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Retail Coffee War in Vietnam

Last year, when Starbucks (SBUX) announced its plans to expand into Vietnam by opening its first store in Ho Chi Minh City in February, it was part of its grander strategy to expand into emerging markets. In fact, Starbucks now predicts that within a couple of years, China will replace Canada as the company’s second biggest market after the U.S. The Vietnam expansion was welcomed by analysts because, unlike India, Vietnam is already a coffee loving nation and is the world’s second biggest coffee exporter – though mostly of Robusta which Starbucks does not normally serve. Yum Brands (YUM) is already operating in the country and has made expansion in emerging markets a focus of its growth strategy. The country now has also gotten the attention of Dunkin’ Donuts, owned by Dunkin’ Brands (DNKN), which has signed a franchise deal with Vietnam Food and Beverage Co. to open its first café in Ho Chi Minh City.starbucks-7

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Amazon Continues to Confound Critics

a.com_logo_RGBAmazon (NASDAQ:$AMZN) recently released its quarterly results in which its sales increased by 22% to $21.3 billion – approximately $12 billion in North America and $9 billion overseas – but it missed analysts’ estimate by $900 million and the market’s reaction was brutal; causing its shares to drop by 6% in the trading day. The company’s net income dropped by 45.2% to $97 million, an EPS of $0.21 which was 7 cents below analysts’ estimates. But the numbers are nearly meaningless because Amazon’s business model continues to confound valuation metrics.

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Vietnam Opening To Energize Starbucks

Starbucks-LogoOn Friday February 1, 2013 Starbucks (SBUX) will commence operations in the country of Vietnam. This is probably something that you may have heard mentioned in the media a month ago, with little fanfare and attention; overshadowed no doubt by the company’s quarterly earnings release. However, this launch in Vietnam’s largest and biggest commercial city, Ho Chi Minh, will be an important portion of the company’s long term growth prospects. The country boasts approximately 90 million people with nearly 60 million below the age of 35 due to post war demographics from the 1970s. Discretionary spending in the country is growing exponentially as the opening of a more free market began back in 1995. Additionally, Vietnamese people are notorious for their love of western brands. You cannot walk down the streets or frequent a fancy restaurant without seeing authentic Louis Vuitton handbags draped over women’s shoulders getting in and out of the latest BWM X6 or Mercedes S-class. In the past two years, U.S.-based fast food franchises have invaded Vietnam at a furious pace, including Carl’s Jr., Burger King, and Subway, which have all done very well. Pizza delivery king Domino’s (DPZ) have 14 stores in Ho Chi Minh City alone.

Read the rest over at Seeking Alpha.

The Value-Trap of Wal-Mart’s Current Model

walmart_com-500x500Wal-Mart (NYSE:$WMT) reported a 9% increase in profits to $3.6 billion for the quarter ending 31st October in line with analysts’ estimates. However, a 1.5% increase same store comps versus the expected 1.8% translated into a 3.6% dip in stock on the day of the earnings release. Net quarterly sales increased by 3.4% to $113 billion which includes 3.6% increase in U.S. sales. According to the U.S. Department of Commerce, the U.S. retail sales in the corresponding quarter were up 4.6%.

Walmex, Wal-Mart’s Mexican arm also reported 8.9% increase in sales in Mexico for November on the back of a Black Friday styled event. On a comparable store basis, sales increased by 5.5% but the total number of transactions dropped by 2.6%.

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Groupon- Creating Competition in Margin Compression

groupon_0Groupon (NASDAQ:$GRPN), whose shares have tumbled by more than 75% this year, been on a roller coaster ride since it first announced the intention to replace its much criticized co-founder and chief Andrew Mason  and then the board subsequently voted to retain Mason, sending the stock back down below $4.  So, all of that served to do little more than induce some short-covering.

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Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital.  (read more)

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