Pending home sales drop, Family Dollar (FDO) to buy Dollar Tree (DTLR) and Nissan posts positive second-quarter.

Bourbon & Bayonets / Monday, July 28th, 2014

Markets were falling on Monday as pending home sales unexpectedly dropped in the month of June. The National Association of Realtors announced that activity was down 1.1% last month. There was a decline of 2.9% in the northeast, a rise of 1.1% in the midwest and a drop of 2.4% in the south. Chief economist at NAR, Lawrence Yun, said, “Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved. However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates.”

Shares of Family Dollar Stores (FDO) were skyrocketing up over 22% after the company announced Dollar Tree, Inc. (DTLR) would be buying them in a deal totaling $8.5 billion. This pairing will create the largest discount store in North America. The Dollar Tree sells items that are priced at a $1 or less while Family Dollar’s price range is generally between $1 and $5. Shares of Family Dollar have recently come under pressure after activist investor and the company’s largest shareholder, Carl Icahn, announced that he wanted the company to sell itself. He holds a 9.4% stake in Family Dollar. Bob Sasser, Dollar Tree’s Chief Executive, said, “This acquisition will extend our reach to lower-income customers and strengthen and diversify our store foot print.” The deal is that they will pay $74.50 per share, $59.60 of it will be in cash. This equals out to a 23% premium over Friday’s closing price.

Nissan announced that they have plans to boost sales in the U.S. while they close the gap on their biggest competitor, Honda Motor Co. The company announced that there was a rise of 14% in U.S. sales for their second-quarter. They also reported that they posted a 4.3% quarterly operating profit margin in North America, which was up from 3.8% a year ago. During the first-half of 2014, the company said that sales were up 12.8% in the U.S. This makes them the sixth-highest selling vehicle manufacturer in the country. They beat out Hyundai and are closing the gap on Honda, who’s sales dropped 0.8% during the same quarter. Joji Tagawa, Vice President of the company, said, “It’s a good thing that gap between Honda is shrinking. But in the end, our goal is to boost our own sales and profitability.

That’s all for today,

Warren Gates, Normandy Research

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