Wednesday, November 6, 2013

Dow rises to new record on Federal Reserve hopes

Dow shot up 128 (closing at the highs), but advancers were barely ahead of decliners & NAZ was off 7.  The MLP index went up 1+ to the 455s & the REIT index about even in the 276s.  Junk bond funds were flattish & Treasuries rose.  Oil rebounded from the lowest level in 5 months as US gasoline demand rose to the most since Jul, trimming fuel inventories.  Higher prices for gold kept it above 1300.

AMJ (Alerian MLP Index tracking fund)

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CLZ13.NYM....Crude Oil Dec 13....95.20 Up ...1.83 (2.0%)

Live 24 hours gold chart [Kitco Inc.]

Abercrombie & Fitch fell the most in more than 2 months after posting fiscal Q3 sales that trailed estimates as teens restrained spending on clothing.  Comparable-store sales fell 14%.  Analysts estimated a 13% decline.  Net sales slid 12% to $1.03B, missing the estimate of $1.07B.  CEO Mike Jeffries has been struggling to reconnect with the chain’s teenage customers who have become less enamored of its fashions, half-naked models & noisy stores.  Consumers are also limiting purchases of non-essential items amid uncertainty in the economy.  Full-year EPS will be as much as $1.50 on an adjusted basis, excluding charges, ANF said, far below the $1.97 estimate.  The company plans to close all standalone stores of its Gilly Hicks lingerie brand by the end of Q1-2014.  The closings will result in pretax charges of $90-$10M. 20 Gilly Hicks stores are operated in the US & 8 internationally.  The company said adjusted Q3 EPS, excluding charges, will be at the higher end of its prior guidance of 40-45¢.  Analysts are estimating 40¢.  Abercrombie will release full Q3 results on Nov 21.  “Our objective is to get stabilization of comparable sales in next 12 to 18 months,” CFO Jonathan Ramsden said.  “The environment is difficult. It’s an open question as to whether what’s transpired since back-to-school is a reset, or is it just a temporary phenomenon caused by factors that are going to abate over time.”  ANF will continue to close underperforming stores in all of its brands at a pace of about 40 per year & the company will expand its product assortment online, including its offering of 3rd-party collaborations.  The retailer is also redesigning Hollister storefronts, replacing porches & shutters with glass windows and video screens.  The stock plunged 5.18 & has an ugly chart in the last 3 months while Dow has been setting new record highs.

Abercrombie Falls as Third-Quarter Sales Trail Estimates

Abercrombie & Fitch (ANF)

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Ralph Lauren's fiscal Q2 net income fell 4%, hurt by the stronger dollar & higher expenses, but results beat expectations & the luxury retailer raised the low end of its revenue outlook for the year.  For the qtr, EPS was $2.23 which compares with $2.29 last year.  Analysts expected $2.20.  Operating expenses rose 6% as the company invested in new technology platforms & global store expansion.  The stronger dollar, which lessens the value of overseas sales, also weighed on gross margin.  The higher expenses were offset by cost cuts & higher revenue.  Revenue rose 3% to $1.92B, as sales in the company's shops & website & thru other stores rose globally.   Analysts expected $1.91B.  The company raised its sales guidance for the year to growth of 5-7%, from prior guidance of 4-7% growth.  That implies revenue of $7.29-$7.43B.  Analysts expect $7.37B.  For Q3, which ends in Dec, the company expects revenue to rise 8-10%, implying revenue of $1.99-$2.03B.  Analysts expect $2B.  The quarterly div was raised 12½% to 45¢ & the stock rose $9.33 (5%).

Ralph Lauren 2Q profit hurt by stronger dollar Associated Press

Ralph Lauren (RL)

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21st Century Fox reported fiscal Q1 profit that missed estimates after a tough qtr for the film division & investments in cable networks.  EPS fell to 33¢ from 95¢ a year earlier.  Analysts expected 35¢.  But operating income rose 1.8% to $1.62B.  FOXA is converting cable channels with smaller audiences into networks with a potentially bigger draw & is also spending to develop programs for its Fox broadcast network, where viewership tumbled in the season ended in May.  “The investment we are making, including the launch of FXX and Fox Sports 1, will drive future sustained growth,” Rupert Murdoch said.  Sales increased 18% to $7.06B, beating the $6.82B estimate.  Murdoch split off his slower-growing News Corp (NWSA). newspaper publishing company in Jun from the film & TV operations.  The print-media business includes the Wall Street Journal & the New York Post. Operating income at the cable division, excluding depreciation & amortization, fell 2.4% to $991M, while sales increased 12% to $2.81B.  Costs increased 22%, with 2/3 of that due to start-up expenses for Fox Sports 1 & FXX, as well as acquisitions of ESPN Star Sports & SportsTime Ohio.  Television profit gained 30% to $231M from a year earlier, on double the retransmission fees from pay-TV systems.  Sales in the division rose 7.8% to $1.05B.  Profit at filmed entertainment fell 24% to $328M, as revenue increased 9.4% to $2.12B.  Titles in the period had tough comparisons to last year’s “Ice Age: Continental Drift.”  The satellite-TV unit doubled profit to $190M, while sales jumped 68% to $1.39B, driven by the consolidation of Sky Deutschland after the acquisition of a controlling stake.  EPS was 54¢, including a gain of $487M from discontinued operations.  EPS a year earlier was 94¢, including a gain from the sale of a stake in NDS Group.  The stock was off 17¢.

Fox Profit Declines on Programming Costs for New Cable Networks

Twenty-First Century Fox (FOXA)

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9 of the Dow stock had gains of at least 1% today led by Microsoft (MSFT) surging 1.55 (4%) on hopes a new CEO will bring better times.  Today's rally was limited to a small number of stocks.  Tech heavy NAZ lost ground, led by a $5 decline for Apple (AAPL).  Twitter's IPO comes tomorrow & that should bring out stock buyers as it's expected to surge in its opening trades.  But economic fundamentals remain drab.  However stock buyers are more concerned with the Federal Reserve maintain its policy of throwing money at the market.  As long as that is the most important thought for buyers, stocks will rise.  Buying will be helped by fund managers adding to positions to make the year-end holdings look more attractive until the next fiscal crisis flares up in DC.

Dow Jones Industrials

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