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from Breakingviews:

Alibaba’s small IPO hike leaves room for believers

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Pricing initial public offerings is an inexact science. Predicting how investors will value a large, fast-growing Chinese e-commerce group involves even more guesswork. That makes Alibaba’s decision to lift the maximum price for its upcoming stock market debut by just $2 a share to $68 puzzling.

It’s not unusual for companies listing in the United States to tweak their IPO price range before finalising the offering. What’s surprising is that Alibaba made such a small adjustment when confronted with what people involved in the process describe as “overwhelming” demand from investors. The new ceiling is only 3 percent above the previous maximum. Compare that with Twitter, which priced its shares 30 percent above the top of the original price range, or Facebook, which lifted its price by 9 percent and also sold an extra chunk of stock. Even JD.com, Alibaba’s Chinese rival, priced its IPO 6 percent above initial indications.

The new maximum market capitalisation of $168 billion – $169 billion if underwriters exercise an option to sell some more shares – does not look a stretch. A Breakingviews calculator puts the company’s value at $158 billion. But the higher target would be justified if Alibaba’s e-commerce volumes grow by 35 percent a year for the next two years, rather than 30 percent, or if Alibaba’s operating margin remains at its current level of 43 percent, rather than declining to 40 percent.

from jharonnemartis:

LOOKING AT BEST BUY IN LIGHT OF RADIO SHACK’S TROUBLES

RadioShack Corp. (RSH.N) is encountering major static from an online marketing environment. The nearly century-old company said on Sept. 11 it may need to file for bankruptcy protection, after reporting its tenth straight quarterly loss. We look at another retailer with a big investment in bricks and mortar – Best Buy Co. Inc. (BBY.N),which is going through its own troubles.   

StarMine analysts seem to like the fact that BBY is cutting costs and seeing strength in appliance sales. However, is this really sustainable in the long run?

from Breakingviews:

Home Depot hack scarier than Hollywood breach

By Richard Beales

The author is a Breakingviews columnist. The opinions expressed are his own.

It’s no surprise that stolen nude photos of Jennifer Lawrence attract more attention than a nerdy report on Home Depot’s security breach. But it’s an unfortunate reality that Hollywood celebrities need to guard their privacy, whether threatened by paparazzi or hackers. Corporate breaches that expose millions of people to financial loss are, on the other hand, in a different league.

With Home Depot, it’s not yet clear what the scale of any hacking may have been, or whether the company’s systems were violated despite strong defenses. But security blogger Brian Krebs said he had received information suggesting the Home Depot episode could be larger than last year’s hack of Target. That attack, which he first publicized, exposed the credit card data of at least 40 million customers.

from Breakingviews:

LVMH, Hermes in five-year handbag peace

By Carol Ryan

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Bernard Arnault has conceded defeat. The LVMH chairman and controlling owner has agreed to distribute the stake he built up four years ago in rival Hermes to the shareholders of his luxury and drinks conglomerate. That’s an uncharacteristic retreat for the man dubbed “the wolf in cashmere.”

from Breakingviews:

Agenda for Tesco CEO: price cuts, board and UK

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Tesco needs to reduce, rebuild and review. Friday saw a jumbo profit alert from the UK grocer, plus a big cut to the interim dividend and a lowered capex budget. The good news was that the new chief executive is to arrive a month earlier than originally envisaged. This kitchen-sinking will make life easier for Dave Lewis when he starts on Sept. 1. But his trolley is still loaded high with problems.

from Breakingviews:

Tesco should cut its dividend

By Robert Cole

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Shareholders ultimately lose out when too-high payouts prevent companies from responding well to problems. Right now, Tesco needs all the financial flexibility it can muster. Its current dividend is dangerously constricting.

from Breakingviews:

Dollar store bid battle leaves value on the table

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Dollar store mergers, it turns out, don’t come cheap. Dollar General – call it General – on Monday joined the fight for rival U.S. discount retailer Family Dollar with a $9.7 billion cash offer. That topped an earlier agreed acquisition of Family by the smaller Dollar Tree, which as wags have noted could result in a combination called Family Tree. Even above General’s $78.50 a share bid, though, both of Family’s suitors have room to lob in a few more singles.

from Counterparties:

MORNING BID – Retail therapy

All that’s left for investors now when it comes to earnings season is the shouting, but if the rest of the retailers post results anything like Kate Spade did on Tuesday, the shouts will be screams of terror rather than anything that assuages investors over the state of the overall economy. Kate Spade’s executives went into some detail on its conference call as to the nature of its margins shortfall – which Belus Capital chief equity strategist and longtime retail analyst Brian Sozzi said are not likely to improve until the middle of 2015 – and the company then did itself no favors by declaring that it wouldn’t be discussing the margin issues any further on the call. (Craig Leavitt, the CEO, violated that rule to some degree, but basically, investors don’t like it when you tell them flat-out that you’re not going to talk about your problems, and when you’re a company with a forward price-to-earnings ratio of 77.5 and a price-to-book value of 119, that’s going to be particularly true.)

Other luxury retailers have noted their own problems with attracting customers at this time, including Michael Kors Holdings, which saw its own shares stumble of late after also warning of margin pressures due to expansion in Europe, but at least Kors has a forward P/E ratio around 19, which puts it in line with peers like Coach and Ralph Lauren.

from Breakingviews:

China’s e-commerce secret weapon: the delivery guy

By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Want a Big Mac delivered to your door in minutes? Or a refrigerator by the end of the day? While U.S. retailers puzzle over how to make that happen, China’s e-commerce companies are already there. Servicing the country’s web-connected consumers at ever-faster speeds is driving some big businesses, not to mention stock market valuations. The secret weapon: the humble delivery guy.

from Breakingviews:

Discounters’ $20 bln deal may spark M&A price war

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Discount retailer Dollar Tree’s $8.5 billion pounce on rival Family Dollar could spark an M&A price war. The companies have identified more than enough cost savings in their $20 billion union to cover the 23 percent premium to be paid to Carl Icahn and other Family Dollar investors. As a percentage of revenue, though, synergies are relatively low. That may leave room for sector giant Dollar General to lob in a bid.

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