Dow went up 75 (off early highs), advancers over decliners better than 2-1 & NAZ gained 91. The MLP index advanced 3+ to 281 & the REIT index added 2+ to the 386s. Junk bond funds edged higher & Treasuries were purchased, lowering yields modestly. Oil was fractionally higher to 79 (but below early highs) & gold was up 6 to 2148 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Shares of Foot Locker (FL) plummeted after the sneaker retailer reported a
holiday-qtr loss, issued weak guidance for the current year & said
it's behind on meeting its financial goals. Given how poorly its
past fiscal year went, the company is now expecting the profitability
goal it laid out during its March 2023 investor day to be delayed by 2
years, finance chief Mike Baughn said. It now anticipates
to reach an EBIT margin of 8.5-9% by 2028, said Baughn added. The company swung to a loss in the 3-month period that ended Feb
3. It lost $4.13 per share, compared with
income of 20¢ per share, a year earlier. Excluding
one-time items, EPS was 38¢. Sales rose slightly to $2.38B, up from $2.34B a year earlier. In
the current fiscal year, FL is expecting profit to be worse
than expected. It anticipates adjusted EPS
will be $1.50 - $1.70, compared with analysts estimates of $1.40 -
$2.30. It's expecting sales to be down 1% to
up 1%, compared with estimates of down ½ a %. CEO Mary Dillon said that FL managed to drive
full-price sales “in addition to compelling promotions” during its
holiday qtr. But as the retailer wound down its
fiscal year, FL marked down more items to clear out excess
inventory, primarily in its apparel category. As a result, “higher
markdowns” drove FL's gross margin down by 3.5 percentage
points. “As we continue evolving into a modern, omnichannel
retailer for ‘all things sneakers,’ we are making important progress
strengthening our brand partnerships, increasing customer engagement,
transforming our real estate footprint, and driving growth in digital,”
said Dillon. The stock sank 10.08 (29%).
Abercrombie & Fitch (ANF) said that its holiday-qtr sales jumped 21% & its
profit grew thanks to higher prices & lower raw material costs. The apparel retailer expects its growth story will continue as it issued better-than-expected sales guidance. EPS for the 3-month period that ended Feb 3 was $158.4 $2.97, compared with 75¢, a year earlier. Sales rose to $1.45B, up about 21% from $1.2B a year earlier. For
the current qtr, ANF expects sales to rise by a low
double-digit percentage, compared with estimates of up 7.2%. For the full year, its anticipates sales will grow 4-6%, compared with estimates of 4%. During
the qtr, comparable sales grew 16% & gross margin came in at
62.9%, 7.2 percentage points higher than the year ago period. Higher
average selling prices plus lower freight & raw material costs boosted
profit. Analysts had expected gross margin to be 60.1%. “Our
strong fourth quarter was fueled by sales growth across regions and
brands. Abercrombie brands grew net sales 35%, continuing an impressive
multi-quarter growth trend, while Hollister brands grew 9%, delivering a
third consecutive quarter of sales growth,” CEO Fran Horowitz said. “By staying close to our customers, tightly
controlling inventories and continuing to operate with financial
discipline, our team delivered year-over-year fourth quarter operating
margin expansion of 800 basis points, reaching 15.3%,” she continued. In
the year ahead, Horowitz said the company is focused on expanding its
global customer base & getting closer to reaching its long-term goal
of $5B in global annual sales. During fiscal 2023, ANF
came close to that target, posting full-year revenue of $4.28B. The stock fell 5.02 (4%).
Abercrombie & Fitch beats estimates as sales soar, helped by higher prices
Struggling New York Community Bancorp (NYCB) announced a $1B capital raise & a leadership shakeup today, headlined by former Treasury Secretary Steve Mnuchin. A report earlier today said that the bank
was looking to outside investors for cash to shore up its balance sheet. The stock was halted for news pending when shares were down 42%. A cash infusion would be the latest development in a turbulent start
to the year for NYCB. The bank disclosed in late Jan that it was
dramatically raising the allowance for potential loan losses on its
balance sheet, with its exposure to commercial real estate being a
potential issue. That was followed shortly by Moody's Investors Service downgrading the bank's credit rating to junk status & NYCB naming former Flagstar bank CEO Alessandro DiNello as exec chairman. Then last week, NYCB disclosed that it had “identified material weaknesses in the company’s internal controls related to internal loan review” & announced that DiNello was taking over as CEO. The struggles for NYCB may have caught regulators off guard as well as investors. The regional lender acquired much of Signature Bank out of receivership from the Federal Deposit Insurance Corp last Mar. Its stock was up 26¢ to 3.48 in hectic trading.
Gold closed at record high for a 4th-straight session as congressional testimony from Federal Reserve chair Jerome Powell, did not shed light on when the central bank will begin lowering interest rates. Gold for Apr was closed up US16 to $2158 per ounce. The price of the precious metal rose to new heights over the past 3 sessions on expectations lower interest rates are on the way, cutting the carrying costs of owning gold, while momentum investors have also added buying pressure. However the first of Powell's 2 days of congressional testimony offered little clarity on when lower rates will come. The $ weakened following Powell's appearance, with the ICE dollar index last seen down 0.48 points to 103.32. Treasury yields also dipped, with the 2-year note last seen paying 4.556%, down 0.6 basis points, while the yield on the 10-year note was down 4.9 basis points to 4.106%.
Gold Posts Another Record Sessions as Fed Chair's Testimony Offers Little Detail on Rate Cut Timing
West Texas Intermediate (WTI) crude oil closed higher after a report showed a smaller than expected rise in US oil inventories last week & lower US production, offsetting concerns over the health of China's economy. WTI crude oil closed up 98¢ to settle at $79.13 per barrel, while May Brent crude, the global benchmark, was last seen up 93¢ to $82.97. The rise comes after the Energy Information Agency said US oil inventories rose by 1.4M barrels last week, under the consensus estimate for a 2.1M barrel rise. Also, gasoline & distillate inventories fell while US production drop to 13.2M barrels per day, down from a record 13.3M bpd a week earlier. The lighter than expected rise came as traders mull a weakening Chinese economy, after the #1 importer again steered clear of stimulus measures amid a debt crisis in its real-estate sector as it set a 5% growth goal for its GDP this year.
WTI Crude Oil Closes Higher After a Report Shows a Smaller than Expected Rise In US Inventories Last Week
There was not much for Powell to say about the future of rate cuts & traders became nervous. While the economy is viewed as strong, the Atlanta Fed does not indicate a strong economy. Latest estimate: 2.5% -- March 06, 2024.
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