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Wednesday December 12, 2018



Smucker's Earnings Miss Estimates

The J. M. Smucker Company (SJM) announced its quarterly and year-end earnings on Thursday, June 7. The company's quarterly earnings fell short of Wall Street's expectations.

The company reported net sales of $1.78 billion for the fourth quarter, relatively unchanged from last year's fourth quarter earnings, but below analysts' estimated $1.81 billion. For the full year, the company reported $7.36 billion in net sales, down from $7.39 billion during the previous year.

"While fourth quarter adjusted earnings per share was below our projections due to industry-wide headwinds and certain discrete items, the actions we are taking to align our portfolio for growth set up our business to win," said Smucker's CEO Mark Smucker. "In the past few months, we brought 1850™ premium coffee and Jif® PowerUps™ snacks to market, innovations created in response to changing consumer preferences. We acquired Ainsworth, thereby strengthening our pet food portfolio with the addition of the high-growth, on-trend Rachael Ray® Nutrish® premium pet food brand."

Smucker's net income for the quarter was $185.9 million, or $1.64 per share, up nearly 42% from $110.4 million, or $0.96 per share, during the same quarter last year. For the full year, net income was $1.34 billion, a 126% increase from the prior year's $592.3 million.

In addition to its namesake brand of fruit spreads, the J. M. Smucker Company includes such brands as Folgers, Dunkin Donuts retail coffee, Pillsbury and Nature's Recipe pet food. In the fourth quarter, the company's retail coffee segment saw a 4% increase in profits, while pet food profits fell 13% due to voluntary product recalls. In the fourth quarter, the company terminated its acquisition of Wesson oil brand due to a Federal Trade Commission challenge.

The J. M. Smucker Company (SJM) shares ended the week at $102.50, down 3.4% for the week.

Ollie's Releases Strong Earnings Report

Ollie's Bargain Outlet Holdings, Inc. (OLLI) reported its first quarter earnings on Tuesday, June 5. The company increased sales and earnings guidance in response to strong quarterly performance.

The bargain store reported net sales of $275.7 million for the quarter. This is up 21% from $227.6 million at this time last year.

"We feel great about the strong start to 2018 and the continued momentum of our business," said Ollie's Chairman, President and CEO Mark Butler. "Our first quarter results were very strong across the board as we delivered our 16th consecutive quarter of positive comparable store sales and a 66% increase in adjusted net income. In addition, we entered our 21st state with two stores in Arkansas, and we are excited to bring 'Good Stuff Cheap' to a growing base of customers."

The company reported net income of $30.5 million, or $0.46 per share. This is up from $19.0 million, or $0.29 per share during the same quarter last year.

Ollie's sells closeout and overstocked merchandise at discount prices in 21 states across the Eastern portion of the United States. The warehouse-style retail company increased its full-year revenue guidance from a range of $1.20 billion to $1.21 billion to a range of $1.207 billion to $1.215 billion. The company opened eight stores in the first quarter, bringing the company's total store count to 276.

Ollie's Bargain Outlet Holdings, Inc. (OLLI) shares closed at $72.45, up 1.9% for the week.

Francesca's Affirms Outlook

Francesca's Holdings Corp. (FRAN), a retailer of women's apparel and accessories, reported its first quarter results on Tuesday, June 5. The company reaffirmed its full-year sales guidance, despite decreased quarterly sales.

The company reported net sales of $100.4 million for the quarter. This is down 7% from $107.7 million at this time last year.

"First quarter results were generally in line with our expectations and we are starting to see signs of progress across several areas of our business," said Francesca's President and CEO Steve Lawrence. "During the quarter, we saw sequential improvement in our non-apparel categories, with both footwear and accessories comping positively in the quarter."

The company reported a net loss of $3.9 million, or $0.11 per share. This is down from net income of $4.3 million, or $0.12 per share during the same quarter last year.

Francesca's, the fastest growing specialty retailer in the U.S., affirmed its full-year sales guidance range of $485 to $499 million. The company opened 27 new stores during the first quarter, bringing the total store count to 744. Francesca's comparable sales decreased 16% in the first quarter.

Francesca's Holdings Corp. (FRAN) shares closed at $6.51, relatively unchanged for the week.

The Dow started the week of 6/4 at 24,728 and closed at 25,317 on 6/8. The S&P 500 started the week at 2,742 and closed at 2,779. The NASDAQ started the week at 7,570 and closed at 7,646.

Treasury Yields Fluctuate

Yields on U.S. Treasuries fell early this week following the announcement of retaliatory tariffs from U.S. trade partners. Yields rose mid-week due to talks of monetary policy change in Europe.

Trade negotiations continue to affect Treasury yields as investors flock to safe-haven investments, such as government bonds, due to market uncertainty. The U.S. trade deficit fell to a seven-month low of $46.2 billion in April.

"While the narrative has been highly variable, the scope of tariffs remains limited so far," said Jason Pride, chief investment officer of private clients at Glenmede. "The total value of exports and imports of goods in the U.S. last year was about $4 trillion. Only about 4% of goods traded face increased tariffs by the U.S. and its partners as a result of trade actions this year, suggesting the scope of tariffs so far remains limited."

On Wednesday, the European Central Bank announced intentions to discuss ending its monetary stimulus program. The 10-year Treasury bond yield increased in response, as investors interpreted the news as a sign that the global economy is strengthening.

"This has been a long time coming, because most of the transparency from the ECB is a series of vague comments about the future of quantitative easing," said Kevin Giddis, head of fixed income capital markets at Raymond James. "Today they took a bolder step by saying that it was 'time to discuss' the stoppage of its bond-buying program."

The benchmark 10-year Treasury note yield dipped to 2.92% during early trading on Friday, while the 30-year Treasury bond was at 3.07%. Treasury yields fell in anticipation of the G-7 summit.

The 10-year Treasury note yield closed at 2.94% on 6/8, while the 30-year Treasury bond yield was 3.08%.

Mortgage Rates Dip

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, June 7. Mortgage rates continued to decline for the second consecutive week.

The 30-year fixed rate mortgage averaged 4.54% this week, down from last week's average of 4.56%. At this time last year, the 30-year fixed rate mortgage averaged 3.16%.

This week the 15-year fixed rate mortgage averaged 4.01%, which is down from 4.06% last week. During this time last year, the 15-year fixed rate mortgage averaged 3.16%.

"Homebuyers have taken advantage of the recent moderation in rates, which led to a 4% increase in purchase applications last week," said Sam Khater, Chief Economist at Freddie Mac. "Although demand has remained steadfast against the backdrop of this year's higher borrowing costs, it's important to note that the growth rate of purchase loan balances has moderated so far this year — and particularly since March. This slowdown indicates that buyers are having difficulty stretching to keep up with the pace of home-price growth."

Based on published national averages, the money market account closed at 1.22% on 6/8. The 1-year CD finished at 2.25%.

Published June 8, 2018

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