November is off to a strong start for investors. The S&P 500 (SNPINDEX:^GSPC)ended today's trading session at 2,099.2 -- less than a single point away from where it started the day. And the Dow Jones Industrial Average(DJINDICES:^DJI) rose 0.26%. But for the week, stocks logged 1% gains and pushed their October rally into a new month.
The big economic news of the day was a surprisingly strong October jobs report that showed 271,000 jobs created last month as the economy's unemployment rate ticked down to a seven-year low of 5%. Wages also jumped up by 2.5%, which was the biggest improvement since July 2009. While the next few months will determine whether the economy is in an extended growth mode, these data points might help convince Federal Reserve officials to begin raising interest rates at their December monetary policy meeting.
Monster Beverage pops
Energy drink giant Monster Beverage enjoyed a 13.6% stock pop today after the company posted surprisingly strong quarterly results. Sales spiked higher by 19% as profit improved by 54%. Gross profit margin logged an impressive jump eight percentage point jump to 62% of sales, while operating margin improved dramatically as well, rising nine percentage points to 39% of sales.
Diving distribution costs from the company's link-up with beverage king Coca-Cola seem to be producing a fundamentally more profitable business. Distribution expenses plummeted by 22% as a percentage of sales, which helped power Monster's surging profit gains. "We have entered into a number of distribution agreements for various international markets served by the Coca-Cola bottler system, which will be implemented over the following months. In the United States, we are seeing continued improvement in distribution," CEO Rodney Sacks said in a press release.
Management suggested that, as good as things were this quarter, growth could have been even more robust. Sacks said that "uncertainties in portions of our international non-Coca-Cola distribution network limited further revenue growth during the quarter." That statement suggests the next few quarters could bring an acceleration of the positive trends that investors saw recently, assuming management can remove those roadblocks.
Men's Wearhouse crumbles
It turns out that people really liked the idea of purchasing four suits at the same time. Men's Wearhouse stock plummeted by 43.4% today after the clothing retailer pre-announced third quarter earnings results that were swamped by a huge customer traffic dip at its Jos. A. Bank stores.
Comparable-store sales tanked by 15% in those locations due to the end of its "buy-one-get-three-free" sales events. Management last quarter warned investors to expect lumpy results as it transitioned away from that promotion-based business model, but the results were dramatically worse than they had expected. "While we expected top line volatility, we did not anticipate that the impact from the traffic decline would occur to this degree," CEO Doug Ewert said in a press release.
The new traffic trends point to an even more brutal fourth quarter ahead. The company forecast a comparable-store sales drop of as much as 25% at Jos. A. Bank over the holidays. And full-year earnings are now seen coming in at $1.90 per share, compared to the $2.80 per share executives had targeted previously.
It's little consolation that the company will be making more money on each suit sale: Gross margin for the brand will rise by five percentage points, management said. Yet the sharply lower sales number means that total profits will be "well below last year's fourth quarter given the anticipated traffic declines". Simply switching back to the four-for-one sales model wouldn't fix the matter either: Jos. A. Bank comps fell 9% in the second quarter as well.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Monster Beverage. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola, short January 2016 $43 calls on Coca-Cola, and short January 2016 $37 puts on Coca-Cola. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.