A roundup of some of the North American equities making moves in both directions today
On the rise
Macy’s Inc. (M-N) and Kohl’s Corp. (KSS-N) jumped on Thursday after they raised their full-year sales and profit outlook, signaling the department store operators have sidestepped supply chain snarls and were well stocked for the all-important holiday season.
The U.S. retailers also exceeded market estimates for third-quarter sales, benefiting from a surge in spending on perfumes, dresses and formal wear by Americans returning to offices and social events.
The retail sector has faced pressure this year from shipping logjams, shuttered factories in Asia and a scarcity of raw materials, leading companies like Nike Inc to warn of product shortages during the holiday season.
But moves by Macy’s to expedite shipments and make product orders earlier in the year helped keep its inventory levels rise by 19.4 per cent in the quarter ended September.
“The company implemented several measures to mitigate supply chain disruptions and does not expect to be materially impacted during the fourth quarter of 2021,” it said in a statement.
Kohl’s said its inventory levels were up about 1 per cent, easing concerns about a shortage of women’s apparel - a key category for department stores.
Macy’s expects full-year net sales of US$24.12-billion to US$24.28-billion, compared with US$23.55-billion to US$23.95-billion previously.
“I don’t think that all supply chain problems have been fixed, but Macy’s raised guidance could put people at ease that there will be enough product,” said Empire Financial Research analyst Berna Barshay.
A 1-per-cent rise in gross margins on pre-pandemic 2019 levels, aided by fewer promotions and full-price selling, should also come as a relief to investors at a time when larger retailers like Walmart Inc and Target Corp are struggling with higher supply costs, Ms. Barshay said.
Toronto-based Enthusiast Gaming Holdings Inc. (EGLX-T), a video game and esports platform, was higher after it announced that unique visitor traffic to its digital media property in the U.S. reached an all-time high in October, based on recent digital media ratings from Comscore, a leading independent third-party measurement firm.
The Enthusiast Gaming digital media property reached 47.8 million U.S. Unique Visitors for the month of October. Enthusiast Gaming ranks between streaming platform Twitch, and game platform Roblox, as a top property in the overall Games category, the company stated.
From April: Toronto video game platform Enthusiast Gaming to list shares on Nasdaq in bid to attract U.S. investors
Apple Inc. (AAPL-Q) rose to hit a new record after Bloomberg reported new car chief Kevin Lynch is pushing to launch its electric car as early as 2025 and refocusing the project around full self-driving capabilities.
Apple’s ideal car would have no steering wheel and pedals, with interiors designed around hands-off driving, the report said.
The company’s automotive efforts, known as Project Titan, have proceeded unevenly since 2014 when it first started to design its own vehicle from scratch.
The news comes as surging demand for electric vehicles propels the market value of companies such as Tesla and Rivian far above traditional carmakers that have been around for decades longer.
Reuters had reported in December that Apple was targeting 2024 to produce a passenger vehicle that could include its own breakthrough battery technology.
Nvidia Corp. (NVDA-Q) soared after it forecast fourth-quarter revenue above analysts’ expectations late Wednesday, betting on growth in its data center business as more internet companies set out to invest in artificial intelligence and the metaverse.
The online realm that uses augmented and virtual reality to help users interact has captured more attention after Facebook , now renamed Meta, said it would boost capital expenditure and shift focus from its social media business.
The move will be a big boost for Nvidia, the world’s biggest maker of graphics and AI chips, as metaverse applications would need more computing power and drive demand for chips.
The company last month released Omniverse Enterprise, a set of software tools that will allow companies to collaborate in building virtual worlds, the computing power for which comes from Nvidia’s chips.
Nvidia Chief Executive Jensen Huang said he believes Nvidia could eventually fetch up to US$1,000 a year from up to 40 million virtual world creators and designers. The company believes about half its revenue from Omniverse will come from chips and half from software.
“There will probably be more virtual worlds than there are websites today. And the reason for that is they are easier to build,” Mr. Huang told Reuters in an interview.
Nvidia expects current-quarter revenue of US$7.40-billion, plus or minus 2 per cent, above analysts’ average estimate of US$6.86-billion, according to IBES data from Refinitiv.
The company has so far avoided major supply chain problems despite a global chip crunch, but supply chain costs are rising. It said Wednesday that outstanding inventory purchases and long-term supply obligations were US$6.90-billion, up from US$2.57-billion a year earlier. The company made a US$1.6-billion payment in the third quarter alone to secure supply.
“When it came up, I jumped on the opportunity. Nvidia has a lot of cash, and we generate a lot of cash,” Mr. Huang told Reuters. “I was more than delighted to secure our future growth with cash.”
For the reported third quarter, revenue in Nvidia’s gaming unit rose 42 per cent to US$3.22-billion and data centers surged 55 per cent to US$2.94-billion.
Analysts had expected US$3.13-billion and US$2.75-billion for gaming and data centres, respectively, according to FactSet.
Overall, revenue rose about 50 per cent to US$7.10 billion for the three months ended Oct. 31, above the average estimate of US$6.83-billion, according to IBES data from Refinitiv. Earnings were US$1.17 per share on an adjusted basis, 6 US cents more than expectations.
CVS Health Corp. (CVS-N) increased after announcing before the bell it will shut about 900 stores over the next three years, as the company tries to adapt to changing consumer preferences by pivoting to new store formats that offer more health services.
Best known for its chain of drugstores in more than 9,900 locations, the company has been working to expand its services since it acquired health insurer Aetna in 2018.
CVS said that as part of its strategic review it would create an enhanced version of its health hubs that offer treatment for common ailments as well as chronic care to add more customers.
The reduction in stores will result in CVS taking an impairment charge of between US$1-billion and US$1.2-billion in the fourth quarter.
As part of the new strategy, the company also created a new position of chief pharmacy officer and appointed executive vice president of specialty pharmacy and product innovation Prem Shah to the role.
Shares of Sweetgreen Inc. (SG-N) was valued at US$5.53-billion after shares skyrocketed 86 per cent in their New York debut on Thursday, as investors embrace companies that focus on healthy and environment-friendly food.
Much of the demand is being fueled by millennials and generation Z consumers, who are more than willing to spend on sustainable products that are also healthy.
Sweetgreen’s shares opened at US$52, compared to the IPO price of US$28 a share, which was well above its targeted price range of between US$23 and US$25.
The Los Angeles, California-based company raised US$364-million on Wednesday, selling 13 million shares in an upsized initial public offering, compared with its original plan of 12.5 million.
Founded by three college graduates in 2007, Sweetgreen operates 140 restaurants in 13 states in the United States. It offers “earth-friendly” meals made with seasonal and locally-sourced ingredients.
In its IPO filing, Sweetgreen reported a loss of US$87-million on revenue of US$243.4-million for the nine months ended September, compared with a loss of US$100-million on revenue of US$161.4-million a year earlier.
Goldman Sachs and J.P.Morgan were among the lead underwriters for Sweetgreen’s IPO.
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On the decline
Tilray Inc. (TLRY-T), Canopy Growth Corp. (WEED-T) and Cronos Group Inc. (CRON-T) all fell after an equity analyst at Barclays expressed concern about their growth potential south of the border.
“The Canadian cannabis market is ultimately small,” Guarav Jain said in a research note. “We estimate a FY30 legal market of C$10-billion, which we see supporting manufacturer fiscal 2030 EBITDA of C$1-2-billion and FY29 EV of C$7-23-billion. “This implies that Canada accounts for 30 per cent of Canopy’s and Tilray’s operating EV, and 40 per cent of Cronos’. The rest of their EV is attributable to optionality in the U.S. market. However, Canadian companies cannot directly invest in the U.S. market. They are entering into structured transactions with US MSOs that would convert into minority stakes upon US federal legalization. We think the benefit of these deals accrues to the shareholders of MSOs rather than those of the Canadian companies.”
Cisco Systems Inc. (CSCO-Q) declined with it forecasting current-quarter revenue below expectations as supply chain shortages and delays drive up costs.
The network gear maker fell after it said it expects second-quarter revenue to grow 4.5 per cent to 6.5 per cent year-over-year, compared with Wall Street expectations of about 7.4 per cent.
Businesses across the globe are facing an unprecedented semiconductor shortage that has pushed up expenses, hurting companies such as Cisco that use chips in their products.
Cisco Chief Financial Officer Scott Herren told Reuters the company also faces higher transport and logistics costs in its supply chain. Cisco is making progress on pinpointing and resolving component shortages but getting everything to the right place remains a challenge, he said.
“A lot more of the subcomponents are coming via air than would have come traditionally,” Mr. Herren said. “The port snarls have hit us in a couple of places.”
Cisco is working to derive more of its sales from software but still gets most of its revenue from hardware. It expects to see the benefit from hardware price increases that came into effect on Sept. 1 later into its fiscal year, because it is still working through hardware backlogs.
The company said orders grew by 33 per cent in the first quarter ended Oct. 30, suggesting strong demand, but supply issues prevented this from translating into revenue right away.
However, the company stood by its fiscal 2022 overall growth target of between 5 per cent and 7 per cent, which was in line with analyst expectations of 6 per cent, according to Refinitiv data. Mr. Herren said a US$15.9-billion backlog of remaining contracts, 60 per cent of which are for services and 40 per cent of which are for software, provides some stability despite hardware supply chain issues.
The San Jose, California-based company said it expects second-quarter profit per share between 80 US cents and 82 US cents, with the midpoint narrowly missing Refinitiv IBES estimates of 82 US cents.
Revenue for the quarter ended Oct. 30 was US$12.90-billion. Analysts on average had expected revenue of US$12.98-billion, according to IBES data.
U.S.-listed shares of China’s Alibaba Group Holding Ltd. (BABA-N) dipped with it forecasting annual revenue to grow at its slowest pace since its 2014 stock market debut as second-quarter results missed expectations due to slowing consumption, increasing competition and a regulatory crackdown.
Alibaba expects its fiscal year 2022 revenue to grow by 20 per cent to 23 per cent.
The company last week recorded its slowest sales growth during its annual Singles’ Day, the world’s biggest online shopping fest.
Once a major media event, the company downplayed its sales tallies and instead highlighted its efforts to improve social welfare and the environment.
China’s big tech companies have also been under pressure as the country’s regulators clamp down on powerful players from Alibaba to ride-hailing giant Didi Global Inc, citing antimonopoly and security reasons.
The crackdowns have also hurt Chinese gaming and social media giant Tencent Holdings, which posted its slowest quarterly revenue growth since it went public in 2004.
Alibaba’s founder Jack Ma has been largely out of public view since criticizing China’s regulatory system last year.
Coty Inc. (COTY-N) trimmed early gains after it forecast a modest revenue growth for the next several years, as it benefits from improving U.S. and China beauty markets and a sales rebound in airport duty-free stores.
The company has been focusing more on high-end fragrances, skincare products, and other categories that picked up pace last year, while makeup products demand waned following the pandemic outbreak that forced people to venture out less.
The majority owner of Kylie Cosmetics brand, founded by TV star Kylie Jenner, has also been trying to revive its CoverGirl, Rimmel and Max Factor brands through new launches, collaborations with models such as Niki Taylor and Adwoa Aboah, and spending more on advertising.
“We expect to outperform the beauty market through FY25 and beyond,” Coty Chief Executive Sue Nabi said.
The company forecast like-for-like net revenue growth of 6 per cent to 8 per cent for each of the next three financial years through 2025, with plans to grow it further in the following years.
With files from Brenda Bouw, staff and wires
David Leeder