Brown-Forman Down Modestly Following Earnings/Guidance Results
Brown-Forman (BF.B $91.92 -0.25) is trading modestly lower today following its quarterly results as well as conference call, which just ended a short while ago.
The company reported earnings earlier this morning of $0.70/share, which fell slightly short of expectations. On the top line, revenue rose 2.8% to $921 million from the prior year's quarter, which also fell a little short of expectations.
It appears that top line growth would have been more impressive, but growth was impacted by the difficult comparison with the prior year period when sales benefited from significant distributor and retail buy-ins, related primarily to price increases.
For the 3% growth that was seen, its price/mix contributed two points to net sales growth and gross margin expanded 50bps. Jack Daniel's trademark grew underlying net sales 5% (+4% reported).
Sales grew 15% (+10% reported) in the emerging markets, a continuation of the strong trends the company has been experiencing in these fast growing markets. The company .drove double-digit growth in many emerging markets, including Turkey, Russia, Brazil, and Indonesia.
However, at the same time the company states that the geopolitical environment remains fragile, particularly in Russia, where iconic American brands are experiencing increased scrutiny, including some of Brown-Forman's brands.
As a result, the company reaffirmed EPS guidance for its fiscal year 2015 at $3.25-3.45 (now including $0.06 FX headwind), which is in-line with expectations. Revenue was also reaffirmed at +6-8% growth, which calculates to approximately $4.18-4.26 billion, which is also in-line with expectations.
While first quarter results were negatively impacted by inventory reductions, the company expects stronger reported and underlying results over the balance of the year, driven by more stable inventory levels and expanding global demand for the company's portfolio of brands.
The stock is now sitting near its 20-day moving average on a daily chart, but is currently below the 50 and 100-day moving avg. However, it remains comfortably above its 200-day moving average, which is at $85.74.
Chico's Bottom Line Hit by Margin Pressures
While the broader market has done just fine in 2014, women's apparel retailer Chico's FAS (CHS 15.39, -0.63) has not. Its stock is down 18% year-to-date and is under pressure today following the company's second quarter earnings report.
The headline trouble started with the understanding that Chico's profit of $0.20 per diluted share fell short of analysts' expectations. It also marked a 26% decline from the year-ago period despite the benefit of a lower tax rate and having roughly 6% fewer diluted shares outstanding on a weighted average basis.
Chico's managed a 3.3% increase in net sales to $649.5 million on comparable-store sales growth of 0.3%; however, promotional activity that pressured gross margins and higher SG&A expenses that pressured operating margins were the main drivers behind the decline in net earnings.
To be exact, Chico's gross margin rate fell by 240 basis points to 54.3% while its operating margin rate contracted by 330 basis points to 8.2%.
On a somewhat better note, the company's core Chico's/Soma Intimates segment enjoyed a 1.4% comparable-store sales increase after a 3.1% decline in the year-ago period. This segment accounted for 64.4% of net sales versus 63.6% of net sales last year.
The White House\Black Market brand, which accounted for 31.9% of net sales, reported a 1.9% comparable-store sales decrease on top of a 1.5% in the same period a year ago.
Chico's didn't offer any guidance in its earnings press release.
Express Sees Turnaround Quarter on Better-Than-Expected EPS and Revenues
Apparel and accessories dealer Express (EXPR) is trading higher by 12.3% in the pre-market after reporting better than expected Q2 results.
Earnings came in above expectations and surpassed the guidance that was given in last quarter's disappointing earnings release. Revenue declined year-over-year but also surpassed analyst expectations.
The company also issued in-line guidance for its Q3 EPS and raised previous guidance for FY15 EPS, while reaffirming FY15 guidance for negative mid-single digits comps.
Express attributed the better than expected results to performance in its Factory Outlet stores and merchandise margins that came in above expectations at the company's full priced retail stores.
Today's better than expected results from Express are encouraging as they follow a string of disappointing quarters that have resulted in a poor performance for the stock during 2014. Prior to this morning's post-earning spike, EXPR equity was down 22% year to date. After hitting a 52-week low of $11.80 following last quarter's earnings, the stock gapped higher in mid-June when activist investor Sycamore Partners indicated it was interested in acquiring the company. Express subsequently established a Special Committee of the Board to determine a course of action. In this morning's report, the company noted that it did not repurchase any stock during the quarter, due to Sycamore Partners' interest in acquiring the company.
Looking at peers, it's worth noting that this morning's results from Express follow earnings reports last week from peers American Eagle (AEO), Buckle (BKE) and Aeropostale (ARO), where AEO and BKE each reported earnings beats and saw strong stock reactions. The retail sector has outperformed over the past month, rising 4.3% vs. a 1.3% gain in the S&P 500 during the same period.
The stock is up 15.7% since its 52-week low of 11.80 on May 30, and is currently gapping up in premarket trading to $16.25.
Tiffany & Co. Has Sparkling Second Quarter Report
Little blue boxes from Tiffany & Co. (TIF 100.77) always contain a pleasant surprise for their recipients. The same can't be said for every earnings report from the jewelry retailer, but in the case of its second quarter earnings report, it was basically all pleasant.
The tone was set in the first few sentences of the earnings press release, which noted: "Net earnings rose 16% due to a 7% increase in worldwide net sales and a higher gross margin. Management increased its earnings forecast for the current fiscal year by five cents per share."
Rising gross margin rates are every retailer's dream. For Tiffany & Co., they jumped to 59.9% in the second quarter from 57.5% in the year-ago period. That was the end result of favorable product costs and price increases taken across all categories and regions. Tiffany & Co. saw a 9% increase in SG&A expenses, but its operating margin still expanded by 190 basis points to 21.0% due to the higher gross margin.
Notably, the increase in worldwide net sales showed there wasn't much pushback to the price increases and that demand for the company's products was solid.
Total sales in the Americas region rose 9% to $484 million. They were up 14% in Asia-Pacific to $237 million and up 8% in Europe to $120 million. The only weak spot was Japan, which saw sales decline 13% to $119 million, yet it would be remiss not to add that the decline was somewhat expected following a robust 20% increase in the first quarter when customers accelerated their purchases in front of a big jump in Japan's consumption tax on April 1.
For the fiscal year ending January 31, 2015, Tiffany & Co. is now forecasting net earnings in the range of $4.20-$4.30 per diluted share versus its previous forecast of $4.15-$4.25 per diluted share. The improved outlook is going to be helped along by an expected high-single-digit increase in worldwide net sales and increasing operating margins due to higher gross margin and SG&A expense growth that is less than sales growth.
That updated forecast is akin to putting a white ribbon on its little blue box of pleasant earnings news. Shares of TIF, which are up 9% year-to-date, are indicated nearly 2.0% higher in pre-market trading.
Brown Shoe Company shares up 1% following beat on earnings
Footwear retailer Brown Shoe Company (BWS $31.74 +0.37) is trading higher by 1% pre-market trading following earnings. The company reported EPS of $0.41 which was ahead of analyst expectations, on revenue growth of 2.3% or $635.9 mln which was roughly in line with estimates.
BWS reported that same store sales rose 1.6%.
Consolidated gross profit of $259.6 million was up 2.0% in the second quarter, while gross margin decreased by 20 basis points to 40.8%.
Inventory at the end of the second quarter was $657.7 million, up 6.8% from $615.9 million in the prior year. Wholesale inventory was up 22.9%, while Famous Footwear inventory was up 2.5%.
Finally, the company increased its EPS guidance for the fiscal year 2015 to $1.50-1.60 (in line with estimates) from prior guidance of $1.47-1.57 on revenue of $2.58-2.60 bln which was reaffirmed from prior guidance. BWS also sees Famous Footwear same-store sales up low-single digits and Specialty Retail net sales down mid-single digits.
BWS shares are hovering near 52 week highs which sit near the $32.50 level and are up 33% YTD.
Smith & Wesson Shoots Self in Foot with Q1 Earnings Report
Firearm manufacturer Smith & Wesson (SWHC 13.10) dropped as much as 15% following Tuesday's close after the company reporting some underwhelming fiscal first quarter earnings results and issuing disappointing guidance.
Its first quarter profit of $0.26 per diluted share was slightly better than expected, yet that was down 35% from the year-ago period on 14% fewer weighted average diluted shares outstanding. And so it went for Smith & Wesson in the first quarter: net sales decreased 23% to $131.9 mln, its gross margin rate contracted by 530 basis points to 37.3% and its operating margin rate dropped by 860 basis points to 19.5%.
The poor year-over-year comparison was attributed to reduced sales volumes, related decreases in fixed-cost absorption, and three fewer production days versus the same period a year ago.
Judging by the stock's performance of late, that news did not come as a surprise to investors. Shares of SWHC have plunged 24% since mid-June.
Things aren't expected to get much better for the company or its stock in the near term considering Smith & Wesson is lowering its financial outlook for 2015, citing high inventories industry-wide resulting from channel replenishment and typical seasonality that slows consumer buying in its fiscal second quarter.
To that end, Smith & Wesson expects second quarter sales to be between $100.0 million and $110.0 million and GAAP EPS from continuing operations to be between $0.04 and $0.08 per diluted share. These projections are well below analysts' expectations. The same can be said for FY15 guidance, which calls for sales to range from $530 million to $540 million and diluted EPS to be between $0.89 and $0.94.
Previously, the company said it was expecting FY15 sales to be $585 million to $600 million and diluted EPS to be between $1.30 to $1.40. Related companies include Sturm, Ruger & Co. (RGR) and Cabela's (CAB).
Analog Devices Grows Earnings Despite Higher Operating Expenses
Analog Devices (ADI 52.21), a semiconductor company serving the needs of the industrial, automotive, consumer, and communication end markets, reported fiscal third quarter results that were in-line with expectations.
Its gross margin rate improved 90 basis points to 65.4%; however, higher operating expenses led to a 310 basis point drop in its operating margin to 27.8%. Most of the drop was related to a 36% increase in selling, marketing, and G&A expenses. Net earnings were up 2.5% to $180.6 million.
The slide in its operating margin rate could put some pressure on the stock in the near term, especially since shares of ADI have risen 7% from their closing level on August 7.
The latter possibility aside, ADI saw some solid growth in its core industrial segment, where revenues rose 12% year-over-year to $350.6 mln. This segment accounted for 48% of the company's total revenue of $727.8 mln. Separately, its automotive segment saw an 8% jump in revenue and its communications segment enjoyed a 19% increase in revenue. The consumer segment was the weak spot with revenues falling 19% year-over-year to $80.9 mln, yet that belied a 4% sequential increase.
Total analog product revenue rose 8% to $663.4 mln while its digital signal processing revenue improved 10% to $64.3 mln. Revenue growth was seen across all product types within those respective categories.
Analog Devices completed the acquisition of Hittite Microwave Corporation near the end of the third quarter. Including the Hittite business, Analog Devices is projecting fourth quarter revenue to be in the range of $790 million to $820 million and non-GAAP diluted EPS to be between $0.66 and $0.70. Both are in-line with expectations.
Related competitors include the likes of Texas Instruments (TXN 47.49), NXP Semiconductors (NXPI 64.74), STMicroelectronics (STM 8.40), Maxim Integrated Products (MXIM 30.91), and Linear Technology (LLTC 45.04).