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Sunday December 15, 2019



Simply Good Foods Misses the Mark

Simply Good Foods (SMPL) released its quarterly earnings report on Thursday, January 3. The nutritional food and snacks developer, marketer and seller reported increased revenue and earnings, but fell short of analysts' estimates.

Simply Good Foods reported quarterly net sales of $120.9 million. This is up 13% from last year's first quarter revenue of $106.6 million, but fell short of Wall Street's expectation of $122.5 million.

"I'm pleased that we delivered a solid first quarter with strong net sales, earnings and point of sales growth," said Simply Good Foods President and CEO Joseph E. Scalzo. "Our business continues to be driven by strong base velocity gains of our core products. We maintained our retail momentum with U.S. retail takeaway for the thirteen weeks ended November 24, 2018, up 23.5%."

The company announced net earnings of $15.3 million for the quarter, an increase from earnings of $10.2 million one year ago. On an adjusted earnings per share basis, the company reported earnings of $0.18 per share, which was just short of analysts' estimates of $0.19 per share but an increase year-over-year from earnings of $0.14 per share.

Simply Good Foods is best known as the maker and seller of Atkins branded nutrition bars, ready-to-drink shakes and snacks. The company expects 2019 fiscal year's sales growth to exceed its target growth of 4% to 6%. On November 13, 2018, Simply Good Foods announced a stock repurchase authorization of $50 million. The company did not buy back any common stock in the first quarter.

Simply Good Foods (SMPL) shares ended the week at $19.11, up 2.5% for the week.

Resources Connection's Income Exceeded Expectations

Resources Connection, Inc. (RECN) announced its second quarter results on Thursday, January 3. The multi-national business consulting firm, operating through its subsidiary Resources Global Professionals, celebrated better-than-expected earnings and revenue.

The company's revenue during the first quarter was $188.8 million, representing growth of 20.5% year-over-year, coming in above analysts' expectation of $185.1 million. Last year, the company reported revenue of $156.7 million.

"We are extremely pleased by the momentum in our business now," said Resources Connection President and CEO Kate Duchene. "I attribute the improving results to three important changes in our Go To Market efforts -- the client service and technical sales teams spend more time in front of clients, we have improved the alignment of our incentive systems to sales growth and velocity in our sales efforts has been delivered by a focused business development team."

Resources Connection's reported net income rose to $10.6 million, or $0.33 per share, above analysts' expected earnings per share of $0.23. In the same quarter last year, net income was $8.1 million, or $0.27 per share.

On January 3, Resources Connection announced John Bower, its Chief Accounting Officer, plans to retire in the fourth quarter of fiscal 2019. Bower has held various financial roles in the company since 1998. The company has commenced a search for a candidate to fill a Senior Vice President of Finance position.

Resources Connection, Inc. (RECN) shares ended the week at $15.75, up 11.9% for the week.

UniFirst Reports Earnings

UniFirst Corporation (UNF) reported quarterly earnings on Thursday, January 3. The uniform provider posted an increase in earnings and revenue.

UniFirst announced increased revenue of $438.6 million for the first quarter. This is up 5.5% from revenue of $415.8 million reported in the comparable quarter last year and above the $434.3 million in revenue that Wall Street expected.

"As anticipated, our overall margin in the quarter was challenged primarily by the impact of higher payroll costs partially driven by the low unemployment environment, as well as higher merchandise and related costs," said UniFirst President and CEO Steven Sintros. "We want to thank our thousands of employee Team Partners across North America, Central America and Europe as they continue to work through these challenges and produce solid results for our Company all while striving to provide high quality service to our customers."

The company reported net earnings of $38.3 million for the quarter, compared to net earnings of $34.2 million one year ago. On an adjusted earnings per share basis, the company posted earnings of $1.99 per share, which was above analysts' estimates of $1.92 per share and above last year's earnings per share of $1.67.

UniFirst is one of the largest providers of uniforms and workwear in North America. On January 2, the company announced a $100 million share repurchase program. In the first quarter, the company benefited from $3.0 million of pre-tax gain from the settlement of environmental litigation, which offset higher energy, depreciation and payroll costs. UniFirst's income tax rate decreased to 26.2% from 35.5% due to tax reform, positively impacting its net income.

UniFirst (UNF) shares ended the week at $135.50, down 4.8% for the week.

The Dow started the week at 23,154 and closed at 23,433 on 1/4. The S&P 500 started the week at 2,499 and closed at 2,532. The NASDAQ started the week at 6,650 and closed at 6,739.

Treasury Yields Rise on Strong Jobs Report

Yields on U.S. Treasury bonds jumped on Friday following a better-than-expected jobs report. Earlier in the week, the yield on the 10-year Treasury note reached its lowest level since January 2017 following the release of global manufacturing data.

On Friday morning, the Labor Department provided the latest jobs report, which revealed that job growth soared in December. The report revealed that 312,000 jobs were added, far surpassing the 176,000 that economists expected. Wage gains rose by 0.4%, exceeding the 0.3% increase expected. Average hourly earnings were up 3.2% year-over-year. Unemployment rose to 3.9%.

"The jump in payrolls in December would seem to make a mockery of market fears of an impending recession," said Paul Ashworth, chief economist at Capital Economics in Toronto. "This employment report suggests the U.S. economy still has considerable forward momentum."

After the jobs data was released, the yield on the 10-year Treasury note jumped six basis points to 2.627%. The yield on the 30-year bond also rose six basis points to 2.955%.

On Thursday, the yield on the10-year Treasury note sank eight basis points to 2.58% after the Institute for Supply Management (ISM) released its manufacturing index for December. The index slipped to 54.1 in December, down from 59.3 in November. China's manufacturing index fell below 50 for the first time in over a year, heightening fears of a global slowdown.

"The Chinese slowdown was expected but today's softer than expected ISM number took investors by surprise because the U.S. seemed to be the only port in the storm," said Sam Stovall, chief investment strategist of CFRA. "But now it appears that our economic growth is facing trade related headwinds. So while most economists are not forecasting a global economic recession, disappointing data seems to be undermining their conviction."

The 10-year Treasury note yield closed at 2.66% on 1/4, while the 30-year Treasury bond yield was 2.97%.

Mortgage Rates Move Lower

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, January 3. The report showed interest rates declined going in to first week of 2019.

This week, the 30-year fixed rate mortgage averaged 4.51%, down from 4.55% last week. At this time last year, the 30-year fixed rate mortgage averaged 3.95%.

The 15-year fixed rate mortgage averaged 3.99% this week, down from 4.01% the week prior. During the same period last year, the 15-year fixed rate mortgage averaged 3.38%.

"Low mortgage rates combined with decelerating home price growth should get prospective homebuyers excited to buy," said Sam Khater, Chief Economist at Freddie Mac. "However, it will be interesting to see how the recent turmoil in the stock market will affect homebuying activity in the coming months."

Based on published national averages, the money market account closed at 1.52% on 1/4. The one-year CD finished at 2.76%.

Published January 4, 2019

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