VW Still Writing Checks for its Bad Behavior; Lululemon’s Sour Outlook; Economy Shows Some Impressive Muscle

Putting this baby to bed…

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Image courtesy of nirots/FreeDigitalPhotos.net

Looks like Volkswagen will be handing over $157 million to ten U.S. states to settle environmental claims over the auto company’s notorious diesel emissions scandal. Among the lucky – if you can call it that – recipients of these funds are New York, which snagged $32.5 million, Connecticut which took in $20 million, Massachusetts, Pennsylvania, Delaware, Maine, Rhode Island, Oregon, Vermont and Washington, which all took in various amounts of the remaining settlement.  Incidentally, that $157 million was well below what the states originally sought. There was already a previous $603 million settlement with 44 other states, but this latest one is separate from that. In fact, the German car company has agreed to spend up to $25 billion to settle claims and make buyback offers. Just wondering if that means it will actually hit that figure or will the company try and do their best to come in as under as possible.  As part of this latest ten-state settlement, VW now has to offer three new electric vehicles in those states. Two of those vehicles need to be SUV’s. Which to me, looks like a bit of a win for VW, but hey, what do I know. In the meantime, as part of a $4.3 billion settlement with the Department of Justice, VW pleaded guilty to fraud, obstruction of justice and falsifying of documents in a district court in Detroit earlier this month. The company can also look forward to major audits, oversight and monitoring for the next three years. Sort of like what Wells Fargo has to go through as payback for its fraudulent account scandal. Am I seeing a pattern?

Soured…

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Fancy trendy yoga apparel maker Lululemon was upsetting Wall Street’s zen today after announcing that its first quarter sales marked a “slow start” to the year. Which is  really just CEO code for “Yikes! Our quarter sucked.” And with that news, shares of the company took a very ugly 23% plunge to $51 a pop, a stock price the company hasn’t seen since December of 2015. This news was especially weird because Lululemon did better in holiday sales than most other clothing retailers. Yet now, this quarter now becomes the very first one in seven years to see same store sales go down. The company took in almost $790 in revenue with a $136 million profit that added 99 cents per share, even though analysts were expecting that figure to be closer to $784 million with a $1.01 profit per share. Last year at this time the company made off with a $117 million profit that added 85 cents per share. Competition from Nike and Under Armour definitely turned up the heat on the super-pricey Lululemon, with their vast offerings and more affordable selections. But CEO Laurent Potdevin blamed the company’s neutral offerings instead, arguing that they lacked  “depth and color for spring” that consumers are apparently craving. That’s got to be it, right?

Yes, you need to know this…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

There was a lot of spending this quarter. A lot. In fact, consumer spending was so strong that it caused the economy’s GDP to grow at a 2.1% rate, more than what was thought in initial estimates. In the process, that impressive growth rate even made up for areas of the economy that didn’t perform up to snuff, like trade and business investing. In fact, for all of 2017, analysts are actually expecting to see a 2.3% rate of growth. Of course, the fact that the labor market is strong, with higher incomes and wages, helps with all that consumer spending as well. Naturally. That 2.1% rate is a major upward shift from last year at this time when that rate stood at 1.6% and had the dubious distinction of being the weakest period of growth in five years. This next bit may cause you to cringe, but one of the reasons for this anticipated impressive growth rate is President Trump. He’s got plans, in case you hadn’t heard, for tax cuts and spending. Say what you will, but moves like that help economies. And who doesn’t like a little economic boost.  However, if it makes you feel any better, Trump thinks he can get that rate up to 4%, and economists are laughing on the inside at him for even thinking he can pull off that feat.

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Wells Fargo Banking on More Headaches; Tonka Christmas Present Sparked – But it Wasn’t Joy; Tyson’s Not Feeding Enough of You Like Family

Leash tightening…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Wells Fargo’s spanking seems to be far from over. Regulators are looking to make life utterly miserable for the bank by placing on it all kinds of restrictions that weren’t initially required as part of September’s $190 million settlement. For instance, if Wells Fargo wants to hire or make changes to senior level management and executives, the Office of the Comptroller of Currency is requiring a 90 day heads up and ultimately gets the final say. If the OCC doesn’t care for a person’s “competence, experience, character or integrity” then they’re out. As for those illustrious “golden parachutes” afforded managers who leave the company, the OCC gets to ban them if it sees fit. And unlike so many other banks, the OCC will no longer grant Wells Fargo expedited treatment for branch openings, and instead any new application for a branch opening will be subject to careful review. It’s not clear why the OCC changed its mind about the additional restrictions and a lot of experts thinks it’s nothing short of weird. Some speculate that the OCC is worried that they appeared soft on Wells Fargo and therefore imposed the restrictions. But others suspect this has more to do with the fact that the OCC didn’t handle the scandal well. The fact that former employers insist the over two million fake account openings occurred well before the 2011 point that regulators suggest, is just one reason. Then there’s the glaring issue of all those whistleblowers who were terminated after calling the Wells Fargo ethics hotline. Over 5,000 low-level employees were fired, yet mysteriously, higher-level execs went unscathed.

Dreaming of a fiery Christmas…

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Image courtesy of John Kasawa/FreeDigitalPhotos.net

Black Friday is still a few days away, yet there will be one less toy crowding the shelves this holiday season: The Tonka Truck 12v Ride On Dump Truck. The battery powered mini-vehicle seats two and the Harden family of Washington thought it wold make a great present for their grandson. Only problem is, driving home from Toys “R” Us, the ride-on toy caught fire in the back of Mr. Harden’s truck. Mr. Harden quickly pulled over to extinguish the flames and proceeded to drive back to Toys “R” Us to return the darn thing. Except the toy truck reignited, only this time it also set the grown up’s truck on fire as well. A Toys “R” Us spokesperson said that the incident appeared to be an isolated one and decided against issuing a full recall. Yet the toy company still went ahead and yanked the item from the shelves and its website as it attempts to investigate with the manufacturer, Dynacraft, what exactly went wrong. Incidentally, the toy received mostly bad reviews on Amazon and the Toys “R” Us website, with most people citing battery problems as the reason. As for the Hardens they got a full refund and a horrifying start to their holiday season.

Hard to swallow…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Investor appetites were not whetted today by Tyson’s earnings. The announcement that it would be changing CEO’s sent shares tumbling a very unappetizing 15%. But that’s not all. Profit came in at $391 million with $1.03 added per share, earning the company a 52% increase over last year at this time. To me that sounds like a respectable number, however, to Wall Street it was nothing short of a disappointment as expectations were for a $462 million profit. Tyson, purveyor of Jimmy Deans Sausages and Ball Park Hot Dogs, also reported a 13% drop in sales. Sales fell from $10.5 billion last year to a meager $9.2 billion, all while estimates called for $9.4 billion. To be fair, food prices had fallen, giving the company sales figures that were hard to digest. Tyson is looking to make between $4.70 and $4.85 per share for the year, but that’ll do little to cheer up investors who were initially expecting to see full-year earnings of $4.98 per share. Tyson’s troubles don’t seem to be going away anytime soon either with animal-right activists hounding the company because they take issue with Tyson’s supply chain practices. Throw in a class-action suit accusing the company of collusion and price-fixing and you’ve got yourself a company that spooks investors more than it feeds them.

Washington State’s New High, Uber Vs. NYC Cabbies and Bed Bath Not Above and Beyond

On a high note…

Image courtesy of Paul/FreeDigitalPhotos.net

Image courtesy of Paul/FreeDigitalPhotos.net

A big shout out goes to Washington today as it becomes the second state to legalize selling and using recreational marijuana. Medical use of the buzz-inducing plant has already been legal there for quite some time. While you might wonder if Washington is doing this out of the kindness of its heart or to increase revenue of the snacking industry, you might also consider the $200 million in taxes and fees related to marijuana that the state expects to rake in over the next four years. “I think they’ve got a good handle on what they’re doing,” says Andrew Freedman, Colorado’s Director of Marijuana Coordination. I wonder what he listed as skills and relevant experience on his resume. Colorado, which had the financial prescience to legalize marijuana much earlier this year, has already generated tens of millions of dollars for the state. Tourists and residents of Washington can expect some shortages and unusually high – no pun intended (well maybe just a little)  – prices until the state can work out the supply and demand kinks of the newly legalized substance but it should be worth it as experts say that legalization leads to better pot potency.

Uber Vs. New York Cabbies…

Image courtesy of digitalart/FreeDigitalPhotos.net

Image courtesy of digitalart/FreeDigitalPhotos.net

Uber made a big in your face decision to temporarily reduce prices on its Uber X service in New York City. The app, which is still fighting numerous regulatory hurdles in numerous cities, wants to take a big bite out of the Big Apple’s market share. Uber’s alleged logic is that even in a city where hailing a cab is easier than looking at your smartphone, if it can lure customers away with cheaper fares, than those customers will just get used to using the app, even if and when those fares go back up. And in case you were wondering, yes, the folks behind Uber are probably taking a huge hit by dropping its prices by 20%. But the company figures that’s what it takes to compete against the already reasonably priced NYC taxis. No doubt that $1.2 billion in funding it just received probably softens the blow. That and the fact that the company is currently valued at $17 billion.

Buybuy shares…

Image courtesy of John Kasawa/FreeDigitalPhotos.net

Image courtesy of John Kasawa/FreeDigitalPhotos.net

Bed Bath & Beyond announced plans to buy back $2 billion in shares over the next fiscal year. Perhaps all those coupons I regularly use are responsible for the the company’s stock slump. But the board seems to think (and hopes) a buyback will help alleviate that and cause shares to go back up. The board clearly feels confident about the company and its long term growth and potential. Sounds like a middle school report card. The company, which also owns Buy Buy Baby and Cost Plus World Market, and has about 1500 stores, has seen its stock tank this year by around 26%. It wouldn’t be right if some of that blame wasn’t attributed to bad weather. But culprits, like Amazon and other e-commerce sites have been giving the chain some fierce competition as well. And even though the company did post a profit this quarter, it was still down 8% over last year’s gains.