Life

Lululemon Looks Good In Those Yoga Pants, Plus China’s Unprecedented American Shopping Spree

#Morning Brew
by Last Updated

“kush! [i’m smoking kush infront the police]” — Tay, Microsoft’s artificial intelligence Twitter bot. Tay was inadvertently activated on Twitter yesterday and posted a bizarre stream of messages, some of them quite racist. Safe to say it’ll be awhile before Tay comes back to life.

MARKET SNAPSHOT
Big Picture

  • Each major U.S. index finished positive for the third straight day, with the Dow Jones setting a six-year record for most positive days in a month, as they rode the momentum from Tuesday’s markets-friendly speech from Fed Chairwoman Janet Yellen

Alternatives to Watch

  • Many bond investors predicted an end to the three-decade long rally in the sector, and they were wrong: Yellen’s speech ensured the rally would continue, with bonds adding over $2 trillion to the market, sending yields even lower

Market Movers

  • U.S. movie theater stocks were hampered after being downgraded by B. Riley financial as box office growth lags behind last year’s figures
  • Apple stock rose 1.3% after receiving an outperform rating from Cowen, and a poll of analysts believe the iPhone 7 will reinvigorate the upgrade cycle program

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CORPORATE PRIMER

Lululemon Looks Good In Those Yoga Pants

Lululemon and its fancy athletic apparel crushed earnings expectations yesterday. The yoga pants powerhouse reported revenue of $704 million (that’s a lot of yoga pants) and reported earnings that were 6% higher than analyst expectations. It gets better: same-store sales, a key metric for retail companies, grew an impressive 11% year-over-year. It’s nirvana for shareholders and the company alike, and Lulu attributes the success to improved infrastructure, bold design and continuous innovation in the athletic apparel space, not to mention progress in international growth. You do you, Lululemon.

MetLife is Just Small Enough

Flashback: in 2014, the Financial Stability Oversight Council deemed insurance giant MetLife to be “systemically important,” or in layman’s terms, a company whose failure could be as disastrous as the Lehman Brothers failure in 2008 (does “too-big-to-fail” ring a bell?). For those of you who think being too-big-to-fail is a sweet deal, think again: systemically important companies are subject to strict regulations and government oversight. Needless to say, MetLife isn’t having any of that, and appealed the council’s decision. Back to the present day: a federal judge sided with MetLife and ruled the institution not “too-big-to-fail,” cueing sighs of relief across the board, and sending shares up 5%. It’s a win for today, but the FSOC doesn’t give up so easily—expect an appeal soon.

Foxconn’s Power Move

Foxconn built its life around Apple. Employing hundreds of thousands of workers, the Taiwan-based factory operator has sacrificed its profit margins to assemble the iPhone at a low enough cost to make it affordable. With tech trends and relationships shifting, Foxconn isn’t going to let Apple go so easily. In order to strengthen its ties to Apple, Foxconn finalized a deal yesterday to purchase 66% of screen-making giant Sharp for $3.5 billion. Why? Sharp is a major Apple supplier, and now Foxconn gets added leverage. Unfortunately, Sharp isn’t in great shape, with $3 billion in liabilities. Meanwhile, labor costs in China are rising and the smartphone market is slowing down. Uphill battle much? Good luck, Foxconn.

Everybody Wants a Piece of Paramount

In February, media giant Viacom announced that it was considering selling a “significant” minority stake in Paramount Pictures. The bait is out there, and there have been plenty of bites—around three dozen, actually. The most recent bite came from a big fish: Twenty-First Century Fox is the latest and greatest to express interest in acquiring the minority stake, but in case you hadn’t noticed, there’s a good deal of competition out there. DreamWorks also recently announced it was interested. Let the games begin.

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OTHER STORIES

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ECONOMIC CALENDAR

CHINESE SPRING FASHION: AMERICAN COMPANIES

We talk a lot about China here at the Brew, but not without reason. Case in point: the country has announced a record $40.5 billion in U.S. deals so far this year, already double the amount of 2015. If you said things are ramping up, we wouldn’t disagree. So where’s the influx of cash going? Read on:

  • $6.5 billion is currently being spent by insurance behemoth Anbang to buy Strategic Hotels and Resorts from Blackstone, and let’s not forget about Anbang’s $14 billion dollar bid to buy Starwood Hotels.
  • The Haier Group bought General Electric’s appliance division for $5.4 billion. With just these three deals, we’re at nearly $26 billion (to be fair, not all of them are finalized).
  • And it’s not just Chinese firms who are taking part in the shopping spree. Super rich individuals are closing deals on their own. Most notably, the richest man in China bought Legendary Entertainment (producer of The Dark Knight Trilogy, Godzilla and Jurassic World) for $3.5 billion.

INTERVIEW QUESTION OF THE DAY

Rhonda will go see ballet but not opera. Her favorite number is eight and she doesn’t like nine. She likes salmon but not trout. She hates Mondays but likes Wednesdays. Does she use a comb or a brush? (Answer)

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BUSINESS TERM OF THE DAY

Unaudited Opinion — An opinion that can be offered by a Certified Public Accountant before he or she audits an organization’s books. This is known as an unaudited opinion, and it will reflect the opinion of the accountant or CPA concerning the organization’s books and financial records. The subsequent audit may or may not bear out the opinion given.

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FOOD FOR THOUGHT

270 million: the number of active users on Windows 10. Considering Microsoft’s latest and greatest only launched last July, it’s quite the number.

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