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.

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.

Nike’s Sales Bruised By Yeezy; McDonald’s Gets Busted for Over-Valuing Value-Meal; Lookout! There’s A Lot More Walgreens/RiteAid Coming Your Way

Yeezy breezy…

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Nike’s quarterly profit might be up 7% thanks to strong demand in China and the United States, but that doesn’t mean everything is coming up roses at the athletic apparel company. Fierce competition from Under Armour and Adidas have been hammering away at Nike’s sales, partly because Adidas knocked it out of the park this year, thanks to Kanye West (it’s okay, I cringed too) and his Yeezy line, which saw sales go up 62%. Under Armour’s Stephan Curry’s shoe and apparel line definitely stole plenty of Nike’s mojo too. So Nike has been in quest mode to find all sort of ways to boost sales from, improving online sales features to cutting prices on some of its more popular offerings. One of Nike’s divisions that took a beating this quarter and fell short of expectations was its ever-important basketball division.  Apparently, consumers weren’t feeling the love for LeBron James and Kevin Durant sneakers when they were sporting a $200 price tag. Nike is banking that a $150 price tag will have people biting a little more. The company is also working on a faster supply chain dubbed “express lane” to bring products to market within weeks instead of months. In an effort to set itself apart from the competition, Nike’s come out with self-tying lace-up shoes. If you’re that lazy, they might actually be worth the $720 price tag. Profit from Nike came in at $842 million, with revenue of $8.18 billion and 50 cents added per share. That’s especially good since Nike’s stock has fallen 17% in the last year and Wall Street only expected $8.1 billion and 43 cents per share. Last year at this time the company posted $785 million  in profit and added 45 cents per share.

Un-happy meal…

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McDonald’s is staring at the wrong end of a lawsuit for 41 cents. 41 cents. Turns out the value meal is anything but since it would be 41 cents cheaper to buy the items individually than to buy the bundled package for $5.90 in certain locations. Enter plaintiff James Gertie who discovered this mathematical irregularity at two McDonald’s restaurants in the Chicago area.  The restaurants in question are operated by Karis Management and Gertie wants the suit to get class-action status for consumer fraud and deceptive practices. He says the lawsuit is about principle and is seeking a refund for any customer who purchased the meal at a McDonald’s restaurant operated by Karis. Those 41 cent refunds could add up to a lot of cash as Karis operates ten restaurants in and around Chicago. In the meantime, Karis has yet to comment on the case or the price discrepancy.  As for other McDonald’s all over the world, well, you’re just going to have to do your due diligence to see if their numbers add up or not.

Urge to merge…

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Walgreens Boots Alliance and RiteAid will finally get their way now that they sold off some 865 RiteAid stores to retail chain Fred’s. That’s what the two companies had to in order to appease the Federal Trade Commission so that it could go ahead with its $9.4 billion merger. Together, the new entity will still have over 12,000 locations from which to choose and will effectively become the largest drug store chain in the United States, effectively taking up 46% of the market. Fred’s currently has almost 650 discounted general merchandise stores and is looking to become the third largest drug store chain in the United States.  It’s also trying to reinvent itself by ditching its former name of Fred’s Super Dollar.  Fred’s had to borrow a whopping $1.65 billion in order to get those 865 stores, but it also had to pledge, as collateral, just about everything it has in the form of assets, and maybe even throw in a few bodily organs as well, to secure that loan.  The stores actually cost $950 million but other expenses, operating and otherwise, necessitated the full $1.65 billion. It should prove to be well worth it, however, as the deal will more than double Fred’s size.  Plus, the deal sent shares of Fred’s surging a mind-blowing 85% to $20.75. And who doesn’t like an 85% surge in shares, right?

Game on Oprah! John Oliver’s $15M Giveaway; Fortune 500 Companies’ Latest Surprises; Burberry Boss Paycheck Getting a Whole Lot Smaller

New queen of daytime…

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Move over Oprah. John Oliver just achieved god-status in the television talk show realm after buying nearly $15 million in medical debt and then forgiving it. Poof. Just like that. On his latest show “This Week Tonight with John Oliver,” the talk-show host took on the debt collecting/buying industry, which can be dubbed “shady” at best. Oliver said, “It is pretty clear by now (that) debt buying is a grimy business, and badly needs more oversight, because as it stands any idiot can get into it.” So John Oliver did “get into it,” and spent just $50 to start his very own debt collection company called Central Asset Recovery Professional aka CARP. It’s no coincidence, he pointed out, that the company is named after the bottom-feeding fish. Oliver’s company was almost immediately offered close to $15 million in medical debt from 9,000 Americans, social security numbers, names and addresses included, for just half a cent on the dollar. In case you were wondering, that came out to about $60,000. Then, with the simple push of a red button, John Oliver, forgave the debt, presumably with funds from his own bank account. But most importantly, Oliver easily trumped Oprah Winfrey’s 2004 television giveaway, when she gave out $8 million worth of cars to 276 audience members. And he didn’t even do it for ratings. Sort of.

Rank and file…

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Fortune Magazine’s annual list of the biggest 500 companies by revenue for fiscal 2015 is out and it was Netflix that was making big waves this year. The video streaming site, which launched in 130 new countries in January, and was the top fiscal performer for 2015, ticked up 95 spots to the 379th spot. However, while the climb was quite impressive, there are still 378 companies that rank higher than Netflix. Rounding out those top spots are Walmart, ExxonMobil, Apple and Berkshire Hathaway. No big surprises there. Apple, by the way, which moved up to two spots from last year’s fifth place, was the most profitable company on the list, earning $53 billion for fiscal 2015. Companies including GM, Ford and AT&T also cracked the top ten with Amazon landing at number 18 and Walgreens following close behind at number 19. Microsoft managed to crack the top 25 for the first time ever as Facebook climbed 85 spots this year to claim its 157th ranking. Interestingly enough, more than half of the companies on the list saw a drop in sales, with energy companies taking the biggest beating of all.

Pay raze…

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The CEO of Burberry Group PLC, Christopher Bailey, will now have to switch to generic brands when he goes grocery shopping. After failing miserably to post respectable earnings results, the dapper exec will watch as 75% his paycheck vanishes into thin air. The CEO, who also serves as the Chief Creative Officer – and herein, might lay the problem –  will earn a paltry $2.74 million this year, a far cry from the $10.8 million he scored last year. Shareholders are also withholding his bonus for missing profit targets. That might seem a bit harsh, but shareholders in hundreds of companies are getting fed up with massive executive salaries that are completely at odds with results. Bailey, however, is not the only executive at the company who will be experiencing the fiscal wrath of the Burberry shareholders. Executive directors at the fashion house will also be stripped of their bonuses this year, because after all, it’s not like Bailey was solely responsible for shares of Burberry taking a 35% hit in the last twelve months. Burberry has announced that it will implement a cost-cutting plan – that has little to do with Bailey’s pay cut – in addition to a share-buyback program. Prudent moves when a companies reports disappointing fiscal earnings. But the earnings may not be entirely Bailey’s fault. Consider that 40% of Burberry sales come from the Chinese, who are in the midst of their own fiscal woes.

Home Sweet Amazon-Serviced Home; Ben Bernanke Joins the Blogosphere; AG Settles Score With GNC

Is there anything it won’t sell?

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Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Amazon has come out with yet another way to take your money. This time it’s through its new Amazon Home Services with over 700 home improvement service providers services at your fingertip, with verified reviews for added peace of mind. Plumbing problems? Too tired to assemble that new gym equipment? Don’t feel like vacuuming? No problem. Just log on and Amazon will make sure it all gets taken care of. Services are paid for via your Amazon account only after the project is completed. So why is Amazon’s home service offerings different from all others, like Angie’s List, Yelp etc.?  Perhaps it the comprehensive vetting process it conducts, including making sure service professionals are licensed, insured and have had their backgrounds thoroughly checked. But Amazon also offers a money-back guarantee charmingly called a “happiness guarantee.” Apparently, consumers also trust Amazon, giving an added incentive to use the ever-powerful e-commerce giant. To be fair, however, I too, once trusted Amazon. But then last month one of its vendors sent me a completely different set of fairy wings than the ones I ordered. Just sayin’.

Payback…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The blogosphere just got a bit more crowded now that Former Federal Reserve Chairman Ben Bernanke joined the mix with his own blog for the Brookings Institute. He is, after all, its latest Distinguished Fellow in Residence of the Economic Studies Program. It’s very pish posh, indeed. The position, I mean. Not the blog. “Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers.” Which means he doesn’t have to be polite anymore and gets to say whatever he wants. For instance, Mr. Bernanke can use his blog for, among other purposes, striking back at the many critics he’s had over the years who took issue with his policies. Janet Yellen, who took over for him last year, does not get to have that kind of fun. At least for now. In today’s post, Mr. Bernanke graciously explains the reasons behind the low interest rates. By the way, he’d like you to know that it’s not necessarily because the Fed is keeping it that way – though there is some truth to that.

Whaddya mean there’s no ginseng in there? 

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Image courtesy of Getideaka/FreeDigitalPhotos.net

This time it is not a bank that has reached a deal with New York Attorney General Eric Schneiderman. GNC Holdings Inc. begrudgingly settled a lawsuit over its Herbal Plus products found at GNC, of course, but also at Target, Walmart and Walgreens. Apparently, it wasn’t at all clear that the ingredients listed on the outside of the bottles of the dietary supplements were actually present on the inside. Who would have thunk it? The presence of things like echinacea, ginkgo biloba, ginseng and St. John’s wort couldn’t be verified when the AG used DNA barcoding methods to test for them. That’s kind of a huge embarrassing problem in the $33 billion a year dietary supplement industry. Of course, GNC disagrees vehemently with the AG’s testing methods saying the “lawsuits are without merit.”  GNC, however, used its own internal test methods, in addition to third party independent test methods which, naturally yielded different results. Despite all that, the supplement company will now be using bar-coding methods –  just like the AG’s office –  beginning in the next 18 months, so that consumers will know for sure if there really is echinacea in that bottle they’re holding, conveniently labeled “echinacea.”

 

 

Keurig Issues a Very Un-Merry Recall; Walgreens’ Happy Fiscal New Year; Barnes & Noble Regifts Itself, Sort of, With Nook Buyback

Ahhhh Keurig!!!

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Image courtesy of lamnee/FreeDigitalPhotos.net

Looks like the automotive industry doesn’t have the monopoly on recalls this year, after all. Enter Keurig, beloved brewer of coffee and other hot beverages for millions. Following over 90 reports of people literally getting burned by their machines, Keurig recalled 7.2 million Keurig Mini Plus machines because they can overheat (imagine that) and spray hot liquid on its discerning coffee drinkers. Oh the horror. Not sure if your precious Keurig is on the recall list? Well, there are an estimated 6.6 million brewers that were recalled in the United States, with the rest purchased in Canada. The machines were made between December 2009 and July 2014 and were likely purchased at Kmart, Kohl’s Target, or directly from the Green Mountain website. In any case, rest assured that Keurig will ship you a repair kit FOR FREE. Of course, can you guess what the company stock did today? Yes it took a bit of a pre-Christmas nosedive and that’s in addition to the 5% drop in sales the company saw in its fourth quarter.

Out with the WAG, in with the WBA…

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Image courtesy of jscreationzs/FreeDigitalPhotos.net

Nothing says jolly like beating analysts’ estimates and Walgreens did just that. The health retail giant pulled in some impressive numbers for its fiscal first quarter with earnings of $809 million and $.085 per share. Analysts forecasted a paltry $0.74 per share. Analysts also called for revenues of $19.43 billion. But Walgreens instead pulled in close to $19.6 billion in revenues. In fact, shares of the company have pleasantly creeped up 29% in the past year. And while we bid farewell to 2014, it’s also time to bid farewell to retiring Walgreens CEO Greg Wasson. Wasson, who will not soon be forgotten – whether some people like it or not – orchestrated plans to takeover Swiss health and beauty company Alliance Boots. Part of the original plan was to pull off an inversion-type deal which did not exactly pan out. But what did pan out was Walgreens’ long-awaited foothold onto the international pharmaceutical/health/beauty market by just taking over the Swiss company. So bienvenu Walgreens. Or whatever it is they say there. With this new deal we shall also bid farewell to Walgreens presence on the New York Stock Exchange and Nasdaq under the ticker symbol WAG. Assuming the deal with Alliance Boots finalizes by December 31, Walgreens will now be traded only on Nasdaq, under the ticker symbol WBA, as part of the Walgreens Boots Alliance, Inc holding company. Sniff, sniff. As for the company’s 8,200 plus stores, expect to see some changes as the company looks to cut costs and trick out appearances.

Nook’d out…

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Image courtesy of adamr/FreeDigitalPhotos.net

It’s official. The Nook e-reader business is once again fully back in the arms of Barnes & Nobles. But don’t expect the reunion to last too long as Barnes & Nobles plans to spin it off on its own by August. The Nook, which turned out to be a big money loser and just couldn’t compete with Amazon and friends (and enemies), cost Microsoft $300 million back in 2012. Barnes & Noble graciously agreed at the beginning of the month to buy back the biz from the software giant for $125 million with Pearson Inc. still holding a stake in the company. But no more as Barnes & Noble paid $27.7 million in cash to the educational book publisher with $13.8 million in actual cash and 603,ooo shares of stock.  Wall Street liked the move as well and shares of the bookseller moved up a smidge.

CVS Not Getting Smoked; Home Depot Data Breach? Check; Viva La Truce!

Quitter…

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Image courtesy of Mister GC/FreeDigitalPhotos.net

You might want to think about skipping CVS today if you were jonesing for a cigarette. Well maybe you should consider skipping the cigarette altogether, but I digress. Since really this is all about how CVS is kicking the cigarette habit out the door from all of its 7,700 plus establishments. It’s also launching a campaign to get people to be quitters – of smoking, that is. CVS is hoping that with its new “wellness” initiative it will attract even more consumers to those thousand of stores. And CVS is gong to need all the customers it can get as this move is expected to cost $2 billion in annual revenue. That’s a lot of wellness to make up for. Besides dumping its tobaacco products, CVS is also dumping the name CVS Caremark and is now going by CVS Health. Got that? The move was initially slated for October 1, but I guess they decided the sooner, the better (to lose that $2 billion). By the way, Walgreens has not announced a similar plan.

Breached…

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Image courtesy of Victor Habbick/FreeDigitalPhotos.net

Home Depot officially joins the illustrious ranks of companies who’ve been targeted (no pun intended – well, maybe just a little) with a data breach. To be fair, however, the issue is still under investigation after some “unusual activity” was noted. Hmmm.  Apparently a large cache of sensitive info made its murky little way onto some dubious black market sites. Of course, customers will not be responsible for any charges incurred as a result of the breach. Because it would be rude to hold a customer liable for such a thing. Just to be on the safe side, Home Depot is taking a page from its fellow data breach victims and is offering free ID protection. The home improvement company is just hoping its breach will be nothing comapred to Target’s $150 million breach, from which it is still reeling. The theft is thought to have been perpetrated by Ukranian or Russian hackers. How this is known I really couldn’t tell you. But some very official sources have said said this and probably could tell how they know but are probably not allowed to share such information, I presume. And of course, the stock took a a 2% hit over this recent revelation.

Making up is fashionable to do…

Image courtesy of John Kasawa/FreeDigitalPhotos.net

Image courtesy of John Kasawa/FreeDigitalPhotos.net

The long awaited truce has finally arrived. Of course, I am referring to the one between the world’s numero uno luxury brand LVMH and equally luxurious and ridiculously expensive retailer Hermes. What? That’s not what you thought I meant? Were you expecting a different truce? Anyways, after four years of intense, but supremely fashionable courtroom drama, the two sides have reached a very posh agreement where everybody wins. LVMH has graciously (and grace never goes out of style) agreed to sell off most of its 23.2% stake in the 177 year old, family controlled, Hermes, to the tune of over $4 billion. Also LVMH will not pursue a takeover, for the next five years anyway. It all started when LVMH kept scooping up Hermes stock in an attempt to takeover the illustrious maker of those outrageously expensive handbags. Except that it acquired all that stock in a way that didn’t require it to declare its stock acquisitions until it was almost too late, for Hermes that is. And who could blame LVMH? After all Hermes’ annual revenue consistently increases by at least 10% every single year.