Dell, Gap, Birkenstock, Foot Locker, Dr Martens, Moderna, Ryanair, Red Bull Leeds – Markets Defused

Proactive Published 30/05/2024

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Markets Defused aims to give an easy-to-understand and straightforward recap of the day’s most engaging business and stock market news.

Dell stock 'sold on the news' as AI sales soar

Dell Inc. (NASDAQ:DELL) stock was down 17%, to $139.57, adding to the earlier 5% decline in ordinary trading hours. Nevertheless, Dell's first-quarter earnings release on the face of it made for very bullish reading.

By almost any metric, it was a very strong first-quarter report card for the laptop, PC and server maker.

But, as the old adage goes, sometimes “it is better to travel than arrive”.

Dell shares were up some 127% in 2024 to date prior to the release, with Wall Street buying interest driven by rampant demand (and hype) around its AI-related businesses.

The share price peaked at $179.21 yesterday, after starting the year below $75.

Today, Dell revealed a 6% improvement in year-over-year revenue for its first quarter, reporting a total of $22.2 billion. That included a doubling of shipments for Dell’s ‘AI-optimized’ servers to $1.7 billion.

At the same time, Dell’s servers and networking unit – which also benefits from booming AI demand – experienced a 42% increase in revenue to $5.5 billion. Though the company noted that the unit’s backlog was up 30% to $3.8 billion.

Dell reported some $955 million of net income, which equates to a 65% improvement year-over-year.

"No company is better positioned than Dell to bring AI to the enterprise," chief operating officer Jeff Clarke said in a statement.

Gap soars as it beats and upgrades

Gap Inc (NYSE:GPS) stock soared more than 20% higher in Thursday’s 'after hours' dealing, adding to the day’s earlier 4% gain, as its first quarter financials smashed Wall Street expectations.

The jeans-n-hoodies retailer reported $3.39 billion of revenue, up 3% year-over-year, and significantly better than the $3.29 billion predicted by Wall Street’s consensus estimates.

Earnings, on a per share basis, was reported at 41 cents – which will have caused some analysts to double-check for a typo, as it compared to a consensus forecast of 14 cents.

All four of Gap’s brands (Old Navy, Gap, Banana Republic, and Athleta) posted growth in comparable sales, bucking the trend of recent years.

Same-store sales were up 3%, versus a 4% decline in the same period last year.

Boosted by the bullish performance, Gap raised its full-year guidance with operating income now expected to grow by a “mid-40s percentage range” rather than previous projections in the “low-to-mid teens”.

Chief executive Richard Dickson talked up Gap’s turnaround. “We gained market share for the 5th consecutive quarter with positive comparable sales at all brands, demonstrating improved relevance with our customers as we execute against our brand reinvigoration playbook,” he said in a statement.

"We are on a journey to become a high-performing house of iconic American brands that shape culture.

In New York, Gap shares were up 23.45% priced at $27.80 in ‘after hours’. Over the past year, Gap stock is up around 170%.

Birkenstock boosted by strong sales

Birkenstock (NYSE:BIRK) shares gained around 12% in Thursday’s dealing, boosted by positive financial results for its second quarter.

Revenue for the three months, ending March 31, amounted to €481 million which was 23% higher than the same period a year ago.

The fashionable German manufacturer of sandals and clogs generated €162.3 million of earnings (adjusted EBITDA), which was comfortably ahead of consensus Wall Street forecasts predicting €145.8 million.

On a per share basis earnings came in at 38 euro cents, also better than the 35 cents forecast by analysts.

Chief executive Oliver Reichert told investors that the strong financials reflected the strength of its business model and the growing demand for the German firm’s footwear.

"We see strong demand growth in the largely untapped white space areas we have identified across geographies, channels, categories and usage occasions,” Reichert said. “At the same time, we continue to see very strong growth in our established markets and products."

Now, thanks to the strong performance, Birkenstock has upgraded its guidance for the full-year.

It now expects to hit €1.77 to €1.78 billion of revenue for the year, nudged up from €1.75 billion. Earnings for the year is meanwhile forecast between €535 million and €545 million, from €520 million and €530 million.

Birkenstock highlighted that it is continuing investments to enhance manufacturing capacity as well as its retail footprint, with the group reacting to the upward demand trend – albeit, at €35 million for the year-to-date the capital spend remains somewhat modest.

In New York, Birkenstock shares were up $6.03 or 12% changing hands at $55.97.

Footlocker beats forecasts as turnaround plan is working

Foot Locker, Inc. (NYSE:FL) stock surged 15% as its first-quarter profit easily exceeded expectations, indicating that the retailer’s “Lace up” turnaround strategy is gaining traction.

Net income for the three-month period was reported at $8 million, versus $36 million a year ago. On a per share basis, earnings (adjusted EBITDA) came in at 22 cents which was much better than the consensus Wall Street forecast of just 12 cents.

It outshone the quarterly revenue number of $1.87 billion which was actually shy of the $1.89 billion that analysts had anticipated.

The financial metrics were good enough for Foot Locker to retain its full-year outlook – envisaging between $1.50 and $1.70 per share of earnings, based on somewhat neutral sales projections (pitched between a 1% decline and 1% growth).

Specifically, management was optimistic about upcoming summer trading and the subsequent ‘back-to-School’ shopping season.

“We are well-positioned with fresh assortments as we approach the summer and Back-to-School seasons,” chief executive Mary Dillon said.

She added: "Through our Lace Up Plan, we are strengthening our brand partnerships, enhancing customer engagement through digital and loyalty investments, and solidifying our position at the intersection of basketball and sneaker culture.

“I remain confident that the Lace Up Plan is positioning the company for sustainable growth and shareholder value creation."

In New York, Foot Locker stock was up $3.33 or 14.79% changing hands at $25.89.

Dr Martens blames weak US demand for sales decline

Dr Martens PLC (LSE:DOCS) ended the day flat, despite reporting disappointing sales numbers for its financial year.

In fact, the iconic boots maker actually spent much of the London trading session on the front foot.

At £877.1 million, turnover was down 12% on the prior year and the was decline was slightly steeper than the 11% drop forecast by City analysts.

Operating profit was down 30% to £122.2 million, beating the forecasted 34% decline, though profit after tax plummeted 46% to £69.2 million.

Chief executive Kenny Wilson blamed the poor results on weak US consumer demand – evidently, looking at Birkenstock’s soaring performance American fashion presently prefers its footwear toes-out.

Dr Martens meanwhile is launching a group-wide cost cutting plan, targeting up to £25 million of savings. It is also now taking a cleaver to the dividend, with the full year payout reduced to 2.55p per share from 5.84p last year.

Wilson warned investors that 2025 would be a “transition year”.

“We are clear that we need to drive demand in the USA to return to growth in FY26 onwards and are executing a detailed plan to achieve this, with refocused and increased USA marketing investment in the year ahead," the Dr Martens boss said in a statement.

At 84p after Thursday’s close, Dr Martens is down 4.9% for 2024 to date and is 45% lower over the past 12 months.

Moderna shares up as investors eye US funding for bird flu trials

Moderna Inc's (NASDAQ:MRNA, ETR:0QF) stock traded higher on Thursday, up 2.4%, amid reports that the US government is close to funding a late-stage trial for an experimental mRNA bird-flu vaccine.

It would be based on the same sort of technology that Moderna used in its COVID-19 vaccine.

The funding, which could total ‘several tens of millions of dollars’, may also include a commitment to purchase vaccine doses if the trial is successful, according to reports across multiple media outlets.

The Biomedical Advanced Research and Development Authority, an office within the U.S. Department of Health and Human Services, is expected to provide the funding.

Meanwhile, dosing is complete for an earlier-stage trial of Moderna's bird-flu vaccine, with data expected soon.

The Center for Disease Control and Prevention recently stated that the risk of bird flu to people in the US remains low, but, it noted that viruses can mutate to spread more easily among humans, potentially leading to a pandemic.

Moderna shares were up $3.57 or 2.41% changing hands at $151.49 – which marks a gain of around 35% for 2024 to date.

Ryanair warns Dublin flight prices will be higher this Christmas

Ryanair (NASDAQ:RYAAY) has warned travellers that it expects higher prices in and out of Dublin airport this winter, amid a row with the Irish authorities.

It comes as Dublin airport is now near its capacity according to historical planning legislation in Ireland, which limits footfall through the airport to 32 million passengers per year.

Ryanair, the Irish headquartered budget airline, claims it would now be unable to operate 1 million seats worth of flights in peak periods – including the Christmas period, St Patrick’s Day and during major sporting events (like the Six Nations Rugby).

Specifically, Ryanair chief executive Eddie Wilson reckoned the cost of single one-way flights between London and Dublin could reach €500 over this year’s Christmas period.

"Prices are going to go through the roof," Wilson said in comments quoted in Irish media outlets.

Wilson has urged Transport Minister Eamon Ryan – who is also leader of Ireland’s Green party - to intervene and increase the passenger cap.

Last year, Dublin airport approached the limit with over 31.9 million passengers, and, now for the ‘winter season’ a passenger cap of 14.4 million has been imposed.

Ryanair claimed it had planned to increase its Dublin passenger numbers by 9% this winter, with additional routes and more flights, but because of the cap it said it only received slots for 6.4 million passengers.

Dublin’s airport operator, DAA, has applied for planning permission to expand capacity to 40 million passengers annually, and, according to reports, it also seeks an interim increase to 35-36 million without adding new infrastructure to the airport.

Leeds United stake acquired by Red Bull

Leeds United has inked a new major partnership with Red Bull, which will be the new main new shirt sponsor and will also be a new investor in the football club.

Unlike its F1 team and the other football clubs in the so-called ‘Red Bull Football Group’ – ‘RB’ Leipzig, FC Red Bull Salzburg, and New York Red Bulls – Leeds United told its supporters that the new team-up with Red Bull will not result in any change to the club’s name or logo.

“I am thrilled that Red Bull is joining us to build a bright future for Leeds United and shares our deep respect for this truly special club,” Leeds chair Paraag Marathe said in a statement.

Under the deal, starting from the upcoming 2024/25 season, Red Bull will be the primary shirt sponsor for Leeds’ mens and womens teams. It will also be the club’s “exclusive energy drink partner”.

In its statement, Leeds United said the deal ‘brings in new commercial revenues as well as additional capital investment for a minority ownership stake that will further enable the club to compete on and off the pitch’.

The size of Red Bull’s equity investment in the club was not disclosed, nor was there detail regarding Leeds' future ties to the Red Bull Football Group.

Leeds United was last year fully acquired by the investment arm of the San Francisco 49ers NFL American football franchise, after the American group took an earlier minority stake in 2018.