Just like Seinfeld or LL Cool J's rapping career, all good things must come to an end. So after six straight winning sessions, the Dow Jones Industrial Average snapped its winning streak, slipping 10 points Monday as investors weighed some notable corporate news.
1. Lululemon founder hires Goldman to take his company back
It's an arms race between lululemon athletica (NASDAQ:LULU) founder Chip Wilson and the board of directors for the best bankers. Both are hiring advisors to duke it out for control of the company. The Wall Street Journal reported this weekend that Wilson wants more control of the company he owns 28% of, and he's saddled up with Goldman Sachs (NYSE:GS) bankers for advice on how to do it.
Wilson took urban women by storm with hip yoga pants that make you stand out in the studio. Lulu was a stock sensation until last year, when pants were recalled since they were too sheer (which is super awkward during Downward Dog pose). He also rubbed some people the wrong with remarks that some women's bodies aren't cut right for his his pants, in response to complaints of eroding fabric between the thighs. The stories made for great MarketSnacks material but led to Wilson's removal as the chairman of the board last month, plus the stock has fallen 33% in the past year.
Goldman did Lulu's IPO back in 2007, so they know Wilson and the company like their favorite Warrior 2 pose. Now Wilson wants to assert more power. Goldman will advise strategic moves that could include buying out current shareholders with the help of a private equity firm.
Lulu rose 2.5% Monday, and tired investors welcomed the gain. A fight for control of the company could increase demand for more shares (but less sheer) on both sides. Plus, Wilson turned an already well known commodity, black spandex, and turned it into a lifestyle. Some are ready to forgive his insensitive remarks so he can bring the mojo back Lululemon.
2. Olive Garden serves up bland quarterly performance
If the unlimited 1,200-calorie breadsticks don't get you sick, then the earnings report just might. Theme-dining chain Darden Restaurants (NYSE:DRI) released its undercooked earnings numbers on Friday. The company's $2.32 billion in quarterly revenues were below the $2.33 billion Wall Street expected, and just a pinch of salt above the $2.3 billion during the same quarter last year. As a side order, profits plunged 35%.
What does Zagat say? Not many good things about the food -- but Darden does own quite a few joints around America that tasted OK. LongHorn Steakhouse enjoyed a 2.4% increase in same-store sales, while Capital Grille, Bahama Breeze, and Yard House saw a nearly 16% jump in revenue. The bug in Darden's earnings soup seems to have been its headline restaurants, Olive Garden and Red Lobster.
The takeaway is that chain restaurants are struggling in the tepid economy. Red Lobster sales dropped 5.6% over the past three months, and Olive Garden's fell 3.4%. Since Darden is selling off Red Lobster soon, the struggling Olive Garden is expected to make up 60% of Darden's entire revenues. Investors felt ready to spit up the stock like undercooked pasta on that kind of news.
3. Existing-home sales jump 4.9% in May
Home resales rocketed in May, as families invaded white picket fenced front yards in full force. The sale of existing housing properties was the highest in over 18 months in May, which boosted investors' confidence in the slowing housing rally.
The number of the day is 4.9 million. That's the number of home resales that went down last month. Economists were expecting a rise of 2.2% but got 4.9%, to the delight of investors of companies that rely on a strong housing market like Home Depot (NYSE:HD) and Lowe's (NYSE:LOW), which both gained Monday.
As originally published on MarketSnacks.com
Jack Kramer and Nick Martell have no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs, Home Depot, and lululemon athletica. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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