Nothing warms an investor's heart quite like a bounce back. Here's our look at the most surprising turnarounds of the past year.
The Frappuccinos might have gone down easy but, for a couple years there, business was tough.
Analysts covering Starbucks (SBUX) emphasize that the coffee giant suffered significant headwinds during our Great Recession: strapped consumers as well as increasing competition.
Starbucks felt the heat like a worn-out barista.
|As we wrote in a recent article, chairman and CEO Howard Schultz, for the first time, told shareholders in an annual letter that the company began to see traffic in US stores slow.
But perhaps most troublesome, said Schultz, Starbucks just got lazy. "[W]here in the past Starbucks had always been forward-thinking and nimble in its decision-making and execution, like many fast-growing companies before us, we had allowed our success to make us complacent," Schultz said.
So Starbucks, with its 16,600 stores and 142,000 employees, swung into action: The company closed 800 underperforming locations, and removed $580 million in costs from the business in fiscal 2009.
The result has been an impressive profitability turnaround and, although it might not enjoy revenue growth like it once did, analysts write, its scale and respected brand should help the powerhouse maintain its leading position in the specialty coffee niche.
|Dollar Thrifty Automotive Group
Dollar Thrifty Automotive Group (DTG) was running out of road at the end of 2008.
The car-rental agency reported a net loss of $340.4 million for the year, compared to a net income of $1.2 million in 2007. Like much of the industry, Dollar Thrifty was struggling with consumers' reduced travel budgets, large debt loads, and the credit crunch. So in October 2008, the company made some changes, including the promotion of Scott Thompson to CEO.
|Thompson had previously played a major role in founding Group 1 Automotive (GPI). A year later, after having to reduce the payroll by more than 700 people, Thompson declared the company "fixed."
Hertz (HTZ) seemed to agree, and decided to make a bid to acquire Tulsa-based Dollar Thrifty for $1.2 billion six months later. But since recovering, Dollar Thrifty has become quite popular and is now also considering a "substantially higher" bid from Avis (CAR). While the other car-rental companies fight over it, Dollar Thrifty can sit back and enjoy its first-quarter 2010 profit: the best first-quarter profit in company history.
Dendreon (DNDN) has proven to be the little biotech that could, and then some. Until just a few weeks ago, Dendreon was a company that had no products bringing in revenue and had failed to get approval from the FDA from its one and only promising compound, the prostate-cancer vaccine Provenge. But last month, the firm finally did get approval for the drug, sending the company's stock up past $50 per share. Prior to approval, Dendreon's stock had gone from $30.90 to $2.55 and back again.
|It was a long road for Dendreon and Provenge. The drug was infamously delayed two years ago and the FDA went on to seek more data. Share prices had also been plagued by problems, including a manipulated bear run on the stock last April, which caused the stock to lose 65% of its value in less than two minutes.
Dendreon's Provenge vaccine costs $93,000, before any insurance savings, for a full course of treatment. Sales could potentially exceed $5 billion in little more than a year.
The recession was devastating for toy makers as consumers stopped spending on things that weren't necessities and even cut back during the usually busy holiday season. Yet, 2010 has breathed new life into the sector, particularly the world's largest toymaker, Mattel (MAT).
Mattel saw increases in most of its product lines during the first quarter with sales of Barbie, the Disney Princess doll line, and Hot Wheels being among its best sellers.
|In April, the company posted a profit of $24.8 million, or 7 cents a share, compared with a loss of $51 million, or 14 cents, in the year-prior period. Revenues were up 12% to $880.1 million for the first quarter.
That said, analysts have been worried that a declining European economy and the rising cost of labor in China could hinder the company's earnings going forward. Mattel has reassured investors that cost-cutting measures will keep the company strong.
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