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Tuesday May 26, 2020



Williams-Sonoma Reports Earnings

Williams-Sonoma, Inc. (WSM) reported its latest quarterly earnings on Thursday, May 30. The company posted increased sales and earnings.

Net revenue came in at $1.24 billion for the quarter. This was up from $1.20 billion in revenue at this time last year.

"We have had a strong start to 2019 with comparable revenue growth of 3.5%, operating margin expansion and significant EPS growth," said Laura Alber, President and CEO of Williams-Sonoma. "Customer acquisition and engagement continued to grow as we delivered more compelling and differentiated experiences to our customers."

The company reported quarterly net earnings of $52.66 billion, or $0.66 per share. This was up from $45.17 in net earnings, or $0.54 per share, during the same quarter last year.

Williams-Sonoma's Pottery Barn segment led the way with $492 million in net revenue, which represents a 1.5% increase over comparable sales for the brand last year. West Elm accounted for the company's highest percentage increase in comparable sales, notching 11.8% growth over the prior year's quarter. The company's namesake brand, Williams Sonoma, experienced a 1.6% drop in sales to $195 million.

Williams-Sonoma (WSM) shares ended the week at $58.50, up 12.0% for the week.

Dick's Sporting Goods Reports Earnings

Dick's Sporting Goods, Inc. (DKS) released its latest quarterly earnings report on Wednesday, May 29. The retailer reported better-than-expected earnings for the quarter.

The company posted quarterly revenue of $1.92 billion. This was a 0.6% increase from revenue of $1.91 billion at this time last year.

"We were pleased with our start to 2019, delivering higher merchandise margins and first quarter earnings per diluted share above last year," said Edward Stack, Chairman and CEO of Dick's Sporting Goods. "Same store sales turned positive in March and remained positive in April, as we started to see the benefits of our key strategies and investments."

Net income for the quarter reached $57.53 million, or $0.61 per share. This was down from $60.09 million, or $0.59 per share, during the same quarter last year.

Shares of Dick's Sporting Goods stock rose 6.2% following the earnings release. The company provided updated guidance for the year, stating that it expects earnings of $3.20 to $3.40 per share on an adjusted basis, up from previous earnings estimates of $3.15 to $3.35 per share. Quarterly same store sales rose from a 2.5% loss to flat compared to this time last year. The company expects a 2% increase in same store sales for the full year.

Dick's Sporting Goods (DKS) shares closed at $34.51, down 6.0% for the week.

Daktronics Reports Net Loss

Daktronics, Inc. (DAKT) released its fourth quarter and full-year earnings on Wednesday, May 29. The company's shares fell 6% following the announcement of growing net losses.

Net sales for the quarter came in at $127.76 million, down from $138.18 million during the same quarter last year. For the full year, Daktronics reported net sales of $569.70 million.

"As we entered into fiscal 2019, we focused on winning more orders and maintaining our product release velocity," said Reece Kurtenbach, Chairman, President and CEO of Daktronics. "We achieved both. Our order volume was the third highest level in our company's history, even though we had fewer multimillion-dollar projects as compared to other record years."

The company reported a net loss of $10.82 million, down from a $3.81 million net loss at this time last year. Daktronics reported a full-year net loss of $958,000, down from $5.5 million in net income the previous year.

The Brookings, South Dakota-based company manufactures scoreboards and video displays. The company's Commercial segment sales totaled $35.04 million for the quarter, a 10% increase over the prior year's quarter. The Transportation segment posted a 5.9% increase year-over-year. Live Events and International sales fell 19% and 15%, respectively.

Daktronics, Inc. (DAKT) shares ended the week at $6.21, down 13.3% for the week.

The Dow started the week at 25,617 and closed at 24,815 on 5/31. The S&P 500 started the week at 2,830 and closed at 2,752. The NASDAQ started the week at 7,656 and closed at 7,453.

Trade Tensions Spark Fed Rate Cut Talk

U.S. Treasury yields fell this week following the announcement of proposed tariffs on imports from Mexico. New and ongoing trade tensions, coupled with low inflation, have many analysts suggesting that the Federal Reserve may reverse course on interest rates.

President Trump announced on Thursday a plan to impose a tariff on Mexican imports, starting on June 10. The tariff would begin at 5% and would escalate monthly up to 25% unless the Mexican government cooperates with the White House on a solution to the border crisis.

"The US economic outlook does stand to face headwinds as the global economy suffers through the effects of US-imposed tariffs," said Han Tan of FXTM Global. "Should downside risks become highlighted, the Fed may just have to succumb to market expectations and lower US interest rates, with the Fed funds futures currently pointing to a near-70% chance of a rate cut by September."

On Friday, the U.S. Department of Commerce released the Personal Consumption Expenditures Price Index (PCE) for April, which showed a 0.3% increase. The Fed's preferred measure of inflation, the core PCE, reached 1.6% for the year, still short of its target of 2%.

"The low inflation readings are likely to be persistent," said Professor Sung Won Sohn of Loyola Marymount University. "With both inflation and economic growth going in the wrong direction, the Fed is likely to cut rates later this year."

The 10-year Treasury note yield closed at 2.14% on 5/31, while the 30-year Treasury bond yield was 2.58%.

Mortgage Rates Fall

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, May 30. The report revealed a decrease in mortgage rates this week.

The 30-year fixed rate mortgage averaged 3.99%, down from last week's average of 4.06%. At this time last year, the 30-year fixed rate mortgage averaged 4.56%.

This week, the 15-year fixed rate mortgage averaged 3.46%, down from 3.51% last week. Last year at this time, the 15-year fixed rate mortgage averaged 4.06%.

"While economic data points to continued strength, financial sentiment is weakening with the spread between the 10-year and the three-month Treasury bill narrowing as fears of the impact of the trade war with China grow," said Freddie Mac Chief Economist Sam Khater. "Lower rates should, however, give a boost to the housing market, which has been on the upswing with both existing and new home sales picking up recently."

Based on published national averages, the money market account closed at 1.22% on 5/31. The one-year CD finished at 2.57%.

Published May 31, 2019
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