Is Tipping Soon To Be A Thing Of The Past? Plus Anheuser-Busch Finally Makes It Official With SABMiller

by 2 years ago

morning-brew

“Hasty and uninformed” — Daily fantasy sports site DraftKings, describing the cease and desist order from the New York Attorney General that ordered DraftKings and FanDuel to cease operations in New York. One thing’s for sure: if they’re going down, at least they’re going down swinging.

MARKET SNAPSHOT 

Mild Hump Day

  • It wasn’t the greatest day for the markets yesterday, as U.S. stocks closed low and bond markets were closed for Veterans Day. You can blame falling oil prices and below-par earnings from Macy’s for the negative day. Following oil’s lead lower, the energy sector closed nearly 2% down, taking the trophy as the S&P 500’s biggest loser.
  • Over in Europe, stocks finished in a swell position despite a disappointing speech by European Central Bank President Mario Draghi. Draghi disclosed fewer details than expected on the recent monetary easing of the Eurozone at the Bank of England’s Open Forum.
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CORPORATE PRIMER

Cheers to Anheuser-Busch InBev and SABMiller

Yesterday, Anheuser-Busch InBev (known for Budweiser) officially offered to buy SABMiller (known for Miller Light) for a grand total of $107 billion, confirming the massive deal that was initially agreed to last month. If your antitrust alarm is going off, it should be: the company will sell around a third of the world’s beer and half of the industry’s profit. To help with the consolidation of brewery power, AB InBev has agreed to sell 58% of its share in MillerCoors to its partner, the Molson Coors Brewing Company. After the announcement, shares of both AB InBev and SABMiller went up 1-2%.

Kroger Buys Out Roundy’s

The grocery store industry is always competing for a growing stake in your wallet, and through some M&A synergies, Kroger and Roundy’s may be able to do just that. Yesterday, Kroger bought out Roundy’s (parent company of Mariano’s) for $800 million at a hefty 65 percent premium. Mariano’s will benefit from Kroger’s impressive store infrastructure, towering at 2,623 supermarkets, while Kroger plans to leverage Mariano’s gourmet product portfolio as well as their consumer-friendly reputation.
Macy’s Tanks
Glass half empty or half full? If you’re Macy’s, it’s definitely empty. After missing earnings and building up unsold inventory amidst unusually warm weather, shares plummeted 12 percent. Macy’s will now likely end up with major markdowns in order to clear all that inventory. But hey, if you’re a consumer, the glass is half full: expect strong discounts on your favorite items heading into the holiday season.

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TODAY IN TECH

Single and Ready to Mingle

Singles’ Day is Alibaba’s version of “Treat Yo Self” and, boy, did the Chinese treat themselves. The e-commerce giant, which ran a massive online shopping festival yesterday, announced a mind-blowing $14.3 billion in sales, shattering analyst expectations. Times have been tough in China with the country mired in its slowest economic growth since the financial crisis, but the success of Singles’ Day sheds a positive light on the country’s consumer spending.

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OTHER STORIES

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ECONOMIC CALENDAR

  • Monday: DISH Network, Hertz, Priceline, Lions Gate Earnings
  • Tuesday: Import/Export Prices
  • Wednesday: Macy’s Earnings
  • Thursday: Cisco, Nordstrom, SABMiller, Viacom Earnings; Weekly Jobless Claims
  • Friday: Retail Sales; Producer Price Index; Consumer Sentiment; J.C. Penney Earnings

TIPPING: A THING OF THE PAST?

Tipping: love it or hate it, it’s an institution in the U.S. But does it have to be? Some restaurants are starting to question the status quo and eliminate tipping altogether. Here are the details:

  • Joe’s Crab Shack, a casual seafood chain, announced yesterday that it will be the first national chain to test a no-tip model in 18 of its restaurants, and the policy could be expanded to all 130 of its locations in the future.
  • How do the finances work out? Instead of tipping, menu prices will increase 12-15%, and waiters will make a minimum of $12 per hour (the federal rate for tipped workers is $2.13 per hour).
  • While the policy change will increase overall labor costs, the benefits for restaurants (it’s easier to keep track of money coming in and out) and employees (their income stream is stable and defined) are clear.
  • So could this be the beginning of a no-tipping revolution? Perhaps, but change takes time: a poll by Quinnipiac University earlier this month showed that New Yorkers still favor tipping over increased menu prices by a 56% to 39% margin.

INTERVIEW QUESTION OF THE DAY

Five pirates are parting ways after finding a treasure of 100 pieces of gold. The pirates decide to split it based on a vote. Each pirate, from oldest to youngest, gets to propose a plan on how to split the gold.
If at least 50 percent of the other remaining pirates agree on the plan, that is how they will split the gold. If less than 50 percent of the pirates agree, the pirate who came up with the plan will be thrown overboard. Each pirate is smart, greedy and wants to throw as many others overboard as possible without reducing the amount of gold they get.
What plan can the first (oldest) pirate propose to live and get as much gold as possible? (Answer)

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BUSINESS TERM OF THE DAY

Tainted Alpha — An alpha return that cannot be attributed solely to the money manager due to consequential beta exposure. Tainted alpha is seen when money managers invest in individual equities instead of using market neutral strategies such as arbitrage and hedging.

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FOOD FOR THOUGHT
106: the number of indictments a grand jury handed down to a biker brawl and shooting at a bar in Waco, Texas.

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