Abercrombie And Hollister Take Nosedives, Apple Smacked By A Whopping $14.6 Billion Dollar Bill By The EU

by 1 year ago

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Big Picture

  • The S&P almost erased all of August’s gains as the recent legal battle with Apple and Europe has investors speculating that this may be just the beginning of a tax crackdown overseas

Market Movers

  • Shares of United Airlines skyrocketed 10% after the company announced it would hire Scott Kirby, former President of rival American Airlines, as CEO

CORPORATE PRIMER

Abercrombie & Fitch Gets Crushed

…Along with so many teen dreams. Yesterday, Abercrombie released second quarter earnings, and boy, it wasn’t pretty. Same store sales for the Abercrombie brands were down 7%. The company recently shifted focus from its teen-based model to consumers in their twenties, attempting to catch up with customers who had transitioned out of their brand. Meanwhile, the Hollister brand, also owned by Abercrombie, continues to cater to teens. How’s that working out? Not great. Investors were spooked, sending shares down 20%.

Remember When Google and Uber Were Friends?

…We ain’t kids no more. Time to grow up: Google is planning to expand an Uber-like ridesharing service that it has been piloting, meaning the relationship between the growing giants is only going to get more tense. Google’s service will partner with the company’s map app Waze and have competitive fares, meaning it could scoop up potential Uber customers. In the midst of this change, Uber just hired Target’s marketing executive to help CEO Travis Kalanick navigate increasing competition in the ridesharing market. Despite all these changes, Google will interestingly remain an investor in Uber….we’ll see how that goes.

Death and Taxes

…The two inescapable facts of life…even for Apple. Yesterday, the European Commission smacked Apple (hard) with a $14.6 billion bill for allegedly cheating on its taxes. Jeez. Let’s start from the beginning: Apple and Ireland struck a deal that involved Apple adding international jobs in exchange for only paying a 1% tax rate instead of a 12.5% rate. The U.S. government is on Apple’s side here, and claims this was direct targeting of U.S. companies—which certainly won’t bode well for foreign investment in the EU going forward. While Apple plans on appealing, don’t feel too bad—it has $231 billion sitting pretty in the bank to cushion the blow.

A Fertilizer Giant

…Is in the works between Agrium Inc. and Potash Corp. Beware: the Canadian firms are in talk of a possible merger with a whopping potential market value of $28 billion. Why? The farming industry hasn’t been doing too hot lately—earnings have slumped across the board due to stubbornly low fertilizer prices. A merger gives Potash access to Agrium’s steadier retail business in the U.S., shielding business from volatile price fluctuations…and perhaps the power to set prices for the industry? Investors seemed optimistic as share prices jumped 11% and 6% for Potash and Agrium, respectively. However, some skeptics feel there will be antitrust issues. Do we smell a monopoly?

OTHER STORIES

ECONOMIC CALENDAR

Friday: August Jobs Report; International Trade; Factory Orders

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One of the first things everyone learns in kindergarten is that it’s important to share. If anybody gets this concept (other than kindergarteners), it’s—you guessed it—millennials. Many think almost nothing of using Airbnb to invite a complete stranger into their homes, and it seems that everyone would rather split an Uber than deal with a taxi. So how big is the sharing economy? Ponder this:

  • According to a report from marketing firm Hitwise, 143 million Americans visited a space-sharing site during the first three months of 2016. Visits to these sites have leapt by 169% since 2014.
  • 44% of American adults know that the sharing economy exists, and 19% have taken part in a sharing economy transaction. People are even cool with sharing a workspace. Think: WeWork.
  • The sharing space phenomenon is hitting the financial world hard too. 18-34 year-olds are 40% more likely to visit financial sharing sites like Kickstarter compared to other age groups.

So who really cares? How ‘bout businesses. Companies must evolve to the sharing economy as it continues to grow—if they want to survive, that is. Just ask a taxi driver.

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What is the difference between a nation’s current account deficit and its currency valuation?

(Answer)

STARTUP OF THE DAY

We’ve got another self-driving startup entering the game: say hello to Drive.ai. This one’s got quite the background: it was started out of Stanford’s artificial intelligence lab, and it’s taking a unique approach. The company won’t be making cars at all—it’s focused purely on developing the “brain” powering the self-driving technology, including the use of deep learning software. Not bad.

FOOD FOR THOUGHT

According to the Transportation Department, U.S. traffic deaths rose 7.2% in 2015. The total death count: a sobering 35,092, with a third of those fatalities related to drunk driving or speeding. All the more reason to root hard for startups like Drive.ai to succeed.

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