Gem – Truly Outrageous Auction Price; Macy’s Needs a Miracle on 34th Street and on Wall Street; Rolls Royce Profits Sputter

Just brilliant…

Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

One Hong Kong billionaire went shopping recently and dropped $77 million…on just two items…for his seven year old daughter. Is your head still attached? Just checking. Joseph Lau, scooped up two large stones at a Geneva auction which was probably way more fun than sitting in a Macau prison where the billionaire is appealing a conviction for corruption and money-laundering. One of the gems Lau bought for $48.5 million is a 12.03 carat “Blue Moon” – as in once in a Blue Moon does a gem like this come around – which set a record for the amount of money paid per carat in a gem. If you do the math, that comes out to approximately $4 million per one brilliant carat. But Lau can afford it since his net worth is estimated to be about $10 billion. Besides, he coincidentally set a second record  – in less than 24 hours – when his company sold a Hong Kong office tower for $1.6 billion. It set a record because it was double the amount of the previous record commercial real estate sale. Some guys – and seven year old girls – have all the luck I tell you.

Let it snow, now!

Image courtesy of Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net

Image courtesy of Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net

Macy’s could use a miracle right about now. Except this time on Wall Street where shares of the company took a 14% hit as it experienced its biggest one day fall in seven years. The company announced that it would be cutting its annual profit forecast as sales and traffic have been anything but miraculous, with quarterly sales that took a 5.2% hit. Revenue dropped to $5.87 billion when analysts thought Macy’s would pull in $6.15 billion. Macy’s profit dropped 45%, falling to $118 million, coming in at 56 cents per share. Analysts thought that would be just 54 cents per share.  First, Macy’s brass blamed the weather. Only this time it was blamed for being too hot instead of too cold explaining why shoppers haven’t been rushing into stores to buy warm-weather apparel. Then Macy’s blamed tourists for not spending enough money in its stores. Macy’s is also pointing the finger at off-price, aka discount, stores like Marshall’s and Nordstrom Rack. Those types of retailers have seen a 44% increase between 2009 and 2014 and have been taking away a big chunk of sales from Macy’s. Together with slow growth and weaker demand for some of Macy’s biggest brands and you get…a big hot fiscal mess. That’s on top of the fact that Macy’s already announced it would be closing 35 – 40 underperforming stores back in September. Too bad the numbers make it seem like all the stores are under-performing. Then investors were bummed that Macy’s nixed the idea of making a Real Estate Investment Trust (REIT) out of its properties. Investors like REIT’s for their liquidity, special tax incentives and the big dividends they yield. Macy’s has got about $21 billion worth of property that could have the potential to trade at a much better value. Instead the retailer will start offering some major discount action in an attempt to get shoppers into its stores just in time for the holiday season.

Not revved up…

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

While visions of Rolls Royce might have you thinking about royalty and James Bond, the heart of its business is in its engines, especially those used for aircraft, ships and industrial use. Unfortunately, the heart of the business is currently undergoing some fiscal coronary issues as new-ish CEO Warren East issued yet another profit warning for Rolls Royce today. Then things got ugly. Shares of Rolls Royce took a 20% beating after Mr. East said that  profits will be 30% lower than what even the analysts were predicting for the famous engine company. To add insult to injury, shares of Rolls Royce suffered their biggest single day drop in fifteen years. The 131 year old, British-based company also reported weak demand for spare parts and services for its existing engines. Now, its executive board is considering scrapping the company’s dividend. Stay tuned…

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Crumbs Has Gone Stale, Rolls Royces Are Everywhere (Almost) and Banks Behaving Badly (Again)

Crumbled…

Image courtesy of YaiSirichai/FreeDigitalPhotos.net

Image courtesy of YaiSirichai/FreeDigitalPhotos.net

America just isn’t that into them anymore…cupcakes, that is. A sure sign the cupcake craze has officially arrived at a screeching halt comes with the news that Crumbs Bake Shop has shuttered all of its 65 bakes shops. All. Of. Them. The first store opened in March 2003 and  the company then went public in 2011. But a taste for the confection went south, as did the bakery’s sales. In 2013, the company choked down close to $20 million in losses. Last week Nasdaq suspended trading of the not so sweet stock after it failed to meet the minimum $2.5 million in shareholder equity. And it is with bitter and not at all sweet sorrow, that the stock has been officially de-listed.

Rolls with it…

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

If you were wondering why you keep seeing Rolls Royces wherever you go (or maybe you don’t wonder about it, or even see them all over the place), there’s a very reasonable explanantion. Lots more people are buying them. Sales for the car (but is it really just a car?) which can go for several hundred thousand dollars are up 33%. But just who are these people that are buying them, since you, unfortunately, are not one of them (or maybe you are). Well if we take peek over the pond, sales of the ultra-luxurious automobile are up in Europe over 60%. Motorists really seem to dig the Rolls in the Middle East and the Asian Pacific too. Even in the good old U.S. of A, sales climbed well into the double digits. Over 1900 Rolls Royces were sold since the beginning of the year. BMW, which owns Rolls Royce also went up about 10%.

Next up…

Image courtesy of anankkml/FreeDigitalPhotos.net

Image courtesy of anankkml/FreeDigitalPhotos.net

Move over BNP Paribas, there’s a new naughty bank in town. Actually two. Commerzbank and Deutsche Bank have become the latest European banks to face the wrath and pricey penalties from the United States Department of Justice. Both banks are accused of playing nice with countries blacklisted by the US government, including Iran and Sudan. The banks allegedly transferred money for the offending and offensively ruled countries through US operations. Deutsche Bank, which already had to pay about 500 million euros in fines swears that all its dealings with Iran were totally legit. After all, how could they not be when dealing with Iran and Sudan? Commerzbank is Germany’s second largest bank and is 17% government owned. However some are wondering and concerned that this not-so-little issue is going to put a crimp in the beautiful and somewhat harmonious relationship between the US and Germany. Let’s hope the expected $500 million settlement to forego criminal charges will assuage that.