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Monday October 21, 2019



Adobe Reports Earnings

Adobe Systems Incorporated (ADBE) released its quarterly and full-year earnings report on Thursday, December 13. The software company's revenue surpassed Wall Street's expectations.

Adobe reported quarterly revenue of $2.46 billion. This is up 23% from last year's fourth quarter revenue of $2.01 billion and was above the $2.43 billion that Wall Street predicted. For the full year, the company brought in $9.03 billion in revenue, up 24% from the prior year's revenue of $7.30 billion.

"Adobe achieved record revenue of greater than $9 billion and delivered outstanding earnings performance in fiscal 2018," said Adobe President and CEO Shantanu Narayen. "In 2018 we made significant investments across our product portfolio, entered new markets, and made strategic acquisitions which we believe will fuel continued top and bottom-line performance."

The company announced quarterly profit of $678.24 million, up from earnings of $501.55 million one year ago. Adobe reported adjusted quarterly earnings of $1.83 per share, missing the $1.88 per share that analysts predicted.

On October 31, Adobe acquired Marketo, Inc. the market-leading cloud platform for business-to-business marketing engagement. Adobe is integrating Marketo with its experience cloud segment to enhance customer solutions for account-based marketing technology. Adobe's digital media segment, which includes the company's Photoshop and Illustrator software, grew 23% in the quarter.

Adobe Systems Incorporated (ADBE) shares ended the week at $230.00, down 3.1% for the week.

Dave & Buster's Shares Slip

Dave & Buster's Entertainment Inc. (PLAY) released its third quarter earnings report on Tuesday, December 11. The dining and entertainment company reported a larger-than-expected decline in same-store sales, despite increased revenues.

Revenue for the quarter was $282.1 million, up 12.9% from $250.0 million during the same quarter last year. This is above analysts' estimates of $278 million.

"Driven by strong unit growth, we delivered record top line results for the third quarter," said Brian Jenkins, CEO of Dave & Buster's. "Comparable store sales improved sequentially as we continued to make progress on our key strategic priorities."

The company reported net income of $11.9 million for the quarter, or $0.30 per share. This is down from net income of $12.2 million, or $0.30 per share at this time last year, but exceeded analysts' expected earnings of $0.24 per share.

Dave & Buster's, known for its unique mix of arcade games and dining options, reported a 1.3% decrease in comparable store sales for the quarter, exceeding the expected decline of 0.5% in comparable store sales. The company adjusted its growth outlook downwards to high single-digits, which is down from Wall Street's expectation of 11.7% growth for the year. Dave & Buster's stock fell more than 15% following the report's release.

Dave & Buster's Entertainment Inc. (PLAY) shares ended the week at $45.65, down 13.9% for the week.

Francesca's Revises Outlook

Francesca's Holdings Corp. (FRAN), a retailer of women's apparel and accessories, reported its third quarter results on Tuesday, December 11. The company revised its full-year sales guidance, in light of slipping comparable sales.

The company reported net sales of $95.4 million for the quarter. This is down 10% from net sales of $105.8 million at this time last year.

"While we saw comparable sales declines start to narrow as we moved into the fourth quarter, we recognize the need to accelerate change and improve results faster," said Francesca's President and CEO Steve Lawrence. "Our biggest challenge and focus is to drive improved traffic trends in brick and mortar. We are stepping up our marketing efforts with increased investments in influencers, and digital and social media."

The company reported a net loss of $16.2 million, or $0.47 per share. This is down from net income of $0.2 million, or $0.01 per share during the same quarter last year.

Francesca's comparable sales decreased 14% in the third quarter, its seventh consecutive quarter of decline, due to slow traffic in its boutiques. The company's shares fell more than 16% following the report's release. Francesca's did not open any new boutiques and closed four stores in the quarter, bringing the company's total boutique count to 738 at the end of the quarter. Francesca's revised its full-year sales guidance to a range of $427 to $433 million, down from prior guidance of $453 to $463 million.

Francesca's Holdings Corp. (FRAN) shares closed at $1.04, down 45% for the week.

The Dow started the week of 12/10 at 24,361 and closed at 24,101 on 12/14. The S&P 500 started the week at 2,631 and closed at 2,600. The NASDAQ started the week at 6,960 and closed at 6,911.

Global Growth Concerns Drop Treasury Yields

U.S. Treasury yields dipped on Friday after rising for much of the week. China's economic outlook sparked concern for the health of the global market, while U.S. retail sales increased.

On Friday, China released a report of retail sales showing an 8.1% annual increase, falling short of analysts' expected 8.8% growth. The report added to growing concerns over the health of the global economy and contributed to a 450 point loss on the Dow Jones Industrial Average during Friday's trading session.

"The economic data continues to bear out growth is slowing," said Tom Martin, senior portfolio manager with Globalt. "There is still a lot of positive positioning out there. As the data continues to slow, people are [feeling] less comfortable with that and start to sell."

The 10-year Treasury note opened the week at 2.836%, rising to a high of 2.920% on Thursday before falling to 2.883% during trading on Friday. The 30-year Treasury bond yield reached 3.172% on Thursday but dipped to 3.141% midday on Friday.

The U.S. Commerce Department also released retail sales numbers on Friday. The report showed a 0.2% increase in retail sales for November. Excluding a decrease in fuel sales, retail sales were up 0.5% for the month. Total retail sales were up 4.2% from November 2017.

"It unquestionably points to a consumer that continues to be upbeat and happy to spend money," said Ward McCarthy, chief financial economist with Jefferies LLC. "Once we move past this, we're not going to see consumer spending quite as strong, but consumer fundamentals are really good."

The 10-year Treasury note yield closed at 2.89% on 12/14, while the 30-year Treasury bond yield was 3.14%.

Mortgage Rates Continue Downward Trend

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 13. The report showed that rates dropped to their lowest point in three months.

This week, the yield on the 30-year fixed-rate mortgage averaged 4.63%, down from last week's average of 4.75%. At this time last year, the 30-year fixed rate mortgage averaged 3.93%.

The 15-year fixed-rate mortgage averaged 4.07% this week, down from 4.21% last week. Last year at this time, the 15-year fixed-rate mortgage averaged 3.36%.

"The 30-year fixed [mortgage rate] fell to 4.63% this week — the lowest it has been since mid-September," said Freddie Mac Chief Economist Sam Khater. "Mortgage rates have either fallen or remained flat for five consecutive weeks and purchase applicants are responding with an uptick in demand given these lower rates."

Based on published national averages, the money market account closed at 1.22% on 12/14. The one-year CD finished at 2.57%.

Published December 14, 2018

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