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Sunday November 29, 2015



Stronger Dollar Hurting Tiffany's

Tiffany & Co. (TIF) announced its third quarter results on Tuesday, November 24. The company reported that U.S. sales fell significantly during the quarter.

The company reported sales during the quarter of $938.2 million, less than the $959.6 million during the same period last year. Comparable store sales in the U.S. fell 6%.

"As expected, the strong U.S. dollar continued to put pressure on our financial results, specifically from the translation of non-U.S. sales into dollars and on foreign tourist spending in the U.S.," said Tiffany & Co. CEO Frederic Cumenal. "However, focusing on what we can control, we're pleased with our progress this year in expanding our store base and introducing and communicating compelling new product designs."

Tiffany & Co. reported a profit during the quarter of $91 million or $0.70 per share. This was lower than $99 million or $0.76 per share reported during the same period last year.

As Tiffany CEO Frederic Cumenal mentioned, a stronger U.S. dollar hurt the company's bottom line. The stronger U.S. dollar had no greater effect than on Tiffany's flagship Fifth Avenue store in Manhattan, which generates 8% of the company's sales. Foreign tourists make up 40% of the Fifth Avenue store's sales and are less likely to purchase jewelry when the dollar is strong. Fortunately, the company's weak performance in the U.S. was offset by strong sales in Europe and Asia.

Tiffany & Co. (TIF) shares closed on Wednesday, November 25 at $80.77.

Cracker Barrel Cooks Up Strong Quarter

Cracker Barrel Old Country Store, Inc. (CBRL) announced its first quarter results on Tuesday, November 24. The Southern-style restaurant and gift shop chain reported strong revenue and income gains during the quarter.

The company reported that revenue increased 2.8% to $702.6 million. Comparable store restaurant sales increased 2.5% during the quarter.

"Thanks to the continued success of our cost reduction initiatives, we were able to deliver strong EPS growth for our shareholders in the first quarter," said Cracker Barrel President and CEO Sandra B. Cochran. "Nevertheless, we believe consumer spending was challenged during the quarter, particularly in October, and that this was reflected in our comparable store traffic and sales. Even in this challenging environment, we believe we have the right menu, marketing, and margin-driving initiatives in place to achieve continued success in fiscal 2016."

Cracker Barrel reported net income of $40.9 million or $1.70 per share. Analysts were expecting earnings per share of $1.59.

Overall, Cracker Barrel's first quarter results surpassed expectations. A better-than-expected profit was an encouraging sign to investors. However, some analysts were concerned by the company's fiscal guidance for the rest of the year, which came in below expectations. It will be up to Cracker Barrel to exceed its released guidance and dispel any doubts that investors and analysts may have going into the rest of the company's fiscal year.

Cracker Barrel Old Country Store, Inc. (CBRL) shares closed on Wednesday, November 25 at $131.00.

Campbell Soup Reports Earnings

Campbell Soup Company (CPB) announced its first quarter results on Tuesday, November 24. The company reported earnings that beat expectations and drove the company's share price to a 16-year high.

The company reported revenue during the quarter of $2.2 billion. Though this was lower than the same period last year, it was in line with forecasts.

"We began fiscal 2016 after successfully implementing a number of changes to align our enterprise structure with our strategy," said Campbell Soup Company's President and CEO Denise Morrison. "Most significant among those changes were the formation of three new divisions with clear portfolio roles and the roll-out of a major cost savings initiative that included streamlining our organization, the launch of an Integrated Global Services organization and initiating zero-based budgeting."

Campbell reported earnings during the quarter of $194 million, less than $240 million during the same period last year. On a per share basis and adjusted for one-time costs, earnings per share were $0.95, better than expectations.

In addition to earnings that beat expectations, Campbell's also released full-year adjusted earnings guidance better than it has previously stated. The company now expects earnings per share to rise between 4% and 7%. The previous guidance was for earnings per share to rise between 3% and 5%.

Campbell Soup Company (CPB) shares closed Wednesday, November 25 at $52.52.

The Dow started the week of 11/23 at 17,824 and closed at 17,813 on Wednesday, 11/25. The S&P 500 started the week at 2,089 and closed at 2,089. The NASDAQ started the week at 5,107 and closed at 5,116.

Two-Year Treasury Yield on the Rise

Yields on the two-year Treasury note reached a five-year high during the week of November 23, shrinking the yield gap with the benchmark 10-year note to the lowest level in nine months. Economic data released this week bolstered chances the Federal Reserve will raise short-term interest rates during its December policy meeting.

During early trading on Wednesday, November 25, the two-year yield was 0.940%. It closed at 0.934% on Tuesday, its highest closing since May 2010. As bond yields rise, prices fall. In contrast, the benchmark 10-year note yield fell to 2.240% during early Wednesday trading. The 10-year yield closed at a three-week low of 2.243% the day before.

Many experts believe the rise in two-year yields, which are sensitive to interest rate policy, reflects widespread expectation that the Federal Reserve will raise rates at its December policy meeting. "A rate hike in December is a go and it looks [like] the bond market has this priced in,'' said Jim Caron, Global Fixed-Income Portfolio Manager at Morgan Stanley Investment Management.

Fed funds futures Wednesday showed that investors and traders believe there is a 78% likelihood that the Federal Reserve will move to raise the benchmark interest rate in December. Nearly a month ago investors and traders saw only a 38% chance the Federal Reserve would raise rates.

Rising 10-year bond prices this week reflected increased investor confidence in the health of the U.S. economy. On Wednesday a report showed durable goods rose by 3% last month, better than expected. Weekly jobless claims also fell last week, a further sign of an improving U.S. economy.

The 10-year Treasury note had a closing yield on Wednesday, 11/25 of 2.23% while the 30-year Treasury note yield was 3.00%.

Little Movement in Interest Rates

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Wednesday, November 25. The report showed interest rates staying relatively unchanged leading up to the Thanksgiving holiday.

The 30-year fixed rate mortgage averaged 3.95% this week. This represents a decrease from last week when it averaged 3.98%. Last year at this time, the 30-year fixed rate mortgage averaged 3.97%.

This week, the 15-year fixed rate mortgage averaged 3.18%, unchanged from last week. The 15-year fixed rate mortgage averaged 3.20% one year ago.

"In a quiet week leading up to the Thanksgiving holiday, the 30-year mortgage rate dipped 2 basis points to 3.95%," said Sean Becketti, Chief Economist at Freddie Mac. "Economic releases over the last week contained no major surprises, and none are expected in the next few days. The year is winding down, and the only remaining market dates of note are December 4—the last employment report of the year—and December 15-16, the long-awaited FOMC meeting."

The money market fund finished Wednesday, 11/25 at 0.3%. The 1-year CD finished at 0.6%.

Published November 27, 2015

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