Saturday, December 20, 2014
- Fast-casual restaurants grew comparable-store sales 8% in Q3, a pace of restaurant industry out-performance forecast to have continued into Q4.
- Panera Bread (NASDAQ:PNRA) and Noodles (NASDAQ:NDLS) have both gone through some growing pains, but are hitting the innovation lever (Panera 2.0, catering, mobile).
- While Chipotle (NYSE:CMG) remains the major success story in the segment with a string of double-digit comp quarters, new concepts are drawing interest.
- IPO-launched Habit Restaurants (NASDAQ:HABT) has the type of on-trend concept (low average check, quick service) and projected growth track (104 units to 2K) that could bring in momentum investors.
- In the fast-casual pizza sub-segment it's wide open. Project Pie, RedBrick Pizza, PizzaRev (NASDAQ:BWLD), Blaze, Pieology, and Pie Five Pizza all have an innovative approach. Expect a fast-casual pizza IPO from at least one of the players in 2015.
- Automobile recalls in the U.S. now number over 60M this year to set a new record, according to a tally from Bloomberg.
- The mind-numbing total is over double the prior annual recall record with Japanese automakers (OTCPK:NSANY, TM, HMC, OTCPK:MZDAY, OTCPK:SZKMY, OTCPK:FUJHY, OTCPK:MMTOF) taking the hardest hits due to exposure to Takata.
- Though automakers see legal and operational costs increase when recalls soar, the impact on the brand in many cases is short-lived.
- Despite having a year to forget amid a public relations headache, General Motors (NYSE:GM) is a top pick in the sector for many analysts.
- The title of SA contributor Alpha Hungry's recent piece indicates where the investor stands: My Best Idea For 2015: General Motors.
- Related: U.S. auto sales forecast to end the year strong (Dec. 19, 2014)
- With crude oil prices near five-year lows, some analysts say gas stations may be the best way to play the energy sector right now, with CST Brands (NYSE:CST), Murphy USA (NYSE:MUSA) and Marathon Petroleum (NYSE:MPC) as pure plays worth watching.
- Gasoline retailers enjoy their largest profit margins in falling price environments such as today, says Again Capital's John Kilduff.
- The gas station trend is clearly seen with refinery Valero's (NYSE:VLO) 2013 spinoff of its retail CST Brands, which operates 1,900 gas stations in North America and whose stock has easily outperformed VLO in recent months; Gabelli last week increased its 2014 EPS estimate on CST because of lower oil prices.
- MUSA and MPC, also created as gas station spinoffs from refineries, have outperformed their parent companies as well.
- Tesoro (NYSE:TSO) said its retail segment enjoyed record performance in the most recent quarter, while big box stores such as Costco (NASDAQ:COST) that have gas stations connected to their stores also noted the benefit of lower oil prices in their earnings reports.
- The S&P Retail ETF (NYSEARCA:XRT) is up 3.4% over the last month to outpace the S&P 500 Index as consumer spending trends improve. Analysts have honed in on some categories which show some promise for growth.
- Drugstores: The transition by the sector into more health/wellness services sets it up for new growth channels. CVS Health (NYSE:CVS) reported strong comparable-store sales despite the full tobacco exit, while Rite Aid (NYSE:RAD) is prepping for a roll-out of RediClinics and HealthSpot kiosks. The visibility on Walgreen (NYSE:WAG) is somewhat clouded by the giant Alliance Boots integration, although it's ahead of rivals on the tech front with its rewards program, pharmacy app and developing online doctor concept.
- Athleisure: There's some gender initiatives going on in the athletic apparel sector with Under Armour (NYSE:UA) and Nike (NYSE:NKE) growing their women's business and Lululemon (NASDAQ:LULU) expanding on the men's side. All three companies have been closely on-trend with their assortment in a category with explosive demand. Importantly, pricing has held up this holiday season in the U.S., note retail watchers.
- Online replenishing: Fresh research into shopping trends indicates certain categories see continued buying through the online channel as consumers become attuned to a brand. Retailers positioned well to see more gains from the trend include Williams-Sonoma (NYSE:WSM), Ulta Beauty (NASDAQ:ULTA), Staples (NASDAQ:SPLS), Office Depot (NASDAQ:ODP), Sephora (OTCPK:LVMHF), Dick's Sporting Goods (NYSE:DKS), and of course Amazon (NASDAQ:AMZN).
- P-E buyouts: There are plenty of candidates in the retail sector for a leveraged buyout similar to the action that helped propel shares of PetSmart (NASDAQ:PETM) +40% from their lows. Keep an eye on Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO), and Ann (NYSE:ANN).
- Safeway (NYSE:SWY) and Albertsons have agreed to sell 168 stores across eight states, mostly in the western U.S., in a bid to gain merger approval from U.S. antitrust regulators.
- The companies, which together own ~2,400 stores, say they expect the buyers to hire most, if not all existing store workers.
- The biggest beneficiary of the deal appears to be the Haggen chain, which is purchasing 146 stores and adding ~$750M in sales.
Friday, December 19, 2014
- Consumer spending in several areas is likely to benefit from lower pump prices, but J.P. Morgan's Ryan Brinkman thinks the auto industry may benefit more than most from consumers having more money to spend on all things apart from fuel.
- The analyst sees Goodyear Tire (NASDAQ:GT), American Axle (NYSE:AXL), GM and Ford (NYSE:F) - in that order - as best positioned to benefit, followed by suppliers with material exposure to full-size trucks and SUVs that is not as great as AXL, including Tenneco (NYSE:TEN), Lear (NYSE:LEA) and Tower International (NYSE:TOWR).
- Tesla (NASDAQ:TSLA) is an exception, however, as Brinkman sees a potential reduction in the terminal value of cash flows on his reduced outlook for Model 3 vehicles if fuel prices remain low longer-term.
- News Corp. (NASDAQ:NWS) has bought BigDecisions.com, a site that "aims to help Indian consumers make smarter financial decisions through interactive, decision-making tools powered by sophisticated algorithms and data." Terms are undisclosed.
- With News Corp. stating BigDecisions.com has "helped some 40,000 users," the site appears to have a fairly small base as of now. Last month, News Corp. spent $30M to take a 25% stake in Indian real estate site PropTiger.com.
- Staples (NASDAQ:SPLS) states its recent data breach (first disclosed in October) involved the deployment of malware to "some point-of-sale systems at 115 of its more than 1,400 U.S. retail stores." Action was taken in mid-September to remove the malware.
- The company thinks the malware "may have allowed access to some transaction data at affected stores, including cardholder names, payment card numbers, expiration dates, and card verification codes." It thinks 1.16M payment cards "may have been affected." A list (.pdf) of affected stores and dates has been provided.
- SPLS -0.5% AH. Staples, of course, is far from the only company to report a high-profile breach over the last 12 months.
- Tesla Motors (NASDAQ:TSLA) is out with more details on the new battery swap pilot program set to launch.
- Select Model S owners will be give the chance to test the service at a new facility in Harris Ranch, California
- The EV automaker says the battery switch will take three minutes.
- If Tesla determines that there is sufficient demand, it will invest in automation and design upgrades to cut down the swap process to under a minute.
- American Apparel (NYSEMKT:APP) trades higher after news broke last night on the company receiving buyout offers.
- A breakdown of the development by ValueWalk concludes the company is taking the offer seriously based on the observation that a $15M unsecured credit agreement hasn't been signed off on yet - despite being tipped off in November.
- Shares of APP are up 9% to $1.09, still well-below the $1.30-$1.40 offer price reported to be offered by a Dov Charney-friendly P-E firm.
- U.S. automobile sales are forecast to increase 11% in December to an annual selling rate of 16.6M units, according to a fresh forecast from TrueCar.
- The research firm says the industry benefited from lower gas prices and a better month of weather than was seen a year ago.
- For the full year, TrueCar expects total U.S. vehicle revenue to be up 8.3% to close to $1T.
- Transaction prices on new cars are up 1.9% to $31,831 YTD.
- Used vehicle sales are up 3.3% for the year.
- Related stocks: GM, F, TM, FCAU, HMC, OTCPK:NSANY, OTCPK:DDAIF, OTC:HYMLF, OTCPK:BAMXY, OTCQX:VLKAY, OTCPK:FUJHY, KMX, CRMT, AN, LAD.
- The age of connected cars appears closer with Google pushing forward with its next-gen Android M software designed to be integrated into automobiles.
- The industry has a bit of an uneasy relationship with Google, despite the company's open-source approach to the technology.
- Though most major automakers collaborate with Google through the Open Automotive Alliance - which aims for a common platform to drive innovation - the self-driving car initiative of Google and their own infotainment ambitions keep them wary.
- Analysts originally forecast vehicle-to-vehicle communication would be part of the connected car concept and be integrated into some models by 2016, although that timetable now appears unlikely.
- What to watch: Before any major breakthrough occurs, the DOT needs to weigh in on next-gen connected cars. That gets trickier with safety and security concerns teed up again after the high-profile GM recall debacle and crippling Sony hacking incident.
- Automaker stocks: GM, F, TM, HMC, OTCPK:NSANY, TSLA, OTCQX:VLKAY, OTCPK:DDAIF, OTC:HYMLF, OTCPK:BAMXY, OTCPK:MMTOF, OTCPK:PEUGF, OTC:RNSDF, TTM, OTCPK:MMTOF, OTCPK:SZKMY, OTCPK:FUJHY, OTC:RNSDF, OTCPK:GELYF, FCAU.
- Analysts expect a mixed holiday season for the retail sector in Hong Kong.
- While mass market retail is forecast to hold up with the level of demonstrations in the region moderating, there's some concerns on the luxury sector.
- The corruption crackdown by Beijing and the weak Yen are two potential drags on tourist traffic.
- Consumer confidence on the high end has also been weakening.
- What to watch: The critical Chinese New Year begins in February giving the luxury sector scant time for the environment to improve.
- Luxury sellers in HK: Gucci (OTC:GUCG), Prada, Louis Vuitton (OTCPK:LVMUY), Coach (NYSE:COH), Ralph Lauren (NYSE:RL), Michael Kors (NYSE:KORS), Swatch (OTCPK:SWGAY), Burberry (OTCPK:BURBY), and Tiffany (NYSE:TIF).
- Whole Foods Market (WFM -0.2%) sits in an ideal position to acquire smaller health and wellness chains, according to Sterne Agee.
- The company's FQ4 balance sheet showed it was light on long-term debt.
- Analyst Charles Grom identifies Fairway Markets (FWM +0.7%) and privately-held Earth Fare as potential targets for Whole Foods.
- DirecTV (DTV +0.1%) says subscribers will have access to the TV Everywhere offerings from Fox Networks (NASDAQ:FOXA).
- Beginning in January, DirecTV Everywhere will also include VOD content from Fox.
- DirecTV's strategy to offer streaming services from within the TV Everywhere platform differs from satellite rival Dish Network which is going with an OTT product.
- FDA Deputy Commissioner for Foods and Veterinary Medicine Michael R. Taylor sends Herbalife (HLF +1.1%) CEO Michael O. Johnson a letter requesting the company remove a broadcast advertisement on YouTube that mischaracterizes the regulator's role pertaining to dietary supplements. In the video, former FDA director Vasilios H. Frankos, Ph.D., states that during his time at the agency he made sure that nutritional supplements were safe and effective for use. This is surprising since the FDA does not regulate dietary supplements.
- The FDA's request is far from urgent. The video was published on April 12, 2011.
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