Saturday, July 26, 2014

Week's Winners & Losers: Airlines Soared, Toymakers Tottered

www.hasbro.com There were plenty of winners and losers this week, including a major airline doing something that it hasn't done in 34 years and more toymakers cutting play time short. Here's a rundown of the week's smartest moves and biggest blunders. American Apparel (APP) -- Loser Some retailers are struggling more than others. American Apparel is shaking up its board to try to get a new lease on life, and one of the appointments announced this week was adding RadioShack (RSH) CEO Joseph Magnacca. Really? RadioShack is one of the few publicly traded retailers with a lower stock price than American Apparel. It's losing gobs of money and closing down stores. Is that really the kind of vision that American Apparel needs in the boardroom? Perhaps more importantly, should RadioShack's CEO be spreading himself thin this way at a time when his own company is struggling just to survive? American Airlines Group (AAL) -- Winner There were a lot of milestones achieved by the parent company of American Airlines and US Airways on Thursday. The biggest takeaway from its report is that the adjusted profit of $1.5 billion that it reported for its latest quarter is an all-time record for the once-struggling air carrier. The acquisition of US Airways last year and improving industry fundamentals have gone a long way to improving its fiscal viability. However, American Airlines Group also initiated a quarterly dividend of 10 cents a share. That may not seem like much, but it's the first time that the airline has offered a cash distribution since 1980. Wow. That was back when folks could still smoke in the back of the plane, and it didn't cost extra to check your luggage. It's not the only way that American Airlines Group is returning its money to its shareholders. Backed by its healthy profitability, its board cleared the way for a $1 billion stock buyback. Airlines have historically been a wealth destroyer. The cyclical swings in the business can get fierce. However, sector consolidation and an improving global economy make it a compelling place for investors to be in the near term. Toymakers -- Loser This was another hard week for the makers of traditional playthings. Hasbro (HAS) shares took a hit on Monday after posting a 12 percent decline in game sales. Other categories were more than enough to offset the weakness in games, but the stock still took a nearly 3 percent stumble on the report. Two days later it was JAKKS Pacific (JAKK) shares experiencing a nearly 14 percent plunge after it posted uninspiring results. When you combine these two reports with Mattel (MAT) falling out of favor last Friday thanks to a 15 percent drop in Barbie sales, it's easy to get worried about the state of traditional toymakers as we stroll toward the holiday shopping season. Chipotle Mexican Grill (CMG) -- Winner We're seeing a lot of eateries drum up excuses for why patrons aren't eating at their establishments anymore, but then we have Chipotle reminding us that it's doing just fine. The fast-casual darling posted blowout quarterly results this week with revenue soaring 29 percent to surpass $1 billion for the first time. It's not just expansion driving the spike in sales. Comparable-restaurant sales jumped 17.3 percent for the quarter. Chipotle's net income of $3.50 a share landed well ahead of the $3.09 a share that the pros were targeting. Chipotle doesn't need scapegoats when it's rolling like its signature burritos. General Motors (GM) -- Loser Another week, another major GM auto recall. The automaker giant is calling back another 717,950 vehicles to correct more safety issues. More than half of the cars in Wednesday's recall involve a potentially defective bolt that adjusts the height of car seats. GM is aware of only a couple of injuries resulting from the bad bolt, but it's yet another embarrassment for the car manufacturer. GM is now closing in on 30 million cars being recalled this year. It's not just about the near-term financial hit as recall-related costs swallowed up most of GM's profits in its latest quarter. At some point, all of these reports have to hurt the perceived quality of GM's cars. More from Rick Aristotle Munarriz
•Norway Is Giving Disney the Cold Shoulder Over 'Frozen' •An Old Favorite May Save Apple from Being All About iPhones •Disney Wants You to See Dumbo Fly Again - in Live Action

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