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

Putting this baby to bed…

ID-100128578

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…

ID-100420194

Image courtesy of khumthong/FreeDigitalPhotos.net

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…

ID-100328948

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.

GM’s Defect Debacle In Rearview Mirror; Overseas Deal Might Have Big Impact Here; Zen-tastic Quarter for Lululemon;

Emboldened or embattled?

ID-10049689

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

Score one for GM, the not-so-embattled-anymore auto company that just won a second lawsuit in a series of bellwether cases. In case you have been hanging out in another solar system for the last couple of years, tons of drivers are filing tons of lawsuits against GM because they got into accidents which they say can be blamed on GM’s faulty ignition switches. After a two week trial and a single day of deliberations, two Louisiana plaintiffs, who crashed their car back in 2014 during a freak ice storm, will not be awarded any damages despite their automobile’s defect. This win bodes well for GM and it’s a good thing because there are hundreds more waiting in the legal wings.This case is the second in a series of six cases that will be used to test strategies, with each side getting to choose three cases to argue. This case was GM’s selection and the next bellwether case is scheduled for May. GM already paid out a lofty $2 billion to resolve a slew of legal claims against it, in addition to recalling millions of vehicles. That includes a $900 million settlement to Uncle Sam so that the government would graciously agree to drop its criminal probe into GM. Another $575 million was paid out to settle close to 1,400 civil cases. Then GM set up a $95 million victims compensation fund. In the meantime, 15 people were fired over the defect debacle – that would have cost a buck to fix, by the way –   as GM CEO Mary Barra has been on a mission to change the company culture. Good luck with that one.

Deal or no deal…

ID-10036919

Image courtesy of digitalart/FreeDigitalPhotos.net

You might not be so familiar with a Taiwanese company called Foxconn but it’s more than likely you’re using its product. That is, if you happen to use a very popular mobile device known as an iPhone. Turns out Foxconn assembles those nifty little phones. But that’s not news. What is news is that the company is set to snap up Japanese company, Sharps Electronics for $3.5 billon. And if you can believe it, some analysts think it’s a bad move. And that’s even after Foxconn knocked a couple of billion off of their initial offer when it was discovered that Sharp has literally billions of dollars worth of problems. But, oh well. In any case, if and when the deal goes through, it will be the biggest acquisition by a foreign company in Japan. But that’s beside the point. Foxconn is unofficially hoping that this acquisition, however fiscally risky it may be, will help give it an edge, albeit a slight one, for its production contracts with Apple, especially considering that Apple uses Sharp screens. Foxconn is well aware that Apple has been giving out production contracts to other companies too, and competition like that can’t be all that good for Foxconn. Hence, besides assembling the phone, Foxconn would also own the company that supplies the screens and well, wouldn’t that put Foxconn in a nice, cozy, almost secure spot with Apple.

Make lemonade yoga pants!

ID-10010917

Image courtesy of Suat Eman/FreeDigitalPhotos.net

Lululemon doesn’t seem to be bothered by increased competition from Nike and Under Armour, as evidenced by its fourth quarter earnings which were nothing short of…zen. And by zen, I mean that the athleisure company beat the Street’s predictions. The athletic apparel company enjoyed a nice little holiday shopping season with increased sales that gave it a profit of $117.4 million with 85 cents added per share. Analysts predicted the company would pick up just 80 cents per share. Maybe those analysts need to pick up some new Lululemon yoga pants, no? Revenue kicked up to $704.3 million, up from last year’s $602.5 million, and again, analysts only expected $692.6 million this quarter. Last year the company only earned $111 million and 78 cents per share. Lululemon is expecting to whip out a fourth quarter that is sure to please investors by picking up earnings between $483 million to $488 million and adding 28 cents to 30 cents a share. However, the perennial buzzkiller we call Wall Street would rather see Lululemon rake in $486.1 million adding 37 cents per share. In what might seem like an awfully bold statement, the yoga apparel company plans on doubling its earnings by 2020. In the meantime, it expects its full fiscal 2016 year to gain between $2.05 and $2.15 a share and that’s nothing to sneeze at. Except that Wall Street is hoping for earnings that will look more like $2.16 per share. Lululemon is pulling out all the stops to improve its margins and part of that means switching over to ocean freight as opposed to air freight. Apparently, air freight is a gigantic margin-money eater. Who knew.

American Apparel Just Can’t Seem to Get it Together; Lululemon’s Un-zen-like Projections; Population Popularity

Overpaid…

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

Image courtesy of jesadaphorn/FreeDigitalPhotos.net

Looks like American Apparel has some legal troubles, yet again. Only this time it’s not because of ex-CEO and founder, Dov Charney (sort of), who is apparently still trying to get his job back. The SEC launched an internal investigation into the apparel company over a very pricey review of the ousting of  Mr. Charney and all the unpleasant accusations against him, including several sexual misconduct allegations. However, to be fair, Mr. Charney’s lawyer called the allegations…don’t laugh now…”baseless.” So just how pricey was this review? Like $10.4 million pricey. Which seems expensive  considering the company’s stock was precipitously tanking, is hard up for $27.6 million with unpaid long-term loans, and has just about $8 million in cash. The price tag certainly got the SEC wondering if this major expense helped send the company into debt. The SEC wants to determine if any laws were broken during the review. But don’t hold your breath for any juicy details as the investigation is “non-public.”

Namaste…

Image courtesy of Master isolated images/FreeDigitalPhotos.net

Image courtesy of Master isolated images/FreeDigitalPhotos.net

Things are looking sort of zen at Lululemon Athletica as it announced its earnings with some decent numbers reported. The fitness apparel company took in profits of $111 million at 78 cents per share when analysts only predicted 73 cents a share. Last year the yoga apparel maker took in $109.7 million and 75 cents a share. But here’s where things aren’t so zen: Lululemon’s profit projections for the year are $1.85 – $1.90 – much less impressive than what analysts would prefer to see: $2.07 per share. It is kind of odd that Lululemon’s projections would be so much lower than analysts’ predictions considering the retailer has all these big revamping and expansion plans. So, it kind of got Wall Street wondering how much growth can they really expect to see from Lululemon following its successful holiday season. Hence, shares went down over 3%.

Booms and bummers…

Image courtesy of Craftyjoe/FreeDigitalPhotos.net

Image courtesy of Craftyjoe/FreeDigitalPhotos.net

Florida is where it’s at. At least according to the latest stats from the U.S. Census Bureau. Florida becomes the third most populous state, knocking New York off that perch. But a lot of that growth is coming from a place called The Village, Florida, ranked as the fastest growing city with a 5.4% population increase last year to 114,000 people. And with a name like that, of course tons of people are setting up house over there. Wish I was. But that was just one of the many cities experiencing major growth in the Sunshine State. Interestingly enough, and even a bit macabre, is the fact that these new residents helped offset the number of deaths of the many retirees who migrate to the state for their golden years, propelling Florida to a population of of 19.9 million people. New York only has 19.7 million. But California is the number one most populous state with 38.8 million folks.  Some of the other big winners, or rather gainers, were Williams County and Stark County, both in North Dakota, which earned the top spots for fastest growing counties. Of course, the booming oil industry and surplus of jobs can be thanked for that. A big loser? Wayne County, Michigan which took a population loss of about 11,000 people.