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Tuesday August 9, 2022



Lululemon Reports Earnings

Lululemon Athletica, Inc. (LULU) released its third quarter earnings report on Thursday, December 9. The athletic-apparel company's quarterly revenue and earnings increased year-over-year, causing its shares to rise more than 2% following the report's release.

Lululemon reported quarterly revenue of $1.45 billion. This is up 30% from last year's third quarter revenue of $1.12 billion.

"Our third quarter results demonstrate the ongoing strength of lululemon and the tremendous growth potential of the business in both the near-and long-term," said Lululemon CEO, Calvin McDonald. "We are pleased with our early holiday season performance and how the lululemon brand continues to resonate in markets around the world. We are energized by the exciting opportunities ahead, and I'm proud of our teams across the globe for their passion and agility – I want to thank everyone for delivering a strong quarter."

The company announced net income of $187.8 million for the quarter. This is up from net income of $143.6 million one year ago.

Lululemon's North America sales grew 28% in the quarter, while international sales increased 40% for the quarter. The company opened 18 new company-operated stores during the third quarter. This brought the total number of open stores to 552 stores by the end of the quarter. The additional stores led to inventory increasing to $943.9 million, up 22% compared to $771.0 million one year ago.

Lululemon Athletica, Inc. (LULU) shares closed at $384.66, down 6.8% for the week.

Costco Releases Earnings Report

Costco Wholesale Corp. (COST) announced its first quarter earnings report on Thursday, December 9. The membership-only retail store reported increased total revenue and net income. The company's stock rose 6% following the release of the report.

For the quarter, the company reported total revenue of $50.4 billion, exceeding analysts' expectations. This was up from $43.2 billion in the same quarter last year.

"Much kudos to the job that our merchants and our traffic department and our operators have all been able to do in order to get the products that we need, pivot when and where necessary, and keep our warehouses full, while keeping prices low for our members and continuing to show value versus our competitors," said Costco's CFO, Richard Galanti. "Look, I think overall, this is best reflected in the operating results that we continue to achieve despite these many challenges."

For the quarter, Costco reported net income of 1.32 billion or $2.98 per adjusted share. This is up from $1.17 billion or $2.62 per adjusted share in the same quarter last year.

Costco currently operates 828 warehouses worldwide. Customer traffic increased 6.8% worldwide and 5.9% in the U.S. In addition, Costco's transactions increased 7.7% worldwide and 8.5% in the U.S. Costco memberships totaled 113.1 million cardholders for the quarter, representing an increase from 111.6 million during the previous quarter. Renewal rates in the U.S. and Canada increased to 91.6%, up 0.3 of a percentage point from the previous quarter.

Costco Wholesale Corp. (COST) shares closed at $547.61, relatively unchanged for the week.

Chewy Announces Earnings

Chewy, Inc. (CHWY) released its third quarter report on Thursday, December 9. The online pet-related products company reported increased net sales for the quarter. The company stock fell 8% following the release of the report.

The company reported net sales of $2.21 billion for the quarter. This was up 24% from $1.78 billion in the same quarter last year.

"Demand and consumer engagement remained strong through the third quarter, with net sales up 24 percent year over year, or 86 percent on a two-year stack basis," said Chewy CEO, Sumit Singh. "Our sustained growth this year shows the soundness of our growth strategy, the uniqueness of Chewy's value proposition, and the durability of the pet category. At the same time, our third-quarter profitability reflects the impact of ongoing supply chain disruptions, labor shortages, and higher inflation. As we work through these macro uncertainties, we remain squarely focused on the long term and on building an enduring franchise to serve millions of loyal pets, pet parents, and partners."

The company reported a net loss of $32.2 million this quarter. This was an improvement from a net loss of $32.8 million net loss the same time last year.

The Florida-based company recently announced that it has expanded access to its popular veterinarian telehealth service to its entire base of 20 million active customers. Access for Autoship customers is free, whereas non-Autoship customers can connect with a veterinarian on a pay-per-consult basis. Chewy has also recently partnered with Trupanion, Inc., a medical insurance provider for pets, to offer health insurance and wellness plans beginning in Spring 2022. This partnership will allow Chewy to utilize Trupanion's software to pay veterinarians directly, reducing costs and increasing access to care.

Chewy, Inc. (CHWY) shares ended the week at $54.76, up 6.5% for the week.

Treasury Yields Drop

U.S. Treasury yields rose throughout the week as investors process the Federal Reserves' announcement that it will quicken the reduction of its monthly bond purchases. Yields fell on Friday as investors continue to be vigilant over the spread of the omicron variant and rising unemployment levels.

On Wednesday the Federal Reserve announced that it will accelerate its plan to decrease bond purchases in an attempt to slow down inflation levels. The Fed had begun tapering its buying by $15 billion per month in November, doubled that to $30 billion in December and looks to increase the reduction to $60 billion in January.

"Economic developments and changes in the outlook warrant this evolution of monetary policy, which will continue to provide appropriate support for the economy," said Federal Reserve Chairman, Jerome Powell. "Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation."

The benchmark 10-year Treasury note yield opened the week of 12/13 at 1.486% and traded as low as 1.417% on Thursday. The 30-year Treasury bond yield opened the week at 1.882% and traded as high as 1.903% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment insurance totaled 206,000. This was higher than the 200,000 unemployment claims estimated by analysts but still holding close to a 52-year low.

"If we filled every single job opening that's out there right now, we'd have employment that was not just well above where we were pre-pandemic, but well above what anyone predicted pre-pandemic," said former Labor Department chief economist, Betsey Stevenson. "That recovery and employers wanting to hire workers is there." "The challenge is that we still have just a lot of uncertainty going on in the labor market."

The 10-year Treasury note yield closed at 1.41% on 12/17, while the 30-year Treasury bond yield was 1.81%.

30-Year Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 16. Mortgage rates increased this week as markets show signs of improving.

This week, the 30-year fixed rate mortgage averaged 3.12%, up from last week's average of 3.10%. Last year at this time, the 30-year fixed rate mortgage averaged 2.67%.

The 15-year fixed rate mortgage averaged 2.34% this week, down from 2.38% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.21%.

"Mortgage rates inched up as a result of economic improvement and a shift in monetary policy guidance," said Freddie Mac's Chief Economist, Sam Khater. "While house price growth is slowing, prices remain high due to solid housing demand and low supply. We expect rates to continue to increase into 2022 which may leave some potential homebuyers with less room in their budgets on the sideline."

Based on published national averages, the savings rate was 0.06% as of 11/15. The one-year CD averaged 0.14%.

Published December 17, 2021

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