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Sunday May 27, 2018



Cracker Barrel's Results Fail to Fully Satisfy

Cracker Barrel Old Country Store, Inc. (CBRL) announced its third quarter results on Tuesday, May 23. The restaurant and gift store reported mixed results with revenue that came in below expectations.

The company reported quarterly revenue of $700.4 million, relatively unchanged from the same period last year. Revenue came in below the pre-release estimate of $710.8 million.

"We are pleased to report that third quarter earnings per diluted share exceeded our expectations," said Cracker Barrel President and CEO Sandra B. Cochran. "Our confidence in the strength of the Cracker Barrel brand is reflected in our raised full-year earnings guidance, our increased quarterly dividend and our declared special dividend."

Cracker Barrel earned $1.95 per share during the quarter, a 7.1% increase year-over-year. Earnings also beat the Wall Street estimate of $1.84 per share.

While investors and analysts were pleased with Cracker Barrel's earnings, they were understandably disappointed by the revenue miss. Comparable store sales decreased 0.4% during the quarter despite a 1.7% increase in average check. Comparable store retail sales saw an even bigger decrease, falling 4.7%. For the fourth quarter, the company expects earnings between $2.10 and $2.20 per share.

Cracker Barrel Old Country Store, Inc. (CBRL) shares ended the week at $165.06, up 3.6% for the week.

Best Buy Reports Strong Earnings

Best Buy Co. Inc. (BBY) announced its first quarter results on Thursday, May 25. The electronics retailer reported results that easily surpassed expectations, driven in large part by strong sales in the company's gaming and mobile divisions.

The company reported that revenue increased 1% to $8.53 billion, topping the $8.26 billion estimate. Comparable-store sales were up 1.6% in the quarter compared to a 0.1% decrease in the same period last year.

"We are pleased today to report strong top and bottom line results for the first quarter of fiscal 2018," said Best Buy Chairman and CEO Hubert Joly. "Compared to our expectations going into the quarter, our revenue was higher due to strong performance in gaming, a better-than-expected result in mobile, and the improvement of overall sales trends due to the arrival of delayed federal tax refund checks."

Best Buy earned $0.60 per share, easily surpassing the $0.40 per share predicted by analysts. Excluding one-time items, earnings per share increased 40% year-over-year.

A significant contributor to Best Buy's strong quarter was domestic online sales, which increased 22.5% year-over-year. International comparable-store sales increased 4.0%. Investors have been impressed with Best Buy over the past 12 months as the share price has risen 57.7% in that time. For the second quarter, the company expects revenue to be between $8.6 billion and $8.7 billion.

Best Buy Co., Inc. (BBY) shares ended the week at $58.97, up 14.5% for the week.

Williams-Sonoma's Announces Q1 Earnings

Williams-Sonoma, Inc. (WSM) announced its first quarter earnings on Wednesday, May 24. The home furniture retailer, and parent company of Williams Sonoma, Pottery Barn, West Elm, and PBteen, experienced a slight decrease in earnings for the quarter on revenue that was mostly flat year-over-year.

Williams-Sonoma reported quarterly revenue of $1.11 billion. This was relatively flat compared to last year's first quarter revenue of $1.10 billion and was largely in-line with analysts' predictions.

"In the first quarter, we saw strong sequential improvement in the Pottery Barn brand, demonstrating the effectiveness of the brand initiatives that we are implementing," said Williams-Sonoma President and CEO Laura Alber. "West Elm, our newer businesses (Rejuvenation and Mark and Graham), and our company-owned global operations delivered another quarter of double-digit growth, and Williams Sonoma started the year off strongly."

Williams-Sonoma reported net income of $39.56 million, down slightly from last year's first quarter earnings of $39.60 million. The company announced that adjusted earnings per share for the first quarter were $0.51 per share, compared to $0.53 per share a year ago.

The San Francisco based company's e-commerce revenue climbed to $581 million, an increase of 0.7% year-over-year. In the first quarter, Williams-Sonoma's e-commerce revenue produced 52.2% of the company's total revenue. Williams-Sonoma's millennial targeted West Elm brand saw a 6% growth in same-store revenue in the first quarter, while comparable-brand revenue fell 1.4% at Pottery Barn, 5.7% at Pottery Barn Kids and 14.3% at PB Teen.

Williams Sonoma, Inc. (WSM) shares ended the week at $49.13, relatively unchanged for the week.

The Dow started the week of 05/22 at 20,868 and closed at 21,080 on 05/26. The S&P 500 started the week at 2,387 and closed at 2,416. The NASDAQ started the week at 6,098 and closed at 6,210.

Yields Trend Lower After Fed Minutes Release

Treasury yields fell on Friday, May 26, during a week in which yields briefly spiked on Monday before steadily falling throughout the week. The falling yields came after minutes from the latest Federal Reserve policy meeting showed the central bank will take a cautious approach to raising rates.

On Wednesday, the minutes for the Fed's May 2-3 policy meeting indicated the central bank remains on track to raise interest rates in June. The minutes also suggested the Fed may delay future interest rate hikes this year if economic conditions fail to meet expectations.

The news caused the benchmark 10-year Treasury yield—which rose earlier in the week—to fall on Wednesday, a trend that continued on Thursday and into Friday. The yield fell from 2.29% on Tuesday to 2.27% Wednesday and 2.25% on Thursday. During early Friday trading, the yield fell to 2.24%.

"We remain in this very tight range," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. "I think we've got priced in a Fed hike on June 14 and then it becomes a question mark."

Economic data released Friday appeared to have no effect on bond yields. First quarter economic growth was revised upward to 1.2% from 0.7%. Meanwhile, a measure of business spending on equipment showed spending was flat in April. Expectations were for business spending to show at least a small increase during the month.

The 10-year Treasury note yield finished the week of 05/22 at 2.25%, while the 30-year Treasury note yield was 2.92%.

Mortgage Rates Reach 2017 Low Point

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, May 25. The report showed mortgage rates dropping to their lowest level so far in 2017.

The 30-year fixed rate mortgage averaged 3.95% this week. This represents a seven basis point decrease from last week when it averaged 4.02%. Last year at this time, the 30-year fixed rate mortgage averaged 3.64%.

This week, the 15-year fixed rate mortgage averaged 3.19%. This was down from last week when it averaged 3.27%. The 15-year fixed rate mortgage averaged 2.89% one year ago.

"As we predicted, the 30-year mortgage rate fell 7 basis points this week in a delayed reaction to last week's sharp drop in Treasury yields," said Sean Becketti, Chief Economist at Freddie Mac. "The survey rate stands at 3.95% today, a new low for the year."

Based on published national averages, the money market account finished the week of 05/22 at 0.72%. The 1-year CD finished at 1.36%.

Published May 26, 2017
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