Tag Archives: Consumer Product

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Retail Sales Make Sigificant Recovery in February Data

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By 24/7 Wall St.

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So remember the very real impact from the payroll taxes on retail sales and consumer spending? The latest round of retail sales is magically showing that somehow the impact might have been very temporary and the market has responded to it.

The Commerce Department reported that retail sales in the month of February rose by 1.1%, and even the ex-autos retail sales rose by 1.0% in February. Bloomberg was calling for a gain of only 0.5% and the highest call was 1.0% on the headline figure. The Bloomberg consensus on an ex-autos retail sales figure was only 0.6%, with 1.1% being the highest projection.

Today’s news may not seem massive on the surface, but it really helps to show the resilience of Joe Consumer. You can blame higher gasoline prices, as those prices peaked at the end of the month in February, for some of the lift as gasoline station sales were up a sharp 5%. Retail sales were down at department stores, furniture stores and at restaurants. Even if you back out gasoline sales, the gain was 0.6% for the month.

If you wanted a first guess, it shows that perhaps pay increases or job growth may have offset the lower post-payroll tax impact. S&P futures are still in the red, but they are down only 2.75 points after the news. DJIA futures have ticked up into positive territory.

Filed under: 24/7 Wall St. Wire, Consumer Product, Economy, Retail

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Source: FULL ARTICLE at DailyFinance

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Wall St. Magically Thinks Yum! Brands' China Woes Are History

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By 24/7 Wall St.

KFC Restaurant

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Yum! Brands Inc. (NYSE: YUM) may have saved its slide of bad news out of China with the release of its same-store sales data. On the surface it looks awful, but Wall St. works off of a relative basis, and it seems that the horrific slide may have abated from the company’s troubles in China.

A Securities and Exchange Commission filing from Monday evening said that first-quarter same-store sales declined an estimated 20% for the China Division, which includes an estimated decline of 24% at KFC and an estimated 2% at Pizza Hut Casual Dining. Yum! Brands went on to say, “Consistent with prior years, the first quarter of the China Division is two months and includes January and February results.”

That 24% sounds awful, and frankly it is. What saved the day is that the February same-store sales growth was approximately 2% for the China Division. That includes flat same-store sales at KFC and 13% growth at Pizza Hut Casual Dining. There is a caveat here around the calendar, but Wall St. is taking it to heart that maybe Yum! Brands is escaping its food quality issues in China.

As far as the caveat, Yum! Brands said, “We estimate the timing of Chinese New Year had a positive mid-teen impact on February same-store sales growth for both KFC and Pizza Hut Casual Dining, offsetting a similar negative mid-teen impact in January. For the full quarter, the Chinese New Year impact to same-store sales growth was neutral.” Yum! Brands plans to release March same-store sales for its China Division on April 10, 2013, after market hours.

Yum! Brands shares closed at $67.84 on Monday, against a 52-week range of $59.68 to $74.75, and the fast-food company’s cycle-low was just in February at the peak of the woes in China after the company admitted to misjudging the situation there. Now shares are up 5% at $71.27 as Wall St. is hoping that it also misjudged the selling pressure so far in 2013.

We have not seen any real spillover into shares of McDonald’s Corp. (NYSE: MCD) on Tuesday. It closed at $98.89 Monday and shares are down only about $0.15 after the open.

Filed under: 24/7 Wall St. Wire, Consumer Product, Corporate Governance, Food, International Markets, Retail Tagged: MCD, YUM

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Pricing/Demand Trends Get Favorable For Beer, Wine and Spirits Makers

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By 24/7 Wall St.

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Good news is headed the way of beer, wine, and spirits makers. Those past cost pressures are abating and trends are starting to look up as a report from Moody’s Investors Service on Monday is signaling good news for the growth of the sector. Moody’s even went as far as to raise its outlook for the global beverage industry to “Positive” from its prior “Stable” outlook. Before you get too excited about winners, keep in mind that much of this is due to emerging market growth as well as “easing of commodity pressures” which are expected to be seen over the next 12 to 18 months.

Among the winning beer makers are Anheuser-Busch InBev (NYSE: BUD), Molson Coors (NYSE: TAP), SABMiller, Heineken and Foster’s Group. Wine and spirits makers like Diageo PLC (NYSE: DEO), Beam Inc. (NYSE: BEAM), Brown-Forman (NYSE: BF-B), Pernod Ricard, and Bacardi are expected to benefit as well.

Moody’s went on to say that A more benign commodity environment will help offset headwinds facing the industry. Those cost pressures have been very costly for producers, no pun intended. The headwinds include the following:

  • slow growth or declining consumption of mainstream beers in developed markets,
  • declining consumption of carbonated soft drinks,
  • new excise taxes or consumption and advertising restrictions in some markets,
  • and continuing economic challenges in Europe.

Global beer consumption is still growing at the same time that demand for wine and spirits is expected to remain strong. This is in the face of declines in beer sales in the UK and in the face of recent declining trends in the United States. An expanding middle class is expected to boost demand for premium beers, high-end wine and spirits in countries like China and also in parts of Latin America.

Another commodity price abatement will come from all of the hedges rolling off that were put in place when prices were high. The price hikes put in place will also lead to higher profits now that commodity prices are abating.

If you have been a reader of 24/7 Wall St. for long, you know we have tracked these issues in depth. These may be consumer products, but as “favorites” they also end up impacting society’s personal finances. All you have to do is look at the implications of our own piece called “9 Beers Americans No Longer Drink” and you can see how important these issues are. Also, here are the states where people drink the most beers.

Filed under: 24/7 Wall St. Wire, Analyst Calls, Commodities, Commodities & Metals, Compensation, Consumer Goods, Consumer Product, Economy, Editor’s Picks, Food, International Markets, Personal Finance, Retail Tagged: BEAM, BF-B, BUD, DEO, TAP

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Shareholder Attack of Smithfield Has Risks, But Merits Too (SFD, HRL, TSN)

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By 24/7 Wall St.

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Smithfield Foods Inc. (NYSE: SFD) is trading higher on word that a top shareholder called Continental Grain Co. has sent a letter urging the company to consider strategic alternatives. These alternatives include a breakup of the company into three units and include a dividend. We have just pondered whether or not there is the formation of an activist investor bubble happening or not, but either way this effort to drive Smithfield has some points which are very hard to ignore.

We cannot help but wonder if this strategy is a bit aggressive for the company if executed in full. Continental Grain owns about 6% of Smithfield, but what is interesting is that the group has recently lightened up by selling a small portion of its stake. The activist letter states:

Since the current management took over on August 31st, 2006 and through March 1, 2013, Smithfield stock has declined by 26 percent while, including dividends, Tyson Foods Inc. (NYSE: TSN) stock returned +70 percent and Hormel Foods Corporation (NYSE: HRL) returned +131 percent — a shocking divergence in shareholder return among industry competitors. During this time, Smithfield has paid no cash dividends, while Tyson has cumulatively paid $429 million and Hormel has paid $728 million.

Despite the poor performance of Smithfield stock (last year alone it was down 11 percent while the S&P was up 16 percent), management has been extremely well compensated. The CEO has received $37 million in total compensation over the past two years.

While a breakup into three units would probably unlock value, it is important to realize that the market cap here at a new 52-week high of $25.67 is only $3.57 billion. That may just unlock value to the point of irrelevance for each of the units. That being said, it is pretty unforgivable that Smithfield has not paid a dividend out to its shareholders. If the company could take away that $37 million going forward then it would have enough to pay a 1% dividend yield without dipping into other cash.

Here are the points of interest in a supplement to the SEC filing which outline Continental’s efforts.

Filed under: 24/7 Wall St. Wire, Activist Investor, Compensation, Consumer Goods, Consumer Product, Corporate Governance, Dividends & Buybacks, Food, Retail Tagged: HRL, SFD, TSN

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Strong Household Net Worth Gains, Led By Houses and Financial Assets

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By 24/7 Wall St.

Money, US, $100 bills

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A report from the Federal Reserve is signaling that US households have seen a substantial rise in their net worth. With the recession not being too long ago and with many workers still unemployed, this is great news when the news flow is still mixed to cautious on so many fronts.

Today’s report of the Flow of Funds Summary Statistics for the fourth quarter of 2012 shows that household net worth was up more than $1.1 trillion from the prior quarter to about $66.0 trillion at the end of the fourth quarter of 2012. It also shows that the value of corporate equities and mutual funds owned by households expanded by $130 billion and the value of real estate owned rose by $480 billion in the quarter.

This matters because the report on net worth is the difference between the value of households’ assets and liabilities. There are still some debt areas growing in the report. Debt of the domestic nonfinancial sectors expanded at a seasonally adjusted annual rate of 6.5% in the fourth quarter, which is 4 percentage points higher than the third quarter. Household debt rose by an annual rate of 2.5% in the fourth quarter and that is actually a contraction of 0.75%. Consumer credit rose at an annual rate of 6.5% percent.

U.S. companies are also sitting on a virtual mountain of cash. That is partly tied to corporate bonds but that figure rose to $1.79 trillion from $1.77 trillion the prior quarter.

There is a huge difference of what is happening at the federal level versus the state and local levels. State and local government debt had been flat in the third quarter but it fell by 3.75%. Washington continues in its irresponsibility trend as the federal government debt rose at an annual rate of 11.25% in the quarter. It is very hard to consider that this is good news on the Federal side, but it is the lowest growth of federal debt with a formal 10.9% growth for all of 2012, down from 11.4% debt growth in 2011, 20.2% growth in 2010, 22.7% in 2009, and 24.2% in 2008.

The total assets were not seasonally adjusted, but this grew from $78.2187 trillion in the third quarter to $79.5248 trillion in the fourth quarter. Real estate values rose from $19.4357 trillion to $19.9144 trillion. Financial assets rose from $53.6061 trillion to $54.3905 trillion.

The real household net worth figures rose from $64.8981 trillion in the third quarter up to $66.0717 trillion in the fourth quarter.

FULL DATA FROM FEDERAL RESERVE

Filed under: 24/7 Wall St. Wire, Accounting, Banking & Finance, Bankruptcy, Compensation, Consumer Product, Corporate Governance, Dividends & Buybacks, Earnings, Economy, Personal Finance Tagged: featured

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Smith &amp; Wesson Gun Demand Blows Profits, Sales, and Guidance Away

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By 24/7 Wall St.

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You have already seen the positive earnings report from Sturm, Ruger & Co. (NYSE: RGR) and positive comments from sporting goods stores about gun and ammo sales. Now we have Smith & Wesson Holding Corp. (NASDAQ: SWHC) shooting the lights out on its earnings report. If you want to know what the specter of gun control does, imagine a 38.8% sales gain year over year! That is what the gun-maker reported in its fiscal third quarter.

Net sales came to $136.2 million and net income from continued operations was $17.5 million or $0.26 in earnings per share. Thomson Reuters had estimates of $0.23 EPS and $133.7 million in sales.

The company also raised its guidance for fiscal 2013 net sales from continuing operations to a range of $575 million to $580 million. Thomson Reuters has estimates of $561.3 million in sales.

Demand is helping margins as well: Gross profit for the third quarter was 36.8% of net sales at $50.1 million compared with gross profit of 30.6% of net sales or $30.0 million a year earlier. At the end of the quarter, S&W had no borrowings under its credit facility and it ended the quarter with a cash balance of $62.0 million. It even spent some $20 million buying back shares of its common stock in the quarter.

We were not expecting that the numbers would have a profound market move in either direction. After all, the demand and shortages are very well known. That being said, Smith & Wesson shares were down about 0.6% at $10.22 today and the stock is down about 1% or so in the after-hours.

Our take is rather simple: imagine how much the gun industry could have made if they were actually able to even be close to meeting the demand out there right now.

Filed under: 24/7 Wall St. Wire, Consumer Goods, Consumer Product, Earnings Tagged: RGR, SWHC

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Google Prepares Streaming Music Launch — Fortune

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By 24/7 Wall St.

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We noted last week in our report on the first music industry profit in more than a decade that Google Inc. (NASDAQ: GOOG) was believed to be negotiating with music industry players to license rights to a streaming music service. The negotiations must be going well.

Fortune magazine reports exclusively today that it has been briefed on Google’s streaming music service by “sources in the record industry and at Google.” The streaming service, which would follow the subscription model used by privately held Spotify, would come under Google’s YouTube division and supplement the company’s digital music locker service currently available on Google Play. The subscription service is expected to launch later this year.

It was probably only a matter of time until this happened. YouTube now streams ad-supported music videos under agreements with the music industry and shares the revenue with the record companies. Privately held Warner Music Group now generates about 25% of its digital revenues from streaming according to Fortune.

Last year, digital revenues accounted for $5.6 billion of the music industry’s total revenue of $16.5 billion. Licensed subscription services such as Spotify and Rhapsody accounted for about 10% of digital revenues.

YouTube’s clout could have a major impact on subscriber streaming services and may have an impact on the so-called freemium radio services of Pandora Media Inc. (NYSE: P), which recently capped its free, ad-supported listening hours at 40 a month. Spotify offers subscribers the capability to listen to any of the millions of songs on thousands of albums and CDs in its catalog by adding it to a playlist. The company also offers a streaming radio service similar to Pandora’s.

Spotify’s problem, one it shares with Pandora, is the high licensing fees which can eat up 80% or more of revenues. Google has much deeper pockets than either of these competitors, plus it already has proven that its YouTube service can make money for record companies. Figuring out new ways to monetize listeners’ appetite for music and how to pay for it is Google’s biggest advantage here. Remember, the music industry’s first concern is money. Music ranks no higher than second.

Filed under: 24/7 Wall St. Wire, Consumer Product, Entertainment, Technology Companies Tagged: GOOG, P

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Is Groupon Really a "Buy"???

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By 24/7 Wall St.

Groupon

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Groupon, Inc. (NASDAQ: GRPN) is a troubled company under questionable leadership where IPO investors have been crushed. Long gone are the days of a $6 billion o $7 billion buyout offer from Google Inc. (NASDAQ: GOOG) back before this IPO. Groupon was raised to “Buy” from “Neutral” bt Stern Agee on Wednesday. We cannot help but wonder if this is really a long-term buy or whether this is just a chance to get out again at a higher price.

For starters, Stern Agee‘s Arvind Bhatia specifically said in the upgrade that this is not endorsement of a quarterly earnings report. His call is based upon the daily deals business is evolving  via a more constructive long-term view. The upgrade was based upon turning the international strategy around and leveraging its mobile efforts. The main assumption here is that Groupon can emerge beyond a push company that sends deals out to a model where consumers can start searching for more current deals. Bhatia thinks that Groupon’s share price can rise to $9.00.

The latter point here is one that has been a serious issue for Groupon. It used to be that you went to Groupon’s site and had to submit your email address if you were not logging in. Now it is more and more like the way that Living Social has been presenting its daily deals. Our take is that the Stern Agee upgrade is making this Groupon story one where consumers can directly go search for their deal. This is the evolution of the daily deal model into the “ongoing deal” category.

While what Stern Agee lists this as a turn right direction, we still have concerns that there are just no barriers to entry at all. Valuation is a concern as well as shares have now more than doubled off their 52-week low.

After a gain of 5.6% to $5.59 so far on Wednesday, the 52-week range is $2.60 to $20.63. As a reminder, Groupon’s IPO price was $20.00 per share.

Filed under: 24/7 Wall St. Wire, Analyst Calls, Consumer Goods, Consumer Product, Internet, Retail Tagged: GOOG, GRPN

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Amazon Coin Launch: Revisiting Micropayments and Virtual Currency

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By 24/7 Wall St.

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Amazon CoinAmazon.com Inc. (NASDAQ: AMZN) is revisiting a blast from the past that never really took off due to the Internet and e-commerce still being in the infancy stage. The company has announced “another new way for app and game developers to make money on Kindle Fire” by introducing Amazon Coins.

Amazon said that this is the new virtual currency for purchasing apps, games and in-app items on Kindle Fire. While this would accommodate larger payments as well, this basically sounds the same as micropayments that tried to gain steam a decade ago. The company said:

Amazon Coins is an easy way for Kindle Fire customers to spend money in the Amazon Appstore, offering app and game developers another substantial opportunity to drive traffic, downloads and increase monetization. When Amazon Coins launches in the U.S. this May, Amazon will give customers tens of millions of dollars’ worth of free Amazon Coins to spend on developers’ apps on Kindle Fire in the Amazon Appstore. Amazon will also make it quick and easy for customers to buy additional Amazon Coins using their Amazon accounts.

Amazon did note that its Appstore developers will still earn their standard 70% revenue share when customers make purchases using Amazon Coins. The Amazon Coins initiative is being called “the latest in a series of new features and services for developers that make Amazon the most complete end-to-end ecosystem for building, monetizing and marketing their apps and games.”

We have seen this effort before in micropayments. Some names of the past were iPIN, IBM Micropayments, Peppercoin, Bitpass and others. This will effectively rival eBay Inc. (NASDAQ: EBAY) for PayPal payments, which do allow micropayments, but this may be an Amazon ecosphere effort for a while.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Consumer Goods, Consumer Product, Internet, Media, Retail Tagged: AMZN, EBAY

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