Smith & Wesson Reports Record Sales; Stock Slumps On Weak Guidance

Moments ago, America’s legendary gun maker Smith & Wesson reported second quarter earnings which, not surprisingly, beat estimates on the top and bottom line, reporting non-GAAP earnings of $39.1 million, or EPS of $0.68, far above the $0.58 expected, and some 172% higher compared to a year earlier, on revenue of $233.5 million -a 63% increase Y/Y – which beat the high end of the company’s own guidance of $230 million, as well as beating street estimates of $227.5 million.

The company’s Q2 revenue was the highest recorded in company history.

James Debney, the CEO of SWHC, said, “We are very pleased with our second quarter results, which exceeded our financial guidance. In our Firearms Segment, we believe higher revenue was driven by strong consumer demand as reflected in adjusted background checks from the National Instant Criminal Background Check System as well as our own market share gains.  In our Outdoor Products & Accessories Segment, we completed the acquisitions of Taylor Brands and Crimson Trace, both of which were accretive to our non-GAAP earnings.”

“Subsequent to the end of the quarter, we completed the acquisition of substantially all of the net assets of Ultimate Survival Technologies, Inc. (“UST”), a provider of high-quality survival and camping products. UST delivered compound annual revenue growth of 49% from 2012 through 2015, maintained healthy gross margins, and developed hundreds of high quality products.  We believe the UST distribution network will create incremental opportunities for our existing accessory product lines.”

For the next quarter, SWHC guided to what would likely be another new all time high in revenue, predicting a sasles range of $230-$240 for the coming quarter (compared to Wall Street estimates of $237.7 million) whose midpoint would make it yet another record revenue quarter for the company history.  For the full 2017 year, Smith & Wesson boosted guidance from the previous range of $900-$920 million to $920-$930 million, above the consensus of $910.6 million.

The stock, however, has tumbled after hours, down over 8%, as a result of SWHC’s Q3 EPS guidance, which came in the range of $052-$0.57, missing Wall Street estimates of $0.61 cents.

And while there are concerns about the future growth of gun demand now that Hillary Clinton is no longer a potential threat to gun rights, the latest just released FBI data on background checks suggests these are, at least for the time being, courtesy of yet another record high print for the month of November, which rose to 2.561 million, an all time high, a month in which Trump was declared president.

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France President Francois Hollande Not Running for Re-Election No Surprise

The Socialist French president, Francois Hollande, announced today he would not be seeking a second term, saying he was aware of the “risk that going down a route that would not gather sufficient support would entail.”

Hollande’s decision doesn’t come as much of a surprise, his approval ratings had been dismal, hitting 12 percent in a poll this summer. And that was a longtime coming—back in 2014, just 3 percent wanted Hollande to be the Socialist nominee for president again in 2017. 85 percent wanted a Socialist primary, and just 15 percent would vote for him in that case. Last week, Hollande had just a 1 percent chance of being the next president of France on ElectionBettingOdds.com.

That betting aggregator, and polls, suggest the first round of the election, scheduled for April 23, 2017, could lead to a win by Francois Fillon of the Republican Party (the former UMP, whose last president, Nicolas Sarkozy, lost this year’s nationwide primary) over the National Front’s Marine Le Pen without the need for a run-off. The Socialists, so far, are a non-factor—they have a primary scheduled for January.

Hollande promised in his election bid in 2012 that he would resign if he couldn’t turn the economy around—surprisingly the socialist prescription of government jobs programs failed to do that. Unsurprisingly, Hollande never resigned. He did face a revolt in his own Socialist Party when trying to push through labor reforms meant to make it easier for employers to hire employees.

Fillon, the center-right frontrunner of the 2017 election, was described in Bloomberg Businessweek as “a neo-Thatcherite who wants to downsize government, slash taxes on corporations and the rich, and scale back labor protections.” His main opponent, Le Pen, meanwhile, who is often described as “far right“, has an economic plan, according to Bloomberg Businessweek, “that could be mistaken for a Marxist tract, with calls to strengthen the social safety net, raise trade barriers, and nationalize the banks.” The National Front is also an anti-immigrant, nationalist party.

Hollande’s popularity problem started before a series of terrorist attacks kicked off by Al-Qaeda-linked gunman massacring the offices of the satirical magazine Charlie Hebdo in January 2015. There were a series of attacks in Paris in November in which 130 people were killed, and a truck attack in Nice earlier this year that killed 86. There have also been a number of smaller incidents like stabbings, a beheading, and vehicle rammings. France has been in a state of emergency since the November Paris attacks.

Although Reuters reports it’s the “first time in decades that an incumbent French president has not sought re-election,” Jacque Chirac was a two-term incumbent when he chose not to seek re-election in 2007. However, in the history of the Fifth Republic, established in 1958, no other incumbent non-interim president had chosen not to run for re-election. Vincent Auriol chose not to run for re-election in 1953 during the brief Fourth Republic. “The work was killing me,” Auriol said at the time, “they called me out of bed at all hours of the night to receive resignations of prime ministers.”

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Trump Picks Retired Marine General “Mad-Dog” Mattis As Secretary Of Defense

President-elect Donald Trump has chosen 66-year-old retired Marine General James N. "Mad-Dog"Mattis to be secretary of defense, according to The Washington Post.

An announcement is likely by early next week, according to the people familiar with the decision. Mattis declined to comment. Spokespersons for Trump's transition team did not respond to requests for comment.

Mattis, 66, retired as the chief of U.S. Central Command in spring 2013 after serving more than four decades in the Marine Corps. He is known as one of the most influential military leaders of his generation, serving as a strategic thinker while occasionally drawing rebukes for his aggressive talk. Since retiring, he has served as a consultant and as a visiting fellow with the Hoover Institution, a think tank at Stanford University.

 

Mattis gets the nod ahead of a notable group who were up for the top role..

  • * David Petraeus, former CIA director and retired Army general
  • * Tom Cotton, Republican U.S. senator from Arkansas
  • * Jon Kyl, former Republican U.S. senator from Arizona
  • * Duncan Hunter, Republican U.S. representative from California and early Trump supporter, member of the House Armed Services Committee
  • * Jim Talent, former Republican U.S. senator from Missouri who was on the Senate Armed Services Committee
  • * Rick Perry, former Republican Texas governor
  • * Stephen Hadley, former national security adviser under President George W. Bush

His bio – as one would expect – is impressive… (via The Intercept)

Mattis is exactly what Trump is not, a soldier-scholar who knows something of the wider world. Now 66 years old, Mattis was born in Walla Walla, Washington. His lifelong bachelordom is the source of one of his many nicknames: “warrior-monk.” He served in every major U.S. Middle Eastern conflict from the first Iraq War on. In 2001, as a one-star general, he led 4,000 Marines in a search for Osama bin Laden near the Afghanistan/Pakistan border. In 2004, as a two-star, he led a Marine division into the second battle for Fallujah. He went on to lead combatant commands at the Pentagon and NATO, culminating in two years as the head of Central Command under President Barack Obama, reportedly leaving after disagreeing with Obama’s policy on Iran. Shortly before his departure, Mattis appears to have weighed in with the Pentagon on behalf of Theranos, Elizabeth Holmes’s troubled biotech firm. He later joined the company’s board. Should Trump nominate Mattis, emails between Mattis and Holmesare likely to come up during his Senate confirmation hearing.

But here are 16 quotes (via FreeBeacon) to get a better feel for "mad-dog"…

1. “I don’t lose any sleep at night over the potential for failure. I cannot even spell the word.”

(San Diego Union Tribune)

James Mattis

AP

2. “The first time you blow someone away is not an insignificant event. That said, there are some assholes in the world that just need to be shot.”

(Business Insider)

3. “I come in peace. I didn’t bring artillery. But I’m pleading with you, with tears in my eyes: If you fuck with me, I’ll kill you all.”

(San Diego Union Tribune)

4. “Find the enemy that wants to end this experiment (in American democracy) and kill every one of them until they’re so sick of the killing that they leave us and our freedoms intact.”

(San Diego Union Tribune)

Flickr

Flickr

5. “Marines don’t know how to spell the word defeat.”

(Business Insider)

6. “Be polite, be professional, but have a plan to kill everybody you meet.”

(San Diego Union Tribune)

7. “The most important six inches on the battlefield is between your ears.”

(San Diego Union Tribune)

8. “You are part of the world’s most feared and trusted force. Engage your brain before you engage your weapon.”

(Mattis’ Letter To 1st Marine Division)

Mattis in 2006 / Flickr

Gen. Mattis in 2006 / Flickr

9. “There are hunters and there are victims. By your discipline, cunning, obedience and alertness, you will decide if you are a hunter or a victim.”

(Business Insider)

10. “No war is over until the enemy says it’s over. We may think it over, we may declare it over, but in fact, the enemy gets a vote.”

(Defense News)

11. “There is nothing better than getting shot at and missed. It’s really great.”

(San Diego Union Tribune)

12. “You cannot allow any of your people to avoid the brutal facts. If they start living in a dream world, it’s going to be bad.”

(San Diego Union Tribune)

Gen. Mattis and Gen. Dempsey / Flickr

Gen. Mattis and Gen. Dempsey / Flickr

13. “You go into Afghanistan, you got guys who slap women around for five years because they didn’t wear a veil. You know, guys like that ain’t got no manhood left anyway. So it’s a hell of a lot of fun to shoot them. Actually it’s quite fun to fight them, you know. It’s a hell of a hoot. It’s fun to shoot some people. I’ll be right up there with you. I like brawling.”

(CNN)

14. “I’m going to plead with you, do not cross us. Because if you do, the survivors will write about what we do here for 10,000 years.”

(San Diego Union Tribune)

15. “Demonstrate to the world there is ‘No Better Friend, No Worse Enemy’ than a U.S. Marine.”

(Mattis’ Letter To 1st Marine Division)

16. “Fight with a happy heart and strong spirit”

(Mattis’ Letter To 1st Marine Division)

 

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Trump’s Formula for Success Is Typical Cronyism, Hollande Won’t Seek Re-Election, Baltimore Releases Body Camera Footage of Police Shooting: P.M. Links

  • SignHow did President-Elect Donald Trump (and Vice President-Elect Mike Pence) get Carrier and United Technologies to keep jobs in the United States instead of shipping them out of the country? Typical cronyist government tax breaks and federal contracts.
  • Sources tell the Washington Post Trump has selected retired Gen. James N. Mattis as secretary of defense.
  • Neighbors where Pence is temporarily staying pre-transition in Washington, D.C., are showing their support for gay issues (and presumably disagreement with Pence) by putting up rainbow flags.
  • France’s President Francois Hollande, a Socialist, announced today that he would not be running for re-election. He was deeply unpopular and had little chance of winning anyway.
  • A police officer in Tacoma, Wash., was shot and killed while responding to a domestic violence call. The suspect inside the home of the call was also killed.
  • Police in Baltimore are releasing—for the first time—body camera footage of police shooting a suspect, in this case of a man shot after refusing to drop knives. The man survived the shooting and is being treated at a hospital.
  • Krispy Kreme is facing a lawsuit because its raspberry-filled donuts don’t actually have raspberry in them and the blueberry donuts don’t actually have blueberries in them, at least according to the list of ingredients.

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

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Free Staters Seem to Have Cost the Republicans a Senate Seat in New Hampshire

Aaron Day, a former chair of both New Hampshire’s Free State Project and the New Hampshire branch of the Republican Liberty Caucus, never much liked his state’s Republican Senator Kelly Ayotte.

He liked her so little he got on the ballot as an independent in her race this year. And she lost.

But did Day beat her?

“Beating Ayotte was my goal,” Day says, in a phone interview this week. “I appeared in a Breitbart article in November of last year in which I threatened to get in [the race] over Medicaid expansion” which Ayotte supported.

Day has been all about trying to beat Obamacare and Medicaid expansion, and launched a SuperPAC that tried to make sure only Republicans who shared that goal survived.

“If the New Hampshire GOP isn’t for getting rid of Obamacare in its various forms, we have no Party,” he says. (Day says that, with his independent run done and no further plans for any running for office himself, he’s a Republican again.)

Both the New Hampshire Union-Leader and Slate have credited/blamed Day for claiming Ayotte’s scalp, and Day firmly agrees.

Given that he earned 17,742 votes and Ayotte lost by just over 1,000, Day thinks he was the secret ingredient that brought her down.

But some have done fine-grained vote analysis that makes it seem more likely that a Day voter, minus Day, would have voted for the Libertarian Party’s Senate pick, Brian Chabot.

As quoted in the Union-Leader, Kathy Sullivan, a Democratic National Committeewoman from Manchester, noted that Libertarian candidates in the state tended to get around 30,000 votes, including Gary Johnson for president and Max Abramson for governor.

And if you combine Day’s 17,742 with Chabot’s reported 12,597, you get right around the typical total L.P. vote in the state.

Certainly if you combine the two “liberty movement” candidates and their approximately 30,000 votes and presume that even 4 percent of those voters would have, absent their presence, voted for Republican Ayotte, the liberty movement writ large in the state can be credited/blamed for costing the GOP a precious Senate seat.

Day thinks it’s “completely untrue” to say that he was in direct competition for votes with Libertarian Brian Chabot, who he writes off as a “left-libertarian” who believed in single-payer health care, the very opposite of Day’s stance.

Day thinks he has some empirical evidence to back his claim that he was pulling more votes from otherwise Republican voters than otherwise Libertarian ones.

“I am involved in two different election recounts” in New Hampshire races, he says, and in the (unscientific) sample of ballots he’s gotten to review in the course of them, “85 percent were straight GOP tickets with me as the only outlier.”

“This was one of the most expensive state races in the country,” Day says, with $30 million spent. “The question is, why did I get 17 thousand votes, given that I didn’t spend any money, had no campaign website, didn’t go to debates, didn’t give speeches, and didn’t have yard signs? How did I get five thousand more votes than the Libertarian? It’s because the hardcore Republicans and the liberty community and the Free Staters see my name on the ballot and know who I am.”

Day has another reason for being confident he shifted votes that would have been Ayotte’s, though he stresses “I’ll probably be blamed for this but I had nothing to do with it”: three mailers sent to Republican voters in the state, with no identifying sponsor in violation of campaign finance laws, that hyped Day as better than Ayotte in right-wing terms on Obamacare, the environment, and guns.

Among Day’s other complaints against Ayotte are that she, from Day’s perspective, helped cost the state its speaker of the House Bill O’Brien, who he admires and supports. As far as he’s concerned, with Ayotte, “every vote is the wrong vote,” including voting to confirm Loretta Lynch as attorney general.

Day points to her Heritage Action rating of just 26 percent, compared to a GOP Senate average of 57, as another sign of why Ayotte had to go. Day also thinks her past record as New Hampshire’s attorney general was rife with corruption, including declining to prosecute what Day calls a Ponzi Scheme.

Day tried to get former gubernatorial candidate Andrew Hemingway to run as an independent against Ayotte, but when Hemingway declined Day stepped in himself. “I was my own last choice,” Day says. He accuses the state GOP of an “unprecedented” legal attempt to disqualify his ballot petitions, saying they knew from the beginning he could be what ruined her.

“Any state Republican Party leader who is angry with me about [Ayotte losing] will all be voted out” of their leadership positions, Day confidently predicts. “I don’t care to talk to the current leadership in the New Hampshire GOP. I’ll just wait until they are replaced.”

Day does not relish have to support primary challenges to Republicans he sees as weak, or spend his time on “wacky independent runs to take out Ayotte. That’s not my goal. But I’m the only one sometimes” willing to do what he thinks is necessary to make the Republican Party a party of liberty.

“I’d like to be able to work cooperatively with a Republican majority on things like school choice, repealing Obamacare, decriminalizing marijuana,” and helping elect candidates on the town council and school board level to rein in state property taxes which he thinks are “out of control.”

“I want to go into a more constructive phase. I never want to have to do what I just did” again, Day says. The GOP probably is with him on that.

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Starbucks CEO Howard Schultz Is Stepping Down

Starbucks has announced that its CEO, Howard Schultz, a vocal proponent of the minimum wage and vocal supporter of Hillary Clinton not to mention the person who almost single-handedly created Starbucks as a worldwide brand, is stepping down to focus on opening higher-end coffee shops for the company. He will be replaced by COO Kevin Johnson.

The stock was down as much as 11% on the news but has since rebounded to -4% on the session.

The full press release:

Starbucks Announces New Leadership Structure to Drive Next Wave of Global Growth

Kevin Johnson to become chief executive officer and assume full responsibility for Starbucks global business and operations
Howard Schultz to become executive chairman and focus on retail innovation and accelerating growth of Starbucks ultra-premium retail formats

SEATTLE (Dec. 1, 2016) – Starbucks Corporation (NASDAQ: SBUX) today announced that Kevin Johnson, president and chief operating officer and a 7-year member of the Starbucks Board of Directors, will expand his responsibilities and assume the role and responsibilities of president and chief executive officer, effective April 3, 2017.

Also effective April 3, 2017, Howard Schultz, chairman and ceo, will be appointed executive chairman and will shift his focus to innovation, design and development of Starbucks Reserve® Roasteries around the world, expansion of the Starbucks Reserve® retail store format and the company’s social impact initiatives. In this new role Schultz will continue to serve as chairman of the Board.

“Starbucks consistently outperforms the retail industry because our stores, our offerings and the experiences our partners create make us a destination. The best evidence of the success of the core strategy driving our business is that we continue to deliver quarter after quarter of record, industry leading revenue, comp sales and profit growth, and that the newest classes of Starbucks stores continue to deliver record-breaking revenues, AUV’s and ROI both in the U.S. and around the world,” said Schultz. “As I focus on Starbucks next wave of retail innovation, I am delighted that Kevin Johnson – our current president, coo, a seven-year board member and my partner in running every facet of Starbucks business over the last two years – has agreed to assume the duties of Starbucks chief executive officer. This move ideally positions Starbucks to continue profitably growing our core business around the world into the future.”

 As president and chief operating officer since March 2015, Johnson has led the company’s global operating businesses across all geographies as well as the core support functions of Starbucks supply chain, marketing, human resources, technology, and mobile and digital platforms. Johnson has been a Starbucks board member since 2009, and will continue to serve as a member of the Board.

“Over the past two decades, I have grown to know Starbucks first as a customer, then as a director on the board, and for the past two years as a member of the management team. Through that journey, I fell in love with Starbucks and I share Howard’s commitment to our mission and values and his optimism for the future,” said Johnson.  “It is an honor for me to serve the more than 300,000 partners who proudly wear the green apron and I consider it a privilege to work side-by-side with Howard, our world-class board of directors, and a very talented leadership team. Together, we will reaffirm our leadership in all things coffee, enhance the partner experience and exceed the expectations of our customers and shareholders.  We believe in using our scale for good and having positive social impact in the communities we serve around the world.”

Johnson’s career spans 33 years in the technology industry which included a 16-year career at Microsoft and a five-year tour as CEO of Juniper Networks. At Microsoft, he led worldwide sales and marketing and became the president of the Platforms Division. In 2008, he was appointed to the National Security Telecommunication Advisory Committee where he served Presidents George W. Bush and Barack Obama. He joined the Starbucks board in 2009 and the management team in 2015.

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Party’s Over? Bonds, Stocks, Dollar Dive As VIX Jumps Most In A Month

For Bondholders, Big Tech shareholders, and Mexicans, here's the message…

 

Well if you thought November was turmoily, December is off to a turmoilier start…

  • Nasdaq worst 2 days in 3 months (below 50DMA)
  • VIX jumped most in a month (above 50DMA)
  • Treasuries worst since Trump election
  • Gold plunged to 10-month lows (but bounced)
  • WTI jumped to highest since July 2015

Following the worst 2 months for risk-parity funds since the taper tantrum…

 

Bonds and stocks were dumped today (as we suspect some RP deleveraging was hitting the market)…

 

A quick look at the day across asset classes shows the inflection point as Gundlach comments seemed to move markets…

 

For the second day in a row, Nasdaq was hammered at the US Open…

 

The Dow (blue) ended green  as Nasdaq (black) plunged along with Small Caps (red) and the S&P (green). NOTE: Dow closed at new record high up 68 points today (with Goldman Sachs and UNH accounting for 69 of those points)

 

VIX spiked (above 14.5) to its 50DMA and the S&P 500 fell to 8-day lows…

 

 

Another very ugly open for bonds ends on the bid… (again suggests RP deleveraging)

 

The USD Index slid lower once again once US markets woke up…

 

Gold was smacked again overnight (to 10-month lows)…

 

WTI Crude continued to rise to its highest since July 2015…

 

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7 Reasons that the Corporate Media Is Pro-War

Why There Is So Much Pro-War Reporting?

There are seven reasons that the mainstream media and the largest “alternative” media websites are both pro-war.

1. Self-Censorship by Journalists

There is tremendous self-censorship by journalists.

A survey by the Pew Research Center and the Columbia Journalism Review in 2000 found:

Self-censorship is commonplace in the news media today …. About one-quarter of the local and national journalists say they have purposely avoided newsworthy stories, while nearly as many acknowledge they have softened the tone of stories to benefit the interests of their news organizations. Fully four-in-ten (41%) admit they have engaged in either or both of these practices.

Similarly, a 2003 survey reveals that 35% of reporters and news executives themselves admitted that journalists avoid newsworthy stories if “the story would be embarrassing or damaging to the financial interests of a news organization’s owners or parent company.”

Several months after 9/11, Dan Rather told the BBC that American reporters were practicing “a form of self-censorship”:

There was a time in South Africa that people would put flaming tires around peoples’ necks if they dissented. And in some ways the fear is that you will be necklaced here, you will have a flaming tire of lack of patriotism put around your neck. Now it is that fear that keeps journalists from asking the toughest of the tough questions…. And again, I am humbled to say, I do not except myself from this criticism.

 

What we are talking about here – whether one wants to recognise it or not, or call it by its proper name or not – is a form of self-censorship.

Rather said in 2008:

One of the most pernicious ways in which we do this is through self-censorship, which may be the worst censorship of all. We have seen too much self-censorship in the news in recent years, and as I say this please know that I do not except myself from this criticism.

 

As Mark Twain once said, “We write frankly and freely but then we ‘modify’ before we print.” Why do we modify the free and frank expression of journalistic truth? We do it out of fear: Fear for our jobs. Fear that we’ll catch hell for it. Fear that someone will seek to hang a sign around our neck that says, in essence, “Unpatriotic.”

 

We modify with euphemisms such as “collateral damage” or “less than truthful statements.” We modify with passive-voice constructions such as “mistakes were made.” We modify with false equivalencies that provide for bad behavior the ready-made excuse that “everybody’s doing it.” And sometimes we modify with an eraser—simply removing offending and inconvenient truths from our reporting.”

Keith Olbermann agreed that there is self-censorship in the American media, and that:

You can rock the boat, but you can never say that the entire ocean is in trouble …. You cannot say: By the way, there’s something wrong with our …. system.

Former Washington Post columnist Dan Froomkin wrote in 2006:

Mainstream-media political journalism is in danger of becoming increasingly irrelevant, but not because of the Internet, or even Comedy Central. The threat comes from inside. It comes from journalists being afraid to do what journalists were put on this green earth to do. . . .

 

There’s the intense pressure to maintain access to insider sources, even as those sources become ridiculously unrevealing and oversensitive. There’s the fear of being labeled partisan if one’s bullshit-calling isn’t meted out in precisely equal increments along the political spectrum.

 

If mainstream-media political journalists don’t start calling bullshit more often, then we do risk losing our primacy — if not to the comedians then to the bloggers.

 

I still believe that no one is fundamentally more capable of first-rate bullshit-calling than a well-informed beat reporter – whatever their beat. We just need to get the editors, or the corporate culture, or the self-censorship – or whatever it is – out of the way.

MarketWatch columnist Brett Arends wrote in 2013:

Do you want to know what kind of person makes the best reporter? I’ll tell you. A borderline sociopath. Someone smart, inquisitive, stubborn, disorganized, chaotic, and in a perpetual state of simmering rage at the failings of the world. Once upon a time you saw people like this in every newsroom in the country. They often had chaotic personal lives and they died early of cirrhosis or a heart attack. But they were tough, angry SOBs and they produced great stories.

 

Do you want to know what kind of people get promoted and succeed in the modern news organization? Social climbers. Networkers. People who are gregarious, who “buy in” to the dominant consensus, who go along to get along and don’t ask too many really awkward questions. They are flexible, well-organized, and happy with life.

 

And it shows.

 

This is why, just in the patch of financial and economic journalism, so many reporters are happy to report that U.S. corporations are in great financial shape, even though they also have surging debts, or that a “diversified portfolio” of stocks and bonds will protect you in all circumstances, even though this is not the case, or that defense budgets are being slashed, when they aren’t, or that the U.S. economy has massively outperformed rivals such as Japan, when on key metrics it hasn’t, or that companies must pay CEOs gazillions of dollars to secure the top “talent,” when they don’t need to do any such thing, and such pay is just plunder.

 

All of these things are “consensus” opinions, and conventional wisdom, which are repeated over and over again by various commentators and vested interests. Yet none of them are true.

 

If you want to be a glad-handing politician, be a glad-handing politician. If you want to be a reporter, then be angry, ask awkward questions, and absolutely hate it when everyone agrees with you.

The Jerusalem Post wrote last year:

Any university journalism course will teach that there are two forms of media censorship in the media: censorship and self-censorship. As one online article explains: “Censorship occurs when a state, political, religious or private party prohibits information from reaching citizens. Self-censorship occurs when journalists themselves prevent the publication of information… because they are fearful of what could happen if they publish certain information – they are fearful of injury to themselves or their families, fearful of a lawsuit or other economic consequence.”

 

***

 

A 2014 academic article was more alarmist in tone. M. Murat Yesil, assistant professor at Turkey’s Necmettin Erbakan University, wrote that “self-censoring practices of journalists put the future of journalism into danger… [such] practices may be threatening the future of journalism.” This past week, Spanish journalists are claiming a new law that protects police officers from having their photographs published will encourage self-censorship.

Self-censorship obviously occurs on the web as well as in old media. As Wikipedia notes:

Self-censorship is the act of censoring or classifying one’s own work (blog, book(s), film(s), or other means of expression) …

2. Censorship by Higher-Ups

http://ift.tt/1ElWiFq

Anthony Freda: www.AnthonyFreda.com.

If journalists do want to speak out about an issue, they also are subject to tremendous pressure by their editors or producers to kill the story.

The 2000 Pew and Columbia Journalism Review survey notes:

Fully half of [the investigative journalists surveyed] say newsworthy stories are often or sometimes ignored because they conflict with a news organization’s economic interests. More than six-in-ten (61%) believe that corporate owners exert at least a fair amount of influence on decisions about which stories to cover….

The Pulitzer prize-winning reporter who uncovered the Iraq prison torture scandal and the Mai Lai massacre in Vietnam, Seymour Hersh, said:

“All of the institutions we thought would protect us — particularly the press, but also the military, the bureaucracy, the Congress — they have failed. The courts . . . the jury’s not in yet on the courts. So all the things that we expect would normally carry us through didn’t. The biggest failure, I would argue, is the press, because that’s the most glaring….

 

Q: What can be done to fix the (media) situation?

 

[Long pause] You’d have to fire or execute ninety percent of the editors and executives. You’d actually have to start promoting people from the newsrooms to be editors who you didn’t think you could control. And they’re not going to do that.”

In fact many journalists are warning that the true story is not being reported.

A series of interviews with award-winning journalists also documents censorship of certain stories by media editors and owners (and see these samples).

It’s not just the mainstream media. The large “alternative” media websites censor as well. For example:

Every year Project Censored [which Walter Cronkite and other ] puts together a list of the top 25 stories censored and ignored by the mainstream media.

 

How many of these stories were you aware of? Even regular consumers of alternative, independent media may be surprised to learn about some of these stories ….

There are many reasons for censorship by media higher-ups.

One is money.

The media has a strong monetary interest to avoid controversial topics in general. It has always been true that advertisers discourage stories which challenge corporate power. In 1969, Federal Communications Commission commissioner Nicholas Johnson noted that tv networks go to great lengths to please their sponsors.

Indeed, a 3-time Emmy Award winning CNN journalist says that CNN took money from the royalty in Bahrain to kill her hard-hitting expose, and instead run flattering propaganda for Bahrain.

Some media companies make a lot of money from the government, and so don’t want to rock the boat. For example, Glenn Greenwald notes:

Because these schools [owned by the Washington P0st’s parent company, whose profits subsidize the Post] target low-income students, the vast majority of their income is derived from federal loans. Because there have been so many deceptive practices and defaults, the Federal Government has become much more aggressive about regulating these schools and now play a vital role in determining which ones can thrive and which ones fail.

 

Put another way, the company that owns The Washington Post is almost entirely at the mercy of the Federal Government and the Obama administration — the entities which its newspaper ostensibly checks and holds accountable. “By the end of 2010, more than 90 percent of revenue at Kaplan’s biggest division and nearly a third of The Post Co.’s revenue overall came from the U.S. government.” The Post Co.’s reliance on the Federal Government extends beyond the source of its revenue; because the industry is so heavily regulated, any animosity from the Government could single-handedly doom the Post Co.’s business — a reality of which they are well aware:

The Post Co. realized there were risks attached to being dependent on federal dollars for revenue — and that it could lose access to that money if it exceeded federal regulatory limits.

 

It was understood that if you fell out of grace [with the Education Department], your business might go away,” said Tom Might, who as chief executive of Cable One, a cable service provider that is owned by The Post Co., sat in at company-wide board meetings.

Beyond being reliant on federal money and not alienating federal regulators, the Post Co. desperately needs favorable treatment from members of Congress, and has been willing to use its newspaper to obtain it:

Graham has taken part in a fierce lobbying campaign by the for-profit education industry. He has visited key members of Congress, written an op-ed article for the Wall Street Journal and hired for The Post Co. high-powered lobbying firms including Akin Gump and Elmendorf Ryan, at a cost of $810,000 in 2010. The Post has also published an editorial opposing the new federal rules, while disclosing the interests of its parent company.

The Post is hardly alone among major media outlets in being owned by an entity which relies on the Federal Government for its continued profitability. NBC News and MSNBC were long owned by GE, and now by Comcast, both of which desperately need good relations with government officials for their profits. The same is true of CBS (owned by Viacom), ABC (owned by Disney), and CNN (owned by TimeWarner). For each of these large corporations, alienating federal government officials is about the worst possible move it could make — something of which all of its employees, including its media division employees, are well aware. But the Post Co.’s dependence is even more overwhelming than most.

 

How can a company which is almost wholly dependent upon staying in the good graces of the U.S. Government possibly be expected to serve as a journalistic “watchdog” over that same Government? The very idea is absurd.

In addition, the government has allowed tremendous consolidation in ownership of the airwaves during the past decade.

Dan Rather has slammed media consolidation:

Likening media consolidation to that of the banking industry, Rather claimed that “roughly 80 percent” of the media is controlled by no more than six, and possibly as few as four, corporations.

This is documented by the following must-see charts prepared by:

And check out this list of interlocking directorates of big media companies from Fairness and Accuracy in Media, and this resource from the Columbia Journalism Review to research a particular company.

This image gives a sense of the decline in diversity in media ownership over the last couple of decades:

The large media players stand to gain billions of dollars in profits if the Obama administration continues to allow monopoly ownership of the airwaves by a handful of players. The media giants know who butters their bread. So there is a spoken or tacit agreement: if the media cover the administration in a favorable light, the MSM will continue to be the receiver of the government’s goodies.

The large alternative media websites also censor news which are too passionately anti-war.

Huffington Post – the largest liberal website – is owned by media giant AOL Time Warner, and censors any implication that a Democratic administration could be waging war for the wrong reasons. So HuffPost may criticize poor prosecution of the war, but would never say that the entire “War on Terror” as currently waged by the Obama administration is a stupid idea.

The largest “alternative” websites may weakly criticize minor details of the overall war effort, but would never say that more or less worldwide war-fighting is counterproductive. They may whine about a specific aspect of the war-fighting … but never look at the larger geopolitical factors involved.

They all seem to follow Keith Olbermann’s advice:

You can rock the boat, but you can never say that the entire ocean is in trouble …. You cannot say: By the way, there’s something wrong with our …. system.

3. Digital Demonetization

The biggest social media websites censor the hardest-hitting anti-war stories. And see this.

We noted in 2013:

Reddit, Facebook, Digg, Youtube and other social media sites have long censored content as well.

 

For example, Facebook pays low-wage foreign workers to delete certain content based upon a censorship list. For example, Facebook deletes accounts created by any Palestinian resistance groups. [See this]

 

Digg was caught censoring stories which were controversial or too critical of the government. See this and this.

 

Many accuse Youtube of blatant censorship.

Indeed, Youtube admits that it censors:

Controversial or sensitive subjects and events, including subjects related to war, political conflicts, natural disasters and tragedies, even if graphic imagery is not shown

Moreover, all of the social media giants say they’re going to crack down on “fake news”.  For example, Facebook, Twitter, Youtube and other social media are partnering with corporate media such as the ABC News, NBC News, Washington Post, New York Times, to filter out what they label as fake news.

Why is this a problem?

Because corporate media giants like the Washington Post are labeling virtually any website which questions U.S. foreign policy as “fake news” … and calling on them to be “investigated” by the FBI and Department of Justice for treason.

So think about how this will play out

1. First, criticizing U.S. wars will get a website listed on a slapdash “fake news” list

2. Second, the blacklisting will lead to social media – and perhaps search engines – blocking links to the site

3. With links blocked, ad revenue for the site will plummet, which will destroy the main source of revenue for most websites, effectively shutting them down.

Get it?

If this trend continues, it will lead to tremendous pressure to stop criticizing U.S. military policy.

4. Drumming Up Support for War

 War Is Sold Just Like Soda or Toothpaste

Anthony Freda: www.AnthonyFreda.com

In addition, the owners of American media companies have long actively played a part in drumming up support for war.

It is painfully obvious that the large news outlets studiously avoided any real criticism of the government’s claims in the run up to the Iraq war. It is painfully obvious that the large American media companies acted as lapdogs and stenographers for the government’s war agenda.

Veteran reporter Bill Moyers criticized the corporate media for parroting the obviously false link between 9/11 and Iraq (and the false claims that Iraq possessed WMDs) which the administration made in the run up to the Iraq war, and concluded that the false information was not challenged because:

The [mainstream] media had been cheerleaders for the White House from the beginning and were simply continuing to rally the public behind the President — no questions asked.

As NBC News’ David Gregory (later promoted to host Meet the Press) said:

I think there are a lot of critics who think that . . . . if we did not stand up [in the run-up to the war] and say ‘this is bogus, and you’re a liar, and why are you doing this,’ that we didn’t do our job. I respectfully disagree. It’s not our role.

The same thing happened in the Libyan and Syrian wars.

But this is nothing new. In fact, the large media companies have drummed up support for all previous wars.

For example, Hearst helped drum up support for the Spanish-American War.

So why has the American press has consistently served the elites in disseminating their false justifications for war?

One of of the reasons is because the large media companies are owned by those who support the militarist agenda or even directly profit from war and terror (for example, NBC was owned by General Electric, one of the largest defense contractors in the world … which directly profits from war, terrorism and chaos. NBC was subsequently sold to Comcast).

Another seems to be an unspoken rule that the media will not criticize the government’s imperial war agenda.

And the media support isn’t just for war: it is also for various other shenanigans by the powerful. For example, a BBC documentary proves:

There was “a planned coup in the USA in 1933 by a group of right-wing American businessmen . . . . The coup was aimed at toppling President Franklin D Roosevelt with the help of half-a-million war veterans. The plotters, who were alleged to involve some of the most famous families in America, (owners of Heinz, Birds Eye, Goodtea, Maxwell Hse & George Bush’s Grandfather, Prescott) believed that their country should adopt the policies of Hitler and Mussolini to beat the great depression.”

Moreover, “the tycoons told the general who they asked to carry out the coup that the American people would accept the new government because they controlled all the newspapers.“

See also this book.

Have you ever heard of this scheme before? It was certainly a very large one. And if the conspirators controlled the newspapers then, how much worse is it today with media consolidation?

(Kevin Dutton – research psychologist at the University of Cambridge – whose research has been featured in Scientific American Mind, New Scientist, The Guardian, Psychology Today and USA Today – also notes that media personalities and journalists – especially when combined in the same persons – are likely to be psychopaths. Some 12 million Americans are psychopaths or sociopaths, and psychopaths tend to rub each others’ backs.)

5. CIA Involvement

An official summary of America’s overthrow of the democratically-elected president of Iran in the 1950′s states, “In cooperation with the Department of State, CIA had several articles planted in major American newspapers and magazines which, when reproduced in Iran, had the desired psychological effect in Iran and contributed to the war of nerves against Mossadeq.” (page x)

Indeed, it is well-documented that the CIA has long paid journalists to write propaganda. This includes foreign, as well as American reporters.

And the military-media alliance has continued without a break (as a highly-respected journalist says, “viewers may be taken aback to see the grotesque extent to which US presidents and American news media have jointly shouldered key propaganda chores for war launches during the last five decades.”)

As the mainstream British paper, the Independent, writes:

There is a concerted strategy to manipulate global perception. And the mass media are operating as its compliant assistants, failing both to resist it and to expose it. The sheer ease with which this machinery has been able to do its work reflects a creeping structural weakness which now afflicts the production of our news.

The article in the Independent discusses the use of “black propaganda” by the U.S. government, which is then parroted by the media without analysis; for example, the government forged a letter from al Zarqawi to the “inner circle” of al-Qa’ida’s leadership, urging them to accept that the best way to beat US forces in Iraq was effectively to start a civil war, which was then publicized without question by the media.

6. Access

Dan Froomkin, Brett Arends and many other mainstream reporters have noted that “access” is the most prized thing for mainstream journalists … and that they will keep fawning over those in power so that they will keep their prized access.

But there is another dynamic related to access at play: direct cash-for-access payments to the media.

As previously mentioned, a 3-time Emmy Award winning CNN journalist says that CNN takes money from foreign dictators to run flattering propaganda.

Politico reveals:

For $25,000 to $250,000, The Washington Post has offered lobbyists and association executives off-the-record, nonconfrontational access to “those powerful few”: Obama administration officials, members of Congress, and — at first — even the paper’s own reporters and editors…

 

The offer — which essentially turns a news organization into a facilitator for private lobbyist-official encounters — was a new sign of the lengths to which news organizations will go to find revenue at a time when most newspapers are struggling for survival.

That may be one reason that the mainstream news commentators hate bloggers so much. The more people who get their news from blogs instead of mainstream news sources, the smaller their audience, and the less the MSM can charge for the kind of “nonconfrontational access” which leads to puff pieces for the big boys.

7. Censorship by the Government

Finally, as if the media’s own interest in promoting war is not strong enough, the government has exerted tremendous pressure on the media to report things a certain way.

If reporters criticize those in power, they may be smeared by the government and targeted for arrest (and see this).

Indeed, the government treats real reporters as terrorists. Because the core things which reporters do could be considered terrorism, in modern America, journalists are sometimes targeted under counter-terrorism laws.

The government spies on reporters. Columbia Journalism Review notes:

The Edward Snowden leaks made clear that the internet is a tool for peering into the lives of citizens, including journalists, for every government with the means to do so. Whether domestic spying in the United States or Great Britain qualifies as censorship is a matter of debate. But the Obama administration’s authorization of secret wiretaps of journalists and aggressive leak prosecutions has had a well-documented chilling effect on national-security reporting. At the very least, electronic snooping by the government means that no journalist reporting on secrets can promise in good conscience to guarantee a source anonymity.

Not only has the government thrown media owners and reporters in jail if they’ve been too critical, it also claims the power to indefinitely detain journalists without trial or access to an attorney which chills chills free speech.

After Pulitzer Prize winning journalist Chris Hedges, journalist Naomi Wolf, Pentagon Papers whistleblower Daniel Ellsberg and others sued the government to enjoin the NDAA’s allowance of the indefinite detention of Americans – the judge asked the government attorneys 5 times whether journalists like Hedges could be indefinitely detained simply for interviewing and then writing about bad guys. The government refused to promise that journalists like Hedges won’t be thrown in a dungeon for the rest of their lives without any right to talk to a judge.

An al-Jazeera journalist – in no way connected to any terrorist group – was held at Guantánamo for six years … mainly to be interrogated about the Arabic news network. And see this.

Wikileaks’ head Julian Assange could face the death penalty for his heinous crime of leaking whistleblower information which make those in power uncomfortable … i.e. being a reporter.

As constitutional lawyer Glenn Greenwald notes:

It seems clear that the US military now deems any leaks of classified information to constitute the capital offense of “aiding the enemy” or “communicating with the enemy” even if no information is passed directly to the “enemy” and there is no intent to aid or communicate with them. Merely informing the public about classified government activities now constitutes this capital crime because it “indirectly” informs the enemy.

 

***

 

If someone can be charged with “aiding” or “communicating with the enemy” by virtue of leaking to WikiLeaks, then why wouldn’t that same crime be committed by someone leaking classified information to any outlet: the New York Times, the Guardian, ABC News or anyone else?

 

***

 

International Law Professor Kevin Jon Heller made a similar point when the charges against Manning were first revealed:

“[I]f Manning has aided the enemy, so has any media organization that published the information he allegedly stole. Nothing in Article 104 requires proof that the defendant illegally acquired the information that aided the enemy. As a result, if the mere act of ensuring that harmful information is published on the internet qualifies either as indirectly ‘giving intelligence to the enemy’ (if the military can prove an enemy actually accessed the information) or as indirectly ‘communicating with the enemy’ (because any reasonable person knows that enemies can access information on the internet), there is no relevant factual difference between [Bradley] Manning and a media organization that published the relevant information.”

***

 

It is always worth underscoring that the New York Times has published far more government secrets than WikiLeaks ever has, and more importantly, has published far more sensitive secrets than WikiLeaks has (unlike WikiLeaks, which has never published anything that was designated “Top Secret”, the New York Times has repeatedly done so: the Pentagon Papers, the Bush NSA wiretapping program, the SWIFT banking surveillance system, and the cyberwarfare program aimed at Iran were all “Top Secret” when the newspaper revealed them, as was the network of CIA secret prisons exposed by the Washington Post). There is simply no way to convert basic leaks to WikiLeaks into capital offenses – as the Obama administration is plainly doing – without sweeping up all leaks into that attack.

 

***

The same [Obama] administration that has prosecuted whistleblowers under espionage charges that threatened to send them to prison for life without any evidence of harm to national security, and has brought double the number of such prosecutions as all prior administrations combined. Converting all leaks into capital offenses would be perfectly consistent with the unprecedented secrecy fixation on the part of the Most Transparent Administration Ever™.

 

The irony from these developments is glaring. The real “enemies” of American “society” are not those who seek to inform the American people about the bad acts engaged in by their government in secret. As Democrats once recognized prior to the age of Obama – in the age of Daniel Ellsberg – people who do that are more aptly referred to as “heroes”. The actual “enemies” are those who abuse secrecy powers to conceal government actions and to threaten with life imprisonment or even execution those who blow the whistle on high-level wrongdoing.

Former attorney general Mukasey said the U.S. should prosecute Assange because it’s “easier” than prosecuting the New York Times.  Congress is considering a bill which would make even mainstream reporters liable for publishing leaked information (part of an all-out war on whistleblowing).

As such, the media companies have felt great pressure from the government to kill any real questioning of the endless wars.

For example, Dan Rather said, regarding American media, “What you have is a miniature version of what you have in totalitarian states”.

Tom Brokaw said “all wars are based on propaganda.

And the head of CNN said:

There was ‘almost a patriotism police’ after 9/11 and when the network showed [things critical of the administration’s policies] it would get phone calls from advertisers and the administration and “big people in corporations were calling up and saying, ‘You’re being anti-American here.’

Indeed, former military analyst and famed Pentagon Papers whistleblower Daniel Ellsberg said that the government has ordered the media not to cover 9/11:

Ellsberg seemed hardly surprised that today’s American mainstream broadcast media has so far failed to take [former FBI translator and 9/11 whistleblower Sibel] Edmonds up on her offer, despite the blockbuster nature of her allegations [which Ellsberg calls “far more explosive than the Pentagon Papers”].

 

As Edmonds has also alluded, Ellsberg pointed to the New York Times, who “sat on the NSA spying story for over a year” when they “could have put it out before the 2004 election, which might have changed the outcome.”

 

“There will be phone calls going out to the media saying ‘don’t even think of touching it, you will be prosecuted for violating national security,’” he told us.

 

* * *

 

“I am confident that there is conversation inside the Government as to ‘How do we deal with Sibel?’” contends Ellsberg. “The first line of defense is to ensure that she doesn’t get into the media. I think any outlet that thought of using her materials would go to to the government and they would be told ‘don’t touch this . . . .‘”

Indeed, in the final analysis, the main reason today that the media giants will not cover the real stories or question the government’s actions or policies in any meaningful way is that the American government and mainstream media been somewhat blended together.

Can We Win the Battle Against Censorship?

We cannot just leave governance to our “leaders”, as “The price of freedom is eternal vigilance” (Jefferson). Similarly, we cannot leave news to the corporate media. We need to “be the media” ourselves.

“To stand in silence when they should be protesting makes cowards out of men.”
– Abraham Lincoln

“Our lives begin to end the day we become silent about things that matter.”
– Dr. Martin Luther King Jr.

“Powerlessness and silence go together. We…should use our privileged positions not as a shelter from the world’s reality, but as a platform from which to speak. A voice is a gift. It should be cherished and used.”
– Margaret Atwood

“There is no act too small, no act too bold. The history of social change is the history of millions of actions, small and large, coming together at points in history and creating a power that governments cannot suppress.”
– Howard Zinn (historian)

“All tyranny needs to gain a foothold is for people of good conscience to remain silent”
– Thomas Jefferson

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The U.S. Put at Least 67,000 People in Solitary Confinement Last Year

While the use of solitary confinement in the U.S. has been decreasing in recent years, there were at least 67,442 inmates in the U.S. locked in their cells for 22 or more hours a day in the fall of 2015, according to a report released Wednesday by the Association of State Correctional Administrators (ASCA) and Yale Law School.

The report gives a significant, albeit incomplete, snapshot of the use of solitary confinement in the U.S., which is an outlier among countries in its use of the widely condemned practice. The census includes federal and state inmates placed in any form of “restricted housing” for at least 22 hours a day for more than 15 consecutive days. It did not include local and county jails, federal immigration detention centers, and juvenile and military detention centers, meaning the number could be higher.

The survey found that “a national consensus has emerged focused on limiting the use of restricted housing, and many new initiatives, as detailed in the report, reflect efforts to make changes at both the state and federal levels.” South Carolina, Utah, and Colorado have all reduced their use of solitary confinement.

“What we are seeing is that prison systems are motivated to reduce the use of isolation in prisons and are actively putting into place policies designed to reduce the use of restrictive housing,” ASCA president Leann K. Bertsch said in a statement.

However, the report also found wide variance from state to state and prison to prison. The percentage of inmates held in solitary in federal and state prisons ranged ranged from 1 percent to 28 percent.

Twenty-nine percent of inmates were placed in solitary for three months or less, but there were roughly 3,000 across the country who had been held in solitary confinement for six years or longer. Of those, more than half were in Texas, dwarfing every other state and the federal Bureau of Prisons system.

Louisiana held nearly 14 percent of its prison population in solitary confinement last fall, although state officials say that, when prisoners held in county jails are included, that number drops to around 8 percent. Likewise, Utah held about 14 percent of its prison population in solitary, but officials say they have since significantly overhauled their restrictive housing practices.

In 2011, the United Nations Special Rapporteur on torture concluded that solitary confinement beyond 15 days constituted cruel and inhumane punishment. Unsurprisingly, locking human beings in tiny boxes for years at a time has negative psychological effects.

In recent years, both the ASCA and the American Correctional Association released new guidelines and standards limiting the use of solitary confinement. The Obama administration also banned the use of solitary confinement for juveniles in the federal prison system and limited the amount of time adults can spend in solitary.

The push to phase out the lengthy and punitive use solitary confinement is not limited to activists, but is increasingly popular among corrections officials. In an interview with The Atlantic Thursday, Rick Raemisch, the executive director of Colorado Department of Corrections and a critic of the widespread use of solitary confinement, said, “We’ve got to change the way we do business.”

Does solitary work? No. It works for one purpose, really, which is if you have a very serious incident occur, you need to put that person somewhere until you can figure out what happened and to start to address the cause. What we have found is that our data has shown that the less you use it, the safer your facilities are, and that the safer your facilities are, the safer your community is once they get out. We’ve tried to build around positive reinforcement versus solitary confinement, which by any means just isn’t effective.

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Dollar General’s Startling Admission: Half Of U.S. Consumers Are Feeling More “Dire” Than Ever

When we last looked at the performance of deep discount retailer Dollar General three months ago, we found something troubling: company CEO Todd Vasos, who badly missed its earnings expectations, admitted on the Q2 conference call that he was surprised to admit that while on the surface things are supposed to be getting better, the reality is vastly different for low-income US consumers:

I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that’s out there, that demographic, things have not gotten any better for her, and arguably, they’re worse. And they’re worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip.

Making matters worse, he added that the company’s core consumers base, 65% of which is comprised of lower-income shoppers, has been impacted by the recent reduction or elimination in foodstamps: “now couple that in upwards of 20 states where they have reduced or eliminated the SNAP benefit, and it has really put a toll on [the core consumer].”

He elaborated that the reduction in foodstamps benefits promptly filtered through the entire business model, and culminated with Dollar General being forced to cut prices to remain competitive.

While America’s poorest where pressured on one side by declining foodstamp benefits, on the other they were getting hit by rising rental and healthcare costs: 

“[The] core consumer, I tell you, has gotten no better as far as her economic well-being. Matter of fact, she tells us, while we’re out in the stores or even through all of our panel data that we do, that while things haven’t gotten a lot worse as far as income coming in, other than the recent SNAP decrease, my expenditures are going up at a very rapid rate. Healthcare is one of the big ones, because most of our consumers, while she may be working, doesn’t have healthcare, and we all know that she’s having to now pay for this healthcare or be taxed on it, right? So that is starting to really play against that low-end consumer right now, and it will continue to play against her. You couple that with those rents that we talked about, those increased rents are real, and in many parts of where we serve our customer, the affordability and availability of rental units are getting more and more scarce, which is driving up prices. And we’re seeing that because most of our core customers cannot and do not own their own homes.”

But the one statement from Vasos that revealed just how bad the situation truly is for much of America was the following: “I’ve been out in stores in the middle of the aisle and heard customers come up to our store manager in tears and thanking them for being there and thanking them for the prices that we offer in a real convenient nature for her, where she can walk to the store, because she can’t afford anything else. When you hear that, that really brings home where this core customer is.”

* * *

Fast forward to today when after last quarter’s abysmal results, and after after two consecutive quarters of slowing sales, Dollar General once again missed expectations across the board. The dollar store reported that earnings came in at 89 cents a share, falling short of Wall Street forecasts for 93 cents a share; sales rose 5% from the prior year to $5.32 billion, missing analysts estimates for $5.36 billion. The deterioration was the result of an ongoing decline in same store sales, which dropped by 0.1% in the quarter, missing consensus estimates of a 0.8% rebound, even as the company cut prices: gross margin declined from 30.3% a year ago to 29.8%, missing estimates of 30.2%. Finally, the company reduced its profit outlook for the year, saying earnings would come in on the low end of the 10%-15%  long-term growth range, and below Wall Street estimates pg 13%.

There were several reasons for the disappointing results, one among which was the company’s latest failed attempt to boost traffic by lowering prices, which while leading to the latest (already razor thin) margin decline, failed to materialize in an increase in same store sales. One can blame that on further industry-wide discounting as the race to the bottom accelerates. “There is evidence Walmart has lowered food prices in certain categories, which likely pressured Dollar General – we note that Dollar Tree is impacted less by this as it has a more discretionary product mix,” points out Barclay’s analyst Karen Short. “We believe Dollar General’s initial price reductions were likely introduced more broadly in the third quarter, potentially pressuring results in the near-term,” Short added.

But the biggest factor by far impacting the performance of the dollar store, was the continued adverse turn in the purchasing power of the lower half of US consumers: according to Dollar General’s executives, the company’s core low-income consumers continued to feel pain, weighed down by higher health-care bills, rising rents and cuts to federal food stamp programs, in other words the very same things the company lamented last quarter.

Which is surprising.

As the WSJ notes, over the past decade, dollar stores benefited from robust growth spurred by cash strapped consumers suffering from the recession and postrecession malaise. “That picture could be starting to change. Low income wages are increasing and competition for hourly workers is increasing.

Which would be great if it were true, because that particular version of reality presented by the Bureau of Labor Statistics seems to conform with what is taking place in the real world, where Dollar General’s shoppers aren’t feeling flush, said the CEO.

And just to avoid putting words in his mouth, this is what Todd Vasos said during today’s Q&A, when a Morgan Stanley analyst asked him if he can share “any further color around the low-end consumer health” and how it differs from what the company noted last quarter versus the latest observations. This is what Vasos replied:

Interestingly, we talk to our consumers each and every quarter through panel data as well as we bring them in and talk to them in general and I can tell you as late as mid third quarter, they were telling us that their sentiment, feeling is even more dire than it was in previous quarters in early 2016. What they’re citing and continue to cite is the rising healthcare costs that they’re facing. I don’t believe any of our core customers realized what they were up against on those rising costs. And then rental costs continue and they call that out second on paying rent because most of our, again, core customers rent, don’t own and those rents are going up across the nation at a pretty high rate. 

 

So we’re hearing a lot of the same things we’ve heard over the last couple of quarters but what was interesting to us was that she was feeling worse off today, middle of the third quarter, than she was earlier in the year.

We go out and talk to the customers each and every quarter, and again I believe that the majority of what we are communicated to everyone earlier in the year pretty well is still well intact as far as the consumer is concerned except for the notion that she may be a little worse off today economically than she was even earlier in the year.

His response, we hope, clarifies any residual confusion about how the lower half of the US consumer class is doing these days.

 

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