Wednesday morning proved problematic for the stock market, as investors got word that China had fired another salvo in the budding trade war. Threats to withhold rare-earth metals that are essential to the production processes of key goods made market participants even more jittery about the tensions between the U.S. and China. As of 11:30 a.m. EDT, the Dow Jones Industrial Average (^DJI 1.20%) was down 286 points to 25,062. The S&P 500 (^GSPC 0.89%) fell 26 points to 2,777, and the Nasdaq Composite (^IXIC) was lower by 76 points to 7,531.
Retailers have been on the front lines of the trade war, and earnings from Canada Goose Holdings (GOOS -0.55%) showed some of the impacts of multiple rounds of tariffs and the resulting ire of Chinese consumers. Meanwhile, Occidental Petroleum (OXY 0.85%) is looking to figure out how to sell some of Anadarko Petroleum's (APC) assets following their merger in order to manage the combined company's balance sheet effectively.
Canada Goose issues disappointing outlook
Shares of Canada Goose Holdings plunged 25% after the maker of luxury outerwear reported its fiscal fourth-quarter and full-year financial results. The high-end apparel provider said that revenue jumped in fiscal 2019 by more than 40% from year-earlier levels, with adjusted net income per share climbing at an even faster rate of more than 60%. The company reported solid gains in sales in Canada and the U.S. for the quarter, and even faster growth rates exceeding 60% in its rest of world category.
Yet quarterly results weren't as encouraging. Revenue growth for the fiscal fourth quarter slowed to 25%. Net income rose at an even weaker 11% pace.
Most troublesome was Canada Goose's outlook for fiscal 2020. The luxury retailer predicted that annual revenue growth would be at least 20%, with adjusted earnings per share rising at least 25%. Yet even those growth rates weren't enough to keep everyone satisfied with Canada Goose, as they implied a much more abrupt reduction in strong top-line performance than initially expected.
Even though Canada Goose is a Canadian company, it's suffered along with U.S. retailers in feeling the fallout from tariffs and other trade tensions. Chinese consumers are boycotting certain products in order to support their government's stance, and it's entirely possible that Canada Goose could come to be a symbol that consumers in China will use to show their defiance. That could ruin the company's expansion plans for the region, and that's why investors aren't happy today.
Occidental faces merger challenges
Shares of Anadarko Petroleum and Occidental Petroleum were both down modestly in the broader market's swoon. With Occidental having emerged as the apparent winner in its efforts to purchase Anadarko, it's now up to the oil giant to figure out how to make the merger work financially.
According to the deal's terms, Occidental will need to come up with cash to cover more than three-quarters of the roughly $76-per-share price it offered for Anadarko. To do so, it turned to Warren Buffett for $10 billion in financing, and it's also looking at selling off some of Anadarko's noncore assets so that Occidental can concentrate on the opportunities it has in the Permian Basin.
Yet those attempts to divest assets are running into potential obstacles. One deal involved the sale of certain properties in Africa to Total, but that part of the proposal has gotten criticism from the Algerian government. With almost $9 billion on the line, losing that part of the plan could prove problematic for Occidental.
At this point, no one expects these side issues to jeopardize the acquisition as a whole. However, they could make it harder for Occidental to reap the full rewards it expected when it bid for Anadarko in the first place.