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Friday December 2, 2022

Finances

Finances
 

The Kroger Co. Reports Earnings

The Kroger Co. (KR) announced its latest quarterly earnings on Friday, September 9. The grocery store chain's shares rose 7.4% following the report's release.

Kroger reported quarterly sales of $34.6 billion in the second quarter. This was up from $31.7 billion reported at this time last year.

"Kroger delivered strong second quarter results propelled by our Leading with Fresh and Accelerating with Digital strategy," said Kroger's CEO, Rodney McMullen. "We are incredibly thankful for our dedicated associates who continue to deliver a full, fresh, and friendly customer experience. Our consistent performance underscores the resiliency and flexibility of our business model, which enables Kroger to thrive in many different operating environments."

Kroger posted net earnings of $731 million or $1.00 per adjusted share. This was up from net earnings of $467 million or $0.61 per adjusted share at this time last year.

The parent company of Ralphs, Fry's, Harris Teeter, and Kroger grocery stores reported sales increased 5.2% compared to the same period last year, excluding fuel. The company's Our Brands identical sales increased 10.2% and 170 new items were introduced in the quarter. Kroger's digital sales grew 8% and its delivery sales increased 34% in the quarter. The Fresh Produce Initiative is now certified in 864 stores which is driving higher identical sales. Kroger increased its full-year expectations for identical sales, excluding fuel, from 4.0% to 4.5%.

The Kroger Co. (KR) shares ended the week at $47.28, down 9.0% for the week.

Oracle Releases Earnings


Oracle Corp. (ORCL) announced its first quarter earnings report on Tuesday, September 12. The Austin-based database technology and software company stock dropped 1.5% after the report's release.

Revenue reached $11.45 billion for the fiscal first-quarter, a 18% increase from revenue of $9.73 billion reported in the same quarter last year. This met analysts' expected revenue of $11.45 billion.

"[The company's application and infrastructure] cloud businesses now account for over 30% of our total revenue," said Oracle's CEO, Safra Catz. "As our cloud businesses become a larger-and-larger percentage of our overall business, we expect our constant currency organic revenue growth rate to hit double-digits with a corresponding increase in earnings per share."

Oracle reported fiscal first-quarter net income of $1.5 billion or $0.56 per adjusted share. Last year at this time, the company reported a net income of $2.5 billion or $0.86 per adjusted share.

Oracle received a revenue boost from the recent acquisition of software maker Cerner, a healthcare cloud service, which contributed $1.4 billion in total revenues. Oracle completed the acquisition of Cerner in the quarter. Without Cerner, Oracle's growing cloud applications and cloud infrastructure business had total revenue of $3.6 billion, up 45% year-over-year. Oracle's board of directors declared a quarterly cash dividend of $0.32 per share of common stock.

Oracle (ORCL) shares ended the week at $68.90, down 9.2% for the week.

Rent the Runway Shares Fall


Rent the Runway (RENT) released its second quarter earnings on Tuesday, September 12. Despite increased revenue, the fashion rental company's shares dropped over 22%, following news it would lay off 24% of its corporate workforce.

Revenue for the second quarter came in at $76.5 million. This was a 64% increase from revenues of $46.7 million during the same quarter last year.

"We achieved two significant milestones in Q2, with both record quarterly revenue and positive Adjusted EBITDA, ahead of the timeline we had outlined, and despite an uncertain environment," said Rent the Runway's CEO, Jennifer Hyman. "The restructuring plan we announced today underscores our commitment to building RTR into a business that is highly profitable, has strong margins, and is self-funding. These actions are intended to accelerate our path to profitability, while allowing us to continue to deliver more value to our customers and drive strong revenue growth."

The company posted net losses of $33.9 million for the quarter. This was an improvement compared to net losses of $42.4 million during the same quarter last year. The adjusted loss per share was $0.53, compared to adjusted loss of $3.75 per share this time last year.

Rent the Runway reported 124,131 active subscribers, up 27% compared to a year earlier but down 8% from the prior quarter. Total subscribers reached 173,321, up 37% in the quarter. The company announced a restructuring plan to reduce costs and improve efficiencies. The restructuring plan, which includes workforce reductions of approximately 24%, is expected to generate annual operating expense savings of $25 to $27 million in the next fiscal year.

Rent the Runway (RENT) shares ended the week at $2.90, up/down 35.1% for the week.

The Dow started the week at 32,152 and closed at 30,822 on 9/16. The S&P 500 started the week at 4,067 and closed at 3873. The NASDAQ started the week at 12,112 and closed at 11,448.
 

Treasury Yields Increase

U.S. Treasury yields climbed throughout the week as investors processed a higher-than-expected inflation report. Yields were also pushed higher by the latest unemployment data, with initial claims moving to the lowest levels since the end of May.

On Tuesday, the August consumer price index (CPI) report was released, indicating an increase of 8.3% year-over-year. The CPI increase outpaced economists' forecast of an 8.1% gain.

"Today's CPI reading is a stark reminder of the long road we have until inflation is back down to earth," said Mike Loewengart, head of model portfolio construction for Morgan Stanley's Global Investment Office. "Wishful expectations that we are on a downward trajectory and the Fed will lay off the gas may have been a bit premature."

The benchmark 10-year Treasury note yield opened the week of September 12 at 3.31% and traded as high as 3.49% on Friday morning. The 30-year Treasury bond opened the week of September 12 at 3.52% and traded as high as 3.54% on Tuesday.

On Thursday, the Labor Department released data on unemployment. Initial jobless claims decreased for the week ending September 10 to the lowest levels since the end of May. Initial claims for unemployment insurance were 213,000, down 5,000 from a downwardly revised total of 218,000 claims from the prior week.

"The CPI and the market reaction suggest inflation will keep rising at an accelerating rate, but not all of the data agree," said Brad McMillan, chief investment officer at Commonwealth Financial Network. "Even using much of the data as it stands, it still looks likely inflation will end the year lower than it is now."

The 10-year Treasury note yield finished the week of 9/16 at 3.45%, while the 30-year Treasury note yield finished the week at 3.52%.
 

Mortgage Rates Increase

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, September 15. Mortgage rates for the 30-year fixed reached highs last seen in 2008.

The 30-year fixed rate mortgage averaged 6.02%, up from last week's average of 5.89%. Last year at this time, the 30-year fixed rate mortgage averaged 2.86%.

The 15-year fixed rate mortgage averaged 5.21% this week, up from 5.16% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.12%.

"Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding 6% percent for the first time since late 2008," said Freddie Mac's Chief Economist, Sam Khater. "Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large."

Based on published national averages, the savings rate was 0.13% as of 8/15. The one-year CD averaged 0.46%.

Published September 16, 2022

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