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business newsMarket Gives Hershey's Kisses a Big Bear Hug
By
Justin Sharon
Oct 21, 2010 4:40 pm
The candy company is currently heading south to the tune of 3% after Chief Executive David West said "macroeconomic challenges and consumer confidence will continue to be a headwind" going into 2011.
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Related content can be accessed at Why Armajaro Holdings’ Massive Cocoa Bet Went Bust -- And How to Play It, Skeletons in the Corporate Closet: Big Chocolate, and Obnoxious Product Placement: E.T. Goes To Pieces.
After that high calorie column I feel compelled to head for the gym, even if no one is staying fiscally fit investing in Life Time Fitness (LTM) right now. Its stock is nosediving more than 9% after reporting third-quarter revenue of $238.3 million. Although this was up 11.2% from $214.3 million of a year-earlier, President Bahram Akradi duly noted “the challenged consumer environment we expect to see for the foreseeable future.” (The Tehran-born CEO apparently has quite enough testosterone already without needing to pump any extra iron, at least if a 2007 assault on an adolescent is any indication.) He heads a Minnesota-based organization comprised of about 86 locations, which is in the process of expanding but focuses for now mainly on the nation’s midsection, generally a less fitness-obsessed cohort than exists on either coast. Its base of centers is maturing and attrition rates, although improving, nonetheless reached 40.6% in 2009 amid persistently high unemployment. Competition is fierce from outfits including
LA Fitness, and the travails of Bally Total Fitness tell a cautionary tale.For those of you who won’t be rushing to work out after work, Couch Potato Investing provides plenty of alternative food for thought.
Netflix (NFLX) can apparently do no wrong. Shares are at fresh highs after announcing a robust set of results and subsequently scoring several analyst upgrades. The DVD subscription market leader added a stunning 1.9 million subs for a total of almost 17 million in its third quarter, some 200,000 above even the more optimistic range of its prior guidance. Customer “churn,” or cancellation, narrowed to 3.8% from 4.4% and average customer acquisition costs also came in better than expected at only $19.81 compared to $22. Netflix clearly continues to reap big benefits from this year’s horrific Hollywood endings at old-school competitors including both Blockbuster and Hollywood Video. Although still best known for the movies-in-mailbox model it introduced in 1998, streaming content via its Watch Instantly platform is increasingly what has investors salivating. As a less expensive option -- postage becomes a non issue obviously and marketing costs fall precipitously -- this represents the way forward for the firm, which CEO Reed Hastings characterizes as “now a streaming company, which also offers DVD-by-mail.” The name "Netflix" still elicits blank stares from Brits among many others abroad but the company now plans an international expansion in 2011. Oppenheimer’s Jason Helfstein, among those who raised his rating this morning, said the stock could see $300 in 2011. Still, there are some Street skeptics who view the stock as less a buy than a rainy-day rental. Easy to forget, amid this afternoon’s euphoria, that a dramatic increase in free subscriptions -- 6.3% of the total compared with only 2.8% in the previous three-month period -- helped drive much of the earnings beat. Critics also point out that shares are currently priced for perfection and trade at absurdly lofty valuations. I’ll weigh in on that one just as soon as I watch the next two films in my Netflix queue. Vertigo and The Man Who Fell to Earth.
Netflix CEO Reed Hastings Bets on American Stupidity in Launch of Canadian Service, Trendspotting: Investing in Video on Demand, and Hulu’s Subscription Service to Compete With Netflix have more.
Today’s “before” and “after” shots of diet darling NutriSystem (NTRI) would make for interesting viewing. In tandem with the market’s overall U-turn shares, though solidly higher, are not now up as much as when I first started strumming on the keyboard today. (Note to self: I need to be faster, if not with my fasting then certainly with my writing.) It's still an interesting story, however, one which appeals to America’s love of panaceas and quick fixes. The key to losing weight, while hardly rocket science -- eat less/exercise more, ideally in tandem -- remains beyond so many of us, myself included, that an entire cottage industry of Fergies (Weight Watchers WTW), and Kirsties (Jenny Craig), and Kimmies (QuickTrim) has sprung up to shame us all into staying svelte. In NutriSystem’s case it called upon a more blue-collar hero to demonstrate the shrinking shirt size that becomes newly available to the biggest loser. Larry the Cable Guy lost 50 pounds while adhering to the company’s Glycemic Index, tumbling to 282. (Another Larry, Hall of Fame linebacker Lawrence Taylor, met a more ignominious end.) The firm peddles its products over the Web, via retail outlets, and through the QVC TV home shopping network and scored a big distributuion deal with Walmart (WMT) almost exactly a year ago. It also currently yields comfortably in excess of 3%. However, risks are real. The weight-loss industry is always prone to fads, from Atkins to South Beach, and shares are also fairly heavily shorted. Moreover, an increasing number of cash-rich members of Big Pharma are starting to muscle in on the anti-obesity market.
Please see The Real Winner From the NutriSystem-Walmart Deal.
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No positions in stocks mentioned.
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