Stocks were pummeled Friday on worries of slowing global economic growth and an inversion of the yield curve, which is considered by some to presage a slowdown. Factory output in Europe fell, as did a gauge of manufacturing activity in the U.S. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) dropped sharply, but are still up 9.3% and 11.7% for the year, respectively.
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The drop in long-term interest rates was bad news for bank stocks; the SPDR S&P Regional Banking ETF (NYSEMKT: KRE) plummeted 4.3%. Defensive utilities had a good day, with the Utilities Select SPDR ETF (NYSEMKT: XLU) rising 0.7%.
As for individual stocks, Nike (NYSE: NKE) and Tiffany (NYSE: TIF) moved in opposite directions after reporting earnings.
Nike gives soft guidance
Nike delivered fiscal third-quarter results that beat profit expectations on strong margin expansion, but guided to slower growth in the current quarter, and shares fell 6.6%. Revenue increased 7% to $6.91 billion, in line with expectations. Earnings per share came in at $0.68, $0.03 above the analyst consensus.
In North America, sales jumped 6.7% with footwear growing 9.4%. Currency headwinds knocked 4 percentage points off the company's revenue growth in the quarter, but excluding that effect, revenue in Europe, the Middle East, and Africa grew 12%, China increased 24%, and Asia-Pacific and Latin America grew 14%. Gross margin expanded 130 basis points to 45.1% after the company said three months ago to expect growth of 70 basis points.
Looking forward, Nike said to expect revenue growth in Q4 to be in the high single digits in constant currency, but in the low single digits in reported terms. Wall Street was expecting 6% growth in reported revenue. Nike officials on the conference call highlighted progress in online sales, which topped $1 billion in the quarter for the first time, and a focus on accelerating sales to women.
Tiffany foresees higher margins ahead
Luxury jeweler Tiffany reported fourth-quarter sales that missed expectations, but posted higher profit due mostly to lower taxes, and shares rose 3.2%. Net sales declined 1% to $1.32 billion, below the $1.34 billion analyst consensus. Earnings per share came in at $1.67 compared with expectations of $1.61.
Sales in the holiday period of November and December were reported earlier, so there were few surprises in today's announcement. In constant currency, comparable sales were flat overall, but up 1% in the Americas. Gross margin fell 10 basis points to 63.8%.
Looking forward, Tiffany expects to continue to have challenges with lower spending by foreign tourists and a stronger dollar. The company guided to low-single-digit growth in sales, and mid-single-digit growth in EPS. Tiffany expects its operating margin to expand this year, and that may have been enough to get the stock moving today.
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