JC Penney Ignores Google

JC Penney is one of the three department store...

Image via Wikipedia

JC Penney (NYSE:JCP) announced Q4 results and fully ignored Google’s imperial directives about search engine optimization. SEO if you are really into it. Google says JC Penney gamed search engine results and was taking steps to counter.

In the meantime JC Penney reported the following on its internet offering

“Internet sales through jcp.com grew $65 million to $1.5 billion for the year, increasing 4.4 percent over last year.  Total sales increased 1.2 percent for the year.  Total sales were approximately 130 basis points lower than same store sales due to the Company’s exit from its traditional catalog business.  In 2010, catalog sales totaled $454 million.”

Not the most straight forward apples to apples comparison. But here is what should interest investors.

  1. No mention of Google trying to ungame JC Penney.
  2. No mention of jcp.com in next years outlook.

jcp.com accounts for 8.4% of  of JC Penney. management cannot go to sleep.

While we are at it. Google is a commercial enterprise that is making up rules of behaviour for a competitive marketplace. Then they get upset when large reputable companies figure out ways to get around them. Will JC Penney have the basis for a restraint of trade lawsuit against Google?

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Loblaw Bites New York

Logo previously used in advertising in Ontario...

Image via Wikipedia

Loblaw (TSE:L) through its Joe Fresh brand is expanding into New York New York. If you can make it here you can make it anywhere. To most investors Loblaw is a grocery store. Low margins needing high turnover. If an investor wants grocery store exposure in the portfolio then go look at Loblaw, do your home work and take it from there.

Now they are confusing the risk weighting by ramping up apparel which is a completely different business. They skirt around financial governance issues and regulatory compliance by announcing the venture as a brand. Most product launches or new divisions interest investors when you can discuss earnings and when they become accretive. Not one word of mention about money. How will the investor track benefits? Where does this stand in wealth creation for shareholders.

Club Monaco expansion into NY NY is cited as an influence. If I have the story right Polo Ralph Lauren eventually bought it out and the boys made some money. Is Joe Fresh being primed for a quick flip? Will Loblaw eventually remove it from their corporate financial body to unlock value and then sell it later for big bucks? Will the Loblaw shareholder be compensated for supporting the new venture?

Loblaw is a public company with a controlling shareholder of George Weston Limited. If you follow the corporate tree you find the Galen Weston Family and Holt Renfrew a high-end Canadian Fashion retailer. Listen for things that make noise in the back room. Then listen and wonder why its very quiet.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Bank of America Passive Aggresive Accounting

Bank of America logo

Bank of America (NYSE:BAC) issued a convoluted press release announcing a restatement covering eight quarters. Management is quick to point out it’s all non cash so relax and have a latte. The restatement has been reported to the FDIC and Comptroller of Currency so they can claim regulatory compliance.

I have read the press release several times. Investors cannot find this to be transparent or useful. Management is relying on the subliminal message that it is a non cash issue, so just go back to sleep. It’s all good?  The reality is components of Bank of America’s credit card operations are worth less than originally reported. Never good news in the financial and investment world.

Management maintains that they have been consistently testing goodwill values. The earlier tests during 2009 and first half of 2010 did not indicate impairment. But in Feb 2011 the same tests now indicate impairment. {insert comments about rear view mirror here}

So what are the changes and why are they necessary” Read this confusing non informational quote and join the skeptics camp.

“The restatement, which resulted from changes to processes covering legal entities implemented in 2010, covers eight quarterly periods of 2009 and 2010,….

The goodwill write-down was caused by deteriorating credit quality and the adverse impact from The CARD Act on Bank of America’s credit card operations in 2009…..

Bank of America periodically conducts a test of the carrying value of the goodwill assigned to each of its business segments, including Global Card Services. Through 2009 and the first half of 2010, the test indicated no goodwill impairment in that segment.”

The press release does not quote any senior officers. A sure sign the big wigs are looking for cover. The reality is a lot of the card operations lost money because of poor credit decisions. Bank of America is opportunistically pointing a finger at Dodd-Frank financial reform legislation. What about the core fundamental fact that poor credit decisions were made which eventually forced impairment charges?

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Will Egypt Invade Libya?

(en) Libya Location (he) מיקום לוב

Image via Wikipedia

The Muslim/Arab/Oil world is experiencing cataclysmic change. Well if you are a ruling dictator it looks bad. In the meantime investors can trade OIL an ETN that trades on NYSE ARCA (NYSE ARCA: OIL) Trading seems fear based. The Saudi’s say do not worry we will sell oil and stabilize Western Oil addiction. Like I said the trading seems fear based.

What changes can you foresee? Are we just changing dictators? Will the new power élite understand they need to do things differently?

Libya accounts for 2-3% of known oil reserves. They have a population of of some 3.5 million. No accurate census data is available.

Egypt accounts for no significant oil reserves. The revenue of the Suez Canal is maxed. The Egyptian population stand at 81-82 million.

Libyan oil revenues would go a long way to help Egyptian rulers solve many many many problems. Egypt has learned to co-operate with the west. Libya has been nothing but a problem for the West.

A population of over 80 million can crush the Libyan 3.5 million and present the west with stability. As Moammar Gadhafi becomes increasingly more bizarre and irresponsible the west may even suggest the invasion to Egypt.

Disclsoure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in any stocks mentioned in this post. I have no plans to initiate new positions withing the next 72 hours.

Time Warner Board Failure

Time Warner

Image via Wikipedia

Time Warner ( NYSE:TWX ) executed the CEO of Time Magazine Jack Griffins. Hand picked by Time Warner CEO Jeff Bewkes it took a mere six months to fall apart.

Say what you want about an immovable object colliding with fast-moving energy I blame the board. Sure Jeff Bewkes picked him. But appointments at this level are or should be scrutinized at the board level. By the time you make C-level status your personality is an open book. The board backed Jeff Bewkes and did not give the proper oversight. A personality conflict after six months means they are asleep and dozing comfortably as the digital world eats their lunch,then dinner, breakfast and lastly all the good snacks you have.

Disclosure: “George Gutowski” writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. 

Dr Pepper Snapple PR Sugar Rush

Dr Pepper/Seven Up logo

Image via Wikipedia

Dr Pepper Snapple ( NYSE:DPS ) reported Q4 results and showed some sugar rush exuberance.  The head bullet shows net sales up 4%. Readers must remember this is the Q4. Reading the fine print net sales are up 2% for the year. Read all commentary about demand very carefully.

But the gold medal standard for sugar rush public relations comes when DPS President and CEO Larry Young says ” … delivering even greater customer value through our developing Rapid Continuous Improvement initiative. This, combined with strong innovation,…” 

Larry you test positive for buzz word addiction. “developing rapid continuous improvement”  just has too much buzzword. Then “we combined with stronger innovation” to go over the top.

When CEO’s crank up the buzzword content it’s time for investors to read carefully. Very carefully.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Orbitz Labor Cost Paradox

Orbitz

Image via Wikipedia

Orbitz (NYSE:OWW) reported poor Q4 results but improved YOY. Reviewing the cost items you will note a decrease in labour cost offset by a slight increase in contract labor. The factor is 5 to 1. Yet net profits were poor. Management does not speak to the issue. Have they maximized employee productivity? Are further gains available or contemplated?

Sounds of silence on the issue. Serious oversight by management to not address the issue. Are they awake or snoozing on the point.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Vonage Spin Guidance

Vonage IPO Wall Street Photo

Image by BrianBoyd via Flickr

Vonage (NYSE:VG) announced Q4 results and told investors the strategy is working. For those who do not want to drink the Kool-Aid look at how the re-affirm their guidance. Basically they promise to do better than before. This is kids stuff.

Marc Lefar, Vonage Chief Executive Officer, said, “Our multi-year plan to improve all of our key metrics culminated in a strong fourth quarter, providing clear evidence of our sustained operational and financial transformation….This is the first year in our history that the Company generated free cash flow.  We are stronger than we have ever been.”  

I guess its a very giddy time when you have finally generated free cash flow for the first time. But seriously folks read the snippet below and see if you have confidence in the way management communicates with shareholders.

Quote

Management Reaffirms 2011 Outlook

Vonage reaffirmed the following financial and operating guidance:

  • Higher gross line additions in 2011 than 2010, and positive net lines for the year
  • Monthly churn of approximately 2.4% for the year  
  • Our growth initiatives are expected to begin to meaningfully impact revenue beginning in the second half of the year
  • Adjusted EBITDA higher than the $156 million achieved in 2010
  • Total capital and software expenditures in the range of $40-45 million

Unquote

Disclosure: “George Gutowski writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

SHAREOWNERS.ORG TO LAUNCH MAJOR CAMPAIGN TO SAVE SEC, CFTC IN THE FACE OF BUDGET CUT PROPOSALS

Seal of the U.S. Securities and Exchange Commi...

Image via Wikipedia

Regulation is critical. Budget cut backs for the SEC and CFTC will only hurt the little investor. I have reprinted the following press release because this is important.

Penny-Wise and Pound Foolish? Cuts Would Come As Agencies Tackle Implementation of Most Sweeping U.S. Financial Reforms Since the Great Depression

WASHINGTON, D.C.///NEWS ADVISORY///A major Web-based campaign to save the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) from the impact of proposed budget cuts will be launched at 1 p.m. Wednesday (February 16, 2011) by ShareOwners.org (http://www.shareowners.org) in cooperation with the Consumer Federation of America (CFA) and the Council of Institutional Investors (CII).

The U.S. House is currently looking at slashes to the budgets for the SEC and CFTC, which would be forced to scale back operations and dismiss hundreds of employees at the very point in time when the agencies are seeking to implement pro-investor reforms mandated by the last Congress in the wake of the recent U.S. financial crisis.

The new campaign spearheaded by ShareOwners.org will mobilize small and large investors to get actively involved in urging Congress to avoid making cuts that would cripple the leading federal agencies responsible for ensuring that America’s financial markets operate in a fair and open fashion. The new effort by ShareOwners.org is one of a number of emerging pushes by a variety of important groups to protect investors and the integrity of the capital markets by shielding the SEC and CFTC against unwarranted budget cuts.

News event speakers will be:

* Tracy Stewart, executive director, ShareOwners.org;

* Barbara Roper, director of investor protection, Consumer Federation of America; and

* Jeff Mahoney, general counsel, Council of Institutional Investors.

TO PARTICIPATE:  You can join this live, phone-based news conference (with full, two-way Q&A) at 1 p.m. EST on Wednesday, February 16, 2011 by dialing 1 (800) 860-2442. Ask for the “Save the SEC/CFTC Campaign” news event.

CAN’T PARTICIPATE?:  A streaming audio replay of the news event will be available on the Web at http://www.shareowners.org as of 4 p.m. EST on February 16, 2011. 

CONTACT:  Patrick Mitchell, (703) 276-3266 or pmitchell@hastingsgroup.com.

Launched in June 2009, ShareOwners.org (http://www.ShareOwners.org) is a nonprofit and nonpartisan organization that educates and organizes U.S. investors to support both short- and long-term financial market reforms. ShareOwners.org’s broad four-part agenda focuses on the need for stronger regulation (including a beefed-up SEC), increased accountability of boards/CEOs, improved financial transparency and protection of the legal rights of investors.
 

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions in the next 72 hours.

RIM Backdoors Android and iPhone

Image representing Research In Motion as depic...

Image via CrunchBase

Research in Motion (Nasdaq:RIMM) announced a second $150 million VC fund for mobile apps. This follows a May 2010 $100 million VC investment with China Broadband Capital to promote mobile applications in the world’s largest market. Google (Nasdaq:GOOG) will have a difficult time in China regardless. iPhone (Nasdaq: AAPL) relies on their current eco-system of apps developers. But scale will trump most other competitive issues. China will give you scale that no other market could hope to match. China will support Chinese apps over foreign designs. Watch how China is invited into the right deals.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.