This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Lululemon, eBay and Staples: 3 Retailers United Under a Red Flag

Stocks in this article: LULU EBAY SPLS AAPL SBUX

NEW YORK (TheStreet) -- Companies have been repatriating earnings in order to boost revenue, as in the case of Lululemon (LULU), to increase available U.S. cash as in the case of eBay (EBAY), or to smooth over the costs of restructuring as in the case of Staples (SPLS) -- but shareholders rarely see a benefit.

Repatriation is a necessary evil for all companies that sell goods or services outside the U.S. The word simply describes converting a foreign currency into the national currency. The amount received depends on the exchange rate at settlement time and, accordingly, there is an exchange risk there, but the risk to investors is even greater because it provides a way for multinational companies to play a shell game.

Roughly 362 companies in the Fortune 500 maintain tax haven subsidiaries, according to the Citizens for Tax Justice in its "Offshore Shell Games 2014" report published June 2014. "Only 55 Fortune 500 companies disclose what they would expect to pay in U.S. taxes if these profits were not officially booked offshore," says the CTJ. "All told, these 55 companies would collectively owe $147.5 billion in additional federal taxes."

Tax avoidance, or to put it nicely "minimization," is nothing new. In 2010, Bloomberg called out several drugmakers for finding ways to avoid paying taxes and both Apple (AAPL) and Starbucks (SBUX) are currently under investigation by the EU for their respective tax structures. Such government scrutiny is obviously necessary, and poses a risk to investors.

Repatriation can also be a way for a company to afford activities that make it look like it is doing well, even if it isn't. Take eBay for instance.

The company took a $3 billion tax charge in order to repatriate $6 billion in foreign earnings and will use part of that money to execute its $5 billion share buyback program.

Does that mean eBay is a buy? Absolutely not. Taxes were a huge hit to net income for last quarter, its share price has fallen 14% over the past three months, and David Dorman, one of its own directors, doesn't own a single share in the company. Not very encouraging.

Repatriation can also be a way to cover up losses, as we can see looking at Lululemon.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,057.40 +44.51 2.21%
NASDAQ 4,743.2230 +98.9110 2.13%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs