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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Image courtesy of nirots/FreeDigitalPhotos.net

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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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

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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Pier 1 Coming Up Short; Pizza Hut Getting Skinny or Skimpy?; Lincoln Logs Makes Its American Re-Debut

Down but not out…

Image courtesy of Keerati/FreeDigitalPhotos.net

Image courtesy of Keerati/FreeDigitalPhotos.net

Pier 1 Imports took a beating on its second quarter earnings. Not because it didn’t earn a profit, which it did. But because the profit just wasn’t good enough – make that high enough. Net income – or as the simple people like me say, profit, – came in at $9.2 million which amounted to $0.10 per share. That’s nice and all but earnings of $0.13 per share would have been a lot nicer according to those hard to please analysts. Especially since last year the company pulled in a $17.8 million profit. Revenue for the company was $418.6 million. But once again, that figure just wasn’t enough to please those Wall Street analysts who were looking to see numbers closer to $427 million. Shares of the Texas-based chain have been down 32% since the beginning of the year. Not exactly encroaching disastrous Radio Shack territory but still, the company is looking to close some of its 1000 plus stores. Though how many is still not clear. There will also be a little less coupon clipping for the store as those will now be yanked, although perhaps not entirely. The question remains, however: Where have all those shoppers gone who used to grace those stores with their presence and credit cards? Hmmm.

The new skinny…

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Image courtesy of suphakit73/FreeDigitalPhotos.net

Pizza Hut has got big plans to make you skinny. Okay that’s a stretch but the chain is unveiling (which sounds so much more dramatic than it actually is) it’s latest plan to gain back some market share in the contentious food turf war that it has been losing as of late. Dubbed the “Skinny Slice,” Pizza Hut’s latest menu addition is, in fact, not sold by the slice. Also, it should be duly noted that this new slice also uses the same exact ingredients as in a regular slice – just less of them. Pizza Hut diners in Ohio and Florida will be among the first who get to sample the new fare. Pizza Hut is hoping to attract those finicky Millenials who seem to prefer chains like Chipotle and Panera bread that apparently serve up healthier, higher quality fare. Go figure.

Quit toying with me… 

Image courtesy of sattva/FreeDigitalPhotos.net

Image courtesy of sattva/FreeDigitalPhotos.net

Arguably a classic in the Canon of America toys (I made that up), Lincoln Logs, whose license is owned by another classic-in the making, K’NEX, makes its way back to the shores of the US all the way from China (where else?). Created almost a century ago by John Lloyd Wright, one of famed architect Frank Lloyd Wright’s children, the toy will now, once again, be manufactured in the United States – well 80% of it anyways. Naturally, the other 20% will still be made in China (again, where else?). Pride Manufacturing, located in Burnham, Maine,  the company that will manufacture 80% of the Lincoln Logs, conveniently enough, already makes wooden toys. The new move will create between 5-10 jobs in the US.