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

Fit to be bit…

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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…

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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…

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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.

Radio Shack’s Got Nick Cannon’s Talent; Fed’s Merry Rate Hike; Yah-who?

 

Going for broke…

 

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Radio Shack may have filed for bankruptcy protection back in February, but that hasn’t stopped the struggling electronics retailer from putting celebrity Nick Cannon on the payroll. Indeed, the America’s Got Talent host was just named Radio Shack’s CCO, as in Chief Creative Officer. Laugh all you want, but it’s not like its Nick Cannon’s first foray into business. He is a bona fide electronics entrepreneur…according to some, anyway. The retailer thinks Nick Cannon can lure in that magical, elusive millennial demographic into its over 1,700 stores by having him develop exclusive products, curate playlists for the shops and even sing a song or two in the process. Among his other duties, Nick Cannon will also be responsible for helping to advance Radio Shack’s education and STEM initiatives. Because, after all, isn’t Nick Cannon the first image that springs to mind when you think of the STEM fields?  As for his paycheck, well, Radio Shack’s not talking, but I suspect Nick Cannon won’t need to ask for a raise anytime soon.

3…2…1…Hike…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Fed Chairwoman Janet Yellen managed to put a little drama (okay, I’m getting carried away) into her talk at the Economic Club of Washington when she made it clear that this month interest rates, which have been sitting pretty close to zero, would finally receive its much overdo hike. It will be the first time in a decade that the Fed has raised the rates and many there feel that the economy is long overdue for this riveting moment. After all, the labor market is kicking butt, in a good way, and the economy is holding its own. Of course, Janet Yellen said it much more eloquently explaining that a rate hike is a testament to an economy’s recovery. But I am no Janet Yellen and could never take down Ralph Nader as graciously as she did last week. But I digress. Both the economy and the labor market have unwittingly met the Central bank’s goals which are resulting in that much-anticipated rate hike expected by December 16. Unemployment is staying put at 5%, when back in 2009, unemployment was 10%. Inflation is still not as high as the Fed would like it to be because of low oil prices and the strong dollar. But the Fed expects it will reach 2% – a natural and necessary component to a healthy economy. At least that’s what the experts say. There are those naysayers at the Fed who are not down with any hiking right now because they think its too soon and it might trip up a steadily recovering economy. But Janet Yellen says not raising those rate could have even worse consequences. So there. Besides, the time between putting monetary policy into place and seeing the results of it take so long that it’s almost like not raising those rates at all. Sort of. Okay, maybe not.  Any subsequent rate hikes will be based on data and reports so don’t assume that this is the beginning of constant stream of hikes.

Boohoo Yahoo…

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Things are kind of iffy at Yahoo these days even though shares did rise more than 7%. But the reason they rose is because the board is meeting to make some big decisions that will hopefully reverse Yahoo’s downward spiral. One of the bigger questions on that conference room table is whether to sell its core internet business, which includes YahooMail and YahooNews. Shareholders value that particular biz at less than zero. To be fair, however, YahooNews is one of the most visited websites in the U.S., according to someone, anyway. But, if it’s sold, it could fetch around $3 billion. So it’s not that worthless. Then there’s the issue of Marissa Mayer who after three years has still been unable to reverse the company’s aforementioned downward spiral. Yahoo’s total market cap is around $34 billion. But that’s mostly because it has a huge $30 billion stake in Alibaba Holdings Group Ltd. and another big stake in Yahoo Japan. Corp. Which brings us to the next order of discussion: whether to spin off the billion dollar Alibaba stake into its very own company.  The problem, however, is whether or not Uncle Sam will find a way to make such a transaction taxable and sic shareholders with a $12 billion tax bill? Yahoo Activist Investor Starboard Value LP already considered this unpleasant scenario and last month put the kibosh on the idea of such a sale.