Friday February 3, 2023



Lululemon Reports Earnings

Lululemon Athletica, Inc. (LULU) released its fourth quarter and full-year earnings report on Tuesday, March 29. The athletic-apparel company's quarterly revenue and earnings increased year-over-year, causing its shares to rise more than 9.6% following the report's release.

Lululemon reported quarterly revenue of $2.1 billion. This is up 23% from last year's fourth quarter revenue of $1.12 billion. Full-year revenue came in at $6.26 billion, a 42% increase from 2020.

"2021 was another successful year for Lululemon, which speaks to the enduring strength of our brand and our ability to deliver sustained growth across the business," said Lululemon CEO, Calvin McDonald. "We are proud that we passed the $6 billion in annual revenue milestone for the first time, and successfully achieved our Power of Three growth target ahead of schedule. This was especially impressive given the challenging macro backdrop. We are entering the new year from a position of strength, which we'll build upon to continue delivering for our guests and shareholders in the years to come."

The company announced net income of $434.5 million or $3.36 per adjusted share for the quarter. This is up from net income of $329.8 million or $2.52 per adjusted share one year ago.

Lululemon's North America sales grew 21% in the quarter, while international sales increased 35% for the quarter. The company opened 17 new company-operated stores during the fourth quarter. This brought the total number of open stores to 574 stores by the end of the quarter. The additional stores led to inventory increasing to $966.5 million, up 49% compared to one year ago.

Lululemon Athletica, Inc. (LULU) shares closed at $367.44, up 14.7% for the week.

Chewy Announces Earnings

Chewy, Inc. (CHWY) released its fourth quarter and full-year earnings report on Tuesday, March 29. The online pet-related products company reported increased net sales for the quarter. The company stock fell 16% following the release of the report.

The company reported net sales of $2.39 billion for the quarter. This was up 17% from $2.04 billion in the same quarter last year. For the full year, the company reported net sales of $8.89 billion, a 24% increase from $7.15 billion.

"Our ability to deliver 24 percent net sales growth in 2021, on top of the outsized growth we delivered last year, reflects the durability of our business and the Pet category beyond the near-term benefits of the pandemic, and is a strong testament to Chewy's ability to execute in the face of rapidly evolving macro conditions," said Chewy CEO, Sumit Singh. "Net sales per active customer, or NSPAC, of $430 is a new company high and demonstrates strong customer loyalty and engagement on our platform, as well as our ability to steadily grow share of wallet. As we look to 2022 and beyond, our innovation pipeline remains robust, our strategy remains intact, and we remain optimistic about the growth opportunity ahead of us."

The company reported a net loss of $63.6 million this quarter. This was a drop from a net loss of $21.1 million the same time last year. Full-year net loss came in at $73.8 million, an improvement from $92.5 million one year ago.

The company reported its third straight quarterly loss and announced it expects sales to be in the range of $10.2 billion to $10.4 billion for this fiscal year. Chewy's fiscal year estimates missed analysts' expectations of $10.8 billion which is partially due to increasing costs from inflation and supply chain issues causing more of Chewy's items to be out of stock.

Chewy, Inc. (CHWY) shares ended the week at $40.93, down 12.2% for the week.

Dave and Buster's Releases Earnings

Dave and Buster's Entertainment, Inc. (PLAY) announced quarterly and full-year earnings on Monday, March 28. The arcade company stock rose 14.5% following the release of the report.

Revenue reached $343.1 million for the fourth quarter, a 1.2% decrease from revenue of $347.2 million reported in the same quarter in 2019. Full-year revenue came in at $1.30 billion, a 3.7% decrease compared to revenue of $1.35 billion in 2019.

"We are pleased to report strong fourth quarter and fiscal year financial results," said Dave and Buster's Interim CEO, Kevin Sheehan. "Fiscal 2021 was a demanding year but our store management teams – and all of our team members rose to the challenge working tirelessly to return our stores to fully operational status. This Company has significant upside potential and with our continued focus on innovation, growth and value creation, we are driving toward unlocking that value. We are optimistic about the future and look forward to sharing our ongoing progress with everyone."

Dave and Buster's reported quarterly net income of $25.7 million or $0.52 per adjusted share. Last year at this time, the company reported a net loss of $56.8 million or $1.19 per adjusted share.

Dave and Buster's began the fourth quarter with all 142 stores operating fully and opened one new store during the quarter. Returning to full operating capacity led to comparable store sales increase of 5.4% compared with the same period in 2019 during the first eight weeks of the first quarter in 2022. Walk-in comparable store sales also increased 9.1%.

Dave and Buster's Entertainment, Inc. (PLAY) shares closed at $48.27, up 9.1% for the week.

The Dow started the week of 3/28 at 34,833 and closed at 34,818 on 4/1. The S&P 500 started the week at 4,541 and closed at 4,545. The NASDAQ started the week at 14,177 and closed at 14,262.

Treasury Yields Fall

U.S. Treasury yields fell throughout the week as the March jobs report revealed the economy added more jobs than was expected. Yields continued to drop on Friday as unemployment numbers are returning better-than-expected.

On Friday, the Labor Department released its March jobs report. The report showed that U.S. employers added 431,000 jobs in March. The unemployment rate for March was 3.6%, down from 3.8% one month earlier.

"Despite concerns about inflation and the Russia-Ukraine war, American businesses are still hiring at full throttle, while more people are returning to the labor force (including retirees), likely drawn by higher wages," said senior economist at BMO, Sal Guatieri. "That's great news for the economy."

The benchmark 10-year Treasury note yield opened the week of 3/28 at 2.479% and traded as low as 2.341% on Wednesday. The 30-year Treasury bond yield opened the week at 2.589% and traded as low as 2.455% on Wednesday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment increased by 14,000, totaling 202,000 for the week. This was more than market estimates of 196,000 but returning to pre-pandemic unemployment levels.

"On-pace jobs growth in March would put the labor market on track to return to pre-pandemic employment levels this June," said Glassdoor senior economist, Daniel Zhao. "The prime-age employment population ratio is on a similar trajectory, only 1 percentage point below pre-pandemic levels."

The 10-year Treasury note yield closed at 2.39% on 4/1, while the 30-year Treasury bond yield was 2.44%.

Mortgage Rates Grow

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, March 31. The mortgage rates saw an increase this week due largely to rapidly rising inflation and continuing supply chain issues in the face of strong consumer demand for goods.

This week, the 30-year fixed rate mortgage averaged 4.67%, up from last week's average of 4.42%. Last year at this time, the 30-year fixed rate mortgage averaged 3.18%.

The 15-year fixed rate mortgage averaged 3.83% this week, up from 3.63% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.45%.

"Mortgage rates continued moving upward in the face of rapidly rising inflation as well as the prospect of strong demand for goods and ongoing supply disruptions," said Freddie Mac's Chief Economist, Sam Khater. "Purchase demand has weakened modestly but has continued to outpace expectations. This is largely due to unmet demand from first-time homebuyers as well as a select few who had been waiting for rates to hit a cyclical low."

Based on published national averages, the savings rate was 0.06% as of 3/21. The one-year CD averaged 0.15%.

Published April 1, 2022

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