Samsung Looks to Erase its Mistakes; A Not-So-New Chapter for American Apparel; Hedge Fund to Kate Spade: Sell off!

Exploding cell phones need not apply…

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Image courtesy of Pansa/FreeDigitalPhotos.net

There were no over-heating phones in sight as Samsung plunked down $8 billion to acquire Connecticut-based Harman International Industries. In case you have no idea who – or what – Harman is, it’s a company best-known for making premium audio systems for cars. But that’s not all. The company also makes plenty of other hardware for vehicles to connect, which makes it a very good fit for Samsung, as there will be very little overlap. Its products can be found in over 30 million vehicles, including BMW, Toyota and Volkswagen. This acquisition is an excellent opportunity for Samsung to break into the automotive industry where it barely exists. For now, anyway. It will also give the South Korean company a strong foothold in a rapidly growing industry that is expected to experience major growth in the next ten years. And who doesn’t like massive growth, right? By the way, this is the biggest overseas acquisition by a South Korean company. Ever. Samsung is paying roughly $112 per share, a 28% premium to Friday’s closing price.

The final chapter?

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

American Apparel is filing for chapter 11 bankruptcy protection. Again. For the second time in a year. After just exiting that protection in February. To be cute, some people call it Chapter 22 because it’s the second time it happened. Get it? Hilarious. In any case, I’m pretty sure American Apparel did set some type of record for earning its second bankruptcy in twelve months. The apparel company will be picked up by Canadian company Gildan Activewear for the bargain price of $66 million. If you recall – and it’s okay if you don’t – American Apparel, arguably best known for its racy ads, first filed for bankruptcy protection back in October 2015, roughly a year after it ousted founder and CEO Dov Charney for a litany of sexual harrassment problems. Charney, who said that the company had been taken from him in a coup, did try to regain control of his company only to have a court put the kibosh on his attempts. Later on, CEO Paula Schneider left after failing to turn the company around. The company, which went from 230 stores down to 110, saw a 33% decline in year over year sales, has $215 million in debt, tons of legal bills courtesy of Dov Charney and took in only $497 million in net sales for 2015. American Apparel will continue to run its normal U.S. operations though, the stores will eventually be put on the auction block. In the meantime, its stores across the pond have already started to experience the trauma and drama of liquidation.

Bag it…

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Image courtesy of lekkyjustdoit/FreeDigitalPhotos.net

Kate Spade is not feeling the love from hedge fund Caerus Investors, who whipped out a letter today asking, or rather urging, the lifestyle brand to sell itself. What Caerus neglected to mention in that letter was what it plans to do should such a sale occur. As for Caerus’ stake in Kate Spade, well, if you find out what it is, feel free to share that information as no one seems to know for sure. In any case, Caerus, according to its letter, has become “increasingly frustrated” with Kate Spade brass who have yet to make the company churn out a profit that would be on par with other companies like it.  Caerus doesn’t care for Kate Spade’s profit margins either, which are apparently lower than its peers, besides the fact that its stock also trades at a discount to other companies in the same category. There is something to be said for Caerus’s “frustration” seeing as how there was a whopping 63% decline since Kate Spade’s intraday high back in August of 2014.  Add that to the fact that Kate Spade’s third quarter revenue missed estimates and the stock is down 7% for the year and maybe you might be wondering if Caerus might be onto something. But then, lo and behold, Jana Partners announced that it owns a hefty .85% stake in Kate Spade, which conveniently sent shares up to $17.80 and gave it a very generous $2.28 billion valuation.  So maybe the answer to Caerus’ issues with Kate Spade lays in Jana Partners stake.

Is a Fiscal Greek Tragedy Looming?; American Apparel’s Un-Trendy Legal Woes; Curing the Black Friday Blues

What would Socrates say?

Image courtesy of koratmember/FreeDigitalPhotos.net

Image courtesy of koratmember/FreeDigitalPhotos.net

The Greeks let its creditors know exactly how they feel about their austerity measures and voted resoundingly against them. But at least Greece’s Foreign Minister, Yanis Varoufakis, resigned announcing via his blog “Minister No More,” much to the delight and merriment of many a Eurozone finance minister. This resignation has even got some folks mildly optimistic that the financial crisis in Greece isn’t completely unsalvageable. But these very same finance ministers are all still in a tailspin about how to avoid a fiscal disaster as Greece already defaulted on a 1.5 billion euro payment to the International Monetary Fund while another payment is due to the European Central Bank for 3.5 billion euros on July 20. If a sovereign, in this case Greece, defaults on its loans, well then, bad things will just get worse as the banks become insolvent – as in, tapped out, dry etc – and then get nationalized. Once they get nationalized a brand new currency is introduced – a change which would be very bad for so many reasons. As for those Greek banks which are staring down the wrong end of nationalization and insolvency, they’re likely to run out of cash by the weekend.  In case you haven’t noticed, Greece’s fiscal turmoil has been causing even more turmoil in the global markets. So yeah, it’s in everybody’s best interest that Greece gets its fiscal act up and economically running.

Clearance…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Things are looking pretty ugly for embattled clothing retailer American Apparel. The company has a $30 million cost-cutting plan in the works and that could mean an under-performing American Apparel store near you might be closing its doors forever.  The chain has 239 stores and 10,000 employees whose heads are currently on the chopping block. American Apparel is also undergoing an image makeover after ousting founder and CEO Dov Charney. New CEO Paula Schneider would like to see the company sell actual clothes, as opposed to body parts. Sounds fair. This $30 million plan will hopefully rectify some of the other problems afflicting the clothing line and reverse those “steep losses.” However, many think it’s going to take a lot more cash than that. Some of that might have to do with the over 20 lawsuits looming courtesy of the booted Dov Charney and his associates. Of course, the brass at American Apparel has called the lawsuits “meritless.” The stock, which is down over 55% for the year and is currently hovering at a dismal 45 cents per share, has a market value of about $90 million. That’s a far cry from its $540 million market value it enjoyed just five years ago.

Prime deal…

Image courtesy of Iamnee/FreeDigitalPhotos.net

Image courtesy of Iamnee/FreeDigitalPhotos.net

If you are eagerly pining away for the chaos that comes with Black Friday that is still an endless five months away, then you’re gong to love this next one. Amazon is throwing its very own birthday party on July 15, dubbed “Prime Day,” and has invited you to come. Amazon wants presents. It wants you to spend your hard-earned money on deals that will be featured on Amazon – deals that you usually only see on Black Friday, and as the case may be, cyber-Monday. And while you don’t necessarily need to rsvp, you won’t walk away with any ridiculously-reduced items unless you subscribe to Amazon Prime – which by the way, will set you back $99 a year. But hey, at least you’ll get instant video streaming, free two-day shipping, Prime music and maybe even some really great bargains.

American Apparel Battles; Not So FedEx-cellent Earnings; Cheerie-Woes

Gone but not forgotten…

Image courtesy of biosphere/FreeDigitalPhotos.net

Image courtesy of biosphere/FreeDigitalPhotos.net

Dov Charney may be officially ousted from American Apparel but wouldn’t you know it…the former CEO, who was booted over a number of misconduct allegations,  still has more than a few friends left at the company he founded. Thirty American Apparel executives just can’t bear the thought of manufacturing retail with provocative ad campaigns without Mr. Charney’s particular skill set. They are a bit peeved that their feelings were not taken into consideration and, in a carefully penned letter, asked the board to reconsider its decision adding, “he makes this thing tick.” A beautiful sentiment for a man who had a slew of sexual harassment allegations against him. Incoming CEO Paula Schneider will become Charney’s official replacement and she gets to plod through the mammoth task of trying to reverse the $300 million in net losses the company racked up since July of 2010. Charney, though, won’t be totally on the outs seeing as how he remains the largest shareholder in the company with a 43% stake in it. He does, however, have to share those voting rights with a hedge fund, presumably to keep him from exercising those rights exclusively for his  questionable benefits.

Shipping dipping…

Image courtesy of Mister GC/FreeDigitalPhotos.net

Image courtesy of Mister GC/FreeDigitalPhotos.net

FedEx had a good quarter. Just not good enough for Wall Street. Earning’s for the shipping company were up a very merry 23% thanks in part to a drop in fuel prices. The company earned $616 million and $2.14 per share. That figure was up from $500 million and $1.57 per share the year before. Revenue was even up 5% to $11.94 billion. But the hardly-ever-content Wall Street analysts wanted to see $2.22 per share and revenues of $11.97 billion. Next quarter should be more telling as this is the company’s busiest time of year. Here’s hoping that FedEx won’t repeat last year’s shipping debacle when over 2 million packages failed to make it to their recipients by Christmas Eve – a gaffe that was attributed to some icy weather and an unforeseen rise in shipping demand. Which I suppose is the one of the reasons an additional 50,000 employees were added to its workforce this season.

Soggy…

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

General Mills, like many of its breakfast-oriented peers/competition, posted second quarter earnings that were nothing to crunch about. Profit for the maker of one the world’s most arguably famous cereals, Cheerios, dropped by a whopping 37%. With consumer tastes  changing, shoppers aren’t exactly spending as much time and money on cereals and other products from the company. But at least its Yoplait and snack divisions are up. A bit. General Mills earned $346 million and $0.80 per share. But Wall Street wanted to see $0.03 more on those shares. The company pulled in sales of $4.71 billion, which seems like a lot of Cheerios, except that Wall Street was gunning for $4.79 billion. Sales in the US alone came in at $2.86 billion but it was still a 4% drop.