A humorous look at the companies that caught our eye, for better or worse, this week
Empire Co. (DOG)
Cleanup in aisle seven. After posting solid gains this year, shares of grocery retailer Empire suddenly went splat this week after the owner of Sobeys, FreshCo, Safeway and other banners reported that same-store sales rose 2 per cent in the second quarter but fell slightly after adjusting for inflation. Further rattling investors, CEO Michael Medline cited a “slight softening in sales at the end of the quarter and into the beginning of Q3” and said the company is “monitoring consumer spending and promotional activity closely.” Don’t put away those mops just yet.
Lululemon Athletica (DOG)
“Deep breath in … now exhale.” Even as Lululemon posted strong third-quarter results, shareholders were stressing about the yoga and athletic-wear company’s forecast that comparable sales – including online orders – will rise by only “low double digits on a constant dollar basis” in the fourth quarter, down from torrid growth of 17 per cent in the third quarter. The deceleration largely reflects quirks in the calendar, according to analysts who remain bullish on the company, but with the stock up more than 80 per cent this year, investors were looking for any excuse to take profits.
Children’s Place (DOG)
“Hey kids! Wouldn’t you love a new shirt and crisp pair of pants for Christmas? How about a pair of socks and some mittens? Go get mom and dad right now and tell them to order some clothes from Children’s Place! We really need your help because our sales barely went up at all in the third quarter. We even had to cut our outlook for the fourth quarter due to ‘meaningfully weaker than planned mall traffic,’ which sent our stock down a lot. So tell mom and dad to get out their credit cards right now! If you don’t, we’ll have no choice but to tell Santa."
For Netflix investors, it’s looking more and more like the streaming giant’s stock market glory days are over. Already down by more than one-quarter over the past 18 months, the shares took another hit after Needham analyst Laura Martin downgraded Netflix to “underperform” from “hold” and predicted it will lose four million subscribers next year amid growing competition from cheaper services such as Disney+, Apple TV+ and Hulu. She even suggested that Netflix should launch a lower-priced tier that costs US$5 to US$7 a month and is subsidized with six to eight minutes of advertisements every hour. Wait, that sounds like regular TV.
Peloton Interactive (DOG)
Riding a stationary bicycle may be good for your health. But investing in a stationary bicycle maker can be hazardous for your wallet. Shares of Peloton fell after short-seller Andrew Left blasted the company’s lofty valuation as “disconnected from all reality” and warned that its US$2,245 bikes face growing competition from products that cost half as much but offer more features. What’s more, customers who buy these cheaper bikes can still get access to interactive classes on the Peloton app for US$12.99 a month – a third of the price that Peloton bike owners pay to get the service on their machines. No wonder investors are sweating.