Swooshed Out: Nike Losing Ground?; Starbucks Perks Up Hiring Goals; Is the End Near for Sears?

Just not doing it…

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Looks like consumers aren’t doing it for Nike as the athletic apparel company posted some pretty unimpressive numbers for its third quarter. To be clear, Nike didn’t lose money. It just didn’t make as much money as analysts wanted it to. For instance, even though Nike took in $8.43 billion in revenue, a 5% increase over last year, analysts were expecting $8.47 billion this time around. The collective disappointment on Wall Street sent shares down because investors are apparently wondering if the company behind the iconic swoosh can withstand some fierce competition from Under Armour and Adidas. But that wasn’t the only bad news sending shares down today. Nike also said that it expects future orders to be down 4%. Nike did score a profit of over $1.1 billion with 68 cents added to shares, a figure that easily beat analysts’ expectations of 53 cents per share. Last year at this time, Nike took in $950 million with 55 cents added per share, illustrating a very respectable increase. Unfortunately, the bit about the decline on future orders didn’t stop from putting a damper on the fiscal mood on Wall Street.

Well done…

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Starbucks is making headlines today after announcing that it not only hit its goal of hiring 10,000 army veterans and military spouses, but now plans to hire another 15,000. Starbucks had hoped it would achieve that milestone by 2018, but lo and behold, it hit its mark well ahead of schedule and the glowing news was announced during its annual shareholders meeting, much to the delight of…everyone. If you recall, back in February, CEO Howard Schultz – who is stepping down at the beginning of April – managed to annoy more than a few of his coffee drinkers when he announced plans to hire 10,000 refugees globally.  Apparently some folks thought those refugee hirings were in place of hiring veterans and thus began a social media campaign urging people to #BoycottStarbucks.  But alas, that was not exactly accurate and the coffee chain found itself explaining that it intended to hire employees from both groups. And that’s not all. The purveyor of premium coffee also plans on creating another 240,000 jobs worldwide by 2021. Because if you were worried that there weren’t enough Starbucks, the company is planning to open 3,400 new stores, just in the United States. So yeah, it’ll definitely need a few extra baristas.

Throwing in the towel?

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It might just be the end of an era as the 130 year old Sears announced in an SEC filing that “substantial doubts” exist with regard to its future. In other words, the department store is staring at the prospect of bankruptcy, and will end up bringing Kmart with it. What’s a little weird about that news though, is that the company’s fourth quarter results were actually better than expected, albeit, dismal. “Better than expected” here basically means that the retailer didn’t lose as much money in its fourth quarter as it was expected to, at least compared to last year’s fourth quarter. The fact remains, however, that according to eMarketer, of the top 250 retailers, Sears is dead last in terms of performance, as it just can’t compete with the offerings of online retailers. In fact, Sears ate over $5 billion in losses just in the last three years and has already been closing plenty of stores, selling off some of its brands and taken other measures just to stay afloat. Besides that, Sears is having too much trouble with its pension plan obligations which has been also eating up a lot of its cash – $4 billion just in the last twelve years. Add to that its more than $13 billion in liabilities and Sears’ future is looking positively grim.

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Starbucks Betting on $10 Coffee; Trump Ready to Dump on Pharmaceuticals; Trump’s June Stock Dump

Jolted…

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Starbucks CEO Howard Schultz is stepping down from his post in April with plans to build a Starbucks’ prestige brand where he will serve as its Executive Chairman. The idea is that by going upscale Starbucks will be able to raise its profile with those pesky millennials. Besides that, the company needs to compete with a number of other upscale rivals that keep rearing their gourmet heads all over the place. One thousand “Reserve” brand stores are slated to set up shop with another 30 large Reserve Roastery (expect to find that word added to a dictionary near you) and Tasting Rooms expected to open up all over the globe. In case you were wondering what one orders from this new prestige brand, you might consider purchasing a $10 cup of coffee that you can sip daintily from a glass siphon.  Or perhaps you’re up for paying $50 for an 8 oz. bag of an exotic, small-lot coffee? I’m sure you’ll find something worth depleting your funds.  In any case, Starbucks also announced plans to open another 12,000 stores –  that’s in addition to its already existing 25,000 stores –  in the next five years.  Five thousand stores are slated just for China. The company also plans to annually boost revenue by 10% while adding between 15% – 20% to its shares, and increase its focus on its food offerings since the coffee giant is convinced it can double its growth in that area.

What a pill…

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Donald Trump’s latest executive plans involve bringing down drug prices and the pharmaceutical companies that keep increasing them with seemingly reckless abandon. Which is kind of ironic since pharmaceutical stocks saw a huge surge following Trump’s election. And here they thought they had an ally. Hah! A Kaiser Family Foundation survey leading up to the election found that people felt drug prices were the number one healthcare issue for the next President. Well, I guess the President-elect is ready for it then. Sort of. Trump has yet to outline any concrete plans on how he is going to achieve this goal. But during his campaign, Trump did say that he is all in favor of consumers having their meds re-imported. He also wants Medicare for the elderly to renegotiate drug prices directly with pharmaceutical manufacturers. That should be fun to watch, especially because both the industry and many many Republicans are vehemently against that idea. Stay tuned for that drama. Just today, Pfizer Inc. and Flynn Pharmaceutical Ltd. were slapped with some massive record fines in the UK after raising drug prices by…wait for it…2,600%. Now, Pfizer will cough up about $106 million, while Flynn will fork over approximately $6.5 million. I guess they should be happy that they were busted in the U.K. and still have time to clean up their act in the United States before Trump-dom takes effect. In the meantime, Allergan Plc. CEO Brett Saunders is bracing himself for the new president’s impact and said Trump could end up being more “vicious” on pharmaceuticals and their drug pricing than Hillary Clinton might have been. But he also pledged to limit price increases to less than 10% per year. Or perhaps he did that lest Trump unleash his Twitter wrath on Allergan, just like he’s done to several other individual companies including Carrier Corp., Ford and Boeing.

Under-stocked…

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Yesterday, President-elect Donald Trump’s team announced, with no explicable reason as to the timing, that he sold off all of his stocks back in June. Don’t hold your breath for proof of that sell-off as none was provided. While being interviewed today on the “Today” show by host Matt Later after being named Time Magazine’s “Person of the Year,” Trump explained that he decided to unload his stock holdings in order to avoid any conflicts of interest. How very gallant of Mr. Trump.  And even though the press was not made aware of it until yesterday, Donald Trump insisted that everybody already knew. We just don’t know who “everybody” is. Mr. Trump went on to say that he sold off his stocks since he knew he would win the election and would be making deals for the United States that could affect various companies in all sorts of different ways. That was indeed very thoughtful of him. He also said he didn’t even own that much stock.  Which is debatable at best since a recent filing from December of 2015 valued his holdings at $40 million. But in all fairness, his stock market holdings pale in comparison to his real estate holdings which apparently make up the bulk of his net worth.  Ethics experts, however, are suggesting those real-estate holdings might also be a conflict-of-interest as well. Just saying. It’s worth noting that since his sell-off, the S&P 500 went up over 10% while the Dow Jones Industrial Average hit some very impressive all-time highs. Since Trump’s victory, many stocks have also hit all-time highs and, of course, he’s taking credit for it.

The Hits Keep on Coming for Wells Fargo; Janet Yellen Gets a Grilling; Perk Up! Thursday is National Coffee Day

Smacked…

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The hits just keep on coming for Wells Fargo as the great state of California gave the bank a major diss in the form of a year-long suspension of its business relationships. The bank is officially barred from underwriting debt and handling bank transactions for the Golden State. And if Wells Fargo still can’t get its act together, it can expect a “complete and permanent severance.” Yikes. I guess that’s what happens when you open up 2 million fraudulent accounts and according to State Treasurer John Chiang, promote “a culture which actively promotes wanton greed.” More yikes. Since Chiang oversees $2 trillion worth of banking transactions, besides managing a $75 billion investment pool, he’s probably a bit sensitive about the way banking institutions handle all that money. In the meantime, Wells Fargo CEO John Stumpf will kiss goodbye his $41 million in unvested stock awards.  Carrie Tolstedt, who oversaw the division that was responsible for green lighting the fraudulent accounts, loses all of her unvested awards and gets no further retirement benefits.  Other than the really good ones she already received.

Awkward…

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Fed Chairwoman Janet Yellen took a beating today from Congressman Scott Garrett over Lael Brainard’s chummy relationship with Hillary Clinton. Brainard, in case you might not know, is the governor of the Fed and is rumored to be the top pic for Treasury Secretary. She also gave $2,700 to the Clinton campaign. Congressman Garrett doesn’t take too kindly to this appearance of impropriety and asked the Chairwoman if this doesn’t pose a conflict of interest for the Fed, seeing as how Brainard is in talks with the Clinton campaign. After all, the Fed is supposed to be non-partisan. Yellen, said she was’t aware that there was, in fact, a conflict while also maintaining that the Central Bank has no biases as far as politics are concerned. Of course, Donald Trump disagreed vehemently with that assessment during Monday night’s presidential debate when he insisted that the Fed is keeping rates low to make Obama look good.  Incidentally, Janet Yellen chaired President Bill Clinton’s Council of Economic Advisers. Besides all that, there apparently is no issue with Fed officials giving money to campaigns. Who knew.

Oh the perks…

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Consider this next bit a public service announcement:  Thursday September 29 marks National Coffee Day. Yes, that’s a real thing. And before you whip out your wallet, you might want to know which eating establishments wont be charging you for your java fix. If you happen to be near a Krispy Kreme store, then I urge you to step inside. Rumor has it you’ll score a free coffee and glazed donut just for showing up. But be sure to say thank you! Manners are key. If you’re a fan of Wawa coffee, then you’re in luck as that chain is also offering free cups of its brew. Particpating 7-Elevens are also giving out free coffee. Just make sure you have their smartphone app and register for its 7Rewards program. Dunkin’ Donuts will offer medium-sized cups of coffee for just 66 cents in honor of the company’s 66th birthday. As for Starbucks, don’t expect any freebies. Ever. However, the company is affording you the opportunity to be charitable. For every brewed cup of Mexico Chiapas Starbucks sells, the company will donate a coffee tree to Latin American growers whose crops have been destroyed by fungus.

EU Wants to Take a Big Tax Bite Out of Apple; Google Takes On Uber. Sort of; Abercrombie & Fitch Teen Ditch

Bite me…

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The EU commission is coming down hard on Apple by slapping the world’s most valuable company with a $14.5 billion bill for back taxes. The EU felt Apple illegally received tax aid in the form of a sweetheart tax deal from Ireland. However, both Apple and Ireland deny that allegation and contend that everything they did was totally legit. More than 700 U.S. companies currently have some type of business set up in Ireland where they enjoy a reduced corporate tax rate compared to that of the U.S. The EU however says that rate is too reduced and says Apple pays much MUCH less than the 12.5% corporate tax rate in the country. Companies can set up tax structures that allow them to pay even less.  EU officials charge that Apple did just that and Apple paid only a .005% rate on its profits in 2014.  I’d love to meet Apple’s accountants who set that one up. Just saying. The U.S treasury isn’t happy about the situation either and feels U.S.firms are being unfairly targeted and that such investigations are unfair. Senator Chuck Schumer even called this latest judgement a “cheap money grab.” Don’t expect to bump into him on your next European vacay. According to the treasury, judgements of this type could undermine U.S. investments in Europe. Starbucks already got hit with a $33 million back-tax deal while Amazon and McDonald’s are currently staring at the wrong end of their own EU investigations. The government believes that U.S. taxpayers will likely bear the brunt of the EU’s very inconvenient decision because Apple would basically deduct the $14.5 billion from taxes that it owes to the U.S. government.

Anything you can do Google can do better…

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Search engine giant, Google, is now offering its own ride-sharing app to San Francisco residents. If you’re thinking Google’s encroaching on Uber and Lyft’s turf then…you might be right. Sort of. Google began a pilot program back in May that allows commuters to carpool at cheaper rates then Uber and Lyft. Much cheaper. In fact, the rates are so cheap – think 54 cents per mile – that there is no incentive to even become a taxi driver. What’s more is that Google doesn’t even take a cut. Yet. By using Waze, which Google acquired back in 2013, commuters connect with other commuters headed in the same direction. Uber, which is currently valued at around $68 billion might begin to take issue with Google’s latest plans, assuming they’ll expand. And they will. Ironically, Google invested $258 million into Uber back in 2013. The situation between the two companies has gotten quite dicey as Google exec David Drummond recently resigned from Uber’s board given all the conflicts that are rising from these latest developments.

Smells like twenty-something spirit…

 

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Abercrombie & Fitch, purveyor of trendy teen clothing, has officially posted its fourteenth straight quarter of losses. The company saw a decline of a 4%, which was more than what was expected. A&F posted a net loss of $13 million, which was a brutal change from last year’s same quarter loss of $810,000. Net sales fell to $783, a far cry from last year’s $818 million. Naturally, as with all bad earnings reports, a tumble in shares ensued, with shares of the trendy retailer taking a 20% hit. Besides a strong dollar, the chain can’t compete with the likes of H&M, Zara and a whole bunch of other clothing sellers. Back in May, the company had predicted an improvement. But that didn’t happen and now A&F isn’t even expecting one in the near future. Which might explain why the company will reshift its focus from teens to bona-fide money making twenty-somethngs who can afford the clothes A&F is selling. Considering that more than 50% of A&F’s customers are adults over the age of 20, this seems like a prudent move. So if you find yourself at one of A&F’s 744 locations – of which 60 of them will be closing –  you might not want to be so quick to walk away as the company attempts to rebrand itself as the “iconic American casual luxury brand.” I don’t know why that just made me think of Harley-Davidson motorcycles. But it did.  The clothing company will be selling clothes for actual grown-ups who once upon a time were the same teens who spent their parents’ hard-earned cash at this very establishment.

 

 

UnderArmour Gets a Chink; McDonald’s Deserves a Break Today; Rate a Minute! No Hike in Sight

Fit to be bit…

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Under Armour seems to have suffered a chink in its earnings as its profits took a particularly brutal 57% dive. The primary culprit is Sports Authority, a company that is thisclose to becoming retail history, but was also one of Under Armour’s biggest retailers carrying tons of its merchandise. Hence, Under Armour took what’s called an impairment charge, and impairing it was, to the tune of $23 million. Last year at this time, the Maryland-based company hauled in an impressive $14.8 million profit. This year, however, that profit was a very disappointing $6.3 million. On the bright side, Under Armour is headed to Kohl’s 1,100 department stores next year. Apparently, it’s a way to connect with female consumers. Who knew. Under Armour brass think this new foray into Kohl’s will make women’s sales hit the $1 billion mark. Besides, since Nike, Under Armour’s biggest competitor, also happens to have a strong – very strong – presence in Kohl’s,  Under Armour hopes its new endeavor will take a big chunk out of the competition’s sales. But if Under Armour’s numbers still fail to impress next quarter, it might have to do with the exorbitant real estate it just leased in New York City – the renowned FAO Schwarz toy store. The rent on that baby ought to set the company back. But the athletic apparel company is banking heavily that the location location location will more than compensate by bringing in some boffo sales.

Mac-attacks need not apply…

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The Golden Arches seemed to have lost their luster this quarter with worse than expected earnings and profit falling over 9% to $1.1 billion. But how could that be if you and everyone you know was there all the time dining on its delectable all-day breakfast selections? And herein lies the problem. Well, part of it anyway. You see, McDonald’s breakfast offerings skew cheaper than the rest of its menu items. Apparently consumers really like having the option to eat breakfast for lunch…and dinner. And they did. A lot. Instead of the pricier items. Incidentally, Dunkin Brands Group Inc, Starbucks Corp and Wendy’s, to name a few, also reported unsavory earnings and shares of McDonald’s took a nasty tumble, bringing along the rest of the industry with it. It seems McDonald’s menu prices also had a negative impact on earnings. The cost of food went down in grocery stores and because of it, more would-be diners chose to eat at home. The curious thing is that the cost of food also went for McDonald’s, which ought to mean that its selections should have been cheaper, or at any rate, stayed the same price. Except that they didn’t because McDonald’s had to increase menu prices to compensate for increased labor costs.

Fed-up…

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In case you were holding your breath to see if the Fed is going to raise rates, you can let it out now. It won’t. At least not before September. Or maybe even December. Apparently the money experts want hard-core evidence of a pick-up in inflation before the Fed decides to make any changes. The Fed wants to see a 2% inflation rate, which might seem like an incredibly minuscule number, yet it’s one that carries incredible weight.  Then there’s the not-so-slight issue of the relatively healthy U.S. economy in the face of the not-as-healthy global economy. Even as the markets here reached new highs, with a labor market that saw an impressive 287,000 jobs added in June, experts – me not being one, mind you –  expect maybe one rate hike this year. From the Brexit to China and other assorted EU drama coming down the pike, the Fed’s not too eager to put in for any hikes until the rest of world cooperates they way it ought to, fiscally speaking anyway. After tomorrow, the Fed’s got three more meetings this year to decide its next move, so sit tight. Or don’t.

Starbuck$$$ Coffee Buzz Gets Pricier; JPMorgan Ups the Minimum Pay Game; Drop in Job Openings Bums Out Economists

And then it happened…

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If there’s one thing you can rely on at Starbucks, besides the quality of their coffee, it’s that come July, the company will raise its prices. Today, the company did just that for the third year in a row. What Starbucks dubs as a “small price adjustment” shouldn’t be too bad. Well, that is, depending on what you purchased. Hey, if you don’t like it, blame rising coffee costs. And Starbucks, too, I suppose. The amount of Americans who drink coffee is expected to rise by 1.5%. The more people drink, the more the beans cost. Just another case of supply and demand, my friend. Prices went up between 10 cents to 20 cents on its brewed coffee, and between 10 cents and 30 cents on its espresso beverages and tea lattes. However, the price increases vary depending on which region you find your local Starbucks. In the grand scheme of things, purchases only actually increase by about 1%. Plus, the price went up on only 35% of its beverages. Which means that 65% of its beverages remain unchanged, price-wise, for those of you who shun change. But in all fairness, Starbucks is giving its employees a 5% raise come fall, not to mention doubling stock awards for employees who have been there for two years or more. Not that their raises and stock awards had anything to do with boosting the price of your chai latte, mind you.

Dimon in the rough…

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Starbucks isn’t the only company who is giving its hardworking employees a raise. Enter JPMorgan, the second most profitable company in the United States, who is about to give 18,000 of its employees a much appreciated boost in their paychecks. And this time, the employees aren’t even the ones who regularly rake in big bonuses. JPMorgan CEO Jamie Dimon will be raising the company’s minimum pay by 18% for employees who are mostly bank tellers and customer service representatives. These employees currently receive $10.15 per hour, but over the next three years will see increases of $12 per hour and then $16.50 per hour, depending on several factors. The company is also beefing up its in-house training programs as well, to the tune of $200 million, that will train thousands of entry level employees who work in consumer banking. Mr. Dimon says the new initiative is all about addressing concerns over income inequality, an issue that’s been getting a lot of negative attention, usually directed at Mr. Dimon and his peers. He also says it’s a way to attract and retain talent – an idea that company’s like Walmart, Target and McDonald’s have already started putting into practice. But leave it to the skeptics to whip out their negative spin and question if Dimon’s motives have more to do with a shrinking labor pool, and if JPMorgan is just getting ahead of an issue that might pose a problem in the future. The cost of raising the minimum pay by 18% will cost JPMorgan just about $100 million, which is just $7 million shy of the total 2015 compensation for Jamie Dimon and his four top-named executives.

Book of jobs…

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Even though JPMorgan and Starbucks are giving its employees more money to attract and retain great employees, the Bureau of Labor Statistics paints a very different employment picture. According to its latest report, job openings dropped to a five month low in May, with just 5.5 million jobs up for grabs, even though that same month also saw 5 million people getting hired. Not to be a downer, but that was the lowest rate since November 2014. At least voluntary quits fell to a 4 month low, with just 2.9 million leaving their jobs, presumably for better opportunities. Yet in April, job openings were at an all-time high. All these mixed numbers might just mean that the economy is not as healthy as we think it is. The Job Openings and Labor Turnover Survey, a.k.a JOLTS, is the division of the Bureau of Labor Statistics that tracks job openings, hires and separations. The Labor Department, which reports just on job creation and unemployment, reported that employers only managed to create 11,000 new jobs in May. In case you’re wondering why that’s a bad thing, then consider that those 11,000 jobs were 25 times less than the amount of jobs created in May of 2015. At least the number of layoffs and firings in May fell to a ten month low of 1.67 million. Economists, however, still think these numbers should be taken with a grain of salt. Which is easy for them to say since they seem to be gainfully employed.

The Hostess with the Mostess is Baaaack; Airlines Take a Fiscal Hit, Yet Consumers Shed No Tears; Starbucks Set to Raise You Up

 

Sugar high…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

No need to get all sentimental here, but Hostess has arrived. Again. The Twinkie maker is set to go public in the fall, following a deal with Gores Holdings which picked up a huge stake in the company. It seems like only yesterday when Hostess rode a fiscal roller-coaster that almost had the sweets maker go bust four years ago. But those days are now far behind, as the Ding-Dongs proprietor boasts a $2.3 billion valuation. The folks who bought the company, Metropoulos & Co. together with Apollo Global Management LLC, were the same ones who restored Pabst to its original glory. They picked up Hostess for $185 million and borrowed another $500 million to basically rebuild the company from the ground up. They did just that, but smaller. Much smaller. Almost all union workers were ousted, equipment was upgraded and even robots were brought in for some labor. Just like “The Jetsons.” Sort of.  Before Twinkies disappeared from shelves for those dark seven months, the company employed 19,000 people, most of them union. Now there are closer to 1,200 employees – not including robots, and more than 95% of them are NOT union workers. Top brass also unloaded Wonder Bread and Nature’s Pride, got products into movies theaters and restaurants, launched a new marketing campaign with celebs, including the illustrious Will Ferrell and threw in a countdown clock in New York’s Times Square for New Year’s. Hostess also doubled the shelf life of its products to 65 days. You might not find that especially appetizing, but investors sure did. And in case you were skeptical about the Will Ferrell choice, then consider that Hostess’s market for sweet-baked goods is up over 16% and posted $650 million in revenue for 2015. The company is now poised to hit $772 million in revenue for 2016 and by 2017, profit is expected to grow to $101.8 million.  If you’re still not convinced that the Hostess tide is turning, then look out for frozen fried Twinkies, making their coronary debut in a few weeks. Then we’ll talk.

Karma, I tell you…

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Looks like the airlines have taken a hit and I suspect no one feels too sorry for the industry’s top players. Delta,  American Airlines, United Airlines and even Southwest posted declines between 12% and 31%. So sad, no? The demand just wasn’t enough for air travel and that, coupled with some other factors, made for some very unpleasant earnings and share declines. But cry me a river. These are, after all, airlines we are talking about. In my most humble opinion, it sometimes feel that they make a sport out of fleecing travelers. Just saying. Delta shares fell on the news that its revenue per each seat flown one mile dipped by 5%. Despite the wordiness of that calculation, it is how airlines measure their success. It also them helps determine just how much pricing power they have. And wouldn’t ya know it. They currently don’t have as much as they’d like. For now anyway. And that’s welcome news for travelers who aren’t too happy shelling out big bucks for uncomfortable seats. Delta, the second largest airline, actually had been expecting the decrease, but a smaller one of no more than 4.5%. The airline also ate a $450 million loss because they bet against fuel prices. Actually, Delta bet that fuel prices would jump and locked in some fuel purchase contracts called hedge contracts. Prices did, in fact, jump. Just not as much as Delta had hoped they so Delta ditched the contracts and ate a half billion dollars on them. So sad, no?

Nothing to buzz about…

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It’s July, oh faithful Starbucks drinker and do you know what that means? It means that it’s time for the price of your caffeine fix to go up. After all, it’s tradition. Actually, the tradition is to raise the prices during the first week of July, yet here were are and no increase. But fear not because Starbucks already made a statement that a price increase is on the horizon. Besides, due to a pricing glitch, some loyal drinkers were already charged that increase. Oops. However, those unfortunate consumers could have only been overcharged by, at most, 30 cents. There’s no official word yet on which drinks will be getting pricier, but  the ones that do go up will only go up by as much as – you guessed it – 30 cents. There is one more caveat, though. The amount of money a drink increases varies by region. So perhaps a move might be in order. Just saying. The fact is coffee futures keep going higher and are up over 10% just this year. Even if you are annoyed that your coffee habit is about to eat a bigger chunk out of your bank account, Starbucks knows that you’re still gonna keep whipping out the cash for it. In any case, if you think you did get overcharged on your recent Starbucks purchase, you can call the customer service hotline at 1-800-782-7282 to request your refund.