Not in the Moody’s: China Gets a Downgrade; Tiffany & Co. Fails to Shine; Can’t Contain The Container Store’s Earnings

Awkward…

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Look like Moody’s wont be getting a warm reception from China in the near – and probably far – future. It took thirty years, but the investor service downgraded China’s sovereign credit rating. Moody’s is more than a bit skeptical that the country can get its debt issues under control while at the same time trying to maintain economic growth. Hence, it bumped China’s rating down a smidgen from a respectable A1 to a not-as-respectable Aa3.  On the bright side – though I highly doubt China sees it that way – Moody’s did upgrade its outlook for the country from negative to stable. That’s gotta count for something, right? Well, maybe not to the Chinese. In any case, even though China has enjoyed pretty fast growth rates that easily surpassed 6%, it is apparently due in large part to its mounting pile of debt, and Moody’s said that it expects that rate to soon come down closer to 5%. As for China, the Finance Ministry is, shall we say, unhappy about this downgrade and called the move “inappropriate”  and “absolutely groundless.” Oh well. So much for diplomacy.

Not so Gaga for Tiffany…

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All is not bling-y for Tiffany & Co. as the luxury jeweler took a nasty 4% hit on its comparable sales, even during the fiscal quarter that brings us Valentine’s Day. Of course, with that ugly bit of news came an even uglier hit to its stock, taking it down around 10%. Like with so many other brands, the company just can’t seem to get a hold on that finicky demographic we call millennials.  And that’s even after the luxury brand made Lady Gaga its poster gal while poaching Coach’s Creative Director, Reed Krackoff to add a little millennial-desirability to the the label.  Naturally, some blame also went to that pesky strong dollar of ours which seemed to put a crimp on tourist spending.  Net sales were up close to $900 million. Too bad expectations were for $914 million On the bright side, Tiffany & Co. added 74 cents to its shares, beating analyst estimates by four cents. Last year at this time, the company hauled in over $891 million in revenue with 69 cents added per share.

Can’t contain myself…

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Shares of The Container Store Group surged 37% after announcing it not only beat expectations, but it also has a restructuring plan in the works. If any company knows a thing or two about restructuring and organization, it’s gotta be The Container Store, right? At least when I walk into one of their stores, I always find myself feeling grossly inadequate and disorganized. In any case, the company took in sales of $221 million, easily blowing expectations of $213 million out of the water. The company also took in 17 cents per share which was 140% higher than last year at this time. Yes, you read that correctly. 140%. Analysts expected 11 cents per share. But mind you, the company’s stock had been down around 50% since it hit a one year-high back in December.  As for the restructuring plan, sadly, there will be layoffs. It’s an unfortunate result of trying to combat all the e-commerce competition that has dogged The Container Store and countless other businesses.

A New Chapter for American Apparel; U.S. Scores a Perfect Triple “A”; Will Italy Say Bonjourno to Domino’s Pizza?

Bust…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

While American Apparel brass continues to tussle with ousted founder Dov Charney, the company still found quality time to file for chapter 11 bankruptcy protection. Not that this bankruptcy announcement is surprising. The company was bleeding cash for a while now, with Mr. Charney’s questionable behavior and sexual misconduct allegations just one slice of the sloppy fiscal pie. But not to worry over that American Apparel tank top you’ve been meaning to get. The stores, over 200 of them worldwide, won’t be closing there doors anytime soon. Well, at least that’s not part of the plan. In 2014 those stores hauled in $600 million in net sales. So clearly, not everybody was so grossed out by Mr. Charney’s alleged exploits and ad campaigns. The company is hoping to reduce its debt from a staggering $300 million to about $135 million and pinning its hopes on some major cash infusions from creditors is just the start. From there, American Apparel hopes to swap out some of that debt in exchange for company stock. America Apparel also wants to amp up its e-commerce by hiring some talent who can pull off such a feat. Add to that some brand rebuilding and a new look, because, let’s face it, America Apparel hasn’t really changed since, well, ever. There’s also lots of talk about whether it’s in the company’s best interests to keep its manufacturing base in the United States, specifically, California. It’s not exactly cost effective and it’s the reason why almost every other American company sets up shop somewhere in Asia. But bankruptcy or not, American Apparel is adamant that its brand be American-made. Otherwise it might have to change it’s name to Asian Apparel. Duh. If you were thinking of scooping up some shares, don’t bother. Trading of the company’s stock has officially been suspended.

AAA is for awesome…

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Image courtesy of fantasista/FreeDigitalPhotos.net

In yet another un-shocking story, Moody’s Investor Service announced that the United States really truly deeply deserves its AAA rating. Unshocking, if only because Moody has never changed that rating. But maybe one day, the ratings service warned. Potential threats could knock down one of those pristine A’s. The insane amount of spending that goes into social programs has Moody’s singing the ratings blues. The company doesn’t care for that habit and is hoping Uncle Sam will figure out soon how to curb that spending. Also, Moody’s wasn’t pleased about that government shut down that almost happened weeks ago. Stuff like that do not a triple “A” rating make. And if Moody’s should someday decide that, alas, a prestigious rating is no longer deserved, it wouldn’t (couldn’t? shouldn’t?) happen before 2020. But that’s a big IF. Because however menacing those threats might seem, it’ll still be difficult to diminish the awesomeness of the United States’ gross domestic product growth, (as in GDP). In fact, growth in the U.S. surpassed that of other triple “A” rated economies (yes, it’s hard to believe but there are other triple “A” rated economies). Awesomeness also abounds because U.S. dollars and treasuries are the global reserve currency and bond market benchmark.  And if that’s not triple “A” worthy, then I don’t know what is.

The ultimate litmus test…

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Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

Domino’s Pizza, believe it or not, still has yet another market to crack: Italy. While to some, opening a Domino’s Pizza shop in Italy, is tantamount to bringing your own sandwich to a restaurant, this Domino’s franchise is aiming for some Italian authenticity. Franchise owner Alessandro Lazzaroni plans to use his own genuine Italian pizza recipe, replete with locally sourced wheat and other native Italian ingredients. A novel approach to pizza, no? After all, according to Domino’s research, Italians chow down on pizza approximately seven times a month and 70% of Italians prefer Margherita pizza (which is plain pizza, mind you). But the pizza company still has a long road ahead as no major American pizza brand has succeeded in the pizza motherland we call Italy. Just make sure that if you absolutely need to eat Domino’s Pizza – in Italy – you’ll have to be in Milan to do so. And how does Wall Street feel about Domino’s latest move? Well earnings are out tomorrow but the stock closed up at $108.03 per share.