UnderArmour Gets a Chink; McDonald’s Deserves a Break Today; Rate a Minute! No Hike in Sight

Fit to be bit…

ID-100121028

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Under Armour seems to have suffered a chink in its earnings as its profits took a particularly brutal 57% dive. The primary culprit is Sports Authority, a company that is thisclose to becoming retail history, but was also one of Under Armour’s biggest retailers carrying tons of its merchandise. Hence, Under Armour took what’s called an impairment charge, and impairing it was, to the tune of $23 million. Last year at this time, the Maryland-based company hauled in an impressive $14.8 million profit. This year, however, that profit was a very disappointing $6.3 million. On the bright side, Under Armour is headed to Kohl’s 1,100 department stores next year. Apparently, it’s a way to connect with female consumers. Who knew. Under Armour brass think this new foray into Kohl’s will make women’s sales hit the $1 billion mark. Besides, since Nike, Under Armour’s biggest competitor, also happens to have a strong – very strong – presence in Kohl’s,  Under Armour hopes its new endeavor will take a big chunk out of the competition’s sales. But if Under Armour’s numbers still fail to impress next quarter, it might have to do with the exorbitant real estate it just leased in New York City – the renowned FAO Schwarz toy store. The rent on that baby ought to set the company back. But the athletic apparel company is banking heavily that the location location location will more than compensate by bringing in some boffo sales.

Mac-attacks need not apply…

ID-100373326

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The Golden Arches seemed to have lost their luster this quarter with worse than expected earnings and profit falling over 9% to $1.1 billion. But how could that be if you and everyone you know was there all the time dining on its delectable all-day breakfast selections? And herein lies the problem. Well, part of it anyway. You see, McDonald’s breakfast offerings skew cheaper than the rest of its menu items. Apparently consumers really like having the option to eat breakfast for lunch…and dinner. And they did. A lot. Instead of the pricier items. Incidentally, Dunkin Brands Group Inc, Starbucks Corp and Wendy’s, to name a few, also reported unsavory earnings and shares of McDonald’s took a nasty tumble, bringing along the rest of the industry with it. It seems McDonald’s menu prices also had a negative impact on earnings. The cost of food went down in grocery stores and because of it, more would-be diners chose to eat at home. The curious thing is that the cost of food also went for McDonald’s, which ought to mean that its selections should have been cheaper, or at any rate, stayed the same price. Except that they didn’t because McDonald’s had to increase menu prices to compensate for increased labor costs.

Fed-up…

ID-100218125

Image courtesy of sheelamohan/FreeDigitalPhotos.net

In case you were holding your breath to see if the Fed is going to raise rates, you can let it out now. It won’t. At least not before September. Or maybe even December. Apparently the money experts want hard-core evidence of a pick-up in inflation before the Fed decides to make any changes. The Fed wants to see a 2% inflation rate, which might seem like an incredibly minuscule number, yet it’s one that carries incredible weight.  Then there’s the not-so-slight issue of the relatively healthy U.S. economy in the face of the not-as-healthy global economy. Even as the markets here reached new highs, with a labor market that saw an impressive 287,000 jobs added in June, experts – me not being one, mind you –  expect maybe one rate hike this year. From the Brexit to China and other assorted EU drama coming down the pike, the Fed’s not too eager to put in for any hikes until the rest of world cooperates they way it ought to, fiscally speaking anyway. After tomorrow, the Fed’s got three more meetings this year to decide its next move, so sit tight. Or don’t.

Rate Hike? What Rate Hike?; Chipotle’s Rocky Road to Recovery; McCormick’s Spicy Good Earnings

Easy does it?

ID-10030403

Image courtesy of twobee/FreeDigitalPhots.net

Well, if you’re looking for the Fed to raise rates, don’t hold your breath. Despite the fact that the Fed’s next meeting is planned for April 26th and 27th, experts think a move like that probably wont happen before July. It was initially believed that there would be four rate hikes over the course of the year, after the Fed raised the rates for the first time in nine years back in December. But now it looks like there will be just two.  Federal Reserve Chair Janet Yellen is still promising a gradual pace of rate increases, but even she admits that the economic climate just isn’t quite impressing these days. The Central Bank is paying very close attention to all the annoying economic issues going on in the world, like the global economic slump, the very very low oil prices and a relatively volatile stock market. Of course, it wouldn’t be right not to mention China’s own economic downturn.  Plus the Fed’s not too stoked about the rate of inflation, which has been holding steady at about 1% when its target is closer to a 2% rate. Add to that weak consumer spending and you’ve got a Fed that’s not looking to stir any fiscal trouble. Hence, the Fed has assured the country that it plans to “proceed cautiously” in its rate hike plans, which is awfully considerate, according to some people, anyway.

Burned burrito…

ID-100317042

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

Free burritos or not, Chiptole’s road to fiscal recovery is looking very far off.  Wedbush Securities analyst Nick Setyan came out with a new report that says he doesn’t expect the fast food chain to recover before 2018 – calling it “the best case-scenario” – and even lowered Chipotle’s price target from $450 – $400. Ouch. Before the food safety crisis, each Chipotle restaurant was pulling down $2.5 million in sales on average. But that’s not expected to happen again for quite some time, especially given the fact that Chipotle’s operating costs are only going to get higher and higher because of its more comprehensive and stringent food safety measures. And even though the company sent out coupons for nine million free burritos, with another 21 million free burrito vouchers en route, Chipotle will still eat a $62 million tab for that, as a burrito typically costs $7.10. But hey, whatever it takes to try and erase the ugliness of E. Coli and norovirus outbreaks, right? Even with all those vouchers being sent out, the company only expects that a quarter of them will actually get redeemed. Naturally, news of the report sent shares south when the stock is already down 37% since August. Shares of Chipotle closed today at 460.10.

Spice spice baby…

ID-100362915

Image courtesy of jk1991/FreeDigitalPhotos.net

Of all the companies to report earnings lately, this one’s pretty…spicy. Yes. I had to go there. McCormick & Co. just released its first quarter results and considering that the company’s products aren’t items typically used in bulk, the $13 billion company pulled in some very impressive figures. In the process, McCormick & Co. even managed to raise its 2016 outlook, and unlike other major food producers that have been struggling to keep up with a health/organic revolution,  McCormick hasn’t faced quite the same challenges. In fact, its stock is up around 28% in the last twelve months with a little help from some recent acquisitions. The spice-maker was expecting to earn between $3.65 to $3.72 per share. But now it’s looking like it’ll pick up between $3.68 and $3.75 per share for the year. Incidentally, despite China’s economic downturn, the country still managed to give McCormick some boffo growth. Perhaps there’s a correlation between economic stress and and a desire for spicy food? Hmm. Will have to explore that one…In any case, McCormick picked up a profit of $93.4 million on $1.03 billion in revenue and adding 73 cents per share. Analysts only expected 69 cents on $1.03 billion in revenue while the year before the company took in a profit of $70.5 million on $1.01 billion in revenue with 55 cents added per share. And if that’s not enough, McCormick also scored a new 52 week high today of 99.90.

Inflation Elation; Home Sweet Home Loans; Feeling 1.7 % More Secure

Get your motors running…

Image courtesy of kongsky/FreeDigitalPhotos.net

Image courtesy of kongsky/FreeDigitalPhotos.net

We can all breathe a collective sigh of relief now that the numbers are telling us how stuff like inflation and the cost to live on this planet, at least our part of it, didn’t really change, as in go up, down etc. Well, it did. Slightly. But nothing that would require any action from those money experts at the Federal Reserve. This means interest rates get to stay nice and low.  For now, anyways. But it should be duly noted that the Feds would prefer to see inflation actually go up. A bit, anyways. Because apparently that would be healthier for the economy, according to people who qualify as experts. What has also become a rather pleasant occurrence is the price of gas these days, which has been going down to an average of $3.09 per gallon. Now who doesn’t love a drop in gas prices? Never a bad thing, in my most humble opinion.

The rates are falling! The rates are falling!

Image courtesy of phasinphoto/FreeDigitalPhotos.net

Image courtesy of phasinphoto/FreeDigitalPhotos.net

Look out for new neighbors with mortgage rates falling down all over the place.  According to the very insightful index of the very insightful Mortgage Bankers Association, or MBA for those in the know, all these new nifty low borrowing costs have resulted in a major increase in mortgage applications. We’re talking an 11.6% increase in applications. Numbers that big haven’t been seen since January. The week before saw a 5.6% increase. Thinking of going for the plunge on a 30 year fixed loan? Well those rates went down to 4.1%. Or perhaps you are mulling over a 15 year fixed rate mortgage? The interest rates on those babies dropped to 3.28%.

Social security butterfly…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

In case you will be wondering (and why wouldn’t you be?) what happened to over 6.2% of your paycheck towards the end of fiscal 2015, look no further than the Social Security tax. Around 10 million Americans will be shelling out over $7,300 towards that “fund” next year. The cap on that figure, by the way, is $118,500 for 2015. Fret not, taxpayer as that is but a mere 1.3% increase over 2014’s $117,000 cap. But wait, there’s more. The millions upon millions of retirees receiving social security benefits will receive  1.7% fatter checks in 2015 thanks to the Cost of Living Adjustment, or COLA , for those in the know (and not to be confused with any beverages, mind you). For the average retiree, that amounts to about $22 more per month on a monthly check of $1,328. If you think that number is, shall we say, unimpressive, then consider the fact that in 2010 and 2011 there was a 0% increase. Z-E-R-O.