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Sunday September 20, 2020



Kroger's Sales Slide

The Kroger Co. (KR) released its latest earnings report on Thursday, September 12, 2019. The grocery store chain reported decreased sales and profits.

Kroger reported net sales of $28.17 billion in the second quarter. This was up from $28.01 billion in net sales at this time last year.

"We are pleased with the improvement of trends in our supermarket business in the second quarter," said Kroger CEO Rodney McMullen. "Guided by our customer obsession, Kroger delivered our best identical sales, without fuel, result since the launch of our transformation plan."

The company posted net income of $297 million, or $0.37 per share. This was down from $508 million in net income, or $0.62 per share at this time last year.

The Cincinnati-based operator of various grocery stores, including Ralphs, Fry's, Harris Teeter and its namesake Kroger stores, is in the midst of its Restock Kroger Plan, an effort to revitalize its stores. The plan includes efforts to redefine the grocery experience, expand partnerships and develop new talent. As part of that effort, Kroger's Our Brands segment increased 3.1% compared to the prior year's quarter.

The Kroger Co. (KR) shares ended the week at $26.25, up 6% for the week.

Dave & Buster's Lowers Guidance

Dave & Buster's Entertainment, Inc. (PLAY) released its latest quarterly earnings on Tuesday, September 10. The restaurant and entertainment company lowered its latest guidance despite posting increased sales and earnings for the quarter.

The company reported revenue of $344.60 million for the quarter. This was up 8% from revenue of $319.19 million at this time last year.

"We continue to deliver strong revenue and earnings per share growth — including record second quarter sales, EBITDA and EPS — while investing for the future and returning substantial capital to shareholders through dividends and share repurchases," said Dave & Buster's CEO Brian Jenkins. "We are executing on five near-term priorities to improve performance and capitalize on the growing consumer demand for our offerings."

Dave & Buster's reported quarterly net income of $32.36 million. Last year at this time, the company reported net income of $33.78 million for the quarter.

Although overall revenue and profit numbers beat the prior year's quarter, Dave & Buster's lowered its guidance for the full fiscal year. The company featured strong expansion, increasing from 117 stores to 130, but comparable store sales fell 1.8%. It now expects full-year sales between $1.338 and $1.359 billion, down from a range of $1.365 to $1.390 billion. The company expects net income between $91 and $100 million versus its previous estimate of between $103 and $113 million.

Dave & Buster's Entertainment Inc. (PLAY) shares ended the week at $41.35, down 1.4%.

GameStop Announces Store Closures

GameStop Corp. (GME) reported its second quarter earnings on Tuesday, September 10. The company reported a 14% drop in sales and announced an initiative to turn things around.

Revenue for the quarter came in at $1.29 billion. This is down from $1.50 billion in revenue at the same time last year.

"We are committed to acting with a sense of urgency to address the areas of the business that are critical to achieving long-term success and value creation for all our stakeholders," said GameStop CEO George Sherman. "We will set GameStop on the correct strategic path and fully leverage our unique position and brand in the video game industry."

The company posted a net loss of $415.3 million for the quarter. This was down from a $24.9 million net loss during the same quarter last year.

GameStop, once a prosperous retailer of video games and consoles, has been hit recently with a decline in sales. The company reported a decrease of 11.6% in comparable store sales for the quarter. GameStop recently announced that its turnaround efforts will include the closure of between 180 and 200 stores by the end of the 2019 fiscal year.

GameStop Corp. (GME) shares ended the week at $4.41, up 1.4%.

The Dow started the week at 26,866 and closed at 27,220 on 9/13. The S&P 500 started the week at 2,988 and closed at 3,007. The NASDAQ started the week at 8,131 and closed at 8,177.

Treasury Yields Rise as Trade Concerns Recede

Yields on U.S. Treasurys increased this week, tracking with steady stock market gains. The rise in yields follows a promising turn in the trade talks between the U.S. and China.

On Friday, the Chinese government announced that it would relax its additional tariffs against U.S. goods. Agricultural products, including soybeans and pork will be excluded from the tariff.

"The prospect of reductions in tariffs on soy and pork is energizing news for U.S. farmers," said David Salmonsen of the American Farm Bureau Federation. "And while we don't yet know if this is meant just to stop new increases or reduce tariffs already in place, this is a good sign for the future."

During early trading on Friday, the benchmark 10-year Treasury note yield was at 1.877%, up from Monday's opening yield of 1.565%. The 30-year Treasury bond was at 2.361% after opening the week at 2.031%.

China's Friday announcement follows a move by President Trump on Wednesday to delay the implementation of tariffs on Chinese goods by two weeks in order to accommodate the country's anniversary celebration. The scheduled increase in tariffs from 25% to 30% was scheduled to take effect on October 1, but will now be implemented on October 15.

"A lot of people are talking about — and I see a lot of analysts are saying — an interim deal, meaning we'll do pieces of it, the easy ones first, but there's no easy or hard," said President Trump. "There's a deal or there's not a deal. It's something we would consider, I guess, but we're doing very well."

The 10-year Treasury note yield closed at 1.90% on 9/13, while the 30-year Treasury bond yield was 2.38%.

Mortgage Rates Rise

Freddie Mac released it latest Primary Mortgage Market Survey on Thursday, September 12. Mortgage rates increased this week following a drop last week.

The 30-year fixed rate mortgage averaged 3.56% this week, up from last week's average of 3.49%. Last year at this time, the 30-year fixed rate mortgage averaged 4.60%.

This week, the 15-year fixed rate mortgage averaged 3.09%, up from 3.00% last week. Last year at this time, the 15-year fixed rate mortgage averaged 4.06%.

"Pipeline purchase demand continues to improve heading into the late fall with purchase mortgage applications up nine percent from a year ago," said Sam Khater, Chief Economist at Freddie Mac. "The improved demand reflects the still healthy underlying consumer economic fundamentals such as a low unemployment rate, solid wage growth and low mortgage rates. While there has been a material weakness in manufacturing and consistent trade uncertainty, so far, the American consumer has proved to be resilient with solid home purchase demand."

Based on national averages, the money market account closed at 1.22% on 9/13. The one-year CD finished at 2.57%.

Published September 13, 2019

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