Please ensure Javascript is enabled for purposes of website accessibility

Stock Market News: SmileDirectClub Fights COVID-19; Lululemon Moves Lower

By Dan Caplinger - Mar 27, 2020 at 10:35AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Wall Street wasn't able to extend its recent upward streak on Friday morning.

The stock market fell sharply on Friday, failing to build on momentum that took many major market benchmarks up 20% or more from their lowest levels. New worries about the coronavirus pandemic surfaced, and the threat of the $2 trillion stimulus bill getting delayed due to procedural voting requirements also raised some worries among investors who had taken the measure's passage for granted. As of 11 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.00%) was down 848 points to 21,704. The S&P 500 (^GSPC 0.19%) fell 88 points to 2,542, and the Nasdaq Composite (^IXIC 0.00%) dropped 267 points to 7,530.

The fight against the coronavirus has been wide-ranging, and SmileDirectClub (SDC -6.57%) announced its intent to join the battle by making a contribution of its own. Meanwhile, lululemon athletica (LULU 0.41%) announced its latest financial results, and despite solid numbers for the most recent quarter, shareholders are nervous about what the rest of 2020 could hold for the yoga apparel retailer.

Making medical professionals smile

Shares of SmileDirectClub were higher by 15% Friday morning, as investors applauded a shift that the company has made in response to the outbreak of COVID-19. Even though the company specializes in dental alignment appliances, SmileDirectClub is trying to bring smiles to medical professionals outside the dental profession.

Purple box with SmileDirectClub logo and slogan.

Image source: SmileDirectClub.

SmileDirectClub has used the 3-D printing capabilities that it typically utilizes to make clear aligners and retainers and redirected it toward the production of medical-grade face shields. Healthcare workers can use the shields to protect themselves against catching COVID-19. A hospital complex in the Idaho capital of Boise will receive SmileDirectClub's first shipment of 1,000 face shields. In addition, the dental specialist is making reusable respirator face masks to help fight shortages in key areas.

The company expects to support healthcare workers throughout the pandemic. SmileDirectClub estimates that it can use 3-D printing to produce up to 7,500 face shields per day, and it's taking orders from healthcare facilities and government entities across the U.S. and Canada. Because its manufacturing facilities are certified by the Food and Drug Administration, SmileDirectClub could also have the ability to make other vital items, including testing supplies.

With millions of people struggling to make ends meet, SmileDirectClub could see a drop in its core dental aligner business. By helping with more immediate needs during the coronavirus crisis, the healthcare company is both doing the right thing now and building goodwill among potential customers in the future.

lululemon heads downward

Elsewhere, shares of lululemon athletica dropped almost 4%. The yoga apparel retailer released its fourth-quarter financial results, but shareholders focused more on what the company didn't say about its immediate prospects.

The numbers for lululemon's holiday quarter were generally good. Sales for the period were up 20% from year-earlier levels, with comparable store sales rising by 9%. Direct-to-consumer revenue jumped an even more impressive 41% year over year. Earnings showed similar growth, rising 23% compared to the adjusted earnings numbers from the fourth quarter of 2018. That capped a strong 2019 for lululemon, which featured 21% revenue gains on a 17% rise in total comparable sales, and 28% growth in adjusted earnings.

Yet because of the impact of the coronavirus pandemic, lululemon chose not to provide any guidance for fiscal 2020. The retailer acknowledged the temporary closures of all locations in North America, Europe, New Zealand, and Malaysia, although it's reopened all but one of its stores in mainland China following the outbreak there.

Investors seem to have some confidence in lululemon's long-term prospects, as the stock's drop is only slightly worse than that of the overall market today. If life returns to normal in the near future, then lululemon will be in a better position than many to take advantage.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$331.70 (0.41%) $1.36
SmileDirectClub, Inc. Stock Quote
SmileDirectClub, Inc.
SDC
$1.99 (-6.57%) $0.14
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,912.44 (0.00%) $0.00
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,305.20 (0.19%) $8.06
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$13,128.05 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.