The Dow Jones Industrial Average (DJINDICES: ^DJI) closed above 25,000 for the first time on Thursday, as it and and the S&P 500 (SNPINDEX: ^GSPC) set new records.
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Financial stocks led the market; the Financial Select Sector SPDR ETF (NYSEMKT: XLF) gained 0.9%. Brick-and-mortar retail stocks had a tough day, as December sales figures started rolling out, and numbers from companies such as Macy’s and J.C. Penney didn’t quite meet elevated hopes for the holiday season. The SPDR S&P Retail ETF (NYSEMKT: XRT) was down as much as 2.5% during the day but partially recovered to close off 0.6%.
L Brands (NYSE: LB) was particularly hard hit in the retail sell-off, and shares of Walgreens Boots Alliance (NASDAQ: WBA) sank despite the company reporting a quarter that beat expectations.
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L Brands reports weak December sales, lowers profit outlook
L Brands, parent company of Victoria’s Secret, PINK, and Bath & Body Works, reported a sales gain for the month of December and updated earnings guidance for its fiscal fourth quarter, which ends later this month. December sales increased 3% to $2.5 billion on comparable-store sales growth of 1%. Guidance for fourth quarter EPS was given as $2.00, compared with previous guidance of $1.95 to $2.10 and analyst expectations of $2.04. The stock plunged 12.3%.
Strength in online sales helped balance out continued weakness in physical-store sales. Considering all channels, Victoria’s Secret comps were down 1% compared with a decline of 4% in the quarter last year, while Bath & Body Works had comps of 4% compared with 3% last year. Based on physical-store sales only, though, Victoria’s Secret comparable sales declined 6% and Bath & Body Works grew only 2%. In the conference call, the company explained that December merchandising margin was below expectations due to a stronger-than-expected response to the Victoria’s Secret holiday reward card.
Compared to the disappointments that the company delivered earlier in the year, the December results would seem to indicate that L Brands has managed to stabilize sales declines. But after a positive third-quarter report, expectations for a stronger holiday season drove the stock price up 30% in November, and investors evidently sought to lock in some of those gains today.
Walgreens grows sales on higher prescription volumes
Walgreens Boots Alliance reported better-than-expected sales and earnings for its fiscal first quarter and raised the low end of its guidance for full-year earnings, but the generally good news didn’t impress investors, and the stock fell 5.2%.
Sales increased 7.9% to $30.7 billion and EPS (excluding some one-time events) rose 16.4% to $1.28. Analysts were expecting adjusted earnings of $1.26 per share on sales of $30.4 billion. The company raised the low end of its guidance for full-year adjusted EPS by $0.05 cents to a range of $5.45 to $5.70.
The sales increase came mainly from a 14.1% jump in pharmacy sales in the U.S., with comparable-pharmacy sales gaining 7.4%, driven by higher prescription volumes. Sales in the front end of the stores declined by 2.8%. Retail pharmacy international saw a sales decline of 0.8% on a constant currency basis, and wholesale pharmacy grew 4.5% excluding currency effects. Walgreens has acquired 357 of the 1,932 stores it is buying from Rite Aid and expects to transfer ownership of the remaining stores by spring of 2018, achieving cost savings of $300 million annually within four years of the transaction’s close.
Walgreens’ results might have generated a better response from investors on another day, but in a session when retail stocks were under pressure anyway, the market didn’t warm to the company’s report.
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