Despite staging an early rally after yesterday's mixed session, stocks fell on Tuesday as investors digested fresh drama out of Washington, D.C.
First, late yesterday, President Trump blocked Singapore-based Broadcom's $117 billion bid to acquire U.S. rival Qualcomm, citing "credible evidence" that the massive combination -- which would have been the largest tech merger in history -- could present a threat to national security. Shares of Qualcomm fell 5% on the news.
Then, this morning, President Trump ousted Secretary of State Rex Tillerson and revealed plans to nominate CIA Director Mike Pompeo in his place.
All told, both the Dow Jones Industrial Average (^DJI 0.40%) and the S&P 500 (^GSPC 1.02%) closed modestly lower.
Today's stock market
| Index | Percentage Change | Point Change |
|---|---|---|
| Dow | (0.68%) | (171.58) |
| S&P 500 | (0.64%) | (17.71) |
Data source: Yahoo! Finance.
Technology and financials stocks were among the hardest hit today. The Technology Select Sector SPDR Fund (XLK 1.13%) fell 1.2%, while the Fianncial Select Sector SPDR Fund (XLF -0.15%) declined 1.1%.
As for individual stocks, earnings news had shares of both Dick's Sporting Goods (DKS 1.43%) and DSW (DBI 3.54%) on the move.
Image source: Getty Images.
Dick's Sporting Goods misses the mark
After falling as much as 9.3% in early trading after posting disappointing fourth-quarter results, shares of Dick's Sporting Goods recovered by the end of the day to close up 1%. So what caused all the volatility?
On one hand, net sales for Dick's quarter ended Feb. 3, 2018, climbed a modest 7.3% year over year to $2.66 billion -- below Wall Street's expectations for $2.73 billion. But the gain was driven primarily by an extra week in the quarter as compared to the same year-ago period; on a comparable 13-week basis, Dick's same-store sales declined 2%, which was technically in line with management's guidance for a low-single-digit decrease.
On the other hand, that translated to adjusted net income of $127.3 million, or $1.22 per share, near the high end of guidance and $0.02 per share ahead of analysts' expectations.
Dick's Chairman and CEO Edward Stack noted the company managed to deliver results in line with its expectations despite today's competitive retail environment. He also noted that while margins "remained under pressure," Dick's declining profitability was less severe than expected.
What's more, for the full 2018 year, Dick's expects earnings per share of $2.80 to $3.00, assuming a flat to low-single-digit decline in same-store sales. Investors were expecting full-year 2018 earnings slightly below the lower end of that range.
It was no surprise to see the market react negatively to Dick's slight top-line shortfall to end the year. But given its outsized profitability and encouraging guidance for the year ahead, it was equally unsurprising to see the stock recover as the day wore on.
DSW hits the ground running
Shares of DSW climbed 10.7% today after the company announced strong fourth-quarter results, punctuated by a shift in strategy by the footwear retailer.
Sales in DSW's latest quarter climbed 6.7% year over year to $720 million, including 1.3% comparable-sales growth. That translated to 90% growth in adjusted net income to $30.5 million, or $0.38 per share. Analysts, on average, were only expecting earnings of $0.27 per share on higher revenue of $728.2 million.
But DSW also announced that after a comprehensive review of strategic alternatives for its Ebuys e-commerce division, it had made the decision to exit the business entirely. For perspective, DSW acquired Ebuys, the parent company of ShoeMetro and ApparelSave, for $62.5 million almost exactly two years ago. Since then, however, Ebuys has proven more of a burden to maintain.
"The challenge of sourcing the right merchandise in a sustainable way, and the requirements to scale the business entail unnacceptable economics in the near term," explained DSW CFO Jared Poff during the subsequent conference call.
As such, for the full 2018 year, DSW expects revenue to decline 1% to 3% year over year as reported. After adjusting for the impact of exiting Ebuys and one less week in the year, however, revenue is expected to climb 2% to 4% this year -- comfortably ahead of the 1.3% investors were anticipating.
