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Wednesday January 19, 2022



GameStop Reports Earnings

GameStop Corp. (GME) announced its fourth quarter and full-year earnings on Tuesday, March 23. The largest video game, consumer electronics and gaming merchandise retailer's shares dropped 33.8% following the report's release.

GameStop reported fourth quarter revenue of $2.12 billion, down from $2.19 billion reported at this time last year. For the year, the company reported $5.09 billion in revenue, down from $6.47 billion reported last year.

"I am proud of how our entire organization came together in 2020 to adapt to the challenging pandemic environment, effectively serve our customers' demand for gaming and entertainment products, and navigate through the year with strong liquidity and a strengthened balance sheet," said GameStop CEO George Sherman. "We are off to a strong start in 2021 as February comparable store sales increased 23%, led by continued strength in global hardware sales."

GameStop reported fourth quarter net income of $80.5 million or $1.23 per share, up from $21.0 million or $0.32 per share year-over-year. The company reported yearly net loss of $215.3 million or $3.31 per share, an improvement from a loss of $470.9 million or $5.38 per share last year.

GameStop recently named former Amazon and Google executive Jenna Owens as its new chief operating officer. For the fourth quarter, comparable store sales increased 6.5%, while full-year comparable store sales decreased 9.5%. Global E-Commerce sales increased 175% and represented 34% of net sales for the quarter. For the year, Global E-Commerce sales increased 191% and represented nearly 30% of net sales. GameStop continues to withhold guidance for the year.

GameStop Corp. (GME) shares ended the week at $181.00, down 11.8% for the week.

General Mills Posts Earnings

General Mills, Inc. (GIS) reported its latest quarterly earnings on Wednesday, March 24. The company's revenue and profit both increased from the prior year.

Revenue for the quarter came in at $4.52 billion. This was up 8% from $4.18 billion in revenue at this time last year.

"We continued to execute well and delivered profitable growth in the third quarter," said General Mills Chairman and CEO Jeff Harmening. "We've made good progress on our fiscal 2021 priorities, including competing effectively, fueling investment in our brands and capabilities, and reducing our leverage. With our balance sheet in a strong position, we have resumed share repurchase activity in the fourth quarter."

The company reported net earnings of $595.70 million. This was up 31% from $454.10 million in net earnings last year at this time.

The company's North American retail segment, which includes its popular breakfast cereals such as Cheerios, Cinnamon Toast Crunch and Wheaties, grew revenue 9%, reaching $2.73 billion. General Mills' Pet segment increased revenue 14% to $436 million. The Convenience and Foodservice segment brought in $417 million in revenue, a 10% decrease.

General Mills, Inc. (GIS) shares ended the week at $60.97, up 1.8% for the week.

Adobe Releases Earnings Report

Adobe Inc. (ADBE) reported its latest quarterly earnings on Tuesday, March 23. The company's first quarter revenue and earnings increased from the prior year's quarter.

Revenue came in at $3.91 billion for the quarter. This was up from $3.09 billion last year at this time.

"Adobe drove record Q1 revenue and we are raising our annual targets based on the tremendous opportunity across our business and our continued confidence in our global execution," said Adobe's President and CEO, Shantanu Narayen. "Adobe's Creative Cloud, Document Cloud and Experience Cloud have become mission critical to all customer segments-from students to individuals to large enterprises-across the world."

Adobe reported quarterly net income of $1.26 billion, or $2.61 per share. This was up from $955 million of net income, or $1.96 per share at this time last year.

The San Jose, California-based software company's Digital Media segment grew 32% from the prior year's quarter, reaching $2.86 billion. The Digital Experience segment recorded revenue of $934 million, up 24% from last year. Adobe expects second-quarter revenue to reach $3.72 billion and earnings per share of $2.09.

Adobe Inc. (ADBE) shares ended the week at $469.09, up 5.4% for the week.

The Dow started the week of 3/22 at 32,602 and closed at 33,073 on 3/26. The S&P 500 started the week at 3,916 and closed at 3,975. The NASDAQ started the week at 13,279 and closed at 13,139.

Treasury Yields Rise

Yields on U.S. Treasurys rose Thursday following statements by the Federal Reserve Chair indicating that a stronger economy would eventually lead to scaling back certain government support programs. The Labor Department reported fewer jobless claims, also causing yields to rise.

On Thursday, Federal Reserve Chair Jerome Powell indicated that fiscal policy must eventually be reined in, but not at this present time. Central bank officials have indicated they do not plan to raise interest rates and will continue to purchase $120 billion of Treasury debt each month until the economy and employment are back in full swing.

"As we make substantial further progress toward our goals, we'll gradually roll back the amount of Treasurys and mortgage-backed securities we've bought," said Powell. "There are of course risks to the upside and downside, but it should be a very strong year from a growth standpoint... Longer run we do have to raise revenue to support permanent spending that we want to do."

The 10-year Treasury note opened the week of March 22 at 1.726% and hit a low of 1.594% on Wednesday, March 24. The 30-year Treasury bond yield opened the week at 2.437% and hit a low of 2.289% on Thursday.

First-time unemployment insurance claims fell to 684,000 for the week ending March 20. This is down from 781,000 claims the week before and beat the 735,000 claims economists had expected. Continuing claims were down 264,000 to a total of 3.87 million.

"The claims data can be noisy and we do not want to extrapolate too much signal from just one week of data, but overall it looks like the trend in initial claims has been moving down lately," said economist Daniel Silver of JPMorgan. "This suggests that the labor market has been improving in recent months as the drag from COVID-19 has been reduced, in part due to vaccine distribution."

The 10-year Treasury note yield closed at 1.69% on 3/26, while the 30-year Treasury bond yield was 2.39%.

Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, March 25. Rates continued their recent upward trajectory.

This week, the 30-year fixed rate mortgage averaged 3.17%, up from last week's average of 3.09%. Last year at this time, the 30-year fixed rate mortgage was at 3.50%.

The 15-year fixed rate mortgage averaged 2.45% this week, up from 2.40% last week. During the same time last year, the 15-year fixed rate mortgage averaged 2.92%.

"During the course of the pandemic, 'home' has become more important than ever. As a result, strong purchase demand continues-but buyers also outnumber the sellers," said Freddie Mac's Chief Economist, Sam Khater. "Since January, mortgage rates have increased half a percentage point from historic lows and home prices have risen, leaving potential homebuyers with less purchasing power. Unfortunately, this has disproportionately affected the low end of the market, where supply is the slimmest."

Based on published national averages, the national savings rate was 0.04% on 3/26. The one-year CD finished at 0.14%.

Published March 26, 2021

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