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Tuesday September 16, 2014

Finances

Finances
 

Barnes & Noble Turning the Page

Barnes & Noble, Inc. (BKS) announced its first quarter results on Tuesday, September 9. Despite a quarterly loss, the company’s results indicated improvements to its business model are succeeding.

Barnes & Noble reported revenue of $1.24 billion during the quarter. This was a 7% decrease from the $1.33 billion reported during the comparable period last year.

“We continued to improve our financial performance, while further executing on our strategic initiatives, including work on the proposed separation of the Barnes & Noble Retail and NOOK Media businesses,” said Barnes & Noble CEO Michael P. Huseby. “NOOK continued to reduce losses and launched its first co-branded tablet in partnership with Samsung, our first new tablet in almost two years.”

The company recorded a net loss of $28.4 billion or $0.56 during the quarter. This compared to a net loss of $87 billion or $1.56 per share during the same period last year.

Barnes & Noble has faced increasing difficulties the past few years as tablets and other e-reading devices have become more popular. The company developed its NOOK e-reader as a way to capitalize on the tablet trend, but its sales lagged behind those of Apple’s iPad and Amazon’s Kindle. The company has since spun off its NOOK business, which has cut losses for the company. In addition, Barnes & Noble has found success with game and toy sales, which rose 20% during the quarter.

Barnes & Noble, Inc. (BKS) shares ended the week at $23.84.

Krispy Kreme Needs More Glaze


Krispy Kreme Doughnuts, Inc. (KKD) announced its second quarter results on Tuesday, September 9. The company experienced a disappointing quarter that added to an already disappointing year.

Krispy Kreme’s revenues increased 6.9% during the quarter to $120.5 million. Company-owned same store sales increased 1.1%.

“A key priority going into the quarter was to regain top line momentum in our Company shops,” said Krispy Kreme President and CEO Tony Thompson. “And we did, by very strategically using promotional incentives and other marketing tools to increase traffic count and top line growth.”

Net income during the quarter was $5.8 million or $0.08 per share. This was a slight increase over the $4.7 million reported during the same period last year.

At this point last year Krispy Kreme was a remarkable comeback story with same-store sales growth of 10.5%. Some of the shine from that story has dissipated this year as the company’s results have failed to match expectations, driving the stock price down 13% on the year. Krispy Kreme continues to face difficulties capturing the attention of health conscious consumers. New CEO Tony Thompson hopes to improve results through an emphasis on increasing “every day” doughnut occasions for its products and an expanded beverage menu.

Krispy Kreme Doughnuts, Inc. (KKD) shares ended the week at $17.52.

Burlington Coats Itself In Success


Burlington Stores, Inc. (BURL), an off-price apparel retailer, announced its second quarter results on Tuesday, September 9. The company, which went public last October, reported revenue that beat expectations.

Burlington’s second-quarter sales increased 8.3% to $1.044 billion. This surpassed estimates calling for sales of $1.031 billion.

“We are extremely pleased with our second quarter performance highlighted by a 4.7% increase in comparable store sales on top of last year’s very strong 7.8% increase,” said Tom Kingsbury, President and CEO of Burlington Stores, Inc. “We believe we are well positioned for the fall season based on the level and currency of our inventory and remain focused on delivering great value, brands, store experience and fresh product to our customers every day.”

The company recorded a net loss during the quarter of $0.9 million. However, this was better than the larger net loss of $13.6 million recorded during the same period last year.

Burlington Stores is quickly closing in on the one-year anniversary of its public offering, which happened in October 2013. So far, the first year for Burlington has been a success and this most recent quarter confirmed that. Sales and earnings improved and the company raised its full-year guidance, projecting sales growth of 6.5% to 7.2% sales growth. As a result, Burlington’s share price rose 5% following the earnings announcement.

Burlington Stores, Inc. (BURL) shares ended the week at $38.10.

The Dow started the week of 9/8 at 17,132, and closed at 16,988 on 9/12. The S&P 500 started the week at 2,007 and closed at 1,986. The NASDAQ started the week at 4,579 and closed at 4,568.
 

Treasuries Decline on Rate Speculation

Treasury prices fell on Friday, September 12, as speculation ramped up that the Federal Reserve could be changing course on its policy of keeping interest rates low for a “considerable time.” Treasury prices were left relatively unaffected by new economic data released on Friday.

The fall in Treasury prices on Friday, and the corresponding rise in yields, was in response to increased speculation this week regarding Federal Reserve interest rate policy. Rumors circulated that the Fed’s next report may delete a reference to interest rates remaining low for a “considerable time” after its bond buying program ends later this year. This has added fuel to prior speculation that the Federal Reserve is looking to raise its benchmark interest rate above its current 0 to 0.25% range sooner than expected.

Anticipation regarding the language change helped the benchmark 10-year yield reach its highest level since July, said Dan Mulholland, head of Treasury trading at BNY Mellon Capital Markets. “At the same time, we’re seeing pressure on global bond markets. There’s a possibility of the Fed moving earlier than previously expected based on expectations for growth,” he said.

During early Friday trading the 10-year yield rose four basis points to 2.58%. Treasury yields move inversely to prices, so as yields rise, prices fall.

Treasuries this week were also helped by European yields that continue to fall. The German 10-year yield increased four basis points on Friday to 1.08% while Japan’s 10-year yield added only one basis point to reach 0.57%. Though unchanged on Friday, Australia’s equivalent yield fell 14 basis points this week.

A pair of economic reports this week seemed to have little effect on Treasury prices. The Commerce Department revealed on Friday that August retail sales were in line with forecasts. August’s retail sales followed on the heels of a 0.3% increase in July that beat estimates.

The 10-year Treasury note yield finished the week of 9/8 at 2.61% while the 30-year Treasury note yield finished the week at 3.35%.
 

Interest Rates See Slight Increase

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, September 11. The results show mortgage rates increasing slightly in response to improving Treasury bond yields.

The 30-year fixed rate mortgage averaged 4.12% this week. This was an increase from last week when the 30-year fixed rate mortgage averaged 4.10%.

This week, the 15-year fixed rate mortgage averaged 3.26%. This was up from last week when the 15-year fixed rate mortgage averaged 3.24%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, had this to say about this week’s rates: “Mortgage rates were up slightly this week, following the increase in 10-year Treasury yields, despite last week’s disappointing employment report. The U.S. economy added only 142,000 jobs in August, after a 212,000 gain in July and a 267,000 increase in June. The unemployment rate fell to 6.1% in August from 6.2% the previous month.”

The money market fund finished the week of 9/8 at 0.4%. The 1-year CD finished at 0.7%.

Published September 12, 2014

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