VW’s China Redemption; Fitbit Numbers Way too Skinny; Deal Drama: Walgreens/RiteAid vs. Regulators

Emissions Scandal? What Emissions Scandal?

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Volkswagen is in the news yet again. And this time it has nothing to do with poisoning the air we breathe. I know. Hard to believe, right? VW is making headlines because it has been crowned the world’s largest automaker, easily besting Toyota, after reporting that it shipped 10.3 million cars in 2016, a 3.5% increase from the year before. Toyota only managed to sell about 10.2 million cars, giving it just a .2% boost over the previous year. T’was a brutal blow dealt to Toyota’s ego – not that it’ll never admit it – since the Japanese automaker held that top spot for seven out of the last eight years.  Toyota says it’s not concerned with being in in the number one spot as long as it’s making good cars.  Toyota definitely makes good cars but I doubt anybody would believe that it’s not itching to reclaim the top spot next year. So what part of this great big planet was scooping up all those VW’s that helped the German automaker earn this dubious distinction? It certainly could not have been in the United States, where the car company isn’t exactly popular following “diesel-gate” and the on-going saga we call the “emissions scandal.”  Well, look no further than China, which stands as the primary reason for VW’s fiscally historic achievement, despite the negative sentiment against it in the rest of the world. It’s not that China is a smog-loving country filled with emission worshippers. However, it must have helped that VW sold almost no diesel cars to the country. Which probably explains the country’s on-going enthusiasm for Volkswagen. The Chinese just really dig VW’s. And in case you were wondering, GM rounded out the third spot. In fact, GM used to regularly claim the top spot, but along came 2008 and burst that bubble when the US carmaker faced the wrong end of bankruptcy and a federal bailout.

Fit to be tied…

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Fitbit is looking anything but fit these days as the company released a preliminary earnings report, ahead of its February date, showing that the hype for its wearable devices is wearing…thin. For the full year Fitbit expects to pull down revenue for 2017 between $1.5 and $1.7 billion, and is expecting a reorganization to cost approximately $4 million. That reorganization, by the way, involves getting rid of about 110 jobs, or roughly 6% of its workforce. The company has been struggling to find ways to keep sales momentum for the wearable device. CEO James Park is hoping to turn Fitbit into a bona fide digital health company. And that’s a noble endeavor, indeed. However, that plan could literally take years that Fitbit may not have.  The company had slashed forecasts for the holiday season, but a move like that never ever bodes well. Competition from Apple, not to mention companies offering cheaper alternatives, have put a major damper on Fitbit’s sales, with 6.5 million devices sold during the fiscally critical holiday season. Apparently, that number just wasn’t good enough and the data only gets worse. Fitbit is reporting estimated revenue of between $572 million to $580 million. While that number might seem respectable, it’s actually disastrous, if only because the company had initially predicted that it would pull down as much as $750 million in revenue, with analysts forecasting $736 million. As for growth, Fitbit can now expect that figure to come in at around 17%, when initial expectations had been closer to 25%. As for shares, they didn’t just fall – they plummeted. They plummeted the most in three months, hitting its lowest intraday price. Ever.

Deal or no deal…

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A deal has finally been struck between RiteAid and Walgreens. Again. If you recall, and it’s okay if you don’t, this deal has been in the works for the better part of fifteen months. Apparently, RiteAid’s new price tag is now coming in at $2 billion cheaper than its previous $9.4 billion price tag, and the official deadline for the deal has been extended as well. The deal was supposed to have closed back in 2016. But, details, mostly those involving regulatory approval, still need to be hammered out. So now, the new official deadline is July 31. In order for the deal to go through, Walgreens needs to sell off stores in certain regions where competition issues might complicate matters. The company needs to dump between 1,000 and 1,200 stores, but at least it will now only have to shell out between $6.8 billion and $7.4 billion, or roughly $6.50 to $7.oo per share, depending on the amount of stores it ultimately sells.  Once those are sold off, regulatory approval should come swiftly. Naturally, shares of RiteAid took a nasty tumble once investors realized they were losing significant bang on their mega bucks.

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Cyber-Attack on U.S. Law Firms Nets Big Illicit Gains for Chinese Hackers; Alexa Gave Amazon a Very Fiscal-Merry Christmas; Fred’s Whips Out the Poison

All hacked up…

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Some of New York’s finest, most prestigious law firms fell victim to a few Chinese hackers when they hacked into the firms’ computer systems and stole valuable information regarding mergers and acquisitions. That information was then used for insider trading which netted the cyber-attackers over $4 million in illegal profits. The attacks happened between April of 2014 – 2015 when the hackers installed malware on the computer networks of the law firms and then downloaded the information from email accounts. U.S. Attorney for the Southern District of New York, Preet Bharara said, “This case of cyber meets securities fraud should serve as a wake-up call for law firms around the world: you are and will be targets of cyber hacking, because you have information valuable to would-be criminals.” The 13 count indictment details how the suspects purchased shares from certain companies involved in mergers and acquisitions and then sold those shares for a massive profit once those mergers and acquisitions were announced.  In the meantime, the SEC has filed its own parallel civil suit against the alleged perps and has asked to have their assets frozen lest they try and cash out on their ill-gotten gains.

It’s all about Alexa…

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The results are in. Well, some of them, anyway. In this case, Amazon is claiming to be the big merry winner (cue the surprised facial expressions) of the retail game we call Christmas – and Hanukah too, of course. Amazon said it shipped more than one billion items through Prime and fulfillment services and, apparently, four of Amazon’s very own devices were the biggest sellers on the e-commerce giant’s site. Go figure. Those top sellers include the Echo Dot Smart Speaker, Amazon’s Fire TV Stick Media Streamer, the Fire Tablet and the regular (plain-old?) standard Echo Speaker.  Just don’t bother asking Amazon for specific sales figures. The company has a nasty habit of not divulging such useful information. Incidentally, the Fire Tablet and Fire TV Stick were also hot sellers last year. With the exception of the Amazon Echo Smart Speakers, the other three cost $5o or less and at those prices it’s easy to see why consumers scooped them up. In fact, sales for Echo devices were nine times higher than they were last year. All the devices, by the way, come with the Alexa voice assistant and Amazon saw a record number of orders for devices that come with Alexa. Only problem was those Echo speakers went too fast. Amazon sold out of them by the middle of December.

Going for the poison…

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Last week Fred’s was on top of the world, after agreeing to buy 865 RiteAid stores for $1 billion. The deal was a win-win. RiteAid needed to dump those stores in order to get regulatory approval to merge with Walgreens Boots Alliance. By purchasing those 865 stores, Fred’s basically doubled its size overnight, going from a market cap $450 million to $1.3 billion. It also experienced a massive stock increase and effectively became the third largest drugstore chain in the U.S. as well as the new darling of the retail pharmacy industry.  But then came activist investor Alden Global, which apparently picked up a 25% stake in Fred’s when no one was paying attention. When the Fred’s board noticed the unusual activity going on with its shares, it unanimously approved a nifty little tactic affectionately dubbed a “poison pill.” A poison pill is simply a shareholder rights plan that kicks into place in the event of a hostile takeover. The targeted company tries to make shares look less valuable and attractive, i.e. “poisonous” to a potential acquirer.  If control is taken, at least shareholders will then be compensated accordingly with a “poison pill” in place.  Fred’s poison pill is meant to take effect when an individual or a group scoops up 10% or more of the company shares. Alden thinks Fred’s shares are undervalued and see their acquisition as a great investment opportunity. Although, Fred’s did deny they threw together the poison pill plan because of a potential takeover bid.

AmEx Wants to Know What Your Loyalty is Worth; How Do You Say Opel-ease in Russian?; FedEx’s Hit and Miss

Where’s your loyalty?

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Maybe membership does still have its privileges. AmEx is trying to make a comeback following its breakup with powerhouse retailer, Costco, and rumors of an impending break-up with JetBlue. To soothe it’s broken fiscal heart, the company is making plans to offer a rewards program called “Plenti.” Catchy, huh? Joining forces with Macy’s, Exxon, RiteAid, AT&T and a few other companies, AmEx is offering a loyalty program where American consumers get to cash in points earned on their AmEx cards, and then redeem the points at these retailers. I say Americans, because AmEx already has loyalty programs in other parts of the world, including Germany and Italy. Fill up your car at Exxon and then run over to Macy’s and buy yourself a shirt. Or some vitamins at RiteAid. Or insurance. Yes, I did say insurance since Nationwide Insurers is one of the partners. As is Hulu. Cool, huh? . Noticeably absent from the list of participants is a national grocer and home improvement retailer. But fear not, oh faithful spender, as rumor has it those slots are just about to be filled. If you’re wondering how AmEx benefits, it’s simple: AmEx gets a fee from its partners-in-retail. Clever indeed.

No more vroom…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

GM is coming to a screeching halt in Russia after taking a 74% hit in sales there with an 86% hit on its Opel brand alone. Hence, GM has put the kibosh on Opel production altogether and will be drastically slowing down production on its Chevy lines, chalking it all up to a $600 million loss. The collapsed ruble and dropping oil prices have dealt a major blow to the Russian economy, with car sales especially down 38%. So GM decided to make a run for it. However, if you find yourself in Russia and jonesing for a Corvette, then no worries. Because Corvettes are imported, they will still be making their way into the country, together with Tahoes and Camaros. Can’t you just picture Putin cruising the Kremlin in a Camaro? Oddly enough, or not, the automobile company is still looking to up its Cadillac game in Russia. The luxury auto has yet to catch up to the popularity of European automobiles BMW and Audi. Tragically, only 72 of them have been sold in Russia in the first two months of the year.

Special delivery…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

FedEx released its earnings report, regaling Wall Street and the world with news of its prosperous third quarter. One of the fiscal highlights was the $11.7 billion in revenue the company took in. Not a major difference than what experts forecasted, and a modest 4% gain over last year, but the number did hit its target so nobody was necessarily complaining on that front. The big exciting numbers, though, came courtesy of FedEx’s impressive profits. At $580 million and $2.01 per share, the company’s net income was a whopping 63% higher than last year at this time. Analysts only predicted a profit of $1.88. It’s kind of nice when analysts are wrong. Just saying. And for that very impressive feat, FedEx can thank low fuel prices. Of course there were a few other reasons too, but fuel could definitely be crowned the star of this one. But then its shares took a bit of dip today on the news of its less than impressive outlook. The company expects to pull in between $8.80 – $8.95 per share for the year but analysts much prefer to see $8.98 per share. FedEx’s performance tends to hint to Wall Street what we can expect from our fickle economy. So if FedEx is feeling a bit too fiscally modest and only moderately ambitious, it makes The Street a little edgy.