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Saturday May 28, 2022



Fossil Watches Reports Earnings

Fossil Group, Inc. (FOSL) announced its first quarter earnings report on Wednesday, May 12. For the quarter, the fashion designer and watch manufacturer reported reduced net sales and net income year-over-year.

Fossil reported quarterly net sales of $363.0 million. This was down 7% from net sales of $390.7 million at the same time last year.

"We are pleased to start the year with better than expected sales performance, which reflects improving consumer demand in the U.S., ongoing momentum in Mainland China and continued strength in our digital channels globally," said Fossil's CEO Kosta Kartsotis. "While the COVID pandemic continues to disrupt certain markets, we are encouraged by our outlook in large markets like the U.S. and Mainland China, which are benefiting from the execution of our digital strategy. More broadly, we are pleased with our success in transforming the business model, which has strengthened our digital mix, significantly improved our cost structure and positions us to drive increased growth and profitability over the long term."

The company reported a net loss of $24.4 million for the quarter or $0.47 per share. This is an improvement from a net loss of $85.6 million or $1.69 per share in the same quarter last year.

Fossil attributed the decreased net sales to reduced traffic in the company's stores and wholesale sector due to COVID-19 and 12% decrease in company-owned stores. Net sales remained static in the Americas at $153 million, while Europe and Asia reported reduced net sales. The decrease in net sales was partially offset by 40% growth in the digital sector. The watches, leathers and other segments reported reduced net sales, with jewelry being the only segment to report an increase. For fiscal year 2021, Fossil expects net sales growth of 12% to 16% and Adjusted EBITDA margin of approximately 5% to 7%.

Fossil Group, Inc. (FOSL) shares closed at $12.16, down 2.1% for the week.

Eastman Kodak Reports Earnings

Eastman Kodak Co. (KODK) announced its first quarter earnings report on Wednesday, May 12. The New York-based printing and film company's shares fell 5.7% following the report's release.

Kodak reported quarterly net sales of $265 million for the quarter. This is slightly down from net sales of $267 million reported at the same time last year.

"The steps we have taken in the last two years — strengthening our balance sheet, establishing a customer-first approach and continuing to invest in innovation — have created the foundation for growth," said Kodak's CEO Jim Continenza. "We will continue to execute on those strategies to create long-term value for our shareholders and our employees."

The company reported net income of $6 million for the quarter. This is up from a net loss of $111 million reported at the same time last year.

Kodak ended the quarter with a cash balance of $401 million. This is up from a cash balance of $196 million reported in the previous quarter. The company reported Operational EBITDA at $3 million for the quarter, compared to a loss of $8 million reported in the same quarter last year. Kodak also announced year-over-year growth in some of their key products. These include the SONORA Process Free Plates and PROSPER annuities at 8% and 12% growth respectively. The SONORA Process Free Plate is a thermal plate used in printers.

Eastman Kodak Co. (KODK) shares closed at $6.75, down 5.6% for the week.

Wendy's Reports Earnings

The Wendy's Company (WEN) reported its quarterly earnings report on Tuesday, May 12. The fast-food company's shares increased more than 5% following the report's release.

Wendy's reported net sales of $460.2 million, up 13.6% from $405.0 million reported in the same quarter last year. Reported net sales topped analysts' expectations of $444 million for the quarter.

"We are increasing our 2021 financial outlook meaningfully across all key financial metrics, driven by an outstanding first quarter that underscores our continued momentum and the overall strength of our business," said Wendy's CEO Todd Penegor. "The robust growth in our business continued in the first quarter of 2021 as sales significantly exceeded our expectations and fueled our restaurant economic model, leading to outsized profits. We remain committed to our three long-term growth pillars—significantly building our breakfast daypart, accelerating our digital business, and expanding our footprint across the globe—and continue to make great progress."

The company reported net income of $41.4 million for the quarter or $0.18 per share. This is up from $14.4 million or $0.06 per share during the same quarter last year.

Wendy's, best known for its square burger patties, saw strong financial results due to its push to promote breakfast menu items. The company increased emphasis on its other product offerings recently. It also launched a new chicken sandwich that sold very well during the quarter and spent $3.5 million in advertising to promote its breakfast menu items. The company updated its 2021 outlook and expects net sales growth from 8% to 10% and adjusted earnings per share from $0.72 to $0.74.

The Wendy's Company (WEN) shares closed at $23.40, up 2.4% for the week.

The Dow started the week at 34,785 and closed at 34,382 on 5/14. The S&P 500 started the week at 4,228 and closed at 4,174. The NASDAQ started the week at 13,688 and closed at 13,430.

U.S. Treasury Yields Rise

U.S. Treasury yields increased mid-week due to investors' fears of increasing inflation. Yields pared back some of the mid-week gains after the release of retail sales data.

On Wednesday, the Consumer Price Index for April was released with a greater-than-expected increase of 4.2%. Economists had expected growth of 3.6%. The 10-year Treasury yield rose in response, as investors' fears were stoked that interest rates may be forced to rise in the coming months.

"The economy is still is far from being fully recovered, but investors have heard enough from Fed Chair Powell about the commitment to keeping interest rates low until the economy recovers," said Anders Persson, chief investment officer of global fixed income at Nuveen. "But the same investors are concerned that the Fed is too confident about signs of inflation in the economy. As a result, the market remains range bound, and we expect that to continue for the foreseeable future."

The 10-year Treasury note opened the week of May 10 at 1.58% and hit a high of 1.71% on Thursday, May 13. The 30-year Treasury bond yield opened the week at 2.28% and reached a high of 2.42% on Thursday.

On Friday, the Commerce Department released its retail sales data for April. Economists had expected growth of 1.0%, however, the reading came in as unchanged. This was a surprise to investors as March's data received a revision to 10.7% from its previously reported 9.7% increase.

"A flat retail sales read is actually par for the course in a normalized environment so in a way this actually shows that retail is somewhat stabilizing," said Mike Loewengart, managing director of investment strategy at E*Trade. "So while on its own this read is not likely to move the needle in either direction, it probably supports the point of view that the dip we experienced this week is a buying opportunity as all sectors march toward full recovery."

The 10-year Treasury note yield closed at 1.63% on 5/14, while the 30-year Treasury bond yield was 2.35%.

Mortgage Rates Continue to Fall

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, May 13. Mortgage rates continued their slide.

This week, the 30-year fixed rate mortgage averaged 2.94%, down from last week's average of 2.96%. Last year at this time, the 30-year fixed rate mortgage averaged 3.28%.

The 15-year fixed rate mortgage averaged 2.26% this week, down from 2.30% last week. During the same time last year, the 15-year fixed rate mortgage averaged 2.72%.

"Since the most recent peak in April, mortgage rates have declined nearly a quarter of a percent and have remained under 3% for the past month," said Sam Khater, Freddie Mac's Chief Economist. "Low rates offer homeowners an opportunity to lower their monthly payment by refinancing and our most recent research shows that many borrowers, especially Black and Hispanic borrowers, who could benefit from refinancing still aren't pursuing the option. Additionally, the low mortgage rate environment has been a boon to the housing market but may not last long as consumer inflation has accelerated at its fastest pace in more than twelve years and may lead to higher mortgage rates in the summer."

Based on published national averages, the national savings rate was 0.06% as of 4/19. The one-year CD averaged 0.14%.

Published May 14, 2021

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