Daily stocks in the news
G-III had a stylish day in the market after surpassing expectations for Q1 earnings and revenue. The company, known for designing and marketing apparel under various well-known brands, including DKNY, Donna Karan, Calvin Klein, and Tommy Hilfiger, put an end to a three-quarter losing streak against analysts' EPS estimates. While revenue still declined compared to the previous year, G-III's turnaround quarter was driven by improvements in inventory levels and gross margin.
The company's inventory increased by around 15% compared to the previous year, with a significant portion of the increase attributed to the acquisition of Karl Lagerfeld. However, on a sequential basis, G-III managed to reduce its inventory levels by $80 million, aiming to minimize exposure to lower-margin licensed brands in the wholesale channel.
The expiration of G-III's licensing agreements with PVH for the Calvin Klein and Tommy Hilfiger brands, which account for about half of its sales, has been a major concern. However, G-III took a significant step towards replacing that lost revenue by securing a new 25-year licensing agreement with Xcel Brands for the Halston brand. Halston, a luxury fashion brand primarily sold in higher-end department stores, aligns well with G-III's "power brands" like DKNY and Karl Lagerfeld. The first deliveries of Halston products to top-tier department stores are expected in the fall. As G-III optimizes its inventory and gradually replaces Calvin Klein and Tommy Hilfiger with high-end brands, its margin profile is expected to continue improving. G-III's gross margin expanded to 41.2% from 35.7% in the year-earlier quarter, driven partly by the inclusion of the Karl Lagerfeld business, which operates at a higher gross margin percentage. Additionally, lower freight costs compared to the previous year provided an additional boost to margins. However, G-III's Q2 EPS forecast missed expectations, primarily due to elevated warehousing costs associated with higher inventory levels related to the acquired Karl Lagerfeld business. Nonetheless, the company raised its FY24 EPS guidance significantly higher than estimates.
Moving on to J.M. Smucker, the company initially saw a positive market reaction after reporting upbeat earnings for Q4. The consumer goods company, owning brands like Smuckers, Jif, and Folger's, surpassed expectations for both revenue and earnings. It also provided guidance for adjusted earnings and revenue growth in FY24. However, investors were unimpressed due to concerns about future growth. SJM's sales outlook for FY24, on a comparable net sales basis, excludes the divestiture of certain pet food brands, which is expected to cause a 10-11% year-on-year decline in net sales. Furthermore, investors worry that SJM's brands may struggle to maintain market share in the face of high inflation, as the company may not have the same brand loyalty as some of its peers.
Despite the concerns, SJM's Q4 results were solid, with a 10% year-on-year increase in revenue driven by growth in its Pet Foods, Coffee, Consumer Foods, and International segments. However, the Pet Foods and Coffee segments experienced volume declines, offset partially by higher prices. Profit margins in the Consumer Foods segment contracted, but overall, SJM recorded an improvement in adjusted gross margins. The company expects further margin improvement in FY24.
While SJM's Q4 report was sound, worries about growth prospects weighed on the stock. The company aims for respectable sales growth in FY24, primarily driven by higher prices, but its earnings growth projections are relatively modest. The concern is that SJM's brand power may not be enough to fend off trade-down activity to private labels, particularly given that its core brands are easily replaceable.
In summary, G-III made a significant turnaround in Q1, surpassing expectations and securing a new licensing agreement, while J.M. Smucker's positive Q4 earnings report was overshadowed by concerns about future growth and market share.
GitLab experienced a significant increase in its stock price, rising by 30%, following the release of its Q1 earnings report. The company reported a narrower loss than expected and exceeded revenue projections for the quarter. Moreover, GitLab provided guidance for Q2 and the full year that surpassed analysts' expectations. This positive news was well-received by investors, especially after the company had lowered its guidance in the previous quarter. Despite acknowledging macroeconomic headwinds and increased scrutiny in deal approvals, GitLab remains optimistic about its sales cycles and bookings predictability. The company also raised the price of its premium SKU, which is expected to have a more significant impact in Q2 and FY25. GitLab emphasized its focus on incorporating AI into its DevSecOps platform, which it believes will make software development easier and attract a broader audience of developers. Overall, the upside guidance and GitLab's realistic perspective on the market were key factors driving the stock's upward movement.
On the other hand, Academy Sports + Outdoors (ASO) reported disappointing results for Q1, falling short of earnings expectations. The company, which went public in October 2020, faced challenges due to a slowdown in consumer spending. ASO also revised its guidance for EPS, revenue, and comparable sales for FY24, indicating weakening business trends throughout the quarter. This disappointing performance aligns with the struggles faced by other retail companies like Hibbett and Foot Locker. In contrast, Dick's Sporting Goods (DKS) outperformed its competitors, reporting positive Q1 results and reaffirming its guidance for FY24. DKS's success can be attributed to its emphasis on providing a unique in-store experience for customers and a strong merchandise assortment featuring top brands like NIKE. ASO experienced declines in comps and total revenue, which were exacerbated by a promotional retail environment and unfavorable weather conditions. Despite the negative results and guidance cut, ASO's stock price increased, potentially driven by the previous decline in its stock value and expectations of improvement in the second half of FY24, attributed to new store openings, the introduction of new brands, and a strengthening of the outdoor business segment. Investors are now looking ahead to potential improvements as ASO faces easier year-on-year comparisons.
Thor Industries (THO) is experiencing a positive shift in its fortunes, with its stock price surging by 14% after the company's impressive earnings beat in Q3. This breakout follows a period of consolidation for the RV manufacturer. While THO slightly reduced its revenue guidance, investors are largely disregarding this minor setback and focusing on the potential turnaround for the company. The earnings per share (EPS) decline of 64.6% compared to the previous year was better than analysts' expectations and a significant improvement from the previous quarter's rare miss. THO also exceeded sales forecasts, despite a 37.1% decline in revenue. Today's gains can also be attributed to low expectations, as other industry players like Camping World Holdings and LCI Industries experienced challenges in their new RV sales. However, THO remains optimistic about the long-term demand for RVs in North America and Europe, emphasizing the continued interest in the RV lifestyle. The company believes that the increase in used RV sales, coupled with rising demand from a younger demographic and RV rentals, contributes to a stronger foundation for future demand. While THO acknowledges current economic softness and the influence of external factors such as inflation and interest rates, it maintains a conservative outlook for the remainder of FY23. Despite cautious sentiments, the market is enthused about the RV industry's potential for a faster-than-expected turnaround, which bodes well for the upcoming MayQ report from competitor Winnebago.