Posts by Nicole Sinclair

2 ways the dismal jobs report actually suggests the economy is ready for a rate hike

The May jobs report was, by many measures, disappointing. US companies added only 38,000 jobs last month, the lowest level in six years and well below the 155,000 expected by economists. And while the Verizon labor strike added noise to the numbers, its estimated impact stood at only 34,000 .

But while negative recaps dominated the report’s post-mortem, two key metrics were glossed over that suggest the US economy may be better off than the preliminary prognosis indicates and may be able to withstand another rate hike: hourly earnings and long-term unemployment.

Signs of declining “labor slack”

A couple of key indicators pointed to the economy approaching full employment and a decline in “slack” in the labor market.

First, wages are growing. Average hourly earnings rose 2.5% year-over-year, an uptick from the 2.0% level of recent months.

RBC Chief U.S. Economist Tom Porcelli wrote in a note that workers’ earnings have been increasing significantly.

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Walmart’s shareholder party will be clouded by a few big concerns

On Friday, Wal-Mart ( WMT ) kicks of its 46th annual shareholder meeting at the Bud Walton arena on the University of Arkansas campus.

The company will aim to continue its upward momentum since its  first quarter earnings report on May 19, where the retail behemoth bucked tepid industry trends. However, depsite the company's positive same-store sales of 1%, it still has many things to improve. 

Questions remain around its growth in e-commerce, which grew only 7% last quarter. This number cam in despite the company's slashed guidance in October when it mphasized it would be making investments online to better compete with Amazon ( AMZN ).

Associates that attend the meeting are hand-picked by their managers.

Wal-Mart does not pay fees for its celebrity guests.

 

Why Salesforce.com's acquisition could be great news for retail

On Wednesday, Salesforce.com ( CRM ) announced the acquisition of Demandware ( DWRE ) for $2.8 billion, its biggest acquisition yet.

Salesforce.com, a giant in the cloud computing space, has become the dominant force in customer relationship management with a focus on marketing and customer service.

But this latest acquisition may make it the solution for brick-and-mortar retail woes.

Until the Demandware acquisition, Salesforce.com had a gap in its overall product portfolio—it didn’t offer the ability to transact with customers yet. This acquisition allows them to do that.

“This is a natural extension and within the customer management space,” according to Brean Capital’s Yun Kim.

According to Gartner, worldwide spending on digital commerce platforms is expected to grow at over 14% annually, reaching $8.5 billion by 2020.

“The number one trend in the retailing vertical is omnichannel,” Kim said.

The most important economic event during this busy week

There is a mountain of major global economic events scheduled for this week: an OPEC meeting, an ECB meeting, Chinese manufacturing reports, US auto sales, and the monthly US jobs report.

The jobs report is often pegged as the most important data point of the month when it comes out. But the fact that traders have all eyes on the jobs number during this data-packed, shortened week speaks volumes about just how important this data is.

“Employment report Friday beats everything else,” according to Deutsche Bank’s Torsten Slok.

A jump in consumer spending by the most since 2009 barely budgeted the markets and preliminary data on the global industrial picture--including China’s purchasing managers index and UK manufacturing--has come in mixed.

Meanwhile, while oil has driven the market, the market has seemed to let go of the excitement that once developed ahead of the Organization of Petroleum Exporting Countries (OPEC) meetings, which will kick off on Thursday.

1) The Fed

Starbucks CEO on presidential election: 'What we don't need is division'

Starbucks ( SBUX ) founder, chairman and CEO Howard Schultz is considered one of the best business leaders of our generation.

But he has also been outspoken on a range of political and social issues.

He told Yahoo Finance he was disappointed with how the election has developed.

“What would we say to all of the young people in America watching the behavior of the candidates over the last few months in the presidential primary season?” he said. “Is that the kind of behavior we want to model for young children in America? We clearly have such significant, substantive problems that require civility, a high level of intellect, and what we don’t need is division and vitriol and the kind of things that would divide us.”

He added that he hopes as we get into the general election between Hillary Clinton and Donald Trump that there is a more serious focus on the issues.

In a New York Times op-ed last summer, Schultz responded to reports that were encouraging him to enter the 2015 race for president as a Democratic candidate.

 

Howard Schultz sees a new multi-billion dollar opportunity for Starbucks

On Tuesday, Starbucks ( SBUX ) announced a new line-up of cold beverages that will become the foundation for a new “cold bar” of coffee and espresso products.

Founder, Chairman and CEO Howard Schultz told Yahoo Finance this is an important needle-mover for the company.

“This is a big deal,” he said. “Over 15 years ago we really created a category that did not exist. And that what was ready to drink coffee in the form of frappachino. That turned about to be north of a $1 billion business in a joint venture with Pepsi. Now we’re seeing a new white space—and that is a multi-billion category growing by leaps and bounds in cold coffee.”

Schultz added that the opportunity for cold brew could follow what has happened with iced tea.

In addition to bringing handcrafted vanilla flavor to cold brew coffee, Starbucks will also debut a handcrafted doubleshot on ice espresso beverage and introduce “Nitro” cold brew in select cities.

According to industry experts, U.S. iced coffee consumption has grown by 75% in the past decade and cold brew sales grew 338.9% between 2010 and 2015.

The cold brew lineup fits right into that, according to Schultz.

Wall Street is blown away by this red-hot retailer

Retailers have continued to report declining or lackluster sales growth.

But Ulta Salon ( ULTA ) managed to report comparable store sales growth of 15% in its first quarter report on Thursday, causing the stock to rise about 8%.

“So this is where all the traffic is going,” wrote Deutsche Bank analyst Mike Baker, who pegged the company’s quarter the ULTAmate retail earnings report.

Meanwhile, the company raised its full year guidance for comparable store sales to rise 10-12% (up from previous guidance of 8-10%) with earnings per share growth in the mid-20s. And while many retailers suffered declining margins because of promotional and discount pressure, for Ulta, margins rose 130 basis points to 13.8%, beating estimates.

“We believe it is remarkable that the comp delta to retail peers across categories and store formats continue to widen,” said RBC’s Brian Tunick.

First, its targeted marketing strategy

Second, its flexible supply chain

Why next week's US jobs report may look particularly crummy

Amid mixed economic data this week including strong housing numbers and underwhelming durable good orders , all eyes are on May’s US jobs report, which will be released next Friday.

Unfortunately, that report will be skewed by an unusual event. The Bureau of Labor Statistics’ (BLS) May strike report indicated that there were over 35,100 workers newly on strike during the May reference week for the report.  Barclays’ analyst Jesse Hurwitz said this could put downward pressure on employment numbers for the month.

“The Verizon worker strike that began on April 13 and continued through the May reference week will likely depress monthly nonfarm payroll growth in next Friday’s report,” Hurwitz said on Friday.  

Economists currently estimate US companies added 160,000 jobs in May. So the strike will have a material effect on the report.

 

Europe may actually be strong for retailers

While American consumers are cutting back on apparel purchases , Europeans are eager to shop.

PVH ( PVH )—the owner of brands including Calvin Klein and Tommy Hilfiger along with smaller ones like Van Heusen and IZOD—highlighted strength of shopping in Europe.

Chairman and CEO Manny Chirico pointed to consumers shopping at home.

“I think it's some of the strength that we're seeing both in our European business and in our Asia business as well, with tourists staying home in market,” he said, “meaning Europeans staying within Europe, the Asian consumer traveling either to Europe or into the Asia market as well.”

Europe was also a positive call-out at Nike, where future orders ( NKE ) rose 23% .

Meanwhile, Guess ( GES ) also pointed to improved revenue in Europe.

European excuses

 

US Foods could mark opening for IPOs

Foodservice distributor US Foods ( USFD ) rose over 7% in its trading debut on Thursday, marking what could be the realization of a comeback for IPOs .

There have been only 31 IPOs year-to-date, down 54% from last year, according to Renaissance Capital, manager of IPO-focused ETFs.

And while the IPO market has been slow year-to-date, the food distributor could mark an opening, particularly for a group looking for exits: private equity firms.

With interest rates rising, private equity firms are looking to raise equity to refinance variable rate debt and lock in low rates now. Leveraged buyout deals, like US Foods, are ripe for an exit opportunity for its investors.  First Data ( FDC ) went public in October 2015, pricing 16% below its midpoint of the expected range.

Albertsons, Univision and Neiman Marcus are all other names in this category that could be waiting to go public.