Thursday March 23, 2023



CarMax Reports Quarterly Earnings

CarMax, Inc. (KMX) released its fourth quarter and full-year earnings on Tuesday, April 12. The automobile retailer's shares dropped more than 5.7% following the earnings release.

CarMax reported net sales of $7.7 billion during the quarter. This was up 48.8% from $5.2 billion in net sales at the same time last year. For the full year, net sales came in at $31.9 billion, a 68.3% increase from $19 billion one year ago.

"We are extremely proud of our accomplishments in fiscal 2022, which we believe position us well for continued long-term growth across our retail and wholesale business, and CarMax Auto Finance," said CarMax President and CEO, Bill Nash. "The roll out and rapid adoption of our online instant appraisal offer has solidified our position as the nation's largest buyer of vehicles from consumers, nearly doubling our fiscal 2022 inventory self-sufficiency and propelling our wholesale business to new heights."

The company reported quarterly net income of $159.8 million or $0.98 per adjusted share. This was down 23.9% from $210 million or $1.27 per adjusted share at this time last year. For the full year, net income returned at $1.2 billion, an increase of 54.1% from $746.9 million one year ago.

CarMax purchased 324,000 vehicles in the quarter, an increase of 69% from last year at that time. CarMax's retail used unit sales decreased 5.2% to 194,318 vehicles and the company's comparable store used unit sales decreased 6.5%. CarMax attributes the decline to a drop in consumer confidence, a surge of COVID cases, vehicle affordability and lapping stimulus benefits paid in the prior year period. During the quarter the company opened four new locations, bringing the total to 230 used car stores currently open.

CarMax, Inc. (KMX) shares ended the week at $91.79, down 9.2% for the week.

Delta Air Lines Announces Quarterly Earnings

Delta Air Lines (DAL) announced its first quarter earnings on Wednesday, April 13. The Atlanta-based airline's shares rose more than 4% following the release of the report.

Revenue for Delta's first quarter increased to $9.35 billion. This is down 11% from $10.47 billion in revenue during the first three months of 2019 but is above the $8.92 billion that analysts predicted.

"With a strong rebound in demand as Omicron faded, we returned to profitability in the month of March, producing a solid adjusted operating margin of almost 10 percent," said Delta's CEO, Ed Bastian. "As our brand preference and demand momentum grow, we are successfully recapturing higher fuel prices, driving our outlook for a 12 to 14 percent adjusted operating margin and strong free cash flow in the June quarter. I would like to thank the Delta people, who once again enabled our best-in-class operational performance, provided an unmatched customer experience and continue to power our industry leadership each and every day."

Delta reported a net loss of $940 million or $1.48 per adjusted share. This is an increase from a net loss of $730 million or $1.09 per adjusted share in the same quarter of 2019.

In March, the airliner recorded its largest bookings in company history. The company announced that it expects to fly 84% of its 2019 capacity levels this quarter as peak travel season approaches. Fuel prices rose 6% from 2019 to $2.09 billion and capacity was down 17% during the quarter. However, Delta expects revenue to rise double digits during the second quarter compared to 2019 and for overall sales to recover as much as 97% from sales during pre-COVID times. This will help counter rising fuel costs and inflation-related expenses.

Delta Air Lines (DAL) shares ended the week at $42.36, up 15.4% for the week.

Bed Bath and Beyond Releases Earnings

Bed Bath & Beyond Inc. (BBBY) announced quarterly earnings on Wednesday, April 13. The home goods retailer's shares fell as much as 12% after the release of the report.

Revenue for the fourth quarter reached $2.05 billion. This is down 22% from $2.62 billion reported during the same quarter last year and is less than the $2.07 billion in revenue that analysts expected.

"We are disappointed that our sales and gross margin performance does not reflect our team's hard work and execution against both strategic and transformation efforts in 2021," said Bed Bath and Beyond CEO, Mark Tritton. "Macroeconomic factors, such as the disruption of the global supply chain, the Omicron variant, as well as the geopolitical turbulence weighing on consumer confidence, have uncovered more vulnerabilities than we could have foreseen at this stage of our transformation, as we completely rebuild the foundation of our business."

Bed Bath & Beyond reported net losses of $159 million or $1.79 per adjusted share. This is up from last year's fourth quarter net loss of $9 million or $0.08 per adjusted share.

Bed Bath & Beyond reported that revenue at existing locations dropped 12% during the quarter and attributed it to continued inventory and supply chain issues. The lack of inventory caused same-store sales to decrease 12% and digital sales to decrease by 18% compared to one year ago. Bed Bath & Beyond CEO, Mark Tritton announced a partnership with Kroger to sell products on its website and to open stores inside Kroger grocery stores in an effort to increase sales.

Bed Bath & Beyond Inc. (BBBY) shares ended the week at $17.32, down 9.2% for the week.

The Dow started the week of 4/11 at 34,630 and closed at 34,451 on 4/14. The S&P 500 started the week at 4,463 and closed at 4,393. The NASDAQ started the week at 13,547 and closed at 13,351.

Treasury Yields Increase

U.S. Treasury yields rose throughout the week as the market experienced the highest annual increase in inflation in 40 years. Yields continued to increase on Thursday as unemployment numbers returned higher than expected.

On Tuesday, the U.S. Department of Labor announced that the consumer price index, which measures the costs of dozens of everyday consumer goods, increased 8.5% from one year ago, exceeding analyst's estimates of 8.4% and marking the highest level since 1981.

"Fallout from Russia's invasion was all over the ugly March CPI report," said chief economist at Moody's Analytics, Mark Zandi. "Prior to Russia's aggression, oil prices were headed lower and overall inflation was peaking as pandemic-scrambled supply chains were slowly, but steadily, sorting themselves out."

The benchmark 10-year Treasury note yield opened the week of 4/11 at 2.710% and traded as high as 2.834% on Thursday. The 30-year Treasury bond yield opened the week at 2.723% and traded as high as 2.933% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment rose to 185,000 for the week. This was 18,000 more than the previous week's revised claims of 167,000 and above market estimates of 172,000 but still marks the lowest level since 1968.

"Claims are still at very low levels, underscoring historically tight labor market conditions,'' said lead U.S. economist at Oxford Economics, Nancy Vanden Houten. "We expect initial claims to remain below (200,000) in the weeks ahead, as employers, who continue to struggle to attract and retain workers, will keep layoffs to a minimum.''

The 10-year Treasury note yield closed at 2.83% on 4/14, while the 30-year Treasury bond yield was 2.92%.

Mortgage Rates Exceed 5%

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, April 14. The mortgage rates saw an increase this week as the Federal Reserve's policies continue to attempt to curb historical inflation.

This week, the 30-year fixed rate mortgage averaged 5.00%, up from last week's average of 4.72%. Last year at this time, the 30-year fixed rate mortgage averaged 3.04%.

The 15-year fixed rate mortgage averaged 4.17% this week, up from 3.91% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.35%.

"This week, mortgage rates averaged five percent for the first time in over a decade," said Freddie Mac's Chief Economist, Sam Khater. "As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation."

Based on published national averages, the savings rate was 0.06% as of 3/21. The one-year CD averaged 0.15%.

Published April 15, 2022

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