Filed under: Consumer experience, Scandals, Southwest Airlines (LUV)

Picture this: You arrive for your Southwest Airlines (NYSE: LUV) flight early. You manage to avoid packing excessive amounts of liquids in your carry-on baggage. You remember your ID, you wait until your seat is called, you stow your bags properly. You’re even prepared to turn off your electronic devices and stow your tray table and put your seat in its upright and locked position when … you’re asked to leave the plane because you’re showing a little too much leg.

Haha! What is this, 1951? Nope. It’s 2007, and a few months ago waitress Kyla Ebbert (who works at Hooters, where scantily-clad is a good thing) was escorted off a Southwest Airlines flight from San Diego to Tucson because her outfit — a miniskirt, tank top, and cropped sweater — was too revealing (check out the photo: I don’t see any cleavage and she was wearing a bra). She put up a fuss and was eventually let back on the plane after a lecture on her dress, or lack thereof.

I’m all for appropriate clothing, but personally saw nothing in Ebbert’s outfit that was cringe-worthy. And if it was?

Continue reading Passenger too sexy for Southwest Airlines (LUV): Miniskirt gets waitress tossed

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Filed under: Analyst reports, Forecasts, Consumer experience, Internet, Blogs, Apple Inc (AAPL), Cisco Systems (CSCO), Intel (INTC), International Business Machines (IBM), Stocks to Buy

Writing about Apple ( NASDAQ: AAPL) is really a fun exercise and also frustrating. It is with hilarity that I watched so many negative people try to “pull the strings apart” on the Apple story for the past couple of years. So many are trying to get that “ah-ha” moment so they can proud as peacocks say ” see, I told you.” Yet the stock and, more importantly, the story just keeps going on and on. Cisco (NASDAQ: CSCO) had the same thing happen to it in the 1990s, all the while the stock got to be over a $500 billion market capitalization. Apple IS the Cisco of this decade, only better.

Cisco was one of the most magnificent performers of the 1990s: investors made 30-40 times on their money. All the while, there were those so-called experts “who never got it” and tried so hard to kill the story. Any little, tiny insignificant item regarding Cisco was blown up as if the company had just robbed the US Mint. They went all over the media bad-mouthing, kicking Cisco, and yet, the company kept performing and exceeding expectations. Long term shareholders just smiled all the way to the bank.

Continue reading Apple is the Cisco of this decade … and then some

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Filed under: Apple Inc (AAPL), AT and T (T)

Yet again, Apple (NASDAQ: AAPL) demonstrated more hip and cool gadgets today (i.e. new iPods). Then again, is there really anything special about that? In a way, Apple is expected to do this kind of stuff.

But, among the fanfare, there was some awful news - that is, Apple dropped the price on its more expensive iPhone, from $599 to $399. Isn’t Apple the epitome of premium pricing? Isn’t their brand impervious to such things?

True, it should help volume (or, perhaps prevent a drop in volume). But of course, there is likely to be a hit against margins.

I had a chance to talk to Allan Keiter, who is an expert on mobile devices and operates MyRatePlan.com. According to him:

“The moves by Apple today offer a mixed message on the current and future success of the relationship with AT&T (NYSE: T). From the wireless company’s perspective, a lower price for the iPhone will broaden the audience for the device, and was probably necessary in a U.S. market that is conditioned to pay next to nothing for a cell phone, regardless of the features it has. On the other hand, the new iTouch may dampen this upside, as it eliminates that segment of prospective buyers who were always more interested in the iPod and browser features than they were in becoming AT&T subscribers. From Apple’s perspective, the iPhone was selling well (a recent report by iSuppli said it was the most popular Smartphone in the U.S. in July), but perhaps not quite well enough to hit Apple’s previously stated goal of hitting a million sales by the end of the quarter. The reduced price and the introduction of the iTouch, at an even lower price point, should drive a good amount of volume this holiday season.”

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

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Filed under: Chasing Value, Stocks to Buy, Intuitive Surgical Inc (ISRG), Garmin Ltd (GRMN)

Yesterday I put out a call for readers to share their picks. Calling all stock pickers - what stocks do you like now? I got some very good items to discuss further. Since I am a value investor the discussion will favor value over growth for the most part. However, It can be argued, and frequently is, that the best growth plays are also value plays of a different order. It is just harder to make the case. I have listed the readers comment followed by my thoughts.

• John: Garmin LTD (NASDAQ: GRMN). Currently hitting all time highs but the growth prospects and cashflow of this stock are too good to ignore!

Looking at a true growth stock, John makes some valid comments, and like many successful companies it is hard to know when to get in, if at all, given the risk versus reward scenario. Garmin is a world leader in GPS navigation systems and is constantly improving it’s product quality, expanding the product line and competitive pricing. My first thought is that I would not buy anything at it’s all time high. Last night it closed at $104.45 and as I write this morning it has reached a new intraday and all time high of $107.92. Looking at the fundamentals, GRMN has very strong metrics. It’s ROE, ROA and ROI are all over 30. It pays a dividend and has no debt. It has high gross margins and high net margins of 29%. So what’s not to like?

Continue reading Chasing Value - reader picks: Garmin (GRMN) reaches all time high - again!

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Filed under: Scandals, Books

Ya know those books from Playboy that are so good you can’t put them down until you finish?

Great Business Disasters: Swindlers, Bunglers and Frauds in American Industry, edited by Isadore Barmash and published by the Playboy Press, is just that kind of book. I would actually say that it’s the most interesting book of business history I’ve ever encountered. And it’s out of print.

Great Business Disasters is an anthology of some of the best financial journalism of the era, with a special focus on longer pieces covering frauds and mess-ups. We get a piece by John Brooks (author of the also-excellent Once in Golconda) on the infamous Ford Edsel and a fascinating piece by a very young Andrew Tobias on the National Student Marketing fiasco, who worked as a marketing director for the company.

There are a total of 15 accounts of some of the greatest and most infamous mess-ups in business history. Some of these are more obscure but still fascinating, and you’re unlikely to find out about them outside of this book.

Reading Great Business Disasters, I couldn’t help but lament the fact that this sort of long-form journalism is dying. Only a few great writers — Gary Weiss and Herb Greenberg come to mind — are carrying on this art. With Rupert Murdoch having complained that he finds The Wall Street Journal’s feature stories too long, this situation seems likely to get worse.

Someone really needs to get the rights to this book and put it back in print — It could be updated with some of The Wall Street Journal’s accounts of the Enron blow-up and, of course, my coverage of Usana Health Sciences (Kidding…). Fortunately, the book is still available. Here are some places to get it used:

• On eBay
• AbeBooks
• Amazon.com (As low as a penny!)

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Filed under: Earnings reports, Good news

When the J.M. Smucker Company (NYSE: SJM) presents at tomorrow’s Lehman Brother Back-to-School Consumer Conference, look for the company to make prominent mention of the fact that its brand of peanut butter, Jif, was not involved in the peanut butter recall earlier this year. But Smucker certainly profited from the recall with increased peanut butter sales that resulted in a 40% or $19.6 million rise in 1Q 2008 operating income. Net sales for the quarter increased 17% to $561.5 million, and diluted EPS increased 42% to $0.71. Investors always like when earnings grow faster than sales.

Smucker recently completed the acquisition of Eagle Brands, maker of canned milk and other baking products. This is a good fit with other Smucker baking related products including Pillsbury and Crisco. During the first complete quarter following acquisition, Eagle Brands contributed $43.5 million to net sales. The company sold its manufacturing facility in Scotland as well as its nonbranded grain products in Canada in order to concentrate on domestic manufacturing and quality control.

The company is sticking with its previously mentioned FY 2008 guidance of sales growth of 8%, half from organic growth and half from acquisitions. Commodity costs will continue to increase for Smucker, as for its competition. Smucker needs to keep a tighter lid on administrative and selling expenses in light of costs increases, some of which cannot be passed on to consumers in the form of higher prices. Interest expense increased by $4 million due to Eagle Brands acquisition, so the company must monitor its debt load.

The stock is up almost 10% for the year, opening the year trading at $49.30, and currently trading at $54.86, with a dividend yield of 2.2%.

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Filed under: Earnings reports, Bad news

Quarter after quarter, why does Del Monte Foods Company (NYSE: DLM) continue to blame its woes on Charlie Tuna? If there is a brand that is a drag on earnings, reinvigorate the brand, sell the brand or terminate the brand. Del Monte needs to do one of the three with its Starkist Tuna. Right now, Del Monte’s bottom line is being carried by non-human foods, specifically Meow-Mix and Milk Bone. Net sales for pet products increased 22% to just about $309 million in 1Q 2008, out of a total of $754.5 million in net sales. This represents net sales growth of 12%, none of which is reflected in increased earnings. Diluted EPS were $0.18 in 4Q 2007 but only $0.02 in 1Q 2008 despite the fact that the previous quarter had higher restructuring costs than did 1Q 2008. Administrative expenses continue to increase, as does interest expense. A significant portion of the pet food acquisitions was financed by incurring more debt. FY2008 interest expense will be in the $150-$160 million range (although management predicts lower interest rates based on less than no evidence) and capital expenditures will run between $100 million and $110 million. Operating income in the consumer products division declined by 46% to just under $14 million.

Do not look for improved earnings in 2Q 2008.The company has already stated FY 2008 earnings will be at the low end of guidance, $0.70. Del Monte will continue to face rising costs for raw materials. Management has not indicated any cost-cutting strategies, preferring to continue to pass along increased costs to consumers. But branded products are already losing market share to generic brands. Wal-Mart (NYSE: WMT) currently accounts for 30% of Del Monte sales. Wal-Mart is focusing more on its own Great Value brand, leaving Del Monte with the problem of how to replace lost shelf space and hence lost sales. The stock has done nothing since opening the year trading at $11.06. It currently trades at $10.60.

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Filed under: Good news, Internet, Blogs, Competitive strategy, Apple Inc (AAPL), Starbucks (SBUX)

One of the most exciting things about being an investor, analyst and writer is watching for really unique combinations. Today, one such combination presented itself. Starbucks (NASDAQ: SBUX) will offer its customers, free of access charge, a direct tie in to Apple’s iTunes store. Neither Apple (NASDAQ: AAPL) nor Starbucks revealed the financial terms of the arrangement.

Whatever the terms are, neither company is going to make or break its quarterly or annual results because of the revenue potential from this deal. It really comes down to 2 excellent growth stories synergizing where it makes sense. Starbucks has been actively trying to develop other “revenue streams” besides its basic drink line-up. With CDs, DVDs and other novelty items for sale, Starbucks is taking advantage of dead-space in its store base and structuring high quality alliances is a high priority.

For Apple, it’s just another feather in its cap. It’s a potent distribution relationship for Apple and another avenue for the company to continue its dominance in the online music industry. iTunes has sold over 3 billion songs and counting. Smart move by both companies.

Georges Yared is the CIO of Yared Investment Research and the author of “Baby Boomer Investing…Where do we go from here?”

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Filed under: Options

The Cooper Companies, Inc. (NYSE: COO) implied volatility elevated into September 6th earnings per share:

COO develops, manufactures, and markets healthcare products through two businesses units: CooperVision and CooperSurgical. COO will report earnings per share (EPS) on Septebmer 6th. Thomson First Call expects EPS of 70 cents. COO September option implied volatility option is at 58; October is at 44; November is at 38, above its 26-week average of 31 according to Track Data, suggesting larger near term risks.

J Crew Group, Inc. (NYSE: JCG) put volume and implied volatility aggressive into earnings per share announcement:

JCG, a multi-channel retailer of men’s, women’s, and children’s apparel, shoes, and accessories through 185 retail stores and 53 factory stores, was recently down $1.95 to $48.77. JCG will report its EPS after the close tonight. JCG call option volume of 1,879 contracts compares to put volume of 3,479 contracts. JCG September option implied volatility of 80 was above its 26-week average of 40 according to Track Data, suggesting larger price risk.

Volatility Index for the NASDAQ 100

VXN was up 3.04 to 27.55; the 10-day moving average was 23.88 according to Track Data.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Industry

When Carlos Ghosn was brought in seven years ago to try and rescue Nissan Motor Co., Ltd. (ADR) (NASDAQ: NSANY) from the edge of financial death, few would have bet that he could do it. Yet not only has Ghosn turned Nissan around and made the Japanese auto company profitable (for six straight years now), but the company is doing well even in the face of Toyota Motor Corporation (NYSE: TM)’s onslaught in recent years and is flying in the face of failures at General Motors Corporation (NYSE: GM) and Ford Motor Company (NYSE: F). GM did report a very good August U.S. sales month yesterday, which was a surprise.

Ghosn also heads French automaker Renault, and he’s bringing in the heavy guns from that operation into Nissan based on slipping profits in 2006. Although Nissan reported a profit for the year, the amount was a fall from previous years, which must have started Ghosn’s head spinning. A relentless cost cutter and advocate for building what customers want with a minimum of global manufacturing platforms, Ghosn has signified that a more “French” touch is needed at Nissan. After Nissan lost is CFO in 2003, a new one from Renault will soon be taking the helm at Nissan in order to shore up what can be done to make the Japanese automaker set back on the track to growing profits.

Ghosn is hailed at a hero in Japan after rescuing a company that was headed down the path to extinction before he took over, and by all accounts Nissan is still doing quite well, even with small market losses in both Japan and the U.S. last year. It’s never good to lose market share, but the automaker is still very profitable — so why all the stink? Well, Ghosn probably wants growth in both market share and profits, right? Who wouldn’t? The only thing is that competition is more than fierce at this time, and it’s not getting anything but more fierce.

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