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Sunday September 15, 2019



Vera Bradley's Earnings Soar

Vera Bradley, Inc. (VRA) reported quarterly earnings on Wednesday, September 5. The specialty luggage and women's accessories brand easily surpassed estimates for its top and bottom line numbers.

The company reported that net sales for the second quarter increased to $113.6 million, above analysts' estimates of $113.14 million. During the same period last year, revenue was $112.4 million.

"At this time last year, we initiated Vision 20/20, our plan to strengthen our brand and financial health by drastically reducing clearance revenues and realigning our expense structure in order to create a solid foundation for future growth," said Vera Bradley CEO Robert Wallstrom. "We have made tremendous headway against our initiatives over the last year and especially in the last six months."

Vera Bradley reported net income of $9.3 million, or $0.26 per share, during the quarter, topping analysts' estimate of $0.17 per share. In the same quarter last year, the company reported net income of $2.2 million, or $0.06 per share.

Vera Bradley beat quarterly estimates due to a 30% increase in full price sales, both in store and online. The company attributed the sales growth to new stores opened in the last 12 months, despite a 4.9% decrease in comparable store sales during the quarter. The company's shares jumped just over 14% after the report's release. Vera Bradley expects sales for the full year to be in a range of $410 million to $420 million with earnings per share of $0.55 to $0.62.

Vera Bradley, Inc. (VRA) shares ended the week at $16.77, up 14.8% for the week.

Ollie's Reports Strong Quarter

Ollie's Bargain Outlet Holdings, Inc. (OLLI) reported its quarterly earnings on Wednesday, September 5. Revenue and profits both showed strong increases during the quarter.

The company reported revenue of $288.1 million for the second quarter, up 13.1% and exceeded Wall Street's expectations of $285 million. During the same period last year, revenue was $254.6 million.

"We are extremely pleased with our results for the quarter, which were strong across the board," said Ollie's President and CEO Mark Butler. "We once again exceeded our sales and earnings expectations, delivering total sales growth of 13% and adjusted net income per diluted share growth of 48%. This was our 17th consecutive quarter of positive comparable store sales, with a 4.4% comparable store sales increase on top of an 8.0% increase on a two-year stack basis."

Net income was $29.8 million during the quarter, an increase of 51.4%, or $0.45 earnings per share. The company's net income during the prior year's quarter was $19.7 million.

Ollie's Bargain Outlet reported a 4.4% increase in same store sales for the quarter. In addition, the company opened six new stores during the quarter, bringing the total number of stores to 282. Ollie's increased its full-year guidance to $1.22 to $1.23 billion, up from $1.21 to $1.22 billion forecasted in June. The company expects same store sales to grow 2.5% to 3% for the full year and hopes to open 36 to 38 new stores.

Ollie's Bargain Outlet Holdings, Inc. (OLLI) shares ended the week at $92.50, up 5.5% for the week.

Barnes & Noble Continues Decline

Barnes & Noble, Inc. (BKS) announced its first quarter results on Thursday, September 6. The book retailer's shares fell 7% following a decline in sales and profits.

The company reported that quarterly sales fell 6.9% to $795 million, missing even the lowest of Wall Street's estimates. During the same period last year, revenue was $853.3 million.

"We fully realize that cutting expenses does not alone provide a path to the long term viability of any retail business," said Barnes & Noble Chairman Len Riggio. "Therefore, our short and long term focus is to grow our top line, and, by doing so, provide us the cash flow needed to grow our business. Comparable store sales have sequentially improved each month and continued into the second quarter."

Barnes & Noble reported a quarterly net loss of $17.0 million, or $0.23 per share. During the same quarter last year, the company reported a $10.8 million net loss, a loss of $0.15 per share.

Barnes & Noble's business has been in decline for 20 out of 23 previous quarters. Comparable store sales fell 6.1% during the quarter but showed sequential improvements each month in the quarter. Revenues for the company's Nook e-reader segment accounted for $25 million in sales for the quarter, down from $29.5 million last year.

Barnes & Noble, Inc. (BKS) shares ended the week at $5.33, up 2.5% for the week.

The Dow started the week of 9/4 at 25,916 and closed at 25,917 on 9/7. The S&P 500 started the week at 2,897 and closed at 2,872. The NASDAQ started the week at 8,088 and closed at 7,903.


Strong Jobs Report and Wage Growth Buoy Treasury Yields

U.S. Treasury yields increased early in the week in response stronger than expected economic expansion. Treasury yields went even higher on Friday in response to the latest U.S. jobs report.

The U.S. Department of Labor released its monthly jobs report on Friday, September 7. Nonfarm payrolls rose by 201,000 in August, surpassing analysts' expectations of 190,000 new jobs added. Unemployment held steady at 3.9% for the month.

Wages grew by 0.4%, the largest annual increase in more than nine years. Average hourly wages grew by $0.10 in August. The 10-year Treasury yield closed Thursday at 2.88% in anticipation of the economic data. The 10-year Treasury yield surged to 2.95% in response to the strong jobs report and wage growth.

"The data is becoming even more important than ever now as the market tries to decide whether the Fed will raise a fourth time this year in December or take a pause," wrote Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. "Average hourly earnings grew faster than expected and more jobs were created than expected which on balance should help push the Fed in the direction of raising rates."

On Tuesday, the Institute for Supply Management released its manufacturing index for August. The index rose from 58.1 in July to 61.3 in August. This jump was the fastest expansion in over a decade.

The benchmark 10-year Treasury note hit a high of 2.92% during trading on Wednesday following the strong manufacturing numbers. The 30-year Treasury note peaked at 3.08% on Wednesday.

"2018 has been a banner year for manufacturing, despite concerns about tariffs and trade barriers that have been ongoing for months," said Jefferies' senior money market economist Thomas Simons. "The increases in the prices of various input materials from tariffs and natural inflation pressure hasn't significantly dampened overall activity."

The 10-year Treasury note yield closed at 2.94% on 9/7 while the 30-year Treasury bond yield was 3.10%.


Mortgage Rates Increase

Freddie Mac released the results of its latest Primary Mortgage Market Survey on Thursday, August 30. The report showed a slight jump in 15-year and 30-year mortgage rates.

The 30-year fixed rate mortgage averaged 4.54% this week, up from 4.52% at this time last week. Last year at this time, the 30-year fixed rate mortgage averaged 3.78%.

This week, the 15-year fixed rate mortgage averaged 3.99%, up from last week's average of 3.97%. The 15-year fixed rate mortgage averaged 3.08%, at this time last year.

"Borrowing costs may be slowly on the rise again in coming weeks, as investors remain optimistic about the underlying strength of the economy," said Sam Khater, Chief Economist at Freddie Mac. "It's important to note that rates are now up three-quarters of a percentage point from last year and home prices - albeit at a slower pace - are still outrunning rising inflation and incomes."

Based on published national averages, the money market account closed at 1.29% on 9/7. The 1-year CD finished at 2.52%.

Published September 7, 2018
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