There was quite a bit of action in the markets this week. The S&P 500 and Nasdaq indexes both snapped three-week winning streaks and ended lower by 0.97% and 2.76%, respectively. The Dow Jones Industrial Average managed to squeak by with a 0.10% gain for the week.
On the bright side, U.S. nonfarm payrolls jumped 178,000 in November as employers hired at a steady pace, and unemployment fell to the lowest level in nine years. U.S. new-vehicle sales also posted a November record -- more on that in a second -- and OPEC decided it would cut production starting in January, which helped oil stocks surge this week. There was enough good news that it was surprising the markets didn't tank in fear of an inevitable interest-rate increase.
With that aside, here are some of the companies that made big headlines or big moves this week.
Black Friday drives auto sales to record high
Heading into November, most industry analysts had predicted that 2016's total new-vehicle sales would fall just short of last year's. It would have been confirmation of what's true: The U.S. auto industry is hitting the ceiling of this cycle.
With help from Black Friday and rising incentives, November shook off three straight monthly sales declines compared to the prior year, and posted a 3.6% gain in sales. In fact, industry sales hit a monthly record of 1.378 million units, which equated to a robust seasonally adjusted annual rate of 17.83 million.
Arguably the biggest winner of the major automakers was General Motors (NYSE:GM), as it posted its largest year-over-year sales gain of the year, totaling 252,644 units. Retail sales moved 7.9% higher and fleet sales jumped 19% -- though it should be noted that GM's fleet sales have remained incredibly low this year – for a total gain of 10% compared to the prior-year's November. Thanks to SUVs and full-size trucks flying off dealership lots, GM's average transaction prices (ATPs) checked in at a healthy $35,767, which is about $4,000 higher than the industry average.
Meanwhile, the arguably biggest loser was also found in Detroit: Fiat Chrysler Automobiles (NYSE:FCAU). Ram Truck brand managed to post a 12% gain during November, but it couldn't carry total sales higher, especially as Jeep posted its third straight monthly decline – and the latter had been a huge bright spot for the automaker over the past couple of years.
Ultimately, FCA's sales actually weren't as bad as they looked on paper. Retail sales, which are healthier than fleet sales, were only down 2% -- which still isn't good, obviously – but its retail sales fell off a cliff, down 42%. That combined for a total 14% decline during November, to 160,827 units.
This eagle is no longer soaring
It's been absolutely hit or miss with clothing retailers this year, and unfortunately for investors, shares of American Eagle Outfitters (NYSE:AEO) did the opposite of soaring, and plunged nearly 12% for the week. The drop was due to the company's third-quarter report, when American Eagle reported a 2.3% sales increase during the third quarter compared to the prior year, and net income of $75.8 million, which was in line with analyst estimates. Earnings per share managed to increase 8%, to $0.41. When adjusted for discontinued operations, that gain was 17%.
The issue wasn't with estimates -- it was the decline in same-store sales and weaker-than-expected holiday estimates. While same-store sales moved 2% higher, which is more than some retailers can say, it wasn't up to estimates, and are only expected to be flat to a slight increase during the fourth-quarter holiday season. Further, management offered guidance of $0.37 to $0.39 for fourth-quarter earnings per share, which was less than the consensus estimate of $0.40 per share.
While clothing retailers won't find a place in my portfolio, thanks to finicky consumer preferences that change at the drop of a dime and increasingly difficult online competition, the company is still going to spend $160 million this year on remodeling projects and new openings.
Sharing the pain
Another retailer suffering this week was Express Inc. (NYSE:EXPR), which dropped more than 21% this week after it posted weak third-quarter results. Express recorded a declining top line with revenue down 7% year over year, to $506.1 million. What's worse was that the revenue decline squeezed its bottom line significantly, with net income down 56%, to $11.6 million, or $0.15 per share. Same-store sales declined 8% year over year, but on the bright side, its e-commerce sales grew 15%, to $96.3 million.
"This progress included refocusing our brand projection and marketing to be more consistent with our core demographic and additional steps taken to drive customer acquisition and retention," Express CEO David Kornberg said in a press release. "Notably, while mall traffic challenges continued to impact our store performance, we achieved a double-digit increase in e-commerce sales."
To top it all off, Express reduced its guidance for the full year. It had previously guided for adjusted net income to reach between $79 million to $90 million, or $1 to $1.14 per share. Now that's expected to be between $62 million to $65 million, or $0.78 to $0.82 per share.
Both American Eagle and Express own respected brands, but like much of the clothing retail industry, they need to find ways to lure consumer foot traffic and adapt to the world of e-commerce. Otherwise, these declines will become the norm.