Google’s Tax Troubles Continue in Madrid; Will Oreo Scoop Up Hershey?; Pier 1 Not Feeling the Outdoor Love

Mucho dinero…

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Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

It was just another day in the life of Google as authorities raided its offices, this time in Madrid, Spain. At issue, yet again, is the search engine giant’s corporate tax practices in Europe and the looming question as to whether or not Google, and other big corporations like it, are steering their profits legitimately, in order to score a reduced tax rate. Spanish authorities are investigating the search engine giant to see if it has been in engaging in the  dark art we know as tax evasion. Back in May, France investigated Google for “aggravated financial fraud” and “organized money laundering” which both sound awfully sinister. France is hoping to get $1 billion from its investigation. Even Italy’s authorities are in on the action and looking to see if Google underpaid its taxes there as well.  Google already forked over $175 million in back taxes to British authorities, whose politicians are still whining because they feel that the amount was too low. Expect more post-Brexit griping. Naturally, Google and its peers are calling out their innocence and are adamant that they comply fully with tax rules. But, at any rate, the investigations still seem far from over.

Yummm…

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The mood is sweet on Wall Street with talk of a Hershey takeover from Oreo maker Mondelez International. Given that there’s a trend to cut back on the amount of sugar people have been consuming, the timing seemed opportune for a buyout of a company that makes the world’s most beloved -in my opinion, anyway – chocolate bar. Mondelez, which also makes Cadbury chocolates, is currently the second largest confection manufacturer in the world. If the buyout goes its way, it will become the number one sweets maker, as 90% of Hershey’s revenue comes from North America. Shares of Hershey shot up 22% on the tasty news, hitting a record high of $117.79. Shares of Mondelez also went up, just not as much. Hershey’s market value is about $21 billion, give or take. But in order for the buyout to go forward, the Hershey Trust would have to give its blessing. After all, it controls 81% of Hershey stock and voting rights. However if you’re looking for some hostile action, might I suggest you look elsewhere. Mondelez already pledged to not shed any jobs and to keep the illustrious Hershey name intact.

Missed it…

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It’s looking like a long walk off a short Pier 1 as revenue for the home store chain came in at a disappointing $418.4 million. That number might seem impressive, except that it wasn’t to analysts, who were expecting revenue closer to $420 million. The company lost $6 million in profits and 7 cents a share when predictions were for a 5 cent per share loss. If those figures weren’t depressing enough, then consider that last year at this time, Pier 1 took in revenue of $436.9 million with a $7 million profit and an 8 cents per share gain. Shares of the company are now 50% less than what they were a year ago. The big area to disappoint was outdoor furniture. Darn you, outdoor furniture. That category was supposed to bring in some boffo results, but instead proved to be a real downer. The table top category did nicely. Just not nice enough. Taking a page from Chipotle, the company will now attempt to march out a rewards program and even add a gift registry. Which is weird, because I assumed the company already had a gift registry. I even went to check just now and wouldn’t you know it? It doesn’t. In any case, the company is forging ahead with plans to close 20 stores, while it already shuttered 8 this past quarter. Pier 1 did, however, open another three stores, presumably in more economically hospitable areas.

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No Slowing Down Alibaba; Feeling Taxed: Google’s Italian Problem; Ads Abuzz for Super Bowl

What economic slowdown?

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China’s economy might be on the skids but apparently Chinese e-commerce giant Alibaba Group Holding Ltd. didn’t get the memo. The company released its earnings and reported that its sales rose 32% to $5.3 billion, easily beating analysts estimates of $5.13 billion. Alibaba even scored a profit of $1.93 billion, picking up 99 cents per share and beating predictions of 89 cents per share. The reason for these positively fabulous numbers have a lot do with insane revenues posted from November’s Singles’ Day. Singles’ Day saw 115 million buyers scooping up $14 billion in purchases. Alibaba CEO Jack Ma is also on a fiscal quest to bring China’s rural countryside onto the mobile shopping bandwagon and it’s been paying off royally.  Of course, shares of the stock rose in pre-market trading, just as they should. Alibaba needed the boost as its shares have declined 14% so far this year after falling back in 2015.  But then shares fell this morning by 2% (as did Yahoo since it owns a sizable chunk of it). Go figure. Ma’s grand plans for the company extend far beyond China and he would really love it if at least half of Alibaba’s revenue started flowing in from outside of China. Good thing he’s already got plans in motion to make that happen.

Google that…

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Authorities in Italy have set their investigative sights on Google charging that the tech giant evaded an estimated 327 million euros in taxes between 2009 and 2013. Of course, a Google spokesperson graciously noted that Google always pays its taxes wherever it operates and even explained how it paid 2.2 million euros in taxes on 54.4 million revenues back in 2014. Problem is Italian authorities aren’t buying it and estimate that Google’s revenues were ten times higher than what it reported. Italian authorities say Google basically redirected revenue to its regional offices in Ireland where the corporate tax rate is much more hospitable to big companies. Last week Google’s parent company Alphabet Inc. forked over $186 million to U.K. authorities for a different tax settlement. While that might seem a considerable sum, there was a huge outcry, particularly by those in Britain’s Labour Party, because they felt that the amount was way too small considering how much profit the company made. Incidentally, back in December, Apple had to settle with Italian tax authorities and ended up paying back 318 million euros.

Getting buzzed…

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With the Super Bowl just around the corner, some of the ads are already making for bigger stories than the game itself. Take for instance Death Wish Coffee. Never heard of it? You’re not the only one. The small business won a contest held by tech company, Intuit, and you’ll be able to catch the 30 second ad during the third quarter of Super Bowl 50. Death Wish Coffee began in 2012 by Mike Brown, who like so very many of us, was on the prowl for a very potent, caffeinated brew. As of now, Death Wish sells about 1,000 packages a day. But after the Super Bowl that number will likely skyrocket considering the 100 million-plus people expected to tune in to the big game. Death Wish Coffee will set you back about $20 a pound. But hey, that’s a small price to pay for the ultimate coffee fix, I suppose. And maybe by next year, Death Wish Coffee will actually able to afford the $5 million price tag for that coveted slot instead having to enter a contest to try and win it.

Newspapers Gone Charitable; Not All is Golden in Europe for McDonald’s; Starbucks Not Letting an Itty Bitty Downturn Get in its Way

Read all about it…

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Not-for-profit has been taking on a whole new meaning lately for some unlikely reasons: newspapers. The Philadelphia Inquirer, the Philadelphia Daily News and Philly.com have gone tax-exempt. It’s probably not the first place you think of when you want to make a charitable contribution, but it’ll gladly take one now. Along with an additional $20 million donation, billionaire H.F. “Gerry” Lenfest, who controlled these publications, took the Philadelphia Media Network, tweaked things around a bit and morphed the newspapers into a public benefit corporation (PBC) that will be called The Institute for Journalism in New Media.  A little wordy, maybe, but the entity itself is dedicated to “independent public service journalism and investigative reporting that positively impacts the community, while also creating innovative multimedia content.” Got that?  The paper will still be run as a “for-profit” biz while getting you a tax deduction in the process.  In case you didn’t know, Kickstarter is also a PBC. Just saying. It’s an interesting idea just not an original one for a newspaper as there are a few other newspapers in Florida and Connecticut that have taken this approach. It’s a way to try and make newspapers relevant and successful in a digital era, not to mention, a last-ditch attempt to try and keep a publication from going bust

Hamburglar?

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So what are the Golden Arches accused of doing this time? Three Italian consumer organizations are charging that the fast-food chain is causing franchises in Italy to inflate the cost of menu items. You see, in order to snag a European franchise lease, a lessee must sign a twenty year contract – a contract that is twice as long as what other franchises require. But then, McDonald’s is also accused of licensing the premises for above market rates – by about ten times –  making it nothing short of a big pain in the but to switch competitors. So, in order to defray the costs of these above-market lease rates, European McDonald’s franchises jack up the prices on menu items with consumers bearing the brunt of the cost. At least that’s according to a survey cited by the coalition filing the complaint. Apparently, a whopping 68% – 97% of McDonald’s menu items in various Italian cities are more expensive in franchises than in company stores. Franchises make up 75% of McDonald’s European revenue and worldwide McDonald’s has made $9.27 billion in revenue from these franchises. But before the EU even considers launching a formal investigation into these alleged shifty practices, authorities will first send out a formal questionnaire. Depending on how well those questions are addressed will determine if there is sufficient cause to even open an investigation. Besides, those same EU authorities are already busy investigating McDonald’s in Luxembourg over allegations that it managed to evade paying $1 billion in taxes on its European operations.

Slowdown? What slowdown?

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There might be an economic downturn in China, but that’s not stopping Starbuck’s from expanding its empire there. Sure there are already 2,000 Starbucks stores caffeinating the world’s second largest economy. However, Starbucks feels that the country could use at least 1,400 more stores and plans to have them all serving up lattes by 2019. Starbucks CEO Howard Schultz feels that China has the potential to become the company’s biggest market. And that’s not so crazy considering that China is already Starbucks’ second largest market and is the fastest growing one too. At a recent Starbucks event in China called the “Starbucks China Partner-Family Forum” (Alibaba’s Jack Ma was at the event so you know it was a big deal), Schultz wanted to reassure the Chinese that he totally gets their culture and has tremendous admiration for it. Hence, he made sure to acknowledge and give major props to the parents of its baristas. In fact, Starbucks wants so badly play nice with China and shower the country with oodles of corporate respect that he is offering to cover 50% of monthly housing expenses for Starbucks employees in China. For baristas there who so valiantly served up drinks for ten years, Starbucks is offering them a “career coffee break” – a year long paid sabbatical. Hěn hǎo!

 

Deutsche Bank CEO’s are Leaving Early and No One is Shedding Tears; McDonald’s Numbers Not Totally Horrible; Smack Talk at the G7 Summit

You’re Fitschen kidding me…

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Image courtesy of biosphere/FreeDigitalPhotos.net

In case you were wondering how Wall Street feels about Deutsche Bank’s outgoing co-CEO’s Anshu Jain and Juergen Fitschen, then just look at the company’s stock price. Shares of Deustche Bank gleefully shot up over 8% at one point, on the news that the two men would be ditching their digs even earlier than planned. However, those gains weren’t just from the sheer joy of those early departures but also because investors totally dig their replacement, British banker John Cryan, who also happens to have a pretty decent track record. Cryan is what the cool kids call a “takeover specialist” which is something Deutsche Bank could use now more than ever seeing as how Jain and Fitschen couldn’t seem to stem the tide of legal issues that have been plaguing the bank, including a massive $2.5 settlement claim the bank had to fork over after some traders very rudely – and illegally, I might add – rigged some benchmark interest rates. In fact, most of Deutsche Bank’s troubles and scandals seemed to to come out of its investment bank, which coincidentally, was/is under Jain’s watch. The question remains as to whether or not Cryan can pull the largest German bank out of its funk. Except, first he’s got to come up with a plan. At least he speaks German. So score one for Cryan.

You deserve a break today…

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Image courtesy of atibodyphoto/FreeDigitalPhotos.net

Things at McDonald’s weren’t nearly as bad as everyone thought they were going to be. They weren’t great but we’ll get to that. The Golden Arches saw same store sales drop .3% , which is definitely not good. However, at least those sales didn’t drop by .9%, the figure expected by all those super-educated analysts. To that I say booyah.  And then there was Europe. While everywhere else on the planet McDonald’s saw sales fall, McDonald’s needs to give much danke to Germany, France and the UK who showed the burger chain some major love in the form of a 2.3% gain. Analysts only expected Europe to bring in a tres  modest .6% gain. So you see, Chipotle, Panera and Shake Shack haven’t taken over the fast-food world. Yet. McDonald’s is in the midst of bringing about a “turnaround plan” which apparently includes offering breakfast all day. Except that’s only in – where else? – Southern California. Also, as part of the plan to reclaim its rightful place in the fast-food kingdom, CEO and President Steve Easterbrook has big lofty plans to rebrand McDonald’s as “a modern, progressive burger company.” Did you get all that?

Back at the G7 Summit…

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Image courtesy of bplanet/Freedigitalphotos.net

There seems to be a bit of confusion coming from the G7 Summit. A French official told reporters that President Obama said the strong dollar is a “problem.” Then, the dollar slid against the euro. However, President Obama insists, “I did not say that.” But, still, the dollar still slipped, for the first time in three days, against the euro. In any case, other important stuff was presumably discussed at the conference where world leaders from the United States, Germany, France, Britain, Italy, Japan and even Canada talked about fiscal issues that are plaguing the world. But who doesn’t love a good “he said, he said,”  especially during a super important meeting between the world’s most powerful people. I could really see this one playing out on South Park.