Enjoy your January 31th hand-crafted Brew!
QUOTE OF THE DAY
“Dramatic shifts” — Sony (-3.54%) CEO Kazuo Hirai and outgoing Sony Entertainment CEO Michael Lynton, in a letter to employees. The Japanese company was forced to write down $962 million in its film and TV business yesterday thanks to changes in how we consume entertainment. Those darn millennials and their cord cutting.
Market Snapshot
- U.S. and European markets each suffered their biggest drops since the U.S. election, with companies vulnerable to immigration policies seeing the largest declines following President Trump’s immigration ban on a number of Muslim-majority countries
- The news seemed to hit airlines the hardest: the travel ban is expected to cut into ticket sales and sparked massive demonstrations at many U.S. airports over the weekend. If that wasn’t enough, another massive system outage from Delta (-4.08%) forced the airline to ground all domestic U.S. flights
The FTC May Have Just Disrupted a Mega-Merger
…Or saved Walgreens (+0.02%) $2 billion. Back in 2015, Walgreens agreed to acquire Rite Aid (-17.46%) for $9.4 billion to create a drugstore empire. Flash forward to the present, and regulators still aren’t crazy about your local family-friendly drug store monopoly. The proof is in the pudding: the deal still hasn’t closed despite both parties agreeing to shed 865 stores. Yesterday, the drugstore duo mutually agreed to sell even more stores in hopes of appeasing the FTC, effectively dropping the price tag by $2 billion, sending Rite Aid shares plummeting. Ouch. Start getting cozy at the edge of your seat, because this deal just got extended another six months.
Speaking of Stocks Getting Crushed
…Tempur Sealy (-28.01%) investors had a rough day yesterday too. In what can only be called a brutal breakup for both sides, mattress and bedding manufacturer Tempur Sealy (perhaps best known for its…uh, creative Tempur-Pedic commercials) got out of bed with its largest customer, Mattress Firm, which accounted for over 20% of Tempur Sealy’s sales. Investors smashed the sell button like a snooze button at 6:00 AM (our condolences to those of you reading this at 6:10 AM after smashing the snooze button) as over $750 million in annual sales got wiped off the table. While no real reason for the fallout was given, Tempur Sealy CEO Scott Thompson ran damage control by stating that the move will help the company devote all resources to retail partners that “exhibit a long-term commitment.” You snooze, you lose?
One Small Step For Auto
…One giant leap towards more sustainable cars. Yesterday, General Motors (-1.84%) and Honda (-0.43%) announced an $85 million joint venture to manufacturing fuel cells for cars starting in 2020. The two automakers started collaborating on fuel cell development in 2013, but the new JV will up the ante by turning their combined research into a bigger reality. Compared to batteries, fuel cells offer longer range and are quick to refuel, so more fuel cells means more options for zero-emissions cars coming our way.
Lyft: 1, Uber: 0
…Thanks to this weekend’s #DeleteUber fiasco, Lyft is laughing all the way to the bank. After Lyft took a stand against the Trump administration’s immigration order, it got a huge boost all the way to the top of the App Store, surpassing Uber in downloads. What did Uber do wrong? It was accused of sending drivers to JFK International Airport during a protest organized by NYC cab drivers in response to the immigration order. Customers didn’t like Uber’s seemingly-shady move at all, and Lyft is cashing out on that publicity nightmare.
Not So Fit
…Fitbit (-15.95%—sadly, not a typo) reported dismal preliminary Q4 results and cut its workforce. Fitbit was in need of some #MondayMotivation yesterday, as the fitness tracker maker said it would lay off 6% of its workforce (110 jobs) after warning investors about a disappointing fourth quarter. Even with the seasonal holiday bump, sales are expected to fall close to 20% and the company’s stock has now dropped more than 70% since its highly anticipated IPO in 2015. Ouch! So what now? Behind co-founder and CEO James Park, Fitbit plans to implement a rigorous cost-cutting plan that the company says will save $4 million in the first quarter of 2017 (hence all the layoffs). Safe to say that 2016 wasn’t the year of the smartwatch so many predicted.
Other Stories
- Starbucks unveils virtual assistant that takes your order via messaging or voice
- Snap to list on New York Stock Exchange
- Cafe X opens in San Francisco, bringing robots to the coffee shop
- Deutsche Bank to pay $425 million fine over Russian money-laundering scheme
Economic Calendar
- Monday: Personal Income and Outlays (+)
- Tuesday: Apple, Exxon Mobil, Pfizer, MasterCard, UPS, Sprint, Under Armour Earnings; Consumer Confidence
- Wednesday: Facebook, Altria, MetLife Earnings; ISM Manufacturing Index; Fed Meeting Announcement; Auto Sales; Private Employment Report;
- Thursday: Amazon, Visa, Philip Morris, Deutsche Bank, Ferrari, Chipotle Earnings; Weekly Jobless Claims
- Friday: Honda, Hershey Earnings; January Jobs Report
Getting Swole is Getting More Expensive
During the recession, health clubs and gyms were forced to hold their prices steady to maintain demand. But in the last few years, gym dues have risen and new boutique gyms and classes have pumped up the cost of fitness. Nearly one in five Americans are members of health clubs, and they’re digging deeper and deeper into their wallets to stay in shape:
- Average health club dues are an astounding $54 per month, which represents 1.2% of the median household income. That’s a 17% increase in dues over the last two years.
- If that sounds expensive, forget about niche studios and classes. Memberships at luxury gyms can cost $200 a month, and some studios, like SoulCycle, can cost up to $4,420 per year.
- So what are frugal fitness fanatics to do? Two words: budget gyms. In 2015, membership grew 69% for gyms that cost $20 or less per month. People are also disloyal to their classes to find the best prices—86% of customers of studio gyms also go to other gyms or classes.
- Hopefully the rising costs don’t discourage exercise. In 2014, 30% of those who signed up for gyms were gone by 2015. Stay fit, Brewers—and maybe buy a Fitbit while you’re at; Fitbit would really appreciate your business right about now.
Interview Question of the Day
What is interest rate risk? What is affected by it? (Answer)
Business Person of the Day
Yesterday, it was announced that the “Father of Pac-Man” and founder of Japanese video game developer Namco, Masaya Nakamura, has died. Nakamura took on the challenge of pioneering arcade games, which included his most famous creation, Pac-Man. The iconic yellow circle gobbles up biscuits, dodges terrifying ghosts and continues capturing the enthusiastic hearts of millions. Thank you Nakamura.
Food for Thought
According to 2016 sales numbers, Volkswagen is the new the automotive sales king, dethroning Toyota. Why the sudden rise? Yes, the that whole emissions crisis did happen, but VW’s upscale brands like Audi and Porsche are absolutely killing it in growing markets like China.
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