Monday August 10, 2020



Tiffany Posts Mixed Earnings

Tiffany and Co. (TIF) released its latest quarterly earnings report on Wednesday, August 28. Despite lower-than-expected sales, Tiffany's profits exceeded expectations.

Revenue for the second quarter came to $1.05 billion, down from $1.08 billion at this time last year. This fell short of analysts' expectation of $1.06 billion in revenue.

"Our second quarter and first half results were mixed with sales coming in below, but net earnings exceeding, our expectations," said Tiffany's CEO Alessandro Bogliolo. "As with the first quarter, we are encouraged in the second quarter by sales growth attributed to our local customer base globally, which was again led by double digit growth in mainland China."

The company reported net earnings of $136.3 million, or $1.12 per share, exceeding Wall Street's predicted earnings of $1.04 per share. At this time last year, Tiffany reported earnings of $144.7 million, or $1.17 per share.

While Tiffany attributed its sales growth to increases in mainland China, the company's Asia-Pacific region posted a 1% decrease in net sales. This was due, in large part, to increasing unrest in Hong Kong, one of the company's largest markets. During an earnings call on Wednesday, Bogliolo stated that the company "lost nearly six full selling days due to unplanned store closures" in Hong Kong during the quarter.

Tiffany and Co. (TIF) shares ended the week at $84.86, up 3.3% for the week.

Price Drops Put Smucker's Shares in a Jam

The J.M. Smucker Company (SJM) reported first quarter earnings on Tuesday, August 27. The company's sales fell farther than expected during the quarter.

Smucker's reported net sales of $1.78 billion during the quarter, down 6% from $1.90 billion in net sales at the same time last year.

"Our first quarter performance fell short of our expectations primarily due to the timing of shipments and deflationary pricing in the coffee and peanut butter categories, as well as competitive activity in the premium dog food category," said Smucker's CEO Mark Smucker. "We have continued momentum in many key product categories, and we are already taking decisive actions and prioritizing initiatives that strengthen our business."

The company reported net income of $154.6 million for the quarter. This was up from $133.0 million in net income at this time last year.

Smucker's shares fell more than 8% following Tuesday's earnings release. Lower prices on the company's Jif and Folgers brands contributed to the downturn in sales. The company's U.S. Retail Coffee segment posted a 5% decrease in sales for the quarter and a 13% drop in profits. Similarly, Smucker's U.S. Retail Consumer Foods segment recorded losses of 17% in both sales and profits.

The J.M. Smucker Company (SJM) shares ended the week at $105.14, down 5.8% for the week.

Dollar General Reports Earnings

Dollar General Corporation (DG) posted its latest quarterly earnings on Thursday, August 29. The discount chain posted strong earnings for the quarter.

The company reported net sales of $6.98 billion during the quarter. This was up from $6.44 billion at the same time last year.

"We are pleased with our second-quarter results, driven by strong performance on both the top and bottom lines," said Dollar General CEO Todd Vasos. "Our results this quarter were fueled by solid execution across many fronts, including category management, merchandise innovation, store operations, and continued progress with our strategic initiatives."

Dollar General posted net income of $427.55 million in net income for the quarter. This was a 6% increase over $407.24 million in net income during the same quarter last year.

The company's same-store sales increased 4% from the same quarter last year. Over the previous 26 weeks, the company opened 489 new stores and closed 23, bringing its total number of locations to 15,836. The company increased its outlook for fiscal 2019, bumping its forecast of net sales growth from 7% to 8%.

Dollar General Corporation (DG) shares ended the week at $156.06, up 12.9% for the week.

The Dow started the week at 25,826 and closed at 26,403 on 8/30. The S&P 500 started the week at 2,867 and closed at 2,926. The NASDAQ started the week at 7,830 and closed at 7,963.

Treasury Yields Rise

Yields on U.S. Treasurys increased this week as investors anticipated productive trade talks between the U.S. and China. Investors appeared to have an optimistic outlook on both international trade and domestic economic growth.

On Friday, the U.S. and China were set to hold another round of trade talks in an attempt to ease international tensions. The latest talks come as each country is set to impose new tariffs on the other's goods beginning in September.

"When you take a look at the $300 billion dollars of goods that will be subject to these tariffs — you know, much of which is not until late December of this year, those goods imported from China represent approximately 3% of total consumer expenditures," said Gerald Storch, former CEO of Toys "R" Us. "So, you're talking about 15% tariff on 3%, a fraction of a fraction."

The yield on the benchmark 10-year Treasury note was at 1.513% during early trading on Friday, up from 1.498% on Thursday. The 30-year Treasury bond was at 1.982%, up from 1.966% on Thursday.

On Thursday, the Bureau of Economic Analysis released an updated estimate of U.S. gross domestic product (GDP) for the second quarter. The report revised GDP down to 2.0% from the initial estimate of 2.1% for the quarter. This was down from 3.1% GDP growth in the first quarter of 2019.

"The U.S. economy continues to show its resilience while also showing signs of softening," said Chad Moutray, Chief Economist with the National Association of Manufacturers. "While manufacturing data have been weaker in the first half of the year than we might desire, recent data point to signs of a possible rebound moving forward, and the labor market remains solid."

The 10-year Treasury note yield closed at 1.51% on 8/30, while the 30-year Treasury bond yield was 1.97%.

Mortgage Rates Edge Higher

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 29. Mortgage rates remained relatively stable over the past week, showing only slight increases.

The 30-year fixed rate mortgage averaged 3.58% this week, up from last week's average of 3.55%. During the same time last year, the 30-year fixed rate mortgage averaged 4.52%.

This week, the 15-year fixed rate mortgage averaged 3.06%, an increase from last week's average of 3.03%. Last year at this time, the 15-year fixed rate mortgage averaged 3.97%.

"Mortgage rates inched up slightly this week, closing the month with the 30-year fixed-rate mortgage rate averaging 3.6% — almost a full percent from the same time last year," said Sam Khater, Chief Economist with Freddie Mac. "Low mortgage rates along with a strong labor market are fueling the consumer-driven economy by boosting their purchasing power, which will certainly support housing market activity in the coming months."

Based on national averages, the money market account closed at 1.30% on 8/30. The one-year CD finished at 2.30%.

Published August 30, 2019

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