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Thursday May 24, 2018



Dollar General Reports Mixed Results

Dollar General (DG) announced its quarterly earnings on Thursday, June 1. The discount retailer reported increased sales but a drop in profits.

The company reported revenue of $5.61 billion for the quarter. This is up 6.5% from $5.27 billion during the same quarter last year.

"For the first quarter of 2017, I am pleased with our earnings results which reflect solid management of the business in a difficult retail environment as we overcame our most challenging comparisons from the prior year," said Dollar General CEO Todd Vasos. "Our same-store sales improved as we moved past the delay in income tax refunds and the timing shift of the later Easter holiday. We continue to execute on our focused strategy and implement our operating initiatives which we believe will improve customer traffic and transactions."

Net income for the quarter was $279 million, or $1.02 per share. This is down from $295 million, or $1.03 per share at this time last year.

The Tennessee-based chain of discount stores is in the process of acquiring newly-formed competitor Dollar Express. The 2015 merger of Dollar Tree and Family Dollar resulted in the sale of several Family Dollar locations which were then rebranded to Dollar Express. After less than two years in existence, the fledgling brand reached a deal with Dollar General, which expects the sale to close in June.

Dollar General (DG) shares ended the week at $78.91, up 9.4% for the week.

Lululemon Shares Soar on Earnings Beat

Lululemon Athletica Inc. (LULU) announced its first quarter earnings on Thursday, June 1. The athletic wear company reported revenue and earnings that beat expectations, causing shares to jump more than 10% in late-day trading.

Lululemon reported quarterly revenue of $520.31 million. This was up from last year's first quarter revenue of $495.52 million and surpassed the $513.69 million in revenue that analysts predicted.

"Our current outlook for the remainder of 2017 is strong, and I'm energized by the growth strategies taking shape," said Lululemon CEO Laurent Potdevin. "I'm also confident in our plans to restructure Ivivva and believe they are the best means to optimize this part of the business."

Lululemon announced that adjusted earnings per share for the first quarter were $0.32 per share, compared to $0.30 per share a year ago. This beat Wall Streets' earnings estimate of $0.28 per share.

The Vancouver, British Columbia-based company announced on Thursday that it will be shutting down 40 of its 55 Ivivva girl's clothing stores and converting half of them to Lululemon stores. Lululemon will continue selling clothing to girls, but will shift the sales online. The company expects that the closures and restructuring will be substantially complete by the end of the third quarter of fiscal 2017.

Lululemon Athletica Inc. (LULU) shares ended the week at $54.29, up 12.1% for the week.

Vera Bradley Reports Q1 Earnings

Vera Bradley, Inc. (VRA) reported quarterly earnings on Wednesday, May 31. The women's fashion company reported a loss in earnings that was better than analysts predicted.

Vera Bradley announced revenue for the first quarter was $96.14 million, which was below the $96.62 million in revenue that analysts predicted. Last year, revenue in the first quarter was $105.18 million.

"Challenges in the retail environment continued into the first quarter, although April sales trends did improve over those in February and March," said Vera Bradley CEO Robert Wallstrom. "Total revenues were in line with our expectations while our gross profit percentage was slightly below our guidance."

Vera Bradley reported an earnings loss of $4.05 million, which was more than last year's first quarter earnings loss of $2.42 million. On an earnings per share basis, the textile company reported a loss of $0.09 per share, which was better than the loss of $0.13 per share that Wall Street predicted.

Vera Bradley designs women's handbags, luggage, fashion and home accessories and sells its products in Vera Bradley Stores and also at department stores and specialty retail locations. During an earnings call on Wednesday, Wallstrom explained that the company's goal in fiscal 2018 is to increase Vera Bradley's customer count. To achieve this objective, Wallstrom said the company will be focusing on increasing brand desirability through its marketing program, expanding the brand's reach and focusing on driving up the company's comparable sales.

Vera Bradley, Inc. (VRA) shares ended the week at $8.88, up 7.6% for the week.

The Dow started the week of 5/30 at 21,045 and closed at 21,206 on 6/2. The S&P 500 started the week at 2,412 and closed at 2,439. The NASDAQ started the week at 6,204 and closed at 6,306.

Treasury Yields Fall as Economic Reports Underwhelm

Yields on U.S. Treasury bonds fell on Friday, June 2 following disappointing inflation and jobs reports. Weaker-than-expected economic growth could impact the Federal Reserve's decision to raise interest rates again this year.

On Tuesday, the Commerce Department released the personal consumption expenditures (PCE) price index for April, which showed an increase of 1.7%. This remains below the Federal Reserve's target of 2% inflation and fell short of matching the March rate of 1.9%.

"We are not seeing strong numbers in inflation," said Performance Trust Capital Partners LLC Vice President Andrew Pace. "The bond market is showing that without a pickup in inflation, many investors are not worried about a big rise in yields."

The benchmark 10-year Treasury note started the week at 2.25% on Tuesday morning and fell to 2.21% by the close of the market. After holding relatively steady throughout the week, the yield fell sharply during trading on Friday to 2.15%.

Friday's dip in Treasury yields came on the heels of the Labor Department's nonfarm payroll report for May. The report showed nonfarm jobs increased by 138,000 in the month of May, falling short of analysts' expected 185,000 job increase. Unemployment fell, however, to 4.3%.

The 10-year Treasury note yield finished the week of 5/30 at 2.16%, while the 30-year Treasury note yield was 2.81%.

Mortgage Rates Hold Steady

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, June 1. Mortgage rates showed relatively little movement from last week's numbers.

The 30-year fixed rate mortgage averaged 3.94% this week. This is down from 3.95% a week ago. Last year at this time, the 30-year fixed rate mortgage averaged 3.66%.

This week, the 15-year fixed rate mortgage averaged 3.19%, unchanged from last week. During this time last year, the 15-year fixed rate mortgage averaged 2.92%.

"In a short week following Memorial Day, the 10-year Treasury yield fell 4 basis points," said Sean Becketti, Chief Economist at Freddie Mac. "The 30-year mortgage rate remained relatively flat, falling 1 basis point to 3.94% and once again hitting a new 2017 low."

Based on published national averages, the money market account finished the week of 5/30 at 0.73%. The 1-year CD finished at 1.38%.

Published June 2, 2017
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