The major benchmarks rebounded on Tuesday, although declining issues still outnumbered advancing ones. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^SPX) closed slightly higher.
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Energy stocks came back on an increase in crude oil prices, with the Energy Select Sector SPDR ETF (NYSEMKT:XLE) up 0.9%. Consumer discretionary shares also gained; the Consumer Discretionary Select SPDR ETF (NYSEMKT:XLY) rose 0.6%.
As for individual stocks, Arena Pharmaceuticals (NASDAQ:ARNA) made a big move upward on positive drug trial results, and Duluth Trading (NASDAQ:DLTH) slumped after beating sales and profit expectations, but giving weak forward guidance.
Arena Pharmaceuticals investors cheer trial results
Shares of Arena Pharmaceuticals soared 28.7% after the company reported positive phase 2 trial results for its drug candidate treatment for ulcerative colitis, etrasimod. Thirty-three percent of the patients receiving a daily 2 mg dose of the drug achieved clinical remission on a three-component scale, compared with 8.1% for the placebo group.
The trial also showed the drug to be well-tolerated, and no safety concerns emerged. Patients on etrasimod had fewer serious adverse events than did patients on a placebo. Issues that have arisen with similar drugs -- such as cardiac events, liver and pulmonary function impact, and macular edema -- did not present serious concerns in the trial.
"The results of this Phase 2 trial are impressive and demonstrate statistically significant efficacy of orally administered etrasimod, including clinically meaningful improvement in remission, as well as endoscopic improvement in what has been historically referred to as mucosal healing," said William Sandborn, M.D., professor of medicine at the University of California San Diego, in the press release.
The good news for Arena comes after Celgene (NASDAQ:CELG) experienced a setback in its development of a potential rival drug, ozanimod. Celgene's application for ozanimod in multiple sclerosis was rejected by the Food and Drug Administration after the agency said it required additional information to move forward with a full review. That setback may be temporary, but Arena also presented data that indicated that the efficacy of etrasimod may be very competitive with ozanimod, and that had Arena investors cheering today.
Duluth Holdings falls on weak sales outlook
Duluth Holdings announced fourth-quarter results that beat expectations, but gave a disappointing forecast for 2018, and shares fell 10.8%. Sales for the vendor of casual wear and work clothing increased 24.7% to $217.8 million, and earnings per share (excluding the effect of the new tax law) came in at $0.55. Wall Street was expecting earnings of $0.54 on sales of $210 million.
Gross margin decreased 210 basis points to 53.3%, due in part to higher promotions and clearance sales in January. Looking forward, Duluth forecast 2018 sales in the range of $555 million to $575 million, which was below the analyst consensus of $588 million, and EPS in the range of $0.79 to $0.84, also missing the estimate of $0.95.
"Fiscal 2017 was a year of solid growth for the Duluth Trading brand as reflected by more than 25% top-line growth and 23% growth in total new customers," said CEO Stephanie Pugliese. "We opened 15 stores and continued to expand our retail store footprint into the Eastern and Western United States. Net sales in our men's business grew 22% and our women's business grew 37%, exceeding the $100 million milestone and accounting for almost a quarter of our total annual sales."
While many apparel companies are struggling to compensate for declining brick-and-mortar sales by building an online presence, Duluth is taking the opposite approach, augmenting successful web sales with new physical stores. The prediction of 20% growth in revenue in 2018, while still a rate many companies would love to see, marks a deceleration for the retailer, and investors expressed their disappointment today.