Good Morning!
Happy Monday! ☀️
👉 McDonald’s beats expectations
👉 HSBC misses quarterly results
👉 Evergrande explores new debt deal amidst restructuring
The workweek is ahead, and we’re diving in.
MCDONALDS: Quarterly Serving of Success
McDonald’s announced better-than-expected earnings on Monday morning. Their earnings per share and revenue exceeded Wall Street expectations. They unveiled a third-quarter net income of $2.32 billion, equating to $3.19 per share. This is an increase from the previous year's $1.98 billion or $2.68 per share. The company witnessed a 14% surge in revenue, reaching $6.69 billion. The global sales for existing stores expanded by 8.8% this quarter, surpassing Wall Street's prediction of 7.8%. Sales in McDonald's U.S. outlets grew by 8.1%, driven in part by strategic pricing, although the exact increase in prices from the previous year wasn't revealed.
Source: McDonald’s
The brand attributes its sales boost to its promotional efforts and increased online and delivery orders. The international segment of McDonald’s experienced an 8.3% growth in sales for existing stores.
Earnings:
Earnings per share: $3.19 vs. $3.00 expected
Revenue: $6.69 billion vs. $6.58 billion expected
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HSBC: Disappointing Quarter
HSBC reported a post-tax profit of $6.26 billion, marking a 235% surge from the $2.66 billion during the same timeframe the previous year. The premier European bank also recorded a revenue increase to $7.71 billion in the third quarter, up from $3.23 billion a year ago. This uptick is primarily attributed to a more favorable interest rate environment. Nevertheless, these figures fell short of analysts' projections. They had anticipated a post-tax profit of $6.42 billion and a pre-tax profit of $8.1 billion for the third quarter.
Source: Bloomberg
HSBC attributed part of the profit growth to a $2.3 billion write-down in the third quarter of 2022, associated with the intended divestment of its retail banking segment in France. From this total, $2.1 billion was recouped in the initial quarter of 2023 due to rising doubts over the deal's finalization. They unveiled a new buyback initiative and suggested the possibility of additional rewards for shareholders.
HSBC Earnings:
Revenue: $16.2B vs. $16.24B expected
Pre-Tax Profit: $7.71B vs. $8.1B expected
$3 billion share buyback
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EVERGRANDE: A Week of Turmoil and Tension
On Monday, Evergrande's shares listed in Hong Kong plummeted to an unprecedented low following a court's decision to postpone a winding-up petition hearing to December 4th. This grants the beleaguered property developer a five-week window to negotiate with creditors or risk being dissolved.
Reuters indicated that the forthcoming hearing could be the final one before a conclusion is reached about the company's liquidation.
In light of an ongoing investigation into its founder, Hui Ka Yan, Evergrande informed the Hong Kong High Court of modifications to its debt restructuring blueprint. The inquiry prevented Evergrande from releasing new dollar bonds, a crucial element of the initial strategy.
Source: Getty, BBC
Legal representatives of Evergrande conveyed to the court an intention to capitalize on two divisions: Evergrande Property Services and Evergrande New Energy Vehicle. In the updated strategy, bondholders have the option to exchange their bonds for shares and bonds associated with the two aforementioned subsidiaries.
Headlines You Need To Know: 🎙
UAW deal with Ford includes $8.1 billion in investments
Biden unveils executive order for AI
Hedge funds pile into uranium stocks set for dramatic rise
The big bond event on Wednesday is at the treasury, not the fed
Peltz pushes for Disney board seats
Higher bond yields could end the Fed’s historic rate hikes
Workers are doing less work for the same pay
Canada auto-union reaches deal
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Hauntingly Profitable: The Spooky Success of Spirit Halloween
You have probably heard of the military-industrial complex, but the Halloween industrial complex is no joke. It is predicted that Spirit Halloween is going to do between $500-$750 million worth of revenue this fall. In 1983, the first-ever Spirit Halloween popped up in Castro Valley, California. It was an extension of founder Joe Marver’s women’s clothing store. Historically speaking, October is a slow month for retail stores. However, Marver saw that there were lines coming out of a local Halloween store, which led him to put costumes in his store. Marver did not name the store “Spirit” because of Ghosts. He took the name of his women’s clothing store (Spirit Women’s Discount Apparel). In the first year, Spirit Halloween did $100,000 in 30 days. Over the next 16 years, Spirit Halloween opened in 60+ locations that only operated in August, September, and October.
Source: costar
In 1999, Marver sold Spirit Halloween to mall retailer Spencer’s. For Spirit Halloween, a pop-up lease is ideal because they are only paying for retail space when they genuinely need it. They are not a year-round business, so they do not need a lease. In the early stages, it was hard for Spirit Halloween to convince landlords to go along with their idea of a pop-up lease. However, when the Great Recession hit in 2008, landlords found that pop-up leases were a good way of filling vacant retail spaces. In other words, some money was better than no money. Spirit adds a kick-out clause to their lease, which means that the landlord can kick them out if they find a long-term tenant. The key for Spirit is finding a giant space that is vacant. They are looking for around 40,000 square feet of real estate. This is usually found in shopping centers or shopping malls. As of October 2022, they have around 1,480 stores around the USA open.
Chart of the Day
US National Debt vs. Economy
The US national debt is growing faster than the economy. The government’s debt exceeded annual GDP ~10 years ago.
Source: Unusual Whales
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Source: @wallstbets
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