sales – The Burning Platform

HOW MANY MORE RECESSION CONFIRMATIONS DO YOU NEED?

Despite the bogus BLS employment report last week (so the Fed could raise rates before the next financial crisis hits), all economic data confirms an economic recession. Corporate profits are falling, and their forecasts for next quarter are worse. Global trade is slowing dramatically. Oil prices and other commodities are plummeting to multi-year lows. Manufacturing and Services surveys are flashing red. China, Japan and European economies continue to suck wind. Layoff announcements by major corporations are up 40% over last year. A global deflationary recession is underway. Only a CNBC bimbo, shill or Ivy League educated economist isn’t bright enough to see it.

Retail sales came out this morning and they were worse than dreadful. They confirmed the horrific quarterly reports from Macy’s, Nordstrom’s, and Kohl’s. Total retail sales grew a minuscule 0.1% from September and only 1.7% versus last year. It’s even worse than it looks. When you back out the subprime auto loan spurred auto sales (long term rentals), retail sales grew only 0.5% over last year. That is far less than true inflation, so on a real basis retail sales are FALLING like a rock. This only happens during recessions. And it isn’t a one month thing. Retail sales, even including loan boosted auto sales, are flat over the last three months and up only 2.1% for the first 10 months of the year.

The decline in gasoline sales due to plunging prices has contributed to the lousy retail sales numbers, but the storyline of the economic bulls was how this was going to boost the spending of consumers across the board. That storyline is as dead as an Obamacare patient. It seems all the gasoline savings immediately went to pay for the soaring cost of Obamacare, even though the BLS says there is no healthcare inflation. There are a few areas that jump out at me and paint an even darker picture:

Continue reading “HOW MANY MORE RECESSION CONFIRMATIONS DO YOU NEED?”

JC PENNEY SHITS THE BED AGAIN & LOSES $188 MILLION

I love reading the spin that passes for earnings releases these days. Remember earlier in the year when the CEO of JC Penney was predicting a glorious turnaround and the Wall Street shysters drove the stock up from $5 to $11?

It’s back under $8 and still headed to $0.

The faux journalists are doing their usual bullshit pump job, but here are the facts:

Even though they were predicting same store sales increases in the 5% to 10% range early in the year, quarterly same store sales were up 0%. This is after a 4% decline last year and 20% declines in the year before that. Sounds awesome.
They lost another $188 million, bringing the 9 month loss to over $700 million. This is after losing over $2 billion last year.
They had a negative cash flow from operations of $320 million for the quarter.
Their long-term debt has increased by $500 million in the last year, while their equity has declined by $200 million.

There is no recovery here. They slowed the bleeding, but they are still dying. They will lose over $500 million in the 4th quarter. Book it dano. Their sales will be negative again. The CEO will lie and Wall Street will pump and dump. But, JC Penney is still on a path to bankruptcy.

JCPENNEY REPORTS FISCAL 2014 THIRD QUARTER RESULTS

PLANO, Texas – (Nov. 12, 2014) – J. C. Penney Company, Inc. (NYSE: JCP) today announced financial results for the quarter ended Nov. 1, 2014.

Myron E. (Mike) Ullman, III, Chief Executive Officer, said, “This quarter shows the progress we are making in the final phase of JCPenney’s turnaround. We continued to significantly improve the profitability of our business with gross margin expansion of 710 basis points, a $342 million improvement in EBITDA and bottom-line financial results that exceeded even our own expectations. Like most retailers, following a strong start to the back-to-school season, sales did slow in September and October as unseasonably warm weather hindered the sale of fall goods.”

Mr. Ullman continued, “During appointment shopping periods like Back to School and Holiday, JCPenney is the customer’s preferred destination for discovering great style, quality and value. This year, we are confident customers will once again choose JCPenney for meaningful holiday gifts that fit their family’s budget. We are well positioned to compete this holiday season and I would like to thank our associates for their hard work, warrior spirit and commitment to delivering an exceptional customer experience every day.”

Financial Results

For the third quarter, JCPenney reported net sales of $2.764 billion compared to $2.779 billion in the third quarter of 2013, with same store sales flat for the quarter.

Home and Fine Jewelry were among the Company’s top performing merchandise divisions in the quarter. Sephora inside JCPenney also continued its strong performance. Geographically, the western and northeastern regions of the country delivered the best performance.

For the third quarter, gross margin was 36.6 % of sales, compared to 29.5 % in the same quarter last year, representing a 710 basis point improvement. Gross margin was positively impacted by a significant improvement in the Company’s mix and margin on clearance sales over the prior year quarter.

Inventory was $3.358 billion, down 10.4 % compared to the same quarter last year. The Company noted it is pleased with the level and content of its inventory heading into the holiday season.

SG&A expenses for the quarter were down $18 million to $988 million, 35.7 % of sales. These savings were primarily driven by lower store expenses and corporate overhead costs.

Operating income for the quarter was a loss of $54 million which represents a $347 million or 87 % improvement over last year. EBITDA was $102 million, a $342 million improvement from the same period last year. EBITDA for the quarter included a gain of $88 million related to the sale of certain store assets. For the third quarter, the Company incurred a net loss of $188 million or ($0.62) per share. A reconciliation of EBITDA to the most directly comparable GAAP financial measure is included with this release.

Financial Position

During the quarter, the Company completed a $400 million offering of senior unsecured notes. The net proceeds of the offering of 8.125 % Senior Notes due 2019 were used to pay the tender consideration and related transaction fees and expenses for the Company’s cash tender offers for approximately $327 million aggregate principal amount of its outstanding 6.875 % Medium-Term Notes due 2015, 7.65 % Debentures due 2016 and 7.95 % Debentures due 2017. Subsequent to the completion of the tender offers, the Company used approximately $64 million of available cash to effect a legal defeasance of the remaining outstanding principal amount of Medium-Term Notes due 2015 by depositing funds with the Trustee for the Notes sufficient to make all payments of interest and principal on the outstanding Notes to October 15, 2015, the stated maturity of the Notes. Through the notes offering, tender offer and defeasance, the Company was able to proactively address its near-term debt maturities. As a result, the Company’s next debt maturity will be approximately $78 million in August 2016.

The Company ended the quarter with over $1.9 billion in total available liquidity.

Outlook

The Company’s guidance for the fourth quarter of 2014 is as follows:

•Comparable store sales: expected to increase 2 % to 4 %;
•Gross margin: expected to increase 500 to 600 basis points versus last year; and
•SG&A expenses: expected to be slightly above last year’s levels.
The Company’s updated 2014 full-year guidance is as follows:

•Comparable store sales: expected to be 3.5 % to 4.5 %;
•Gross margin: expected to be 500 to 600 basis points above last year;
•Free cash flow: expected to be positive;
•Liquidity: expected to be approximately $2.1 billion at year-end;
•Capital expenditures: expected to be approximately $250 million; and
•Depreciation and amortization: expected to be approximately $640 million.
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McSHITS STILL SHITTING THE BED

How bad must McDonalds food be if the Chinese think it is too putrid to serve? Have you seen what the Chinese eat? The storyline for the horrible US sales has been that competition is tougher, blah, blah, blah. It’s all a crock. The American lower and middle class are so hard up for cash, they can’t even afford the $5 for a crappy McShits meal. Barnes & Noble sales were also negative. Gap sales were negative. Wal-Mart sales are negative. Target sales are negative. Olive Garden sales are negative. It isn’t competition. It’s a country running on fumes while the oligarchs pillage, rape and gut the remnants of wealth.

McDonald’s sales woes continue in August

By Erin McCarthy

Published: Sept 9, 2014 8:53 a.m. ET

McDonald’s Corp. said its global sales fell 3.7% in August as problems with one of its suppliers in Asia drove a precipitous drop in sales in the region and the core U.S. market continued struggling as well.

The sales decline was steeper than expected as Consensus Metrix had called for a 3.1% drop.

In the Asia/Pacific, Middle East and Africa region, sales at existing locations slid 14.5% last month.

McDonald’s has said it is seeking to restore customer trust in China, where it has more than 2,000 stores, following problems that began in late July with meat supplier Shanghai Husi Food Co., owned by U.S.-based OSI Group LLC.

Authorities accused the Shanghai plant of intentionally selling expired meat to restaurant companies after a television station ran a report alleging the practice.

On Tuesday, McDonald’s said it expects the China supplier issue will hurt third-quarter results by about 15 cents to 20 cents a share, largely because of lost sales, expenses related to its recovery efforts and the effect of these items on the quarter’s tax rate.

Earlier this month, McDonald’s said it is overhauling its food-safety strategy in China after problems with a supplier hit the fast-food chain’s image and eroded its sales in the country.

The Oak Brook, Ill.-based company said in a statement that it will review surveillance video from meat-production sites in China and boost audits of suppliers. Other steps include the creation of anonymous hotlines for suppliers and their employees to report unethical or noncompliant practices and the dispatching of quality-control specialists to all of McDonald’s meat-production facilities in China, the company said.

“We are diligently working to effectively navigate the current market conditions to regain momentum,” Chief Executive Officer Don Thompson said in a statement Tuesday.

In the U.S., sales slid 2.8% as the company faced multiple headwinds, including sluggish industry growth in a competitive marketplace, the company said.

The U.S. has been a particularly challenging market for McDonald’s, where the company has said it has lost relevance with consumers. Mr. Thompson has said that the company first needs to repair fundamentals, such as staffing restaurants appropriately during peak hours, and has noted that the company is working to streamline its menu as previous efforts to roll out numerous menu items served to complicate matters.

Meanwhile, McDonald’s said sales at existing restaurants in Europe ticked down 0.7% as weak performance in Russia offset gains in the U.K. The fast-food chain warned that weak consumer sentiment will likely hurt sales and profitability in the region.

OBESE MASSES RUN OUT OF DIPPING SAUCE

The average price of a regular meal at McDonalds is about $5.00. This would be for one of their greasy, fat filled, sodium time bomb sandwiches, some greasy fries and 16 ounces of sugar water. They are the dining choice of the obese American masses. They were absolutely booming during the early part of this fake economic recovery. Comp store sales increases of 4% to 9% were the rule in 2010 and 2011 as the Obama stimulus funds flowed like McDonalds chicken McNugget dipping sauces. But something happened in the middle of 2012. The $800 billion Obama McNugget Keynes Stimulus Meal plan was designed to feed the Democratic constituents – government union workers, the urban ghetto dwellers, and the rest of the Obama entitlement class.

Just like with McDonalds food, the Obama stimulus plan gave the appearance of providing sustenance, but just gave our economic system a case of the runs. And now all we’ve got is gas. The Obama/Bernanke economic solutions have left the poor and middle class more impoverished, while enriching the sociopathic greedy rich bastards that destroyed the worldwide financial system in 2008. While 7 million people joined the ranks of the food stamp army AFTER the “economic recovery” began in 2009, the .1% have reaped billions in Federal Reserve created stock market profits. Sales at Del Frisco’s and Nobu, where the big swinging dicks of Wall Street celebrate their brilliance and ability to force the Fed to guarantee risk free returns, have been booming. Champagne flows freely and the wolves of Wall Street like their steaks bloody. It reminds them of the carcasses of the former middle class, who they have brutally slaughtered.

Over the last 18 months McDonalds, the largest restaurant chain in the world, has generated a net 0.6% increase in sales in the U.S. Our friendly government drones at the BLS tells us that food outside the home inflation has been 3.1% over this same time frame, but anyone with an IQ above 80 (rules out most McDonalds customers) knows you need to double any government reported number to get the truth. I’m sure the BLS has captured the fact the mega-corporation restaurant chains have reduced portion sizes and quality of ingredients while keeping prices the same. McDonalds, dining option for the ignorant obese masses, has gone off the rails.

You know things are getting bad in this country when the obese, unemployed, ignorant, SNAP dependent masses can’t find $5 in the couch cushions to enable them to consume fat filled, greasy, salt saturated grub at a germ infested palace of plastic clowns. The continued decline of sales at McDonalds is the rat in the fryer. The implosion of retailers to the lower and middle classes (JC Penney, Sears/Kmart, Kohl’s) is being matched by the decline in restaurants to the lower and middle classes. The average American is so broke they can’t even afford a Little Mac.

The fat lady will be singing for America as soon as she finishes her three Happy Meals.

MAIN STREET VERSUS WALL STREET

Do small businesses, which account for 65% of all the new hiring in the country, become less optimistic during an economic recovery?

“After another false start, small business confidence has sputtered and stalled again. For the sector that produces half the private GDP and employs half the private sector workforce -— the fact that they are not growing, not hiring, not borrowing and not expanding like they should be, is evidence enough that uncertainty is slowing the economy. Virtually no owners think the current period is a good time to expand, because they simply don’t know what the future holds. So why invest? And with the lack of any sustainable fiscal policy or a federal budget, no one’s banking that Washington will be at forefront of any meaningful change. Overall, it appears that there will be little growth coming from the small business half of the economy; as the world economy slows, even big business may suffer.” — NFIB chief economist Bill Dunkelberg

Small Business Optimism Down in March

The March NFIB Index of Small Business Optimism ended its slow climb, declining 1.3 points and landing at 89.5. In the 44 months of economic expansion since the beginning of the recovery in July 2009, the Index has averaged 90.7, putting the March reading below the mean for this period. Of the ten Index components, two increased, two were unchanged and six declined. Among the greatest declines were labor market indicators, inventory investment plans and sales expectations.

Small business owners are on the ground near the real people. They aren’t sitting in ivory towers at Princeton playing with regression models. They aren’t programming their high frequency trading computers to buy the dip. They aren’t calculating their bonuses and stock option compensation. They are trying to make payroll. They are trying to sell products. They are trying to understand how badly Obamacare will screw them. They are trying to navigate through the hundreds of thousands of rules, regulations and laws that are passed by politicians. They are paying experts thousands of dollars to decipher and comply with the IRS tax code. Well guess what? They have no plans to hire anyone and they expect sales to go lower.

Ben Bernanke’s money printing is not benefitting them in any way. His policies are not generating jobs. His policies are impoverishing savers, who now have less money to spend at small businesses. Ben Bernanke’s policies are designed to benefit Wall Street banks and mega-corporations. His policies are designed to drive stock prices higher and enrich the connected crony capitalists that control the country. Meanwhile, small businesses and small people are dying on the vine. The real economy is withering away under the weight of massive debt, crushing taxation, and ponderous government regulations and red tape.

There has never been a greater disconnect between Main Street America and Wall Street in our history. It will not end well. Bill Dunkelberg seems to be an economist with common sense, as opposed to the Keynesian morons like Krugman and the other Wall Street shills paraded on CNBC.

COMMENTARY BY CHIEF ECONOMIST BILL DUNKELBERG

NFIB Chief Economist
William Dunkelberg

Small business produces half the private GDP and employs half the private sector workforce. But it is not growing, not hiring, not borrowing and not expanding enough. Small business owners have been depressed since 2007 and that has not changed. In the March survey of NFIB’s 350,000 member firms, 77% expect the economy to be no better or even worse 6 months from now that it is currently. Only 4% think the current period is a good time to expand substantially, compared to an average of 17% for the period 1973 to 2007. More owners plan to reduce employment in the coming months than plan to create new jobs. More owners plan to reduce their inventories than plan to order new stocks. The bulk of growth comes from the increase in our population of about 3 million people and the growing need to simply replace stuff that is wearing out, not enough to get the economy back to trend growth much less the strong growth needed to restore employment to 2007 levels.

The Federal Reserve continues to assert its intention to purchase a trillion dollars of Treasury securities and mortgages, adding a trillion dollars to its portfolio and stuffing a trillion dollars of new liquidity into the banking system, until the unemployment rate falls below 6.5% or inflation breaks out. Then it will “consider” changing policy. Unless something really bad happens, this is a winning strategy for the Fed because eventually the private sector will improve, the labor force will shrink (as boomers leave), the unemployment rate will fall and the Fed can claim its policies “worked”, even if their policies made no contribution to the improvement or even slowed it down by creating uncertainty and fear among investors and business owners.

This is a risky strategy. The evidence that “uncertainty” is slowing the economy is pretty clear now (research at the San Francisco Federal Reserve for example) and uncertainty probably increases with the size of the Fed’s portfolio (as has the price of gold). The real economy is hardly growing yet the stock market and corporate profits are at record high levels. How do we make a record amount of money without producing more output and employing more workers? Such contradictions breed uncertainty.

In the meantime, a record low percentage of small business owners claim that credit is their top business problem (3%) while taxes get the most votes (23%). Record numbers of owners have no interest in a loan (over 60%), because they have no use for the funds that have a high probability of successfully generating a return so the loan can be repaid. The Fed has made sure that there is plenty of money to lend, but in the process may have reduced the confidence that borrows need to take risks, borrow, spend and expand. And then there’s the impact of fiscal policy (or the lack of a policy). The President is flying around the country doing fund-raisers and stumping for gun control, but he still has presented no budget proposal. Enough said.