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.

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Fitbit Fit to be Publicly Traded?; It’s All About the Vice for Dollar General; Start Saving, Health Insurance is on the Rise. Again

Working up a sweat…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

You may not own a Fitbit (yet) but perhaps you might be interested in owning shares of the company instead. The fitness monitoring device, which collects data on how much exercise you do – and don’t do – along with how much sleep you get – and don’t get – is now looking to fiscally beef itself up for some IPO action. The company, started by James Park and Eric Friedman, already pulled down $745 million in revenue and $100 million just last year. Fitbit is looking to raise $478 million to put out 29.85 million shares that might just fetch somewhere between $14 – $16 per share. That ought to give Fitbit a hefty $3.3 billion valuation. Of course, with any IPO, Fitbit has its share of detractors who are eager to point out the oodles of competition from, among others, Apple’s Smartwatch, Samsung and Jawbone.  The other issues that have investors skeptical is the tendency of fitness device wearers to ditch the “bits” within months, though I am not pointing any fingers, if only because I don’t have enough. Research found that a third of fitness device wearers ditch them within six months of getting them. Too bad you’ll have to wait until June 17 to find out the exact IPO price. But at least it gives you some time to start saving up.

Can I get a light?

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Dollar General sells a lot of useful stuff for dirt cheap and who doesn’t like that. But it was the not so useful stuff that helped the chain boost its sales this quarter. And by “not useful” I am actually referring to a little category dubbed “vice spending.” Yes, sales from tobacco and candy generated a greater portion of sales, in addition to its less vice-ful, or vice-free merchandise. Dollar General managed to rake in $4.92 billion in revenue. While that number just barely missed expectations, Wall Street didn’t seem to mind as it was still an almost 9% increase over last year and and that came with a very satisfactory profit of $253.2 million adding 84 cents per share. Analysts only expected 82 cents per share, by the way.  Even though same store sales grew 3.7% as opposed to the 4.1% expected by analysts, Wall Street still wasn’t upset and instead sent the stock up about 5%. Apparently, the stores were still seeing a lot more traffic i.e. customers who were shelling out a lot more cash. And if “vice” spending takes the credit for that, then so be it.

Stick out your tongue and say argh…

Image courtesy of ddpavumba/FreeDigitalPhotos.net

Image courtesy of ddpavumba/FreeDigitalPhotos.net

If the cost of your health insurance doesn’t suck enough, then get ready for 2016. Many many many health insurance companies have big expensive plans to ask state regulators to allow them to hike premiums on individual policies, whether they’re on the Obamacare exchange or not. We’re talking double digit increases. Apparently, these companies didn’t anticipate an increase in the amount of people going for doctor’s visits and getting prescriptions filled. Which is kind of weird because, don’t insurance companies pay people big salaries to anticipate such expenses? Just asking. Even though insurance commissioners and regulators can deny insurance companies their proposed rate hikes, it’s likely they’ll get approved for some type of increase, just maybe not as much as the insurers would have liked. So maybe you should start saving up to pay for your health insurance rate hike instead of those Fitbit shares.

Uber Revs Up for a Big U.N. Campaign; Credit Suisse Says Auf Wiedersehen to CEO; Barnes and Noble Books Not Terrible Earnings

Put the pedal to the metal…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Über is stepping on the p.r. gas and teaming up with U.N. Women for a big campaign. There is probably a joke in there somewhere about irony but I’ll let you come up with it. In honor of the twenty year anniversary of the Beijing Declaration – a provision promising global gender equality – Über wants to help foster and facilitate economic growth for women through the “Step It Up For Gender Equality” program. The idea is to employ 1 million women as Über drivers by 2020. But here’s the tricky part: Both Über and U.N. Women need to be present in a region. U.N. Women is only present in 48 countries while Über is allowed to operate in 55 countries, and the two don’t always coincide. Sadly, Über is more globally successful than gender equality. But that’s for another blog. Of course, it’s also hard to ignore all the scandals and issues Über has been having with not just female passengers who have been victims of violent drivers, but female drivers who have been harassed by passengers, as well. Currently, 14% of Über’s 160,000 drivers are women. This latest initiative, though no doubt noble and sincere, tends to also suggest that Über’s got some major fiscal growth plans up its tailpipe – continuing to intrigue investors who can’t seem to stop throwing billions of dollars Über’s way.

Nein…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Credit Suisse CEO Brady Dougan has announced he will be leaving the Swiss bank in June and giving the position over to Prudential’s Tidjane Thiam. Dougan, who had been at the post since 2007, said the decision to leave was mutual. Of course it was. For a while investors had wanted Dougan to cut back on the investment arm, but the CEO resisted. His resistance did not pay off. Combine that with the $2.5 billion Credit Suisse had to pay U.S.authorities for helping its clients evade taxes and, well, here we are today, discussing Dougan’s resignation. As the first American selected to be CEO of Credit Suisse, the Swiss media just wasn’t that into him from the start. His loyalty was questioned and he took heat for his pay packages. Also, Dougan doesn’t speak German, which apparently didn’t sit well the Swiss media either (and presumably, many many others). News of the impending change sent the stock climbing.

 Book it….

Image courtesy of adamr/FreeDigitalPhotos.net

Image courtesy of adamr/FreeDigitalPhotos.net

Barnes & Noble’s quarterly results are in and the word is that revenue is down 1.7%  to $1.96 billion. This ought to surprise no one. And if it does surprise you then I have one word for you: Nook. The e-reader has been nothing but a giant money pit for the bookseller even with Samsung trying to come to its rescue by putting out the first new tablet for Nook in two years. What ought to surprise everyone is that B&N didn’t do nearly as bad as many thought it would all because of books. And toys. But definitely books. Actual books printed on (hopefully) recycled paper. I kid you not. It helped B&N rake in 93 cents per share in profits and helped store sales increase by 1.7%. Sure it wasn’t the forecasted $1.23 per share, but hey, Barnes & Noble will take it. Also, college books proved to be a big help in the fight against horribly missed earnings, with revenue coming in 7.2% higher. Barnes & Noble has plans to spin spin off its college books division in the summer. And now, instead of closing 20 stores this year, Barnes & Noble only plans to close 13 stores.

Is Xiaomi the Next Big Thing to Hit the Smartphone Scene?; Russia’s Ruble in the Rubble; Shake Shack Shaking Up Wall Street

Third’s the word…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Here’s a riddle for you: If Samsung is the number one smartphone maker in the world, with Apple perched at the number two spot, then who has taken third? Hint: It’s not LG. Or Nokia. Or Motorola. Or… In fact, the number three smartphone maker in the world has yet to reach our shores, even though the company’s got a $45 billion valuation and is slated to become the most valuable IPO. Ever. In case you haven’t figured it out – and it’s okay if you didn’t –  I am talking about Chinese smartphone maker Xiaomi. The company which, just pulled in another $1.1 billion in funding, is number one in the mammoth Chinese market. It also happens to be the fastest growing smartphone maker and the most valuable start-up in the world right now (yes, even more so than Über and Pinterest, if you can believe it). And by fast I mean the company’s sales are up 211% in the third quarter, having taken a 5% bite out of the market share. Xiaomi, whose Mi4 smartphone coincidentally, bears a striking – make that very striking – resemblance to the iPhone, actually makes most of its money from apps and add-ons, and not from the phone itself. It also apparently has some nifty marketing strategies, though I can’t weigh in on that one. Xiaomi is currently focusing on branching out into places like Indonesia, Russia and Mexico with no immediate plans to come to the US, which clearly hasn’t been a problem for it.

Is that a recession I smell…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Russia’s not having a very good week. News is out now that the economy there shrank for the first time in five years. The GDP fell by .5% with the Russian government saying that next year the GDP could go down by as much as 4%. How do you say “yikes” in Russian? The ruble is continuing its slide,  falling the most in two weeks, and is about 40% weaker than the dollar. It’s down by about 70% since the beginning of the year. Of course the international sanctions imposed on Russia by other countries who were not cool with its incursions into the Ukraine are being blamed. And, of course, Russia then decided to block imported food – a move that has not been good for anyone on either side of the issue. Then there’s the price of oil which keeps dropping and dropping and…well, it’s no fun to see oil numbers drop if you happen to be the largest energy exporter and well, that’s exactly what Russia is.

Yeah, it’s that good…

Image courtesy of KEKO64/FreeDigitalPhotos.net

Image courtesy of KEKO64/FreeDigitalPhotos.net

Apparently the Shake Shack is so good that Wall Street will get to partake of its delicacies in the form of a $100 million IPO that the company just filed today. Conceived by restaurateur Danny Meyer, the chain will be listed on the New York Stock Exchange under the aptly named ticker symbol SHAK. The company began as a single “shack” in New York City’s Madison Square Park and quickly grew to 63 locations…worldwide, with half of those operated by licensees. Shake Shack reported sales of $140 million in 2013, a scrumptious $81 million gain from the year before. Investors are awfully curious to see how Shake Shack will fare considering the mixed results the market has seen from food companies like perennial fave Chipotle to less than stellar performer Noodles & Co. If that’s not enough to whet your IPO appetite, then how about the fact that they pay an average hourly wage of $10.70 with health benefits and paid time off?

Citigroup Pays Its Dues…and Fines, The Tastiest Merger and Samsung Is In Hot Water

Hot in the Citi…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Citigroup was all fiscal smiles today even as it agreed to cough up $7 billion for all the aggravation it caused because of its fraudulent mortgage practices. US Attorney General Eric Holder graciously pointed out, “The bank’s misconduct was egregious…the bank has admitted to its misdeeds in great detail.” Now Holder and the FDIC needn’t bother anymore with its cumbersome civil investigation. It also frees up the AG to sit back, relax and think about how he’s going to pull billions of dollars from Bank of America’s deep coffers. Part of the settlement is supposed to provide relief. That relief could come in the form of loans for affordable housing and changes to mortgages. Too bad those innovative ideas aren’t slated to take place until 2018. And while Citi did post better than expected earnings, trouble still looms for it as a money-laundering investigation is taking place at its Mexican unit.

That’s one sweet pairing…

Image courtesy of Arvind Balaraman/FreeDigitalPhotos.net

Image courtesy of Arvind Balaraman/FreeDigitalPhotos.net

Swiss chocolatier Lindt & Sprüngli is picking up a tasty American treat by purchasing Russell Stover Chocolates. Kansas City, Missouri-based Russell Stover, which also makes Whitman’s (as in “the samplers”), has 2,700 employees and generates a yummy $500 million a year. Lindt & Sprüngli are looking forward to generating revenues of $1.5 billion with its new-found American sweetheart. While the exact price of the purchase hasn’t been disclosed, the estimated figure is $1.4 billion and will make the newly formed venture the third largest chocolate manufacturer in North America. The two companies called it “a perfect strategic fit” and I couldn’t agree more.

Ugly technology…

Image courtesy of nonicknamephoto/FreeDigitalPhotos.net

Image courtesy of nonicknamephoto/FreeDigitalPhotos.net

Things are not looking so smart over at Samsung, the world’s biggest smartphone maker. The company just suspended business with one of its suppliers in China. According to New York-based human rights watchdog group China Labor Watch (CLW), the factory in question employs under-age workers amid a litany of other offenses. Children were allegedly made to work eleven hour days and paid for only ten of them. Even though Samsung maintains a “zero tolerance policy” for such odious practices, CLW also found the factory, Dongguan Shinyang Electronics, had its employees work for excessive and unpaid overtime. This is not Dongguan Shinyang Electronics’ first brush with human right violations either. The company has been audited three times since 2013. In the meantime CLW thinks Samsung is treating its social responsibility as “just advertisements.” Ouch.