What Investors Might Have Missed in the Market Last Week
Last week had a lot of news. Aside from all eyes focusing on Hurrican Irma, concerns again grew about tensions with North Korea and investors grew pessimistic about an interest rate hike by year's end.
When all was said and done, the Dow Jones Industrial Average and S&P 500 declined 0.68% and 0.41% for the week, respectively. Here are some of the big headlines and big movers from the week.
Partnering with Amazon
It's been tough for many brick-and-mortar retailers as Amazon.com (NASDAQ: AMZN) has time after time shown it could enter many markets and quickly make its presence known. Amazon's challenge has forced many retailers to develop successful or at least promising e-commerce strategies in order to be considered quality stocks to own. Kohl's Corporation (NYSE: KSS), while also focusing on e-commerce growth, made an intriguing move last week when it announced a partnership with Amazon that pushed its stock almost 6% higher for the week.
The partnership itself won't help move the needle for Kohl's, at least not yet. But the idea is intriguing and gives investors some hope Kohl's can find a way to work with the e-commerce giant more, rather than compete.
"The Amazon Smart Home Experience" will be available in 10 Kohl's stores in the Los Angeles and Chicago areas beginning in October. The two partners tout the initiative as a first-of-its-kind experience where customers can purchase Amazon devices, accessories, and smart-home devices from Kohl's stores.
Time will tell if this development expands to more stores, or which of the two partners benefits more, but if it enables consumers to see how new smart-home products -- many powered by Alexa -- work, it seems like it can play to Amazon's advantage.
Falling sales
Chances are, you've heard about Barnes & Noble, Inc.'s (NYSE: BKS) struggles as Amazon overwhelmed the bookstore-chain industry with its e-commerce strength. While Barnes & Noble has managed to survive, it took another hit last week. Its stock lost 10% for the week after the company released disappointing first-quarter results.
Starting with the top line, sales during the first quarter declined 6.6% to $853 million, driven by a comparable-store sales decline of 4.9%. And while its loss per share improved over the prior year to a loss of $0.15 per share, it was still short of analysts calling for a slimmer loss of $0.12 per share. The company also reported lower online and Nook sales during the first quarter, partially due to lower promotional activity. Some worry Barnes & Noble will be forced to cut its dividend.
How it's done
Since we stumbled on to a retail theme with this recap, we might as well finish off with an interesting example of a small, yet successful, retailer. Duluth Holdings (NASDAQ: DLTH), a retailer of clothing and gear targeted at tradesmen and women. After the company released second-quarter results, its stock price initially jumped 10% before normalizing throughout the week for a minimal gain -- but its financial results were impressive.
The clothing and gear retailer started almost entirely as a catalog and online retailer before taking its proven products into brick-and-mortar stores. Taking the reverse path to traditional retailers has worked well for the company. During the second quarter its total revenue jumped 31% to $86.2 million and, if you're keeping track, that's the 30th consecutive quarter of year-over-year sales gains.
It's fair to point out that shipping promotions and discounts, which management said pressured gross margins by about 240 basis points, helped boost the top line but adjusted EBITDA still increased 27% compared to the prior year, and earnings per share grew 18% to $0.13 per share, ahead of analysts' projections for $0.10 per share. CEO Stephanie Pugliese explained the growth in customer acquisition, another bright spot: "We drove a 35% increase in new customer acquisition year-over-year, as we continue to invest in our omnichannel model and in growing our brand awareness with our direct marketing efforts and with geographical expansion of our retail stores."
Duluth has so far proven that to survive in retail these days, companies have to think out of the box. So far, starting online then slowly and methodically opening a handful of brick-and-mortar stores, all the while targeting a specific consumer demographic, has worked well.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Duluth Holdings. The Motley Fool has a disclosure policy.