06/02/14 - 04:53 PM EDT
The live blogging, constant TV coverage and the overall hype surrounding the Apple developer's conference has me wondering: But, why? In what amounts to a giant free advertisement, Apple gets coverage of the latest and greatest tweaks to its operating system and even new products. But, for the most part, everything being rolled out, for the average user, is incremental (and, it could be argued, annoying because if the new operating system is at all radically different than the one customers just learned to use, they may now have to learn something different.)READ FULL POST
05/29/14 - 02:37 PM EDT
The most significant thing that came out of Valeant's VRX investor call Wednesday was this comment from CEO Mike Pearson: 'I probably was incorrect in talking about the $150 billion market cap company. That was just more a statement that we are not just going to sit back and do nothing and that we are just like each of the business units as hungry to achieve organic growth and continue to build shareholder value.' Later in the day, Pearson added: 'And I think we put -- maybe putting the $150 billion number out was a mistake, but I think our investors understood that. It meant that we're not satisfied with where we are. We're going to continue to try to build and drive shareholder value. And if you do that, you're eventually going to have a higher market cap.' They were 'incorrect' about discussing the $150 billion market cap? It was a 'mistake'?READ FULL POST
05/28/14 - 11:50 AM EDT
Here is a given in business: When companies start giving discounts and coupons, it's not out of strength.Today SolarCity issued a press release on its partnership with Groupon headlined, "SolarCity and Groupon Offer First of Its Kind Deal on Solar Power."From the press release:"Groupon (GRPN) will work with SolarCity (SCTY), the nation's largest solar power provider, to offer deals on solar systems in the Groupon marketplace. SolarCity makes it possible for many homeowners to pay less for solar electricity than they pay for utility power. For a limited time, customers can benefit from additional savings with a deal from Groupon by paying $1 for $400 off home solar power."Groupon has more than 200,000 active deals and more than 51 million active customers globally. The SolarCity offer is Groupon's first national deal in the solar category and is part of their growing collection of home and auto services deals."After purchasing today's solar deal on Groupon, homeowners will be contacted by SolarCity to schedule a consultation. If the homeowner decides to move forward with solar service, the discount will be applied. Homeowners can install their solar system at no additional cost and pay only for the power. SolarCity currently serves thousands of communities and major metropolitan areas in 15 states."READ FULL POST
05/28/14 - 11:01 AM EDT
Michael Kors beat on the top and bottom lines, but this is worth noting: Gross margin was 59.9%. While that's in line with the company's guidance, which called for a "slightly higher" number than last year's 57.7%, it missed when compared with 60.1% a year earlier.What's more, on its call this morning, the company guided to a slightly "lower-than-expected" margin for the current quarter.More disconcerting, perhaps: Last quarter's meager margin performance, relative to expectations, came on top of 12.5% increase in revenue. In theory, at least, margin should have risen commensurately.I understand the concept/argument that "everybody in retail missed on margin" in what arguably has been a horrible market for the sector.But that, I believe, makes my point stronger. Everybody and Kors is missing on its margin guidance -- yet, with better-than-expected revenue, it's the outlier against its peers, customers and the malls themselves. So the implication is that, in order to keep its revenue up, Kors is discounting more than ever.Lower margin guidance, as the company provided for this quarter, would seem to confirm that. Higher inventory, as was the case, doesn't help, and this suggests more discounting is on the way.READ FULL POST
05/27/14 - 11:43 AM EDT
When Michael Kors KORS reports earnings Wednesday morning, it could be a blowout. Or at least better than expected -- that is if a steady stream of analyst recommendations and reiterations, on the eve of earnings, is any indication.Typical is an analyst at Piper Jaffray, who just last week encouraged investors to buy the shares ahead of earnings.Investor enthusiasm is understandable. In the fourth quarter Kors was the outlier, outperforming its peers even as big customers, like Macy's M, were posting slower traffic. In the first quarter Macy's traffic was slow, too, but not to worry: It's Kors we're talking about, and (sarcasm alert) it transcends everything else going on in retail and, especially, at its wholesale customers.But there's a flipside to the story. And while it may be early, it would be foolhardy for investors -- caught up in what a great investment Kors has been -- to dismiss out of hand.Barclays, one of the few firms to veer from the bullish pack, wrote a report earlier this year aptly headlined, "Running Low on Jet Fuel." From the report:"An impressive multi-year track record has led the brand to a point of maturity earlier than anticipated..."READ FULL POST
05/22/14 - 11:28 AM EDT
A few weeks ago I went to a local Best Buy to buy a cable modem. It was a Thursday night at about 7, and there were more salespeople in the large, well-lit store than customers. As has been the case in recent visits, it was friendly, clean and the salespeople seemed to know the products. Or if they didn't, they did a good job pretending they did. Once I chose the product, I headed to the cash register. But before I got there I whipped out my phone, pulled up Amazon and found the same product for about $20 less. I showed it to the cashier. He called over a manager to get approval. Done. Then I asked the question that gave me the surprising answer: How many people price match? "Five out of 20," said the cashier. I was stunned. I would've thought it was more like 20 out of 20. It's such a no-brainer. But that's not the point. The point is, rather than showrooming, I bought it there...READ FULL POST
05/19/14 - 11:29 AM EDT
Something doesn't smell m'm! m'm! good! at Campbell's Soup CPB.In its earnings release today, the company blamed "a challenging consumer environment" for the soggy performance of its soup business, even with the help of promotional activity.On the company's earnings call, CEO Denise Morrison said:"Overall, organic net sales grew 1% which was 1% below our expectations, and I'm disappointed that we failed to deliver the sales growth that we anticipated in the third quarter."We believe this is in part a reflection of the persistence of an exceptionally challenging consumer environment as many others in the industry have noted, consumers are suffering from continuing underemployment, reductions in the SNAP Program and rising home, fuel, and healthcare costs."She's right, except there was a time canned soup was considered recession proof.READ FULL POST
05/15/14 - 11:07 AM EDT
Cisco's bounce says more about the little market that could than it does about Cisco.As I wrote in Reality Check this morning, the company remains yellow-flagged on the Reality Check Watch List because of what would appear to be a pipeline stuffed with too much unsold inventory. Much of that, as I point out, is stealth and off the company's balance sheet.But like grasping at straws, this is a market that wants to find the silver lining whenever possible and give companies that are "less bad," even if it's still bad, the benefit of the doubt.So despite revenue falling 5.5% -- the second straight quarter of negative revenue growth -- Wall Street preferred to view the decline as better-than-expected and go along with CEO John Chambers' comment that he is "pleased with the progress to return to growth."Never mind that we've seen this before, with Chambers steering investors down a dusty dirt road.READ FULL POST
05/12/14 - 08:58 AM EDT
All you need to know about Boulder Brands in the wake of its first-quarter results last week is that the growth of its Udi's gluten-free bread as well as the Udi's and Glutino brands combined is tumbling.Last quarter Udi's grew 37.4%; that's down from 62% a year earlier. And Udi's and Glutino combined grew at 31%, down from 50%.Margins aren't looking too hot either, with the gross margins sliding to 37.7% from 41.4% in the previous quarter and 42.7% a year ago. The company blames the margin, in part, on the impact of high egg white prices.Speaking on the earnings call, CFO Christine Sacco said:Despite higher egg white prices, we expect gross margin to benefit from a number of initiatives. The first is an improvement in our cost of goods, as we are in the process of improving our formulation, which requires less egg whites. This new formulation is in production, and when inventories flow through it will have a meaningful impact in Q3.Reality: One of the reason's Udi's has done so well is because many consumers prefer its taste to other gluten- free products.READ FULL POST
05/08/14 - 11:15 AM EDT
The other day I tweeted that if Green Mountain and SolarCity could hold their post-earnings gains, especially if the news wasn't great, it could mark a turning point for the momentum names in this market. Both are poster children of a market gone wild. As I write this, that's just what is happening as momentum investors, stung from the market's recent upheaval, reach for straws (or reasons to buy.) Green Mountain beat the street, but guided earnings to below expectations. SolarCity, as I wrote in Reality Check today, used a classic diversion tactic by giving its 2015 guidance at least six months prematurely. None of that, of course, matters. Investors who look for reasons to buy will see the glass as half full; just the opposite when they're headed for the exits...READ FULL POST
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