Trump’s Treasury Trove; Things are (finally) Looking Up for Target; Neiman Marcus Bets on Rentals

 

Trump’s to treasure…

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Leave it to Carl Icahn to tweet that Donald Trump honed in on his choices for Treasury Secretary and Commerce Secretary. And, believe it or not, those choices may not be as bad as you think. Enter Steven Mnuchin, a veteran Wall Streeter and former Goldman Sachs partner who most recently served as Donald Trump’s campaign finance manager. Okay, that last bit may not be his best selling point. But if it makes you feel any better, controversial Trump White House Chief Strategist Stephen Bannon didn’t care for him and questioned Trump on whether he was “selling out to Wall Street.” Next we have Wilbur Ross, a billionaire investor and major NAFTA critic who also served as part of Trump’s economic advisory team. Ross has a knack for restructuring failing companies and has done so successfully in the energy and textile industries. That’s a big resume plus for the Commerce Secretary post. However, if Ross is serious about the post, he’ll have to step down from the numerous boards on which he serves, besides selling off tons of investments or chucking them into a blind trust. As for Carl Icahn, he tweeted that “Both would be great choices” and that they are “two of the smartest people I know.” And, if Carl Icahn thinks that then it must be so. Right?

Target = hipster?

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Things are looking up for Target. At least according to its CEO, Brian Cornell who said today that he is “increasingly confident” about Target’s new plans and endeavors for its 1,800 plus stores. Part of those endeavors include its foray into small-format stores. Those are basically shops that are targeted – no pun intended – to meet the consumer wants and needs of a specific location. With several under its belt already, Target’s latest small-format shop is slated for a 45,000 square foot space in super hip NYC locale, Tribeca. But Cornell’s enthusiasm went way beyond just the new stores. Shares of the retailer went up almost 9% today in pre-market trading because its third quarter sales decline was smaller than expected. Translation: Target didn’t lose as much money as experts thought it would. Those sales were down almost 7% to $16.4 billion, but that was primarily due to Target selling its pharmacy biz to CVS. As for the company’s e-commerce department, those sales were up 26% over the same time last year, which was especially welcome news considering that e-commerce for Target’s second quarter was down.

All rent out of shape…

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Online clothes and jewelry rental companies are betting that if you’re not a customer now, you will be after you visit them at an actual showroom. And so begins a new journey for companies like Blue Nile and Rent the Runway, who have decided that it would be cheaper to install showrooms and hire staff than to find new ways of advertising that would attract new customers. Blue Nile already successfully tested out this timeless showroom concept with just 300 square feet at one lucky Nordstrom department store, while Rent the Runway is set to unveil a 3,000 square foot space at Neiman Marcus’ San Francisco store on Friday. However, many are skeptical that this is a prudent move for Neiman Marcus assuming that instead of buying Neiman Marcus inventory, customers will simply rent it from Rent the Runway. And is it wise for Neiman Marcus to be playing around with such a novel concept after losing $407 million in its last quarter? But the logic is that Rent the Runway has 6 million customers in an age demographic that Neiman Marcus would like to have. The luxury store is banking that the customers who come and pay to rent the high-end brands will end up being big ticket buyers of those very same high-end brands soon after. Plus, for an additional $30 – $75, Neiman Marcus will throw in styling services for Rent the Runway customers. Rent the Runway’s concept might seem cute but the money is definitely serious. A monthly subscription of $139 gets you up to three pieces at a time which you can keep for the month or send back in less than a day. The company so far raised $126 million in start-up venture capital and already exceeded its 2016 sales projections of $100 million.  So maybe Neiman Marcus is onto something because Rent the Runway sure is.

 

No Slowing Down Alibaba; REI VS. Black Friday; Rumor Has it Walgreens is Going Shopping

Slowdown? What slowdown?

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There might be an economic slowdown in China, but judging by Alibaba’s recent earnings, you’d never know it. China’s largest e-commerce site easily topped Wall Street predictions, adding 57 cents per share on $3.5 billion in revenue. Forecasts were for 54 cents on $3.35 billion. The company saw a 32% increase with a lot of help from major growth in mobile revenue. Mobile revenue alone pulled in a staggering $1.66 billion, triple last year’s figures, and accounting for more than 60% of the company’s retail sales. And its monthly mobile active users only continue to grow, up 57% over the same last year, an easy feat for Alibaba, yet something hundreds of other companies wished they could do. Yahoo also came out a winner today, as well, since it owns a 15% stake in Alibaba.  The company also plunked down about a $1 billion for some cloud computing investments which could see some big returns. Now Alibaba is gearing up for Singles Day, as in November 11, as in 11/11, one of the countries biggest shopping days. Last year, the company hit a record $59 billion in sales on that day and chances are it might just break that record again this year. Now about that downturn..

Take it outside…

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Don’t bother getting on line at 5 am on Black Friday outside of any one of REI’s 143 locations. Don’t bother looking for any Black Friday coupons, discounts or promotions from REI either. REI president and CEO, Jerry Stritzke, announced today that its stores will be CLOSED on what is considered one of the most important shopping days of the year. Stritzke is giving his 12,000 employees a paid day off “so they can do what they love most—be outside.”  The company, which brings in annual sales of $2.2 billion, is hoping that consumers will follow suit instead of spending the day spending money. The company has set up a special website, optoutside.rei.com, that among other things, recommends hiking trails, that will presumably remind you of all the gear you need to go and buy at REI once the stores re-open. That’s no joke. As far as PR goes, this is one tactic that is sure to help the company rake in more sales this holiday season than in year’s past. Considering that in 2014, sales from Black Friday weekend actually declined 11%, staying closed on Black Friday, doesn’t seem so insane after all, even though the day has always ranked as one of REI’s ten best sales days, And if you’re jonesing to spend some money online at REI on Black Friday, don’t hold your breath as your order won’t even get processed until Saturday.

Keeps growing and growing…

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The Wall Street rumor mill is all abuzz with talk that Walgreens Boots Alliance is about to scoop up smaller competitor Rite Aid for upwards of $10 billion. That might be a very generous offer considering that even after shares of Rite Aid jumped 36% to $8.27, the company’s valuation was still only around $8.7 billion. But again, this is all just rumor. For now. Until today, shares of Rite Aid were down 29% since it announced last month that it was lowering its profit and revenue forecast. The move will up Walgreen’s game in the $ 263 billion drug distribution industry where it currently holds 31% of the market share to CVS’s 58%. Rite Aid’s share is but a paltry 10%.  Profits from this industry are a very lucrative $10.3 billion. So who can blame Walgreens for wanting to stake out a bigger share. Walgreens Boots Alliance CEO Stefano Pessina recognizes the United States’ government’s ever-growing role in the pharmaceutical industry all because of the Affordable Care act aka ObamaCare, and he thinks consolidating U.S. pharmacies could yield some massive returns. Of course, Walgreens and CVS still have to contend with competition from online, mail-order and wholesale pharmacies, but for now, they’ll satisfy themselves with bigger fry. Incidentally, Walgreens is supposed to report its fourth quarter results tomorrow.

Colt Arms Itself With Chapter 11 Protection; Target Teams Up With CVS; Another One Bites the Sawdust as Lumber Liquidator CMO Ousted

Out with a bang?

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The maker of everybody’s favorite M16 rifle, gunmaker Colt Defense, has filed for bankruptcy. Famous for perennial firepower darlings, the Colt .45 and the “Peacemaker” – aka the gun that won the West – Colt saw delays in orders from both the US and foreign militaries, not to mention less demand for the company’s sport rifles, that caused its numbers to go into the red. Filing for chapter 11 in Wilmington, Delaware, the arms company already hit up Morgan Stanley for a $70 million loan, back in November, just to make an interest payment. Colt currently has about $500 million in assets and Chief Restructuring Officer Keith Maib wants to assure the public that “Colt remains open for business” while it attempts to figure out how to redo its balance sheets. Incidentally, this is not the company’s first trip down bankruptcy road. Colt, which was started by Samuel Colt back in 1836, also hit the bankruptcy skids back in 1842. The company rebounded and Samuel Colt went on to become one the country’s wealthiest men.

If you can’t beat ’em, join ’em…

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Target’s ditching its pharmacy business in a $1.9 billion deal with CVS. The retailer came to some conclusions about the whole operation which basically had to do with money, and how much of it the pharmacy division wasn’t making. In fact, Target was actually losing money on it. Part of the problem is that the Affordable Care Act was just making everything so darn complicated and well, CVS is more equipped to handle the constantly changing landscape of healthcare while Target is best suited to sell stuff that consumers want and need but that don’t require prescriptions. So basically, Target is taking the pharmacies it already has housed in its locations and magically transforming them into CVS stores. Target expects that will bring in more traffic to its stores as CVS enthusiasts will flock to Target/CVS stores to get their prescriptions filled and then be compelled to step inside the store, filling up their red shopping carts with the kind of merchandise on which Target intends to place an increased focus to increase sales. Funny how that works, huh?

Saw it coming…

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The latest executive to bite the Lumber Liquidators’ sawdust is Chief Merchandising Officer William Shlegel. The executive was on the job for four years before that scathing “60 Minutes” report aired back in March accusing the company of using formaldehyde-laced laminate flooring form China. Shlegel will be replaced by Chief marketing Officer Marco Pescara, who will pull double duty as he stays in his post while assuming his soon-to-be-former colleague’s role as well. No statement or comment was offered by Lumber Liquidators as to why Shlegel was shown the door, nor were there any comments about what, if any, his role was in the formaldehyde-laced flooring disaster. Of course, this latest switcheroo doesn’t even begin to solve the company’s tsunami of problems as the Justice Department is still seeking criminal charges against Lumber Liquidators, while it faces more than 100 class-action lawsuits. Sales of all the toxic flooring from China has been halted at the 360 locations. In the meantime, Lumber liquidators founder Thomas Sullivan has been playing CEO since the previous one, Robert Lynch ungraciously bowed out last month. The stock, to the surprise of…no one, has lost over 70% of its value in the last twelve months.

Smokin’ Earnings for CVS; Yelp Satisfies Craving by Scooping Up Eat24; Israelis Go Full Force On Corporate Cyber Attacks

Butt out…

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CVS had some smokin’ good earnings even though it kicked the tobacco habit. As one of the largest pharmacies in all the land, CVS beat those fourth quarter estimates, and perhaps even shocked the tobacco industry, by earning a record $1.32 billion in profit and $1.21 a share. A year ago CVS pulled in $1.27 billion, tobacco and all. It was a big gamble, getting rid of cigarettes and its nicotine friends, since tobacco helped CVS pull in $2 billion annually. What may have contributed, however, to this quarter’s pleasing numbers was a super-combo of two very unique factors:  First, there are more insured Americans – who were previously uninsured – making up for lost times by getting all their prescriptions filled, and then some. Then there was that flu vaccine that proved less than useful against this season’s particularly nasty strain of the virus. Because the vaccine wasn’t as effective this time around, consumers were flocking to CVS to buy flu remedies causing a 13% increase in sales to $37.1 billion. Analysts only expected CVS to pull in $36 billion. So I guess, in some weird alternate universe, CVS can thank the flu. Sort of.

Can I get that to go?

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Yelp is hoping to increase its presence in the food delivery arena by chowing down Eat24 to the very hearty price of $134 million. The two companies did some experimenting over a year ago and apparently it whet Yelp’s appetite to go full force on acquiring the online ordering engine. While Eat24 was only founded back in 2008, it already deals with 200,000 restaurants in 1,500 cities. Yelp will now compete with GrubHub –  who itself had a nifty little IPO debut back in April –  and is counting on its recent purchase to allow for a more streamlined approach to the online ordering experience. Sounds pretty tasty to me. Yelp currently has around 84,000 advertising accounts and, in case you were curious, it also has about a million restaurants listed with 135 million average monthly users dishing out their reviews, however unsavory they might be.

Bring it on…

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Because Israel’s cyber-security is actually a matter of life and death for its citizens, it only make sense that it would lead the way in cyber-hacking defense. And since necessity is the mother of invention, it should come as no surprise that the latest defense mechanism to be used in the fight against corporate hacking – think Target, JPMorgan Chase, Home Depot, to name but a few –  is coming from Israel’s military. And hey, if you happen to make a few bucks on all the economic opportunities that come with protecting your peeps, then why not? Unit 8200, Israel’s elite intelligence division, has entered the cyber defense fray, launching its very own “cyber security” foundry called Team 8. With some help from investors like Google Chairman Eric Schmidt and Cisco, it’s safe to say (no pun intended, or maybe a little) that Team 8’s got some major street cred. Founded by former Unit 8200 member Nadav Zafrir, Team 8 bills itself as a “start-up for start-ups” (catchy, huh?).  No doubt Target, Home Depot and JPMorgan Chase are currently exploring their cyber-security options and licking their chops in anticipation of what Team 8 can do for them. Or not. Whatever the cost to implement the technology, it will still pale in comparison to the epic damage cyber hacks can cause. But I’m guessing if Eric Schmidt is throwing money at Team 8, then it’s probably worth it to have a go at the technology.

Alibaba Love Story; CVS Gets the Last Hacking Laugh; Holiday Retail Shaming

Like you expected anything different?

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Chinese e-commerce giant Alibaba dished out its very first earnings report since going public and surprised NO ONE! Revenue was up an insanely impressive 54% to $2.74 billion even though analysts only expected a “modest” $2.61 billion figure. Net income for the company was up 16% to $485 million which, incidentally, was not as much as hoped. But hey, that’s literally the price you pay to become a record-setting $25 billion IPO. If you recall, Alibaba (BABA) began trading at $68 per share when it made its Wall Street debut back in September. But if you’d like to purchase some shares today, you’re going to have whip out over $104 per share. I bet your kicking yourself over that one, huh? Alibaba’s active buyers are up 52% to 307 million users while the number of its mobile monthly users doubled. Yes. Doubled. No major IPO success story (or quarter) would be complete without bringing a little Hollywood glamour into the mix. Which is precisely why Alibaba Chairman, Jack Ma, has been kicking it in La La Land recently.

And they said it couldn’t be done…

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CVS can take a non-emphysemic sigh of relief now that its earnings came out. The company’s idea to kick the tobacco habit from its shelves in close to 8,00 stores did not prove to be a fiscal disaster after all. On the contrary, the company posted better than expected earnings – across the board! Ha! Who says tobacco always wins? Actually I don’t know if anybody has ever said that…but moving on. True the company did take a bit of a hit over its initiative to pull smoking products from its shelves but revenue still went up. In fact, it was up by 10% and $35 billion – $250 million more than analysts’ predictions. But it gets even better. Retail sales were up over 3% to about $16.7 billion. It turns out that CVS got a little boost from Americans covered under ACA and Medicaid. But the big boost came from (drumroll please…) prescription drugs. Oh the irony…out with tobacco and in with prescription drugs.

Attention K-Mart shoppers…

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Now you can get your Black Friday game on the day before. Which is, of course, Thanksgiving. In fact, if you are so jonesing for a shopping fix wile most people have yet to wake up and defrost their poultry, take comfort in knowing that you can mosey on over to you local K-Mart, which will be conveniently opening its doors at 6:00 am, and staying open until (Black)Friday November 28 at midnight. Warms the heart, no? While a slew of retailers have decided to begin the Black Friday chaos/fun/sales before most Americans even digest their Turkey, there’s a whole group of companies that have shunned the practice of opening on the national holiday and have taken to retail-shaming their fellow retailers. Why there’s even a page dedicated to the cause appropriately called Boycott Black Thursday. K-Mart insists that employees who work Thanksgiving day are doing so voluntarily for “holiday pay.” Even though K-Mart and other stores are opening earlier to beef up sales, oddly enough, last year K-Mart sales actually fell during the holiday season after instituting this new “working-holiday” tradition.

 

CVS Not Getting Smoked; Home Depot Data Breach? Check; Viva La Truce!

Quitter…

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You might want to think about skipping CVS today if you were jonesing for a cigarette. Well maybe you should consider skipping the cigarette altogether, but I digress. Since really this is all about how CVS is kicking the cigarette habit out the door from all of its 7,700 plus establishments. It’s also launching a campaign to get people to be quitters – of smoking, that is. CVS is hoping that with its new “wellness” initiative it will attract even more consumers to those thousand of stores. And CVS is gong to need all the customers it can get as this move is expected to cost $2 billion in annual revenue. That’s a lot of wellness to make up for. Besides dumping its tobaacco products, CVS is also dumping the name CVS Caremark and is now going by CVS Health. Got that? The move was initially slated for October 1, but I guess they decided the sooner, the better (to lose that $2 billion). By the way, Walgreens has not announced a similar plan.

Breached…

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Home Depot officially joins the illustrious ranks of companies who’ve been targeted (no pun intended – well, maybe just a little) with a data breach. To be fair, however, the issue is still under investigation after some “unusual activity” was noted. Hmmm.  Apparently a large cache of sensitive info made its murky little way onto some dubious black market sites. Of course, customers will not be responsible for any charges incurred as a result of the breach. Because it would be rude to hold a customer liable for such a thing. Just to be on the safe side, Home Depot is taking a page from its fellow data breach victims and is offering free ID protection. The home improvement company is just hoping its breach will be nothing comapred to Target’s $150 million breach, from which it is still reeling. The theft is thought to have been perpetrated by Ukranian or Russian hackers. How this is known I really couldn’t tell you. But some very official sources have said said this and probably could tell how they know but are probably not allowed to share such information, I presume. And of course, the stock took a a 2% hit over this recent revelation.

Making up is fashionable to do…

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The long awaited truce has finally arrived. Of course, I am referring to the one between the world’s numero uno luxury brand LVMH and equally luxurious and ridiculously expensive retailer Hermes. What? That’s not what you thought I meant? Were you expecting a different truce? Anyways, after four years of intense, but supremely fashionable courtroom drama, the two sides have reached a very posh agreement where everybody wins. LVMH has graciously (and grace never goes out of style) agreed to sell off most of its 23.2% stake in the 177 year old, family controlled, Hermes, to the tune of over $4 billion. Also LVMH will not pursue a takeover, for the next five years anyway. It all started when LVMH kept scooping up Hermes stock in an attempt to takeover the illustrious maker of those outrageously expensive handbags. Except that it acquired all that stock in a way that didn’t require it to declare its stock acquisitions until it was almost too late, for Hermes that is. And who could blame LVMH? After all Hermes’ annual revenue consistently increases by at least 10% every single year.