of his issues.

 

Not So Wholesome Foods, Is There A Nap For That? Banking On Stress

Whole lotta nothing…

Image courtesy of Africa/FreeDigitalPhotos.net

Image courtesy of Africa/FreeDigitalPhotos.net

Looks like Whole Foods needs to shift its focus from organics to business law now that it was slapped with a very unwholesome $800,000 in penalties and fees for overcharging its customers. Not the best move since the chain is facing increasing competition from other retailers offering organic products for considerably less money. Among the troublesome and illegal practices in which the organic chain engaged include not subtracting the weight of containers and selling prepared food by the item and not by the weight. Yes, those practices are illegal. Who knew? The offending markets are located in California. The Golden State has 74 Whole Foods Markets all of which can now look forward to four random audits a year.  However, it should be duly noted that Whole Foods says its prices were accurate 98% of the time.  And that’s great news as long as you weren’t the one paying the other 2% of the time.

ZZZzzz…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Yahoo CEO Marissa Mayer got caught napping on the job. The Silicon Valley exec was slated to have a very important meeting with ad execs in a very pish posh Cannes restaurant. She was bit late, though. That is, if you think two hours is a bit late. Some of her guests decided to leave before she arrived. She reportedly told someone at the dinner that she was late because she had fallen asleep. That faux pas was followed with a speech at a later point that was supposed to wow people. Except they were wowed by how un-wow the speech actually was. And the media wasted no time in skewering her for it. Some argue she’s getting more slack for her actions because she’s a woman. Still others feel her actions only mirrored her less-than enthusiastic attitude towards client relationships. Either way it’s a problem if only because Yahoo has been having “issues” with advertising and needs all the help it can get.

Still stressed out?

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Citigroup and three other banks just can’t handle the stress…of their inadequate capital plans, anyway. It seems Citigroup, Banco Santander, the US division of HSBC and the Royal Bank of Scotland were supposed to have their affairs in order. Those affairs include internal controls, risk assessment in global operations and other not so minor details to make their inadequate capital plans a lot more adequate. The Feds want banks to make sure they can make it through economic downturns without needing any government handouts, which ultimately come out of taxpayer dollars. The banks were supposed to have all their action plans last week but the effort proved to be a bit too…stressful, so the they were given another six months to get de-stressed.