Look Out Tesla! Volvo Plans to Disrupt Electric Car Industry; Plus Tesla’s Major Q2 Miss; Losing My Religion: Denim Company Goes Bust

Tesla disrupt…

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With all the attention Tesla has been getting – and seeking – lately, a major company just threw down the automotive gauntlet in the electric car arena. Enter Volvo, the perennial boxy but safe, Swedish import, which just announced that come 2019, it will only sell hybrid or electric vehicles. That’s right. The ultra-reliable, ever dependable Volvo will likely be giving Tesla a serious run for its money. The fact that its got a solid, dependable reputation to back it up only sweetens the pot. Lucky for Volvo, its parent company Geely Automobile Holdings of China has already sold tons of electric vehicles and now Volvo gets to tap into all those tech resources. And it’s not just Tesla that should be worried. Toyota, Honda and BMW, to name a few, should also look to up their game now that Volvo has entered the field. This announcement is epic since it means that Volvo becomes the very first major automobile manufacture to make the decision to completely kick internal combustion engines to the curb. Interestingly enough, hybrids accounted for only about 2% of auto sales in the U.S. last year, in part because gas prices have fallen so much, that people don’t mind getting cars with traditional gas-guzzling engines.

Speaking of which…

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Shares of Tesla took a nasty little drop today after the company reported that its second quarter sales were flat as a pancake. To add insult to fiscal injury, the company also reported that it delivered just 22,000 vehicles. That seems like a good thing except for the fact that Tesla had built over 25,000 cars. Demand is good. Oversupply is not so good. At all. And the fact that consumers have stopped demanding the Model S sedans and the Model X utility cars leaves Wall Street feeling less than stoked about Tesla. Especially Goldman Sachs, which just released a report documenting its concern over Tesla’s slow growth. It’s never good when Goldman Sachs is concerned about you. Naturally, Tesla pointed its finger at the ever-reliable and handy excuse of “production issues” to explain the shortfall of deliveries. Too bad Wall Street didn’t seem to care what excuse Tesla used.

Another one bites the dust…

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Today’s Chapter 11 bankruptcy filing is brought to us by True Religion, purveyor of super-pricey denim. True Religion brass is pointing the finger at e-commerce and the shift in consumer spending habits, since customers are choosing to purchase their goods from their devices instead of heading into actual stores where True Religion merchandise is typically sold. Fortunately, the company was able to come up with a restructuring agreement with several of its lenders that should get rid of approximately $350 million of its debt, while its creditors would get paid in full, at least the ones critical to the company’s operations. In the meantime, with 140 stores still under its belt, the company is going to explore ways to “reinvigorate the brand.” In other words, it is going to try to figure out how to get people to spend hundred of dollars on True Religion’s pricy merchandise once again.

Amazon Lands Itself in the Middle East; Price of New Skin Drug Will Make Your Skin Crawl; Spoiler Alert: Uber’s Not So Diverse

Just Souq it up…

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In case you were wondering what Amazon’s been up to lately, here’s a hint: It’s got nothing to do with drones. Sort of. Instead, the online marketplace just agreed to scoop up Souq.com, the Dubai-based Amazon of the Middle East, and apparently the largest online retailer in the region. While we don’t know the exact numbers involved in the deal, we do know that 1.) There was one other bid by a billionaire from Dubai and 2.) It’s apparently the biggest tech merger & acquisition in the Arab world. Ever. At least according to somebody at Goldman Sachs. But I guess Goldman Sachs would know something like that. Rumor has it that although the Dubai billionaire, Mohamed Alabbar, counter-offered $800 million for the company, Amazon will be paying even less. What’s super-interesting about that factoid is that last year Souq.com was valued at around a billion following a funding round.

What a bargain…

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The good news is that the FDA actually approved a new treatment for severe eczema. The bad news is that it costs $37,000 a year to get it. But for some it might be worth every penny considering that one-third to two-thirds of the patients who used the drug actually regained clear or almost-clear skin.  Manufactured by Frace’s Sanofi SA and New York’s Regeneron Pharmaceuticals, the just approved drug, called Dupixent, is actually injected under the skin every two weeks, unlike previous eczema treatments, which are typically topical and often involve steroids and antihistamines. The injection apparently contains an antibody that does something to basically scare off the skin condition condition. Sort of. In any case, while $37,000 seems like a ridiculous amount of money to pay – because it is – consider that it’s still lower than Humira and Enbrel, drugs that also treat skin ailments. However, Wall Street didn’t look at it that way and instead sent shares of Regeneron down upon news of the five-figure price tag.

 

Well, what did you expect?

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Uber finally finally released its very first diversity report following a slew of issues, a ton of criticism, not to mention claims of sexual discrimination. But the only surprising thing about the report is that there weren’t any.  Surprises, that is. Sure the company employees minority groups. Unfortunately, those groups aren’t as well-represented at the top. The ride-hailing app employs about 12,000 people globally, and about 64% of them are males. Of that 12,000 figure, 36% are women and 22% of those women hold higher-level positions, while 15% of them work in the company’s tech areas. In the U.S., however, the numbers are almost embarrassing as blacks hold just 2.3% of leadership roles, while Hispanics represent .8% of those positions  – just not on the technical side.  And just to be clear, those percentages are not exclusive to Uber, but rather are fairly representative of Silicon Valley tech companies. Except now Uber pledged to throw $3 million at the problem in order to find solutions to make those numbers...better.

Tesla Deliveries Anything But Electrifying; Sec’y of State Nominee’s Future Looks Green; Trump’s SEC Chairman Pick

Not electrifying…

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Tesla’s fourth quarter sales rose 27%, yet deliveries fell short with CEO Elon Musk pointing to production delays. And Tesla didn’t fall short according to Wall Street’s predictions but rather its very own.  It may seem like a convenient excuse, but it’s a valid one that was also used to blame the company’s second quarter shortcomings. The electric car company delivered 22,000 cars in its last quarter, which was over 5,000 more than the same time last year. That might seem awfully impressive except that Tesla wanted that figure to top 25,000 vehicles. So now, that 3,000 car miss becomes an ugly smudge on the company’s fourth quarter earnings report. Tesla’s grand total of car deliveries for the year hit over 76,000. But once again, because Tesla went ahead and predicted that number would hit 80,000, it disappointed only itself.  Setting forecasts he just can’t meet is a nasty habit that Elon Musk can’t seem to break.  Production delays or not, maybe Tesla’s should stop trying to predict the future.  Shares were down 11% for 2016 which marks the first time that Tesla reported an annual decline since its 2010 IPO. But miraculously those shares still rose today because Wall Street clearly has a thing for Elon Musk. Well, his company, anyway.  Wall Street and consumers alike are waiting with bated breath to see if the much anticipated $35,000 Model 3 will actually surface this year. Some experts, however, think the more affordable model will only be making its grand debut in 2018. That still has’t stopped loyal Tesla buyers and enthusiasts from shelling out a total of $350,000 worth of deposits for the car.

Hatched…

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President-elect Donald Trump’s pick for Secretary of State, Rex Tillerson, reached a very lucrative retirement deal with ExxonMobil. If Tillerson does in fact get confirmed – and that’s still kind of iffy – then he’ll walk away from his post with $180 million comfortably nestled in a trust account. And that’s the approximate value of Tillerson’s 2 million deferred shares of the energy giant. Because he would not be allowed to own shares of the company if he took the post, the shares would get cashed out and put into an independently managed trust account. Besides dumping his ExxonMobil shares, Tillerson will not be allowed to work in the oil and gas industries for a period of ten years. Plus, he has to give up a cash bonus and other benefits that are worth another $7 million because he won’t be there in March, when he’ll have reached the company’s official retirement age that affords him the opportunity to collect on that $7 million package. But, that $180 million ought to tide him over. He’ll also need to agree to sever ties in order to avoid any conflicts of interest. Should he decide to return to the industry, then all that money would be given to charities of the main trustee’s choosing. But I did write that his confirmation is”iffy” because there are plenty of Congressional members who aren’t down with Tillerson’s cushy relationship with Russian president Vladimir Putin. That’s going to come up a lot during the confirmation hearings and it’ll probably be ugly, if not wholly entertaining.

And I choose you…

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Trump just announced his pick for Securities and Exchange Commission Chairman and it’s one that should surprise…no one. Enter Jay Clayton, a lawyer with the law firm Sullivan and Cromwell, who has plenty of experience with banks. Well, representing them, anyway. Besides banking clients, Clayton also defended a variety of “large financial institutions” against such entities as the Department of Justice, other government agencies and regulators and – get this – even the SEC itself.  Some of his more notable achievements include representing everybody’s favorite Chinese e-commerce giant, Alibaba, when it made its grand IPO debut. He’s also represented Barclays when it unceremoniously scooped up Lehman Brothers, and Bear Stearns when JP Morgan took it on. You didn’t think we’d leave out Goldman Sachs, did you?  Because he repped that one too.  Word on the street is that Carl Icahn interviewed Clayton, along with several other candidates for the post. Presumably the two gentlemen discussed how to best undo obstructive banking regulations, Dodd-Frank and all those other pesky rules that have been casting a major downer on the financial world.

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.

 

French Company Goes Organic for U.S. Acquisition; U.S. Airlines Gear Up for Cuba; U.S. Banks Bond Over Brexit

Let them eat organic cake!

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Dannon Yogurt’s parent company, Danone (said with a French accent) is looking to pick up  a major U.S company that will effectively double its size. That’s assuming all goes according to plan. Danone wants to offer organic food provider, WhiteWave, purveyor of favorites like Silk Almond and Soy Milk, Horizon Milk and Earthbound Farms, $10.4 billion in cash for the fiscal pleasure of its company. That’s a 24% premium over WhiteWave’s thirty day average closing price and comes out to about to $56.25 per share. But for Danone, whose looking to make itself a bigger presence in the United States, it’s well worth it, since WhiteWave’s offerings tend to attract wealthier consumers. WhiteWave generates annual sales of about $4 billion and with this acquisition, Danone expects to see a $300 million boost in operating profit. Danone has also been struggling in other parts of the world and this acquisition would ease the burden of some of those lesser-performing markets. FYI, when companies offer to buy other companies, their offers tend be at least at a 30% premium. Because this offer was not, it theoretically means that the bidding door is still open to other offers from companies like Coca Cola, PepsiCo and Kellogg Co, to name but a few. In a regulatory filing, though, WhiteWave did graciously say that it wouldn’t solicit other offers. However, there are exceptions. Should WhiteWave go with another offer, Danone still wins because it will get a $310 million break-up fee.

Bienvenido…

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Believe it or not, Hillary Clinton wasn’t the only topic of conversation today coming out of Washington DC. President Obama announced a proposal to allow eight U.S. airlines to provide nonstop service between Cuba and ten U.S. cities, beginning this fall. This will mark the first time in 50 years that travel of this kind will be available. And all this just one year after diplomatic relations were re-established. The city and airline selections were made by the Department of Transportation and the lucky airline winners are: Alaska Airlines, American Airlines, Delta Airlines, Frontier Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines. American Airlines is actually no stranger to the island nation, as it has been offering charter services there since 1991. Just last year the airline made over one thousand chartered flights to Cuba, while JetBlue made over 200 chartered trips. That’s awfully welcome news for an industry that took a fiscal beating lately. The cities that can look forward to the new service had to have have substantial Cuban-American populations already in place. Hence, Florida finds itself the recipient of 14 out of the 20 daily nonstop flights, since it boasts the largest Cuban-American population. The cities include: Atlanta, Charlotte, Fort Lauderdale, Houston, Los Angeles, Miami,  Newark, New York City, Orlando and Tampa. According to Cuban officials, the number of American travelers to Cuba is up 84%, compared to last year, in just the first half of the year.  But there is still a trade embargo in place, which does include a travel ban. However, there are twelve convenient categories of reasons to fly to Cuba that you can check off should you decide to make your way to Havana any time soon.

Come together…

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It’s a fiscal kumbaya as four U.S. banks offered up their sincerest support for London following the Brexit vote. The gracious supporters include, JPMorgan, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley. The banks agreed to help British Finance Minister George Osborne find ways to ensure that the U.K. remains the prominent financial player that it always was, pre-Brexit. And of course they all will try and find new and exciting ways to lure and retain big banking to London so that the consequences of the Brexit don’t do the country in completely. While that sentiment no doubt warmed the hearts of investors all over the world, the investment banks could not offer up as much optimism as far as the jobs situation is concerned. After all, “no one in their right mind would currently invest in Britain.” Keeping those jobs there might might be the biggest challenge of all and no one wants to make any promises on that. Especially Jamie Dimon, who had previously mentioned that around 4,000 jobs could make their way out of London. In the meantime, the French wasted no time – I mean NONE! – in announcing to the world that it would make its tax regime as enticing as possible, in a not at all subtle attempt to grab some pricey banking business from London.

Bit Who? Is Mother Nature Losing Her Cool and @GSElevator Pushed the Wrong Button

Bit of confusion…

The founder of Bitcoin has been revealed. Well…sort of…um…okay so nobody’s a hundred percent sure on that one. Here’s what is known: The virtual currency was created in 2009 – and NOT – it should be duly noted – by the Winklevoss twins. However, the creator remains a mystery (cue the eerie music).  Or does he (or she? or it?). Many believe(d) that the creator went/goes by the name Satoshi Nakamoto. A man by that name has been found in California and following a wild car chase in Los Angeles (duh…where else?) it’s still unclear who the founder is. Nor does it change the fact that the Winklevoss twins used bitcoins to pay for their galactic voyage or that bitcoin exchange Mt. Gox went buh-bye.

Take that Mother Nature…

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In case you were wondering why Wall Street was putting out some record highs today (and it’s okay if you weren’t  – that’s why we’re here), it’s because 175,000 new jobs were added to the work force beating analysts’ expectations. Not only is that a positive sign that the economy is starting to regain some of its mojo, but it’s also seen as big kick in the butt to mother nature who has been toying so rudely with our economic emotions (bet you didn’t know you had those). But don’t break out the champagne just yet. Unemployment still climbed up .1% to 6.7% when that number should have stayed put like a good little estimate.

The final chapter?

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And so the individual behind the twitter account @GSElevator is not @ Simon & Schuster anymore either. Straight To Hell, the book John Lefevre wrote based on things overheard in the hallowed elevators at Goldman Sachs has been canceled. The problem with the story is that Lefevre is not only NOT an employee of Goldman Sachs, but he resides in Texas which makes it kind of hard to overhear conversations in elevators in New York. But just so we’re clear, he did interview with Goldman Sachs, albeit, many many years ago.

Not @GSElevator, A Big Bite of Bitcoin and Your Innermost Thoughts

In a strange twist of corporate Goldman Sachs drama…

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The identity of twitter account @GSelevator has finally been identified.  The tweeter had over 600,000 followers, as he/she tweeted about Wall Street’s corporate culture. The author of the account, John Lefevre, isn’t and was never even an employee there.  If he were, however, he’d have had one hell of a commute since he’s a resident of the great state of Texas.  Apparently it’s not necessary to have ever been employed at a particular firm in order to tweet about it.  Simon & Schuster agree as Mr. Lefevre has a six-figure advance from them for his book.  To be fair, though, he interviewed there seven years ago so it’s safe to say he had a glimpse of a genuine Goldman Sachs elevator.  Must have been some elevator.

There seems to be a Bitcoin of a problem…

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Ever heard of Mt. Gox?  Well that’s probably just as well since the Tokyo based Bitcoin exchange mysteriously misplaced about  744,000 Bitcoins.  And just how much is that worth, you might be wondering.  Hundreds of millions of dollars, that is,  if you don’t take into account the currency’s volatility.  What that means for the future of virtual currency depends on whom you ask.  Venture Capitalist Marc Andreesen compared it to MF Global, the brokerage that filed for bankruptcy in 2011.  Thinking he was reassuring Bitcoin investors and enthusiasts with that comparison, Andreesen said, “Bitcoin protocol is unchanged and other Bitcoin exchanges and companies are doing fine.”  Feel better about that now?

How thoughtful of you…

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If you consider yourself a consumer, say like…um…everybody,then I know what you’ve been thinking about these days. No, really.  I do.  Your thoughts were thoughtfully expressed on the consumer confidence index.  You see, a bunch of people were surveyed on their consumer thoughts – as they consider themselves to be consumers just as you do – are those thoughts are meant to represent yours as well.  How ’bout that.  First of all, you think that the economy has improved.  You also think that jobs are plentiful.  But then again you also weren’t feeling totally optimistic about the economy either.  And you were definitely concerned with “the short-term outlook for business conditions, jobs and earnings.” Did you know that’s what you were thinking?  Well, I hope you thought this through carefully.