The stock market gained ground on Thursday morning, and as we've seen numerous times before, the source of the good news came from the trade front. President Trump made an encouraging comment about the prospects for a resolution to the trade dispute between the U.S. and China, and investors took that as a positive sign. As of 11 a.m. EST, the Dow Jones Industrial Average (^DJI -0.11%) was up 223 points to 28,134. The S&P 500 (^GSPC 0.02%) climbed 26 points to 3,168, and the Nasdaq Composite (^IXIC 0.10%) picked up 66 points to 8,720.
On the earnings front, lululemon athletica (LULU -0.03%) reported its latest quarterly results, and investors weren't entirely happy with what the yoga apparel retailer had to say. Meanwhile, Constellation Brands (STZ -0.04%) decided to renegotiate a proposed sale of some of its brands in the hopes of winning regulatory approval.
Lululemon points downward
Shares of Lululemon Athletica fell 5% after the athleisure retail giant reported its third-quarter financial results. As we've seen with many companies during this earnings season, past performance for the retailer looked strong, but guidance for the near-term future didn't live up to shareholders' expectations.
Image source: Lululemon Athletica.
The numbers at Lululemon during the third quarter showed sustained growth. Revenue jumped 23% on a 16% rise in comparable sales, and adjusted earnings per share were higher by 28% year over year. Lululemon scored good results both in its stores and through its online channel, with comparable-store sales climbing 10% and direct-to-consumer revenue soaring 29% from year-ago levels.
Yet even Lululemon's encouraging guidance for the fourth quarter and full year weren't enough to satisfy investors. Anticipated holiday-quarter sales of $1.315 billion to $1.33 billion fell short of what most of those following the stock had expected. Full-year numbers of $3.895 billion to $3.93 billion in revenue and $4.75 to $4.78 per share in earnings also had some shareholders shaking their heads.
Lululemon has done an excellent job of getting itself back in the game after suffering a devastating blow to its reputation several years ago. However, expectations are now high for the yoga apparel retailer, and declines like this for what has been a high-growth stock over the past year are likely to persist until those expectations become more reasonable.
Constellation revises its Gallo sale
Shares of Constellation Brands were little changed on Thursday morning following reports that the spirits giant had sought to renegotiate terms of its proposed sale of various brands of wine and spirits to privately held E. & J. Gallo Winery. The new deal will be smaller than the original proposal, largely in response to regulatory pressure.
Under the terms of the new proposal, Gallo would pay Constellation about $1.1 billion for a less comprehensive buyout. Taken out of the transaction will be brands of champagne and brandy that raised some competitive concerns with officials at the U.S. Federal Trade Commission. Of the $1.1 billion, $250 million will be based on how certain brands perform during the first two years after the deal closes.
Constellation also agreed that it would make other arrangements to divest some of the assets it had initially planned to sell to Gallo, including the New Zealand-based Nobilo Wine brand. The spirits giant believes that with the sales, it'll be better able to concentrate on its most important avenues for growth.
Even after the changes, it'll still take a while for the deal to get done. Constellation believes that it will be able to close the sale by the end of 2020, but it'll be up to regulators to have the final say on that matter.
