Trader Talk

Retail And Jobs Lift Mood

S&P 500 futures move up as October Productivity and Initial Jobless claims were both better than expected.

October retail sales generally positive, not as robust as last month, but we don't have the back to school stimulus that we had last month.

Higher guidance: Children's's Place, Hot Topic,Wet Seal, Gymboree, Kohl's, JC Penney, Ross Stores, Gap.

Rockin' Retailers

Department stores were pretty good: Nordstrom and Saks better than expected.

Teen retailers were strange: Amercian Eagle worse (down 5 percent, expected to be up 2 percent), is down 11 percent pre-open, Aeropostale  had sales up only 3 percent, much worse than 13.6 percent increase expected, though they raised earnings forecast. Abercrombie was in-line.

Teen Retailers-Strange World


1) Hyatt priced its IPO at $25 a share (38 million shares), the midpoint of the $23-$26 range. But with many IPOs fading shortly after they went public, it will be important to keep an eye on the first day of trading.

They are selling Class A shares. However, the Pritzker family owns most (70 percent) of the 130 million Class B shares, which has a supervoting position of 10-1, which can be converted to common.

So buying the Class A shares means you have no real voting power; you are essentially a silent partner with the Pritzker family. All the A share holders amount to 2.8 percent of total voting power, but they represent 22.6 percent of total outstanding shares. This is not uncommon, unfortunately.

Another point: all the money is going to the Pritzker family. The only money that will go to Hyatt is the overallotment of 5.7 million shares (15 percent), which may or may not be issued. The underwriters have 30 days to exercise the overallotment.

2) Wendy's/Arby's is up 3 percent after reporting its bottom line returned to the black as margins improved thanks to lower costs. Same-store sales at its two restaurant chains were worse than expected, however, with Arby's sales falling 9 percent (vs. down 5.4 percent est.) and Wendy's sales only up 0.1 percent (vs. up 0.8 percent est.).

3) Food maker Sara Lee saw earnings top estimates ($0.27 vs. $0.16 est.) due to lower commodity costs and continued cost controls Revenues fell more-than-expected (down 7.4 percent vs. down 5.5 percent est.) as lower volumes, pricing pressures, and negative currency impact weighed.

Guidance for the year is raised to $0.90-$0.96 and comes in above expectations of $0.89. 



Questions?  Comments?