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Turning to individual companies, struggling retailer Sears Holdings (NASDAQ:SHLD) gave its stock a jolt by announcing an agreement to sell appliances on Amazon.com (NASDAQ:AMZN), while Sherwin-Williams (NYSE:SHW) reported strong sales but weak profit in the latest quarter.
"Alexa, help us sell more appliances."
Sears Holdings made a big splash in the market today by announcing an agreement with Amazon to sell Kenmore appliances on the online retailer's web site, including Alexa-enabled devices. The parent company of Sears, Roebuck plans to launch its full line of Kenmore appliances on Amazon to all U.S. markets. The entire Kenmore Smart line will get smart home features that will allow them to be controlled by voice commands through Amazon's Alexa artificial intelligence ecosystem. Investors cheered the news and sent Sears stock soaring as much as 24% at one point before shares settled to an 10.6% gain.
Sears Home Services and Innovel Solutions, Sears' logistics subsidiary, will provide delivery, installation, and extended warranty service for the products, and the company hopes that the deal will drive growth opportunities for those units.
"We continuously look for opportunities to enhance the reach of our iconic brands to more customers and create additional value from our assets," said Sears CEO Eddie Lampert in the press release. "The launch of Kenmore products on Amazon.com will significantly expand the distribution and availability of the Kenmore brand in the U.S."
The struggling mall-based retailer has fallen on such hard times that the company has been the subject of bankruptcy speculation in recent months. But Lampert has been making bold moves to stave off that possibility, selling off the Craftsman tool brand, closing stores, and focusing on strong brands like Kenmore. In last quarter's financial release, the company said it was exploring ways to unlock value in the Kenmore brand through partnerships to expand distribution, but evidently the "if you can't beat 'em, join 'em" approach with Amazon was even bolder than the market expected.
Sherwin-Williams paints a mixed picture
Paint maker Sherwin-Williams announced strong revenue growth in the second quarter but a disappointing drop in profit. Sales increased 16% to $3.74 billion, handily beating guidance given three months ago of mid- to high-single-digit growth. Net income was impacted by costs relating to Sherwin's purchase of Valspar, and came in at $3.36 per share, down 16% from last year and far below guidance of $4.15 to $4.35.
Acquisition costs were higher than anticipated, at $1.16 per share, compared with a forecast of $0.25. Excluding these expenses, EPS was $4.52 per share, above the midpoint of management's guidance, but $0.05 shy of what analysts were expecting. Sherwin-Williams stock closed down 2.5%.
CEO John Morikis expressed how important the Valspar deal is to the company's growth, saying in the press release, "This acquisition accelerates Sherwin-Williams' global growth strategy and creates the global leader in paints and coatings. The combination of these two companies forms a world class brand portfolio, expanded product range, premier technology and innovation platforms and an extensive global footprint."
The disappointment over profit overshadowed a sales performance that would be the envy of many other retail businesses. Same-store sales in the U.S. and Canada were up 4.9% and sales of the performance coating group soared 48% due to the addition of Valspar. But Sherwin-Williams cut its guidance for full-year earnings, and investors were apparently counting on a smoother transition for the combined businesses.
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