Life

Under Armour’s Profits Dropped By 57% In Q2, Plus LeEco Buys Vizio For $2 Billion

#Morning Brew
by Last Updated

“That is the danger—and you can be sure that the hawks are going to be arguing that” — Former Fed vice chairman Alan Blinder, expressing his disapproval that some Fed policymakers are going to argue for a rate increase to avoid a surge in inflation.

MARKET SNAPSHOT

Big Picture

  • Markets finished mixed yesterday as investors reacted to a earnings and a steady consumer confidence report—and braced themselves for the Fed’s announcement today on whether to hike interest rates

Alternatives to Watch

  • The yen gained value against the dollar as traders lowered expectations of how much stimulus the Bank of Japan will inject into the Japanese economy when it announces its monetary policy decision on Friday

Market Movers

  • Shares of computer chipmaker Linear Technology jumped 29% after reports surfaced that it would be purchased by Analog Devices for $14.8 billion

CORPORATE PRIMER

What Goes Down

…Must come up? After a miserable first quarter, Apple beat earnings estimates yesterday, sending shares cruising up over 6% after-hours. While analysts had their doubts about the new iPhone SE, the four-inch phone actually helped Apple to beat shipment expectations. Meanwhile, Apple’s cash pile actually decreased, as the company made bold investments in companies like Uber rival Didi Chuxing. What’s next? The tech giant hopes for continued growth in emerging economies like China and India, and Cook and Co. can’t wait to celebrate when Apple sells its billionth iPhone.

LeEco Makes Its American Debut

…After purchasing TV manufacturer Vizio for $2 billion. What exactly is LeEco? It’s a Chinese conglomerate that does it all—from smartphone and TV manufacturing to movie production. The deal will give LeEco full control of Vizio television and 49% control of Inscape, which is Vizio’s big data complement that tracks user behavior. The purchase opened a lot of eyes because Vizio provides LeEco with its first foothold in the U.S. market. Companies like Apple and Sony had better watch out.

Still Alive

…But barely breathing. Twitter beat earnings expectations yesterday, but it posted disappointing sales guidance, leading shares to drop over 10% after-hours. Twitter struggles as it continues to see “less overall advertiser demand than expected.” The social network has bet its life on live stream, as it has recently made deals to stream NBA pregame shows, Thursday Night football games, and live baseball and hockey games. With shares trading below $20, experts have suggested that Twitter is becoming a potential takeover target.

Even Steph Curry Can’t Save Under Armour

…At least not this quarter. The Baltimore-based company reported disappointing earnings yesterday, which included a 57% decrease in profit—largely due to the bankruptcy of Sports Authority—one of its biggest distributors. Under Armour is banking on next quarter, as it plans to start distribution at Kohl’s, continue with Curry’s footwear and launch a high-end sportswear line this fall. Rival Nike also came up short in its last earnings report. Oh well.

OTHER STORIES

ECONOMIC CALENDAR

BACK-TO-SCHOOL BEDLAM

The school year is right around the corner. While some students may dread the return of classes, homework and responsibility, retailers absolutely love it. According to the National Retail Federation’s annual survey, Americans plan to blow past last year’s numbers and spend billions on back-to-school shopping. Here’s why retailers are excited:

  • Americans are expected to spend $75.8 billion on back-to-school supplies this year. That’s a solid $7.8 billion more than last year. Jeez, how many pencils do you need?
  • Spending for college students is expected to be even higher this year. The average family will spend $888.71 on everything from laptops to mini fridges.
  • Families with kids in grades K-12 are expected to spend 9.6% more this year than last year. That means the average family will spend an average of $673.57 per family for back-to-school items. Talk about spoiled.
  • What’s causing the uptick in spending? Consumer confidence in the economy may be one reason. Yet, 27% of those surveyed said the economy will have no effect on their spending plans this year. Go figure.

INTERVIEW QUESTION OF THE DAY

What are some possible valuation methodologies other than comparable companies, precedent transaction and discounted cash flow (DCF) analyses? (Answer)

BUSINESS PERSON OF THE DAY

Liz Powers — A 28-year-old entrepreneur who founded ArtLifting with her brother in 2013. It’s an online marketplace that allows customers to purchase original works from homeless artists..

FOOD FOR THOUGHT

Hedge funds are supposed to hedge against risks, right? Well, investors pulled $20.7 billion from hedge funds in June, the largest monthly withdrawal since firms began keeping the data in 2009. Believe it or not, the recent withdrawals have nothing to do with Brexit, as it takes at least a month to pull money out of hedge funds.

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