Wednesday November 29, 2023
Nike Reports Quarterly Results
Nike posted second quarter net revenue of $13.32 billion. This is up 17% from $11.36 billion reported in the same quarter last year, exceeding the $12.57 billion in revenue that analysts expected.
"NIKE's results this quarter are a testament to our deep connection with consumers," said Nike CEO, John Donahoe. "Our growth was broad-based and was driven by our expanding digital leadership and brand strength. These results give us confidence in delivering the year as our competitive advantages continue to fuel our momentum."
The company reported net income of $1.33 billion for the quarter or $0.85 per adjusted share, which is little changed from year-over-year net income of $1.34 billion or $0.83 per adjusted share.
Nike Direct segment sales reached $5.4 billion, up 16% for the quarter. Nike Brand Digital sales were up 25%. Nike's inventories were $9.3 billion in the quarter, up 43% compared to a year ago. Despite Nike's continued shift to direct-consumer sales, wholesale revenues were up 19% due in part to inventory availability. Nike expects inventories to decline as it continues aggressive promotional strategies and shifts its sales focus away from wholesalers and directly to consumers.
Nike, Inc. (NKE) shares ended the week at $117.01, up 0.5% for the week.
Carnival Releases Earnings
Carnival Corporation & plc (CCL) released its fourth quarter and full year results on Wednesday, December 21. The cruise ship operator's shares rose more than 4% following the earnings release.
Revenue for the fourth quarter totaled $3.84 billion and is above the $3.73 billion that analysts predicted. This is up from the $1.29 billion reported in the same quarter last year. For the full year, Carnival reported net revenue of $12.17 billion, up from $1.91 billion one year ago.
"Throughout 2022, we have successfully returned our fleet to service, aggressively building occupancy on growing capacity, while driving revenue per passenger cruise day higher than 2019 record levels, both in the fourth quarter and full year overall," said Carnival CEO, Josh Weinstein. "Booking volumes strengthened following the relaxation in protocols, cancellation trends are improving globally, and we have seen a measurable lengthening in the booking curve, across all brands."
The company reported a net income loss of $1.60 billion or $1.27 per diluted share for the quarter. This was better than the net loss of $2.62 billion or $2.31 per diluted share during the same quarter last year. Full year net loss was $6.09 billion or $5.16 per diluted share, an improvement from a net loss of $9.50 billion or $8.46 per diluted share in 2021.
During the quarter, Carnival's passenger ticket revenue reached $2.27 billion with onboard and other revenues at $1.57 billion for the quarter. The company saw its capacity rate increase to 85% and expects the summer of 2023 to return to 2019's pre-pandemic historical levels of over 100% capacity. Total customer deposits in the quarter reached a record $5.1 billion, beating the record from the same quarter in 2019 by more than 4%. The company plans to continue to expand its fuel saving and emission program, known as air lubrication systems (ALS), from 5 ships to 19 ships.
Carnival Corporation & plc (CCL) shares ended the week at $8.06, up 3.6% for the week.
CarMax's Third Quarter Earnings
CarMax, Inc. (KMX) released its third quarter earnings on Thursday, December 22. The automobile retailer's shares dropped more than 12% following the earnings release.
CarMax reported net sales of $6.5 billion during the quarter, down 24% from $8.5 billion in net sales at this time last year. This fell short of analysts' expected quarterly revenue of $7.24 billion.
"In response to the ongoing pressures across the used car industry, we have taken deliberate steps to support our business for both the near-term and the long-term," said CarMax CEO, Bill Nash. "We are managing our business prudently, and prioritizing initiatives that reduce costs, unlock operating efficiencies, profitably grow market share and create better experiences for our associates and customers."
The company reported quarterly net income of $37.6 million or $0.24 per adjusted share. This was down 86% from $269.4 million or $1.63 per adjusted share one year ago.
CarMax sold 298,807 vehicles in the quarter, a decrease of 28% from the same time last year. CarMax's retail used sales decreased almost 21% to 180,050 vehicles and the company's comparable store used sales decreased 22%. CarMax attributes the decline to inflationary pressures, rising interest rates and low consumer confidence. During the third quarter, CarMax added one new location for a total of 240 retail locations. The company announced plans to add ten locations in 2023 and five locations in 2024. The company also announced it will pause share buybacks and hiring to increase overall financial stability and preserve its capital structure.
CarMax, Inc. (KMX) shares ended the week at $60.89, up 1.8% for the week.
The Dow started the week of 12/27 at 33,224 and closed at 33,147. The S&P 500 started the week at 3,843 and closed at 3,840. The NASDAQ started the week at 10,462 and closed at 10,467.
Treasury Yields Move Higher
On Wednesday, the Census Bureau reported that the U.S. goods trade deficit decreased 15.6% to $83.8 billion in November, down $15.5 billion from $98.8 billion in October. Wholesale inventories increased 1% over the prior month to an estimated $933.6 billion while retail inventories edged up 0.1% to $738.7 billion.
"The main engine of U.S. growth ? the consumer ? is still running, but as we head into 2023, three key factors suggest it will lose considerable steam," said chief economist at EY-Parthenon, Gregory Daco. "First, the soft income trend will weaken further in 2023 on softer compensation and employment growth. Second, the 'savings dip' is unprecedented and unsustainable. Third, the credit splurge is a true risk, especially for families at the lower end of the income spectrum."
The benchmark 10-year Treasury note yield opened the week of 12/27 at 3.75% and traded as high as 3.89% on Wednesday. The 30-year Treasury bond opened the week at 3.82% and traded as high as 3.99% on Wednesday.
On Thursday, the U.S. Department of Labor reported that initial claims for unemployment increased 9,000 to 225,000 for the week ending December 24. Continuing unemployment claims increased 41,000, reaching over 1.7 million.
"It feels like we have a structural labor shortage out there," commented Federal Reserve Chairman, Jerome Powell, earlier this month. "Despite very high wages and an incredibly tight labor market, we don't see participation moving up, which is contrary to what we thought."
The 10-year Treasury note yield finished the week of 12/30 at 3.86%, while the 30-year Treasury note yield finished the week at 3.96 %.
30-Year Mortgage Rate Edges Higher
This week, the 30-year fixed rate mortgage averaged 6.42%, up from last week's average of 6.27%. Last year at this time, the 30-year fixed rate mortgage averaged 3.11%.
The 15-year fixed rate mortgage averaged 5.68% this week, down from 5.69% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.33%.
"The housing market remains in the doldrums with declining sales, inventory and prices," said Freddie Mac's Chief Economist, Sam Khater. "The declines in sales and deceleration in home prices began swiftly earlier in 2022 but have moderated more recently. While the intensity of weakness is moderating, the market continues to decline and forward leading indicators suggest housing will remain weak throughout the winter."
Based on published national averages, the savings rate was 0.30% as of 12/19. The one-year CD averaged 1.07%.