Good Thursday Morning
Daylight – Good news/bad news routine this morning – “We are going to work it out.” – How many times a day do you say this, and yesterday President Elect Trump said the same thing after he had a phone call from Air Force One to the CEO of Boeing about blowing the budget on the future Air Force One orders, which Trump tweeted about early in the morning. Almost too good of news to be true. Bad news is Trump’s appointment of Scott Pruitt, a climate change skeptic, to head up the U.S. Environmental Protection Agency makes no sense, defies logic and is quite frankly mind-bending. What else is new – we have an Entrepreneur in the White House. There could be a bigger plan.
Hot – By the way, with Google announcing yesterday it will be totally energy renewable in 2017, let’s Entrepreneurially look at climate change by the upside and downside – basically how we should look at any risks and ROI. If indeed the planet’s warming is man-made and from carbon emissions, then we need a worldwide emergency to put the brakes on all emissions and start every program to reduce what could take out the entire planet, not a climate skeptic who is currently suing the EPA over climate change policies. There’s a huge upside in saving the planet.
Buzzard’s Roost – Now, the downside on getting climate change policies wrong…imagine all 98 percent of the scientists are wrong and ice caps melting the size of India have nothing to do with man-made carbon emissions – then the downside is a more beautiful planet and few less fossil fuel jobs, but make the wind mills in Kentucky. By the way, what you probably didn’t see is Google on most days have larger power usage requirements than all of San Francisco.
Hot – Lululemon Athletica is off to a hot start this morning, as its stock is headed for biggest one-day gain in eight years. – The company defies denim and naysayers with upbeat earnings report and third-quarter upside on accelerating comp trends. Overall, traffic is down, but higher total ticket per customer walking out the door. Comps included an 11 percent comp gain in women’s pants (similar to the second quarter’s double-digit gain) despite investor angst over resurgent denim trends and the lapping of last year’s revamped pant wall. Men’s also remained very strong, with a mid-teens comp increase. The comp was driven by increased ticket, as traffic remained slightly negative, as has been the case all year. E-commerce sales rose 16 percent. Inventory increased two percent, but declined eight percent on a per-square-foot basis versus revenue growth of 13.5 percent, and management expects inventory at the end of the fourth quarter to be in line with forward sales expectations, including shifts in product flows around the Chinese New Year. Sales over Black Friday and Cyber Monday were particularly strong with comps up 16 percent and 29 percent, respectively. Lululemon’s stock jumped more than 10 percent after the close to 27 times our new 2017 EPS estimate on the sales and earnings upside. Expensive and Dicey.
Investment Banking – Entrepreneurs, if you want to get a glimpse of what it is like in the slow lane of corporate, look no further than yesterday morning when Merrill Lynch put the hammer down. In 2017, the company will require its brokers to make at least two client referrals to other parts of its parent, Bank of America, to avoid a one percent pay cut from their take-home pay for that month. If you make no referrals all year long, you could take up to a 12 percent pay cut for the year.
Culture – In our Entrepreneur Briefing this evening, we will show what Entrepreneurs get wrong: sales, and it is the whole shooting match – sales plans, sales comps, sales incentives. We will show how to get sales right, which includes first and foremost a sales strategy for every stage of the company. By the way, we are also finding good reasons to have a sales bonus plan for the entire team instead of individual sales contests. Big change and sign of the times.
Live Rounds – By late afternoon, Merrill was annoyed that its 2017 sales comp plan had been leaked to social media. This may be the bigger problem for Merrill management to think it wouldn’t leak. Management clarified its brokers only to make a referral to another Bank of America unit, giving the broker credit regardless of whether it generates new business – a key distinction it said compared with the incentives plan offered to retail bank employees at Wells Fargo. MIA – creativity and customer.
M&A – Stone-Goff Partners has acquired a major interest in The Channel Company, a provider of media, events and other marketing services to the technology channel.
ECI Partners has sold its stake in Rhubarb, a food and beverage operator, to Livingbridge.
Staples, Inc. has agreed to sell its European business, which consists of retail, contract and online businesses in 16 countries and generates aggregate annual sales of about $1.82 billion, to an affiliate of private equity firm Cerberus Capital Management. Staples will retain a 15 percent stake.
Hedge Funds – Winners emerge in hedge fund industry despite rocky start to year. London-based Cheyne Capital’s Total Return Credit Fund has generated 42.7 percent through the end of October.
Spotlight – I will be in Houston tomorrow morning, so the Morning Report will return Monday.
Exits – Keter Group, a household and garden product manufacturer backed by BC Partners, has agreed to acquire a stake in ABM Italia, a maker of high-end resin storage systems for domestic and office applications.
Altus Capital Partners has sold Rocla Concrete Tie, a manufacturer of concrete railway ties, to Vossloh for about $117.2 million.
Venture Capital – Finicity, a financial data aggregation and API services platform provider, raised $42 million.
SnapLogic, an enterprise integration platform that connects data, applications and devices for digital businesses, raised $40 million.
PatientPing, a company whose technology lets healthcare providers monitor their patients remotely, raised $31.6 million.
KeyMe, an app that allows users to store, copy, share, and duplicate their physical keys using a digital scan, raised $25 million.
Menlo Micro, a designer of electronic switches created by GE, raised $18.7 million.
Kenna, a vulnerability and risk intelligence platform, raised $15 million.
Metabolon, a maker of software for biotech research, raised $15 million.
Secdo, a maker of security alert monitoring software, raised $10 million.
Abyrx, a maker of biosurgical products, raised $10 million.
PDCline Pharma, a developer of a new immuno-oncology platform, raised $4.2 million.
Alluvium, a developer of software that applies machine learning to mechanical data, raised $2.5 million.
Pepo, a group social messaging app that connects users with shared interests, raised $2.35 million.
Private Equity – L Catterton has acquired Pinarello, a maker of road bikes, apparel and accessories.
Worldwide Facilities, an insurance wholesale broker, has acquired Trinity Underwriting Managers Inc, an underwriting manager and insurance broker specializing in commercial transportation.
AVI-SPL, a developer of audio visual and video collaboration services, has acquired Anderson Audio Visual, a provider of audio visual services.
Onward Capital and Thompson Street Capital Partners have acquired Domaille Engineering, a maker of polishing machines and fixtures, inspection equipment, and associated engineered products for the fiber-optic cable market.
Nestle has agreed to sell its nutrition drink brand Nutrament to Harvest Hill Beverage Company, a fruit juice company backed by Brynwood Partners.
Spanos Barber Jesse & Co. has invested in Troy Lee Designs, a provider of off-road motorcycling and mountain biking gear and apparel.
And that’s what’s ahead, Cliff