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Thursday April 18, 2019



CarMax Earnings Hit Speed Bump

CarMax, Inc. (KMX) reported its fourth quarter and full-year earnings on Wednesday, April 4. The used-car giant reported increased quarterly sales but a decline in profits.

The company's revenue for the fourth quarter was $4.08 billion, up from $4.05 billion during the same quarter last year. CarMax reported full-year revenue of $17.12 billion, an increase of 7.8% over the company's prior fiscal year.

"We are disappointed with the decrease in our quarterly comps, which we believe is partly due to macro pricing factors that resulted in a softer sales environment," said Bill Nash, president and chief executive officer. "Although used-vehicle pricing has fallen since October of 2017, valuations were still significantly higher than in last year's fourth quarter."

CarMax reported net income of $122.1 million for the quarter, down 20% from $152.6 million during the previous year's quarter. For the full year, the company reported $664.1 million in net income, up 5.9% from the prior year.

The automobile reseller has faced a difficult sales environment in recent months. Comparable store sales decreased 8% for the quarter. The company continues to look for new ways to draw in customers. It is currently testing a home delivery service in its Charlotte, North Carolina location.

CarMax, Inc. (KMX) shares ended the week at $60.30, down 2.0% for the week.

Dave & Buster's Reports Earnings

Dave & Buster's Entertainment Inc. (PLAY) released its quarterly and full-year earnings report on Tuesday, April 3. The dining and entertainment company reported increased revenue and profits but a drop in same-store sales.

Revenue for the quarter was $304.9 million, up from $270.2 million during the same quarter last year. For the full year, Dave & Buster's reported $1.1 billion in revenue.

"2017 was another outstanding year for us as we delivered double-digit revenue, net income and EBITDA growth," said Steve King, CEO of Dave & Buster's. "Our primary growth vehicle and the biggest driver of value continues to be opening stores that offer excellent returns in the face of a more intense competitive environment. However, recent sales trends in our comparable stores have been disappointing and we are working diligently to re-build momentum by evolving the brand."

The company reported net income of $35.6 million for the quarter, or $0.85 per share. This is up from $27.4 million, or $0.63 per share at this time last year. Full-year net income was $120.9 million, or $2.84 per share.

Dave & Buster's, known for its unique mix of arcade games and dining options, reported a 5.9% decrease in comparable store sales for the quarter. For the full year, comparable store sales dropped by 0.9%. Despite these decreases, the company's non-comparable store revenues increased 67.5% during the fourth quarter.

Dave & Buster's Entertainment Inc. (PLAY) shares ended the week at $41.58, virtually unchanged for the week.

Ollie's Releases Quarterly Earnings

Ollie's Bargain Outlet Holdings, Inc. (OLLI) reported its fourth quarter and full-year earnings on Wednesday, April 4. The company had increased sales and profits for the quarter.

The bargain store reported net sales of $356.7 million for the quarter, up 25.9% from $283.4 million at this time last year. The company's full-year net sales were up 21% at $1.08 billion.

"We are very pleased with our fourth quarter and full-year results," said Ollie's Chairman, President and CEO Mark Butler. "The fourth quarter was our 15th consecutive quarter of positive comparable store sales and we achieved record top and bottom line results in both the quarter and fiscal year. Strong deal flow, great new store performance and tight expense controls continue to be the hallmarks of our business and we are using our growing scale to gain better access to merchandise, open stores and leverage expenses."

The company reported net income of $70.1 million, or $1.07 per share. This is up from just $24.4 million, or $0.39 per share during the same quarter last year. Ollie's Bargain Outlet reported net income of $127.6 million for the full year.

Ollie's Bargain Outlet operates warehouse-style retail locations across the United States. The company acquires and sells closeout merchandise and overstocked inventory at discount prices. The addition of 34 stores, along with a 4.4% increase in same-store sales, contributed to the company's strong sales growth for the year.

Ollie's Bargain Outlet Holdings, Inc. (OLLI) shares closed at $58.95, down 1.9% for the week.

The Dow started the week of 4/2 at 24,077 and closed at 23,933 on 4/6. The S&P 500 started the week at 2,633 and closed at 2,604. The NASDAQ started the week at 7,016 and closed at 6,915.

Weak Jobs Report Tamps Down Treasury Yields

Yields on U.S. Treasury bonds fell on Friday in the wake of the latest U.S. jobs report. The report showed slower-than-expected job growth and a steady unemployment rate.

The U.S. Department of Labor released the jobs report on Friday, April 6. The report indicated an increase in nonfarm payrolls of 103,000 in the month of March. This fell far short of analysts' expected 193,000 gain. The unemployment rate remained at 4.1%.

"We've had such unsustainably strong results in January and February that it was largely expected that we were due for some payback," said Ellen Zentner, Chief U.S. Economist at Morgan Stanley. "The weak number in headline payrolls does not change the fact that trend job growth is strong."

The yield on the benchmark 10-year Treasury note opened the week at 2.76% and rose to a high of 2.85% on Thursday. During early trading on Friday, the yield retreated to 2.77%.

The midweek rise in yields corresponded to similar fluctuations in the stock markets. The Dow Jones Industrial Average fell 432 points on Monday but rebounded and ultimately surpassed its opening numbers by Thursday. During trading on Friday, however, the Dow was down 375 points for the day.

Many investors and analysts attribute the recent market volatility to the potential trade war brewing between the U.S. and China. In addition, the Federal Reserve's plan to raise interest rates three times this year has caused concern among market experts.

"The stock market is in a bit of a tug of war," said Allen Bond of the Jensen Quality Growth Fund. "There are concerns about tariffs, trade wars and the potential for higher inflation—and the [Federal Reserve's] response to that."

The 10-year Treasury note yield closed at 2.78% on 4/6, while the 30-year Treasury note yield was 3.02%.

Mortgage Rates Drop for Second Straight Week

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, April 5. The report showed interest rates declining for a second consecutive week.

The 30-year fixed rate mortgage averaged 4.40% this week. This is down from 4.44% last week. Last year at this time, the 30-year fixed rate mortgage averaged 4.10%.

This week, the 15-year fixed rate mortgage averaged 3.87%, down from 3.90% at this time last week. During the same time last year, the 15-year fixed rate mortgage averaged 3.36%.

"After dropping earlier this week on a trade-related anxiety in financial markets, the benchmark 10-year Treasury stabilized on Wednesday, but at a level slightly lower than from the start of last week," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "Mortgage rates followed and fell for the second consecutive week; the U.S. weekly average 30-year fixed rate mortgage was 4.4% in our survey this week."

Based on published national averages, the money market account closed at 1.14% on 4/6. The 1-year CD finished at 2.04%.

Published April 6, 2018
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