AI News Buoys Big Tech

Dollar General is back in the news with the same old issues as in June and August. Let’s take a look at today’s earnings report. 👀

The discount retailer’s third-quarter earnings per share of $1.26 topped expectations of $1.20. Unlike previous quarters, its sales beat expectations, reaching $9.694 billion versus the $9.644 billion expected. Same-store sales also fell less than anticipated, 1.3% versus 2.1%. 🔺

In recent quarters, the company has struggled with low-income consumers pulling back on spending due to inflation and an uncertain economy. And when those consumers did spend at its stores, they primarily bought lower-margin necessities rather than higher-margin discretionary items. That continued this quarter, with consumables as the only category seeing positive sales growth and gross margins falling by 81 bps YoY.

Despite the lackluster sales growth, expectations have finally gotten low enough for the company to step over them. 👍

CEO Todd Vasos said, “While we are not satisfied with our financial results for the third quarter, including a significant headwind from inventory shrink, we are pleased with the momentum in some of the underlying sales trends, including positive customer traffic, as well as market share gains in both dollars and units.”

Overall, management believes its business model is relevant in all economic cycles and is working to address the several operational issues that caused it to stumble through the last year or so. As such, they’re charging ahead with their expansion plans, planning 800 new stores, 1500 remodels, and 85 relocations in fiscal 2024. 🏬

With that said, they acknowledged the lackluster stock performance and declared a $0.59 per share quarterly dividend to appease investors. It also has an open $1.4 billion authorized share repurchase program available should it want to support the price of its shares further.

To combat its shrink problem, which has been a roughly 100-basis-point margin headwind for the company, management is increasing staffing in the front of stores near the checkout area. It’s also reallocating labor investments toward store-level inventory-management processes to keep the shelves stocked. 🚨

Lastly, management said they’d seen an uptick in traffic trends during the middle of the quarter, which has continued into December. Should that remain through year-end, the company could be in a solid position to beat its sales guidance for the first time in many quarters.

$DG shares fell about 1% after failing to hold earlier gains. 🔻

There are plenty of U.S. stocks for investors to focus on. However, occasionally, international stocks will pop up on the radar. And this year is one of those times. ⌚

Below are four examples of international indexes hitting new all-time highs, including Germany’s DAX, Poland’s Warsaw Stock Index, Brazil’s Bovespa, and India’s Nifty 50. It shows a range of both developed and emerging markets seeing strong demand from investors around the globe. 📈

While these charts are impressive, it’s important to note they are in local currency terms. So, U.S. investors have not seen these types of returns, given the strength of the U.S. Dollar. Nonetheless, it shows that there remains global demand for stocks as an asset class, which is an important signal given that different asset classes tend to move in the same direction over time. 🤑

Stock market bulls want to see this list of international indexes hitting new highs continue to expand, arguing that more strength internationally will further support the bull case for U.S. stocks. We’ll have to wait and see. 👀

Lululemon shares were in focus recently, running hot since mid-October when news broke it would be added to the S&P 500 index. The stock was roughly 5% below all-time highs ahead of today’s earnings results, which were mixed versus expectations.

The athleisure retailer posted $2.20 billion in revenues during the third quarter, topping estimates of $2.19 billion. Driving that was a 12% increase in North American sales and a 49% jump internationally. Comparable sales rose 13%, with store sales rising 9% and direct-to-consumer (DTC) revenues rising 18%. DTC revenues remained at 41% of total sales, flat QoQ. 🛒

Adjusted earnings per share of $2.53 was essentially in line with expectations. Gross margins rose 110 bps YoY to 57%, below the 57.7% expected by Wall Street. The impairment of its Mirror assets weighed on margins this quarter, which is concerning with investors so focused on profitability in a weak(er) sales environment. 🔺

CEO Calvin McDonald said, “As we enter the holiday season, we are pleased with our early performance and are well-positioned to deliver for our guests in the fourth quarter.” Despite that commentary, its fourth-quarter earnings per share guidance of $4.85 to $4.93 was mixed versus estimates of $4.80 to $5.19. That also caused its full-year guidance to be worse than anticipated. 

$LULU shares are down about 2% after the bell. Technical analysts continue to focus on the stock’s long-term support and resistance level, which is near 385-400. They suggest that the price’s longer-term breakout remains intact above there and that dip buyers are likely to scoop up shares if prices drift lower. 🧘