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Saturday August 15, 2020



Walmart Releases Quarterly Earnings Report

Walmart Inc. (WMT) released its latest quarterly earnings on Thursday, August 15. The retail giant posted strong earnings for the quarter.

The company posted revenue of $130.37 billion during the second quarter. This was up 1.8% from $128.03 billion in earnings at this time last year.

"From a performance point of view, we're pleased with the strength we see in the business," said Walmart President and CEO Doug McMillon. "Customers are responding to the improvement's we're making, the productivity loop is working, and we're gaining market share. We're on track to exceed our original earnings expectations for the year, and that's possible because of the work our associates do every day."

Walmart's net income for the quarter was $3.61 billion, or $1.26 per share. Last year at this time, the company posted a net loss of $861 million, or $0.29 per share.

The company's U.S. Walmart segment led the way with net sales of $85.2 billion in the second quarter, up 2.9% from the prior year. Comparable sales at domestic Walmart locations increased 2.8%. In the International segment, Walmart posted a 1.1% decrease in net sales, down to $29.1 billion. Finally, sales in the company's Sam's Club segment grew 1.8% for the quarter, up to $15.0 billion.

Walmart Inc. (WMT) shares ended the week at $112.97, up 5.9% for the week.

Macy's Posts Disappointing Earnings Results

Macy's, Inc. (M) posted its latest earnings results on Wednesday, August 14. The big box retailer posted profits that failed to meet Wall Street's expectations.

The company reported revenue of $5.55 billion for the quarter, slightly ahead of analysts' expected revenue of $5.54 billion. Last year at this time, Macy's reported $5.57 billion in revenue.

"Macy's, Inc. delivered another quarter of comparable sales growth," said Macy's Chairman and CEO Jeff Gennette. "That said, we had a slow start to the quarter and finished below our expectations. Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women's sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism."

Macy's reported net income of $86 million, or $0.28 per share, falling short of analysts' expectations of $0.45 per share. This was down from $166 million, or $0.53 per share during the same quarter last year.

Shares of Macy's stock fell 13% on Wednesday, following the company's earnings release. The company posted overall comparable store sales of 0.3% for the quarter, missing analysts' expected 0.4% increase. In the wake of the report, Macy's maintained its guidance related to comparable store sales at "flat to up 1%," The company lowered its expected earnings per share from a range of $3.05 to $3.25 to a range of $2.85 to $3.85.

Macy's, Inc. (M) shares ended the week at $15.98, down 17.7% for the week.

JCPenney Reports Earnings

J. C. Penney Company, Inc. (JCP) reported its latest quarterly earnings on Thursday, August 15. The department store chain posted a net loss for the quarter and reported decreased comparable sales.

Revenue for the quarter came in at $2.62 billion. This was down 7.4% from revenue of $2.83 billion at this time last year.

"I am pleased with the results we delivered this quarter and the progress we are making against our plan," said JCPenney CEO Jill Soltau. "While we still have work to do on our topline, I strongly believe that growing sales in an unprofitable way is simply not an option. The only way I know how to reconstruct a business, is through a holistic approach across all the key tenets of strategic, purposeful and effective retailing."

The company reported a net loss of $48 million for the quarter. This is an improvement over the company's $101 million net loss at this time last year.

JCPenney reported a comparable store sales decrease of 9% for the quarter, exceeding analysts' expected 5.2% drop. Last year at this time, the company reported a 0.3% increase in comparable store sales. The company attributed the higher-than-expected decrease in comparable sales to its recent move to discontinue appliance sales. Adjusting for this change, JCP reported a 6% decrease in comparables for the quarter.

JCPenney (JCP) shares ended the week at $0.61, relatively unchanged for the week.

The Dow started the week at 26,170 and closed at 25,886 on 8/16. The S&P 500 started the week at 2,907 and closed at 2,889. The NASDAQ started the week at 7,907 and closed at 7,896.

Yield Inversion Sparks Recession Concerns

Treasury yields fell this week as investors flocked to the perceived safety of bonds during a tumultuous week for the stock market. This week's market volatility has produced mixed reactions from analysts regarding whether a recession is on the horizon.

On Wednesday, the yields on the 10-year Treasury note fell to 1.623%, dipping below the yield on the 2-year Treasury note, which was at 1.634%. This was the first inversion of this part of the yield curve since 2007.

"There isn't a hard and fast signal for a future recession, but there is this correlation between curve inversions and recessions," said Brian Daingerfield of NatWest Markets. "That's what the market has been discussing."

Wednesday's brief inversion kicked off a dismal day for the stock market. The Dow Jones Industrial Average fell more than 800 points for the day, a 3.1% drop. The S&P 500 and NASDAQ both took similar hits at 2.9% and 3%, respectively.

"Although the recent drop is worrying, it is also normal," said Brad McMillan, Chief Investment Officer at Commonwealth Financial Network. "In fact, it is consistent with the market's rational efforts to price in the effects of both a slowing economy—not a recession—as well as the ongoing trade confrontation."

Despite Wednesday's poor performance, stocks showed signs of a rebound on Friday. The Dow Jones Industrial Average was up more than 270 points during early trading.

The 10-year Treasury note yield closed at 1.54% on 8/16, while the 30-year Treasury bond yield was 2.00%.

Mortgage Rates Remain Low

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 15. The 30-year fixed rate mortgage remained at a three-year low.

This week the 30-year fixed rate mortgage averaged 3.60%, unchanged from last week. Last year at this time, the 30-year fixed rate mortgage averaged 4.53%.

The 15-year fixed rate mortgage averaged 3.07%, up from last week's average of 3.05%. The 15-year fixed rate mortgage averaged 4.01% at this time last year.

"The sound and fury of the financial markets continue to warn of an impending recession, however, the silver lining is mortgage demand reached a three-year high this week," said Sam Khater, Chief Economist with Freddie Mac. "The decline in mortgage rates over the last month is causing a spike in refinancing activity—as homeowners currently have $2 trillion in conventional mortgage loans that are in the money—which will help support consumer balance sheets and increase household cash flow."

Based on published national averages, the money market account closed at 1.25% on 8/16. The one-year CD finished at 2.31%.

Published August 16, 2019
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