Consumer Discretionary

Amazon’s Margin Growth May Have to Take a Breather

/ / Consumer Discretionary /

The timing of several elements of Amazon’s forward guidance are conspiring to slow the upward trajectory of its margin expansion, Benchmark analyst Daniel Kurnos says in a research note. Management has pointed out several near-term headwinds, including a drop in the useful-life estimate tailwinds for AWS servers, an investment in the buildout of AWS, and incremental investments in a subsidiary’s Project Kuiper mission to get thousands of satellites off the ground in 4Q, the analyst says. The resulting downward margin pressure in the next couple quarters may blunt some prior momentum and put a sharper focus on revenu at a time when the macro environment looks unstable, Kurnos says. Shares slide 10% to $165.63.

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Amazon.com’s Q2 Results Fell Short of Expectations; AI, AWS Trends on Rise, BofA Says

/ / Consumer Discretionary /

Amazon.com (AMZN) reported “mixed” Q2 results versus higher expectations as retail margins failed to exceed by as much as expected, advertising growth slowed, the Amazon Web Services backlog declined and the revenue outlook for retail was “soft,” BofA Securities said in a note Friday. For Q2, the company reported revenue slightly below expectations. Retail revenues fell short due to lower sales per unit, but margins were better than expected due to improved efficiency. Amazon Web Services growth was 19%, surpassing the 17% forecast, and AWS earned $9.3 billion in profit with a 36% margin, higher than the 32% estimate, the analysts said. The midpoint of the company’s Q3 revenue forecast is $154 billion to 158.5 billion, however, Amazon typically exceeds its guidance, so if profits hit the high end of the range, it will grow quarter-over-quarter despite margin pressure from Prime Day and added retail capacity, which is a positive

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Domino’s Pizza Q2 Earnings, Revenue Increases

/ / Consumer Discretionary /

Domino’s Pizza (DPZ) reported fiscal Q2 earnings Thursday of $4.03 per diluted share, up from $3.08 a year earlier. Analysts polled by Capital IQ expected $3.68 per share. Revenue for the quarter ended June 16 was $1.1 billion, compared with $1.02 billion a year earlier. Analysts surveyed by Capital IQ expected $1.1 billion. The pizza chain’s US same-store sales grew 4.8% in fiscal Q2, while international same-store sales, excluding foreign currency impact, grew 2.1%. The company also said it expects to miss its 2024 goal of more than 925 net international stores by 175 to 275 stores due to challenges faced by its master franchisee, Domino’s Pizza Enterprises. Domino’s also suspended its guidance of more than 1,100 global net stores until the full impact of the franchisee’s situation is understood, the company said. Shares of the company were down more than 14% in recent premarket activity.

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Domino’s Pizza Takes On Value Wars

/ / Consumer Discretionary /

Value wars have broken out at McDonald’s, Burger King and other U.S. chains offering discounts on meals to try and lure customers back, but Domino’s Pizza thinks its approach to everyday value “breaks through the sea of sameness.” The world’s largest pizza chain says in a 2Q call that a loyalty program delivering rewards more quickly is paying off with consumers seeking deals, as are promotions through Uber Eats. Domino’s reported a U.S. same-store sales increase of 4.8% for 2Q, and many analysts were hoping the company would report a bigger lift in domestic sales. Domino’s sinks 10% in early trading.

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Domino’s Expects To Fall Short Of International Store Growth Goal

/ / Consumer Discretionary /

Domino’s Pizza expects to fall 175 to 275 stores below its 2024 goal of adding 925+ new stores internationally, primarily because of challenges in both openings and closings faced by one of its master franchisees. The franchisee, Domino’s Pizza Enterprises, is partnering closely with Domino’s to work through the process. Domino’s says it will have more updates once it can get more visibility into the effect these challenges will have on net store growth numbers. For now though, the company says it is temporarily suspending guidance for 1,100+ global net stores until the full effect of DPE’s store opens and closures on international net store growth are known. In the U.S., the company still expects to add 175+ net stores annually for 2024 to 2028. Domino’s falls 12% in premarket trading.

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Domino’s Pizza Continues to Grow Sales as Peers Struggle

/ / Consumer Discretionary /

Domino’s Pizza’s grew revenue by 7.1% in the second quarter even as other restaurant chains struggled. The pizza chain also posted earnings early Thursday that beat Wall Street forecasts because of one-time gains. For the three months ended in June, the company grew earnings by 30.8% from a year ago to $4.03 per share. Analysts polled by FactSet had expected $3.68. Total revenue came at $1.1 billion, slightly below analyst expectations. The earnings gain was primarily due to a change in pretax unrealized gains and losses associated with the company’s investment in DPC Dash, its exclusive franchisee in the China region, according to Domino’s. “For the second straight quarter we drove U.S. comp performance in the healthiest way possible, through profitable order count growth,” said CEO Russell Weiner in a statement, noting that the firm has seen positive order counts in both its delivery and carryout businesses across all income

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Nike’s Corporate Plan Step in Right Direction, but Challenges Mount

/ / Consumer Discretionary /

Nike has named company veteran Thomas Clarke as a senior adviser to CEO John Donahoe, and John Hoke as president of innovation, according to Bloomberg. But there remains an ample amount of wood to chop for this executive team, Jefferies analysts say in a research note. This is a step in the right direction for the sneaker and apparel company, but it will most likely continue to face headwinds as it works to control its current product assortment and wholesale partnerships. This should lead to a pressured topline performance amid increased competition and softer customer reception to new product, the analysts add. Jefferies cuts its target price to $80 from $90 previously. Shares fall 0.2% to $73.28

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Airline Stocks Face Turbulence After Delta’s Profit Tumbles

/ / Consumer Discretionary /

Delta Air Lines shares tumbled 4.9% after its second-quarter profit dove from a year earlier, putting pressure on American Airlines Group, Spirit Airlines and JetBlue AIrways. Shares of Delta were trading around $44.57. American Airlines declined 4.7% to $10.63, while Spirit was down 2.1% at $2.99, and JetBlue edged down 0.9% to $5.67. Delta on Thursday reported second-quarter profit that fell 29% as its U.S. market saw more supply of seats than demand, as well as higher fuel costs at large. The company is the first airline to report second-quarter earnings

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Delta Isn’t Immune to Contagion From the Struggles of Budget Airlines

/ / Consumer Discretionary /

Delta and stronger airlines are starting to see spill over from the problems plaguing carriers in the budget sector of the industry, JP Morgan analysts write. Troubled carriers, including budget airlines and Southwest, are inclined to maximize flying capacity when demand is high to compensate for losses at slower times of year, the analysts write. “Much like a swimmer that has ventured too far from shore, airlines under duress can be sloppy on the pricing front as they flail about for oxygen.” Delta CEO Ed Bastian says he expects to regain pricing power as airlines throttle back flying plans, but other analysts are skeptical cuts will be big enough. “Maybe the industry stares those losses in the face and makes structural changes, but if history repeats itself, the more likely outcome is short-term tweaks in hopes of drastic change,” Melius Research analysts

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Netflix Could Raise Revenue Growth Outlook on Subscriber Additions

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Netflix’s upcoming earnings should come with strong net subscriber additions and monetization initiatives, KeyBanc Capital Markets analysts say in a research note. The streaming giant is priced at a $1 a month premium to competitors following recent U.S. price increases from Max, Peacock and Paramount+, meaning the likelihood of a price increase has improved. Netflix will not likely guide for quantitative net additions, but could raise its annual revenue growth outlook to 14% to 16% from 13% to 15% previously given its first-half net addition momentum, the analysts say. Shares fall 0.4% to $682.79.

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Delta 2Q Revenue Expected to Climb on Steady Demand — Earnings Preview

/ / Consumer Discretionary /

Delta Air Lines is scheduled to report second-quarter results before the market opens Thursday. Here’s what you need to know. PROFIT: The airline is expected to post a profit of $1.57 billion for the quarter that ended last month, down from $1.83 billion in the same quarter a year ago, according to the consensus estimate of six analysts polled by FactSet. EARNINGS: Adjusted earnings, which strip out one-time items, are projected to be $2.37 a share, according to 15 analysts surveyed by FactSet. REVENUE: Revenue is forecast to rise to $15.45 billion from $14.61 billion in the year-ago quarter, according to the estimates of 11 analysts polled by FactSet. Shares slipped 2.7% during the quarter and were recently trading at $46.81.

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