Jobs numbers down, Family Dollar (FDO) rejects Dollar General (DG) big and Starbucks (SBUX) to open new stores.

Bourbon & Bayonets / Friday, September 5th, 2014

Markets were falling on Friday after job growth fell to its lowest level in eight months during August. The Federal Reserve announced that payroll dropped to 142,000 last month after a jump to 212,000 in July. They also downwardly revised June and July’s data to show 28,000 fewer jobs. There was a drop in retail hiring and a manufacturing hiring remained flat. August’s data came in far below economists’ expectations of 225,000. Omair Sharif, senior United States economist at RBS, said, “This looks like a breather, rather than a fundamental downshift.” He also added that the month of August tends to be a disappointment and that eight of the ten last August jobs reports came in below expectations. There was also a drop of one-tenth of a percentage point in the unemployment rate. This was partially attributed to a large number people of ceasing to look for work.

Shares of Family Dollar Stores Inc. (FDO) were sinking after news was released that the company rejected the takeover bid from Dollar General (DG). The company said they would turn down the $9.1 billion bid because the offer did not address antitrust concerns and would likely not be approved. Yesterday Dollar General upped the bid by 2%, which translated to roughly $80 per share, they also added that they would sell nearly 1,500 stores in efforts to help with competition concerns. Family Dollar Chief Executive, Howard Levine, said, “There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process.” DG also said they might bypass and take the offer straight to the shareholders if the offer was rejected.

Shares of Starbucks Corporation (SBUX) were trading slightly higher after the company reported that they would be opening two new types of coffee shops. They will be taking steps to keep up with upscale coffee shops and “express” stores. They will be opening a 15,000 square foot small-batch roastery in Seattle this December. The move is expected to allow the company to offer nearly 30 different reserve coffees instead of the current 15. Batches sell between $15 to $80 for an 8 ounce package. The company also has plans to open nearly 100 reserve-only cafes throughout the world in the next five-years. Starbucks Chief Executive, Howard Schultz, said, “We plan to take this super premium experience to cities around the world.”

That’s all for today,

Warren Gates, Normandy Research

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