Whole Foods Discovers Stock Buybacks, And It’s Too Little Too Late: Stock Tumbles Again

A quarter ago, when we commented on the latest post-earnings collapse in Whole Foods stock, we said that “Whole Foods Misses, Lowers Guidance, Or What Happens When You Ignore Buybacks At The Expense Of CapEx”, and broke down the results as follows:

.. the luxury grocery chain moments ago reported revenues of $3.32 billion, missing the $3.35 billion expected, and EPS which also missed expectations of $0.41, instead printing at $0.38. Adding insult to injury, WFM also cut comp store sales guidance lowering its previous fiscal year comp store guidance from 5.5%-6.2% to 5.0%-5.5%, cutting sales growth from 11-12% to 10.5%-11%, and also cut EBITDA from $1.32-$1.37 billion to $1.29-$1.32 billion.

Ok, the results were horrible, but one key thing was missing.

WFM continues to be a cash cow, generating tremendous amounts of bottom line cash. Which perhaps was its biggest failing as well – WFM reported that “year to date, the Company has produced $619 million in cash flow from operations and invested $362 million in capital expenditures, of which $207 million related to new stores. This resulted in free cash flow of $257 million. In addition, the Company has paid $82 million in quarterly dividends to shareholders and repurchased $117 million of common stock.”

The problem was clear: “Alas, this is nowhere near enough shareholder friendly activity to keep investors happy in a New Normal in which buybacks tend to be far greater in amount than CapEx spending.”

As expected, the stock promptly collapsed by 10%:


 

A quarter later, Whole Foods management seems to have read our lament and acted accordingly. On the chart below see if you can figure out which is the company’s quarterly stock repurchase and capex activity without peeking at the legend:

 

Indeed, that red bar soaring from a negligible $55 million to a whopping $361 million is precisely what happens when a company realizes that its only recourse to “goose” EPS is to go full tilt buying back its stock in the open market.

And sure enough, when WFM reported earnings moments ago, it “magically” beat EPS expectations of $0.39, courtesy of its raging repurchasing activity, printing a $0.41 EPS.

However, that was as far as it went. Unfortunately, while this time Whole Foods remember to repurchase as much stock as it could, it missed the key metrics starting with comp store sales, which were +3.9% on expectations of 4.8%, but the biggest impact was the reduced full year guidance as follows:

  • Sales growth: 9.6-9.9%, down from 10.5-11.0%
  • Comp store sales growth: 4.1-4.4%, down from 5.0%-5.5%
  • Operating margin: 6.4%-6.5%, down from 6.5-6.6%
  • EPS growth: 3-4%, down from 3-6%.

And so on. The stock reaction:

So while we congratulate WFM management on finally figuring out that in the New Normal financial engineering is perhaps the only thing that matters to get the algo momentum ignition boost upon announcing earnings, next quarter it may want to pay some more attention to the underlying business model too.




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Whole Foods Discovers Stock Buybacks, And It's Too Little Too Late: Stock Tumbles Again

A quarter ago, when we commented on the latest post-earnings collapse in Whole Foods stock, we said that “Whole Foods Misses, Lowers Guidance, Or What Happens When You Ignore Buybacks At The Expense Of CapEx”, and broke down the results as follows:

.. the luxury grocery chain moments ago reported revenues of $3.32 billion, missing the $3.35 billion expected, and EPS which also missed expectations of $0.41, instead printing at $0.38. Adding insult to injury, WFM also cut comp store sales guidance lowering its previous fiscal year comp store guidance from 5.5%-6.2% to 5.0%-5.5%, cutting sales growth from 11-12% to 10.5%-11%, and also cut EBITDA from $1.32-$1.37 billion to $1.29-$1.32 billion.

Ok, the results were horrible, but one key thing was missing.

WFM continues to be a cash cow, generating tremendous amounts of bottom line cash. Which perhaps was its biggest failing as well – WFM reported that “year to date, the Company has produced $619 million in cash flow from operations and invested $362 million in capital expenditures, of which $207 million related to new stores. This resulted in free cash flow of $257 million. In addition, the Company has paid $82 million in quarterly dividends to shareholders and repurchased $117 million of common stock.”

The problem was clear: “Alas, this is nowhere near enough shareholder friendly activity to keep investors happy in a New Normal in which buybacks tend to be far greater in amount than CapEx spending.”

As expected, the stock promptly collapsed by 10%:


 

A quarter later, Whole Foods management seems to have read our lament and acted accordingly. On the chart below see if you can figure out which is the company’s quarterly stock repurchase and capex activity without peeking at the legend:

 

Indeed, that red bar soaring from a negligible $55 million to a whopping $361 million is precisely what happens when a company realizes that its only recourse to “goose” EPS is to go full tilt buying back its stock in the open market.

And sure enough, when WFM reported earnings moments ago, it “magically” beat EPS expectations of $0.39, courtesy of its raging repurchasing activity, printing a $0.41 EPS.

However, that was as far as it went. Unfortunately, while this time Whole Foods remember to repurchase as much stock as it could, it missed the key metrics starting with comp store sales, which were +3.9% on expectations of 4.8%, but the biggest impact was the reduced full year guidance as follows:

  • Sales growth: 9.6-9.9%, down from 10.5-11.0%
  • Comp store sales growth: 4.1-4.4%, down from 5.0%-5.5%
  • Operating margin: 6.4%-6.5%, down from 6.5-6.6%
  • EPS growth: 3-4%, down from 3-6%.

And so on. The stock reaction:

So while we congratulate WFM management on finally figuring out that in the New Normal financial engineering is perhaps the only thing that matters to get the algo momentum ignition boost upon announcing earnings, next quarter it may want to pay some more attention to the underlying business model too.




via Zero Hedge http://ift.tt/1rI4BmH Tyler Durden

Woman Wasn’t Told She Was Participating in an Active Shooter ‘Drill’

PoliceA Coloardo nursing home worker
is suing her employer and the Carbondale Police Department for
emotional distress after they staged an active shooter drill
without telling her that the threat was fake.

From
NBC 9 News
:

In a complaint received by 9NEWS Tuesday, Meeker claims she was
taken hostage by a man with a gun while at work at the assisted
living center in Carbondale. Meeker says the gunman held her
against her will while she begged for her life.

According to the complaint, what she did not know at the time
was that the man with the gun was a Carbondale police officer, and
it was all a part of an active shooter drill that was taking
place.

Meeker claims that she was not informed of the training and
suffered severe mental and emotional distress since the
incident.

If her side of the story is accurate, that’s certainly a
terrible way to conduct such an exercise.

I reached out to the police department for comment. An officer
referred me to the department’s lawyer; I haven’t heard back from
him yet. I will update this story if that changes.

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Woman Wasn't Told She Was Participating in an Active Shooter 'Drill'

PoliceA Coloardo nursing home worker
is suing her employer and the Carbondale Police Department for
emotional distress after they staged an active shooter drill
without telling her that the threat was fake.

From
NBC 9 News
:

In a complaint received by 9NEWS Tuesday, Meeker claims she was
taken hostage by a man with a gun while at work at the assisted
living center in Carbondale. Meeker says the gunman held her
against her will while she begged for her life.

According to the complaint, what she did not know at the time
was that the man with the gun was a Carbondale police officer, and
it was all a part of an active shooter drill that was taking
place.

Meeker claims that she was not informed of the training and
suffered severe mental and emotional distress since the
incident.

If her side of the story is accurate, that’s certainly a
terrible way to conduct such an exercise.

I reached out to the police department for comment. An officer
referred me to the department’s lawyer; I haven’t heard back from
him yet. I will update this story if that changes.

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Rand Paul Calls Out MSNBC for Being Dishonest

fuckits body language Sen. Rand Paul (R-Ky.) was on MSNBC earlier today
along with Sen. Cory Booker (D-NJ) to talk about their joint effort
to reform prison sentencing guidelines. Because it’s MSNBC
eventually the host segued into Paul’s comments on The Rachel
Maddow Show in 2010, when he explained that while he supported the
bulk of the 1964 Civil Rights Act he had some philosophical issues
with government telling private businesses  who they could and
couldn’t bar from their private property. It was among his first
media appearances after winning his primary election that year, and
led to a firestorm of left-wing-generated criticism. Politicians,
after all, shouldn’t expect to have honest conversations ,
especially on partisan outlets.

Paul’s learned his lesson. Here was his response to the MSNBC
anchor today,
via Mediaite
:

People need to get over themselves writing all this stuff that
I’ve changed my mind on the Civil Rights Act. Have I ever had a
philosophical discussion about all aspects of it? Yeah, and I
learned my lesson: To come on MSNBC and have a philosophical
discussion, the liberals will come out of the woodwork and go crazy
and say you’re against the Civil Rights Act, and you’re some
terrible racist. And I take great objection to that, because, in
Congress, I think there is nobody else trying harder to get people
back their voting rights, to get people back and make the criminal
justice system fair. So I take great offense to people who want to
portray me as something that I’m not.

His response shows a healthy dose of combativeness that suggests
Paul is readier than he’s ever been to mount a national
campaign.

Watch Reason TV’s latest Rand Paul interview below:

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The “Nanny States of America” – Mother Arrested for Allowing 7-Year-Old Son Walk to Park Alone

Screen Shot 2014-07-30 at 3.15.05 PMI remember all throughout my childhood hearing tales of how my father and his friends would run around for countless hours playing all over his Sheepshead Bay, Brooklyn neighborhood. He and his friends were quite young and completely unaccompanied. His mother was busy at home, and he cherished those moments in between school and dinnertime. In fact, the many stories he told my brother and I always came with a nostalgic smile related to the memories of those fleeting, precious moments of “dangerous freedom.”

continue reading

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Four Chicago Cops Were Responsible For 200 Internal Affairs Complaints in a Five Year Period

bad copA Freedom
of Information request by the Chicago Tribune has yielded
a list of officers who collected at least 11 complaints each
between 2001 and 2006, when a scandal over how corrupt the Special
Operations Sections (SOS) of the Chicago Police Department (CPD)
broke. The Tribune
reports
:

Four Chicago police officers from a unit at the center of one of
the worst misconduct scandals in department history amassed 200
complaints in the years leading up to revelations that they were
repeatedly abusing and robbing citizens, according to City of
Chicago documents made available this week to the Tribune.

The officers included former cops Jerome Finnigan and Keith
Herrera of the now-defunct Special Operations Sections. They racked
up 105 complaints against them to Internal Affairs from 2001
through 2006 – the period during which the officers took part in
robberies, illegal traffic stops and illegal searches of the homes
of suspected drug dealers and other citizens.

Finnigan was sentenced
to 12 years in jail in 2011 for plotting to kill another cop, while
in 2012 Herrera was
sentenced
to two months for participating in three robberies
with SOS. Before being convicted, but after being charged, Herrera
insisted he and the other “special ops” members of the CPD were
just doing their job, which he says was described as getting guns
and drugs off the street “at any
cost
.”

Craig Futterman, a professor at the University of Chicago’s law
school who was involved in the litigation that spurred the creation
of the list,  says it’s evidence that the CPD could’ve clued
itself in to the corruption at SOS before 2006. Futterman also
insists not every cop on the list (which includes only cops who
have had at least 11 complaints in five years filed against them)
was a “bad cop.”

Since 2004 Chicago has spent an average of
$1 million a week
settling and otherwise handling lawsuits
against the CPD.

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Portuguese Regulator Bans Short-Selling After Banco Espirito Santo Unveils Massive $5 Billion Loss

Having waited until after the US equity markets closed, Portugal’s troubled Banco Espirito Santo unveiled an enormous EUR 3.577 Billion loss – that is 15 times larger than the loss the bank suffered a year earlier. The data  – to end-June, before the crisis really got going – already shows notable deposit flight, a 73.1% plunge in banking income, and a EUR 3 billion collapse in repoable assets (i.e. liquidity). On the heels of this Portugal’s securities regulator has enforced a short-selling ban on BES… we suspect they would not have done that if all was systemically well in Portugal.

 

Highlights (or lowlights) of the data as of June 30th – before the crisis escalated

A collapse in banking income

 

Plunge in liquidity, collapse in Net Income, jump in operating costs, and tumble in total equity…

 

*  *  *

With the President warning this is systemic, Draghi better hope they can figure out a bailout (or bail-in) soon…

*  *  *

Full data release below:

BES Results




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The Problem Isn't That Lois Lerner Doesn't Like Conservatives, It's That the IRS Gave Her a Weapon Against Them

Lois LernerIt’s no surprise that Lois Lerner,
the former Internal Revenue Service official whose name is now
eternally connected to politically motivated abuse of the tax
agency’s powers, doesn’t like conservatives. She’s a
registered Democrat
who explicitly
targeted tea party
groups during her tenure at the IRS. So the

release by House Ways and Means Committee Chairman Dave Camp

(R-Mich.) of emails
from 2012
in which she referred to conservatives as “rabid,”
“crazies,” and “assholes” (the “ass” is inexplicably redacted, but
I think we can assume) isn’t a shocker.

It is interesting, though, that she reacted to
overhearing Britons discussing America’s financial straits by
pointing out that “they don’t seem to see that they can’t afford to
keep up their welfare state either.”

But many people have strong political opinions, whether or not
they stupidly express those thoughts in emails sent through
government accounts. She would have still held those beliefs if
she’d confined herself to GMail—or kept her trap shut entirely.

And many of her critics have expressed similar feelings about
liberals. Or about both liberals and conservatives
(*cough* *cough*).

Strong political preferences are almost certain to be held by
people holding government office. That isn’t a reason to go looking
for rare candidates who have managed to develop the competence to
perform a responsible job without, somehow, acquiring political
preferences.

Because there’s almost certainly something seriously wrong with
such people.

The proper response to the “revelation” that people have
political biases is to make sure that they can’t wield government
power against those they don’t like. If the people who are going to
hold position in government are going to be biased, which is to
say, actual human beings, then those positions shouldn’t inherently
represent weapons to be used against the opposition.

Lois Lerner isn’t the problem. The power of the IRS—and so many
other government agencies—is a
bludgeon that will inevitably be used by almost anybody who gets
their hands on it
.

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