VW’s China Redemption; Fitbit Numbers Way too Skinny; Deal Drama: Walgreens/RiteAid vs. Regulators

Emissions Scandal? What Emissions Scandal?

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Volkswagen is in the news yet again. And this time it has nothing to do with poisoning the air we breathe. I know. Hard to believe, right? VW is making headlines because it has been crowned the world’s largest automaker, easily besting Toyota, after reporting that it shipped 10.3 million cars in 2016, a 3.5% increase from the year before. Toyota only managed to sell about 10.2 million cars, giving it just a .2% boost over the previous year. T’was a brutal blow dealt to Toyota’s ego – not that it’ll never admit it – since the Japanese automaker held that top spot for seven out of the last eight years.  Toyota says it’s not concerned with being in in the number one spot as long as it’s making good cars.  Toyota definitely makes good cars but I doubt anybody would believe that it’s not itching to reclaim the top spot next year. So what part of this great big planet was scooping up all those VW’s that helped the German automaker earn this dubious distinction? It certainly could not have been in the United States, where the car company isn’t exactly popular following “diesel-gate” and the on-going saga we call the “emissions scandal.”  Well, look no further than China, which stands as the primary reason for VW’s fiscally historic achievement, despite the negative sentiment against it in the rest of the world. It’s not that China is a smog-loving country filled with emission worshippers. However, it must have helped that VW sold almost no diesel cars to the country. Which probably explains the country’s on-going enthusiasm for Volkswagen. The Chinese just really dig VW’s. And in case you were wondering, GM rounded out the third spot. In fact, GM used to regularly claim the top spot, but along came 2008 and burst that bubble when the US carmaker faced the wrong end of bankruptcy and a federal bailout.

Fit to be tied…

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Fitbit is looking anything but fit these days as the company released a preliminary earnings report, ahead of its February date, showing that the hype for its wearable devices is wearing…thin. For the full year Fitbit expects to pull down revenue for 2017 between $1.5 and $1.7 billion, and is expecting a reorganization to cost approximately $4 million. That reorganization, by the way, involves getting rid of about 110 jobs, or roughly 6% of its workforce. The company has been struggling to find ways to keep sales momentum for the wearable device. CEO James Park is hoping to turn Fitbit into a bona fide digital health company. And that’s a noble endeavor, indeed. However, that plan could literally take years that Fitbit may not have.  The company had slashed forecasts for the holiday season, but a move like that never ever bodes well. Competition from Apple, not to mention companies offering cheaper alternatives, have put a major damper on Fitbit’s sales, with 6.5 million devices sold during the fiscally critical holiday season. Apparently, that number just wasn’t good enough and the data only gets worse. Fitbit is reporting estimated revenue of between $572 million to $580 million. While that number might seem respectable, it’s actually disastrous, if only because the company had initially predicted that it would pull down as much as $750 million in revenue, with analysts forecasting $736 million. As for growth, Fitbit can now expect that figure to come in at around 17%, when initial expectations had been closer to 25%. As for shares, they didn’t just fall – they plummeted. They plummeted the most in three months, hitting its lowest intraday price. Ever.

Deal or no deal…

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A deal has finally been struck between RiteAid and Walgreens. Again. If you recall, and it’s okay if you don’t, this deal has been in the works for the better part of fifteen months. Apparently, RiteAid’s new price tag is now coming in at $2 billion cheaper than its previous $9.4 billion price tag, and the official deadline for the deal has been extended as well. The deal was supposed to have closed back in 2016. But, details, mostly those involving regulatory approval, still need to be hammered out. So now, the new official deadline is July 31. In order for the deal to go through, Walgreens needs to sell off stores in certain regions where competition issues might complicate matters. The company needs to dump between 1,000 and 1,200 stores, but at least it will now only have to shell out between $6.8 billion and $7.4 billion, or roughly $6.50 to $7.oo per share, depending on the amount of stores it ultimately sells.  Once those are sold off, regulatory approval should come swiftly. Naturally, shares of RiteAid took a nasty tumble once investors realized they were losing significant bang on their mega bucks.

Mega Media Merger; Fitbit is Overweight…And That’s a Good Thing; Some Foam for Thought

Urge to merge…

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

While you were busy navigating mall parking lots trying to find a parking space so you could do some meaningful Labor Day shopping, Media General was also busy doing some shopping of its own. The media company picked up, or merged – as it’s being called – with Meredith Media to the tune of $2.4 billion. The new company to be borne out of this merger will be called Meredith Media General – how convenient – and will take its place as the third largest television station operator in the U.S. Media General is gaining an additional 17 television stations, bringing its grand total to 88. Meredith also brings with it some great poolside reading, including Better Homes and Gardens, Shape and Parents magazine – the ultimate publication that lets parents know they are doing everything wrong. The deal was done for $51.53 per share, a generous 12% premium from Meredith’s Friday closing price of $45.94. While the boards of both companies approved the deal, the FCC must also gives its blessing for this union, which is estimated to rake in $3 billion in annual revenue. And here’s a little fun fact: Meredith Media began in 1902 as an agricultural publisher. Who knew?

Fit to be upgraded…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Nothing says fit like having your stock upgraded by Morgan Stanley to overweight. Oh the irony.  Morgan Stanley had initially classified the stock as equal weight as in, it’s right where it belongs. But alas! Morgan Stanley has been noticing how Fitbit has been performing really nicely lately, fiscally speaking of course, and expects the maker of the wearable device to outperform aka overweight. That is a finance term, I kid you not, which also can mean (and does in this instance) outperform. And who does’t love a stock that is overweight and outperforms? Hence, the stock rallied today. In fact, Fitbit had its biggest jump today since June, when it debuted at a relatively modest $20 per share. Second quarter revenue tripled from a year earlier to over $400 million, compelling Morgan Stanley to revise Fitbit’s target price from a paltry $43 per share to a handsome $58 per share. And it’s no wonder since Fitbit has a staggering 21% piece of a a $10 billion industry. As for that little company we call Apple, it appears that wondrous watch they peddle isn’t swaying those Fitbit wearers, many of whom have decided against purchasing that ever wondrous piece of technology. Fitbit’s stock price, btw, hit $34.77 and closed today at $35.49.

An ice cold one…

Image courtesy of Getideaka/FreeDigitalPhotos.net

Image courtesy of Getideaka/FreeDigitalPhotos.net

Because it’s the thing to do, Heineken is adding to its stash of beer selections by welcoming craft brewery Lagunitas Brewery to its foamy fold. Apparently craft beer is the new black and has been growing at a steady clip compared to its less craftier counterparts, whose growth rate has slowed considerably. In fact, one out of every ten beers is a craft beer. Clearly it’s all the rage. Lagunitas’ beverages, most notable for its India Pale Ale, are reputed to be so tasty, that the company shipped out 600,000 barrels just in 2014. Unfortunately, now with Heineken taking a 50% stake in Lagunitas, the California-based beer company no longer gets to sport the craft brewer status. In order to be classified in that illustrious category, a company must be less than 25% owned or controlled by a larger brewer. Oh well. But at least with Heineken buying it, Lagunitas gets to spread its foamy wings and bring its tasty ales to other parts of the world that have yet to experience the joy that is…Lagunitas.

Fitbit Fit for Wall Street; President Obama Not Making Dems Happy; Softbank’s Robot Wants Your Affection

Fiscal fitness…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Fitbit made its highly anticipated Wall Street debut today and beefed up its valuation to a very fit and healthy $4 billion. CEO James Park, who had some 20 million shares, has now banked a very robust $600.6 million. Even though $732 million was raised for the IPO and the initial price per share was but $20 a pop, the stock surged 52% on its very first day of trading. Opening up the fiscally glorious day at over $30 per share, Fitbit clearly sent a message to Wall Street that it has arrived and that investors totally dig the stock. The company, which trades under the very aptly named FIT (catchy, huh?) has been drawing some not so flattering comparisons to Blackberry. There is currently a number of other companies offering similar devices. And despite Fitbit’s insistence that it is different from the rest, many analysts are still wondering if Fitbit can keep ahead of the competition, as it seems to be doing now. Or will it lose its swagger with consumers if it can’t innovate quickly and effectively enough. Hmmm….

Things could get ugly…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

It’s called the “fast-track trade bill” a.k.a. “trade promotion authority” and it’s causing quite the stir in Washington. Basically, it’s a bill that lets the President negotiate global trade deals and Congress can opt to reject or approve them. It just can’t make any changes to them. It’s a take it or leave it kind of thing. Sounds completely harmless, right? That depends on whom you ask. Democrats, and unions don’t like the bill. They feel it will cost American jobs. Of course, American businesses are totally down with the bill and want to see it passed because they feel it would lead to more opportunities which is just fancy talk for: lots of money. The House of Representatives already voted in favor of it and the bill’s fate is now in the hands of the Senate. This bill is all part of President Obama’s master plan to pass the Trans-Pacific Partnership that would make trading between the U.S. and 11 other countries so much easier and take away a bunch of pesky obstacles. If the Senate votes to pass it, well then, I guess you’ll have some very ticked off Dems and union members. Oh well.

All I want for Christmas…

Image courtesy of  Boians Cho Joo Young/FreeDigitalPhotos.net

Image courtesy of Boians Cho Joo Young/FreeDigitalPhotos.net

Softbank, in a joint deal with China’s Alibaba and Taiwan’s Foxconn, is putting its adorable robot “Pepper” up for sale beginning June 20. Well, in Japan anyway. But don’t worry. It’s set to make its U.S. debut sometime next year. Now, adorable may not be the first word that comes to mind when you think of robots, but consider that Pepper enjoys contact with humans, particularly on its head and hands, and was initially used as a greeter in Softbank’s phone stores. Pepper, affectionately dubbed the “robot with a heart” goes on sale for $1,600 with an additional $200 for monthly service fees and maintenance. The bot is apparently also good with kids and makes for a great employee as well, though not necessarily in that order. There must be a joke in there somewhere.The cuddly bot is also able to recognize human emotions and can even react with anger and joy. I’m pretty sure there was a sci-fi horror flick based on that premise.

Gap Tries to Bridge Its Sales Gap; Under Armour CEO Lofty Leadership Plans; Fitbit Not So Bitty Ticker Plans

Big Gap-ing hole…

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Gap Inc. finally realized that its brand just isn’t what it used to be and has decided to shutter about 175 of its 675 specialty stores. What once might have been considered the Generation X go to wardrobe supplier, has now become passé to the millennials, many of whom, ironically, are employed by the Gap. Millennials have been opting to shop at “fast” brands like Zara, H&M and Forever 21, leaving the Gap holding the empty shopping bag of fiscal anguish. And not to be a downer, but when I browsed through a Gap last week, I wasn’t exactly swooning over the merchandise which the store was practically giving away. Shoppers are doing a lot more of their shopping online so there was no great pay-off in having so many stores open anyways. About 250 employees over at Gap headquarters in San Francisco are also set to lose their jobs and all these cuts are expected to cost between $140 – $160 million.

So classy…

Image courtesy of cooldesign/FreeDigitalPhotos.net

Image courtesy of cooldesign/FreeDigitalPhotos.net

Under Armour CEO Kevin Plank has big plans to lead the company he founded for many many years. Good thing he figured out way to do just that – by offering up more shares to investors. Of course, these aren’t your regular average shares. These shares do carry all the rights and privileges that come with owning a company stock – but with one itty bitty difference: the shares carry no voting power.  The company already has class A shares and class B shares. With class A shares, a shareholder gets one vote per share, while class B shares get ten votes per share owned. In case you haven’t figured it out, Kevin Plank holds most of those shares giving him lots of control. But, the board of directors had no problem with Kevin Plank’s class-y plan, unanimously passing it through. And why should the board take issue with it? Under Plank’s guidance, he led the company to a $17 billion valuation. The problem, however, that everybody seems to be wondering about, is what happens if Kevin Plank begins to under-perform?

Speaking of class-y shares…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Fitbit is getting pumped up to make its big ticker debut on Thursday and gearing up to offer 34.5 million class A shares which are set to go for between $17 – $19 a pop. That’s a bit higher than the $14 – $16 range it was going for a few weeks back.  That means the company, famous for its wearable fitness tracker,  could end up with a potential valuation of almost $4 billion.  And while you may bemoan the thought of exercise, there are a lot you out there who are eager to get fit, as evidenced by the $745 million in revenue Fitbit pulled down last year, earning a $100 million profit with that. Of course there’s still a lot of competition out there when it comes to wearable fitness trackers which has investors pondering just how Fitbit is going to set itself apart from the pack. Then there’s that other slight problem where users decide to ditch their trackers after just a few months. But hey, it’s only money, right?

Fitbit Fit to be Publicly Traded?; It’s All About the Vice for Dollar General; Start Saving, Health Insurance is on the Rise. Again

Working up a sweat…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

You may not own a Fitbit (yet) but perhaps you might be interested in owning shares of the company instead. The fitness monitoring device, which collects data on how much exercise you do – and don’t do – along with how much sleep you get – and don’t get – is now looking to fiscally beef itself up for some IPO action. The company, started by James Park and Eric Friedman, already pulled down $745 million in revenue and $100 million just last year. Fitbit is looking to raise $478 million to put out 29.85 million shares that might just fetch somewhere between $14 – $16 per share. That ought to give Fitbit a hefty $3.3 billion valuation. Of course, with any IPO, Fitbit has its share of detractors who are eager to point out the oodles of competition from, among others, Apple’s Smartwatch, Samsung and Jawbone.  The other issues that have investors skeptical is the tendency of fitness device wearers to ditch the “bits” within months, though I am not pointing any fingers, if only because I don’t have enough. Research found that a third of fitness device wearers ditch them within six months of getting them. Too bad you’ll have to wait until June 17 to find out the exact IPO price. But at least it gives you some time to start saving up.

Can I get a light?

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Dollar General sells a lot of useful stuff for dirt cheap and who doesn’t like that. But it was the not so useful stuff that helped the chain boost its sales this quarter. And by “not useful” I am actually referring to a little category dubbed “vice spending.” Yes, sales from tobacco and candy generated a greater portion of sales, in addition to its less vice-ful, or vice-free merchandise. Dollar General managed to rake in $4.92 billion in revenue. While that number just barely missed expectations, Wall Street didn’t seem to mind as it was still an almost 9% increase over last year and and that came with a very satisfactory profit of $253.2 million adding 84 cents per share. Analysts only expected 82 cents per share, by the way.  Even though same store sales grew 3.7% as opposed to the 4.1% expected by analysts, Wall Street still wasn’t upset and instead sent the stock up about 5%. Apparently, the stores were still seeing a lot more traffic i.e. customers who were shelling out a lot more cash. And if “vice” spending takes the credit for that, then so be it.

Stick out your tongue and say argh…

Image courtesy of ddpavumba/FreeDigitalPhotos.net

Image courtesy of ddpavumba/FreeDigitalPhotos.net

If the cost of your health insurance doesn’t suck enough, then get ready for 2016. Many many many health insurance companies have big expensive plans to ask state regulators to allow them to hike premiums on individual policies, whether they’re on the Obamacare exchange or not. We’re talking double digit increases. Apparently, these companies didn’t anticipate an increase in the amount of people going for doctor’s visits and getting prescriptions filled. Which is kind of weird because, don’t insurance companies pay people big salaries to anticipate such expenses? Just asking. Even though insurance commissioners and regulators can deny insurance companies their proposed rate hikes, it’s likely they’ll get approved for some type of increase, just maybe not as much as the insurers would have liked. So maybe you should start saving up to pay for your health insurance rate hike instead of those Fitbit shares.