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Wednesday August 17, 2022

Finances

Finances
 

Lululemon Reports Earnings

Lululemon Athletica, Inc. (LULU) released its first quarter earnings report on Thursday, June 2. The athletic-apparel company's quarterly revenue and net earnings increased year-over-year, causing its shares to remain relatively unchanged following the report's release.

Lululemon reported quarterly revenue of $1.61 billion, a 32% increase from last year's first quarter revenue of $1.23 billion. This exceeded analysts' expected quarterly revenue of $1.53 billion.

"In the first quarter of 2022, continued momentum in the business enabled us to achieve a strong start to the year," said Lululemon CEO, Calvin McDonald. "These results provide a solid foundation as we begin our next five-year journey and deliver against our new Power of Three ×2 growth plan."

The company announced net income of $190 million or $1.48 per adjusted share for the quarter. This is up from net income of $145 million or $1.11 per adjusted share one year ago.

Lululemon opened five net new company-operated stores during the first quarter, bringing the total number of open stores to 579 at the end of the quarter. The company reported comparable sales increased 28% in the quarter. Inventory increased 74% to $1.3 billion compared to last year's first quarter. The company announced it continued to operate under Covid-related restrictions in China during the first quarter.

Lululemon Athletica, Inc. (LULU) shares closed at $291.60, down 4.3% for the week.

Lovesac Quarterly Report


The Lovesac Company, (LOVE) released its first quarter earnings on Wednesday, June 8. The home-furnishing brand exceeded expectations in net sales for the quarter.

The company reported net sales of $129.4 million. This is up 56% from $82.9 million in the same quarter last year. Analysts expected net sales to be $115 million for the quarter.

"Lovesac's strong performance in the first quarter exceeded expectations at the top and bottom lines and, perhaps more importantly, defied the macro headwinds that are negatively impacting consumers and the broader economy," said Lovesac's CEO, Shawn Nelson. "These first quarter results build on our track record of consistent strong performance, marking our 16th consecutive quarter of at least 25% net sales growth, and establishing a nearly 50% net sales CAGR since our IPO four years ago."

Lovesac posted net income of $1.9 million or $0.12 per adjusted share for the quarter. This was down from the same quarter last year, where the company reported net income of $2.1 million or $0.22 per adjusted share.

The Connecticut-based furniture retailer saw an increase in net sales growth across all of its commercial channels. The company reported a 42% comparable sales increase. Comparable showroom sales increased 53% in the quarter. The company noted that higher point of sale transactions with lower promotional discounting, a strong Easter promotional campaign with the addition of 31 new showrooms, 13 kiosks, and 2 mobile concierges helped to lead the way for growth.

Lovesac Company, (LOVE) shares ended the week at $31.82, down 15.3% for the week.

Dave and Buster's Sets Record First Quarter Earnings


Dave and Buster's Entertainment, Inc. (PLAY) announced quarterly results on Tuesday, June 7. The arcade company reported record first quarter earnings, causing its stock to increase 11% following the release of the report.

Revenue reached a record of $451.1 million for the first quarter, a 70% increase from revenue of $265.3 million reported in the same quarter last year. Analysts expected quarterly revenue to reach $441.3 million.

"I am so proud of our teams as they have enthusiastically welcomed back guests to our stores," said Dave and Buster's Interim CEO, Kevin Sheehan. "We are excited about the trajectory of our business and particularly the next few months as we begin our 'Summer of Games' roll-out that we hope will drive even more visitation to our stores."

Dave and Buster's reported quarterly net income of $66.98 million or $1.35 per adjusted share. During the first quarter a year ago, the company reported a net income of $19.64 million or $0.40 per adjusted share.

Dave and Buster's record first quarter revenue and profits stemmed from having their 147 locations fully operational. The company reported comparable store sales increased 10.9%, compared with the same quarter in 2019. Walk-in comparable store sales also increased 14.7% and special event revenue decreased 34.6%, as compared to the same quarter in 2019.

Dave and Buster's Entertainment, Inc. (PLAY) shares closed at $37.63, up 4.5% for the week.

The Dow started the week of 6/6 at 33,032 and closed at 31,393 on 6/10. The S&P 500 started the week at 4,135 and closed at 3,901. The NASDAQ started the week at 12,200 and closed at 11,340.
 

Treasury Yields Climb

Yields on U.S. Treasurys grew throughout the week as markets reacted to the latest inflation data. Yields continued to increase on Friday as unemployment numbers returned to the highest level in five months.

On Friday, the U.S. Department of Labor announced that the consumer price index, which measures the cost of dozens of everyday consumer goods, rose 8.6% year-on-year in May, marking the fastest increase since 1981. This was higher than analysts' estimates of 8.3% growth in inflation for May.

"Any hopes that the Fed can ease up on the pace of rate hikes after the June and July meetings now seems to be a longshot," said Bankrate chief financial analyst, Greg McBride. "Inflation continues to rear its ugly head and hopes for improvement have been dashed again."

The benchmark 10-year Treasury note yield opened the week of 6/6 at 2.94% and traded as high as 3.01% on Thursday. The 30-year Treasury bond yield opened the week at 3.09% and traded as high as 3.21% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment rose to 229,000 for the week, an increase of 27,000 claims from the previous week's revised claims of 202,000. This exceeded economists' estimates of 210,000 and marks the highest level of unemployment since January. The unemployment rate hovered at a low of 3.6%.

"Claims data can be noisy around holidays," said lead US economist at Oxford Economics, Nancy Vanden Houten. "However, while we think labor markets are still currently quite tight, we can't totally dismiss the notion that the rise in claims is a sign of a modest rise in layoffs."

The 10-year Treasury note yield closed at 3.16% on 6/10, while the 30-year Treasury bond yield was 3.19%.
 

Mortgage Rates on the Rise

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, June 9. Mortgage rates increased for both the 30-year and 15-year fixed rates as record inflation continues to impact the housing market.

This week, the 30-year fixed rate mortgage averaged 5.23%, up from last week's average of 5.09%. Last year at this time, the 30-year fixed rate mortgage averaged 2.96%.

The 15-year fixed rate mortgage averaged 4.38% this week, up from 4.32% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.23%.

"After little movement the last few weeks, mortgage rates rose again on the back of increased economic activity and incoming inflation data," said Sam Khater, Freddie Mac's Chief Economist. "The housing market is incredibly rate-sensitive, so as mortgage rates increase suddenly, demand again is pulling back. The material decline in purchase activity, combined with the rising supply of homes for sale, will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home."

Based on published national averages, the savings rate cap was 0.07% as of 5/16. The one-year CD averaged 0.21%.

Published June 10, 2022
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