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Saturday July 13, 2024



Levi Strauss Releases Earnings Report

Levi Strauss & Co. (LEVI) announced its second quarter financial results on Wednesday, June 26. The denim powerhouse's revenues fell short of analysts' expectations, causing its shares to drop 15% following the earnings release.

Levi reported revenue of $1.44 billion for the second quarter, which was up 8% from revenue of $1.34 billion in the same quarter last year. This was slightly below analysts' expectations of $1.45 billion.

"We delivered another strong quarter driven by the Levi's brand's prominence at the center of culture, a robust pipeline of newness and innovation, and continued momentum in our global direct-to-consumer channel," said Levi Strauss & Co. CEO, Michelle Gass. "Our amplified focus on women's and denim lifestyle is delivering outsized growth and driving meaningful market share gains. Our transformational pivot to operating as a DTC-first company is yielding positive results around the world, giving me great confidence that we will achieve accelerated, profitable growth for the rest of the year and beyond."

The company reported net income of $18.0 million or $0.04 per adjusted share. This was an improvement from a net loss of $1.6 million or $0.00 per adjusted share reported during the same quarter last year.

The company's global direct-to-consumer (DTC) revenue and E-commerce segments saw significant growth, increasing 8% and 19% respectively. Wholesale revenues increased by 7%, which the company attributed to shifting of wholesale shipments to the first quarter in the prior fiscal year and an exit from the Denizen brand. Levi declared a dividend of $0.13 per share of common stock, payable on August 20, 2024, to the stockholders of record for Class A and Class B common stock on August 2, 2024. The company reaffirmed its fiscal 2024 guidance and anticipates net revenue to grow between 1% to 3% year-over-year and adjusted earnings per share to be between $1.17 to $1.27.

Levi Strauss & Co. (LEVI) shares ended at $19.13, up 1% for the week.

McCormick Announces Earnings

McCormick & Co Inc. (MKC) announced its second quarter results on Thursday, June 27. Despite reporting a decrease in revenue, the company's shares rose nearly 5% following the release.

Revenue came in at $1.64 billion for the second quarter, down 1% from $1.66 billion during the same quarter last year. This was marginally above analysts' estimates of $1.63 billion.

"We are pleased with our performance for the first half of the year, which was in line with our expectations and reflects the success of our prioritized business investments to drive improving results and trends," said McCormick & Co Inc. CEO, Brendan M. Foley. "Our results for the first half of the year coupled with our growth plans, support our continued confidence in achieving the mid to high-end of our projected constant currency sales growth for 2024. Overall, we are confident in the sustained trajectory of our business, and in our ability to deliver on our 2024 outlook and long-term financial objectives."

For the quarter, the company reported net income of $184.2 million or $0.68 per share. This is up from net income of $152.10 million or $0.56 per share the year prior.

The Hunt Valley-based spice company reported Consumer segment sales decreased 1% compared to the prior year. Within the Consumer segment, sales in the Americas declined 2% in the quarter, sales in its Europe, Middle East and Africa segment increased by 5% and sales in the Asia and Pacific region fell by 5%. The company's Flavor Solutions segment also saw a year-over-year decline of 1% in sales, which McCormick attributed to a decline in volume and product mix as well as divesting in its canning business. The company reaffirmed its fiscal 2024 outlook and expects earnings per share in the range of $2.76 to $2.81 and sales growth ranging between negative 2% to 0%.

McCormick & Co Inc. (MKC) shares ended the week at $70.88, relatively unchanged for the week.

MSC Industrial Reports Third Quarter Results

MSC Industrial Supply Co. (MSM) reported its third quarter earnings on Tuesday, July 2. The industrial supplier's stock was unchanged after reporting revenue that met analysts' expectations.

MSC Industrial reported quarterly revenue of $979.4 million. This was down over 7% from revenue of $1.1 billion during the same quarter last year but was in line with analysts' expectations of $979.5 million in revenue.

"Looking forward, as our corrective actions take hold, we will remain steadfast in our approach to unlocking the value creation potential of MSC," said MSC Industrial CEO, Erik Gershwind. "We are doing this by leaning into the core pillars of our Mission Critical initiatives - Maintaining Momentum, Reenergizing the Core Customer, and Optimizing Cost to Serve. While results to date in fiscal 2024 are not up to our standards, we are confident we have the talent and strategy in place to achieve our long-term goals and create meaningful value for all stakeholders."

For the quarter, MSC Industrial reported net income of $71.7 million or $1.27 per adjusted share. This was a decrease from net income of $95.2 million or $1.69 per adjusted share in the same quarter last year.

MSC Industrial, a distributor of metalworking and maintenance, repair and operations products, reported operating income totaling $106.8 million for the quarter, down 21% from the same quarter the prior year. The company's operating margin also decreased to 10.9% from 12.8%. MSC Industrial reported that average daily sales declined 7.1%, which was attributed to non-repeating public sector orders and declines in manufacturing verticals. The company adjusted its full-year 2024 guidance and now expects fiscal year 2024 average daily sales to decline between 4.7% to 4.3%, a decrease from its initial forecast of 0% to 5% growth.

MSC Industrial (MSM) shares ended the week at $77.37, down 3% for the week.

The Dow started the holiday week of 7/1 at 39,186 and closed at 39,376 on 7/5. The S&P 500 started the week at 5,471 and closed at 5,567. The NASDAQ started the week at 17,774 and closed at 18,353.


Treasury Yields Move Lower

U.S. Treasury Yields fell during the week as investors waited for employment data and digested the latest manufacturing data which showed a third consecutive month of shrinking. Yields stayed lower on Friday as investors reacted to sluggish employment reports.

On Monday, the Institute for Supply Management (ISM) released its purchasing managers' index (PMI) for June indicating a contraction in manufacturing. The PMI measures the change in production levels across the U.S. and is used as an indicator of the U.S. economic activity. The PMI read at 48.5% in June, below analysts' expectations of 49.2% and decreased slightly from a PMI of 48.7% in May.

"U.S. manufacturing activity continued in contraction at the close of the second quarter," said Chair of the ISM Manufacturing Business Survey Committee, Timothy R. Fiore. "Demand remains subdued, as companies demonstrate an unwillingness to invest in capital and inventory due to current monetary policy and other conditions. Suppliers continue to have capacity, with lead times improving and shortages not as severe."

The benchmark 10-year Treasury note yield opened the week of July 1 at 4.40% and traded as low as 4.34% on Wednesday. The 30-year Treasury bond opened the week at 4.57% and traded as low as 4.52% on Wednesday.

On Wednesday, the U.S. Department of Labor reported that initial claims for unemployment increased by 4,000 to 238,000 for the week ending June 29. Continuing unemployment claims increased by 26,000 to 1.86 million. On Friday, the Bureau of Labor Statistics released its monthly jobs report for June which showed an increase of 206,000 jobs, slightly higher than economists' estimates of 200,000 but lower than the prior month.

"The longer the Fed maintains its high interest rate strategy, the greater the risk that it throttles the economy back too far," said chief economist at Moody's, Mark Zandi. "We are starting to see higher claims and layoffs and job market pullbacks. That is an increasing concern."

The 10-year Treasury note yield finished the week of 7/1 at 4.29%, while the 30-year Treasury note yield finished the week at 4.49%.


Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey on Wednesday, July 3. The survey showed the 30-year fixed mortgage rate increasing after dropping for four straight weeks.

This week, the 30-year fixed rate mortgage averaged 6.95%, up from last week's average of 6.86%. Last year at this time, the 30-year fixed rate mortgage averaged 6.81%.

The 15-year fixed rate mortgage averaged 6.25% this week, up from 6.16% last week. During the same week last year, the 15-year fixed rate mortgage averaged 6.24%.

"Mortgage rates increased this week, coming in just under 7%," said Freddie Mac's Chief Economist, Sam Khater. "Both new home and pending home sales are down, causing active listings to rise. We are still expecting rates to moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers."

Based on published national averages, the savings rate was 0.45% as of 6/17. The one-year CD averaged 1.86%.

Editor's Note: The publicly available financial information is offered as a helpful and informative service to our friends. This article is not an endorsement of any company, product or service.

Published July 5, 2024
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