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Business

Peloton (PTON) Q2 earnings 2023

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Brody Longo works out on his Peloton exercise bike on April 16, 2021 in Brick, New Jersey.

Michael Loccisano | Getty Images

Peloton said Wednesday its net loss narrowed year over year, and, for the third quarter in a row, subscriptions revenue was higher than sales of the company’s connected fitness products.

CEO Barry McCarthy called the results a possible “turning point” for the business, which has spent much of the past year executing an aggressive turnaround strategy. 

The fitness equipment company’s fiscal second quarter revenue beat Wall Street’s expectations, but the company posted wider losses per share than expected. Peloton’s stock jumped about 7% in premarket trading.

Here’s how Peloton did in the three months that ended Dec. 31 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

  • Loss per share: 98 cents vs. 64 cents expected
  • Revenue: $792.7 million vs. $710 million expected

The company’s reported net loss for the three-month period that ended Dec. 31 was $335.4 million, or 98 cents per share, compared with a loss of $439.4 million, or $1.39 per share, a year earlier. While it’s the eighth quarter in a row the exercise company has reported losses, it’s the narrowest loss Peloton has marked since its 2021 fiscal fourth quarter. 

Revenue dropped 30% compared to the year ago period but exceeded the company’s expected range of $700 to $725 million. Connected fitness product sales, which are typically strong during Peloton’s holiday quarter, dropped 52% year-over-year while subscription revenue jumped 22%. 

“This is the time of year when, if we’re going to sell a lot of hardware, we have so you would expect there to be lots of hardware related revenue, and you would expect that maybe that revenue would exceed subscription,” McCarthy told CNBC. “It didn’t. It’s why in the letter [to investors], I call it out, as it may be a turning point.”

In his letter to investors, McCarthy said he expects the trend to continue. 

The company ended the quarter with 6.7 million total members and 3.03 million connected fitness subscriptions, which is a 10% jump compared to the year ago period. The company counted 852,000 subscribers to its app, a 1% drop compared to the year ago period. It has a goal of getting 1 million people to sign up for trials of its app over the next year.

Peloton is losing money on Bikes, Treads and other machines, but its subscription business has once again kept its overall margins above water. Gross margins for its connected fitness products were negative 11.2%, but gross margins for subscription sales were 67.6%. The total gross margin was 29.7%, up from 24.8% in the year ago period. It declined from the previous quarter, however, driven in part by increased promotions in the holiday quarter.

Peloton expects revenue to be lower but margins higher in the next quarter. The company is forecasting sales between $690 million to $715 million and a total gross margin of about 39%. Wall Street analysts pegged their revenue estimate for the quarter at $692.1 million.

The company is also expecting connected fitness subscribers to be between 3.08 million and 3.09 million. 

Next phase of the turnaround

Peloton, which boomed during the earlier days of the pandemic, has been in the midst of a broad turnaround strategy under McCarthy, who took the helm of the business a year ago. 

The company’s stock is up about 62% so far this year, closing at $12.93 on Tuesday, giving it a market value of about $4.4 billion. Shares are well off their 52-week high of $40.35, which they hit around the time McCarthy became CEO.

“The viability of the business was very much in doubt when I walked in,” said McCarthy, a former Spotify and Netflix executive. “It probably wouldn’t be an overstatement to say there were some people who didn’t expect us to survive this long.”

Since he took over, McCarthy has cut Peloton’s workforce by more than half, expanded its Bike rental program nationwide, started selling certified pre-owned Bikes, debuted a rowing machine and partnered with Amazon and Dick’s Sporting Goods to sell its Bikes and Treads. 

McCarthy’s top priority was to manage cash flow and get the company out of the red, a goal he said the company has nearly accomplished. Free cash flow was negative $94.4 million, compared with negative $246.3 million in the previous quarter and negative $546.7 million in the year-ago period. 

McCarthy said he’s ready to pivot from trying to keep the company alive to growing it, he told CNBC. 

“Now that we’ve addressed the viability issues, let’s get back to thinking about growth and the future of the business, like full stop,” said McCarthy. 

“So there are a bunch of initiatives that we’ve announced that position us to pursue growth,” he added. “And the question we need to answer for investors now that we’re not talking about viability is how fast, how profitable, where’s it coming from, and over time we’ll begin to address some of those questions.”

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Business

Peloton (PTON) reports Q1 earnings

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Brody Longo works out on his Peloton exercise bike on April 16, 2021 in Brick, New Jersey.

Michael Loccisano | Getty Images

Peloton posted a wider-than-expected loss for its fiscal first quarter, as a steep decline in connected fitness products revenue outweighed an increase in subscription revenue.

The company’s shares fell more than 17% in premarket trading Thursday. As of Wednesday’s close, Peloton’s stock has dropped about 75% so far this year.

Here’s how the fitness device maker performed compared with Wall Street estimates, according to Refinitiv.

  • Loss per share: $1.20 vs. 64 cents, expected
  • Revenue: $616.5 million vs. $650.1 million, expected.

Revenue fell 23% compared with the same period last year. Peloton’s revenue outlook for the holiday quarter, between $700 million and $725 million, would mark a quarter-to-quarter increase, but it’s well below analysts’ estimates of $874 million.

“Given macro economic uncertainties we believe near-term demand for Connected Fitness hardware is likely to remain challenged,” the company said.

Peloton CEO Barry McCarthy said in an earnings announcement Thursday that the company’s turnaround is a “work in progress.” The company has been struggling with the end of pandemic-era demand, when lockdowns spurred growth in at-home exercise. This year, the company undertook significant leadership changes, mass layoffs and a new business strategy under McCarthy. The company has pushed beyond its direct-to-consumer roots into deals with other retailers and into a model that emphasizes subscriptions.

“The ship is turning,” McCarthy, a former Spotify and Netflix executive, said Thursday.

Co-founder and former CEO John Foley left his board chair position in September along with co-founder and Chief Legal Officer Hisao Kushi, shortly followed by Peloton’s head of marketing, Dara Treseder. Foley had stepped down from his role as CEO in February, when he was succeeded by McCarthy.

McCarthy has helmed a broad turnaround effort for the company. He oversaw thousands of layoffs, including 500 jobs which were culled in early October. The cost-cutting efforts were paired with new initiatives to sell more bikes and increase Peloton’s digital subscribers.

Subscription revenue increased to $412.3 million from $304.1 million last year. Meanwhile, revenue from connected fitness products declined to $204.2 million from $501 million. Peloton’s gross margin, 35.2%, was largely in line with expectations and a drastic improvement from the negative 4.4% in the preceding quarter.

Peloton reported 6.7 million total members, up from 6.3 million last year, but down from 6.9 million the prior quarter. McCarthy has said that the company hopes to someday reach 100 million members.

The company also touted improvement in its free cash flow, which was negative $246.3 million, compared with $411.9 million in the previous quarter and negative $651.9 million in the year-ago period. Peloton has said it hopes to be near break-even on this by the latter half of the fiscal year.

Among McCarthy’s recent initiatives was Peloton’s decision to sell bikes and treads through Amazon and Dick’s Sporting Goods. The company also began certifying pre-owned bikes and expanded its bike rental program nationwide. And, in a partnership with Hilton, the company is set to put bikes in the fitness centers of around 5,400 hotels nationwide.

The first quarter also saw the release of Peloton’s $3,195 rowing machine. More recently, the company extended its refund period for its recalled Tread+ treadmill, which was recalled over multiple user injuries and a death.

The company reported $199 million in first quarter recall reserves, restructuring and impairment expenses as it continues embarking on its turnaround.

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Business

Twitter, Zoom, Palo Alto Networks, Macy’s and more

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Check out the companies making headlines in midday trading Tuesday.

Zoom Video — Zoom sank more than 14% after missing on revenue estimates for the previous quarter due to a strong dollar. The videoconferencing company also cut its forecast for the full year amid slowing revenue growth.

Twitter – Shares of the social media network fell 6% after a whistleblower at the company filed complaints with the Securities and Exchange Commission, Federal Trade Commission and Justice Department alleging “extreme, egregious deficiencies by Twitter” related to privacy, security and content moderation.

Palo Alto Networks – Shares of Palo Alto Networks jumped 11% after the company reported an earnings beat Monday, driven by strong billings up 44% in the quarter. The cybersecurity company also raised its quarterly and full-year guidance, boosted its buyback program and announced the approval of a 3-for-1 stock split.

Macy’s – Shares of the department store rose more than 4% after the retailer reported a fiscal second-quarter profit and revenue that topped analysts’ expectations. Macy’s also teased that its digital marketplace, which was announced last year, is launching in the coming weeks. However, the company cut its full-year forecast, saying it anticipates deteriorating consumer spending on discretionary items such as apparel that will lead to heavy markdowns to move items off shelves.

Dick’s Sporting Goods — Shares climbed 2% after the sporting goods retailer topped earnings and revenue estimates in its second-quarter results and also raised its full-year financial outlook.

Medtronic — Medtronic shares sank 3.4% despite a beat on revenue and earnings in the recent quarter. The medical devices maker said that revenue fell from a year ago as it grapples with supply chain constraints.

JD.com — Shares of the e-commerce company based in China rose 3.8% after the company exceeded analyst expectations on the top and bottom lines in the recent quarter. JD.com also said that annual active customer accounts rose 9.2%.

XPeng — XPeng sank 8.8% after posting a wider-than-expected loss in the previous quarter. The China-based electric vehicle company topped revenue expectations but said deliveries nearly doubled from the year-ago period.

J.M. Smucker – Shares of the food products company rose more than 3% on Tuesday after J.M. Smucker’s first-quarter adjusted earnings topped expectations at $1.67 per share. Analysts surveyed by Refinitiv had penciled in $1.27 per share. Revenues were in-line at $1.87 billion. The earnings beat came despite a hit from the Jif peanut butter recall

Grocery Outlet Holding – Shares of the discount grocery store chain shed 4% after being downgraded by Morgan Stanley to underweight from equal weight. The firm cited downside to Grocery Outlet Holding’s 2023 estimates and not as much upside to its 2022 estimates being baked in. The stock has also already surged more than 40% this year. 

Pinduoduo — The e-commerce stock jumped 6.2% amid news that it’s reportedly preparing to launch an international e-commerce platform next month targeting North America.

— CNBC’s Carmen Reinicke, Yun Li, Sarah Min, Tanaya Macheel, Jesse Pound and Michelle Fox contributed reporting.

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Business

This week is all about Powell, but don’t overlook any great earnings reports

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Wall Street is collectively bracing for Federal Reserve Chair Jerome Powell’s speech later this week, CNBC’s Jim Cramer said Monday after the major U.S. stock indexes tumbled.

Powell’s address — set for 10 a.m. ET Friday as part of the Fed’s annual Jackson Hole symposium — is by far the biggest event on the calendar, according to the “Mad Money” host. The reason is investors are trying to gauge how hawkish the U.S. central bank may be in the coming months, and the Fed chief’s commentary is expected to offer clues on the matter.

While Friday’s speech is highly important to the market, Cramer stressed that he’s not ignoring corporate earnings and the economic insights they offer. He said reports last week from the likes of Cisco Systems and Target have been far better than feared, and he’s keeping his eye on many more this week.

Here is what Cramer is watching, with all earnings and revenue estimates compiled by FactSet:

Tuesday: Macy’s, Dick’s Sporting Goods, Toll Brothers and Intuit

Macy’s

  • Q2 earnings before the bell; conference call scheduled for 8 a.m. ET Tuesday
  • Projected EPS: 86 cents
  • Projected sales: $5.49 billion

Dick’s Sporting Goods

  • Q2 earnings before the open; conference call scheduled for 10 a.m. ET Tuesday
  • Projected EPS: $3.59
  • Projected revenue: $3.07 billion

Toll Brothers

  • Q3 earnings release after the close; conference call set for 8:30 a.m. ET Wednesday
  • Projected EPS: $2.30
  • Projected revenue: $2.51 billion

“I bet Macy’s has a decent story to tell about the right clothes at the right time. Dick’s is selling all the best sporting goods at good prices, and Toll Brothers is only making homes that it can reap huge profits on. All three should have gotten much better on that supply chain front, too, versus when they spoke last,” Cramer said.

Intuit

  • Q4 earnings release after the close; conference call at 4:30 p.m. ET Tuesday
  • Projected EPS: 98 cents
  • Projected sales $2.34 billion

Cramer said he’s expecting a “terrific quarter” from Intuit, driven by “good growth in tax returns and also all the things they do for small business.”

Wednesday: Nvidia, Salesforce, Snowflake, Splunk and Box

Nvidia

  • Q2 earnings after the bell; conference call slated for 5 p.m. ET
  • Projected EPS: 50 cents
  • Projected sales: $6.7 billion

Salesforce

  • Q2 earnings after the close; conference call set for 5 p.m. ET
  • Projected EPS: $1.03
  • Projected revenue: $7.69 billion

“Nvidia preannounced and missed not that long ago versus an already-lowered forecast. The same thing could happen again — rough time for these chips,” said Cramer, whose Charitable Trust owns both Nvidia and Salesforce shares. “I think Salesforce will complain about the strong dollar again, but don’t forget that it does a ton of business at Dreamforce and that conference is back in person this September.”

Snowflake

  • Q2 2023 earnings release after the close; conference call set for 5 p.m. ET
  • Projected EPS: 7 cents
  • Projected revenue: $721 million

Splunk

  • Q2 2023 earnings after the bell; conference call scheduled for 4:30 p.m. ET
  • Projected EPS: loss of 36 cents
  • Projected sales: $749 million

Box

  • Q2 2023 earnings after the close; conference call set for 5 p.m. ET
  • Projected EPS: 27 cents
  • Projected revenue: $245 million

“There are lots of other software companies reporting that people are worried about, like Snowflake, Splunk and Box. I think they’re doing fine, but it just might not matter because of this general malaise” in the market, Cramer said.

Thursday: Dollar General, Dollar Tree, Ulta Beauty, Gap, Affirm, Dell and Workday

Dollar General

  • Q2 earnings before the open; conference call set for 10 a.m. ET
  • Projected EPS: $2.94
  • Projected sales: $9.4 billion

Dollar Tree

  • Q2 earnings before the bell; conference call slated for 9 a.m. ET
  • Projected EPS: $1.60
  • Projected revenue: $6.79 billion

Dollar General and Dollar Tree should “please the market to no end because investors have decided that we’re headed into a recession and the hedge fund playbook says you have to own one or both of these two stocks” in that situation, Cramer said. “I don’t like mindlessly following the playbook, but it’s not wrong here. My preferred one, by the way, is Dollar General if they have the merchandise.”

Ulta Beauty

  • Q2 earnings release after the close; conference call set for 4:30 p.m. ET
  • Projected EPS: $4.95
  • Projected sales: $2.21 billion

“Both Estee Lauder and Target, which has embedded Ultas [in some stores], raved about how the chain’s doing. I think now we’re in a mask-off world, which is great for skin care. Ulta will shine,” Cramer said.

Gap Inc.

  • Q2 earnings after the bell; conference call scheduled for 5 p.m. ET
  • Projected EPS: Loss of 5 cents
  • Projected sales: $3.82 billion

Affirm

  • Q4 earnings after the close; conference call set for 5 p.m. ET
  • Projected EPS: Loss of 62 cents
  • Projected revenue: $355 million

Dell Technologies

  • Q2 2023 earnings release after the bell; conference call scheduled for 5:30 p.m. ET
  • Projected EPS: $1.79
  • Projected sales: $26.87 billion

Gap, Affirm and Dell all fall into what Cramer called the “troublesome” reports category for their own reasons.

“Gap could have still one more difficult quarter,” he said. “I’m not sure how good Affirm will be given how the market has turned against buy now, pay later. I think CEO Max Levchin will try to spin a good yarn, but it’s an awfully hard tape to pull that off in. Then there’s Dell. I bet it’s gonna report a solid number that will actually help tech, something we very well need by the time we get to [Thursday].”

Workday

  • Q2 2023 earnings after the close; conference call set for 4:30 p.m. ET
  • Projected EPS: 79 cents
  • Projected sales: $1.52 billion

“I think Workday had a good quarter, and maybe because it’s on the eve of Jackson Hole, it will be as irrelevant as [Monday’s] sell-off,” Cramer said.

Friday: Powell speech

“Wall Street is starting to have less confidence in the idea that the Fed will soon pivot to a more dovish posture. I think Jay Powell can afford to be a little less ruthless with the rate hikes here, but the market clearly disagrees,” Cramer said. “We’ll find out who’s right on Friday — we need to slog through the whole week to get to the Fed’s guillotine. But even if the guillotine blade falls, we can ride through the turbulence and do some buying on the way down after this incredibly difficult two-day sell-off.”

Disclosure: Cramer’s Charitable Trust owns shares of NVDA, CRM and CSCO.

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Business

Target will cover employees’ travel to other states for abortions

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A person walks into a Target store in Washington, DC, on May 18, 2022.

Stefani Reynolds | AFP | Getty Images

Target will cover employees’ travel if they live in a state where abortion is banned, according to a company memo obtained by CNBC.

The new policy will take effect in July, according to the email, which was sent to employees Monday from Target’s Chief Human Resources Officer Melissa Kremer.

“For years, our healthcare benefits have included some financial support for travel, when team members needed select healthcare procedures that weren’t available where they live,” Kremer said in the memo. “A few months ago, we started re-evaluating our benefits with the goal of understanding what it would look like if we broadened the travel reimbursement to any care that’s needed and covered – but not available in the team member’s community. This effort became even more relevant as we learned about the Supreme Court’s ruling on abortion, given that it would impact access to healthcare in some states.”

With the reversal of Roe v. Wade, the country has been divided into states where abortion is legal and states where it is outlawed. The court decision has led to a wave of announcements by companies that have committed to providing travel coverage for employees as part of their health insurance plans. That list cuts across industries and includes JPMorgan Chase, Dick’s Sporting Goods and Rivian.

Some companies, like Amazon, already announced travel coverage for employees who need to seek reproductive healthcare in other states before the Supreme Court decision. The tech giant said it will pay up to $4,000 in travel expenses annually for abortion and other non-life threatening medical treatments.

Target did not immediately respond to a request about whether the travel policy will come with a dollar limit. It did not say how it plans to protect the privacy of employees who seek travel reimbursement.

In the memo, the retailer said its health care travel reimbursement policy will include travel for mental health, cardiac care and other services that aren’t available close to employees’ homes, in addition to reproductive care.

Kremer said Target updated its policy to “ensure our team has equal access to high-quality, low-cost care through our healthcare benefits.”

In the memo, Target did not take a position on the Supreme Court decision. Kremer praised Target’s employees for how they “recognize and respect a wide spectrum of beliefs and opinions that other team members and guests hold close – even if those beliefs differ from their own.”

Others companies have stayed silent in the wake of the Supreme Court decision. Walmart, the largest private employer in the U.S., declined to say if or how it will allow employees to access abortions in states where they are illegal. Its headquarters is in Arkansas, a state that already has a law on the books to trigger a ban.

Walmart, however, does cover travel costs for some medical care — including certain heart surgeries, cancer treatments and organ transplants — that employees get at hospitals in other states or cities far from home.

The top court’s decision has prompted outrage from some employees who have pushed their companies to go further. Hundreds of Amazon employees have signed an internal petition, calling on the company to condemn Supreme Court’s decision, cease operations in states with abortion bans and allow workers to move to other states if they live in a place where the procedure is restricted, according to Business Insider.

CNBC’s John Rosevear contributed to this article.

This story is developing. Please check back for updates.

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Business

Dick’s Sporting Goods (DKS) Q3 2021 earnings

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Cars are seen parked in front of a Dick’s Sporting Goods store at Monroe Marketplace in Pennsylvania.

Paul Weaver | SOPA Images | LightRocket | Getty Images

Dick’s Sporting Goods shares fell Tuesday despite the company reporting fiscal third-quarter earnings and sales that outpaced analysts’ expectations, which led the sporting goods giant to hike its annual forecast.

Chief Executive Lauren Hobart said that consumer demand remained strong after the summer season and back-to-school rush, and that the company’s broad assortment of products allowed it to meet many shoppers’ needs — from golf clubs to running gear.

Its shares were recently down more than 2% in extended trading on the news.

Here’s how Dick’s did in its fiscal third quarter compared with what analysts were expecting, according to a poll compiled by Refinitiv:

  • Earnings per share: $3.19 adjusted vs. $1.97 expected
  • Revenue: $2.75 billion vs. $2.50 billion expected

In the three-month period ended Oct. 30, net income rose to $316.5 million, or $2.78 per share, from $177.2 million, or $1.84 a share, a year earlier.

Excluding items, it earned $3.19 per share, ahead of the $1.97 that analysts had been expecting.

Revenue rose roughly 14% to $2.75 billion from $2.41 billion a year earlier. That topped expectations for $2.50 billion.

Same-store sales, which track revenue at stores open for at least 12 months, rose 12.2%. Analysts surveyed by StreetAccount had been calling for a gain of 1.9%.

Dick’s said its online sales rose just 1% from a year earlier, when many consumers resorted to shopping online, and were up 97% on a two-year basis. E-commerce sales made up about 19% of its total business, up from 13% in 2019.

As its sales have accelerated and new customers have shopped its website and stores during the pandemic, Dick’s has invested in its business to keep shoppers coming back for more. It launched a men’s athleisure brand, VRST, in March. It opened its largest store yet, called House of Sport, in a suburb of Rochester, New York, in April. The store includes an indoor rock climbing wall, putting green, health and wellness shop, and a track and turf field outside.

And in August, it announced a tie-up with its biggest brand vendor, Nike. Nike’s membership program now links to Dick’s loyalty program to allow customers to shop for exclusive Nike shoes and apparel on Dick’s website.

Dick’s now expects to earn between $12.88 and $13.06 per share on sales of between $12.12 billion and $12.19 billion. After adjustments for Covid-19-related expenses, Dick’s said it would earn $14.60 and $14.80 per share.

Previously, it estimated full-year adjusted earnings to be between $12.45 and $12.95 per share, on sales of $11.52 billion to $11.72 billion.

Analysts had been looking for fiscal 2021 adjusted earnings per share of $13.13 on sales of $11.84 billion.

Dick’s shares have been on a tear this year, rising nearly 150% year to date. Its market value is about $12.5 billion.

Find the full earnings press release from Dick’s Sporting Goods here.

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Business

Levi Strauss to buy yoga apparel brand Beyond Yoga

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An employee holds a shopping bag while ringing up a customer at the Levi Strauss & Co. flagship store in San Francisco, March 18, 2019.

David Paul Morris | Bloomberg | Getty Images

Levi Strauss & Co. on Thursday agreed to buy the yoga apparel brand Beyond Yoga, launching the jeans maker into the competitive activewear space.

Levi didn’t disclose the size of the all-cash deal, which is expected to close in the fourth quarter.

Levi expects the acquisition will add more than $100 million to its net revenue next fiscal year, and immediately bolster its earnings.

“We’ve been looking at acquisitions for quite some time, and the activewear space has obviously been very, very attractive,” Levi CEO Chip Bergh told CNBC in a phone interview. “We see enormous growth potential here. It puts us as a company smack into the high-growth, high-margin activewear segment.”

Levi shares were up less than 1% in extended trading on the news.

After the transaction is complete, Levi said Beyond Yoga will operate as a standalone division within its business. Co-founder Michelle Wahler will continue to serve as Beyond Yoga CEO, reporting to Bergh.

Levi CFO Harmit Singh commented that Beyond Yoga has more than doubled its revenue while growing profitability over the past three years. The brand, headquartered in Los Angeles, was founded by two women in 2005. Its marketing often echoes messages of body positivity and size inclusivity to younger girls.

Bergh said Levi plans to expand the Beyond Yoga brand outside of the United States and open more bricks-and-mortar stores. The deal should also help Levi grow its women’s business, which accounts for roughly one-third of sales today. The goal is to grow women’s to 50%, Bergh said.

Levi’s acquisition is yet another vote of confidence that an already hot retail sector is growing even hotter, as companies from Kohl’s to Target vie for a sliver of the activewear market.

On Monday, Wolverine Worldwide — the company behind Merrell, Saucony, Sperry, Stride Rite and other shoe names — scooped up Lululemon rival brand Sweaty Betty for $410 million.

Big-box chains Dick’s Sporting Goods, Kohl’s and Target have also launched their own activewear offshoots, competing with the likes of Nike, Under Armour and Gap’s Athleta banner. There are a number of other smaller start-ups in the space, ranging from Outdoor Voices to Nobull to Bandier.

Even as Americans return to the office and to socializing with colleagues, many are still opting for comfortable and casual clothing, including stretchy bottoms and sneakers.

This shifting fashion trend has been coined “workleisure,” a play on athleisure garb that can be worn from a workout class to the coffee shop. It’s fueling further growth in the activewear category.

“As some people start going back to the office, you’re not seeing suits anymore, you’re seeing people go into the office in more casual clothing, even athleisure-type products,” Bergh said. “And it’s a truly global phenomenon.”

Levi shares are up 37% year to date. Its market cap is $11.1 billion.

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Business

Four takeaways as child tax credit kicks off this month

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A woman wears a face mask while shopping for a baby shower gift during the Covid-19 pandemic, at Madison’s Niche boutique in Huntington, New York on April 21, 2021.

Alejandra Villa Loarca | Newsday | Getty Images

Child tax credit payments are an “underappreciated stimulus” that could lift sales across the retail, restaurant and travel industries — especially as shoppers emerge from the pandemic and get ready for back-to-school season, according to a research note published Tuesday by Cowen analysts.

The monthly payments, which begin Thursday, could benefit a wide range of companies, from grocers including Walmart to fast food chains such as Jack in the Box, according to the note.

Families have gotten child tax credits for years, but the American Rescue Plan made several key changes. It increased the amount per child from $2,000 to $3,000 for those between the ages of 6 and 17, and to $3,600 for each child under age 6. It qualified low-income families who have little or no taxable income. And it changed the way it is paid out, so that families receive half the money through direct deposits that run from July to December. Families will receive the other half after filing taxes.

That will translate to $250 or $300 per child each month. Families who make up to $150,000 for a couple or $112,500 for a family with a single parent, called a head of household; or $75,000 as an individual taxpayer will get the full amount. The payments will be phased out above that amount — but even those who get less money will receive advance payments.

Parents and caretakers of nearly 90% of children in the U.S. will receive the payments, according to the Internal Revenue Service.

Here are four major takeaways from the analysts:

More dollars mean more spending

The child tax credit will amount to an estimated $150 billion in stimulus over the next year, according to Cowen. Analysts at the equity research firm say the extra dollars may surprise both Americans and the economy at large, calling it “an underappreciated catalyst for discretionary consumer spend.”

As families get the money, Cowen predicts, they will spend it on food for the home, dining out and shopping online. The analysts named retailers and restaurants that are best-positioned to attract those dollars. On the grocery side, they pointed to Walmart, Target and Grocery Outlet. Among fast-food chains, they named Jack in the Box, Wingstop, Papa John’s and Darden, based on a survey of consumers that looked at their incomes and what places they frequent. And among e-commerce companies, they named Amazon.

Coinciding with ‘pent up demand’

Many families have already ramped up spending on new shoes and clothes as they emerge from their homes after getting Covid-19 vaccinations. Analysts from Cowen said that child tax credit dollars will likely feed into that spending spree.

Already, some retail industry watchers have predicted an usually hot back-to-school season as families crave a new start and a sense of more normalcy — and potentially channel that toward fresh notebooks and first-day-of-school outfits.

Cowen analysts expect that retailers that cater to back-to-school or team sports are positioned well to attract child tax credit dollars, including Walmart, Kohl’s, Foot Locker, Dick’s Sporting Goods and Nike. They also said retailers that focus on value, such as off-price retailers Burlington, Ross and T.J. Maxx, could get a boost since they cater to low-income families that are receiving child tax credit payments. They also said American Eagle Outfitters is in a good spot to attract the payments, as it caters to styles that teens crave, such as looser-fitting denim and casualwear.

Spilling over into adult categories

Parents, grandparents and other caretakers may spend some of the child tax credit dollars on themselves in the form of beer, cigarettes and plane tickets, according to Cowen.

Analysts estimated that the tobacco industry could pick up about $1.2 billion and alcoholic beverages could pick up roughly $2.7 billion of the estimated $150 billion impact of the child tax credit. That could mean good news for tobacco company Turning Point Brands and beer industry players, Constellation Brands and Boston Beer.

Cowen estimated air travel will get an approximately $1.15 billion bump from child tax credits, as the July payments arrive just in time for vacation season. That will be most noticeable for airlines that cater to leisure travel and lower prices, such as Allegiant, Frontier and Spirit, the analysts predicted.

A renewal looks likely

The monthly payments will end in December — but Cowen analysts are betting that they will be renewed. In the note, they said they expect the one-year program will be extended through 2025 through a reconciliation bill.

In the note, the analysts cited the size and scope of the government program, which is intended to fight childhood poverty. They called it a “huge policy change” that acts as “universal basic income for low-middle income parents.”

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Business

Dick’s Sporting Goods is launching its own men’s athleisure line

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VRST is debuting Tuesday on both Dick’s Sporting Goods’ website and a standalone VRST.com, and will be rolled out to more than 400 Dick’s Sporting Goods locations across the country in the coming weeks.

Source: Dick’s Sporting Goods

Dick’s Sporting Goods is entering a hotly contested market for men’s athletic apparel with the launch of its own brand called VRST.

VRST debuts Tuesday on Dick’s website and a standalone VRST.com, and will roll out to more than 400 Dick’s stores in the coming weeks, the company said. Items in the line, which include everything from joggers and shorts to tees, quarter-zips, and hooded sweatshirts, retail anywhere from $30 to $120, putting it on the higher end of the market when it comes to price point.

Following the success that Dick’s has had with its Calia athleisure line for women, the company said it saw a blank space in its stores to have a more upscale and lifestyle-driven line for men. The line won’t compete directly with the sweat-wicking performance gear sold by Under Armour and Nike. Instead, it’s more similar to Lululemon.

Dick’s amped up private-label investments come, though, as big-name brands like Nike and Under Armour have pledged to sell more merchandise directly to consumers. Adidas announced earlier this month its direct-to-consumer vertical should make up 50% of net sales by 2025. While Dick’s still carries these brands, the pivot has put more pressure on wholesale retailers to have exclusive lines, like Calia and VRST, to drive traffic and sales.

In 2020, Dick’s rang up $1.3 billion in sales from its in-house brands. Total revenue was $9.58 billion. The company said its own brands outperformed national labels in the golf, fitness, outdoor equipment and team sports categories. Calia was the second-best women’s apparel brand falling only behind Nike last year, it said.

Filling the ‘white space’

VRST will be the second brand that Dick’s has launched with its own website. Calia was the first.

“When you see VRST, it will be a very different product assortment from when we have with our core vendor partners right now, and it is a white space,” Dick’s Chief Executive Lauren Hobart said earlier this month during an earnings call. “It covers a broad range of activities.”

“VRST will put us in a much stronger position to compete with similar offerings from premium apparel brands and specialty athletic apparel stores,” Hobart explained.

Items in the VRST line, which include everything from joggers, shorts, tees, quarter-zips, and hooded sweatshirts, retail anywhere from $30 to $120, putting it on the higher end of the market when it comes to price point.

Source: Dick’s Sporting Goods

Companies like Lululemon, Nike, Adidas and Under Armour have seen more momentum over the past 12 months than clothing brands focused on work wear and dressier items. And in turn, more traditional apparel brands and department store chains quickly shifted their merchandise and marketing to center around casual and comfort, creating more clamor in an already noisy category.

Activewear grabs market share

Prior to the pandemic, for example, Lululemon said it planned to double its men’s business in five years. Direct-to-consumer men’s athleisure brands like Rhone, Ten Thousand and Vuori have also been doubling down on marketing spending online to reach new customers. Even department store retailers Nordstrom and Kohl’s have put a renewed focus on activewear, in a bid to boost sales. Kohl’s efforts include an in-house line called FLX, which debuted earlier this month.

At the same time, there’s been enormous growth in the space.

Last year, men’s activewear gained market share to account for 45% of the total men’s apparel market, compared with 39% in 2019, according to data compiled by the consumer research firm NPD Group. Categories that helped drive dollars in the space included sweatpants, which were up 16% year over year, and sweatshirts, which rose 3%, it said.

But VRST isn’t a hurry-up solution to take advantage of a pandemic pop. It has been in the works for a few years, the company said.

“And obviously we’re maximizing the current momentum,” Nina Barjesteh, senior vice president of product development, said in an interview. “But more than anything, we continue to look at the long run, and make sure that we’re building products that you want to come back for more.”

Dick’s shares are up more than 190% over the past 12 months, as of market close on Monday. The company has a market cap of $7 billion.

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Business

Build a cash position for the next stock sell-off

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CNBC’s Jim Cramer said the jobs report from the Labor Department Friday satisfied markets, at least for the interim.

The U.S. economy added 379,000 jobs last month and the unemployment rate inched down, with stocks managing to bounce from their lows of the day and snap a tough three-day trading stretch to end the week on a high note.

Economists had forecast the job market to grow by 210,000 in February.

“An employment number that’s strong, but not too strong, was just what this crazy market needed today, although it took half the day for Wall Street to figure that out,” Cramer said after the close on “Mad Money.”

The major stock indexes all swung nearly 2% higher at the close after trading in the red during the morning. The Dow Jones Industrial Average rallied 572 points, or 1.85%, to close at 31,496.30, finishing up 1.82% after a volatile week. The S&P 500 advanced 1.95% Friday to 3,841.94, also finishing the week in positive territory.

After closing down in the red Thursday, the Nasdaq Composite bounced 1.55% to 12,920.15 on Friday. The tech-heavy index ended the week down 2.06% as growth stocks sold off.

As the U.S. continues its recovery from last year’s coronavirus-induced business lockdowns and restrictions, the February labor report likely did not do enough to push the Federal Reserve to raise interest rates to tamp down inflation as the economy grows, Cramer said.

“It was a hidden-Goldilocks report: A lot more people are getting hired, thanks to the vaccine rollout and the reopening, but not so many that the Fed will feel compelled to raise interest rates, and some are really being left behind,” he said.

Wall Street is on standby to see if the uptrend will continue or the downtrend in stocks will resume. The bond market is still in control, however, as investors continue to rotate from high-growth stocks to value and cyclical names until rising Treasury yields stabilize, Cramer added.

Longer-term Treasuries are a bellwether for lending rates. Higher rates make cyclical stocks more attractive, leading investors to reduce their appetite for riskier assets.

“I’m betting the bond bullies will be back, so get ready by using rallies like this one to lighten up, as we did for my charitable trust at the end of the day, and certainly lighten up on the high-flying dreamer stocks and the SPACs,” he said. “That way you’ll have some cash to deploy for the real companies the next time we get hammered like we did yesterday afternoon.”

Cramer gave his game plan for the week ahead. Earnings-per-share projections are based on FactSet estimates:

Monday: Stitch Fix

Stitch Fix

  • Q2 2021 earnings release: after market; conference call: 5 p.m.
  • Projected losses per share: 22 cents
  • Projected revenue: $512 million

“A great quarter won’t produce the kind of explosive reaction we got last time,” Cramer said. “Still, I’m betting the numbers are better than expected because this is a great business.”

Tuesday: Dick’s Sporting Goods

Dick’s Sporting Goods

  • Q4 2020 earnings release: before market; conference call: 10 a.m.
  • Projected EPS: $2.30
  • Projected revenue: $3.07 billion

“I expect Dick’s to deliver a very strong number, one that could send the stock flying,” he said.

Wednesday: Campbell Soup, Oracle

Campbell Soup

  • Q2 2021 earnings release: before market; conference call: 8:00 a.m.
  • Projected EPS: 83 cents
  • Projected revenue: $2.3 billion

“So far, these pantry stocks they’ve failed to impress,” Cramer said. “I can’t go against the prevailing wisdom here, although I think this company’s won over enough of the stay-at-homers with its snack offerings that you won’t be that disappointed, and you get that 3.2% yield.”

Oracle

  • Q3 2021 earnings release: after market; conference call: 5 p.m.
  • Projected EPS: $1.11
  • Projected revenue: $10.05 billion

“This is exactly the kind of lower-risk tech stock that people suddenly like … [as opposed to] the high-flyers,” he said. “Those are still getting torn to pieces, so I was ready to recommend Oracle [tonight], but I got beat to the punch. A big brokerage house pushed it today, sent the stock up 6%, stole my thunder.”

Thursday: JD.com, Ulta Beauty

JD.com

  • Q4 earnings release: before market; conference call: 7 a.m.

Cramer said JD.com is “one of the few Chinese stocks I like because it’s another ‘Amazon of China’ thing. It’s like Alibaba, which you know I like, but it’s got faster growth, though.”

Ulta Beauty

  • Q4 earnings release: after market; conference call: 5 p.m.
  • Projected EPS: $2.32
  • Projected revenue: $2.07 billion

“It’s about to experience a sales explosion when the country reopens. Ulta pivoted to e-commerce when the pandemic hit … but now that we’re getting vaccinated, their brick and mortar business can make a comeback,” he said. “Plus, they’re rolling out a new Target collection. I’d be a buyer ahead of that quarter.”

Disclosure: Cramer’s charitable rust owns shares of Amazon.

Disclaimer

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