Barnes & Noble Inc. Sinks and Ulta Jumps as Stocks Soar

Indexes posted their best day in months after a strong jobs report made it a near lock that the Federal Reserve will begin raising interest rates in December.

Demitrios Kalogeropoulos
Demitrios Kalogeropoulos
Dec 4, 2015 at 6:38PM
Consumer Goods

Stocks bounced back into rally mode today. After losing nearly 2% yesterday, the S&P 500 (SNPINDEX:^GSPC) gained 2% and the Dow Jones Industrial Average (DJINDICES:^DJI) rose 2.1% to end up in positive territory for the week.

^INX Chart

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Contributing to the optimism was a jobs report that showed steady employment growth: The economy added 200,000 jobs in November as the unemployment rate held at 5%, according to the Department of Labor. Those results make it a near certainty that the Federal Reserve will raise interest rates for the first time in nine years after its monetary policy meeting ends on Dec. 16 .

Meanwhile, Barnes & Noble (NYSE:BKS) and Ulta Salon, Cosmetics & Fragrance (NASDAQ:ULTA) were among the biggest percentage-movers of the day after the retailers posted their third quarter results.

Barnes & Noble's Nook losses
Barnes & Noble shares ended down 17% after having fallen by as much as 22% in trading today. The catalyst for the slump was a disappointing third-quarter earnings report.

Image source: Barnes & Noble.

Revenue in Q3 fell 5% to $895 million as net loss worsened to $0.36 per share, from a $0.16 per share loss last year. Consensus estimates were higher in both cases: Analysts expected to see $920 million of revenue and red ink of $0.31 per share.

Barnes & Noble's Nook business posted accelerating losses as sales shrunk by 32%, compared to a 22% drop last quarter. In a conference call with investors, CEO Ronald Boire said the Nook was hurt by broader problems with the company's e-commerce site, which has suffered from worsening traffic and conversion metrics. But improvements are on the way. "We implemented a significant number of website fixes to increase traffic, improve the overall user experience and stabilize the site," Boire said .

The retailer's core business fared about as well as management expected. The retailing segment logged a 1% rise in comparable store sales on strong demand for popular books like Harper Lee's Go Set a Watchman. Barnes & Noble still aims for comps growth of roughly 1% this year, excluding the large losses from the Nook segment .

Ulta's beautiful earnings
Beauty retailer Ulta's stock jumped 13% to set a new all-time high today after the company posted surprisingly strong third-quarter earnings. Revenue spiked 22% higher thanks to a fast-growing store base and a hefty improvement in comparable-store sales. Comps rose 13%, beating the prior quarter's 11% gain, which indicates positive momentum heading into the holiday shopping season .

Image source: Ulta.

In fact, Ulta clocked a scorching 11% rise in customer traffic in the third quarter, improving on the 7% traffic boost it posted last quarter. "We believe our efforts to build awareness of the Ulta Beauty brand are bringing more guests to discover our differentiated assortment," CEO Mary Dillon said in a press release.

The retailer boosted its 2015 earnings and sales growth guidance for the third straight quarter, saying it now expects to post 9% comps, up from the 7% management had forecast to begin the year. Earnings are also climbing at a faster pace than expected: EPS should grow by over 20%, Ulta said, compared to earlier guidance of a percentage gain in the "mid high teens." This new outlook is a result of Ulta's "position of strength heading into the holiday season," Dillon said.