J.C. Penney names new CEO, Shares rise

J.C. Penney spikes after naming former Joann Stores chief as new CEO

Retail selloff continues with J.C. Penney report. See Stockwinners.com for details.
J.C. Penney names new CEO, Shares rise

Shares of J.C. Penney (JCP) surged in Wednesday’s pre-market trading after the company named Jill Soltau as its new chief executive officer.

The CEO role has been vacant since the resignation of Marvin Ellison earlier this year to become the CEO of Lowe’s (LOW).

J.C. PENNEY GETS ITS CEO

On Tuesday after the market close, J.C. Penney said that Jill Soltau, the former president and CEO of fabric and crafts retailer Joann Stores, will become its next CEO.

Her appointment is effective on October 15.

In a statement, J.C. Penney director and chairman of the search committee Paul Brown said “Jill stood out from the start among an incredibly strong slate of candidates,” adding that “As we looked for the right person to lead this iconic company, we wanted someone with rich apparel and merchandising experience and found Jill to be an ideal fit.”

Former CEO Marvin Ellison left the company in May to become CEO of Lowe’s, and the CEO role at J.C. Penney has been vacant ever since.

Additionally, last week, J.C. Penney announced the resignation of CFO Jeffrey Davis to pursue another opportunity. His departure was effective October 1.

As J.C. Penney looks for Davis’ replacement, the company said Jerry Murray, senior VP of finance, will serve as interim CFO.

The retailer said it will consider both internal and external candidates to replace Davis, who has been CFO since July 24, 2017.

This summer, Chief Customer Officer Joe McFarland quit after less than a year to become executive vice president, stores, at Lowe’s.

Following Ellison’s departure, J.C. Penney created an “Office of the CEO,” comprised of Davis, McFarland, Chief Information Officer and Chief Digital Officer Therace Risch and EVP of Supply Chain Mike Robbins. Just two of those executives are still working at J.C. Penney.

WHAT’S NOTABLE

Mall-based retailers, including J.C. Penney, have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increasing shift by shoppers to purchase online on sites like Amazon (AMZN).

J.C. Penney has struggled more than some of its peers, including Nordstrom (JWN) and Macy’s (M), and in August, cut its outlook for fiscal 2018 as it continued to deal with too much inventory.

ANALYST COMMENTARY

In a research note to investors, Piper Jaffray analyst Erinn Murphy said Soltau has “direct insights” on J.C. Penney’s core consumer given the overlap of the consumer base in her prior roles as Joann Stores CEO, but remains sidelined on shares due to her longer-term view on department store retailing and her belief that J.C. Penney is still in the process of “right-sizing” its inventory.

Murphy has a Neutral rating and $1.50 price target on the shares.

PRICE ACTION

In pre-market trading, shares of J.C. Penney are up nearly 13% to $1.76.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Online retailers fall on Amazon concerns

Online retailers slide as Amazon reportedly testing recommendation service

Https://stockwinners.com/
Online retailers fall on Amazon concerns

 

Shares of several retailers and online personal shopping services are slipping in afternoon trading after CNBC reported that Amazon (AMZN) is testing a new on-site recommendation service known as Scout.


WHAT’S NEW:

 

CNBC reported that Amazon is testing a new service called Scout, a shopping site for consumers who don’t know specifically what they want to buy but are willing to take some automated recommendations.

 

Scout asks shoppers to like or dislike a product and responds by showing other products based on user responses, according to CNBC.

 

Scout is currently available for home furniture, kitchen and dining products, women’s shoes, home decor, patio furniture, lighting and bedding, with more categories coming soon.
“This is a new way to shop, allowing customers to browse millions of items and quickly refine the selection based solely on visual attributes,” an Amazon spokesperson said in an emailed statement. “
Amazon uses imagery from across its robust selection to extract thousands of visual attributes for showing customers a variety of items so they can select their preferences as they go.”

WHAT’S NOTABLE

The CNBC report noted that Amazon is utilizing machine learning technology to address one of the major criticisms of its service, namely that it’s a great place to buy things but not a great place to browse.
While Amazon is easily the biggest U.S. e-commerce company, e-retailers such as Stitch Fix (SFIX) and Walmart’s (WMT) Bonobos provide a more personalized experience and have given social media services such as Instagram (FB) and Pinterest more room to use their large collections of data in turning their networks into fledgling commerce sites, CNBC said.

PRICE ACTION

Following the news, Wayfair (W) slipped 4.3%, Williams-Sonoma (WSM) fell 1.9%, Stitch Fix dropped nearly 9%, and Steven Madden (SHOO) slid 1.3%. Meanwhile, Amazon (AMZN) shares are 1.5% lower in Wednesday afternoon trading.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.


L Brands drops after PINK CEO departs

L Brands slides after slashing earnings forecast, PINK brand CEO departure 

L Brands drops after PINK CEO departs, Stockwinners
L Brands drops after PINK CEO departs, Stockwinners

Shares of L Brands (LB) are sliding after the parent of Victoria’s Secret and Bath & Body Works reported better than expected quarterly earnings and revenue but lowered its profit outlook.

While Jefferies analyst Randal Konik reduced his price target for L Brands and recommended investors sell the shares, his peer at Citi argued that the guidance cut was expected and reiterated a Buy rating on the stock.

QUARTERLY RESULTS

Last night, L Brands reported second quarter adjusted earnings per share of 36c and revenue of $2.98B, both above the consensus of 34c and $2.93B, respectively.

The company also lowered its FY18 earnings per share view to $2.45-$2.70 from $2.70-$3.00, with consensus at $2.77.

Additionally, L Brands said second quarter consolidated same-store sales for Stores and Direct were up 3%, while same-store sales for the quarter at Victoria’s Secret were down 1% and up 10% at at Bath & Body Works.

Alongside quarterly results, the company announced that Denise Landman, CEO of Victoria’s Secret PINK, has made the decision to retire at the end of this year.

Pink CEO departs, Shares slide

Amy Hauk, currently president for merchandising and product development of Bath & Body Works, will replace Landman as CEO of Victoria’s Secret PINK.

JEFFERIES SAYS SELL SHARES

In a research note to investors this morning, Jefferies’ Konik lowered his price target for L Brands to $20 from $23 and recommended investors sell the shares.

The analyst argued that the company’s fiscal year earnings guidance cut is still not low enough, and sees PINK on “precipice of massive declines.” Further, the analyst thinks L Brands’ free cash flow guidance is too high as its net debt continues to grow.

The dividend is at risk in the medium-term and the company needs to save cash now “before the next recession,” Konik contended.

The analyst reiterated an Underperform rating on the stock.

Meanwhile, his peer at JPMorgan also lowered his price target for L Brands to $26 from $28.

While the stock was bracing for an earnings forecast reduction, the magnitude of management’s near-term third quarter cut was greater than expected, calling for break-even earnings at the low-end, the first time in more than a decade, analyst Matthew Boss contended.

He reiterated a Neutral rating on the shares. Voicing a similar opinion, Wells Fargo analyst Ike Boruchow lowered his price target for L Brands to $30 from $42 and kept a Market Perform rating on the shares as the core Victoria’s Secret concept continues to struggle.

Pointing out that the second quarter results “raised a number of red flags,” including “severe” margin contraction, “bloated” inventory, Bath & Body Works returning to margin contraction and issues at PINK, Nomura Instinet analyst Simeon Siegel reiterated a Neutral rating and $31 price target on L Brands’ shares.

CITI SAYS RISK/REWARD STILL ATTRACTIVE

Still bullish on the stock, Citi analyst Paul Lejuez told investors that while the turnaround path for Victoria’s Secret “remains unclear,” the market expected last night’s fiscal 2018 guidance cut.

With a 7.5% dividend yield, the stock’s risk/reward is attractive, particularly given actions by management that suggest “they have more than enough liquidity to continue funding the dividend,” Lejuez argued.

The analyst reiterated a Buy rating on the shares and said he views the dividend as safe.

While lowering her price target for L Brands to $44 from $49, B. Riley FBR analyst Susan Anderson kept a Buy rating on the stock as she believes Bath & Body Works continues to excel and Victoria’s Secret remains a work in progress.

While weaker PINK performance is “disappointing,” the analyst believes management is taking steps to correct lounge performance as well as improve performance in lingerie.

Further, Anderson highlighted that L Brands reiterated its commitment to share repurchases and dividend, and reiterated that the company has substantial liquidity to fund the dividend and other expenditures.

PRICE ACTION

In Thursday’s trading, shares of L Brands have plunged over 12% to $28.50.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Supreme Court ruling moves retail stocks

Physical retailers rise, online retailers drop after Supreme Court tax ruling

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

Shares of brick-and-mortar retailers are rising, while shares of e-commerce firms are slipping, after the Supreme Court ruled that online retailers can be required to collect sales taxes in states where they have no physical presence.

SUPREME COURT RULING

On Thursday, the Supreme Court sided with the state of South Dakota in a fight it brought against Wayfair (W) to require a business that has no physical presence in the state to collect its sales tax.

Supreme Court ruling moves retail stocks, Stockwinners
Supreme Court ruling moves retail stocks, Stockwinners

The Supreme Court ruled in a 5-to-4 vote that a 1992 judgement in Quill Corporation v. North Dakota regarding the physical presence rule was “unsound and incorrect,” according to a judgement posted to the high court’s website.

Justice Anthony Kennedy, in writing for the majority opinion, said the Quill decision had distorted the economy and resulted in states losing annual tax revenues between $8B-$33B.

“Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote.

“Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”

WHAT’S NOTABLE:

Following the ruling, industry trade organization National Retail Federation issued a statement saying,

“Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well.

This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

ANALYST COMMENTARY

KeyBanc analyst Edward Yruma called the ruling a negative for Wayfair, arguing that it may reduce some of the price differential that has helped it gain share from traditional peers.

The ruling is also a negative, but to a lesser degree, for eBay (EBAY) and Etsy (ETSY), said Yruma, who views the impact on those two as more related to compliance and implementation.

He adds that the news could be a modest positive for retailers of high-ticket and branded products, such as Best Buy (BBY), Home Depot (HD), Lowe’s (LOW), La-Z-Boy (LZB), Kirkland’s (KIRK), RH (RH) and Williams-Sonoma (WSM).

PRICE ACTION

At Thursday midday, Target (TGT) rose 1.8%, Walmart (WMT) was up 0.7%, Costco (COST) rose roughly 1.1% while Amazon (AMZN) was down 0.4%, Etsy dropped about 2.5%, eBay fell 1.4% and Wayfair (W) was down 1.2%.

In addition, Avalara (AVLR), a software company focused on automated tax compliance that recently held its initial public offering, gained 17.1%.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Rent-A-Center sold for $1.365 billion

Rent-A-Center to be acquired by Vintage Capital for $15 per share in cash

Stockwinners offers winning stock and option picks since 1998
Rent-A-Center sold for $1.365 billion

Rent-A-Center (RCII) announced that it has entered into a definitive agreement with Vintage Rodeo Parent, LLC, an affiliate of Vintage Capital Management, LLC, pursuant to which Vintage will acquire all of the outstanding shares of Rent-A-Center common stock for $15.00 per share in cash.

The transaction, which is not subject to a financing condition, and is expected to close by the end of 2018, subject to customary closing conditions including the receipt of stockholder and regulatory approvals, represents a total consideration of approximately $1.365B, including net debt.

Under the terms of the Merger Agreement, Rent-A-Center stockholders will receive $15.00 in cash for each share of Rent-A-Center common stock, which represents a premium of approximately 49 percent over the Company’s closing stock price on October 30, 2017, immediately prior to the announcement that the Company’s Board of Directors initiated a process to evaluate strategic and financial alternatives focused on maximizing stockholder value.

The Rent-A-Center Board has unanimously approved the transaction and recommends that stockholders vote in favor of the transaction.

Upon completion of the transaction, Rent-A-Center will become a privately held company and its common shares will no longer be listed on any public market.

“The Rent-A-Center Board, having just completed a comprehensive review of strategic and financial alternatives in consultation with outside legal and financial advisors, unanimously supports this transaction and is confident it maximizes value for stockholders while delivering a significant and immediate cash premium,” said Mitch Fadel, CEO of Rent-A-Center.

RCII closed at $12.03.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Walmart to pay $16B for about 77% in India’s Flipkart

Walmart to pay about $16B for initial stake of about 77% in India’s Flipkart

Walmart to pay about $16B for initial stake of about 77% in India's Flipkart, Stockwinners
Walmart to pay about $16B for initial stake of about 77% in India’s Flipkart, Stockwinners

Walmart (WMT) announced it has signed definitive agreements to become the largest shareholder in Flipkart Group.

The investment will help accelerate Flipkart’s customer-focused mission to transform commerce in India through technology and underscores Walmart’s commitment to sustained job creation and investment in India, the company said.

Subject to regulatory approval in India, Walmart will pay approximately $16B for an initial stake of approximately 77% in Flipkart, formally Flipkart Private Limited.

The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings (TCEHY), Tiger Global Management and Microsoft (MSFT).

While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.

While Walmart and Flipkart will leverage the combined strengths of both companies, they will maintain distinct brands and operating structures.

Currently, Walmart India operates 21 Best Price cash-and-carry stores and one fulfillment center in 19 cities across nine states in India, with more than 95 percent of sourcing coming from India, aiding suppliers, creating skilled jobs and contributing to local economies across the country.

Krish Iyer, president and chief executive officer of Walmart India, will continue to lead that part of the business.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Amazon higher on Prime members

Amazon rises as Prime reaches 100M paid members

Https://stockwinners.com/
Amazon higher on Prime members

Amazon’s (AMZN) CEO Jeff Bezos told investors that the company has exceeded 100M paid members globally and has shipped more than 5B items with Prime worldwide.

The good news for the e-commerce giant may not end there, as Morgan Stanley analyst Brian Nowak told investors that his analysis shows that Amazon has gained 1.5% of U.S. apparel market share in 2017 and may achieve number one U.S. apparel market share in 2018 as Prime members and Millennials shift spending to Amazon and away from traditional brick and mortar retailers.

100M PAID MEMBERS

According to a regulatory filing, Amazon said that it has exceeded 100M paid Prime members globally 13 years post-launch.

In 2017, Amazon shipped more than 5B items with Prime worldwide, and more new members joined Prime than in any previous year — both worldwide and in the U.S., the company said, adding that members in the U.S. now receive unlimited free two-day shipping on over 100M different items. The company expanded Prime to Mexico, Singapore, the Netherlands, and Luxembourg, and introduced Business Prime Shipping in the U.S. and Germany.

Additionally, CEO Jeff Bezos informed shareholders that Amazon Music now has tens of millions of paid customers, with Amazon Music Unlimited expanding to more than 30 new countries in 2017.

GAINING APPAREL MARKET SHARE

In a research note to investors this morning, Morgan Stanley’s Nowak said his analysis shows that Amazon gained 1.5% of U.S. apparel market share in 2017, largely at the expense of department stores.

According to his work around Amazon’s apparel gross merchandise value, the analyst estimates the e-commerce giant continues to be the second largest U.S. apparel retailer, trailing only Walmart (WMT), as the company has grown to about 7.9% of the overall U.S. apparel market, excluding shoes, or $21.1B apparel gross merchandise value.

Further, #Nowak told investors he expects Amazon to achieve the number one spot in 2018, as Prime members and Millennials shift spending to Amazon and away from traditional brick and mortar retailers.

The analyst pointed out that Amazon’s 2017 share gains look to have come largely at the expense of department stores, estimating Sears (SHLD), Macy’s (M) and J.C. Penney (JCP) lost 0.8% share in 2017, with shareholding remaining roughly flat for Target (TGT) and Kohl’s (KSS).

L Brands (LB) lost share due to the elimination of its swimwear and apparel categories, he contended.

Additionally, his U.S. apparel market deep-dive indicated that Walmart and Costco (COST) showed “impressive gains” despite a weak industry backdrop. Among the Softline retailers, Gap’s (GPS) Old Navy, Ross Stores (ROSS) and Nordstrom’s (JWN) Nordstrom Rack also added 10-15 bps of market share in 2017, he added.

Nowak reiterated an Overweight rating and $1,550 price target on Amazon shares.

PRICE ACTION

In Thursday’s trading, shares of Amazon have gained 2% to $1,554.90.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Bed Bath & Beyond tumbles after guidance

Raymond James  says sell Bed Bath & Beyond after guidance

Bed Bath & Beyond tumbles after guidance, Stockwinners
Bed Bath & Beyond tumbles after guidance,

Shares of Bed Bath & Beyond (BBBY) are sliding after the company announced better than expected fourth quarter results but issued a weaker 2018 forecast.

Following the news, several Wall Street analysts cut their price targets on the stock, while Raymond James analyst Beryl Bugatch downgraded Bed Bath & Beyond to Underperform, a sell-equivalent rating.

RESULTS

Last night, Bed Bath & Beyond reported fourth quarter earnings per share of $1.48 and revenue of approximately $3.7B, both above consensus of $1.39 and $3.68B, respectively.

However, the company also said that it sees FY18 EPS in a low-to-mid $2 range, with consensus at $2.76.

Additionally, Bed Bath & Beyond outlined its “roadmap for continuing the evolution of its foundational structure” with the goals of: growing its comparable sales, which it expects to begin in fiscal 2018; moderating the declines in its operating profit and net earnings per diluted share, in fiscal 2018 and fiscal 2019; and growing its net earnings per diluted share by fiscal 2020.

SELL, SAYS RAYMOND JAMES

In a post-earnings note, Raymond James’ Bugatch downgraded Bed Bath & Beyond to Underperform from Market Perform.

The analyst noted that the company’s management announced multiple initiatives ranging from new store concepts to new organizational structures, to new investments in technology that will come at a cost, as underscored by management’s view for continuing operating profit declines in FY18 and FY19.

Despite the array of initiatives announced, a key issue for the analyst is that the fleet of over 1,000 legacy Bed Bath & Beyond stores continue to deliver in-store mid-single-digit comparable sales declines.

Bugatch argued that it is “Beyond” him that management did not cite a remodeling of its flagship store base that he finds “increasingly unattractive” due to being dated, cluttered and crowded.

Without some underlying growth in management generated earnings over the next two years, shareholder value is likely to erode further, he added. Nonetheless, Bugatch pointed out that at its current valuation, Bed Bath may attract activist interest.

TARGETS CUT

Meanwhile, Morgan Stanley analyst Simeon Gutman lowered his price target for Bed Bath & Beyond to $16 from $20 as he is not convinced its revenue will respond to the company’s initiatives.

The analyst told investors that beyond a lift from the Babies R’ Us bankruptcy, it is hard for him to see how the company can drive positive same-store sales without the aid of promotions.

Gutman reiterated an Underweight rating on the shares.

His peer at JPMorgan also lowered his price target for Bed Bath & Beyond to $16 from $18.

Analyst Christopher Horvers noted that the company’s negative comparable sales in Q4 and over the past two quarters are “particularly disappointing” as is the acceleration in gross margin declines. The analyst also kept an Underweight rating on the shares.

Additionally, Wedbush analyst Seth Basham, Credit Suisse’s Seth Sigman, and Loop Capital’s Anthony Chukumba all lowered their price targets on the name to $18, $20 and $18, respectively, while reiterating neutral-equivalent ratings.

PRICE ACTION

In Thursday’s trading, shares of Bed Bath & Beyond dropped over 19% to $17.39.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Finish Line sold for $558 million

Finish Line to be acquired by JD Sports Fashion for $13.50 per share 

Finish Line sold for $558 million

Finish Line (FINL) announced that it has entered into a merger agreement providing for JD Sports Fashion to acquire 100% of the issued and outstanding Finish Line shares at a price of $13.50 per share in cash representing an aggregate deal value of approximately $558M.

JD is the leading European retailer of sports, fashion and outdoor brands.

The terms of the merger represent a premium of 28 percent for Finish Line shareholders compared to the closing price of Finish Line’s shares of $10.55 as of March 23, 2018.

This provides an excellent strategic fit for Finish Line and JD.

Finish Line moves into a stronger position to compete as part of a global enterprise that leads in the industry.

JD gains a significant physical and online retail presence with direct access in the US which they have long identified as a highly attractive growth opportunity.

Finish Line and JD together create a leading global, premium, multichannel retailer of sports, fashion and outdoor brands who embraces the latest online and in-store digital technology. Upon closing of the agreement, the Finish Line executive team will continue their involvement with the business.

The expected timeline to close on this agreement is no earlier than June 2018.

FINL closed at $10.55.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Barron’s is bullish on Facebook, La-Z-Boy

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy

BULLISH   MENTIONS:

Barron’s lists potential takeover targets in cloud software – Shares of young cloud software companies like MongoDB (MDB) and SendGrid (SEND) have soared since the Nasdaq’s bottom on February 8, in part on speculation of a takeover, Barron’s Tiernan Ray contends. Takeover targets form a long list in addition to the aforementioned, and include Friday’s initial public offering Dropbox (DBX), Appian (APPN), Veeva Systems (VEEV), Atlassian (TEAM) and ServiceNow (NOW), Ray writes.

La-Z-Boy shares could rally 20% within a year or two – La-Z-Boy (LZB) shares currently trade at 13.8 times forecast earnings for the next 12 months, which is well below the small-cap Russell 2000 Index’s price/earnings ratio of 25, the Standard & Poor’s 500 index’s 17, and its own five-year average of 16.3 times forward earnings, writes Barron’s Brett Arend. He believes the stock, which closed Friday at $28.75, could merit a valuation of $36 per share, or roughly 20% higher, within a year or two “by simply getting back to its average five-year multiple.” Higher consumer spending, a new relationship to sell on Amazon.com (AMZN), and successful efforts to reach millennials could propel the shares even higher, Arend contends.

Time Warner shares look appealing with antitrust trial under way – Time Warner (TWX) investors face a “win-win” scenario with the antitrust trial for AT&T’s (T) proposed takeover now under way in Washington, Andrew Bary of Barron’s writes. Time Warner shares “look appealing, based on their underlying value and AT&T’s strong chances of winning,” Bary contends. He notes the stock closed Friday roughly $11 below the current value of AT&T’s cash and stock bid, worth $103.60 per share. The 12% deal spread is appealing with “many observers” believing AT&T and Time Warner will prevail over the U.S. government, according to Bary. He adds that while Time Warner shares could fall $5 if the government wins, some analysts think the stock will quickly recover to its current price of $92.57.

Interactive Brokers tops Barron’s list of best online brokers – Interactive Brokers (IBKR) sits atop Barron’s 23rd annual ranking of The Best Online Brokers. Interactive scored highly in trading experience, range of offerings, and portfolio analysis, Theresa Carey writes in a feature story for this weekend’s magazine. Interactive Brokers is followed by Fidelity, TD Ameritrade (AMTD), Charles Schwab (SCHW), TradeStation, Merrill Edge (BAC), E-Trade (ETFC) and tastyworks in Barron’s annual ranking.

Facebook may now be more tempting to investors – In its cover story titled “Facebook Comes Under Siege,” Barron’s says Facebook  (FB) shares may be more tempting to investors following last week’s 14% decline. With more than 2B users, however, Facebook is “almost certain” to not walk away unscathed as the top target for privacy concerns, Jon Swartz writes. Nonetheless, with nearly $42B in cash and investments, Facebook has the flexibility to diversify into other business lines, as it did with Instagram and WhatsApp, Swartz adds.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Barron’s is bullish on Allergan and Gaps

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Barron’s is bullish on Gaps

BULLISH   MENTIONS:

Allergan shares could rise 20% or more– New competition to Allergan’s top product, Botox, and the loss of patent exclusivity for its second biggest, the dry-eye treatment Restasis, have left investors with “worry lines,” Vito Racanelli writes in this week’s edition of Barron’s.

However, Racanelli says concerns are way overdone as the company’s pipeline of new drugs should eventually replace the lost revenue from products going off patent. The shares could rise 20% or more, to $200-$225 by the end of 2019, Barron’s adds.

Old Navy may lift Gap (GPS) by 25% – Old Navy is enjoying fast sales growth and plump profit margins but is trapped inside a Gap, a name that has been an investor turnoff, Jack Hough writes in this week’s edition of Barron’s.

Old Navy contributes close to half of company sales and within two years could generate three-quarters of profits, and yet Gap shares trade at just 12 times projected earnings for the next four quarters, which is one sign Gap could have plenty of upside left – perhaps 25% or more over the coming year, he adds. GPS closed at $31.74.

CAUTIOUS MENTIONS:

Broadcom Plan B looks complicated – After Broadcom’s (AVGO) bid for Qualcomm (QCOM) ended last week after President Trump blocked it on grounds of national security, the Wall Street now wants to know what the former will try to buy as plan B, Tiernan Ray writes in this week’s edition of Barron’s. The two most heavily speculated-about targets are Xilinx (XLNX) and Micron Technology (MU), he notes, adding that several others are conceivable, including Microchip Technology (MCHP), Marvell Technology Group (MRVL), Maxim Integrated Products (MXIM), and Analog Devices (ADI). However, with nearly $18B in 2017 revenue, Broadcom is big enough to make finding targets that matter challenging, he contends.

Goldman Sachs’ next CEO will have to fix trading– In a follow-up story, Barron’s notes that Goldman Sachs (GS) was once known for its trading prowess but has recently humbled by a trading slump. The bank has created something of a hedge with its apparent choice of successor, David Solomon, a lender and investment banker but not a trader, the report says. If a long-awaited trading rebound materializes in the quarters ahead, CEO Lloyd Blankfein can hand over the keys with a grin, but if not, the Solomon era could see Goldman reduce exposure to trading, Barron’s points out.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Macy’s rises on strong earnings

Macy’s rises as turnaround plan fuels better-than-expected earnings

Macy's rises as turnaround plan fuels better-than-expected earnings. Stockwinners.com
Macy’s rises as turnaround plan fuels better-than-expected earnings. Stockwinners.com

Shares of Macy’s (M) rallied after the company reported better-than-expected earnings, including a surprise increase in same-store sales, and offered 2018 guidance.

EARNINGS AND GUIDANCE

Macy’s reported fourth quarter adjusted earnings per share of $2.82, beating analysts’ estimates of $2.71, on revenue of $8.67B, essentially in line with the $8.68B consensus but up 1.8% from the year-ago period.

Comparable sales on an owned basis were up 1.3% and up 1.4% on an owned plus licensed basis. Macy’s also offered guidance for 2018, including EPS of $3.55-$3.75, excluding anticipated settlement charges related to the company’s defined benefit plans, which compares to analyst estimates of $3.66. The retailer sees comp sales on both an owned and an owned plus licensed basis flat to up 1% and expects total sales to decline 0.5% to 2%.

EXECUTIVE COMMENTARY

In a statement, Chairman and CEO Jeff Gennette said, “We are committed to returning Macy’s to comparable sales growth in 2018 and will build on the momentum we created in the fourth quarter of 2017… We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy’s to growth.”

On the company’s quarterly earnings call, CFO Karen Houget said Macy’s expects stronger sales in the second half of 2018 than the first half and that first half owned plus licensed comp sales are expected to be “approximately flat to slightly down.”

UPDATE ON BROOKFIELD ALLIANCE

Macy’s this morning also provided an update on its agreement with Brookfield Asset Management (BAM), noting that it recently agreed to sell seven floors of its State Street store in Chicago to a private real estate fund sponsored by Brookfield.

As part of the transaction, Macy’s will receive a total of $30M as well as upside participation in the ultimate value creation associated with the conversion of the upper floors to office space. The company anticipates closing this transaction in the first half of fiscal 2018.

The company is also exploring opportunities to sell the approximately 240,000 gross square footI. Magnin portion of the main Union Square building in San Francisco.

The companies have also agreed to certain terms on nine assets, which Brookfield will redevelop once it has received approval. Macy’s said it hopes to reach a deal on the nine assets in 2019. Macy’s said it “continues to opportunistically evaluate its real estate portfolio to identify opportunities where the redevelopment value of its real estate exceeds that of non-strategic operating locations.”

PEERS

Macy’s and other mall-based retailers and department stores have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increase in online shopping on sites such as Amazon (AMZN).

Additionally, in January, Macy’s reported that its comparable sales on an owned basis increased 1% in the months of November and December 2017 combined, which lagged rivals J.C. Penney (JCP) and Kohl’s (KSS). J.C. Penney posted same-store sales growth of 3.4% during the November-December holiday period, while Kohl’s reported that total and comparable sales were up 6.9% for the period over the last year. Kohl’s , J.C. Penney, and Nordstrom (JWN) are expected to report later this week.

PRICE ACTION

Shares of Macy’s are off earlier highs and are now up about 4% to $28.51 in Tuesday’s trading.

OTHERS TO WATCH

J.C. Penney is up 2.3%, Nordstrom is down about 2% and Kohl’s is down 1.5%.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Fogo De Chao sold for $560 million

Fogo De Chao to be acquired by Rhone for $15.75 per share in cash

Fogo De Chao to be acquired by Rhone for $15.75 per share in cash. Stockwinners.com
Fogo De Chao to be acquired by Rhone for $15.75 per share in cash.

Fogo de Chao (FOGO) announced an agreement to be acquired by investment entities affiliated with Rhone Capital.

Under the terms of the agreement, Rhone will acquire the Company in an all cash transaction valued at $560M.

The Company’s stockholders will receive $15.75 per share, representing a 25.5% premium to the closing share price of the Company’s shares on February 16, 2018.

The transaction is the result of a comprehensive strategic alternatives review process taken by the Company’s Board of Directors.

The transaction has been unanimously approved by Fogo’s Board of Directors. Funds affiliated with Thomas H. Lee Partners, L.P. and certain of Fogo’s directors and executive officers, which collectively hold more than 60 percent of Fogo’s shares, have approved the transaction by written consent.

The acquisition is expected to be completed during the second calendar quarter of 2018, subject to regulatory approvals and other customary closing conditions.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Albertsons and Rite Aid to merge

Rite Aid CEO to become CEO of combined Rite Aid, Albertsons

Albertsons and Rite Aid to merge

Albertsons Companies and Rite Aid Corporation (RAD) announced a definitive merger agreement under which privately held Albertsons Companies will merge with publicly traded Rite Aid.

Under the terms of the agreement, in exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either (i) one share of Albertsons Companies common stock plus approximately $1.83 in cash or (ii) 1.079 shares of Albertsons Companies stock.

Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28.0 percent to 29.6 percent stake in the combined company, and current Albertsons Companies shareholders will own a 70.4 percent to 72.0 percent stake in the combined company on a fully diluted basis.

Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons Companies will have approximately 392.9 million shares outstanding on a pro forma and fully diluted basis.

Following the close of the transaction and the share exchange, Albertsons Companies’ shares are expected to trade on the New York Stock Exchange.

Albertsons Companies is backed by an investment consortium led by Cerberus Capital Management, L.P., which also includes Kimco Realty Corporation (KIM), Klaff Realty LP, Lubert-Adler Partners LP, and Schottenstein Stores Corporation.

Current Rite Aid Chairman and Chief Executive Officer John Standley will become CEO of the combined company, with current Albertsons Companies Chairman and CEO Bob Miller serving as Chairman.

The combined company is expected to be comprised of leadership from both companies and will be dual headquartered in Boise, Idaho, and Camp Hill, Pennsylvania.

The name of the combined company will be determined by transaction close.

The integrated company will operate approximately 4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states and Washington, D.C., serving 40+ million customers per week.

Most Albertsons Companies pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid stand-alone pharmacies.

The combined company expects to deliver annual run-rate cost synergies of $375 million in approximately three years and access potential annual revenue opportunities of $3.6 billion.

Over 60 percent of the cost synergies are expected to be realized within the first two years post-close. Identified revenue opportunities primarily include partnering with payors, including Rite Aid’s PBM, EnvisionRx, through preferred networks to drive additional high-value customers, connecting Rite Aid’s reliable pharmacy customer base to Albertsons Companies through loyalty programs and targeted marketing, leveraging Albertsons Companies’ grocery capabilities and Rite Aid’s pharmacy expertise to enhance the customer offering, and driving traffic through the omni-channel experience.

Cost synergies will be achieved primarily through procurement savings, leveraging efficiencies realized by a combined supply chain, combined distribution and fulfillment channels, and leveraging manufacturing capabilities.

The board of directors will be comprised of nine directors, four of whom will be named by Albertsons Companies, four of whom will be named by Rite Aid (including John Standley), and one of whom will be a jointly selected director. A majority of the Board will be independent. Lenard Tessler will serve as Lead Director.

Kimco Realty Corp (KIM) confirms its participation as an investor in connection with today’s announced execution of a definitive agreement under which Albertsons Companies will acquire all outstanding shares of Rite Aid Corporation (RAD).

RAD closed at $2.13. It last traded at $2.68.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Kroger sells convenience store business for $2.15B

Kroger to sell convenience store business unit to EG Group for $2.15B

Kroger to sell convenience store business unit for $2.15B. Stockwinners.com
Kroger to sell convenience store business unit for $2.15B 

Kroger (KR) and EG Group, a privately-held petrol forecourt convenience store retailer based in Blackburn, Lancashire, United Kingdom, announced a definitive agreement for the sale of Kroger’s convenience store business unit to EG Group for $2.15B.

Kroger’s convenience store business generated revenue of $4B, including selling 1.2 billion gallons of fuel, in 2016. Kroger’s supermarket fuel centers and its Turkey Hill Dairy are not included in the sale.

Kroger announced in October 2017 its intention to explore strategic alternatives for its convenience store business, including a potential sale, in conjunction with the “Restock Kroger” plan.

The company expects the transaction to close quickly as EG Group has no U.S. presence today. The companies expect to close the transaction during the first quarter of Kroger’s fiscal year.

As part of the agreement, EG Group will establish their North American headquarters in Cincinnati, Ohio and continue to operate stores under their established banner names.

Kroger plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.