Greetings folks and warm welcome to the 80TH Edition of Friday Finance Weekly. My apologies for last week as I decided to talk a day off.
Clothing seller Gap Inc. said that it plans to start to franchise Old Navy stores in international markets in 2014, part of its plan to add business at home and globally. “There is meaningful opportunity for our diverse portfolio of brands to gain share in the $1.4 trillion global apparel market,” said Gap CEO Glenn Murphy in a statement. The news comes as Gap presents its future goals at its 2013 investor meeting in San Francisco. The company, which operates 3,100 company stores under the Gap, Banana Republic, Old Navy, Piperlime, Athleta and Intermix brands, did not specify how many stores it plans on franchising. It also said it is looking into the possibility of opening company-owned Banana Republic and Gap stores in China. In North America, the company said it plans to focus on expanding its smaller brands, athletic gear Athleta, e-commerce site PiperLime and boutique Intermix. After having a few mediocre years, looks like The GAP is getting its grove back. Its shares are up 20.75% on a year to date basis and presently trade at $37.48/share. Franchising is a fantastic way to expand especially as the capital cost is limited. Let’s see if they can maintain their brand integrity. Given their price point let’s hope nobody try to make Old Navy knock offs. (Source: Business Week)
McDonald’s revealed a weaker-than-expected first-quarter profit as sales at its more established stores slumped across its geographic markets amid a still turbulent economy. The Oak Brook, Ill.-based fast-food company reported net income of $1.27 billion, or $1.26 a share, compared with a year-earlier profit of $1.26 billion, or $1.23 a share. Revenue for the three months ended March 31 was $6.6 billion, up 1% from $6.55 billion a year ago, edging just above the Street’s view of $6.59 billion. However, same-store sales, a key growth metric for sales at stores open longer than a year, slumped 1.2%. McDonald’s continues to update its menu with health options to make it more relevant to today’s society. It will be interesting to see if the McCafe concept is actually working. I would think that the switch to higher margin products would be boom for the company, but perhaps the target client doesn’t sip lattes. Regardless I wouldn’t read into this too much and the market seems to have agreed as the stock price has remained relatively flat (increase of 0.88%). Summer is generally good for fast food as more people eat on the go. (Source: Washington Post)
Dish Network has proposed a $25.5 billion merger with Sprint Nextel, exceeding the bid by Japan’s Softbank to buy the cellular carrier. Satellite-TV provider Dish hasn’t formally withdrawn its offer to purchase cellular carrier Clearwire, which is majority-owned by Sprint but not controlled by Sprint. Dish said its offer for Sprint is not contingent on Sprint succeeding in its current bid to purchase the remaining Clearwire shares that it doesn’t own. The merger would reduce joint costs by $1.3 billion in the first year and by $1.8 billion in three years, thanks in part to lower acquisition costs and other synergies, the company said. The merged company would use Dish’s 700MHz spectrum to deliver Dish programming in a one-to-many setup to mobile devices. The proposal would not be subject to a government review that foreign-owned SoftBank’s proposal is. Dish, however, needs to raise an additional $9.3 billion to pay for the merger. This deal is a near certainty and as a result I would be bullish on this stop. This week Sprint was relatively flat on the markets. I doubt Softbank will increase their offer especially in light of the fact that the US government my squash it. Given Dish’s diversified income base it will be a real competitor to AT&T and Verizon. (Source: New Bay Media)
The economic theory underpinning austerity policies being followed by governments worldwide may be flawed. That is the allegation made in a study by the University of Massachusetts. It claims to have found coding errors on the Excel spreadsheet used by the academics who produced the theory which could invalidate their conclusions. It was economists Kenneth Rogoff and Carmen Reinhart who found that economic growth normally slows when a government’s debt exceeds 90 percent of the country’s annual economic output. The observation and the subsequent conclusion that countries must cut public spending has meant hardship for millions. Hope nobody in Greece or Cyprus reads this. Regardless, maybe they were using the wrong version of Excel. (Source: Euronews)
In March, Washington state Rep. Ed Orcutt, apparently upset that bicyclists use the state’s roads without paying the state gasoline tax for highway maintenance, proposed a 5 percent tax on bicycles that cost more than $500, pointing out that bicyclists impose environmental costs as well. Since carbon dioxide is a major greenhouse gas, he wrote one constituent (and reported in the Huffington Post in March), bike riders’ “increased heart rate and respiration” over car drivers creates additional pollution. Damn, so do start taxing the gyms as well? (Source: Huffington Post)
Have a fantastic weekend folks. Too bad the rains are returning. Please don’t hesitate to forward this email. Many thanks,