Market Snapshot
briefing.com
| Dow | 34991.21 | +163.51 | (0.47%) | | Nasdaq | 14103.84 | +9.45 | (0.07%) | | SP 500 | 4502.88 | +7.18 | (0.16%) | | 10-yr Note | -29/32 | 4.54 |
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| | NYSE | Adv 1524 | Dec 1283 | Vol 100 mln | | Nasdaq | Adv 2397 | Dec 1884 | Vol 5.0 bln |
Industry Watch
| Strong: Consumer Staples, Financials, Materials, Industrials, Communication Services, Real Estate |
| | Weak: Utilities, Energy, Information Technology |
Moving the Market
-- Follow through momentum after post-CPI rally
-- Strong response to Target's (TGT) better-than-expected earnings report
-- Digesting economic data this morning that conveyed more of a soft landing outlook for the economy
-- S&P 500 finding support at 4,500
-- Jump in Treasury yields keeping stocks in check
| Closing Summary
15-Nov-23 16:20 ET
Dow +163.51 at 34991.21, Nasdaq +9.45 at 14103.84, S&P +7.18 at 4502.88
[BRIEFING.COM] The stock market had a decent showing today. The major indices added modest gains, continuing a rally that began after yesterday's CPI data. The S&P 500 closed just above the 4,500 level with a 0.2% gain, which was still impressive considering the S&P 500 is up 9.4% since October 27.
The thinking that the Fed is done raising rates contributed to the positive bias following another batch of economic data that seemed consistent with a soft landing scenario for the economy.
Total retail sales declined 0.1% month-over-month in October (Briefing.com consensus -0.3%) and sales, excluding autos, increased just 0.1% (Briefing.com consensus -0.2%). The retail sales data are not adjusted for inflation, so these weak month-over-month changes signify a weakening in demand for goods.
Separately, the Producer Price Index for final demand declined 0.5% month-over-month (Briefing.com consensus 0.1%) and was up just 1.3% year-over-year versus 2.1% in September. Excluding food and energy, the index for final demand was unchanged month-over-month (Briefing.com consensus 0.3%) and up 2.4% year-over-year versus 2.7% in September.
The positive bias was also supported by a huge gain in Target (TGT 130.46, +19.67, +17.8%) following its better-than-expected earnings results and a lingering fear of missing out on further gains during a seasonally strong time of year for the market.
Seven of the 11 S&P 500 sectors closed with a gain led by consumer staples (+0.7%), communication services (+0.6%), and financials (+0.6%). The energy (-0.3%), utilities (-0.3%), and information technology (-0.1%) sectors, meanwhile, fell to the bottom of the pack.
In spite of today's pleasing economic data, Treasuries experienced some selling after yesterday's big gains. The 2-yr note yield rose nine basis points today to 4.91% after plunging 22 basis points yesterday. The 10-yr note yield climbed nine basis points to 4.54% after declining 19 basis points yesterday.
Notably, President Biden and President Xi met today at the APEC Summit. Both leaders gave introductory remarks, but there was no public discussion of policy issues. President Biden will hold a press conference tonight at 7:15 p.m. ET.
- Nasdaq Composite: +34.8% YTD
- S&P 500: +17.3% YTD
- Dow Jones Industrial Average: +5.6% YTD
- S&P Midcap 400: +4.6% YTD
- Russell 2000: +2.3% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index 2.8%; Prior 2.5%
- October Retail Sales -0.1% (Briefing.com consensus -0.3%); Prior was revised to 0.9% from 0.7%; October Retail Sales ex-auto 0.1% (Briefing.com consensus -0.2%); Prior was revised to 0.8% from 0.6%
- The key takeaway from the report is that it isn't adjusted for inflation, so it is clear to see that consumer demand for goods in October fell off noticeably from September.
- October PPI -0.5% (Briefing.com consensus 0.1%); Prior was revised to 0.4% from 0.5%; October Core PPI 0.0% (Briefing.com consensus 0.3%); Prior was revised to 0.2% from 0.3%
- The key takeaway from the report is that it reflects a sharp moderation in prices at the wholesale level, which should remain relatively subdued barring a future jump in energy prices, as the index for unprocessed goods for intermediate demand was down 1.4%.
- November Empire State Manufacturing 9.1 (Briefing.com consensus -5.0); Prior -4.6
- September Business Inventories 0.4% (Briefing.com consensus 0.4%); Prior 0.4%
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 217,000), Continuing Claims (prior 1.834 mln), October Import Price Index (prior 0.1%), Import Prices ex-oil (prior -0.2%), Export Price Index (prior 0.7%), Export Prices ex-agriculture (prior 1.0%), and Philadelphia Fed Survey (Briefing.com consensus -7.5; prior -9.0)
- 9:15 ET: October Industrial Production (Briefing.com consensus -0.4%; prior 0.3%) and Capacity Utilization (Briefing.com consensus 79.4%; prior 79.7%)
- 10:00 ET: November NAHB Housing Market Index (Briefing.com consensus 40; prior 40)
- 10:30 ET: Weekly natural gas inventories
- 16:00 ET: September Net Long-Term TIC Flows (prior $63.5 bln)
Treasuries give back some gains
15-Nov-23 15:35 ET
Dow +211.61 at 35039.31, Nasdaq +29.88 at 14124.26, S&P +14.07 at 4509.77
[BRIEFING.COM] The market is moving is mostly sideways. The S&P 500 is trading around the 4,500 level heading into the close.
The 2-yr note yield rose nine basis points to 4.91% and the 10-yr note yield climbed nine basis points to 4.54%.
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 220,000; prior 217,000), Continuing Claims (prior 1.834 mln), October Import Price Index (prior 0.1%), Import Prices ex-oil (prior -0.2%), Export Price Index (prior 0.7%), Export Prices ex-agriculture (prior 1.0%), and Philadelphia Fed Survey (Briefing.com consensus -7.5; prior -9.0)
- 9:15 ET: October Industrial Production (Briefing.com consensus -0.4%; prior 0.3%) and Capacity Utilization (Briefing.com consensus 79.4%; prior 79.7%)
- 10:00 ET: November NAHB Housing Market Index (Briefing.com consensus 40; prior 40)
- 10:30 ET: Weekly natural gas inventories
- 16:00 ET: September Net Long-Term TIC Flows (prior $63.5 bln)
Energy complex settles mixed
15-Nov-23 15:05 ET
Dow +199.54 at 35027.24, Nasdaq +24.70 at 14119.08, S&P +12.19 at 4507.89
[BRIEFING.COM] Things are little changed at the index level over the last half hour.
Energy complex futures settled the session in mixed fashion. WTI crude oil futures declined 2.0% to $76.56/bbl and natural gas futures rose 1.5% to $3.36/mmbtu. On a related note, the S&P 500 energy sector (-0.2%) remains in negative territory at this point.
The utilities (-0.3%) and information technology (-0.01%) sectors also trade down.
Earnings movers outperforming in S&P 500
15-Nov-23 14:30 ET
Dow +165.00 at 34992.70, Nasdaq +22.62 at 14117.00, S&P +11.63 at 4507.33
[BRIEFING.COM] The S&P 500 (+0.26%) is in second place on Wednesday afternoon, trading now about the middle of today's range.
Elsewhere, S&P 500 constituents Target (TGT 130.20, +19.41, +17.52%), Catalent (CTLT 39.61, +4.08, +11.48%), and Etsy (ETSY 72.28, +3.90, +5.70%) pepper the top of today's standings. Both TGT and CTLT jump higher following earnings, while earlier in the session ETSY hit its best levels since early September.
Meanwhile, Vertex Pharma (VRTX 352.37, -17.58, -4.75%) is today's top laggard despite a dearth of corporate news.
Gold notches narrow losses at midweek
15-Nov-23 14:00 ET
Dow +173.02 at 35000.72, Nasdaq +29.46 at 14123.84, S&P +13.12 at 4508.82
[BRIEFING.COM] With about two hours remaining on Wednesday afternoon the tech-heavy Nasdaq Composite (+0.21%) shows the shallowest advance among the major averages, consolidating its bounce out of the red from the prior half hour.
Gold futures settled $2.20 lower (-0.1%) to $1,964.30/oz, held down by the familiar duo of higher treasury yields and a stronger dollar.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $104.41.
Page One
Last Updated: 15-Nov-23 09:05 ET | Archive
More data, more gains
There was no mistaking yesterday that the Treasury market and stock market liked what they saw in the October Consumer Price Index. Both rallied in a big way.
The 2-yr note yield, which is most sensitive to changes in the fed funds rate, plunged 22 basis points to 4.82%. It did so as the fed funds futures market effectively priced out any additional rate hikes and priced in an expected four rates cuts before the end of 2024 (versus three expected rate cuts before the CPI data were released). The Russell 2000, meanwhile, surged 5.5%.
Market breadth was decidedly positive. Advancers outlegged decliners by a 10-to-1 margin at the NYSE. The S&P 500, which toyed with a break of 4,100 on October 27, cleared 4,500 on an intraday basis.
It was pretty much all good as market participants relished the thought that the Fed is done raising rates. That may or may not prove true over time, but what mattered most yesterday was the thought itself. Accordingly, there was short-covering activity and a fear of missing out on further gains that catalyzed the major indices.
There has been no give back this morning either. Currently, the S&P 500 futures are up 13 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 81 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 58 points and are trading 0.2% above fair value.
The futures market has been underpinned by several factors:
- Follow-through momentum
- A 14% gain in Target (TGT) following its better-than-expected earnings report
- Some pleasing retail sales and industrial production data out of China
- News that the People's Bank of China made its largest liquidity injection (CNY600 billion) since 2016
- The House passing a continuing resolution that keeps some government agencies funded through January 19 and others through February 2. The Senate is expected to pass this resolution as well, so it looks like a government shutdown during the holidays will be averted.
- U.S. economic data this morning that conveyed more of a soft landing outlook for the economy
With respect to the data, retail sales declined 0.1% month-over-month in October (Briefing.com consensus -0.3%) following an upwardly revised 0.9% increase (from 0.7%) in September. Excluding autos, retail sales were up 0.1% month-over-month (Briefing.com consensus -0.2%) following an upwardly revised 0.8% increase (from 0.6%) in September.
The key takeaway from the report is that it isn't adjusted for inflation, so it is clear to see that consumer demand for goods in October fell off noticeably from September.
Separately, the October Producer Price Index (PPI) also took a market-friendly inflation turn. Total PPI was down 0.5% month-over-month (Briefing.com consensus 0.1%) -- the biggest drop since April 2020 -- following a downwardly revised 0.4% increase (from0.5%) in September. Core PPI, which excludes food and energy, was unchanged month-over-month (Briefing.com consensus 0.3%) following a downwardly revised 0.2% increase (from 0.3%) in September.
On a year-over-year basis, total PPI was up just 1.3% while core PPI was up 2.4%.
The key takeaway from the report is that it reflects a sharp moderation in prices at the wholesale level, which should remain relatively subdued barring a future jump in energy prices, as the index for unprocessed goods for intermediate demand was down 1.4%.
The November Empire State Manufacturing Survey, meanwhile, surprised on the upside, checking in at 9.1 (Briefing.com consensus -5.0) versus -4.6 in October.
The initial reaction in the market to the data wasn't anything like yesterday. Treasury yields went up and equity futures faded from higher levels. That response, though, likely has a lot to do with yesterday's reaction. The moves then were outsized, partly because of the thinking that today's data would not disrupt yesterday's view of the world, meaning it had been priced in already to some extent.
Granted the slowdown in retail sales could stir some concerns about the economy being weaker than expected in coming months, but the understanding that it was a slowdown after a big month of spending, and that it occurred before holiday spending is set to ramp up, should create an allowance in the market's mind that one month of data does not a trend make.
Currently, the 2-yr note yield is up seven basis points to 4.89% and the 10-yr note yield is up six basis points to 4.50%. The action there will be watched closely per usual, as will any remarks coming out of the meeting at 2:00 p.m. ET today between President Biden and President Xi at the APEC Summit.
-- Patrick J. O'Hare, Briefing.com
JD.com bounces on a wide Q3 EPS beat as recent business adjustments begin to bear fruit (JD)
JD.com (JD +8%) springs higher after clearing analysts' sales and earnings forecasts in Q3. The China-based e-commerce giant struggled immensely this year, especially when stacked against rivals Alibaba (BABA) and Pinduoduo (PDD). However, earlier this year, JD made it clear that it would be an adjustment year as COVID-related forces died down and macroeconomic problems kicked in. Recovery efforts in China have lagged behind many of its Western counterparts, largely stemming from a longer-lasting COVID-related headwind.
The steps JD embarked on earlier this year were significant. First, it refocused on its core business, reigning in more innovative business initiatives that may not aligned with long-term goals. Second, JD set out to improve efficiency, a common theme amongst e-commerce companies in and outside China, setting profitable growth as a priority instead of growth at all costs -- part of this initiative involved streamlining the company hierarchy and empowering frontline workers. Third, JD would enhance customer experience, supporting first- and third-party models.
Since outlining its strategies around May, JD has not enjoyed meaningful success, delivering only a few pockets of good news. However, it may have turned a corner following its solid Q3 performance.
- JD recorded EPS of RMB 0.83 in Q3, accelerating from RMB 0.44 in Q2, reflecting benefits from ongoing efficiency improvements finally flowing through to its bottom line.
- Revenue growth did tap the brakes, expanding only +1.7% yr/yr to RMB 247.7 versus +7.6% growth last quarter. However, seasonality was a factor as the summer months weighed on electronics and home appliance revenue. Furthermore, although general merchandise also lagged, delivering a 2% revenue decline during the quarter as the supermarket category continues to recover, the sales decline narrowed compared to the previous two quarters, showing signs of an improving economic backdrop.
- Additionally, JD witnessed uplifting trends in user shopping behavior, potentially underscoring success related to user experience investments. JD Plus members, similar to Amazon (AMZN) Prime, maintained double-digit growth and demonstrated strong loyalty. For example, Plus members' annual average revenue per user was eight times that of non-Plus members during Q3.
- New business remained a drag on overall revenue, posting a 24% drop in sales as JD continues to scale back its international business. Again, this should be expected as the company reigns in more ambitious growth efforts, focusing on bolstering its core offerings.
Overall, 2023 has been challenging for JD, but its decision to hunker down and focus on building its core business, maintaining financial discipline, and cutting expensive growth endeavors is starting to pay off. A recovering Chinese economy is still vital to JD's near-term success. However, even if recovery efforts remain sluggish, JD is taking the proper steps to maintain its competitive positioning and reignite growth once economic conditions turn around more rapidly.
Catalent shares catapulting higher with Wegovy growth opportunity in the spotlight (CTLT)
Production setbacks, delayed financial filings, pressure from activist investors, and eroding sales of COVID-related biologics have plagued contract drug manufacturer Catalent (CTLT) in a tumultuous year, but the news is much more bullish today.
- After adjusting for a sizable $700 mln goodwill impairment charge related to prior acquisitions, CTLT's 1Q24 EPS of ($0.10) edged past estimates, while revenue of $982 mln comfortably topped expectations.
- However, the primary story revolves around CTLT's brightening outlook, including its expanding business with Novo Nordisk (NVO), the maker of the ultra-popular weight loss drug, Wegovy.
- CTLT, which produces the pre-filled syringes for Wegovy, stated during the earnings call that revenue contributions from GLP-1 drugs could grow to over $500 mln once its manufacturing facilities are back to running at full scale.
- For a reference point, CTLT expects GLP-1 drugs, like Wegovy, to generate less than $100 mln in revenue in FY24.
- Additionally, CTLT anticipates that demand will remain strong from its largest customer, Sarepta Therapeutics (SRPT). Recall that on October 31, SRPT announced disappointing topline results for Elevidys, its treatment for Duchenne muscular dystrophy. The development sent shares of CTLT spiraling lower as investors contemplated the negative impact to CTLT's sales.
- This morning, CTLT calmed investors' fears, commenting that SRPT has already confirmed their scale-up plans for 2024. The company added that it expects revenue from its top customers to increase by about 65% in FY24 as it ramps up production for SRPT and its partners.
- Bolstered by these factors, CTLT reaffirmed its FY24 revenue guidance of $4.30-$4.50 bln and its adjusted EBITDA forecast of $680-$760 mln. This came as a relief following a barrage of bad news for the stock, including CTLT's decision to delay the filing of its Annual Report for FY23 (ending June 30, 2023).
- CTLT said it needed additional time to complete the procedures related to the aforementioned $700 mln goodwill impairment charge, which didn't exactly inspire confidence among investors.
- That issue, though, is moving to the rearview mirror and CTLT is making progress on another key issue. Back in April, the company warned of slower-than-expected production at three of its facilities, which hit its top-line in Q3.
- Today, the company noted that improved productivity at these plants helped push EBITDA margin higher by 1,400 bps sequentially to 11.6%. Furthermore, CTLT anticipates additional margin improvement in FY24 as utilization improves and as it executes a cost reduction plan in its cell therapy business.
The main takeaway is that after a very unsettling year, CTLT seems poised for a turnaround in FY24 as it capitalizes on its partnerships with NVO and SRPT and as its facilities return to pre-COVID operating levels.
Advance Auto's "kitchen sink" quarter flushes out the bad news, paving way for gradual U-turn (AAP)
The past two years have been full of potholes for Advance Auto Parts (AAP) and the road to recovery didn't get any smoother in Q3 as the company posted a sizable and unexpected net loss while significantly cutting its FY23 EPS guidance. Badly in need of some repair work, recently appointed CEO Shane O'Kelly, who came over from Home Depot (HD) subsidiary HD Supply in late August, disclosed the company's next steps in its turnaround effort.
- Those plans include a new cost reduction program that is expected to generate at least $150 mln in savings on an annualized basis.
- The bigger news, though, is that AAP is looking to divest its Worldpac and Canadian businesses in a move that will lessen its exposure to commercial sales. With over 315 branches, Worldpac primarily serves professional customers as a wholesale distributor of original equipment and aftermarket parts, while the approximate 150 Carquest stores in Canada also mostly cater to professionals.
- To help lead the sales process and AAP's overall turnaround strategy, the company also announced that it has appointed Ryan Grimsland as its new Executive Vice President and CFO. Interestingly, Mr. Grimsland most recently served as Senior Vice President, Strategy and Transformation, at Lowe’s (LOW), making AAP's top two positions filled by former HD and LOW executives.
- Both of those companies have performed well in the face of macroeconomic headwinds, so the idea of bringing in outsiders from HD and LOW to right the ship seems sensible.
However, they have their work cut out for them as AAP's rough Q3 results and bleak FY23 guidance attest.
- The company reported a net loss of ($0.82)/share compared to positive EPS of $1.92 in the year-earlier period. It doesn't appear that the Q3 EPS number is directly comparable to analysts' estimates because it includes a non-recurring charge of about $119 mln related to an estimated change in value for inventory reserves.
- Still, AAP's operating results were weak as higher product costs, elevated supply chain costs, and sluggish demand pressured its financials.
- Comparable store sales increased by just 1.2%, indicating that AAP continues to lose ground to competitors O'Reilly Auto (ORLY) and AutoZone (AZO). When ORLY reported Q3 results on October 25, it disclosed that comparable store sales jumped by 8.7%. AZO's Q4 same store sales were up 4.5%.
- Based on AAP's updated FY23 guidance, it's evident that things are likely to get worse before they get better. The company now expects EPS of $1.40-$1.80, down sharply from its prior guidance of $4.50-$5.10.
- It's worth noting, though, that the downward revision is partly due to the aforementioned non-recurring Q3 expenses. Importantly, AAP essentially kept its FY23 revenue outlook unchanged at $11.25-$11.30 bln, with the high end of the range down only modestly from $11.25-$11.35 bln.
Overall, it was another rough quarter for AAP, but that was widely anticipated, and expectations were at rock-bottom levels ahead of the earnings report. After an initial knee-jerk reaction lower, shares have rebounded as Q3 may represent the "kitchen sink" quarter in which all of the bad news is flushed out, potentially paving the way for improved results in the quarters ahead.
Target is surging following earnings; in-line holiday guidance was music to investors' ears (TGT)
Target (TGT +18%) is trading sharply higher after reporting Q3 (Oct) results. Target again beat handily on EPS, although it has now missed on revs in three consecutive quarters, although the miss was quite small. We said in our preview that our main concern was the guidance for the Q4 (Jan) all-important holiday season. And drum roll...Target guided Q4 EPS in-line at $1.90-2.60, a notable improvement after guiding lower in each of the three prior quarters.
- Same store comps came in at -4.9% (in-store -4.6%; digital -6.0%), in-line with prior guidance of a mid-single digit decline. Comps in discretionary categories remained soft in Q3, with demand for electronics remaining particularly soft. However, discretionary comp trends improved relative to Q2. Food & beverage comps were down slightly. Hardlines comps were down in the low teens. On the positive side, Beauty led comp performance in the high-single digits. Comps were also strong in back-to-school and college categories. Apparel comps declined high-single digits, but that was a nearly 3 pt improvement from Q2.
- Besides comps, another key metric we watch is operating margin. Operating margin in Q3 improved to 5.2% from 3.9% a year ago and from 4.8% in Q2. Target benefitted from lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs, and favorable category mix. These benefits were partially offset by higher inventory shrink and higher pay/benefits.
- In terms of the consumer, Target says people remain remarkably resilient. However, pressures like higher interest rates and the resumption of student loan payments have left them with less ability to spend on discretionary items, particularly electronics. That is forcing them to make tradeoffs in their family budgets. For example, Target is seeing consumers delay their spending until the last moment as they work to stretch their budgets until the next paycheck.
- In terms of the holiday season, Target is going to be cautious about the size of its inventory commitments. Also, Target will focus on newness and value for guests this holiday season. Target plans to offer more than 10,000 new items for the holidays, with thousands of must-have gifts under $25, and thousands of exclusive-to-Target items across many categories.
So, why is the stock up so much? We were cautious coming into this report and, based on the weak stock action, we were not alone. Our main concern was another downside guidance quarter and with Q4 being the holiday quarter, today's guidance was particularly important. Investors are excited that TGT stopped guiding lower and guided in-line. It was not perfect guidance, at $1.90-2.60, that is wide enough to drive a truck through. But it was in-line nonetheless.
We also think Target is well positioned for the holidays from an inventory standpoint by having a lot of newness, but also focusing on value-priced gifts. We think that is a good place to be. On a final note, we think this report bodes well for Walmart (WMT), which reports tomorrow morning.
TJX pulls back after trimming its JanQ EPS guidance; in-store traffic still robust during OctQ (TJX)
Even though earnings and sales toppled expectations in Q3 (Oct), shares of TJX (TJX -3%) are slipping following weak Q4 (Jan) guidance, underscoring a relatively sluggish holiday shopping season. The off-price retailer, the parent of T.J. Maxx, HomeGoods, Marshalls, Sierra, and Homesense, trimmed its previous JanQ EPS prediction. Also, even though it reaffirmed its JanQ comp growth outlook of +3-4%, it translates to a sequential deceleration.
While retail peer Target (TGT) is gapping significantly higher following its OctQ report today, it also issued somewhat lackluster JanQ guidance, anticipating another quarter of a mid-single-digit same-store sales decline. E-commerce names like eBay (EBAY) and Amazon (AMZN) also predicted a relative pullback in consumer spending during the holidays, reflecting a still-elevated inflationary environment.
Still, despite the price action today, we do not consider TJX's mild JanQ guidance overly concerning. Today's pullback is healthy given TJX's recent run, soaring approximately +20% higher over the past six months. Furthermore, there are reasons to stay upbeat on TJX's near and long-term future.
- TJX's OctQ results highlighted its ability to shine despite an unfavorable economic background, delivering EPS of $1.03, a 19.8% improvement yr/yr, and revs of $13.27 bln, a 9.0% jump. Meanwhile, overall comp sales increased by +6%, well above the company's previous forecast of +3-4%.
- Strength stemmed from the HomeGoods banner, which delivered a +9% comp, sustaining upward momentum from last quarter when the banner returned to positive comp growth after several quarters of declines. Marmaxx, which includes Marshalls and T.J. Maxx, tracked closely to HomeGoods, registering +7% comp growth. Like Q2 (Jul), management observed increasing customer traffic across the board, underpinning a robust treasure-hunting desire from consumers, which requires in-store shopping.
- Laggards in OctQ were TJX Canada and TJX International, which includes Europe and Australia, recording comp growth of just +3% and +1%, respectively. While TJX Canada translated to an acceleration from JulQ, TJX International's growth faded from the +3% growth delivered last quarter.
- While a decelerating comp overseas was disappointing, reducing its JanQ EPS outlook to $0.97-1.00 from $1.10-1.13 contributes most to TJX's bearish reaction today. The primary factor was an unexpected hit to adjusted pretax profit margins, driving TJX to trim its margin outlook for JanQ to 10.0-10.2% down from 10.7-10.9%.
We have mentioned before that off-price retail remains an attractive choice for an increasing number of shoppers as value becomes the top priority during a high-price, high-interest rate environment. TJX entices buyers to step into their physical locations to seek out bargains, which can lead to a greater basket size than initially intended as more bargain finds pile up, unlike online shopping. Therefore, while discretionary spending will likely remain tight until inflationary pressures across daily essentials ease more meaningfully, TJX stands out positively during the current unfavorable economic backdrop.
Lastly, TJX's OctQ results are positive signs ahead of peers' upcoming reports, including Ross Stores (ROST) on November 16, Burlington Stores (BURL) on November 21, and Dollar Tree (DLTR) on November 29.
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