-Apparel sales -12.2%. Women’s apparel -18.2%. Men’s apparel -8.3%. Footwear -9.7%
-Electronics and appliances -19.9% vs. -13.8% in September
-Furniture -15.1%, home furnishings and decor -20.6%
-Luxury high-end sales -20.1% vs. -4.8% in September
-Restaurants +0.3%, fast-food +1%
It has been widely reported in the press that Peter Thiel’s Clarium got hit on a long equities position the last couple months. Thanks to their 13F, we know as of September 30th, 2008, the long basket included:
“America is a like a family who over-spent for years.. has to de-lever itself.. take a long, long time for that to be completed.. I look for a long tough period for the American people”
“I am not positioned long… I am short personally quite a bit”
“So far I don’t think we had the blow to the economy that will eventually obviously come from the wealth devastation that’s occured the last several months”
“General de-leveraging will be a strain on the economy for a long time”
On Google: “(Market) throwing the high multiple stocks out with the bath water. I look to take further advantage of that.”
On Baidu: “Baidu is a fantastic company that has great potential in China. Their market cap is a tiny fraction of Googles. Their potential is probably equal or greater. A case of a stock that will have terrfic growth and will be recognized in the years ahead”
-Revenue $134.8M, up 45% y/y. EPS 28c
-273 million K-Cup were shipped, up 62% y/y
-Increased prices by 8-12% in May 2008
-Keurig sales $74.6M, up 75% y/y
-Inventories $85.3M, up 119%
-Kraft paid $17M for perpetual license on patents
-FY2009 Guidance: Sales growth 40-45%. K-cup up 50-60%. EPS $1.20-1.30
-Believe market opportunity is the 90 million U.S. households that own coffee makers
-13,800 retailers today and 2,600 supermarkets
-Introduced Keurig Mini for $79 in August
-October and early part of November are holding up at same rate of growth as Q3
-Keurig is 9% of total coffee maker dollars, up 100% y/y
-70% of sales is someway related to single serve
-Trends in October and November show continued 90% dollar and 100% unit growth
-Started $6M national ad campaign
-$149 model is the #2 selling coffee maker of all coffee makers
-10% yearly obsolescence rate so far
-Keurig seems like one of the only product cycles in this poor economy that is growing straight through without any weakness. To explain it, I bet a lot of people are switching from their Starbucks habit
-It seems some investors were caught short today as GMCR is up 24.6%
“It’s the single best time in my career that I’ve seen to invest.. the spread between price and value is widest it’s been in many years.. 30 or more years” – Bill Ackman
He is probably the most eloquent spokesman for the hedge-fund industry out there speaking in public forums. Too bad he is not one of the hedge-fund managers speaking before Congress tomorrow. It’s obvious Congress is looking for scapegoats in the financial crisis.
The hits just keep on coming. Intel lowered their fourth quarter guidance today after the close. It now expects revenue of $9B vs. $10.36B est. The company’s previous expectations were $10.1-10.9B.
Revenue is being affected by significantly weaker than expected demand in all geographies and market segments. In addition, the PC supply chain is aggressively reducing component inventories.
Gross margin guidance also goes to 55% from 59% previously. They will also cut R&D and MG&A spending from $2.9B to $2.8B. They will not do the previously scheduled December 4th update call and will observe a quiet period till January 15, 2009.
With Best Buy and Intel today, it’s obvious people are not spending on discretionary consumer electronics and PCs. The new guidance is a 16% decline y/y in revenue. This is stunning as the company is launching their new CPU this month, code-named Nehalem, with amazing performance increases.
Best Buy cut their guidance this morning. FY2009 (February) goes to $2.30-2.90 range vs. $3.02 est., a 13.9% miss. Revenue goes to $43.7-45.5B vs. $46.23B est., a 3.5% miss.
“Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen. Best Buy simply can’t adjust fast enough to maintain our earnings momentum for this year,” said Brad Anderson, vice chairman and chief executive officer of Best Buy
Same-store sales declined 7.6% in October vs. a 2.4% decline in September. They project November 2008 to February 2009 same-store sales to decline 5 to 15 percent. Their guidance is predicated on same-store sales being comparable to October’s 8% decline.
Previous guidance for FY2009 was $3.25 to 3.40 in EPS with same-store gain of 2-3%. They plan to report November same-store sales on their Q3 conference call on December 16th.
Obviously things are getting materially worse for anything in the consumer discretionary sector in the last few weeks. On the bright side, Best Buy is still in the black and making money vs. other retailers that are going bankrupt. *Cough*
Readers of Earnings Breakout of course are not surprised of these consumer electronics negative announcements due to these previous posts: Link 1, Link 2
But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.
He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.
“Why?” asked Hintz.
“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.
-Revenue $163.1M, up 26% y/y. EPS 42c. FY2008 Revenue of $640.2M, up 33% y/y. EPS $1.74
-FY2009 Guidance of $660-720M. EPS $1.57-1.77. Including $5M restructuring charge that has 3c EPS impact
-$5.81/share net cash
-Long-term objective is to be an essential element in the best entertainment technologies used by professionals and consumers
-Continue to benefit from strong PC notebook demand
-Dolby Digital is the mandated audio standard for digital terrestrial broadcast and de facto standard for satellite and cable
-Dolby Digital is mandated in Blu-ray
-Much of its revenue is from discretionary products and they are not immune to a slowdown in consumer spending
-License growth of 33% y/y and 8% q/q primarily from PC and broadcast markets
-FY08 revenue from PC was over 40% of licensing revenue, broadcast is just under 20%, consume electronics just over 25%
-For guidance, assuming PC unit growth of just under 5%, which includes 20 million net-books, which do not use Vista. On CE, modeling 15% decline in DVD players. Broadcast, flat y/y world wide. Strong growth in set-tops driven by converter boxes
-Microsoft new OS in 2010, can’t comment on any new agreements
-$27.91 is 13Xs forward EPS ex-cash
-One of the best business models out there, could actually grow in 2009 even in a bad recession