The Mouse is Going After the Fox; Dollar Wise for Fast Food; A Wrinkle in Allergan’s Plan

Fox-y mouse…

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Today’s juicy merger gossip is brought to you by Fox and Disney. Apparently, a deal is thisclose that will have Disney scooping up Fox’s studio and television production assets. The deal, which is rumored to be worth about $60 billion, will also include the acquisition of Fox’s stakes in Hulu and Sky. As for its news and sports division, Disney is taking a pass on those entities. But Disney isn’t the only one with its sights set on Fox. Comcast and Verizon are also trying to get in in some Fox action. It’s just that right now Disney seems to be getting the best crack at the media conglomerate. Wall Street seems to like the news considering it sent shares of Fox up over 3%. But the question you might be wondering about is why Disney even needs  $60 billion worth of Fox’s assets? Doesn’t it have more than enough of its own? Well,  yes, it does. However, in case you missed it, the entertainment industry is changing, with a big push towards streaming and direct to consumer models and believe it or not, picking up those particular assets over at Fox will give Disney a much much bigger global reach. And who couldn’t use some more global reach, right?

Bucking the trend…

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Fast food restaurants are engaged in a bloody dollar war. But that just means good news for consumers. McDonald’s is bringing back its dollar menu, which it ditched just four years ago because it didn’t pull down the kind of cash McDonald’s wanted to see. As for the term “dollar,” well that might be a bit generous in its definition. To be clear, the fast-food chain is offering the $1-$2-$3 Dollar Menu. If you’re in the mood for a sausage burrito, cheeseburger or any-size soft drink, well then, feel free to fish out that dollar bill that’s burning a hole in your wallet. Otherwise, prepare to shell out more. Not to be left out of the fast food fiscal fun, Burger King and Wendy’s are also trying to woo you with their version of “value” menus. But it’s Taco Bell that’s really taking aim at the Golden Arches with 20 items listed for just a dollar.  For McDonald’s, the cheapy menu is its answer to win back customers. The company apparently lost out on some “500 million transactions” because it didn’t have a value menu. Ironically, or not, Taco Bell’s dollar menu actually generated $500 million in sales. To make up for the lack of profitability that comes with McDonald’s having a value menu, the chain is expanding its “Signature Crafted Recipes” – which is really just code for more expensive menu items that will offset the value items.

A wrinkle in time…

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There’s a new Botox sheriff in town and Allergan doesn’t like it. Not one bit. Enter Revance Therapeutics Inc., a small biotech company that holds the formula for RT002, aka “the better, longer-lasting botox.” If it’s approved people can start sticking their faces with the stuff as early as 2020. Which is great news for everyone. Well, everyone except for Allergan, the pharmaceutical giant behind Botox, the original, whose stock fell over 4% on the news today. In fact, today Allergan hit its lowest price since 2013, after losing a third of its value in the last five months. And, while RT002 uses the same main ingredient for wrinkle reduction as Botox does, that being botulinum toxin Type A, it also uses the company’s proprietary peptide technology, which is apparently the reason why this particular formula lasts about a month longer than Botox.  In any event, Allergan wasn’t especially impressed by Revance’s new data released today and called it “underwhelming.” As for Allergan’s response, you could probably just call it sour grapes.

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.

Latest Lousy Jobs Report; Wendy’s Is Losing its Buns. Sort of; Are Commercial Drones Finally Taking Flight

Book of jobs…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The private sector added 169,000 new jobs but that’s nothing to celebrate. Well those 169,000 people who will now be collecting paychecks can celebrate but that’s about it. While that number seems significant, and in some ways it is, it is actually the lowest number we’ve seen since January of 2014. Experts expected growth of up to 224,000, as last month’s job growth came in at 175,000. Celebrating occurs only when the numbers go up. Drops like these don’t necessarily mean the economy is about to head south, but it can suggest periods of sluggish growth are on the horizon. This gloomy news is brought to us by ADP, the largest private payrolls processor in the United State and they’ve got the dirt on the digits. But we’re still waiting on the U.S. Labor departments figures, due Friday, which are apparently more detailed and include both the public and private sectors, and may even supply us with better figures. And on the bright side, April’s growth rate wasn’t nearly as abysmal as March’s growth of just 126,000 jobs. So there’s always that heart-warming fact to fall back on.

Where’s the buns? 

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Image courtesy of atibodyphoto/FreeDigitalPhotos.net

Wendy’s restaurants just came out with its earnings and announced it will be selling 640 restaurants. Taking a page from McDonald’s playbook, Wendy’s is hoping that franchising costs will help the chain take in between $400 million to $475 million. The restaurant plans to sell 380 restaurants in this year alone. So if your lifelong dream is to own a Wendy’s, this might be your chance. Wendy’s is definitely having a better quarter than McDonald’s, as the company, famous for its freckle-faced braided redhead, and I guess its food too, took in first quarter earnings of $27.5 million and 7 cents a share, just barely beating analysts expectations of 5 cents a share. However, revenue was down almost 11%. Oh well. Maybe next quarter. Wendy’s also announced that it’s selling its bakery operation in Zanesville, Ohio, which conveniently supplied the chain’s buns. While the folks in Zanesville might not be thrilled, the folks on Wall Street were and sent shares up over 7%. Shares of the company are up over 30% in the last twelve months so clearly someone over there knows what they’re doing.

Droning on and on…

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Image courtesy of bplanet/FreeDigitalPhotos.net

Drone enthusiasts, rejoice! FAA Administrator Michael Huerta announced that the FAA is going to figure out how drones and other aircraft can share all that airspace safely. At the Unmanned Systems 2015 Conference, Huerta said, “Integrating unmanned aircraft into our airspace is a big job, but it’s one the FAA is determined to get right.” This exciting mission will be done through the Pathfinder Program, which will study commercial drones and all the great and lucrative ways they can be used. For instance, CNN wants to see how to gather news with drones in heavily populated areas. A company called PrecisionHawk wants to test it out for the agricultural industry to see how drones can help monitor crops. Then there’s Berkshire Hathaway company, BNSF, a railroad company, that wants to use drones to inspect tracks. Such clever usage. Surprisingly mum on these new developments was Amazon, who has long wanted to use drones to make deliveries. Amazon, if you recall, wasn’t too happy about the FAA’s rules that were proposed in February and let the FAA know it. And if you think the use of drones will take jobs away from actual human beings, then check out the reports from the  Association for Unmanned Vehicle Systems International which estimates that thousands of jobs would be created and  generate hundreds of millions of dollars. And judging by last month’s Labor report, this drone “thing” just keeps sounding better and better.