Donor Stories

Friday May 22, 2015

Finances

Finances
 

Macy's Earnings Disappoint

Macy's, Inc. (M) reported its latest quarterly earnings on Wednesday, May 13. The company reported disappointing earnings, but also a new initiative to improve declining sales.

Macy's announced quarterly sales of $6.23 billion. This represents a slight decrease from the same period last year when the company reported sales of $6.28 billion.

"We had expected our first quarter sales to grow at a rate lower than our guidance for the full year. We fell short because of a confluence of factors," said Terry J. Lundgren, Macy's, Inc. Chairman and CEO. "Delayed merchandise shipments from the West Coast port slowdown and severe winter weather early in the quarter restrained business levels. Moreover, sales were negatively affected by lower levels of spending by international tourists visiting major U.S. cities with flagship Macy's and Bloomingdale's stores, including New York City, Chicago, Las Vegas and San Francisco."

The company reported net income of $193 million for the quarter. This represents a decrease from the comparable period last year when Macy's reported net income of $224 million. Earnings per share came in at $0.56 per share.

Macy's, like other retail stores, has been struggling of late. The market is deeply fragmented. Shoppers are either purchasing items from discount stores or high-end stores. This leaves department stores like Macy's struggling to find their target audience. In addition, millennials, whose purchasing power is increasing dramatically, tend to gravitate towards retail stores that offer an experience. Macy's stores fail to draw this key demographic. As a result, management's latest initiative is aimed at high-end shoppers. Macy's plans to redesign and add high-end merchandise, more staff and new technology to its best 150 stores.

Macy's, Inc. (M) shares ended the week at $66.53, up 1.05% for the week.

J.C. Penney's is Improving


J.C. Penney Company, Inc. (JCP) reported its latest quarterly earnings on Wednesday, May 13. The company is attempting a comeback and reported improved earnings compared to the same quarter one year ago.

J.C. Penney reported quarterly sales of $2.86 billion. This represents a slight increase from the same period last year when the company reported sales of $2.80 billion.

"We are pleased with the Company's solid performance this quarter across all key metrics including sales, gross margin and EBITDA," said Myron E. Ullman, III, CEO of J.C. Penney. "This year we are switching gears, going on the offensive to gain back share and grow our business profitability while executing our vision to become the preferred shopping choice for Middle America. I would like to thank our team of 114,000 associates for their hard work and warrior spirit that helped us deliver these results. It is their passion to win and to serve the customer that sets J.C. Penney apart from the competition."

The company reported a net loss of $167 million for the quarter. This represents an improvement over the comparable quarter last year when J.C. Penney reported a net loss of $352 million.

Investors were initially disappointed with J.C. Penney's earnings report. Many were hoping for a more marked improvement in sales. As a result, J.C. Penney's stock price fell to a low of $8.02 per share immediately after the release. However, investment bank BMO Capital Markets upgraded J.C. Penney's rating from "underperform" to "market" before the market opened on Friday. The investment bank stated that the ratings upgrade is largely due to renewed confidence that J.C. Penney will be able to reach its goal of $1.2 billion in EBITDA by 2017. After the ratings upgrade, J.C. Penney's stock price began to rise, hitting a high of $8.44 in early Friday trading.

J.C. Penney Company, Inc. (JCP) shares ended the week at $8.56, relatively unchanged for the week.

Nordstrom Reports Mixed Earnings


Nordstrom, Inc. (JWN) reported its latest quarterly earnings on Thursday, May 14. The company reported impressive sales, but a decline in net income as the company spends heavily on capital improvements.

Nordstrom reported net sales of $3.12 billion for the quarter. This represents an increase in sales over the same period last year when the company reported net sales of $2.84 billion.

"Our customer strategy is squarely focused on serving customers on their terms and delivering the high level of service they expect from us," said Blake Nordstrom on a conference call with investors. Blake Nordstrom is one of three siblings who are presidents at Nordstrom, Inc.

The company reported quarterly net income of $128 million. This represents a slight decrease from the comparable period last year when the company reported net income of $140 million. Earnings per share came in at $0.66 per share.

As other department stores have been struggling, Nordstrom has been shifting its strategy to fit customer needs. This shift has already shown dividends as revenue rose almost 10% this quarter compared to one year ago. However, this shift has not been cheap. The company has been spending heavily on technology and warehouses to speed up the delivery of online orders. In addition, Nordstrom is expanding into Canada and doubling the size of its discount outlet Nordstrom Rack. The company plans to spend an additional $4.3 billion between now and 2019.

Nordstrom, Inc. (JWN) shares ended the week at $74.80, down 3.1% for the week.

The Dow started the week of 5/11 at 18,188 and closed at 18,273 on 5/15. The S&P 500 started the week at 2,116 and closed at 2,123. The NASDAQ started the week at 5,003 and closed at 5,048.
 

The Treasury Rollercoaster

Bond yields rose and prices dropped sharply early in the week as investors sold U.S. Treasury bonds. Later in the week, foreign investors purchased U.S. bonds at record levels pushing yields back down.

The 10-year Treasury bond yield rose to 2.35% on Tuesday, May 12. This is the highest level in six months. On Thursday, the government auctioned $16 billion in 10-year and $24 billion in 30-year Treasury bonds. Foreign investors purchased these bonds in record numbers. As a result, Treasury yields dropped in Thursday and Friday trading. In early Friday trading the 10-year Treasury yield was 2.14%.

Analysts are looking at the bond selloff early this week as a market correction rather than a market shift. "It is a correction, albeit a deep one," said Ray Uy, Senior Portfolio Manager at Invesco Ltd. Zhiwei Ren, Managing Director and Portfolio Manager at Penn Mutual Asset Management, Inc. stated, "Currently the market consensus is this selloff is more of a technical selloff than a sea change."

The "sea change" is unlikely to occur until the Federal Reserve raises interest rates. According to a survey conducted in May by the Wall Street Journal, 73% of economists surveyed believe that the Federal Reserve will begin raising rates at its September meeting.

The 10-year Treasury note yield finished the week of 5/11 at 2.14% while the 30-year Treasury note yield finished the week at 2.92%.
 

Interest Rates Rise Again

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, May 14. The results show mortgage rates continuing to rise for a third consecutive week.

The 30-year fixed rate mortgage averaged 3.85% this week. This was up from last week when it averaged 3.8%.

This week, the 15-year fixed rate mortgage averaged 3.07%. This number was up from last week when it averaged 3.02%.

"Mortgage rates rose for the third consecutive week as 10-year Treasury yields continued to climb," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "The labor market continues to improve with the U.S. economy adding 223,000 jobs in April, a solid rebound from merely 85,000 job gains in March. Also, the unemployment rate dipped to 5.4% in April as the participation rate ticked up to 62.8% and jobless claims were far less than expected."

The money market fund finished the week of 5/11 at 0.4%. The 1-year CD finished at 0.6%.

Published May 15, 2015

Previous Articles

Kellogg's Profit Plummets

Apple Reports Record Earnings

GM's Earnings Disappoint

Intel Reports Flat Earnings

Dave & Buster's Issues Cautious Guidance

scriptsknown