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Tuesday November 12, 2019



Macy's Announces Earnings and Restructuring

Macy's, Inc. (M) reported quarterly earnings on Tuesday, February 26. The company reported a dip in revenue and profits for the quarter.

The department store company posted quarterly net sales of $8.46 billion, down from $8.67 billion during the same time last year. For the full year, Macy's reported $24.97 billion in net sales, up from $24.94 billion during the previous year.

"2018 was an important year for Macy's, Inc. as we changed the trajectory of the company and delivered positive comparable sales for the full year," said Macy's Inc. Chairman and CEO Jeff Gennette. "I'm pleased with the impact of our strategic initiatives, particularly as they gained traction in the back half of the year. Looking at the fourth quarter of 2018, while we delivered positive comparable sales against what was a strong holiday season in 2017, results were lower than our expectations."

Net income for the quarter came in at $740 million, or $2.37 per share. This was down from net income of $1.35 billion, or $4.38 per share, at this time last year. For the full year, Macy's reported net income of $1.10 billion.

In addition to its namesake retail stores, Macy's, Inc. operates Bloomingdales and Bluemercury. The retailer recently announced a restructuring plan in an effort to curb declining sales. The restructuring is projected to result in job cuts, affecting mainly upper management. The company expects the restructuring to save approximately $100 million.

Macy's Inc. (M) shares ended the week at $24.50, virtually unchanged for the week.

Home Depot Builds on Earnings

The Home Depot (HD) released its latest quarterly and full-year earnings report on Tuesday, February 26. The home improvement retailer posted increased sales and earnings.

The company reported $26.49 billion in net sales for the fourth quarter. This was an 11% increase from $23.88 billion in net sales in the same quarter last year, but missed analysts' revenue expectations of $26.57 billion. For the full year, Home Depot posted $108.20 billion in net sales, up from $100.90 billion during the previous year.

"We achieved record sales and net earnings in fiscal 2018, while making great progress on the strategic investments we laid out in December of 2017," said Craig Menear, Chairman, CEO and President of Home Depot. "We focused on enhancing the interconnected retail experience for our customers, providing localized and innovative product, and delivering best in class productivity."

Home Depot reported net earnings of $2.34 billion for the quarter, a 32% increase from $1.78 billion during the previous year's quarter. For the full year, the company reported net earnings of $11.12 billion, up from $8.63 billion during the previous year.

While revenue and profits increased for the quarter, Home Depot's earnings report failed to meet Wall Street analysts' expectations. The home improvement retailer posted a 3.2% increase in comparable store sales for the quarter, missing the 4.5% mark analysts expected. The company announced that it expects 5% comparable store sales growth in the year ahead.

The Home Depot (HD) shares ended the week at $74.08, down 1.6% for the week.

Shake Shack Releases Earnings

Shake Shack Inc. (SHAK) reported its fourth quarter and full-year earnings on Monday, February 25. The restaurant chain reported increased quarterly revenue and a decreased net loss.

The company reported revenue of $124.27 million for the quarter, up from $96.14 million during the same quarter last year. For the full year, Shake Shack posted $459.31 million in earnings, up from $358.81 million during the previous year.

"2018 was another year of exceptional growth and I couldn't be more proud of the entire Shake Shack team," said Randy Garutti, Shake Shack CEO. "We opened a record number of Shacks and drove strong revenue and profits while continuing to build the foundation for sustainable long-term growth ahead."

Shake Shack reported a net loss of $548,000, an improvement over a net loss of $11.03 million last year at this time. For the full year, the company posted $15.18 million in net income.

The New York City-based company has embarked on an expansion plan, opening 17 new company-owned restaurants across the U.S. as well as two international licensed restaurants, located in Hong Kong and Kuwait. Shake Shack expects to open up to 58 new stores in 2019.

Shake Shack Inc. (SHAK) shares ended the week at $52.47, down 2.1% for the week.

The Dow started the week of 2/25 at 26,126 and closed at 26,026 on 3/1. The S&P 500 started the week at 2,804 and closed at 2,804. The NASDAQ started the week at 7,585 and closed at 7,595.

Manufacturing Index Report Boosts Treasury Yields

Yields on U.S. Treasury bonds increased on Friday in response to a reported slowdown in domestic manufacturing growth. The report follows testimony by Fed Chairman Jerome Powell during which he remarked that the Fed will soon end its policy of balance sheet normalization.

On Friday, the Institute for Supply Management (ISM) released its Manufacturing Index for February. The latest index dropped to 54.2%, down from January's reading of 56.6%.

"Comments from the panel reflect continued expanding business strength, supported by notable demand and output, although both were softer than the prior month," said ISM Chair Timothy Fiore. "Consumption (production and employment) continued to expand but fell a combined 8.9 points from the previous month's levels."

Following the release of the Manufacturing Index, the benchmark 10-year Treasury note rose to 2.74%, up from Monday's opening yield of 2.67%. The yield on the 30-year Treasury bond was at 3.11%.

Earlier in the week, Treasury yields started to climb following statements made by Federal Reserve Chairman Jerome Powell. In testimony before the House Financial Services Committee on Wednesday, Powell indicated that the Fed will soon end its process of reducing the size of its balance sheet. The Federal Reserve has been allowing up to $50 billion in maturing bonds to run off its balance sheet each month.

"We've worked out, I think, the framework of a plan that we hope to be able to announce soon that will light the way all the way to the end of balance sheet normalization," Powell said. "We [are] going to be in a position . . . to stop runoff later this year."

The 10-year Treasury note yield closed at 2.76%, while the 30-year Treasury bond yield was 3.12%.

Little Movement for Mortgage Rates

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, February 28. The report showed rates remaining stable from last week.

The 30-year fixed rate mortgage averaged 4.35%, unchanged from last week. At this time last year, the 30-year fixed rate mortgage averaged 4.43%.

This week, the 15-year fixed rate mortgage averaged 3.77%, down slightly from last week's average of 3.78%. During this time last year, the 15-year fixed rate mortgage averaged 3.62%.

"Mortgage rates remained mostly unchanged this week, while mortgage applications rose 5.3% from the previous week," said Sam Khater, Chief Economist at Freddie Mac. "The general decline in rates we have seen recently, combined with rebounding pending home sales, hint at a strong spring homebuying season."

Based on published national averages, the money market account finished the week of 2/25 at 1.22%. The 1-year CD finished at 2.57%.

Published March 1, 2019
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