economycommentator, Author at Economy Commentator

Housing Prices Take a Beating

In January, new US single family home sales took a tumble from their 10 month high. This was particularly due to a dip in the West, although overall housing market recovery remains strong. The Commerce Department has reported that single-family home sales dropped 9.2% last month. In the West, where there has been a sharp rise in home prices, sales went down 32.1% to the lowest level since July of 2014. This was the largest decline they’ve seen since May of 2010.

In the Northeast, the sales rose 3.4% and sales were up 1.8% in the South. However, sales decreased 5.9% in the Midwest. While the plunge was dramatic, economists did not seem too worried about it.

As Daniel Silver, an economist at JPMorgan in New York said, “Through some of the noise in the data, it appears that home sales are continuing to trend higher over time off of historically low levels. We maintain our view that the housing market will continue to recover.”

Xerox Corp. Splitting Into Two Companies

Xerox Corp. is soon splitting into two companies, one for the printer operations and the other for business process outsourcing. They have, for years, tried to integrate the businesses and have finally decided to divide into this model. Carl Icahn will have three board seats on the outsourcing company as he tweeted on Friday that “the separation will greatly enhance value for Xerox Corp shareholders.”

As Xerox Chief Executive Officer Ursula Burns said, “The reason why it was easy to get to a decision is because we do have two businesses that rotate around two different axes.”

Xerox’s shares have fallen more than 30% in the last 12 months and it has been trying to turn itself around by focusing on software and services. Burns explained that the leadership and the names of the new companies have not yet been decided.

Does the Avon Lady Sing the Blues?

Avon Products rebuffed a $10.7 billion offer by Coty over three years ago and since then their business has been on the rocks. This week, Cerberus Capital Management agreed to take their North American business. The North American business has been at the heart of Avon’s problems, weighing down the rest of the company.

Sheri McCoy, the chief executive of Avon Products, explained that the Avon portfolio outside of North America represents 86% of their revenue in the last nine months.

As Ms. McCoy explained, “We believe that the separation of North America is the best way to ensure that both businesses have an unencumbered path to profitability and growth. This was a key principle as we considered alternatives.”

Learn more about Avon’s plans and what Cerberus has planned with their take-over.

Mobile Hits the Mark on Cyber Monday

Mobile device shopping accounted for more than a quarter of the $3 billion in sales over Cyber Monday. Cyber Monday was the biggest ever day for online sales in the US according to the Adobe Digital Index report. This was attributed to larger than expected discounts and to a demand for electronics and toys in particular.

There were 200 million visitors who visited 4,500 retail websites on Cyber Monday. Last year, mobile devices accounted for 19% of the total sales on Cyber Monday, and this year that number hit 26%.

What were the top selling items? Lego’s Star Wars collection, the Barbie Dream House, the Samsung 4K television set and Apple Inc.’s iPad Mini.

Interestingly, even though more people were shopping from their mobiles, they were spending less. On average, the smartphone shopper spent $102.02 on each order, which was below the $128 average spent by desktop users. Scot Wingo, executive chairman of ChannelAdvisor shared his frustration when he said, “The fact that we haven’t improved the mobile conversion rate is a little depressing to be honest.”

Which stores faired the best? Amazon.com Inc. had a 21.1% rise in Cyber Monday sales according to ChannelAdvisor. Discounts through Amazon averaged 40%.

Target Earning Results

Target just issued its earning results, reporting $.086 earnings per share (EPS) for the quarter. They hit the Zacks’ consensus estimate of $.086, as reported by MarketBeat.com. Target earned $17.60 billion during the quarter, just over the consensus estimate of $17.57 billion. Their revenues are up 2.1% on a year-over-year basis.

Thursday, they opened at 69.78. Their quarterly divided will be paid on Thursday, December 10th. As the article explained, “Shareholders of record on Wednesday, November 18th will be given a $0.56 dividend. The ex-dividend date is Monday, November 16th. This represents a $2.24 dividend on an annualized basis and a yield of 3.21%.”

Major Gift: Northwestern University School of Law

In recent, and very exciting news for Northwestern University School of Law, alumnus J.B. Pritzker and his wife, M.K. Pritzker, have made a $100 million gift to the 156 year old school. The law school will change its name to the Northwestern Pritzker School of Law, as this is the single largest gift ever made to any law school.

Certainly, this will have an impact on everyone at for Northwestern University School of Law, from the students to the adjunct professors like Geoff Richards and the senior lecturers like Herbert N. Beller.

The announcement about the gift was made at the Law School on October 22, 2015 by Northwestern President Morton Schapiro and Law School Dean Daniel B. Rodriguez. The gift will support several social justice centers at the Law School including the Center on Wrongful Convictions, the Children and Family Justice Center, the Center on International Human Rights and the Environmental Law Center. The gift will also permanently endow and rename the Law School’s Entrepreneurship Law Center as the Donald Pritzker Entrepreneurial Law Center.

As Dean Rodriguez said, “Our increasingly complex and dynamic world demands lawyers who are trained to tackle difficult legal and policy problems and to work imaginatively at the interface of law, business and technology. This extraordinary gift will help provide the financial foundation for this law school to produce a new breed of highly skilled, adaptive lawyers—creative, constructive problem-solvers armed with multidisciplinary skills and resolutely committed to social justice and the rule of law.”

The Pritzker gift will have a long-standing impact on everyone at Northwestern, including faculty and adjunct faculty, from Ronald J. Allen and Karen Alter to Geoff Richards and Robert P. Burns. As President Schapiro said, “J.B. and M.K. are such good friends of the University, and their extraordinary commitment will allow a bold future for an already great law school.”

Walgreens Buying Rite Aid Corp.

Next time that you enter the Rite Aid Corp. drugstore chain, you just might find that it’s no longer a Rite Aid. That’s because Walgreens Boots Alliance Inc. said on Tuesday that they will be acquiring Rite Aid for $9.4 billion. The goal for Walgreens is to increase their footprint in the United States by half. They also hope to be able to negotiate for low drug prices.

Walgreens hopes that the transaction will close in the second half o 2016.

Analysts believe that the deal will increase Walgreens’ presence in the Pacific Northwest and make it in a better position to take on CVS Health Corp.

Walgreens currently has 13,200 stores, 60% of which are in the US. They generated $76.4 billion in sales during the year that ended on August 31, 2014.

Combining Music Listening and Watching: Pandora and Ticketfly

Pandora, the streaming music company, has just said that they are buying ticket seller Ticketfly for $450 million. Pandora says that 80 million people use their service each month for music and comedy. The combination, they believe, will allow them to use their data to tell fans when bands will be in town and to sell tickets.

As Stifel Nicolaus analyst John Egbert said,

“We believe this acquisition closes the loop for Pandora by creating a one-stop-shop for artist discovery, marketing, and concert ticket sales. Pandora can now share in the upside of live music industry growth that is undoubtedly being driven in large part by rapid growth in streaming music consumption.”

Egbert believes that the sale will make Pandora “the premier platform for independent artist marketing.”

HP Job Cuts on the Horizon

Possible Sale of Ariad Pharmaceuticals

Reuters recently reported that drugmaker Baxalta Inc. is in talks with Ariad Pharmaceuticals Inc. to buy Ariad. Ariad is a developer of leukemia and lung-cancer treatments and their shares have jumped approximately 43% to a two-year high of $10.

Bloomberg reported that Baxalta was working with bankers to buy an unidentified US-based oncology specialist valued at about $2 billion.

Time will tell if the deal goes through, but it is worthwhile to watch these companies in the interim.