Updated: 11-14-2018

Quotes at time of story, top stories today: 12:42PM | 12:08PM | 10:25AM | 09:57AM | 09:46AM | 09:36AM | 09:20AM

12:42PM ET
Macy's trades lower despite solid third quarter results

Macy's (M) is trading 5% lower despite reporting solid third quarter results this morning.

Same store sales grew 3.1%, 60 basis points better than expected. Adjusted for the calendar shift that benefited the first quarter and weighed on second quarter results, comparable store sales have grown four quarters in a row after declining eleven consecutive quarters.

Macy's executives said consumer spending remains strong.

Meanwhile, the company's initiatives are taking hold. Management said eCommerce is Macy's 'recipe for success'. The company's digital business is growing double digits. Stores are becoming more like fulfillment centers. Buy online and pick up in store and buy online ship to store initiatives are doing well.

Coming back to third quarter results, gross margin was flat as merchandise margin expansion was offset by higher delivery costs.

Adjusted earnings per share grew 22% to $0.27. Excluding asset sales gains in both periods, adjusted EPS grew 113% to $0.17/share.

The company said inventories were on track to be down by year end and management sees momentum continuing in to the fourth quarter and next year.

Macy's raised guidance for sales and earnings while reaffirming its gross margin outlook.

Investors may be concerned about whether positive comparable store sales are sustainable.

Macy's is the largest department store in the US and trades at ~8x earnings estimates. That represents a notable discount to Dillard's (DDS) at 12x, Kohl's (KSS) at 14x, higher end Nordstrom (JWN) at 17x and the average retailers at 16x.

One would think that Macy's recent success puts them on track to emerge as a survivor following the collapse of Bon-Ton and Sears, but investors are not yet willing to pay up for Macy's earnings despite support from the 4% dividend yield.

12:08PM ET
Looking Ahead - November 15, 2018 - Retail Sales Report

Retail sales are watched closely every month. That will be the case again on Thursday when the data for October are released, helping to shape forecasts for fourth quarter GDP.

Retail Sales Report for October (Thursday, November 15, 8:30 a.m. ET)

  • Why it's important
    • It's the first comprehensive look of the month at consumer spending on durable and non-durable goods.
      • Spending on goods represents roughly 1/3 of consumer spending while spending on services (e.g. hair cuts, utilities, insurance, etc.), which is not captured in this report, comprises the other 2/3 of consumer spending.
    • The report provides an opportunity to determine if consumers are spending more, or less, on discretionary items, which helps paint a picture of underlying strength (or lack thereof) in the U.S. economy.
    • The report factors into GDP computations through the measurement of core retail sales, which exclude auto, gasoline station, building equipment and materials, and food services sales.
      • Core retail sales are used in the computation of the goods component for personal consumption expenditures.
    • This report will directly influence expectations for fourth quarter GDP.
    • Consumer spending activity will contribute to the Federal Reserve's thinking about the US economic outlook and path of monetary policy.
  • A closer look
    • Retail sales increased 0.1% in September on the heels of a 0.1% increase in August.
    • Excluding autos, retail sales declined 0.1% in September following a 0.2% increase in August.
    • The Numbers:

      Thurs., Nov. 15 Time of Release Briefing.com Consensus Prior
      Retail Sales 8:30 ET 0.5% 0.1%
      Retail Sales, Ex Auto 8:30 ET 0.5% -0.1%

 

  • What's in play

    • Sector ETFs
      • SPDR S&P Retail ETF (XRT)
      • Market Vectors Retail ETF (RTH)
      • Consumer Discretionary Select Sector SDPR Fund (XLY)

    • Index ETFs
      • SPDR S&P 500 ETF (SPY)
      • Invesco QQQ ETF (QQQ)
      • iShares Russell 2000 (IWM)
      • SPDR Dow Jones Industrial Average ETF (DIA)

    • Treasuries

    • S&P futures

    • Fed Funds futures

10:25AM ET
Canada Goose soars to all-time highs as China is going well, results and guidance impress

Toronto-based outdoor apparel company Canada Goose (GOOS 68.82, +10.24, +17.5%) trades to all-time highs in reaction to better than expected second quarter results and a fiscal 2019 guidance raise.

Simply put GOOS reported both solid results and upped guidance. Specifically, earnings of CAD$0.46 and revenue growth of 33.7% on healthy inventory levels to CAD$230.3 million was enough to beat the market expectations on both counts. Management also highlighted that, relative to last year, the Canadian dollar depreciated in comparison to the U.S. dollar, euro, pound, benefiting the company's reported top line.

Breaking it down a bit, Canada Goose reported wholesale revenue of CAD$179.9 million from CAD$152.1 million. Management noted the increase was attributable to higher order values from existing partners, earlier shipment timing relative to last year and favorable foreign exchange rate fluctuations. What's more, direct-to-consumer (DTC) revenues doubled to CAD$50.4 million from CAD$20.2 million. The company stated that the strong performance of well-established retail stores and e-commerce sites, and incremental revenue from four new retail stores opened in the quarter were both significant contributors.

Additionally, gross profit increased to CAD$128.5 million, a gross margin of 55.8%, compared to CAD$87.1 million, a gross margin of 50.6%. Canada Goose suggested that the increase in gross margin was driven by a greater proportion of DTC revenue, as well as underlying gross margin expansion at the respective channel levels.

Unallocated corporate expenses rose to CAD$34.2 million, compared to CAD$16.2 million. In part due to the expansion to China, the company noted the increase was due to investments to support growth including marketing, corporate headcount and IT, as well as higher professional fees and other costs relating to public company compliance.

Based on the strength of performance across the business with a particularly significant contribution from the DTC channel, Canada Goose is raising its fiscal 2019 financial guidance; the company now expect annual revenue growth of at least 30%, adjusted EBITDA margin expansion of at least 150 basis points and annual growth in adjusted net income per diluted share of at least 40%. This compares to the company's prior forecast of at least 20%, 50 basis points and 25%, respectively. The company's revised guidance also assumes annual wholesale growth in the high single digits as well as the opening of five new retail stores.

In terms of adjusted EBITDA margin expansion, Canada Goose continues to expect a positive but less pronounced increase relative to last year. This is due to the SG&A growth investments in IT in the company's Greater China's business unit, as well as variable SG&A fees that it pays to its operating partners on incremental revenue from both Tmall and its retail stores in Hong Kong and Beijing.

Into the print shares of GOOS were up about 85.6% YTD vs the modest 6.6% gains in the XRT.

09:57AM ET
Cardlytics trades lower on Q3 earnings, recent IPO has struggled a bit

Cardlytics (CDLX), which made its IPO debut in February 2018, is trading sharply lower today after reporting Q3 results. Cardlytics provides a platform that helps marketers determine where and when consumers are spending money. The company partners with more than 2,000 financial institutions to run their banking rewards programs. In turn, CDLX has a secure view into where and when consumers are spending their money. CDLX uses these insights to help marketers identify, reach, and influence likely buyers.

CDLX has an interesting backstory. Its founders are former bankers. They noticed that all that data from banking transactions were not being monetized properly. With this data distributed across approximately 10,000 financial institutions (FIs) in the US alone, it needed to be aggregated and standardized to provide effective data for marketing. CDLX's founders partnered with FIs and architected a platform that leverages machine learning and a robust set of algorithms to analyze trillions of dollars of raw purchase data from tens of millions of accounts.

The Cardlytics Direct platform helps solve fundamental problems for marketers. Marketers increasingly have access to data on the purchase behavior of their customers in their own stores and websites. However, they lack insight into their customers' purchase behavior outside of their stores and websites, as well as the purchase behavior of people who are not yet customers. The reality is, no matter how robust their own customer data, marketers only see a small portion of their customers' overall spend. As a result, it is difficult for businesses to focus their marketing investments on the most valuable customers.

Turning to the Q3 results, CDLX reported a non-GAAP loss of $(0.15), which was better than the $(0.20) loss last year. However, revenue rose just 10.1% year/year to $34.6 mln, that was below prior guidance of $36-38 mln. And the Q4 revenue guidance of $43-45 mln was also below market expectations.

There is not a lot of explanation in the press release as to why the revenue was shy of prior guidance. However, CDLX has contracts with a lot of banks and sometimes the timing of those deals can be difficult to predict. Most recently, CDLX has begun rolling out Cardlytics Direct with Chase, which CDLX expects will significantly increase its FI MAU base over the next few quarters. In fact, CDLX describes the Chase deal as one of the most significant implementations in Cardlytics' history, in terms of overall scale and complexity. So perhaps that revenue is taking longer than expected to materialize, but it's not clear.

In sum, this was a rough quarter for CDLX. And investors tend to be pretty harsh with recent IPOs. So a revenue miss on just the third quarterly report for a new IPO can spook some investors. Typically, with a recent IPO, the market likes to see big revenue growth and large beats and CDLX's growth seems a bit more muted. It could also raise concerns about this important deal with Chase.

The stock has had a difficult time since going public. The IPO priced at $13 in February and traded above $28 as recently as mid-September. But now it's trading around $16. While this appears to be an attractive market that has a lot of potential over the long term, CDLX seems to be having some problems.

On a final note and on a more general level, we have to wonder if CDLX may get impacted in the future as consumers start to push back on data sharing. The Facebook data sharing incident caused some backlash at Facebook. Many people may not realize their banking transactions are being aggregated and sold to marketers. There may be some pushback at some point and consumers may demand stricter regulations.

09:46AM ET
Murky Conditions in IPO Market Dampen Vapotherm's Pricing
Coming off a strong week for the stock market, there was plenty of optimism that conditions would begin to thaw for IPOs. As followers of the IPO market are well aware, the past several weeks have been erratic at best, with strong pricings few and far between. Unfortunately, while things are looking up for stocks today, the week got off to a very rough start, negating most off those good vibes from last week.

Wild, unpredictable swings in the stock market are not conducive to a healthy IPO market. Companies looking to go public don't want to see their stock get pummeled out of the chute, while investors are far more hesitant to take on significant risk by buying stock in a (usually) unproven company.

So, with that context, it doesn't come as much of a surprise that medical technology company Vapotherm (VAPO) saw muted interest in its deal. Specifically, its 4.0 million share IPO priced at $14, the low end of the $14-$16 expected range, generating total gross proceeds of $56 million. That said, it could have been much worse. Over the past few weeks, we have seen plenty of IPOs get cut in size, while also pricing at the low end of expectations, or worse.

The deal was led by BofA Merrill Lynch and William Blair. Shares are set to open for trading later this morning on the NYSE.


Overview

Vapotherm (VAPO) is a medical technology company which has developed proprietary Hi-VNI technology products that help with treatment of patients suffering from respiratory distress.

The Hi-VNI technology allows for the delivery of heated, humidified, and oxygenated air at a high velocity through a small nasal interface. The company's Precision Flow systems are considered clinically-validated alternatives to current treatment of respiratory distress offered in a hospital setting. At the end of September, more than 1.5 million patients have undergone treatment with Vapotherm's Precision Flow systems.

The FDA granted the company's de novo request for an expanded indication for a new version of the company's Precision Flow system. Furthermore, Vapotherm's updated Precision Flow system is the only device currently listed under a new regulatory classification created by the FDA. According to the new designation, the system will be identified as 'a high velocity nasal insufflation device that augments breathing of spontaneously breathing patients suffering from respiratory distress in a hospital setting.' The company believes its system is an attractive alternative to current standards of care for the treatment of respiratory distress.

The company has three versions of its Precision Flow systems. The systems are sold to hospitals through a direct sales organization in the U.S. and through distributors in select countries outside the U.S. The company also has clinical educators who focus on medical education efforts to increase adoption and utilization. The company targets, physicians, respiratory therapists, and nurses who work in acute hospital settings or ICUs.

Vapotherm has sold its Precision Flow systems to more than 1,200 hospitals across the U.S. Most of these systems are used in intensive care units.


Financials

The company generates revenue through sales of capital units of its Precision Flow systems and single-use disposables. Total revenue in 2017 increased 18.3% year-over-year to $35.60 million. Through the first nine months of 2018, the company's revenue grew 21.8% to $30.70 million.

Gross margin increased to 37.2% in 2017 from 33.0% in 2016. Gross margin for the first nine months of 2018 ticked up to 38.9% from 38.8% one year ago. Revenue from single-use disposables made up 67.3% of total 2017 revenue and 66.7% of revenue recorded through the first nine months of 2018. International revenue made up 21.5% of total 2017 revenue and 21.9% of revenue recorded through the first nine months of 2018.

The company reported a loss per share of $3.36 for 2017. Through the first nine months of 2018, the company's net loss per share hit $2.61. Vapotherm used $29.25 million for operating activities in 2017. Through the first nine months of 2018, the company used $28.60 million for operating activities.

09:36AM ET
SurveyMonkey Climbs After Beating Expectations

SurveyMonkey (SVMK 11.49, +0.20) is higher by 1.8% after reporting better than expected results for the third quarter.

SurveyMonkey was founded in 1999, but the provider of online survey services and tools did not begin trading on the public market until late September. The stock opened at $18.75 on September 26 after pricing at $12.00, but steady selling pressure over the next few weeks drove shares to a 2018 low just above $10.00 per share.

The company's survey platform generates an average of more than 20 million answered questions daily across 190 countries and territories. Organizations employ SVMK's platform to collect Net Promoter Score data from customers, measure employee engagement, and conduct market research. More than 60 million registered users have used the survey platform since inception. More than 16 million users were active within the past year. The company has more than 600,000 paying users across more than 300,000 organizations. The company has paying users in 98% of the companies that make up Fortune 500.

In its first report as a public company, SurveyMonkey reported a slimmer than expected third quarter loss of $0.01 per share on revenue, which jumped 17.9% year-over-year to $65.21 million, which was also ahead of expectations.

The company reported a third quarter net loss of $102.40 million, which was driven by IPO-related stock-compensation charge. Adjusted EBITDA totaled $16.99 million, representing year-over-year growth of 28.1%.

Gross margin weakened to 64.4% from 70.6% one year ago. Research & Development expense grew 247.2% year-over-year to $51.77 million.

Looking ahead, the company expects that revenue for the fourth quarter will be between $64.80 million and $66.80 million, which would translate to year-over-year growth between 14.0% and 17.0%. The company's revenue guidance range is on the high end of market expectations.

09:20AM ET
Wix.com trades lower despite solid Q3 results/guidance; getting better at monetization

Wix.com (WIX) is trading lower today despite reporting upside Q3 results and providing in-line guidance. This Israel-based company offers a web development software platform enabling small business owners to bring their businesses online. WIX offers some free products (must become a registered user) with the hope they will upgrade to paid subscribers at some point. Wix currently has over 137 mln registered users worldwide.

Its core product is the Wix Editor, a drag-and-drop website editing platform with templates, graphics, image galleries and fonts. Users create websites that can be viewed across all major browsers and mobile devices. WIX has created templates in several verticals (retail/online stores, hotel and property mgmt, music and restaurants etc.) that can be set up with minimal effort and without the need to write code.

Its other major offering is its App Market, which allows users to easily install 250+ free and purchasable apps (social plug-ins, online marketing, CRM mgmt, contact forms, payment processing etc.) These apps add additional functionality and are easily integrated into WIX websites with one click and without any coding. Another offering is Wix ADI, which is the world's first platform that combines website design and content creation with artificial intelligence to enable complete websites to be created in a matter of minutes. In December 2017, Wix officially launched Wix Code to all users. Wix Code greatly expands Wix's addressable market by bringing a platform for creators/designers to take advantage of a serverless development environment.

Turning to the Q3 results, non-GAAP EPS jumped to $0.39 from just $0.01 last year, which was much better than market expectations. Revenue rose 40.2% year/year to $155.6 mln, above prior guidance of $152-153 mln. For Q4, WIX expects revenue of $161-162 mln, which is roughly in-line with expectations.

What stands out to us about the operating metrics is that registered users grew 20% YoY to 137 mln. That's a lot of growth off of such a large base. It's easy to post huge growth numbers when a platform is small, but 20% growth is quite robust for a 100+ mln registered user pool. Also, Wix says accelerating monetization drove results as average revenue per subscription increased 11% YoY and conversion increased.

Also worth noting is that Wix.com has gotten into the payments game with its recently launched Wix Payments, a payments platform designed to help owners manage and grow their business. Wix Payments allows users to set up and accept payments without the need to integrate third party payment providers. Wix Payments also enables small businesses to manage their entire financial flow, from sales to payouts, in a single place, solving a significant challenge with doing business online. Wix Payments is available today in Brazil and will be available in the US and Europe in early 2019.

Another positive is that Wix Code has not even been out for a year, but it's really seeing good momentum as new functionalities have enabled users to create more complex websites with Wix Code. Wix is penetrating the professional market quicker than they had expected. Users of Wix Code who have purchased subscriptions are purchasing multiple subscriptions at a rate of more than 4x non-Wix Code users.

In sum, it's not entirely clear why the stock is down despite the upside results. It may be that Wix saw a dip in non-GAAP gross margin to 80% from 84% last year although this appears to be more of an accounting change issue. Also, perhaps investors wanted to see some upside guidance for Q4. Despite the stock reaction, this looks like another good quarter for Wix. It was also good to see them announce a $100 mln share repurchase plan.

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