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Monday August 8, 2022
Nike Earnings Report
Nike, Inc (NKE) reported its fourth quarter and full year results on Monday, June 27. Despite exceeding Wall Street estimates for earnings, the company's shares fell 3% following the release of the report.
Nike posted fourth quarter net revenue of $12.2 billion. This is down 1% from $12.3 billion reported in the same quarter last year, but exceeded the $12.1 billion in revenue that analysts expected. For the full year, Nike reported net revenue of $46.7 billion, up 5% from $44.5 billion one year ago.
"NIKE's results this fiscal year are a testament to the unmatched strength of our brands and our deep connection with consumers," said Nike President and CEO, John Donahoe. "Our competitive advantages, including our pipeline of innovative product and expanding digital leadership, prove that our strategy is working as we create value through our relentless drive to serve the future of sport."
The company reported net income of $1.4 billion for the quarter or $0.90 per adjusted share. This was down 5% year-over-year from net income of $1.5 billion or $0.93 per adjusted share. Full year net income came in at $6 billion or $3.75 per adjusted share, up 6% from $5.7 billion or $3.56 per adjusted share in 2021.
The Nike Direct segment sales were reported at $4.8 billion, up 7% for the quarter. Nike's wholesale segment reported revenues of $6.8 billion, down 7% compared to the prior year's quarter. The company has shifted focus to sell more products directly to consumers and scale back the amount sold by wholesale partners. The Nike Brand digital sales segment increased 15% for the quarter. Inventory for the quarter rose 23% or $8.4 billion for the year, due to extended lead times from ongoing supply chain issues.
Nike, Inc. (NKE) shares ended the week at $101.18, down 9.9% for the week.
General Mills Posts Quarterly Earnings
General Mills, Inc. (GIS) posted its fourth quarter and full year earnings on Wednesday, June 29. The company stock jumped 5% following the release of the report.
Net sales totaled $4.9 billion for the quarter, up 8% from $4.5 billion one year ago and exceeding market estimates of $4.8 billion. Full year net sales returned at $19 billion, a 5% increase from $18.1 billion in 2021.
"I am proud of the way our team advanced our Accelerate strategy this year by executing well on our core business while taking significant steps to reshape our portfolio," said General Mills CEO, Jeff Harmening. "Though significant inflation and supply chain disruptions put pressure on our margins, we responded quickly to address those challenges and keep our brands on shelf for our customers and consumers."
The company reported net income of $822.8 million or $1.35 per adjusted share for the quarter. This was up 97% from $416.8 million or $0.68 per adjusted share during the same quarter last year. The company reported net income of $2.7 billion or $4.42 per adjusted share for the full year. This was up 16% from $2.4 billion or $3.78 per adjusted share in fiscal 2021.
General Mills reported that operating profit grew 85% to $1 billion due to higher gross profit dollars, lower restructuring charges and divestiture gains. The company saw an 11% rise to $3 billion in net sales in its North America Retail segment. The company's International segment was down 21% to $750 million in net sales. The company expects inflationary costs and supply chain disruptions to be the biggest impact on business heading into fiscal 2023 and expects net sales to increase 4% to 5% as a result.
General Mills, Inc. (GIS) shares ended the week at $75.79, up 7.4% for the week.
Bed Bath and Beyond Releases Earnings
Bed Bath & Beyond Inc. (BBBY) announced first quarter earnings on Wednesday, June 29. The home goods retailer's shares fell as much as 24% after the release of the report.
Revenue for the first quarter reached $1.46 billion. This is down 25% from $1.95 billion reported during the same quarter last year and is less than the $1.5 billion in revenue that analysts expected.
"The simple reality though is that our first quarter's results are not up to our expectations, nor are they reflective of the Company's true potential," said Interim Bed Bath and Beyond CEO, Sue Gove. "The initiatives we are instituting today are just the first steps in putting our business on firm footing to drive our future success."
Bed Bath & Beyond reported net losses of $358 million or $4.49 per adjusted share. This is up from last year's first quarter net loss of $225 million or $2.83 per adjusted share.
Bed Bath & Beyond reported that the company's same-store sales declined 27% from the same time one year ago. Comparable sales in stores declined 24% and digital sales decreased 21%. The company ended the quarter with operating profits at a loss of $224 million and $107 million in cash. On the heels of the earnings report, the company announced the departure of CEO Mark Tritton and named board member Sue Gove as Interim CEO.
Bed Bath & Beyond Inc. (BBBY) shares ended the week at $4.71, down 30.4% for the week.
The Dow started the week of 6/27 at 31,534 and closed at 30,738 on 7/1. The S&P 500 started the week at 3,921 and closed at 3,781. The NASDAQ started the week at 11,661 and closed at 11,007.
Treasury Yields Start to Fall
U.S. Treasury yields fell throughout the week as the Federal Reserve's preferred inflation gauge shows signs that inflation could begin to slow down. Yields continued to fall on Friday as unemployment numbers decreased.
On Thursday, the Commerce Department announced that the core personal consumption expenditure price index, the Federal Reserves' inflation metric, rose 4.7% year-on-year in May, remaining at a 40-year high. This was slightly below analyst's expectations of 4.8% and represented a 0.2% decrease from the previous month.
"The rising cost of living absorbed all of the increased spending power from added jobs and higher wages in May," said chief economist for Comerica Bank, Bill Adams. "Americans are running faster just to stay even."
The benchmark 10-year Treasury note yield opened the week of 6/27 at 3.136% and traded as low as 2.973% on Thursday. The 30-year Treasury bond yield opened the week at 3.263% and traded as low as 3.118% on Thursday.
On Thursday, the U.S. Department of Labor reported that initial claims for unemployment decreased to 231,000 for the week ending June 25. This was 2,000 less than the previous week's revised claims of 233,000 but was more than market estimates of 230,000. Ongoing unemployment claims fell slightly to 1.33 million.
"The level of claims is still relatively low, but we don't expect claims to fall much below the levels of the last few weeks," said lead U.S. economist at Oxford Economics, Nancy Vanden Houten. "While labor markets remain very tight, reports of layoffs are increasing."
The 10-year Treasury note yield closed at 2.89% on 7/1, while the 30-year Treasury bond yield was 3.12%.
Mortgage Rates Start to Ease
Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, June 30. U.S. mortgage rates fell for the first time in three weeks but remain at record highs as inflation continues to impact the housing market.
This week, the 30-year fixed rate mortgage averaged 5.70%, down from last week's average of 5.81%. Last year at this time, the 30-year fixed rate mortgage averaged 2.98%.
The 15-year fixed rate mortgage averaged 4.83% this week, down from 4.92% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.26%.
"The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession," said Freddie Mac's Chief Economist, Sam Khater. "This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller's market to a more normal pace of home price appreciation."
Based on published national averages, the savings rate cap was 0.08% as of 6/21. The one-year CD averaged 0.25%.
Published July 1, 2022