Nike’s Sales Bruised By Yeezy; McDonald’s Gets Busted for Over-Valuing Value-Meal; Lookout! There’s A Lot More Walgreens/RiteAid Coming Your Way

Yeezy breezy…

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Image courtesy of John Kasawa/FreeDigitalPhotos.net

Nike’s quarterly profit might be up 7% thanks to strong demand in China and the United States, but that doesn’t mean everything is coming up roses at the athletic apparel company. Fierce competition from Under Armour and Adidas have been hammering away at Nike’s sales, partly because Adidas knocked it out of the park this year, thanks to Kanye West (it’s okay, I cringed too) and his Yeezy line, which saw sales go up 62%. Under Armour’s Stephan Curry’s shoe and apparel line definitely stole plenty of Nike’s mojo too. So Nike has been in quest mode to find all sort of ways to boost sales from, improving online sales features to cutting prices on some of its more popular offerings. One of Nike’s divisions that took a beating this quarter and fell short of expectations was its ever-important basketball division.  Apparently, consumers weren’t feeling the love for LeBron James and Kevin Durant sneakers when they were sporting a $200 price tag. Nike is banking that a $150 price tag will have people biting a little more. The company is also working on a faster supply chain dubbed “express lane” to bring products to market within weeks instead of months. In an effort to set itself apart from the competition, Nike’s come out with self-tying lace-up shoes. If you’re that lazy, they might actually be worth the $720 price tag. Profit from Nike came in at $842 million, with revenue of $8.18 billion and 50 cents added per share. That’s especially good since Nike’s stock has fallen 17% in the last year and Wall Street only expected $8.1 billion and 43 cents per share. Last year at this time the company posted $785 million  in profit and added 45 cents per share.

Un-happy meal…

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Image courtesy of Areeya/FreeDigitalPhotos.net

McDonald’s is staring at the wrong end of a lawsuit for 41 cents. 41 cents. Turns out the value meal is anything but since it would be 41 cents cheaper to buy the items individually than to buy the bundled package for $5.90 in certain locations. Enter plaintiff James Gertie who discovered this mathematical irregularity at two McDonald’s restaurants in the Chicago area.  The restaurants in question are operated by Karis Management and Gertie wants the suit to get class-action status for consumer fraud and deceptive practices. He says the lawsuit is about principle and is seeking a refund for any customer who purchased the meal at a McDonald’s restaurant operated by Karis. Those 41 cent refunds could add up to a lot of cash as Karis operates ten restaurants in and around Chicago. In the meantime, Karis has yet to comment on the case or the price discrepancy.  As for other McDonald’s all over the world, well, you’re just going to have to do your due diligence to see if their numbers add up or not.

Urge to merge…

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Image courtesy of Pansa/FreeDigitalPhotos.net

Walgreens Boots Alliance and RiteAid will finally get their way now that they sold off some 865 RiteAid stores to retail chain Fred’s. That’s what the two companies had to in order to appease the Federal Trade Commission so that it could go ahead with its $9.4 billion merger. Together, the new entity will still have over 12,000 locations from which to choose and will effectively become the largest drug store chain in the United States, effectively taking up 46% of the market. Fred’s currently has almost 650 discounted general merchandise stores and is looking to become the third largest drug store chain in the United States.  It’s also trying to reinvent itself by ditching its former name of Fred’s Super Dollar.  Fred’s had to borrow a whopping $1.65 billion in order to get those 865 stores, but it also had to pledge, as collateral, just about everything it has in the form of assets, and maybe even throw in a few bodily organs as well, to secure that loan.  The stores actually cost $950 million but other expenses, operating and otherwise, necessitated the full $1.65 billion. It should prove to be well worth it, however, as the deal will more than double Fred’s size.  Plus, the deal sent shares of Fred’s surging a mind-blowing 85% to $20.75. And who doesn’t like an 85% surge in shares, right?

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Kraft Ketch-es Up; Amazon Wants FAA to Start Droning Around; Lumber Liquidators’ Slight Rebound

Ketchin’ Up…

Image courtesy of Mister GC/FreeDigitalPhotos.net

Image courtesy of Mister GC/FreeDigitalPhotos.net

HJ Heinz, as in, ketchup is teaming up with Kraft foods, as in Mac & Cheese and Philadelphia Cream Cheese, to become the world’s fifth largest food and beverage company. And just who is behind this master plan for food domination? None other than everybody’s favorite (and only) Oracle of Omaha, Warren Buffet – well, Berkshire Hathaway really, and Brazilian Venture Capital firm 3G. The two entities are throwing $10 billion at the deal, which seems like a relative bargain since the merger is expected to generate $28 billion in annual revenue.  Of course, federal regulators still need to give their seal of approval, along with Kraft shareholders. But considering that the stock went up a whopping 32% on the news I’m guessing they won’t mind. Plus, if you are one of the lucky shareholders, then look out for a cash dividend of $16.50 per share, not to mention a 49% stake in the new venture.

 Droning on and on…

Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Amazon is taking on the FAA, telling them they lack the “impetus” to develop drone policies in a timely manner – said in the nicest possible way, of course. The e-commerce giant wants the agency to move quicker on issuing permits for drone testing. Like a lot quicker. Like before the model drones Amazon plans to use for its Prime Air Delivery Service become obsolete. Oops. Too late. Even Senator Cory Booker agreed with Amazon saying that if the FAA had been around during the time of the Wright Brothers, then commercial flying would have literally never taken flight. Then there are all those restrictions associated with the testing. For instance, drones can’t fly higher than 400 feet, and in some cases 200 feet, and the drones must also always be in view of the pilot. Where’s the fun in that? Amazon, and several other companies are wondering why it takes so long for the U.S., on average, six months longer to issue these permits when in other countries it takes about 1-2 months?  The drone industry is also irritated by it all seeing as how drone delivery is apparently way more economical, faster and cheaper with the added bonus of less traffic and pollution? Who doesn’t like that? But to be fair, the FAA has some not-so-minor concerns about the potential for drones to collide with commercial carriers carrying passengers. Not to mention the potential loss of link between a drone pilot and the drone.

Lumbering on…

Image courtesy of  Sira Anamwong/FreeDigitalPhotos.net

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

Lumber Liquidators stock went up today by 8%, which actually came as somewhat of a surprise since the stock is down 59% for the year after a scathing “60 Minutes” report that found high levels of formaldehyde in its laminate flooring from China. The reason for its little upswing is presumably because the U.S. Consumer Product Safety Commission has entered the fray by launching a federal investigation into the claims, also involving the EPA, CDC and Federal Trade Commission. Lumber Liquidators is said to be fully cooperating in the investigation. No kidding. But don’t bother holding your breath for results – they won’t be in for several months. Lumber Liquidators, by the way, says “60 Minutes” used a test that is considered unreliable, by Lumber Liquidators standards anyways. The company, which has 350 locations throughout the United States, has graciously offered to come test the flooring in your home. If high levels of formaldehyde are found to be present, then rest assured…Lumber Liquidators will do more testing. If those tests keep coming back positive then yeah, they’ll finally agree to replace the questionable, carcinogenic flooring.