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Saturday December 3, 2022



NIKE Reports Earnings

NIKE, Inc. (NKE) released its second quarter earnings report on Monday, December 20. The company reported increased revenue and earnings, causing its shares to rise 3% following the release of the report.

Nike posted second quarter net revenue of $11.36 billion. This is up 1% from $11.24 billion reported in the same quarter last year, exceeding the $11.25 billion in revenue that analysts expected.

"NIKE's strong results this quarter provide further proof that our strategy is working, as we execute through a dynamic environment," said Nike CEO, John Donahoe. "We are now in a much stronger competitive position today than we were 18 months ago. And I want to thank our roughly 75,000 global teammates for all their work to provide consumers with the compelling new product, innovation and experiences that only NIKE can deliver."

The company reported net income of $1.34 billion for the quarter, up 7% year-over-year from net income of $1.25 billion. On an earnings per adjusted share basis, net income improved year-over-year from $0.78 to $0.83, a 6% increase.

The Nike Direct segment sales were reported at $4.7 billion, up 9% for the quarter. The Nike Brand digital sales segment increased 12% for the quarter, with 40% growth in North America. Net revenue in North America was up 12% despite supply chain challenges. The supply chain was impeded most notably in North America due to COVID-related factory shut downs overseas.

NIKE, Inc. (NKE) shares ended the week at $165.67, up 3.9% for the week.

Rite Aid Posts Earnings

Rite Aid Corporation (RAD) released its quarterly earnings report on Tuesday, December 21. The drugstore chain reported increased revenue but announced plans to close numerous stores.

Rite Aid reported quarterly revenue of $6.23 billion. This is up 1.8% from last year's third quarter revenue of $6.12 billion and is below the $6.32 billion that analysts predicted.

"We delivered a solid quarter as we grew Adjusted EBITDA by 12.7% versus last year," said Rite Aid CEO, Heyward Donigan. "Despite challenges in the labor market, our pharmacists and store teams were able to meet the unprecedented volumes for COVID and flu immunizations, COVID testing and other clinical services, which clearly demonstrates our Lean work to free up capacity is paying off."

The company announced a net income loss of $36.1 million for the quarter, which is less than earnings of $4.3 million one year ago. On an adjusted earnings per share basis, the company posted net loss per share of $0.67 compared to $0.80 per share during the same quarter the previous year.

Rite Aid announced plans to begin its first phase of store closures in an attempt to reduce costs and improve profitability for the company. The company has identified 63 stores for closure, which amounts to 2% of the company's footprint. The company estimates that the closures will save the company an estimated annual $25 million.

Rite Aid Corporation (RAD) shares ended the week at $13.96, up 18.5% for the week.

General Mills Reports Quarterly Earnings

General Mills, Inc. (GIS) posted its second quarter earnings on Tuesday, December 21. The company stock fell 4% following the release of the report.

Net sales totaled $5.02 billion for the quarter, surpassing analysts' estimates. This was up 6% from $4.72 billion during the same quarter last year.

"We continued to compete effectively and execute well this quarter in a challenging operating environment," said General Mills CEO, Jeff Harmening. "In the face of an unprecedented combination of input cost inflation and supply chain disruptions, we're moving quickly to keep our trusted brands on store shelves for consumers while driving net price realization to protect our bottom line. As a result, we now expect to meet or exceed each of our financial targets for the year. We also advanced our portfolio reshaping efforts in the quarter, and we're more confident than ever that General Mills will emerge from the pandemic a stronger company better geared to generate profitable growth in line with our Accelerate strategy."

The company reported net income of $597.2 million or $0.97 per adjusted share for the quarter. This was down 13% from $688.4 million or $1.11 per adjusted share during the same quarter last year.

General Mills reported that operating profit fell 13% to $800 million due to rising inflation and supply chain interruptions due to COVID-19. The company saw a 2% rise to $2.98 billion in net sales in its North America Retail segment. The company's Europe & Australia segment posted a 1% rise to $464 million in net sales. The company's Asia & Latin America segment posted a 5% increase to $450.5 million.

General Mills, Inc. (GIS) shares ended the week at $65.99, down 1.6% for the week.

The Dow started the week of 12/20 at 35,222 and closed at 35,950 on 12/23. The S&P 500 started the week at 4,587 and closed at 4,725 on 12/23. The NASDAQ started the week at 14,933 and closed at 15,653 on 12/23.

Treasury Yields Rise

U.S. Treasury yields rose throughout the week as investors continued to process the spread of the Omicron variant and rising inflation levels. Yields continued to increase on Friday as unemployment levels fell below pre-pandemic levels.

On Thursday, the Commerce Department announced that the Personal Consumption Expenditures price index revealed that U.S. inflation rose 5.7% in November from the prior year. This marks the fastest increase in the consumer spending price index since July 1982.

"Consumers are able to purchase less because prices are rising, and that is starting to put the brakes on real spending growth," said senior U.S. economist at Capital Economics, Andrew Hunter.

The benchmark 10-year Treasury note yield opened the week of 12/20 at 1.407% and traded as high as 1.486% on Wednesday. The 30-year Treasury bond yield opened the week at 1.814% and traded as high as 1.892% on Wednesday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment insurance totaled 205,000. This was in line with analysts' estimates and fell below pre-pandemic levels of 220,000 claims filed during the same time in 2019.

"The claims data indicate strong demand for workers and a reluctance by businesses to lay off workers," said chief economist for High Frequency Economics, Rubeela Farooqi. "However, disruptions around Omicron and Delta could be a headwind if businesses have to close for health-related reasons."

The 10-year Treasury note yield closed at 1.495% on 12/23, while the 30-year Treasury bond yield was 1.908%.

Mortgage Rates Decline

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 23. Mortgage rates decreased this week as markets continue to digest the latest news regarding the COVID-19 Omicron variant.

This week, the 30-year fixed rate mortgage averaged 3.05%, down from last week's average of 3.12%. Last year at this time, the 30-year fixed rate mortgage averaged 2.66%.

The 15-year fixed rate mortgage averaged 2.30% this week, down from 2.34% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.19%.

"The market volatility resulting from the COVID-19 Omicron variant is causing mortgage rates to decrease," said Freddie Mac's Chief Economist, Sam Khater. "As the year comes to a close, the housing market is proceeding steadily. However, rates are expected to increase in 2022 which will impact homebuyer demand as well as refinance activity."

Based on published national averages, the savings rate was 0.06% as of 12/20. The one-year CD averaged 0.13%.

Published December 24, 2021
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