NO DOLLARS FOR DONUTS
Krispy Kreme Doughnuts (
NYSE:KKD,
Forum) slid off the table today, dropping 14% on disappointing Q2 results. Surprisingly, the sugar-filled, sugar-frosted, sugar snack apparently isn’t going down so well in a world filled with diabetes sufferers. Weird.
KKD hit the heights of $23 per share in late 2013, but has slid back to $17.73 on today’s trading.
Canadians may recall Krispy Kreme as the chain that once opened restaurants up here, had lines around the block for three days, and whose licensors up north soon after filed for bankruptcy protection and all but disappeared because, Tim Hortons (
TSX:QSR,
Forum).
Krispy Kreme’s first quarterly loss was
back in 2004. Management blamed the rise of low carb diets at the time and yet, eleven years later, they’re still apparently surprised when the financials look bad.
LULU A LEMON WITH INVESTORS
Canadian culture/athletic brand
Lululemon (
NYSE:LULU,
Forum)
announced Q2 results that pissed off the street Thursday, leading to a 15% slash on its share price.
Funny thing: The company grew just about all its important metrics over the quarter – it made more revenue, paid less tax, grew same store sales, and cranked it up on direct-to-customer sales (up 30% to 18.2% of total company revs)… but not enough to please the machine.
The problem at hand? Gross margins at 46.8%, down from 50.5% a year ago – when the Canadian dollar was 20% higher and the company wasn’t in the middle of a marketing push to expand globally, a stock buyback, and the launch of new men’s lines (good luck with that).
“They are spending on product development and sourcing and that is what is putting pressure on gross margins and that is expected to last throughout this year,” Dorothy Lakner, a retail analyst at Topeka Capital Markets,
told The Globe and Mail.
Laurent Potdevin, CEO of the company, said in a news release: “We exceeded our revenue targets for the past quarter, supported by strong performance from both our store and e-commerce channels.”
He added, “Looking to the remainder of the year, our team is laser focused on meeting our strategic key goals: grow our global collective, relentlessly innovate our product lines and continue to create transformational experiences for our guests.”
I’m pretty comfortable with my masculinity, but you’ll never see me with a Lululemon logo on my butt. That said, yoga participation is going nowhere but up, and girls of average size are starting to forget the comments that brought Lululemon leadership undone a few years back… if the stock price limps much longer, it wouldn’t surprise to see someone make a run at the company.
The retail world is getting curbstomped by investors pretty much across the board at the moment. The latest to take it in the neck is
Zumiez (
NASDAQ:ZUMZ,
Forum), an apparel chain based on skateboard culture that has hit that point where it’s so big, it can’t really sustain its counter-culture appeal.
Zumiez released quarterlies today that showed EPS numbers that were worse than analyst estimates by close to 10%. Sales were down year over year. The company is predicting Q3 EPS will be between $0.27-$0.31,as opposed to a $0.53 consensus figure, with a 7-9% decrease in Q3 comparable sales.
Zumiez stock has nearly halved since March of this year, but that’s kind of what retail does nowadays. Junior mining executives think retail is in the toilet. The rare earths sector says, “Phew! At least we’re not in retail,” at their annual suicide watch dinners.
Gutsing it out in the online world is Canadian microcap
Mezzi (
TSXV:MZI,
Forum), which has added a line of gun cases to its signature smart luxury bag line, and is rumored to be running the ruler over an acquisition target or two.
Notice the
recent private placement for $700,000, which only adds fuel to the fire. That ain’t office rental money..
Mezzi stock has drifted to the mid-teens of late, despite heavy buying by its CEO, Keir Reynolds, but it’s online strategy is a major plank in its business platform.
Go visit their site right now and time how long it takes for one of their staffers to engage you in a chatbox… it’s almost eery. Like they’re sitting there waiting for you, ready to walk you into a $500 handbag…
THANKS OBAMA
A US government report indicates there are more job openings in that country now than at any time in the last 15 years – or, basically, since Clinton 1 was in office.
Not a bad result, considering the mess that was handed to him. In fact, I’m still waiting for Obama to reveal he was a Muslim Manchurian Candidate… it’s been nearly eight years, conservatives, since the far right warned he would destroy America, and I still don’t see madrassas proliferating.
IN CONTRAST
Brazil’s debt just got downgraded to “junk” status by Standard & Poors. The government down there is selling $1.5 billion in Brazilian Reals today to stop the currency from plunging too hard.
USE THE PLATFORM TO BUY THE PLATFORM
Stockhouse sister company and high tech startup InvestX has just announced you can use its crowd-funded private equity platform to buy shares in … InvestX!
Yes, fresh off helping members buy private equity stakes in Lyft, Spotify, Cleveland Heart Lab, Spacefy, and more, the InvestX machine, with the help of Waverley, is now selling pieces of the platform itself, hoping to raise $900k in growth funds.
$400k has already been assigned, with previous investment coming from Mercury Capital, Pathfinder Asset Management, US Global Funds, Mutual Fund Alliance and Meridian. If you’d like a piece of what’s left, go read up at
https://www.waverleyix.com/deals/investx.
No investment class has brought about better returns than private equity in the last few years, especially pre-IPO tech equity, and InvestX gets you in the door on pre-market deals that you usually can’t get near unless you’re a whale.
Apparently there’s still a little equity left in Spotify and touchscreen maker Baanto, if you’re daring..
THE GOOD NEWS IS, YOU STILL HAVE A JOB
Canadian Natural Resources (
TSX:CNQ,
Forum) employs some 7,600 employees across three continents. But oil prices have hit them hard.
Expectations were the company would let some of those employees go, but the company has instead decided to cut salaries by as much as 10%, with higher paid employees taking the brunt.
Competitors have opted to lay-off employees without much thought, warning, or concern. So, well played, CNQ.
SLUMP -> CLOSURES -> SHORTAGE -> SPIKE -> PROFIT
Copper supplies are starting to really fall away globally right now, with each new day revealing more news of closures, stoppages and cuts.
Yesterday we talked of worker protests in Chile forcing Codelco to shut down its concentrator, while
Glencore (
OTO:GLNCY,
Forum) announced Monday it was cutting 400,000 metric tons of production over the coming 18 months. That comes after mines at
Freeport McMoran (
NYSE:FCX,
Forum) have been shuttered or cut back and Chinese operators in Zambia have shut the Baluba mine there.
Freeport today said El Nino wether patterns in Indonesia will cut production there, and a lack of water supply will cut sales by 25m lbs.
If that wasn’t enough, Codelco today announced it was going to
start killing off management positions ‘to cut costs to the bones’, which is likely a bone thrown to the unions in the hope they’ll end protests.
Sounds miserable, right? Wrong. Copper is up 5% on the week and showing signs of an upswing, especially if China makes good on promises to stimulate its economy.
Consider this: Carl Icahn took 8.5% of Freeport on August 25.
Since then, it’s up 39%.
Still wouldn’t want to be trying to get a copper mine started just now, but a sustained upward move might be one worth watching up close.
MOVERS
Moseda Technologies (
TSXV:MSD,
Forum), which I mentioned in yesterday’s screed, saw big volume today as it shifted up another 9.1%. Medicinal cannabis services aggregator
Invictus MD Strategies (
CSE:IMH,
Forum) saw some love, jumping 41.7% (though some of that, admittedly, may have been down to me buying it).
Crippled by debt,
DryShips (
NASDAQ:DRYS,
Forum) has agreed to sell 17 bulk carriers to companies owned by its CEO and Chairman, to get some cash in the door and stave off the wolves. The move will reportedly lead to a $795m loss on the deal, but the doors remain open. Stock dropped 36.8% on the news.
MEA CULPAS
Back late last year, I wrote a series of pieces about a little coal company in the US that was expanding into the frac sand business.
CanAm Coal (
TSXV:COE.H,
Forum) was a crapped out stock, mainly because it was in the coal sector, but also because it had racked up a big debt buying up dying competitors to form one larger entity that could (hopefully) remain competitive.
In researching the pieces, I asked execs several times if that debt was manageable, and they insisted it was. They had a plan to shift out from under the debt quickly and move forward into the new industry.
Just looked at recent news from the company and, well, it seems the truth is the first casualty of war and business, and that debt crushed them but good.
Most recent news headlines:
When I started writing about the company, it was trading at $0.02. It lifted to $0.06 quickly thereafter and a $250k private placement was carried out at $0.05 subsequently, even after they announced a quarterly loss of $2.5 million, more than 2.5 x the quarterly loss from the previous year, a few weeks after my pieces ran.
Annoyed. Execs often make grand promises that don’t come true, but “can you service that debt without any problem” is a clear question that you don’t answer yes to when you know you have a $2.5 million quarterly loss coming. Avoid. Sell. Dump. If it ever resumes trading.
MOST READ BULLBOARDS OF THE DAY
- Equitas Resources (TSXV:EQT, Forum), hard running stock hit by profit-taking
- Fission Uranium (TSXV:FCU, Forum), the circular firing squad continues
- Bombardier (TSX:BBD.B, Forum), plane nobody wants makes less noise than expected, discussion ensues
--Chris Parry
https://www.twitter.com/chrisparry
FULL DISCLOSURE: Mezzi and Moseda Technologies are Stockhouse Publishing marketing clients.