Tuesday, August 26, 2014

Best Buy Comments on Earnings Call Sound Bearish For RadioShack $BBY $RSH

Transcript:

Now looking forward to the back half, as Hubert remarked earlier, industry wide sales are continuing to decline in many of the consumer electronics categories in which we compete. We are also seeing ongoing softness in the mobile phone category ahead of highly anticipated new product launches. Therefore absent any changes in these declining industry trends and with limited visibility to new product launch quantities, we continue to expect comparable sales to decline in the low single digits in both the third and fourth quarter. From an operating income rate perspective in the back half, we are expecting the following business drivers versus last year. One, a similar promotional competitive environment but with better promotional effectiveness internally; two, a greater mix of online revenue that will put pressure on the overall operating income rate; three, continued industry softness and higher promotionality in Canada and China...

Q & A: This is really the first time you have given definitive guidance on your comp outlook for the all-important fourth quarter and you are now saying it will be down low single digits. Where does this number really compare to where your plan was at the beginning of the year and what really has changed if anything in terms of your guidance on the comp for Q4 specifically?

SHARON MCCOLLAM (CFO)
Alan, we certainly believed that early in the year that we would see less softness in those NPD categories. We also were more optimistic about the innovation in mobile and after last year having the Samsung Galaxy other things came out, we had a few exciting things last year. But the fact that the innovation in mobile has been pretty soft this year was different than we had hoped. Now the good news is that we have remained very conservative and you know us. We don't live on our wishes and hopes here. We live on what the data says. So based on the industry data around these categories, it still does not paint a positive picture. If you look at the people who write about this industry, even with a highly anticipated phone, not speaking to any one vendor but one highly anticipated phone launch, the saturation in the mobile phone category makes this complicated to forecast. We think it is exciting and we think the installment billing programs which by the way Hubert also called out, we are seeing an acceleration in that and it is very fast. The disruption of the carriers could be a dynamic that we did not anticipate. What is happening with the carrier plans right now which you are observing I'm sure, we did not anticipate. Now again until we see what that means, we are not going to put that into a forecast. We are looking at economic data just like you, our consumer trending data and this is what it is showing. Now that is the same data I might add that told us to tell you last quarter that Q2 would be negative low single-digit comps which is exactly where we ended up and we still in those NPD categories gained share. So that is what we are using. Could it be better? Yes. Is the acceleration of Ultra High Definition TV happening? There is no question about it.
Comment from an analyst: "If Best Buy’s top line is hurting, particularly in the mobile business, that portends incredibly poorly for RadioShack."

"Aurelius Said to Double NII Stake as Bankruptcy Path Is Readied" $NIHD

Bloomberg article

Aurelius Capital Management LP doubled its stake in some NII Holdings Inc. bonds to more than $500 million, seeking to gain a leading position among creditors as the mobile-phone carrier heads toward a possible bankruptcy, according to a person with knowledge of the matter. The distressed-debt investor that’s been labeled a 'vulture' by the government of Argentina bought more of NII's $500 milion of 8.875 percent bonds due 2019 and $800 million of 10 percent securities due 2016...

Aurelius and Capital Group Cos. plan to hold talks next week to decide how to split ownership of NII, paving the way for a possible pre-arranged bankruptcy plan, according to the person.

Winning Bid At James River Coal Auction Was $52 Million $JRCC

From 8-K filing:

Pursuant to the Strategic Transaction Bidding Procedures, the Debtors, in consultation with the agent under the Debtors’ debtor-in-possession financing facility (the “DIP Agent”) and the Unsecured Creditors’ Committee, entered into an Asset Purchase Agreement, dated August 15, 2014 (the “Agreement”) with, JR Acquisition, LLC, a wholly owned subsidiary of Blackhawk Mining LLC (together with JR Acquisition, LLC, “Blackhawk”), and selected the Agreement to serve as a Stalking Horse Bidder for the purchase of the Debtors’ mining complexes commonly referred to as the Hampden Complex (including the assets of Debtor Logan & Kanawha Coal Company, LLC), the Hazard Complex (other than the assets of Debtor Laurel Mountain Resources LLC) and the Triad Complex (collectively, the “Purchased Assets”). The Agreement contemplated that, among other things, Blackhawk would (i) pay to the Debtors $20.0 million in cash and deliver a third lien secured promissory note in the amount of $25.0 million, and (ii) deliver to one of the Debtors’ lessors, in lieu of a cash payment of cure costs under leases to be assumed and assigned to Blackhawk, a second lien secured promissory note in the amount of $5.0 million. A copy of the Agreement is filed herewith as Exhibit 2.1 and is incorporated by reference herein.

In conjunction with the Strategic Transaction Bidding Procedures, the Debtors filed with the Court the Agreement with Blackhawk and then held a previously announced public auction on August 18-21, 2014 to determine whether a higher or better bid (or combination of bids) could be obtained. During the auction process, Blackhawk submitted a bid that, among other things, increased the consideration offered for the Purchased Assets from $50 million plus the assumption of certain liabilities to $52 million plus the assumption of certain liabilities.

On August 21, 2014, the Debtors, in consultation with the DIP Agent and the Unsecured Creditors’ Committee, selected Blackhawk’s revised bid as the winning bid. The revised bid contemplates that Blackhawk will (i) pay to the Debtors $20.0 million in cash and deliver a third lien secured promissory note in the amount of $27.0 million, and (ii) deliver to one of the Debtors’ lessors, in lieu of a cash payment of cure costs under leases to be assumed and assigned to Blackhawk, a second lien secured promissory note in the amount of $5.0 million. The Company will file an amendment to the Agreement reflecting the revised bid in a Current Report on Form 8-K within four business days of the date of the amendment.

The sale is expected to close on or about August 29, 2014 and is subject to customary closing conditions, including Court approval. A Court hearing is scheduled for August 26, 2014 to consider approval of the sale.
It looks as though the sale was approved at the hearing today, judging by the docket entry.

"RadioShack shareholder negotiating rescue package" $RSH

Vague story:

"RadioShack Corp's second-largest shareholder, Standard General LP, is negotiating a rescue package with investors to help the consumer electronics retailer ward off bankruptcy, Bloomberg reported, citing people with knowledge of the matter.

Standard General is seeking to strengthen RadioShack's cash flow by issuing debt or equity, Bloomberg said."

DW: "RadioShack landlords retain advisors to prep for restructuring talks" $RSH

Debtwire story:

"An ad hoc group of RadioShack landlords has engaged Kelley Drye as legal counsel, alongside financial advisory firm Province, as the retailer gears up for a potential restructuring, according to three sources familiar with the matter.

The assignments come as RadioShack’s ability to remain solvent is under question amid an escalating cash burn, the sources added. As such, the retailer is working with Jones Day to craft a workout plan, while an ad hoc group of bondholders has formed."

"Standard General Said to Explore Rescue Financing for RadioShack"

"Standard General LP, one of RadioShack Corp.’s largest shareholders, is negotiating a possible rescue package with investors intended to allow the retailer to stave off a bankruptcy filing, according to two people with knowledge of the talks. The hedge fund that is also orchestrating a lifeline for American Apparel Inc. is seeking to bolster RadioShack’s cash through the issuance of debt or equity, said the people, who asked not to be named because the discussions are private. The firm is also working with RadioShack’s management to craft a plan that would avoid Chapter 11, the people said."

Sunday, August 24, 2014

Peak McDonald's? $MCD

The WSJ ran an article this weekend, "McDonald's Faces 'Millennial' Challenge: Customers in Their 20s and 30s Are Defecting to Fast-Casual Restaurants Like Chipotle, Five Guys". A correspondent writes,

"My kids have a very negative reaction to the chain. I’m not sure why."
I have noticed that McD's feels more "downscale". I still think they make the best french fries, but the only time I find myself at one now is on road trips.

I could see McDonald's being obsolete with current understanding of nutrition and availability of ingredients. Also, Yelp is bad for the predictability selling point.

They'll still have the dollar menu for the (growing) underclass. And the real estate portfolio.