MARKET CURRENTS
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MARKET CURRENTS
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Today - Tuesday, June 18
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4:46 PM More on La-Z-Boy (LZB): FQ4 beats on all counts. Net earnings fell 6.6% Y/Y however, as year-ago results were bolstered by a large benefit from antidumping income. Margins improved in the latest period to 33.8% from 31.6%. Retail segment sales, which includes La-Z-Boy Furniture Galleries stores, swung to an operating profit of $4M from a year-earlier loss of $1.1M. Same-store written sales rose 11.2%, while wholesale upholstery, the main contributor to its top line, saw revenue grow 8.4% to $289.4M. Comment!
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3:41 PM McDonald's (MCD +0.9%) will sell premium hamburgers in Japan for a limited time in order to see if the company can improve the sluggish results it has been seeing in the nation. (MCD Japan sales timeline) Comment!
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3:14 PM Smoking rates in the U.S. dipped even lower than expected, according to data released by the CDC. Last year, only 18% of adults in the U.S. identified themselves as smokers after the rate stalled around the 20% to 21% range for a seven-year period. The news isn't a shock for Big Tobacco (MO, LO, RAI, BTI) which has been pitching the case that electronic cigarettes will be a billion-dollar business. 3 Comments
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2:44 PM Tesla Motors (TSLA +1.3%) shares are on the move amid some chatter that General Motors is interested in the EV automaker's technology. Though Tesla supplies Mercedes-Benz with electric drivetrains, there hasn't been any prior indication that the Big Three automakers have had any serious interest in working a deal with Tesla. 9 Comments
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2:37 PM Chrysler (FIATY.PK) has reportedly decided to comply with a government request to recall 2.7M vehicles to end a showdown over the issue which upset the status quo in the industry a bit. Comment!
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2:31 PM "We hosted meetings at [company] HQ with senior management," Sterne Agee proudly says of talks with Ulta Salon's (ULTA +0.3%) top brass. Analyst Ike Boruchow ups the price target on the shares to $104 from $100 citing a positive outlook for the "themes of the day": Margins and inventory. Comment!
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2:13 PM A mini-drama is evolving in the automobile industry with Chrysler (FIATY.PK) expected to formally inform the NHTSA it won't comply with a request to recall certain older Jeep Grand Cherokee and Jeep Liberty models. If the stalemate continues between the automaker and the agency, the issue could be resolved in hearings or in court. (Chrysler White Paper on recall) Comment!
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2:05 PM United Technologies (UTX +1.1%) has been ordered to pay $473M, plus interest, for overcharging the US Air Force for jet engines. The ruling is the result of a lawsuit filed by the DoJ in 1999 seeking reimbursement for inflated costs by UTX unit Pratt & Whitney under the False Claims Act. Since the judgement includes interest charges, hundreds of millions in dollars could be added to the $473M price tag once it's all tallied, as the overcharges go all the way back to 1986. Comment!
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1:55 PM Not all consumer staples funds (XLP, FXG, VDC, KXI, PMR) are created equal, according to S&P Capital IQ. Fund managers' weighting toward certain sub-sectors or their willing to invest globally or lean on fundamentals can create varying rates of return in the staples group. If there is some common ground, it's with the propensity of staples favorites Procter & Gamble (PG +0.1%), Coca-Cola (KO +0.5%), Philip Morris (PM +0.2%), and Wal-Mart (WMT +1%) to show up as top ten holdings. Comment!
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1:15 PM Noodles (NDLS) will offer 5.4M shares in a price range of $13 to $15 in its IPO. What to watch: The chain boasts some of the highest margins in the fast-casual sector and has seen comparable store sales growth accelerate over the last few years. (S-1) 2 Comments
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12:44 PM Heard during Starbucks' (SBUX +1.4%) presentation at the Jefferies 2013 Global Consumer Conference: 1) The company has a long-term revenue growth target of +10% and EPS growth target of 15%-20%. 2) Opportunities for expansion of food sales exist around the world. 19% of total Starbucks sales is food - led by France with a food mix of 28% and trailed by China at 10%. 3) New food products are trending well including new items from recently-acquired La Boluange. 4) The company's loyalty program accounts for almost 25% of all transactions. 5) Rest easy Green Mountain Coffee Roasters (GMCR). CFO Troy Alstead says Starbucks has no plans to turn into a "deep equipment" company.(webcast) 1 Comment
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12:30 PM Summer blockbusters Man of Steel and Iron Man 3 are strong indicators that moviegoers in the U.S are willing to buck up for the higher ticket prices for the IMAX (IMAX -1.6%) format. Last weekend, Man of Steel averaged a rousing $53K per IMAX screen. Comment!
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11:39 AM "A mid-single digit operating margin over the next 2-3 years is reasonable," says Piper's Stephanie Wissink of Wet Seal (WTSL +0.7%) in a cautious note. Although "sales stability, merchandise margin improvement, and cost leverage" should drive margin expansion, "the current environment" warrants trepidation regarding store growth expectations, she adds. Meanwhile, SA contributor Unbigoted Research says the stock could be "the turnaround story of 2013". Comment!
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11:16 AM Heard during Wal-Mart's (WMT +0.4%) presentation at the Jefferies Global Consumer Conference: 1) Sam's Club CFO Michael Dastugue notes online channels are picking up as the chain dabbles with more social media promotions. 2) On products trending well, Dastugue notes mattress sales are strong. Should Sealy (ZZ) and Tempur-Pedic (TPX) be worried with Serta and Night Therapy leading sellers at Sam's? 3) The company plans to open 15-20 new and relocated clubs during FY14. 4) New tech initiatives include self checkout kiosks, convertible registers, and scan & go testing. (webcast) Comment!
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10:49 AM Amazon (AMZN +1.2%) tries to profit from the growing use of Facebook (FB +2.8%) as a "social gifting" platform by launching Amazon Birthday Gift, a solution that allows Facebook users to send a friend Amazon credit for his/her birthday, and then lets other friends to add to the pot. The product is separate from Facebook's Gifts platform. Also: 1) Leveraging existing content deals, Amazon is adding videos and games from Disney, Viacom, Warner Bros., and Electronic Arts to its Kindle Freetime kids' platform. The move comes shortly after a major deal was reached with Viacom for kids' shows. 2) AdAge reports Facebook's video ads will be delayed until fall. The magazine reported in April Facebook plans to charge up to $1M per daily ad slot. Comment!
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10:43 AM Heard during a presentation by McDonald's (MCD +1.1%) at the Jefferies Global Consumer Conference: 1) The company gives out more details on its After Midnight menu at select locations, noting that the Midnight to 4:00 AM fare will include popular breakfast items. 2) Execs says the 1,500-1,600 planned new restaurants and another 1,600 re-images will help lift sales by 6% to 7% after one year. 3) The dollar menu will continue to be focus and will see new items added later this year. (webcast, slides) Comment!
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10:31 AM Lennar (LEN -1.7%) expands its homebuilding operations into the Nashville, Tennessee market by acquiring control of approximately 40 homesites in the Tollgate Village community. The company says been evaluating the Nashville market for some time and "believes this is a perfect time to enter." The expansion into the Tennessee market is similar to LEN's other recent strategic moves into the Atlanta, Seattle, Portland and Central Texas regions, and now gives the company operations in 19 states and 46 markets across the nation. Comment!
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10:29 AM Kimberly-Clark (KMB -0.4%) plans to invest $234M in Venezuela in order to expand manufacturing capabilities with the nation facing a national shortage of critical bathroom products. The company currently has 15% of the market for toilet paper in the nation, but that mark could be on the rise with capacity slated to be boosted by 30% to 40%. Comment!
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9:53 AM New Oriental Education & Technology (EDU +0.9%) continues to be the subject of privatization chatter, according to the South China Morning Post. The company has been slowly recovering its footing after closing under-performing schools and riding out an attack from a short seller. 1 Comment
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9:16 AM Adidas (ADDYY.PK) thinks sales of soccer-related products will rise to €2B ($2.7B) next year as the World Cup in Brazil drives demand. Nike (NKE) also is betting heavily on the global event - including a sponsorship of the popular national team from the host country. Sales of soccer apparel/gear is expected to be high enough in 2014 to also move the needle for Dick's Sporting Goods (DKS). Comment!
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9:07 AM Starbucks (SBUX) will be the latest restaurant chain to post calorie information on menu boards across the country. The company continues to try to position itself as a healthy alternative to fast food fare with its new grab-and-go lunches and line of Evolution Fresh juices, but also has its share of calorie headaches if whips, milks, and sugary options are included in beverage calorie counts. 2 Comments
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9:00 AM Campbell Soup's (CPB) acquisition of Danish firm Kelsen Group is a move designed to boost the company's presence in China and other global markets, according to food industry analysts. With its 20-year history of growing brands in China, Kelsen provides a convenient shortcut to the booming sweet biscuits market in the nation. Comment!
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8:42 AM Oppenheimer lifts its price target on SodaStream (SODA) to $85 following the company's intriguing deal with Whirlpool to jointly develop a home carbonation system. SODA +1.5% premarket to $72.05. 1 Comment
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8:31 AM Tim Hortons (THI) has attracted the attention of a second hedge fund with Scout Capital Management increasing its stake to 5.5% and tipping off it plans to raise some issues with management. Earlier this year, Highfields Capital pushed the Tim Hortons board to consider U.S. expansion. (13D) Comment!
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8:24 AM A profit warning from Hormel is enough to scare off some investors across the sector. Premarket: Tyson Foods (TSN) -1.3%, Pilgrim's Pride (PPC) -2.0%, Seaboard (SEB) inactive. Comment!
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8:19 AM Hormel (HRL) lowers estimates for profitability this year, dropping its EPS outlook to $1.88-$1.96 from prior guidance of $1.93-$2.03. The company cites higher input costs and poor pork sales for the shortfall. HRL -9% premarket, working off much of the gains picked up from enthusiasm in the sector after Smithfields Foods was bought out. 2 Comments
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8:06 AM Toys "R" Us reported sales fell 7.8% to $2.4B during its FQ1 as cold weather contributed to slow demand. Comparable store net sales dropped 8.4% in the U.S. and 6% in the international segment. The below-par performance from the toy seller doesn't bode particularly well for Hasbro (HAS) and Mattel (MAT). 1 Comment
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8:03 AM KeyBanc is "incrementally positive on chicken," but that doesn't mean any price will do for shares of Sanderson Farms (SAFM) which are downgraded to Hold from Buy. In a valuation call, analyst Akshay Jagdale says protein companies have generally traded at a 12-14 multiple over the past seven years and at 13.8x estimates, SAFM's valuation is "full." Comment!
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7:52 AM Shares of Sony move up 3.6% premarket after Dan Loeb turns up the heat on his proposal to see the company spin off its entertainment business. What to watch: Sony holds its annual meeting on Thursday where execs will have to either publicly back a plan to keep the firm together or leave the door open just a crack that a spinoff is a possibility. Comment!
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7:47 AM ICSC Retail Store Sales: +0.3% W/W, vs. -2.7% last week. +2.5% Y/Y vs. +2.2% last week. Comment!
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7:05 AM Jack In The Box (JACK) plans to close 67 Qdoba restaurants by the end of its current fiscal year after analyzing sales performance metrics. A charge of approximately $40M will be taken to cover costs associated with the closings. Expansion is still on tap for Qdboa, with the company saying 70 to 75 new outlets are scheduled to be opened this year and another 60 to 70 in 2014. Comment!
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6:57 AM Ford (F) plans to add buttons and knobs to its MyFord Touch infotainment system on more models. The automaker is reacting to some criticism over the digital touchscreen which was called too complicated by some drivers. 4 Comments
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6:51 AM Fifth & Pacific (FNP) says a court in New York ruled in its favor in a trademark case involving its Kate Spade brand. The decision will allow the Kate Spade Saturday brand name to survive in the market in its current form. Comment!
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6:41 AM North Carolina is the latest state to attempt to block Tesla Motors (TSLA) from selling electric vehicles directly to consumers. The state Senate has already approved a measure to ban Tesla from selling online in the state and the House could vote on it within weeks. 38 Comments
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3:59 AM Paris Air Show: Boeing (BA) has lost out to Airbus (EADSF.PK) for a major order from easyjet (EJTTF.OB), which has agreed to purchase 135 A320 aircraft in a deal that would be worth $11.5B at list prices but in which the airline received a "very substantial" discount. easyjet has also taken an option for another 100 planes. (PR) Comment!
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3:18 AM As expected, France Telecom's (FTE) board yesterday kept Stephane Richard as CEO despite French authorities placing him under investigation for his role in the suspected misuse of public funds. Richard's status was pretty much assured after the government said they would back him. The board said it doesn't believe that Richard's legal problems "impede his ability to fully and effectively" manage France Teleom. (PR) Comment!
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3:06 AM The EU new-car market showed no signs of bottoming out in May as registrations dropped 5.9% to 1.04M units, the lowest level for the month since 1993. The fall followed a 1.7% gain in April. In January-May, registrations slid 6.8% to 5.07M vehicles. GM (GM) was among those to suffer the most in May with an 11.3% decline. Toyota registrations dropped 4.9% but those of Ford fell just 0.3%. (PR) 1 Comment
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1:55 AM Sony (SNE) repeats that it will review Daniel Loeb's proposal that the company float its entertainment business after Loeb's Third Point hedge fund increased its stake in the electronics firm to 7% from 6.5%. In the past, Sony has said that its film and device units are better together - CEO Kazuo Hirai believes they have valuable synergies - and that it would consider Loeb's spin-off idea. Comment!
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