Green Mountain Coffee Executives "Baffled" By Declining Sales

The big news in the stock market this week was the plunging sales of Green Mountain Coffee, which caused the company's stock to sink dramatically. Here is CNN with the story:

Green Mountain Coffee Roasters shares plummeted Thursday after the company reported quarterly revenue that missed estimates and lowered its guidance for 2012.

Green Mountain (GMCR) shares sank nearly 40% in early morning trading Thursday, dipping to about $30 after closing Wednesday at $49.52.

The company's quarterly earnings came in line with expectations at 64 cents a share, though its $885 million in sales missed estimates of $972 million.

Green Mountain also reduced its fiscal 2012 sales guidance from between $4.3 and $4.5 billion to between $3.8 and $4 billion. The full-year earnings-per-share projection was cut from between $2.55 and $2.65 to between $2.40 and $2.50.

As usual in these situations, the suits don't have a clue:

In a conference call with analysts, Green Mountain executives said they didn't have a full explanation for why sales were weaker than expected. They suggested that low brewer machine sales and weak demand for holiday drinks during the warm winter -- like cider and hot cocoa -- were partially to blame.

"We're very positive about this business going forward, but there's a lot of moving parts," Green Mountain CEO Larry Blanford said.

Green Mountain currently dominates the single-serving coffee market with its popular Keurig, or K-Cup, machines.

It was one of the fastest-growing companies of the past decade and one of the best-performing stocks, handing investors 110% gains on an annualized basis until last fall.

Please allow me as a former Green Mountain customer to offer up a possible explanation. I used to love Green Mountain coffee after having discovered it more than a decade ago when it was still a small regional concern. I even went out of my way to order it online back when it was not available in the stores in my area.

Nowadays, I can even buy it in my local supermarket. But I don't. In fact, I ordered up my last ever batch of the stuff about a year ago. And you know why? Because the coffee now tastes like ass. I don't know what the difference is between how they make the stuff now and how they made it a decade ago. All I know is what my tastes buds tell me.

Somewhere along the way, Green Mountain became far more concerned with expansion than it did about putting out a good product. But that is par for the course in corporate America these days.


Bonus: Instead of some Green Mountain, how about some Green Day...because I came around on Green Mountain

Sony To Cut Global Workforce By 10,000

There was no immediate word on how many jobs the Sony Corporation will be cutting stateside as a result of their mass layoff announcement today. Here is MarketWatch with the story:

Sony Corp is planning to cut its worldwide workforce by about 10,000, or by 6%, with the layoffs coming by the end of the year, according to a report in the Nikkei newspaper on Monday. Seven senior managers, including Chairman Howard Stringer, are expected to give up their bonuses for fiscal 2011, the Nikkei said. Sony reported a net loss for the recent fiscal year ended in March, dragged in part by a poor performance at its LCD television unit, with the earnings result marking its fourth straight loss-making year.

The story also contained more proof that the stock market has gone completely insane:

Sony's shares, which fell 3% earlier in the day, rebounded as much as 1.5% following the report. The stock ended the day 0.6% higher.

Yep...because there is nothing like having your potential customer base reduced by 10,000 to boost those sales of useless LCD televisions.

The Truth is in the Housing Sales Numbers, Not the Stock Market

It should be evident by now to any observer who has more than two brain cells to rub together that the stock market has for nearly three years been pumped up by the Federal Reserve in order to create the illusion of an economic recovery that just does not exist in reality. But while the Fed's easy money policies have given the big banks and Wall Street the liquidity they need to drive up the price of stocks (and other asset classes) from their March 2009 lows, what they haven't done is put money back in the pockets of working and middle class people. Consumers may still be whipping out the plastic to buy cheap crap from China in order to make themselves feel more prosperous than they really are, but when it comes to the biggest ticket item of all, housing, as the chart above from Calculated Risk shows, the country remains mired in a deep depression.

In fact, here are a couple of very telling quotes from two different posts Calculated Risk made on the subject last week:

2011 was the worst year for new home sales since the Census Bureau started tracking sales in 1963. The three worst years were 2011, 2010, and 2009 - and 2008 is also on the worst ten list.

But wait...there's more:

In December 2011, 21 thousand new homes were sold (NSA). This was the weakest December since this data has been tracked, and was below the previous record low for December of 23 thousand set in 1966 and tied in 2010. The high for December was 87 thousand in 2005.

That's right, we just had the worst year ever for new home sales, and December, despite all of the hype regarding holiday retail sales, was the worst month of the worst year ever. And this happened, we must remember, at a time when rates for a 30-year, fixed rate mortgage have fallen BELOW 4%.

Buying a home has always been, and remains, at the very heart of the American Dream. If people could still afford to buy real estate, especially at these mortgage rates, they would. The fact that they are not speaks huge volumes about the real state of the economy, despite the rise of the manipulated stock market.

The media has been hyping up the fact that the weekly unemployment claims numbers have fallen and that the monthly jobs data has shown a steady, if still sluggish increase in employment over the last year. The question they never ask in following up is: what kind of jobs are these that are being created? Are they higher paying jobs that provide the employee with a ticket to the middle class which will allow them to live the dream and buy their own home? Or are they menial, near minimum wage paying retail and service sector jobs that keep one on the edge of poverty and buying a house well beyond their means? The housing sales statistics seem to strongly indicate the latter.

Unless and until we start to see a real and sustained upturn in the number of homes being purchased, I think we can safely say that the rhetoric about economic recovery is nothing more than lies and propaganda spewed forth by a media machine of behalf of it's ever increasingly desperate masters.


Bonus: "I'm homesick for the home I've never had"

US man arrested in hacker stock fraud scheme

© AFP/POOL/File

AFP

WASHINGTON (AFP) - US authorities Monday arrested and charged a Texas man accused of masterminding a scheme using a Russian hacker and an email spam campaign to pump up the value of fledgling companies, the Justice Department said.

Christopher Rad, 42, of Cedar Park, Texas, was arrested by FBI agents on a federal indictment charging him with one count of conspiracy to commit securities fraud and transmit commercial email messages with fraudulent information.

The scheme employed hackers, including at least one in Russia, to distribute computer viruses to infect computers around the world and create so-called "botnet" computers that were used to manipulate stocks, a Justice Department statement said.
"In addition to relying on unsuspecting investors to buy into the spam promotions, the hackers also hacked into the brokerage accounts of third parties, liquidated the stocks in those accounts, and then used those accounts to purchase shares of the manipulated stocks," the statement said.

"This created trading activity in the manipulated stocks and increased the volume of shares being traded, further creating an impression that the manipulated stocks were worth purchasing."

Rad is the second person charged in the so-called "pump and dump" scheme.

James Bragg, 42, pleaded guilty on October 20 to charges linked to his role in hiring botnet operators and engaging in mass email campaigns to pump up the value of stock prior to dumping shares, the Justice Department said.

The scheme began as early as November 2007 and continued through February 2009, and allowed the perpetrators to gain control of so-called "penny stocks" which were not traded on major exchanges.

In some cases, the conspirators would trade the stock among themselves to give the impression of trading volume to increase market interest.

The conspiracy count with which Rad was charged carries a maximum potential penalty of five years in prison and a $250,000 fine.

© AFP -- Published at Activist Post with license 

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Directionless Japan?

The Bank of Japan could be leaderless within a week is the headline today in an article in the Times of London online:

The central bank of the world’s second largest economy could be “leaderless within a week” after an assault on the Japanese government by the opposition party.

The opposition Democratic Party of Japan (DPJ) today successfully blocked the government’s nomination of Toshiro Muto as the next Governor of the Bank of Japan. Analysts claim the gambit could force a general election.

The piece goes on to paint a very bleak picture for the Japanese economy:

With nobody selected to replace Toshihiko Fukui as governor when his term ends next Wednesday, the BoJ faces its worst crisis since gaining independence a decade ago. The turmoil also coincides with a Japanese stock market in tatters and the economy balanced on the edge of recession.

It reminds me of the lashing the Economist gave Japan a few weeks ago. On the cover of an issue that covered Japan’s economic and political problems, the magazine inserted an “i” in Japan to create “Japain.” Here is the essence of their argument:

A few years ago, people hoped that Japan, which is still a bigger economic power than China and has some marvellous companies, would help take up some of the slack in the world economy if America tired; that now looks unlikely. Productivity is disastrously low: the return on new investment is around half that in America. Consumption is still flagging, thanks in part to companies' failure to increase wages. Bureaucratic blunders have cost the economy dearly, and Japan needs a swathe of reforms to trade and competition without which the economy will continue to disappoint.

The leaderless central bank seems to be an apt symbol for Japan in general.

During my trip to Japan last week, I heard several stories from businesspeople about an overall lack of direction in the country.

One employee of a major Japanese manufacturing firm said that current economic growth is the result of hard work and innovations made five to ten years ago. The manufacturing sector operates on a five-year product cycle, so if we want to know what is in store for Japan’s future, we should look at what is happening now. In his view, hard work and the “samurai spirit” are long gone in Japan. The recent entrants into the labor force are lazy, he said. His forecast was therefore bleak for Japan’s manufacturing sector.

What’s more, he said that Japan as a society needs instructions on what the next goal is. He said that firms are great at reaching centrally-mandated goals. The problem is that no one has a sense of what is next for Japan.

His friend, a Japanese entrepreneur, told me that there are still few incentives to become an entrepreneur in Japanese society. As an entrepreneur, one can expect no favors from the government and lower earning power compared with salaried employees. Where is the productivity and innovation going to come from?

As many people know, Japanese bureaucrats briefly considered promoting nanotechnology and biotechnology as alternatives to manufacturing. Now that the consensus is that manufacturing is Japan’s strength, panic is setting in about Japan’s relative competitiveness in that sector.

I heard one story about a major manufacturing company hiring consultants to build a new business strategy from scratch. As the story went, the company asked the consultants, “What should we do next?”

Another businessman told me about some of the young entrepreneurs he has met. In his view, they have no ideas and are simply throwing away their careers because they launch businesses without a business plan or experience.

The same businessman went on to tell me that executives looking for new employment opportunities are only concerned about two things: the salary offered and the benefits available. In his experience, no one talks about finding rewarding work or making a difference. This mentality may be a hangover from the restructuring that took place over the previous decade. Moreover, during the Koizumi years, restructuring and the use of part time labor only provided a temporary fix.

Here is a fairly pessimistic assessment from economist Krassimir Petrov in the Market Oracle:

To summarize my expectations about the Japanese economy in 2008, the macroeconomy and the stock market should perform poorly, while the Yen has a strong potential to rise. The long-term strategic investor should stay out of the Japanese stock and bond markets.