Markets Defused aims to give an easy-to-understand and straightforward recap of the day’s most engaging business and stock market news.
- Lululemon's international sales saved its quarter
- Texas Stock Exchange to launch next year
- Psychedelic stocks hit after FDA snub
- Zara owner strutted higher on strong financials
- WH Smith thanked travel for growth
Lululemon’s international sales saved its first quarter
Lululemon Athletica Inc (NASDAQ:LULU) stock shot around 10% higher in ‘after hours’ trading, up $30.23 to $338.50, after its first-quarter revenue beat Wall Street forecasts.
Stronger international sales offset a slowdown in consumer spending in North America, the Canadian yoga pants maker revealed.
The company, which is a leading brand in the so-called ‘athleisure’ trend, also announced it will conduct a $1 billion increase to its stock repurchase program.
International demand, particularly from China, bolstered Lululemon’s sales whilst flat sales in the Americas and contributed to a 6% increase in year-over-year comparable sales.
Whilst the numbers were better than Wall Street expected nonetheless they represent a slowdown in Lululemon’s run-rate – which was marked ‘double-digit’ percentage in the two prior years.
Lululemon reported $2.21 billion in quarterly net revenue, comfortably above the $2.19 billion predicted by analysts. It achieved improved margins, by 20% to 57.7%, thanks to tighter and leaner inventories.
Gross profit was up 11% for the quarter at $1.3 billion, whilst income from operations rose by 8% to $432.6 million. At the end of the quarter, Lululemon had $1.9 billion of cash and equivalents.
The company upgraded its guidance for the full year, forecasting annual revenue between $10.7 billion to $10.8 billion. It anticipates it will report earnings per share of $14.27 to $14.47 – versus its previous forecast of $14.00 to $14.20.
“Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver for our guests in 2024 and beyond,” chief executive Calvin McDonald said.
Texas Stock Exchange to launch next year
Dallas, Texas, could become a new American financial capital, that is if a new exchange backed by leading institutional investors BlackRock and Citadel Securities proves successful.
Reports claim that the proposed Texas Stock Exchange is set to launch in 2025, and could see its first listings in 2026, following a recent $120 million funding from a group of investors.
The exchange is expected to initially target companies based in Texas, Oklahoma, and southeastern states.
It is proposed to be an electronic exchange, and, according to reports, its scheduled to file for SEC approval later this year.
This would mark an increase in competition amid shifting landscapes in capital markets.
Presently, the traditional home of US equities would be the New York Stock Exchange and Nasdaq whilst ‘premarket’ and ‘afterhours’ trading is increasingly prominent to accommodate investors across continental and international timezones.
A further extension to trading hours was recently mooted.
Market access, liquidity and the regulatory environment will all be factors that will be keenly watched should the Texas Stock Exchange project advance.
Psychedelic stocks hit
Psychedelic medicine stocks were hit on Wednesday after the US Food and Drug Administration (FDA) rejected a MDMA-based treatment for post-traumatic stress disorder (PTSD).
Lykos Therapeutics' MDMA-assisted therapy was not recommended by an FDA advisory panel, with the agency’s advisors taking the view that the benefits do not outweigh the risks of taking MDMA (the active compound in ‘ecstasy’).
It was a blow not just for Lykos, but also the broader psychedelic medicine sector – with shares in companies developing other treatments falling in the morning’s deals.
Mind Medicine Inc. (MNMD), which is developing an LSD-based treatment for generalized anxiety disorder, was down around 10% whilst Compass Pathways (NASDAQ:CMPS) PLC (CMPS), studying psilocybin for depression, fell 13%.
A final FDA decision for Lykos’s MDMA drug is expected later this summer, though experts note that the agency often aligns with the recommendations of its advisors.
Lykos chief executive Amy Emerson said the company was disappointed by the outcome, whilst highlighting an “urgent unmet need” for people suffering with PTSD.
Emerson noted, however, that she appreciated that “he committee faced a challenging and atypical assignment, which was to evaluate a therapeutic approach that combines drug therapy (MDMA) and psychological intervention”
The company’s new drug application to the FDA included the findings of two randomized, double-blind, placebo-controlled Phase 3 studies (MAPP1 and MAPP2) which confirmed he efficacy and safety of MDMA used in combination with psychological intervention including talk therapy provider by a qualified healthcare provider.
“Research has suggested the unique properties of MDMA may act as a catalyst to enhance psychotherapy, the current standard of care, by helping diminish the brain's fear and avoidance responses and extend the window of tolerance of painful emotions and memories, thereby allowing people to access and process painful memories without being overwhelmed,” said Jerry Rosenbaum, a Director of the Center for the Neuroscience of Psychedelics at Massachusetts General Hospital Research Institute.
Amy Emerson, meanwhile, added: “We remain committed to working with the FDA to address outstanding questions so that we may find a path forward to ensure the responsible and careful introduction of MDMA-assisted therapy into the healthcare system, if approved.
“We are grateful to the advocates, clinical trial participants and people living with PTSD who shared their testimony in the open public hearing and through written comments, and will continue to do everything we can to bring this potential new therapeutic option to people living with PTSD."
Zara owner struts higher after showing ‘strong’ financials
Zara owner Inditex (BME:ITX) was boosted on Wednesday, up 3.7% in Madrid trading at €45.57, after reporting a strong performance in its three months ending April.
Inditex posted revenue of €8.2 billion, a 7.1% increase from the same period last year, which at constant currency rates equated to 10.6% sales growth. Profit before tax increased by 11.1% to €1.7 billion.
It comes as the fashion retailer is rolling out a two-year investment campaign to expand its logistics capabilities.
Some €900 million is being invested this year, and, the same amount will be invested next year. At the same time, it plans to increase ‘gross store space’ by 5% between 2024 and 2026.
The fashion retailer, meanwhile, highlighted that its Spring/Summer collections “continue to be very well received by our customers”.
“Inditex continues to see strong growth opportunities,” Inditex said in a statement.
“Our key priorities are to continually improve the fashion proposition, to enhance the customer experience, to increase our focus on sustainability and to preserve the talent and commitment of our people. Prioritising these areas will drive long-term growth.
“To take our business model to the next level and extend our di¡erentiation further we are developing several initiatives in all key areas for the coming years.
Known for its brands such as Zara, Massimo Dutti, and Pull&Bear, the Madrid firm is deemed to be the world's largest listed fashion retailer.
WH Smith thanked travel for growth
WH Smith PLC (LSE:SMWH) continues to see its ‘travel’ business – its shops in airports and train stations – as the main driver, whilst its more traditional high street newsagent stores sees weaker trading.
Sales in the travel-related outlets saw 8% growth in the retails 13 week reporting period ending 1 June.
WH Smith sees itself as a “one stop shop for travel essentials”, and highlighted that it is also expanding its offerings via its ‘Smiths Family Kitchen’ brand which is now present in more than 300 sites.
“The transformation of the business to a one-stop-shop for travel essentials is delivering strong results, increasing average transaction values and returns,” the company said in a statement.
High Street sales were down 4%, however, the company noted, and it added that like-for-like sales in the unit were flat year-over-year.
The company, meanwhile, noted that it ‘opened’ five new Toys’R’Us branded “shops-in-shops” during the period. This diversification has seen “good” early feedback, it added, whilst telling investors it intends to add another 25 such ‘openings’ over the remainder of this year.
“Looking ahead, the group is well positioned as we enter our peak summer trading period. Good trading momentum continues across all three Travel divisions and we are in a strong position to capitalise on substantial growth opportunities across our markets,” the retailer added.
In London, WH Smith shares gained 1.4% on Wednesday.