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Canaccord Genuity on Amazon, Mead Johnson Nutrition, and Abercrombie & Fitch


Commentary on's GameCircle, China's apology to Mead, and a buyback for A&F.

The following are excerpts from Canaccord Genuity analysts' commentaries. (AMZN): Achievement Unlocked.
Amazon unveiled GameCircle on Wednesday, a new feature for the Kindle Fire that fits in perfectly as another must-have for any mobile platform: gaming leaderboards and achievements. Achievements will keep tabs on user progress, and all the trophies, treasures, badges, and awards they've earned in various games. Gamers can "pause a game, view an achievements summary, determine what badges are still needed or desired, and then return to gameplay," Amazon said. With leaderboards, gamers can see how their achievements stack up against other players, including score comparison information and percentile ranking. Finally, much like e-books and music on Amazon's platform, games on GameCircle will be stored in the cloud and synced across devices. The function allows users to save in-game progress to the cloud and pick up where they left off after restoring their tablet or switching to a different device. This could be a possible indicator that the online retailer is getting ready to roll out its own smartphone or at least expand its mobile device offerings. The new APIs also make it easier for game developers to create games for the Kindle Fire because it eliminates the need to make in-game leaderboards or achievements.

Mead Johnson Nutrition (MJN): You Buy Now.
Shares of Mead Johnson rebounded after a Chinese agency issued an apology for false reports relating to the presence of a "prohibited additive" found in the company's baby formula. On Tuesday, an influential Chinese business magazine reported online that vanillin, a common vanilla substitute, was found in the baby formula of companies including Mead Johnson. The magazine said that according to China's National Food Safety Standards for Users of Food Additives, vanillin should not be allowed in formula meant for infants from birth to six months of age, as it can cause liver and kidney damage. The initial report caused a scare among Mead Johnson investors, which sent the company's shares plunging. On Wednesday, a spokesman for the agency said the employees of Hunan Agricultural University in central China had misread inspection results which led to faulty allegations against Mead Johnson. The faulty findings are a further blow to China's dairy and infant-formula markets, which are still recovering from a scandal in which six babies died and hundreds of thousands were sickened in 2008 from drinking tainted milk that caused kidney stones.

Abercrombie & Fitch (ANF): I Demand a Refund.
Abercrombie & Fitch plans a big share buyback to appease investors and is also likely to cut back on its European expansion plans, the New York Post reported. The exact size of the repurchase program could not immediately be determined, but a source told the paper it would be a "material increase" over the board's current authorization to buy back 12.9 million shares, or about 15.0% of the teen apparel retailer's float. The New York Post also quoted unnamed "insiders" as saying that Chief Executive Mike Jeffries is considering curtailing the company's European expansion and that Abercrombie is expected to announce its plans on or before its next quarterly earnings report in mid-August. Expansion in Europe has cost Abercrombie in the recent past as sales trends in the region weighed on overall performance. Nevertheless, top execs at Abercrombie "got an earful after that last earnings report," according to one insider briefed on the situation, referring to angry phone calls from investors who were surprised by Europe's damage to quarterly results. Rumours swirled this spring that Abercrombie had been approached by a prospective buyer. However, the current plan to step up share buybacks makes such a deal less likely, insiders said.

Editor's note: For more information on Canaccord Genuity, click here.
No positions in stocks mentioned.
Canaccord Financial and its affiliated companies may have a Corporate Finance or other relationship with the companies mentioned and may trade in any of the Designated  Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage herein.
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