Strome Business Minute With Dr. Jeff Tanner

Virginia Beach’s LifeNet Health acquired Samsara Sciences, a San Diego-based life sciences company. Samsara specializes in human primary liver and kidney cell isolation, research in primary cells that fits with LifeNet’s focus on regenerative therapies.

Commercial Property Accessed Clean Energy, or C-Pace, is a financing program for commercial property owners and developers to fund energy efficiency and storm water resiliency projects. A market-based program, C-Pace offers 100 percent private financing. Rather than a down payment, the lender is protected by a lien similar to a tax lien. Approved projects improve the building or property and often reduce operating costs – which helps attract and retain businesses, creates construction jobs, increases tax revenue through higher property values, and provide incentives to build to green and resiliency standards. Arlington, Loudoun, and Fairfax, and the City of Fredericksburg, have already enacted ordinances to establish C-Pace. It would make good business sense for Norfolk, Virginia Beach and other Hampton Roads cities to adopt C-Pace as well.

CoStar, the Richmond-based company with brands like Apartments.com, is both a platform for buyers to find properties and a data company. In fact, data is really the company’s bread and butter. The NASDAQ listed company employs about one thousand analysts in Richmond. They just announced plans to buy STR, a hotel data analytics company that provides reports monthly on the hotel industry to over one million subscribers. STR is located in Hendersonville Tennessee and employs three hundred seventy people in fifteen countries. It’s too early to know how many jobs will be relocated to Richmond. While the stock is off its high of six forty at about five fifty, it is still up over fifty percent for the year.

The Dow hit twenty eight thousand last Friday and the stock that has contributed the most to the run-up since last July is Apple. Just FYI, I sold my stake in Apple and missed most of this run-up. Apple has contributed forty-two percent of the last one thousand points. The increase is due to the strong sales of the iPhone Eleven and robust sales of Apple services. JP Morgan and United Technologies are up more than thirteen percent in the same period. At least I have some JP Morgan. Even Boeing is up, though only three point six percent. The American consumer is fueling a strong economy, with retail sales revised up in October. Barring trade war disaster, this market could continue to grow.

In my early career, I worked for Xerox and watched as the company that invented the technology that made Apple computers possible, offered the first computer networks, and created artificial intelligence products fail to capitalize on any of these. The printing and copying company is now banking on a future that includes another faded glory, Hewlett Packard. Xerox offered to buy HP, which looks like the merger of two buggy whip makers. For the millennials, buggy whips are used to make horses go when they pull a buggy – all outdated technology. Yes, the new company will be seventy billion dollars in revenue, a huge printer and PC maker but these are commodities. The real challenge will be finding new products and services.

Southwest Airlines just cancelled all flights for the Boeing seven thirty seven Max through March, as Boeing continues to work on problems that led to two crashes. The software glitches were expected to be fixed in a matter of weeks but Bloomberg reports that flight simulations last June identified additional problems stemming from antiquated computer systems. Boeing hopes to have fixes in place and the plane certified to fly by the end of this year, but Southwest’s decision to pull flights through March is important. Southwest flies nothing but Boeing seven three sevens and their delay will likely be matched by other airlines. In addition, Southwest’s board ordered the company to look at buying alternative planes, a major shift in strategy.

Ferguson’s fiscal year ended this month with a solid 8 percent year over year growth in revenue and a slight improvement in margin. Earnings per share, though, grew over sixteen percent. These results mark the ninth year in a row for growth in all of the key areas.

Towne Bank announced earnings last week that beat Wall Street estimates but were down off a year ago. The Street had expected fifty-one cents per share but the bank came in a fifty-two, just below last year’s fifty-four cents per share. Revenues were one hundred and forty six million, right at the estimate and up more than five percent over last year’s one hundred and thirty-eight million. Towne Bank shares are up nineteen percent, just a little below the S and P 500. Towne Bank has been aggressive in snagging top talent away from Sun Trust and BB&T following the announcement of their merger. They also continue to be aggressive in growing through acquisition, with rumors of additional purchases outside of Virginia to come.

Dominion Energy just released a green energy plan that consumers can purchase. But big customers like Walmart are pushing back. The pushback stems from the fact that Dominion is packaging energy from four coal-based plants with eight solar and two hydroelectric sources and calling it renewable. State regulations allow that because some coal plants also burn biomass. According to the Virginia Mercury, Walmart’s Lisa Perry told state regulators that Dominion’s plan would stifle renewable energy investment and innovation. The Renewable Energy Buyers Alliance, which includes General Motors, Google and Amazon, opposes Dominion’s proposal, because if regulators approve the proposal, Dominion is granted a monopoly on renewable energy, effectively ending investment by potential providers.

The largest toy distributor in the world is McDonald’s. The first Happy Meal with a toy was sold forty years ago and now they sell one point five billion Happy Meals a year!

Henrico based Altria is writing down four point five billion dollars in its investment in Juul, the e-cigarette leader. Altria has nearly thirteen billion invested in the San Francisco-based company, which many saw as the future of smoking. But there have been almost forty deaths attributed to e-cigarettes, along with nearly nineteen hundred vaping-related cases of lung disease in the US. This type of write-down is called an impairment charge. The company has reduced its assets in the goodwill category, meaning there is no physical asset or cost associated with the write-down. The write-down is taken as an operating expense, reducing net income. Should the Altria sell its Juul stock, then there would be either income or losses based on the price of the stock.

The Federal Reserve cut the rate it charges banks for the third time this year. The last time there were three cuts in one year was 2007. The cut lacked the normal broad support among members of the Fed, but failure to cut the rate would have caused the stock market to stumble. Not a good thing right before an election.

Baltimore-based Under Armour is under investigation for possibly shifting sales from one quarter to another in order to create an appearance of better results. The investigation began two years ago shortly after the company first experienced major losses. As one analyst put it, the brand became just another in a sea of brands. Sales are down three percent this year and the stock fell ten percent in pre-market trading on this news. Founder and CEO, Kevin Plank, will step down January first and be replaced by Patrick Frisk, currently the company’s chief operating officer. While the replacement of Plank is probably more about getting the company turned around than the investigation, as one Bloomberg analyst said, where there’s smoke, there’s usually fire.

I’m Jeff Tanner, Dean of the Strome College of Business at Old Dominion University and this is a Strome Business Minute. Have you see the new Coors Light commercials promoting the brand as the official beer for breakfast, the official beer of playing golf just to drink beer, and the official beer of being done with wearing a bra? Maybe it’s just me, but other than the no bra at the end of a workday, these promote irresponsible beer consumption.

While the economy seems to be slowing, Virginia is adding jobs. Virginia’s unemployment rate is at the lowest in eighteen years, two point seven percent, compared to three point five percent nationally. Hampton Roads unemployment is about the same as Virginia at two point eight percent. The number of Virginians working, four point four million, is the highest ever. If a slowdown results in job losses elsewhere, Virginia should remain employed, if skills can match the needs of Amazon and Newport News Shipbuilding. Americans are less likely than ever to move from depressed areas to new locales to find work, so we may have to grow our own, something we should be able to do between our colleges and transitioning military personnel.

Hampton Roads is a hot residential real estate market! Okay, maybe it’s not like San Francisco but home sales are way up. Homes under contract jumped thirty percent last month, and closings were up thirteen percent. The median price of a home was up over six percent to two hundred forty nine thousand, and distressed sales, or sales of homes that have been foreclosed, was at its lowest level in over a decade. New home sales in the four hundred thousand range have been selling very quickly over the past couple of years, and it now appears that the entry level market is catching up. Inventory has also declined, good news for folks who want to sell or trade up.

Last week, Strome College invited marketing industry experts to share their expertise during Marketing Week, a joint event sponsored in part by the American Marketing Association Professional Chapter in Hampton Roads. Our keynote speaker for the week was Jaclyn Ruelle, the new Managing Director of Cultural Impact and Brand Communications at the Martin Agency. Ruelle shared how too many brands have become complacent. The best brands know how to get noticed and tell the story – they do it by finding some tension in what they’re talking about and using insights or data points that make the brand edgier. A good example – the latest Land O’Lakes campaign who by changing one pronoun to “she” hit a home run and has inspired future female farmers and changed the way an entire generation sees farming.

Regular listeners know that we’ve been covering the opioid lawsuits for over a year, well before the story became mainstream. The proposed settlement in Ohio by McKesson, Cardinal Health, Teva Pharmaceutical and AmeriSource Bergen with the two counties who sued will close two of the first lawsuits brought and will trigger similar settlements in over two thousand more lawsuits. Henry Schein, another defendant, appears to have settled separately while Walgreens has refused to do so. Denying any culpability, this is the same Walgreens that is being sued by the state of Florida for allegedly selling 285,000 opioid pills per month in a town of 3000 people and another Walgreens sold 2.2 million pills a month in Hudson, Florida, population 12,000 in 2014.

Virginia just cut a deal with Dominion Energy to buy renewable energy. Most of the energy will come from Dominion’s solar installations, and we’re buying the equivalent of what’s needed to power one hundred thousand homes. Virginia has the potential to be the east coast leader in renewable energy, especially wind, but is way behind other states. The wind energy generated in this agreement is from an on-shore installation that has yet to be built. In fact, this would be Virginia’s first wind energy installation, as the Commonwealth is among only nine states without wind energy. Virginia, though, is kicking things off in a big way, as the National Governor’s Association says this is the biggest single contract for renewable energy by a state.

Straws can be made out of paper, as can cups, egg cartons, and even those rings that hold a six-pack of beer together. So Carlsberg beer is exploring whether cans of beer can be made from paper. Using a thin plastic film to create an interior bladder protected by a wooden fiber, or paper, shell, two different versions were designed. One uses recycled plastic while the other uses a bio-based plastic like you’ve seen in the corn-based coke bottles. University researchers from the Technical university of Denmark played a part in the design, leading to the creation of a paper bottle company that is also working with Coca Cola, Absolut, and L’Oréal. The question remains as to whether consumers will accept these products.