Stocks dipped on Tuesday as the Dow Jones Industrial Average (^DJI 0.40%) ended its 12-day streak of all-time highs and the S&P 500 (^GSPC 1.02%) finished down by less than 0.3%.
Today's stock market
|
Index |
Percentage Change |
Point Change |
|---|---|---|
|
Dow |
(0.12%) |
(25.20) |
|
S&P 500 |
(0.26%) |
(6.11) |
Data source: Yahoo! Finance.
Financial stocks saw heavy trading, but hardly budged as a group, keeping the popular Financial Select Sector SPDR ETF (XLF -0.15%) flat. Meanwhile, the Direxion Daily Gold Miners Bull 3X ETF (NUGT 1.63%) ticked up by less than 1% following yesterday's double-digit loss.
Image source: Getty Images.
As for individual stocks, Target (TGT 0.18%) and NutriSystem (NTRI) both made large moves following their companies' quarterly earnings announcements.
Target abandons its model
Target shares dropped 12% following surprisingly weak fourth-quarter results that were paired with a conservative forecast for the coming year. The retailer's comparable-store sales fell 1.5%, which was at the worse end of the guidance that management issued in January. The decline was comprised of a drop in average spending per guest and generally flat customer traffic.
Image source: Target.
Target did enjoy a 34% spike in digital sales, but that success dragged overall profit margins lower since its in-store purchases carry higher margins. In fact, gross profit margin fell by a full percentage point to 26.9% of sales. Adjusted earnings fell to $1.45 per share, missing consensus estimates by $0.06.
"Our fourth quarter results reflect the impact of rapidly changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores," CEO Brian Cornell said in a press release. Executives are responding to the shift by switching to an entirely new business model that includes doubling down on investments in the e-commerce sales channel while slashing prices at physical locations. The company warned that the changes will pressure sales and profits over the next few years, but ideally will position the retailer for steadier growth from there.
NutriSystem gains market share
NutriSystem shares spiked nearly 19% after the company posted a strong start to the dieting season. Its fourth-quarter sales soared 21% to $108.9 million, outpacing management's late-October forecast that called for revenue of $96.5 million to $101.5 million. Net income also beat the target by more than doubling to $8.9 million, compared to targets of between $6.1 million and $7.5 million. "We exceeded top and bottom-line expectations as NutriSystem continued to expand solutions for those looking to lose weight," CEO Dawn Zier said in a press release. Executives credited new product releases, improved marketing, and enhancements made to the customer experience for generating strong momentum heading into 2017.
Zier and her executive team see more opportunities to expand sales, earnings, and profitability ahead with help from the just-launched South Beach Diet offering. Revenue is projected to be between $630 million and $650 million in 2017, equating to growth of 17% at the midpoint, compared to last year's 18% increase. Adjusted earnings should climb to between $95.8 million and $100.3 million, for a 30% gain at the midpoint over 2016's result. NutriSystem will need to keep up a steady pace of successful product innovations to hit those aggressive targets, but its latest results show that momentum is on the company's side right now.
