MARKET CURRENTS
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MARKET CURRENTS
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Today - Friday, May 24
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11:57 AM Gasoline prices in Minnesota are the highest in the continental U.S., a dubious honor usually reserved for California and odd considering the state borders North Dakota, now the no. 2 U.S. oil producer. Minnesota drivers were paying $4.29/gal. on May 20, $0.62 above the U.S. average. Planned and unplanned maintenance at Midwest refineries have cut into gasoline production and available supplies are depleted, the EIA says. 1 Comment
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11:14 AM Fast-casual chain Noodles files for IPO of an undetermined size. In its released financials, the company indicated revenue grew from $170M in 2008 to $300M in 2012. At current growth rates, Noodles could expand to 2.5K restaurants over the next 15 to 20 years and eventually give Panera (PNRA -0.5%), Qdoba (JACK -0.4%), and Chipotle (CMG -1.3%) something to think about. Noodles is expected to trade under the symbol NDLS. (S-1) Comment!
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11:11 AM Hibbett Sports (HIBB -4.1%) sinks after Q1 earnings and revenue miss estimates. From the report: Sales and comps rise 3% and 0.8% Y/Y respectively (Q1 2012 comps were +12%). Product margin was up during the period, but an 18 basis point rise in warehouse expenses hurt HIBB's gross margin, which fell slightly (10 basis points Y/Y). FY14 EPS outlook is reiterated at $2.85-3.05 versus consensus of $3.03. (PR) Comment!
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11:05 AM Heard during Abercrombie & Fitch's (ANF -10.1%) earnings call: 1) The biggest takeaway is that ten percentage points of the large drop in comparable store sale is attributable to inventory issues. 2) China isn't the problem behind slumping sales. Comp sales in the nation were +40% despite difficult inventory issues. 3) On share buybacks, the retailer says it will remain consistent with past policy - but will have a goal of maintaining a cash position of $350M. 4) Analysts take a pass on asking about the recent flap over the stance of CEO Michael Jefferies on plus sizes. (webcast) Comment!
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10:46 AM Luxury retail companies seem to be seeing something more than economists do as they ramp up investments and marketing on expectations for increased high-end spending in the U.S. Even with all the focus on the growth potential for the luxury sector in China and Hong Kong, by sales the U.S. market is still twice as big and has plenty of upside, according to industry insiders. A wildcard in the mix is the impact from some relaxed rules on visa approvals for wealthier tourists from emerging markets. On watch: Hermes, LVMH Moet Hennessy (MAGOF.PK), Gucci (GUCG.PK), Louis Vuitton (LVMUY.PK), Coach (COH), Tiffany (TIF), Ralph Lauren (RL), Burberry (BURBY.PK), Saks (SKS), Hugo Boss, Christian Dior (CHDRF.PK). Comment!
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10:30 AM An opinion piece titled "The Other Government Motors" from the WSJ isn't too subtle about taking apart the Q1 profit Tesla Motors (TSLA +1.4%) reported as it hitched a free ride with U.S. taxpayers. The zero-emission tax credits Tesla can sell to other automakers and the generous $7.5K federal tax credits to motivate buyers are the big two complaints. But what isn't entirely clear is why other car companies selling EVs aren't lumped into the same discourse? 13 Comments
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10:27 AM Shoe Carnival (SCVL +10%) hits a 52-week high after Q1 results top estimates. From the report: Q1 was challenging thanks to colder weather, but trends improved in April helping comps growth which, although still negative (-0.8%), was better than the company anticipated. Revenues rise 4.3% Y/Y, profit margin falls 130 basis points, SG&A falls $2.8M. Guidance: Q2 revenue of $217-220 and EPS of $0.26-0.30 against consensus of $218.88 and $0.28/share. (PR) Comment!
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10:18 AM A group of broadcasters including Fox (NWS), NBCU (CMCSA), ABC (DIS), and Telemundo filed a copyright infringement lawsuit in Washington DC against a similar outfit to Aereo that is also offering re-transmission services to consumers. The target, subtly called Aereokiller, appears to be an easier case for the broadcasting companies to win a decision over - right in the backyard of politicians. Comment!
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10:15 AM Campbell's Soup (CPB -0.8%) trades lower after announcing it will acquire Plum Organics, a maker of organic foods for kids, for an undisclosed amount. CPB is apparently looking to cash in on a growing market for premium and organic baby food and says that with the addition, the company's "portfolio of kids-focused soups, beverages and snacks will have annual sales of more than $1B." Plum is the No. 4 baby food brand in the country, with $93M in gross sales during 2012. (PR) Comment!
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10:05 AM Wal-Mart (WMT +0.5%) thinks it has the answer on how to keep its shelves stocked adequately at stores as it introduces a new measure to link executive compensation to the issue. In the past, the company audited its on-shelf performance internally but will now turn it over to outside auditors. What started as anecdotal complaints on a lack of items at stores has turned into a larger flap which was even addressed during the firm's recent earnings call. (transcript). 3 Comments
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9:51 AM Microsoft (MSFT -0.3%) and other publishers will take a cut of every sale on pre-owned Xbox One games, according to gaming website MCV. Under a new arrangement, retailers will tap into Microsoft's cloud servers for a transfer of rights on sales of pre-owned games. Though the games can be sold at any price the retailers wish, estimates on the percentage of the sale they can keep are drifting steadily lower. Shares of GameStop (GME -2.4%) are lower on the day. Comment!
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9:41 AM Sherwin-Williams (SHW +0.7%) gets an upgrade from Baird to Outperform from Neutral (price target $205). Q2 margins in the Global Finishes segment were "very, very strong" in 2012, analyst Ghansham Panjabi noted on the most recent CC, before asking management if they believed they could beat the tough comp next quarter. "Yes, [but] we don't give guidance by segment," CFO Sean Hennessy said, before turning the conversation back to Q1. (transcript) Comment!
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9:37 AM Polar Capital's Brad Ginesin indicates the read-through for J.C. Penney (JCP -0.7%) from Sears Holdings' (SHLD -17.4%) shoddy quarter isn't too pretty. The hedge fund manager's laundry list of JCP/SHLD headaches: "...no consumer traction, drifting strategy, murky profit outlook, victim to strong competition." 1 Comment
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9:29 AM Beer market winners and losers: Tracking data from Citi Research showed Boston Beer was the big winner over the four-week period ending May 11, although Craft Brew Alliance (BREW) and Heineken (HINKY.PK) also made solid gains, sales up 10.7% and 7.1% respectively. The market share gains came at the expense of Anheuser-Busch InBev (BUD) and MillerCoors (SBMRY.PK, TAP) which saw sales slip during the same period. Comment!
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9:24 AM Boston Beer (SAM) increased sales by over 40% during a four-week tracking period, according to Citi Research. A combination of seasonal specials, higher promotional spending, and attractive pricing helped beer sales shoot up 18% in dollar terms. Comment!
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8:58 AM News Corp. (NWS, NWSA) says its board of directors formally approved the split of the company into two entities to be called 21st Century Fox and the new News Corporation. After the separation, the new News Corp. will be have an authorization to buy back $500M in stock in its back pocket. A rights agreement was also adopted to protect shareholder interests. NWS +0.6% premarket. (PR) Comment!
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8:46 AM Douglas Kass cuts against the grain on the wave of analyst love following Procter & Gamble's (PG) move to bring back A.G. Lafley as its CEO, saying he will short P&G between $81.50 and $82 based on an over-reation to the news and the lower guidance he thinks is coming from the company. PG +2.6% to $81.33, nearing Kass' entry point. 2 Comments
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8:41 AM Annual shareholder meeting headaches: An increasing trend at this year's round of shareholder meeting for major companies is a rash of negative publicity from loud activist shareholders looking to score points on political issues. McDonald's (MCD) had to engage in spirited debate and a shareholder vote on childhood obesity - while CBS (CBS) had its meeting nearly taken over by a pro-Israel group. During the Q&A session of Time Warner's (TWX) meeting, CEO Jeff Bewkes was bombarded with complaints over CNN's coverage on major issues. Though the companies won all the important shareholder votes, execs appeared a little more bedraggled than normal. 7 Comments
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8:31 AM Shares of Foot Locker (FL) slip 2.2% premarket after the retailer's Q1 earnings came in just ahead of estimates but it didn't give investors any meaty guidance to bite on. The quarter from Foot Locker doesn't appear to raise any alarm bells for Nike (NKE) or Under Armour (UA), although the firm's conference call could tip off some buying trends for the athletic apparel sector. Comment!
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8:07 AM Shares of Wendy's (WEN) are up 2.6% premarket after a juicy upgrade from Janney Montgomery Scott to a Buy rating. The company's new store design has been drawing praise and is viewed by some as a differentiator between the chain and the beaten-down look of some other rivals. 1 Comment
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7:58 AM Chrysler (FIATY.PK) says software issues held up production this year which led to a nasty cut of the automaker's profits, but a bigger issue could be lying under the surface. Sources tell the Detroit News that the large number of rookie workers on the assembly line were the real bug in the system. Comment!
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7:37 AM Retail reporter Sapna Maheshwari delivers a sobering thought on Abercrombie & Fitch's (ANF) sub-par quarter (SSS -15%). She notes the rehashed "fat" comments from CEO Michael Jeffries didn't go viral until after the reporting period. The exec was trying to highlight the aspirational aspect of the ANF brand, but made a bit of a mess of it all. The conference call at 7:30 AM EST could be interesting. ANF -7.5% premarket. (webcast) Comment!
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7:30 AM UBS upgrades Procter & Gamble (PG) to a Buy rating following the company's appointment of a new CEO. It could be a cavalcade of analyst upgrades and commentary as the consumer products giant gets teed up again as a growth story due to the management change. (Previous: Citi wants P&G to put the band back together) PG +2.3% premarket. Comment!
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7:23 AM More on Abercrombie & Fitch (ANF): The company was selling, but not as many people were buying in Q1. Comparable store sales fell 15% including direct-to-consumer sales with Hollister off 18% and the Abercrombie & Fitch brand falling 13%. Sales weakened at the end of the quarter even with improving weather patterns. The retailer says "external pressures" led to significant inventory issues during the period. Full-year EPS guidance is taken down to $3.15-$3.25 and Q2 is adjusted to $0.28-$0.33. ANF -7.5% premarket. (PR) Comment!
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7:06 AM May is an important month for the automobile industry after the last three years saw a post-Q1 dip in sales. Industry forecasts are for May volume to top 1.4M units, which would mark a 9% Y/Y improvement. If May comes in strong, annual forecasts are likely to be raised as the threat of another late spring swoon is lifted. What to watch: A pickup in housing could help lift sales of full-sized pickups, while the average selling price for automakers (GM, F, FIATY.PK, NSANY.OB, TM, HMC, VLKAY.PK) should look strong as they take their foot off the promotional pedal. Comment!
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6:57 AM Sony (SNE) plans to sell $1.5B in five-year bonds in June. Of the total $1.1B is slated to be used to pay existing debt and $400M is planned for capital investment. SNE -1.5% premarket. Comment!
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6:52 AM Hulu (DIS, NWS, CMCSA) has received buyout offers from DirecTV and Time Warner Cable in the first round of bidding, according to the New York Post. Guggenheim Partners, which is helping the tech concern sell itself, isn't saying if P-E firms are joining the chase. Comment!
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4:35 AM U.S. District Judge Denise Cote has dealt a blow to Apple (AAPL) over charges that it manipulated e-book prices, giving a "tentative view" that the Department of Justice will be able to show "direct evidence" that Apple took part in a conspiracy with publishers to raise prices. Apple is the last man standing in the case after all the publishers involved settled. The trial is due to start on June 3. 5 Comments
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4:26 AM Google (GOOG) could reportedly enter the fray for Israeli start-up Waze, which provides a mobile phone app that helps drivers avoid traffic jams and has over 40M users. Waze has been holding talks with Facebook (FB) for a $1B deal while there was chatter earlier this year of Apple offering $500M. Waze could disappoint them all by raising more venture-capital money and staying independent. Comment!
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