Amazon profit blows away expectations, but sales forecast muted.

Amazon.com Inc on Thursday April 25th announced that it had trounced first-quarter profit estimates on soaring demand for its cloud and advertising services, but forecast second-quarter revenue largely below expectations. Net sales rose 17 per cent to US$59.70 billion, beating the analysts’ average estimate of US$59.65 billion. The company forecast net sales of between US$59.5 billion and US$63.5 billion for the second quarter, the midpoint of which was below analysts’ average estimate of US$62.37 billion, according to IBES data from Refinitiv. Amazon’s net income rose to US$3.56 billion, or US$7.09 per share, in the first quarter ended March 31, from US$1.63 billion, or US$3.27 per share, sending its shares up 1.2 per cent after the bell.

Net sales in North America, its biggest market, jumped 17 per cent to US$35.81 billion in the quarter. Amazon Web Services revenue surged 41.4 per cent to US$7.70 billion, but missed the estimate of US$7.72 billion. Amazon’s operating expenses rose 12.6 per cent in the quarter to US$55.28 billion as it invested in electric-car maker Rivian and self-driving car startup Aurora and continued spending on its Prime program, grocery delivery from Whole Foods stores and original video content. Amazon has also been gaining immensely from its highly profitable ad sales business. The company said revenue from the category and some other items grew 33.7 per cent to US$2.72 billion, but missed estimates of US$2.85 billion. Read the full story.

Sears Holdings suit claims Lampert stripped asset.

The bankrupt estate of Sears Holdings Corp. sued Eddie Lampert and his hedge fund ESL Investments Inc., claiming they wrongly transferred $2 billion of company assets beyond the reach of creditors in the years leading up to the retailer’s bankruptcy. “Had defendants not taken these improper and illegal actions, Sears would have had billions of dollars more to pay its third-party creditors today and would not have endured the amount of disruption, expense, and job losses resulting from its recent bankruptcy,” lawyers for the estate said in a court filing.

The complaint, filed as part of the retailer’s ongoing bankruptcy case, asks that the transactions be ruled fraudulent transfers and says creditors should be compensated. Other defendants who allegedly benefited from the transfers include Fairholme Capital Management LLC, Seritage Growth Properties Inc. and U.S. Treasury Secretary Steven Mnuchin, whom the complaint says was an investor and former vice chairman at ESL. An ESL representative said in an emailed statement the suit repeats baseless and fanciful claims. “All transactions were done in good faith, on fair terms, beneficial to all Sears stakeholders and approved by the Sears Board of Directors,” ESL said. Representatives for the other defendants couldn’t immediately be reached for comment.

Bankruptcy Battle The complaint opens another chapter in the contentious battle over Sears, which collapsed into bankruptcy in October when Lampert was chief executive officer and then came within hours of liquidation. He emerged in control of Sears with a last-minute rescue offer, but the squabbling over assets between ESL and the estate continued even after the deal was sealed. As part of the bankruptcy agreement, the “new Sears” was protected from lawsuits, making it unlikely the revived operating company will directly face any of the claims made in the complaint. “It’s obviously a liability for Eddie himself,” said Noel Hebert, a credit analyst who covers Sears for Bloomberg Intelligence. “The reality is, he’s going to be stuck in litigation. There’s enough here that the risk is he’s going to have to settle or be doing this for a long time.”

The complaint highlights five transactions that it says unfairly benefited Lampert and the defendants that involved Orchard Supply Hardware Stores Corp., Sears Hometown and Outlet Stores Inc., Sears Canada Inc., Lands’ End Inc. and Seritage. Lawyers for the estate also allege that ESL stripped Sears of the real estate under 266 of the retailer’s most profitable stores, undervaluing the land by at least $649 million. “Moreover, the culpable insiders arranged for Sears to lease the properties back under blatantly unfair terms,” according to the complaint. Sears has been insolvent since at least 2014, which means Lampert and the other defendants had a duty to protect creditors, not just themselves and other equity holders, the estate asserted. Read the full story.

Bed Bath & Beyond investor group again pushes for CEO’s replacement.

A group of activist investors on Friday April 26th again urged Bed Bath & Beyond to replace Chief Executive Officer Steven Temares and laid out a plan including cost cuts and better inventory management to improve the retailer’s profitability. The investor group, comprising Legion Partners Asset Management LLC, Macellum Advisors GP LLC and Ancora Advisors LLC, also said the recent company management shake-up appeared hastily constructed, with new directors lacking the experience to turn around Bed Bath & Beyond’s fortunes.

On Monday April 22 the company appointed five new independent members to its board, replacing some directors including co-founders Warren Eisenberg and Leonard Feinstein. Bed Bath & Beyond said it had offered the group the opportunity to participate in the selection of the new board, but the activists declined.

The investor group said its plan, which includes reassessing the household-goods chain’s expenses including its advertising budget, could drive annual earnings of $5 per share. The company reported a profit of $2.05 per share last year. Bed Bath & Beyond has struggled to keep pace with changing consumer tastes and shopping habits over the years, even after introducing experimental store formats, investing in its decorative furnishing business and digital platforms. In its latest results, the retailer forecast dismal first-quarter profits that raised doubts on the efficacy of its turnaround plan. Bed Bath & Beyond said it was reviewing the group’s plan for opportunities to incorporate it in the company’s strategy. However, an initial review showed that most of the operational areas targeted for improvement include actions that are already part of Bed Bath & Beyond’s current transformation plan, the company said. The group of investors, who collectively own a stake of about 5 per cent in the company, first called for Temares’ ouster and the replacement of the entire board in March. Read the full story.

Loblaw Companies raises quarterly dividend, reports Q1 profit down from year ago.

Loblaw Companies Ltd. reported “sluggish” same-store sales again in its most recent quarter, but raised its dividend for common shareholders. “For the second quarter in a row (Loblaw) delivered solid and slightly better-than-expected financial results for Q1, but story today is once again likely going to be sluggish (same-store-sales) growth as shift in general merchandise strategy continued to weigh on reported sales,” wrote Irene Nattel, an analyst with RBC Dominion Securities Inc., in a note. She once again said the key retail metric lagged the forecast. Loblaw reported its food retail business same-store sales grew two per cent for the first quarter ended March 23. Its drugstore same-store sales growth, which includes its Shoppers Drug Mart business, was 2.2 per cent as pharmacy same-store sales growth was 1.2 per cent and front store same-store sales growth was 3.1 per cent.

Nattel noted Loblaw competitor Metro Inc. reported same-store sales growth of 4.3 per cent or 1.8 per cent after inflation in its most recent quarter, which ended March 16. The timing of the Easter holiday, as well as health-care reform and general merchandise shopping impacted Loblaw’s same-store sales performance, chief financial officer Darren Myers said during a conference call WednesdayMay 1st. The company is starting to see improvement in its general merchandise performance, added president Sarah Davis. Loblaw said its profit attributable to common shareholders was $198 million or 53 cents per share for the quarter. That compared with a profit of $377 million or 98 cents per share a year ago. Revenue totalled $10.66 billion, up from $10.34 billion. On an adjusted basis, Loblaw said it earned a profit from continuing operations attributable to common shareholders of 78 cents per share, down from 81 cents in the same quarter last year.

Loblaw’s adjusted profit was expected to be 80 cents per share on $10.59 billion on revenues, according to analysts polled by Thomson Reuters. Excluding an accounting change related to its leases and a change related to the spin-out of the company’s stake in Choice Properties, Loblaw said it earned an adjusted profit of 84 cents per share in its most recent quarter. The grocery and drugstore retailer said it will now pay a quarterly dividend of 31.5 cents per share, up from 29.5 cents per share. Read the full story.