Ticketmaster, NatWest, Dell, Gap, Birkenstock, Footlocker, Dr Martens, Salesforce, Royal Mail – Markets Defused

Proactive Published 01/06/2024

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

Ticketmaster owner Live Nation confirms data hack

Ticketmaster owner Live Nation Entertainment Inc (NYSE:LYV) has confirmed a data breach that has compromised the personal details of 560 million of the ticker seller’s customers.

The breach, discovered on May 20, involves a third-party cloud database used by Ticketmaster.

Hacking group ShinyHunters is demanding a $500,000 ransom from Live Nation for the stolen data, which is said to include names, addresses, phone numbers, and partial credit card details of customers.

The breach was revealed when hackers posted an advert for the data on May 27.

In a filing to the US Securities and Exchange Commission, Live Nation acknowledged the unauthorized activity and its ongoing investigation.

Live Nation has not disclosed the exact number of customers affected but said it is working with law enforcement and regulatory authorities to mitigate the risk.

"We continue to evaluate the risks and our remediation efforts are ongoing," the company noted.

Despite the significant scale of the breach, Live Nation is not anticipating a material impact on its overall business operations or financial condition.

NatWest sealed quick-fire share deal ahead of election

NatWest Group PLC (LSE:NWG) got away a quick-fire $1.24 billion share buy-back, before the UK general election stalls deals. The company bought the shares from the UK government, which reduced its shareholding to 22.5% from 26%.

Its shareholding followed the Government’s 2008 bail-out of the banking sector, with the taxpayer at one stage owning 58% of the banking group.

This means that shareholder returns, comprising buybacks and dividends, will now total £2.74 billion for the year.

Importantly, with the general election coming in early the Government’s divestment of its remaining stock, representing 22.5% of Natwest, may potentially stall.

“Generally, we view the progressive elimination of the UK Government's holding as positive for the rating of the shares,” stockbroker Peel Hunt said in a statement.

Peel Hunt rates NatWest as a 'buy', with a 370p price target – compared to today’s closing price of 315p each.

Dell's AI sales are soaring

Dell Inc. (NASDAQ:DELL) stock was down 17.8%, to $139.56, at the end of the week - nevertheless, its 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 Thursday’s quarterly report, peaking above $179 on Wednesday, with Wall Street’s 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.

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 beat expectations and upgraded forecasts

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”.

Birkenstock boosted by strong demand

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."

Footlocker showed 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.

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.

Salesforce plummeted as financials disappoint

Salesforce Inc (NYSE:CRM, ETR:FOO) stock plummeted, down 16% on Wednesday night to $227.53, after its first quarter financial results disappointed compared to market expectations.

Revenue did increase 11% year-over-year, to $9.13 billion, but was shy of the $9.15 billion that Wall Street analyst consensus predicted.

Net income amounted to $1.53 billion, or $1.58 per share, up from $199 million and 20 cents per share a year ago. Analysts had expected Salesforce to report $2.37 per share.

Salesforce said its operating cash flow for the quarter was $6.25 billion, an increase of 39% year-over-year, while free cash flow reached $6.08 billion, up 43% year-over-year.

The stock ended the week with something of a rally, recovering around 7.5%, to end Friday priced at $234.44 having started Monday at $270.

Royal Mail takeover to run regulatory gauntlet

The takeover bid for Royal Mail parent International Distributions Services PLC (LSE:IDS) looks set to run the political and regulatory gauntlet in the UK, as the postal company’s board on Wednesday backed the offer from Daniel Křetínský.

Křetínský, bidding via an ‘EP Group ‘ vehicle, proposes to pay 370p per IDS share which pitches the transaction at a premium of around 73% to the prevailing share price immediately before the initial approach in mid-April.

The announcement from the IDS board, that it had recommended the EP Group bid, comes on the final day deadline under the UK takeover code.

As the deal now progresses it is expected that the deal will go through a phase of regulator diligence, further complicated by the British general election due to take place on 4 July 2024.

Chief among the concerns for regulators and politicians will be the protections for the universal mail provision, a legacy of Royal Mai’s heritage as the national postal service which mandates a number of delivery standards and operational KPIs which, if missed, result in fines from the government.

Additionally, UK Chancellor of the Exchequer Jeremy Hunt has recently warned that the government would also review any transaction from a national security standpoint.

Elon Musk raised $6bn for X AI venture

Elon Musk's AI company, xAI, has successfully raised $6 billion in a Series B funding round, boosting its valuation to $24 billion.

The funding round was backed by investors including Andreessen Horowitz, Sequoia Capital, and Saudi Prince Alwaleed bin Talal.

Proceeds are expected to be used to bring xAI’s initial products to market, as well as develop more advanced infrastructure, and expedite the research and development of future technologies.

Musk, who founded xAI in July last year, on X (formerly called Twitter) said the company’s valuation was $18 billion before the new funding.

xAI has already launched Grok, an AI chatbot with enhanced features available to X Premium subscribers.

The company is also said to be recruiting engineers and researchers to further strengthen its technological capabilities in Palo Alto, San Francisco, and London.