“The management team of Buffalo Wild Wings communicates its strategic and financial rationale to the investment community with inveterate avoidance of specificity” — Mick McGuire, founder of activist hedge fund Marcato Capital Management, in a blistering report criticizing Buffalo Wild Wings’ business plan and capital allocation strategy.
MARKET SNAPSHOT
Big Picture
- U.S. stocks closed higher yesterday despite a rough start after the Fed minutes revealed the committee still remains divided on when to raise interest rates (more on that in a bit)
Market Movers
- Shares of Barnes & Noble plummeted 13% after announcing it would fire its CEO and begin searching for a new one, as the once-mighty retail bookstore chain struggles to compete with Amazon and the rise of e-books
CORPORATE PRIMER
Lowe’s Goes Low
…And then even lower. The retail home improvement company reported quarterly earnings yesterday that missed analysts’ estimates by a whole lot. The culprit: according to a UBS analyst, Lowe’s suffered because it was overweight on seasonal categories like lawn and garden. Come on, lawn and garden—what were they expecting? Shares tumbled 6% on the news. However, unlike other retailers, Lowe’s is still expected to grow quite a bit in the coming years as the home improvement market remains strong—the company plans on adding about 45 stores this year alone. See you next spring.
Cisco Slims Down
…To the tune of up to 5,500 employees. That’s right, the world’s largest maker of networking equipment is downsizing its own network, cutting 7% of its total workforce. Let’s back up: over the past year, Cisco’s been shifting away from its slowing, bread-and-butter networking business to the new rage these days: cloud computing and the Internet of Things. Of course, that shift ultimately requires employees with different skillsets—so while you never like to see a company cut jobs, it was a necessary evil in Cisco’s case. And the transition seems to be working:Cisco’s Q4 earnings beat analyst estimates despite a challenging overall environment. Call it addition by subtraction?
Target’s Earnings?
…Behind target (sorry, we couldn’t resist). Facing a decline in store traffic, disappointing performance with groceries and low demand for consumer electronics (lookin’ at you, Apple), consumer goods giant Target posted a decline in sales at established stores for the first time in over two years—sending shares falling 6.5%. The numbers suggest that CEO Brian Cornell’s efforts to slash costs and retain consumers despite a growing shift in spending patterns were unsuccessful. Side note: Target’s also spending $20 million to install single-stall bathrooms in all stores by early 2017 in response to widely-publicized boycotts.
WORLD MACRO
The Fed Puts on Hiking Boots
…Decides to just stay inside. Minutes from the Fed’s July meeting were released yesterday, revealing that that—drumroll, please—there’s not economic growth to warrant an increase in increase rates just yet. So yes, rates look to stay fixed for the time being, reflecting slow economic growth and uncertainty from, yes, you guessed it: Brexit. It’s not all doom and gloom, though: some Fed officials actually believe it’s about time for a hike—but Fed chairwoman Janet Yellen, who’s typically been on the side of “no hike,” could put a stop to that with a scheduled speech next week.
OTHER STORIES
- SolarCity announces layoffs; top execs to get $1 pay
- Pinterest starts rolling out native video ads
- AT&T ends data overages with new plans
- Intel announces Project Alloy, a standalone ‘merged reality’ VR headset
ECONOMIC CALENDAR
- Monday: Housing Market Index (+/-)
- Tuesday: Home Depot (+), TJX (-), Advance Auto Parts (-), Dick’s Sporting Goods (+), Urban Outfitters (+) Earnings; Consumer Price Index (+/-); Housing Starts (+); Industrial Production (+)
- Wednesday: Cisco (+/-), Lowe’s (-), L Brands (+), Staples (-), American Eagle (+) Earnings; Fed Meeting Minutes
- Thursday: Walmart, Ross Stores, Gap Earnings; Weekly Jobless Claims
- Friday: Foot Locker, Deere, Estee Lauder Earnings
THE ELIXIR OF LIFE
This may come as no surprise to you literal morning brewers (not to be confused with Morning Brewers, which you all are by brilliantly choosing to read the Brew), but according to a new survey by Cafe Don Pablo, drinking coffee in the morning can significantly boost happiness and satisfaction. Suspicious that the survey was done by a coffee company? Nah—you’re probably just a bit cranky this early in the morning. Take a sip of these numbers:
- People who drink coffee to start off their day are 13% more likely to be happier in the morning than those who don’t. In other words, while you’re making a pot, consider getting your boss a cup too.
- For some reference, 77% of Americans drink coffee on a regular basis, while 59% drink at least one cup a day.
- Of these coffee lovers, 57% say that coffee increases their level of work productivity. And it’s not just a slight bump—they say it boosts their productivity by a staggering 41%.
- Here’s a weird one: one in five coffee drinkers say that when they don’t have enough coffee, they’re more likely to get into a fight with their significant other.
INTERVIEW QUESTION OF THE DAY
There are n men, n hats, one hat belonging to each person. A random permutation of hats is picked by the men. Whoever gets their own hat takes it and leaves and a random permutation of the remaining hats is picked and so on. What is the expected number of rounds it takes for everyone to leave? (Answer)
BUSINESS TERM OF THE DAY
Back Up The Truck — Slang that refers to the purchase of a large position in a stock or other financial asset by an investor or trader. Typically, when someone is willing to back up the truck on a financial asset, it implies that they’re extremely bullish on that asset’s performance.
FOOD FOR THOUGHT
Hugh Hefner sold the Playboy Mansion to Daren Metropoulos, the co-owner of Twinkies-maker Hostess. The price? A cool $100 million, making it the most expensive home ever sold in Los Angeles. Back up the moving truck.