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Friday July 3, 2015



BlackBerry Implementing Strategic Plan

BlackBerry Ltd. (BB.TO) reported its latest quarterly earnings on Tuesday, June 23. The company reported mixed results.

The company reported quarterly revenue of $658 million, a decrease of 32% from the same period last year when the company reported revenue of $966 million. This was below analysts’ expectations that revenue would be $683 million.

“I am pleased with the strong performance of our software and technology business,” said Executive Chairman and CEO of BlackBerry, John Chen. “This is key to BlackBerry’s future growth. Our financials reflect increased investments to sales and customer support for our software business. In addition, we are taking steps to make the handset business profitable. We believe these actions are prudent and necessary to grow the business and we believe the remaining milestones in our strategic plan are achievable.”

BlackBerry reported net income of $68 million for the quarter. This represents a significant increase from the same quarter one year ago when the company reported net income of $23 million.

Mr. Chen took BlackBerry’s helm in November of 2013 and instituted a two-year strategic plan to turn BlackBerry’s struggling smartphone business into a software company focused on mobile security. The company’s latest earnings show this turnaround is on track. BlackBerry generated strong revenue from licensing deals and sales of software that enable companies to manage their employees’ mobile devices. However, the company is still struggling to generate revenue. BlackBerry’s performance during the next year as the company finishes its two-year strategic plan will communicate to investors where the company is heading.

BlackBerry Ltd. (BB.TO) shares ended the week at $10.53, down 3.5% for the week.

Bed, Bath & Beyond Reports Earnings

Bed Bath & Beyond, Inc. (BBBY) reported its latest quarterly earnings on Wednesday, June 24. The company reported an increase in revenue, but a decrease in net income.

The company reported net sales of $2.74 billion for the quarter. This represents a slight increase from the comparable quarter last year when the company reported net sales of $2.66 billion.

“Overall, it was a good start to the fiscal year, as we continue to strive to do more for and with our customers, wherever, whenever and however they express their life interests and travel through their various life stages,” said Steven Temares, CEO of Bed, Bath & Beyond. “At the same time, we continue to make the necessary investments to thrive in an ever-evolving retail environment.”

Bed, Bath & Beyond reported quarterly net income of $158.45 million. This represents a decrease from the same period last year when the company reported net income of $187.05 million.

Bed, Bath & Beyond is struggling as competition from online retailers increasingly cuts into the company’s revenue. To combat this threat, the company has increasingly turned to coupons and promotions to get customers in the door. In addition, the company is buying back stock to buffer earnings per share numbers. However, this strategy is not sustainable. The company will soon need to change strategies. Bed, Bath and Beyond’s future path is still unclear.

Bed Bath & Beyond, Inc. (BBBY) shares ended the week at $71.11, up 0.07% for the week.

Barnes & Noble Reports Quarterly Results

Barnes & Noble (BKS) reported its latest quarterly and annual earnings on Thursday, June 25. The company is still trying to find its niche in a digital world.

The company reported quarterly sales of $1.18 billion and annual sales of $6.07 billion. Both figures represent decreases from the same periods last year. The figures for one year ago put quarterly sales at $1.32 billion and annual sales at $6.38 billion.

“The company is successfully implementing strategic and operating initiatives resulting in the improved performance of each of our business units as we evidenced by our 30% year-over-year consolidated EBITDA,” said Michael P. Huseby, CEO of Barnes & Noble. “We ended 2015 with an improved balance sheet, and also well positioned to move forward with a focus on operations and our customers.”

Barnes & Noble reported a net loss of $19.42 million for the quarter and net income of $36.60 million for the year. These figures represent an improvement over last year. One year ago, the company reported a quarterly net loss of $36.70 million and an annual net loss of $47.27 million.

Two highly anticipated books that will be released in July are Harper Lee’s sequel to “To Kill a Mockingbird,” “Go Set a Watchman,” and Dr. Seuss’s “What Pet Should I Get?” Both are expected to help Barnes & Noble raise annual revenue by 1% this year. That would be the largest increase in seven years.

Barnes & Noble (BKS) shares ended the week at $26.04, down 3.56% for the week.

The Dow started the week of 6/22 at 18,028 and closed at 17,947 on 6/26. The S&P 500 started the week at 2,113 and closed at 2,102. The NASDAQ started the week at 5,148 and closed at 5,081.

Treasuries Fall as Greek Debt Talks Continue

Treasury prices fell and yields rose this week as optimistic investors predicted Greece and its creditors will come to an agreement on Greece’s debt repayment before next week’s deadline. Additionally, news that consumer spending improved last month also caused investors to leave the safe haven of U.S. government bonds.

The leaders of Greece and several European nations continue to negotiate repayment of Greece’s obligations due at the end of this month. Both sides have an incentive to come to an agreement. If Greece defaults it could destabilize an already struggling European Union and cause financial turmoil throughout Europe.

In addition, the U.S. Department of Commerce released a report this week showing that consumer spending rose 0.9% in May from one month earlier. That is the largest rise month-to-month since July to August 2009. Analysts point to an improving labor market, cheaper gasoline prices and the end of winter as the primary reasons for the improvement in household spending.

However, even with this improvement the Federal Reserve continues to worry about weak inflation. The Federal Open Market Committee has set an inflation target of 2% and wants to see movement toward that target before raising interest rates later this year. On Friday, investors saw a 17% likelihood that the Fed would raise rates in September and a 57% likelihood that the rate increase would occur in December. A rate increase will cause bonds currently held to lose value and trade at a discount.

An improving economic picture, optimism with regard to a Greek deal and the possibility of rising interest rates all caused investors to sell bonds this week. As a result, the 10-year U.S. Treasury yield rose to 2.46% in early Friday trading. This is the highest yield since September 2014.

The 10-year Treasury note yield finished the week of 6/22 at 2.48% while the 30-year Treasury note yield finished the week at 3.25%.

Interest Rates Remain Mostly Unchanged

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, June 25. The results were mixed as the 30-year and 15-year average rates moved in opposite directions.

The 30-year fixed rate mortgage averaged 4.02% this week. This was up from last week when it averaged 4.00%.

This week, the 15-year fixed rate mortgage averaged 3.21%. This number was down from last week when it averaged 3.23%.

“Mortgage rates were little changed this week,” said Len Kiefer, Deputy Chief Economist at Freddie Mac. “The rate on 30-year fixed rate mortgages was 4.02%, an increase of just 2 basis points from the previous week. Economic releases confirmed increasing strength in housing. Existing home sales increased 5.1% in May to an annual pace of 5.35 million units and new home sales increased 2.2% to an annual pace of 546,000 units. Buyers appear anxious to purchase homes before the expected increase in interest rates later this year. Given the tight inventory for sale, a 5.1-month supply at the current sales pace, home prices are being bid up."

The money market fund finished the week of 6/22 at 0.3%. The 1-year CD finished at 0.6%.

Published June 26, 2015

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