VW Still Writing Checks for its Bad Behavior; Lululemon’s Sour Outlook; Economy Shows Some Impressive Muscle

Putting this baby to bed…

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Looks like Volkswagen will be handing over $157 million to ten U.S. states to settle environmental claims over the auto company’s notorious diesel emissions scandal. Among the lucky – if you can call it that – recipients of these funds are New York, which snagged $32.5 million, Connecticut which took in $20 million, Massachusetts, Pennsylvania, Delaware, Maine, Rhode Island, Oregon, Vermont and Washington, which all took in various amounts of the remaining settlement.  Incidentally, that $157 million was well below what the states originally sought. There was already a previous $603 million settlement with 44 other states, but this latest one is separate from that. In fact, the German car company has agreed to spend up to $25 billion to settle claims and make buyback offers. Just wondering if that means it will actually hit that figure or will the company try and do their best to come in as under as possible.  As part of this latest ten-state settlement, VW now has to offer three new electric vehicles in those states. Two of those vehicles need to be SUV’s. Which to me, looks like a bit of a win for VW, but hey, what do I know. In the meantime, as part of a $4.3 billion settlement with the Department of Justice, VW pleaded guilty to fraud, obstruction of justice and falsifying of documents in a district court in Detroit earlier this month. The company can also look forward to major audits, oversight and monitoring for the next three years. Sort of like what Wells Fargo has to go through as payback for its fraudulent account scandal. Am I seeing a pattern?

Soured…

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Fancy trendy yoga apparel maker Lululemon was upsetting Wall Street’s zen today after announcing that its first quarter sales marked a “slow start” to the year. Which is  really just CEO code for “Yikes! Our quarter sucked.” And with that news, shares of the company took a very ugly 23% plunge to $51 a pop, a stock price the company hasn’t seen since December of 2015. This news was especially weird because Lululemon did better in holiday sales than most other clothing retailers. Yet now, this quarter now becomes the very first one in seven years to see same store sales go down. The company took in almost $790 in revenue with a $136 million profit that added 99 cents per share, even though analysts were expecting that figure to be closer to $784 million with a $1.01 profit per share. Last year at this time the company made off with a $117 million profit that added 85 cents per share. Competition from Nike and Under Armour definitely turned up the heat on the super-pricey Lululemon, with their vast offerings and more affordable selections. But CEO Laurent Potdevin blamed the company’s neutral offerings instead, arguing that they lacked  “depth and color for spring” that consumers are apparently craving. That’s got to be it, right?

Yes, you need to know this…

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There was a lot of spending this quarter. A lot. In fact, consumer spending was so strong that it caused the economy’s GDP to grow at a 2.1% rate, more than what was thought in initial estimates. In the process, that impressive growth rate even made up for areas of the economy that didn’t perform up to snuff, like trade and business investing. In fact, for all of 2017, analysts are actually expecting to see a 2.3% rate of growth. Of course, the fact that the labor market is strong, with higher incomes and wages, helps with all that consumer spending as well. Naturally. That 2.1% rate is a major upward shift from last year at this time when that rate stood at 1.6% and had the dubious distinction of being the weakest period of growth in five years. This next bit may cause you to cringe, but one of the reasons for this anticipated impressive growth rate is President Trump. He’s got plans, in case you hadn’t heard, for tax cuts and spending. Say what you will, but moves like that help economies. And who doesn’t like a little economic boost.  However, if it makes you feel any better, Trump thinks he can get that rate up to 4%, and economists are laughing on the inside at him for even thinking he can pull off that feat.

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OMG-D-P!!!!; No Bling In Tiffany & Co. Earnings; McDiss Day

G.D.P-habulous…

Image courtesy of cooldesign/FreeDigitalPhotos.net

Image courtesy of cooldesign/FreeDigitalPhotos.net

China might be hogging center stage for its economic slowdown but the U.S. is stealing the spotlight now for the exact opposite reason. The exciting news off Wall Street today (okay, exciting is a stretch) is that the U.S. economy grew by a whopping (not a stretch) 3.7% instead of the initially estimated 2.3% growth rate. So let’s give a big shout out to the GDP for not repeating that awful first quarter growth rate of .6% which had everybody reeling and blaming a brutal winter and a slowdown at west coast ports. Business investments also saw a 4% increase even as low oil prices and a strong dollar continue to toy with our fiscal emotions. Shares went up across the indexes and the Dow Jones isn’t looking so scary right now, having gone up 1.4%. Consumer and government spending are up too. As if government spending ever goes down? So does this mean the Fed might once again forge ahead with its unwelcome plans to raise rates? Doubtful, for September anyway. But brace yourself because that hike is on the horizon.

You can forget breakfast…

Image courtesy of MR LIGHTMAN/FreeDigitalPhotos.net

Image courtesy of MR LIGHTMAN/FreeDigitalPhotos.net

Tiffany may have some sweet bling to offer but its earnings were anything but. The luxury goods retailer saw a 15.4% decrease in profits to $105 million, raking in 86 cents per share, a nickel short of estimates. So what gives? A strong dollar has got tourists shying away from Tiffany & Co. since they wouldn’t have been getting enough bang for their good old American bucks. However, Tiffany also saw a 21% increase in sales from Japan. The jeweler is also betting big on China, despite that fact that everyone else seems freaked about by the country’s slowing economy. Sales there are up. So clearly more than a few folks in China are plunking down lots of cash for some fancy Tiffany merchandise. Which makes perfect sense since China is the number two luxury market in the world. In fact, Tiffany is going ahead with plans to open two more stores there, adding to the thirty others already in the country and its 304 total stores. But shares of Tiffany are down 20% for the year and are currently hovering at an 18 month low. Interestingly enough (at least I thought so), less prestigious bling company Signet Jewelers Ltd., parent to both Kay and Jared Jewelers, saw some especially good earnings. Signet beat estimates of $1.15 per share to come in at $1.28 per share. Does this mean a shift in consumer preferences? Hmmm.

Off with their chicken supply…

Image courtesy of  joephotostudio/FreeDigitalPhotos.net

Image courtesy of joephotostudio/FreeDigitalPhotos.net

McDonald’s has cut ties with one of its chicken suppliers after some video was obtained from a Tennessee farm that supplies to Tyson, which in turn, supplies to McDonald’s. Unfortunately, these chicken farmers were allegedly using inhumane tactics on their farm – a big no-no if you wanna be in good with the Golden Arches. And while it was the right and noble thing to do to terminate their contact, McDonald’s still has not exactly landed in the good graces of Americans today. However, it has nothing to do with chicken. Only beef. As in a beef with Burger King. Perhaps you may have heard that today is National Burger Day. In a two page ad taken out in the New York Times and Chicago Tribune, Burger King wanted to join forces with McDonald’s on this auspicious day, put aside its McDiffferences, and offer up a McWhopper. Instead of graciously accepting this show of good beef, McDonald’s very undiplomatically declined the opportunity with CEO Steve Easterbrook writing, “We commit to raise awareness worldwide, perhaps you’ll join us in a meaningful global effort?” Can you say McOuch?

Is Xiaomi the Next Big Thing to Hit the Smartphone Scene?; Russia’s Ruble in the Rubble; Shake Shack Shaking Up Wall Street

Third’s the word…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Here’s a riddle for you: If Samsung is the number one smartphone maker in the world, with Apple perched at the number two spot, then who has taken third? Hint: It’s not LG. Or Nokia. Or Motorola. Or… In fact, the number three smartphone maker in the world has yet to reach our shores, even though the company’s got a $45 billion valuation and is slated to become the most valuable IPO. Ever. In case you haven’t figured it out – and it’s okay if you didn’t –  I am talking about Chinese smartphone maker Xiaomi. The company which, just pulled in another $1.1 billion in funding, is number one in the mammoth Chinese market. It also happens to be the fastest growing smartphone maker and the most valuable start-up in the world right now (yes, even more so than Über and Pinterest, if you can believe it). And by fast I mean the company’s sales are up 211% in the third quarter, having taken a 5% bite out of the market share. Xiaomi, whose Mi4 smartphone coincidentally, bears a striking – make that very striking – resemblance to the iPhone, actually makes most of its money from apps and add-ons, and not from the phone itself. It also apparently has some nifty marketing strategies, though I can’t weigh in on that one. Xiaomi is currently focusing on branching out into places like Indonesia, Russia and Mexico with no immediate plans to come to the US, which clearly hasn’t been a problem for it.

Is that a recession I smell…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Russia’s not having a very good week. News is out now that the economy there shrank for the first time in five years. The GDP fell by .5% with the Russian government saying that next year the GDP could go down by as much as 4%. How do you say “yikes” in Russian? The ruble is continuing its slide,  falling the most in two weeks, and is about 40% weaker than the dollar. It’s down by about 70% since the beginning of the year. Of course the international sanctions imposed on Russia by other countries who were not cool with its incursions into the Ukraine are being blamed. And, of course, Russia then decided to block imported food – a move that has not been good for anyone on either side of the issue. Then there’s the price of oil which keeps dropping and dropping and…well, it’s no fun to see oil numbers drop if you happen to be the largest energy exporter and well, that’s exactly what Russia is.

Yeah, it’s that good…

Image courtesy of KEKO64/FreeDigitalPhotos.net

Image courtesy of KEKO64/FreeDigitalPhotos.net

Apparently the Shake Shack is so good that Wall Street will get to partake of its delicacies in the form of a $100 million IPO that the company just filed today. Conceived by restaurateur Danny Meyer, the chain will be listed on the New York Stock Exchange under the aptly named ticker symbol SHAK. The company began as a single “shack” in New York City’s Madison Square Park and quickly grew to 63 locations…worldwide, with half of those operated by licensees. Shake Shack reported sales of $140 million in 2013, a scrumptious $81 million gain from the year before. Investors are awfully curious to see how Shake Shack will fare considering the mixed results the market has seen from food companies like perennial fave Chipotle to less than stellar performer Noodles & Co. If that’s not enough to whet your IPO appetite, then how about the fact that they pay an average hourly wage of $10.70 with health benefits and paid time off?

Black Friday Offers “Creep-y” New Sales Trend: Visa Vis your Wallet; Defensive Save for the GDP

On your mark, get set, shop!

Image courtesy of Feelart/FreeDigitalPhotos.net

Image courtesy of Feelart/FreeDigitalPhotos.net

Black Friday keeps coming sooner and sooner. Expect to see Kohl’s, JC Penney and Macy’s all unlocking their doors while your still trying to pry yourself out of your chair, post turkey. In fact, Kohl’s is opening at six pm, two hours earlier than last year. But that’s nothing compared to Amazon which is starting its Black Friday deals on Saturday. This Saturday, November 1, nearly four weeks before the actual “Black Friday.”  This trend even has a name. It’s called “Black Friday Creep.” How clever, sort of. You can thank the recession we endured a few years ago for all this Thanksgiving retail interruption. Several retailers aren’t too thrilled with their sales forecasts and are hoping those added shopping hours and Thanksgiving day will give their sales a much needed boost. But don’t bother standing on line at Gamestop or Costco. Those companies feel Thanksgiving should be spent with families. However, GameStop will be flinging it’s doors open at midnight. Not sure how that fits into the quality-family-time equation. Costco, however, strongly feels its employees need time with their families and that they work especially hard during the holiday season. So what does that say about how Walmart executives feel about their employees, whose stores will be open all day on Thanksgiving?

Speaking of transactions…

Image courtesy of Michelle Meiklejohn/FreeDigitalPhotos.net

Image courtesy of Michelle Meiklejohn/FreeDigitalPhotos.net

Visa reported its fourth quarter earnings and how do you think the largest credit and debit card company did? I am being rhetorical. The company reported $3.23 billion in revenue, a whopping 9% increase over the same time last year. Analysts expected only $3.19 billion. Net income for the company came in at $1.4 billion which came out to a sweet $2.18 per share. That pretty little figure was 17% higher than last year’s fourth quarter and $0.07 higher than what Wall Street predicted. One of the reasons these numbers are so darn plump has to do with Visa’s growing payment volume. The company processed almost 17 billion transactions with about $1.2 trillion changing hands. Note the use of the “t.”  For the year, the company can already boast almost 70 billion transactions. That’s nothing to sneeze at, I am sure you know. All eyes are always on Visa, which is seen as a barometer of our collective spending habits and other financial aspects of our lives.

Growing, growing not gone…

Image courtesy of jannoon028/FreeDigitalPhotos.net

Image courtesy of jannoon028/FreeDigitalPhotos.net

Our fourth quarter grew at 3.5%. Economists only predicted a growth rate of 3% How ’bout that? But don’t pop open the champagne just yet because it didn’t grow as much as the previous quarter’s 4.6% rate. But it’s not fair to compare the quarters. After all, we were just coming off a brutal and fiscally inconvenient winter so the economy did have a jump of rebound there. So what kinds of things contributed to this quarter’s growth? One of the big contributors, whose spending frenzy helped growth is the government. Yes, in this case, major government spending proved to actually be healthy for the economy. But it wasn’t just any kind of government spending that sent our GDP into upward glee. For that we need to give a big shout out to defense spending, which played a prominent and much appreciated role in our economy this quarter.