Today's stock market
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Oil dropped sharply over concerns about global output, with futures down 2.9% and the popular Energy Select Sector SPDR ETF (XLE -0.22%) posting a 0.4% decline. Financial stocks took a tumble as well, with the Financial Select Sector SPDR ETF (XLF -0.19%) losing 0.9%, giving up all of its gains for 2017.
Perrigo shares some good news (for a change)
Investors in Perrigo breathed a sigh of relief when Q1 results came in above expectations, sending shares up 7.3%. Adjusted earnings per share came in at $1.05 compared with analysts' average estimate of $0.98. The maker of generic drugs and store-branded over-the-counter medications had seen its stock fall in the last two days in anticipation of the earnings announcement, but shares recovered to last week's level on the good results.
Turmoil at Perrigo has contributed to a stock price decline of 12.5% so far in 2017. In recent months the company announced a restructuring, the resignation of the CFO, replacement of some members of the board of directors, the divestiture of the royalty stream from its multiple sclerosis drug Tysabri (with a resulting writedown of $5.4 billion), and a three-month delay in the reporting of fourth-quarter results. If all that weren't enough, the company revealed in early May that its pricing practices are under investigation by the U.S. Department of Justice Antitrust Division.
Company executives are clearly eager to get investors looking forward. In the press release, CEO John T. Hendrickson said, "I am pleased that our consolidated first quarter 2017 top and bottom line results were consistent with our plan, with our operations continuing to deliver strong cash flow conversion. I continue to anticipate 2017 will be a year of execution to reestablish our foundation, with a projected return to consolidated growth in 2018."
Indeed, first-quarter results may indicate the worst is behind for Perrigo, but investors are not likely to get too excited until they see signs that the restructuring is paying off, growth returns, and the DOJ issue is resolved.
Michael Kors stock continues to be unfashionable
Shares of Michael Kors Holdings plunged 8.5% after the company reported an awful fiscal fourth quarter. The luxury handbag maker's sales declined 11% year over year and Kors posted a loss of $0.17 per share, compared to a gain of $0.98 in the period a year earlier. Retail comparable-store sales declined 14% and wholesale net sales declined 23%. Openings of 159 net new stores over the past year, mostly due to acquisitions in China, kept the top line from looking even worse.
Michael Kors has had to contend with a challenging retail environment that has particularly affected luxury goods, but company officials acknowledged that some of the problems are of its own making. "Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels," said Chairman and CEO John Idol. "In addition, our product and store experience did not sufficiently engage and excite consumers."
After years of challenging results, observers were not expecting much out of the quarter, but Idol made it clear that a turnaround is not coming soon. "Looking ahead, as we expand the fashion innovation in our accessories assortments, right-size our store fleet and elevate our store experience, fiscal 2018 will be a transition year in which we establish a new baseline before returning to long-term growth," he said. The company announced that 100 to 125 full-price retail stores will be closed over the next two years, resulting in charges of $100 million to $125 million.