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Tuesday October 21, 2014

Finances

Finances
 

CarMax Misses Expectations

CarMax, Inc. (KMX), a retailer of used vehicles, reported its fourth quarter and fiscal year 2014 results on Friday, April 4. While revenue increased substantially for the year, the results still missed analysts’ expectations.

The company reported revenue of $3.07 billion for the quarter and $12.57 billion for the year. This compares favorably to the same periods last year when the company reported $2.83 billion for the quarter and $10.96 billion for the year. Despite the increase in revenue year-over-year, analysts had expected revenue of $3.18 billion for the fourth quarter.

CarMax reported net income of $99.21 million for the fourth quarter and $492.59 million for the year. Last year, CarMax reported fourth quarter net income of $107.22 million and annual net income of $434.28 million. Earnings per share came in at $0.44 per share for the fourth quarter. This was below analyst estimates of $0.53 per share.

“We had another great year, achieving several new milestones,” said Tom Folliard, President and CEO of CarMax, Inc. “While the accounting correction related to ESP and GAP reserves had an impact on the fourth quarter, we posted solid earnings growth in fiscal 2014, and we believe our continued geographic expansion and market share growth will drive our success in the years to come. The expansion of our share repurchase program reflects our confidence in the business and our ability to deliver on our growth plans, as well as an ongoing commitment to shareholder value.”

CarMax released a study on March 18 that looked at the top uses for tax refunds this year. Twenty-six percent of respondents said they are going to put their refund into savings and twenty-five percent said that they will use the refund to pay down outstanding debt. However, seventeen percent said that they are likely to use the money to shop for a car. Interestingly, twenty-nine percent of respondents said they were not expecting a refund.

CarMax, Inc. (KMX) shares ended the week of 3/31 at $45.56, down 0.55% for the week.

Jos. A. Bank Performs as Expected


Jos. A. Bank, Inc. (JOSB), a designer and retailer of men’s clothing and accessories, reported its fiscal year 2013 results on Wednesday, April 2. In general, the earnings met the expectations of Wall Street analysts.

The company reported net sales of $1.03 billion for the year. This figure was in line with analyst forecasts and represents a slight decrease from last year when the company reported net sales of $1.05 billion.

Jos. A. Bank reported net income of $63.33 million for the year. This represents a decrease from last year when the company reported net income of $79.70 million. Earnings per share for the year came in at $2.26 per share, matching analysts’ predictions.

Jos. A. Bank President and CEO, R. Neal Black, had this to say about the company’s annual earnings. "The initiatives we have undertaken to improve both our top and bottom line performance are delivering results. We have generated double-digit total sales gains in fiscal February and the first four weeks of fiscal March of 2014, reflecting positive consumer response to our promotions as well as ongoing strength in the non-promotional portion of our business. We are focused on maintaining this sales momentum while improving our profitability."

Jos. A. Bank entered into a merger deal with Men’s Wearhouse on March 11 whereby Men’s Wearhouse would purchase Jos. A. Bank for $1.8 billion. This has generally been seen as a beneficial move for both companies. It increases the reach of both companies’ distribution chains while allowing the companies to cut costs by combining forces.

Jos. A. Bank Clothiers, Inc. (JOSB) shares ended the week of 3/31 at $64.37, up 0.08% for the week.

Perry Ellis’s Earnings Disappoint


Perry Ellis International, Inc. (PERY), an international retailer of apparel and accessories, reported its fourth quarter and fiscal year 2014 results on Thursday, April 3. Overall the company’s results were disappointing as it posted a loss for the year.

The company reported quarterly revenue of $216.08 million and annual revenue of $912.22 million. This represents decreases from the same periods last year when the company reported quarterly revenue of $258.35 million and annual revenue of $969.55 million.

Perry Ellis reported a net loss for the quarter of $28.25 million and for the year of $22.78 million. Last year, the company reported net income of $4.49 million for the quarter and $14.80 million for the year. Quarterly loss per share came in at $1.91 per share.

Oscar Feldenkreis, President and COO of Perry Ellis International commented, "We were disappointed with the results of fiscal 2014. The year saw significant challenges, with unseasonal weather, consumer indifference to apparel, and declines in mall and outlet center traffic all negatively impacting our business. We also experienced a fundamental shift in the business model favoring national brands over private and exclusive brands, thereby impacting revenues and near term profitability."

Perry Ellis increases the number of brands it owns by licensing trademarks from third parties. It licenses Nike and Jag for swimwear and Callaway, PGA TOUR and Jack Nicklaus for golf apparel. This strategy has worked well for Perry Ellis and particularly this year when their proprietary brands did poorly.

Perry Ellis International, Inc. (PERY) shares ended the week of 3/31 at $14.37, up 6.2% for the week.

The Dow started the week of 3/31 at 16,324 and closed at 16,413 on 4/04. The S&P 500 started the week at 1,859 and closed at 1,865. The NASDAQ started the week at 4,186 and closed at 4,128.
 

Treasuries Rise on Jobs Data

Treasury prices rose and yields fell on Friday, April 4 after the Department of Labor released the results of the latest employment survey. The economy added fewer jobs than forecast, however, there were some encouraging signs in the Department of Labor report.

The U.S. economy added 192,000 private sector jobs in March. While this number was below the consensus forecast of 200,000 jobs, it put the total number of private sector jobs in the U.S. above prerecession levels for the first time. The total job count is now 116.1 million, which is higher than the same figure in January 2008 of 116 million.

The unemployment rate stayed constant at 6.7%, however, primarily because almost half a million people entered the workforce. This addition to the workforce is mostly due to the long-term unemployed beginning to look for work. The survey also showed an increase in the number of workers employed part-time. Upon the release of the jobs data, the yield on the 10-year Treasury note fell seven basis points to 2.73%.

The question that many people have been asking is how these numbers will affect the decisions of Fed Chair Janet Yellen and the FOMC moving forward. Janet Yellen spoke this week at a conference in Chicago. She said, “The numbers of people who have been trying to find work for more than six months or more than a year are much higher today than they ever were since records began decades ago. While there has been steady progress, there is also no doubt that the economy and the job market are not back to normal health.”

While it seems reasonable to expect that the Fed will continue to reduce bond purchases over the next several months, these comments at least seem to suggest that the Fed’s borrowing rate will remain low for the foreseeable future. “In all likelihood, the Fed’s going to remain accommodative,” said Richard Schlanger, Vice-President at Pioneer Investments.

The 10-year Treasury note yield finished the week of 3/31 at 2.73% while the 30-year Treasury note yield finished the week at 3.58%.
 

Interest Rates Inch Higher

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, April 3. The results show mortgage rates inching higher this week after the release of economic data.

The 15-year fixed rate mortgage averaged 3.47% this week. This represents an increase from last week when the fixed rate mortgage averaged 3.42%. One year ago at this time, the 15-year fixed rate mortgage averaged 2.74%.

This week, the 30-year fixed rate mortgage averaged 4.41%. This represents an increase from last week when it averaged 4.40%. Last year at this time the 30-year fixed rate mortgage averaged 3.54%.

Vice President and Chief Economist at Freddie Mac, Frank Nothaft, commented on this week’s results. "Mortgage rates were little changed amid a week of light economic reports. Of the few releases, real GDP was revised up slightly to 2.6% growth in the fourth quarter of 2013. The private sector added an estimated 191,000 jobs in March, which followed an upward revision of 39,000 jobs in February according to the ADP Research Institute. Also, the Institute for Supply Management reported the manufacturing industry rebounded from a soft February but was still below market consensus."

The money market fund finished the week of 3/31 at 0.4%. The 1-year CD finished at 0.7%.

Published April 4, 2014


Previous Articles

Carnival's Quarterly Results Sink

Adobe is on Cloud Nine

Williams-Sonoma's Great Quarter

Adidas Finishes Strong

Pizza Wars: Papa John's v. Domino's

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