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Mid caps

Investors are unimpressed with The Gap

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The Gap Inc beat earnings… but investors still dropped the stock like a hot potato. I’ll bet you are wondering why, so let me explain – CEO Arthur Peck doesn’t know what he is doing. Well, it doesn’t appear that way, but what do I know. However, investors shared the same sentiment as shares of the retailer dropped 10% following the company’s earnings call.

 

Most companies are closing stores… but Gap Inc. is opening more than they are closing and their CEO is very keen on having plenty of stores. Peck said that “…most apparel is sold in stores and will continue to be sold in stores.” We are not so sure about that statement. At any rate, sales were up slightly this quarter; but the problem is, most retailers are doing much better than “slightly.”

 

Gap stores are the problem… because sales fell by 5% which was worse than the 1% decline last year. Old Navy and Banana Republic had increased sales which saved Gap Inc. from posting a loss on the quarter. The company plans to open 270 Old Navy and Athleta stores and close 200 Gap and Banana Republic stores over the next three years.

Blue Chip

Tesla says ‘nevermind’ about that going private thing

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Musk shocked investors again… after announcing that the “better path” for Tesla is to remain a public company. Musk came to find that taking a company private would be more work than originally thought. Oh, and the consensus from shareholders was ‘please don’t do this’ according to Musk himself.

 

Eh, they didn’t need the distraction… because Tesla is a company with enough of those. First, Tesla must focus on Model 3 production – they need to produce more of those. The ability to produce more of these cars is an important test- Also, the company is trying to become profitable (that’s why we’re in business, right?). And don’t forget that Musk has called this year “excruciating” in part due to 120 hour work weeks.

 

But it’s not over… not yet, at least. If you recall, Musk tweeted out that Tesla had funding secured to take the company private – he is still on the hook for that statement. Although he further explained his tweet, the SEC is still trying to determine if investors were misled. It looks like the Tesla CEO will be dealing with even more ‘bull-sh#t’ thanks to reckless tweeting.

Miscellaneous

The rich get richer – again

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It’s the tax cuts… that have helped propel banking profits to a record $60.2 billion in the second quarter. This record profit beats last quarter’s record profit by a whopping $4B+ and profits are up 25% compared the same time last year. Apparently, over half of this newfound wealth has come from the drastically lowered corporate tax rates created by Trump himself.

 

They take their tax savings… and help the rich get richer. Well, that is an argument some are making – really, these banks are paying higher dividends and funding stock buybacks. The bankers are claiming that they are pumping money back into the economy, which in-turn, helps the economy.

 

The bankers are also saying… that tax cuts are not the reason that they are doing so well. It is the economy that is producing such excellent results. That’s right – more lending because people can’t get enough cold, hard cash. However, to be realistic, it is a combination of tax reform, strong lending, and the economy. So if you’re someone that thinks bankers are crooks – hopefully, this doesn’t put a damper on your day.

Blue Chip

Lowe’s wants to catch Home Depot

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Lowe’s is shutting down… its Orchard Supply Hardware stores and plans to lower inventory at stores, as well. This announcement seems odd, especially after the company just reported better-than-expected earnings and saw their stock rise more than 7%. Despite the strong results, Lowe’s still cut their sales and profit outlook for the rest of the year.

 

Home Depot is just better… because although sales at Lowe’s were good, up 5.3%, sales at Home Depot were better, up 8%. To keep pace with Home Depot, significant changes (mentioned above) are in store for the company. Closing all of the Orchard Supply Hardware stores is one way they will accomplish this – a company they acquired just five years ago for $205 million.

 

Shaking it up… Lowe’s announced that they will be hiring David Denton, the current CFO of CVS. The company also eliminated the COO and CCO position last July. Lately, we have seen companies grabbing the ‘bull’ by the horns and taking control of their future – not a bad idea, and looks like Lowe’s will follow suit.

Blue Chip

Microsoft is getting into politics

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When you think election meddling… I bet you think of Facebook, Twitter, and YouTube as the primary vehicles for disinformation. However, Microsoft presents another target for hackers to, well, hack. Our friends at Microsoft have realized this and created their “Defending Democracy Program” as a solution.

 

Free security for ALL… just kidding, it is free security for some. That ‘some’ being election candidates and relates parties; they will be protected with the Microsoft’s AccountGuard. AccountGuard is a service that alerts organizations when attacks are detected and also offers education on cybersecurity. Microsoft isn’t the first of its kind to do this – Google has a similar product in their ‘Advanced Protection’ program.

 

Don’t be like Facebook… and companies are trying to avoid the bad news that has followed FB since the 2016 election issues. Additionally, AccountGuard will probably be an excellent form of marketing for Microsoft because most people forget they even offer cybersecurity. And while this effort is nice, it probably won’t make much of a difference because the problem is too big for Microsoft alone. But we appreciate the effort to stop those damn Russian hackers.

Miscellaneous

How could SPAM be performing so poorly?

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I can’t imagine there are many of you… but I have some terrible news for SPAM lovers. Hormel reported worse-than-expected sales on Thursday and is proceeding with caution due to tariffs on US agricultural products. Specifically, pork exports have declined along with sales and profitability. These tariffs are almost definitely going to put a dent in earnings this year for Hormel.

 

Shares were down… just 3% after the announcement which isn’t too bad. And who knows if it is even the tariffs because SPAM is disgusting…just kidding. While I stand by my stance on SPAM, in reality, it probably is the tariffs…

 

They’re not alone… because Sanderson Farms, a producer of poultry, reported that the trade turmoil is hurting their earnings, as well. Grain costs have gone up; shares of Sanderson have gone down (by 4%). Tyson is another company that has complained about the tariffs. So it looks like pork producers pockets will be a little less fat this year..

Blue Chip

Target is the new Walmart

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Sales are waaay up… Target reported that sales were up 6.5% at stores open for at least one year this week. To put this in perspective, Target hasn’t done that well since 2005. Customers ran to Target this quarter for clothing, toys, electronics, home goods, and probably to avoid the people of Walmart. Shares of the retail giant are up 47% over the past year.

 

Target is mixing it up… by redesigning stores, creating more exclusive brands, and lowering prices. They are also building smaller stores in big cities and near college campuses. And, of course, the retailer improved the online side of things. Digital sales for Target were up 41% compared to last year.

 

Don’t count brick-and-mortar out… especially in the case of Target, because the company’s same-store sales growth beat that of Walmart – and people thought Walmart had a great quarter. Target also capitalized on the downfall (or impending downfall) of many retailers like Toys R Us, Bon Ton, JCPenney, and Sears. When is everyone else going to get with the program?

Mid caps

This merger will help Serta rest easy…for now

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The mattress maker is… Serta, the world’s largest bedding manufacturer that has nearly $3 billion in sales. And now, they just got a little bigger by merging with Tuft & Needle, an online mattress startup. This move is an interesting one because we just saw Casper venture out from behind the computer into the world of brick-and-mortar.

 

Bad news for Mattress Firm… because Serta supplies companies like them with mattresses. However, with the coming merger, it seems that Serta is looking to get away from that. Instead, Serta is trying to become digital and develop a more significant presence online. The mattress company also hopes to sell more direct-to-consumer, rather than going through a middle-man like Mattress Firm.

 

It’s Casper’s fault… because selling mattresses in a box over the internet is the way to go. Consumers are going to Casper for the speed, cost-savings, and convenience that you don’t get at a mattress store. These benefits could mark the end for many brick-and-mortar mattress stores – but Serta and Tuft & Needle aim to stay competitive by leaving before this $#!& hits the fan.

Miscellaneous

Get off your phone (after you read this one…and the next one)

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More than half… of teenagers actually admitted to using their smartphone too much. A quarter of these kids said they feel anxious, lonely, or upset without their phone. And hell, I do, also – how else can one avoid looking like a loser while standing in public alone or escape boredom while on “the John.” Answer: you can’t.

 

But I am beyond help… however, kids aged 13 to 17 are not. Doctors are concerned that too much screen time can negatively impact everything from cognitive development to social skills. This issue is now coming to light because teens haven’t had such universal access to these devices in the past. 95% of teens in the United States have smartphones now.

 

The good news… is that kids are supposedly trying to cut down on their smartphone use (or at least they say). However, teenagers may need to take matters into their own hands considering adults aren’t much better about staying off their phones. Or maybe we are just all doomed..