Foot Locker's revival sparks 30% surge / Deep Dive: Dollar General Q1 rises on grocery demand / Best Buy up 10% despite sales slump

Plus, American Eagle's profit surges, sales slow

Inside Business For May 30, 2024

Here’s your daily business briefing. 👟 Foot Locker's revival sparks 30% surge 🛒 Deep Dive: Dollar General Q1 rises on grocery demand 💻 Best Buy up 10% despite sales slump Thanks for reading! Shriram p/Shriram

1 Foot Locker's ($FL) turnaround efforts are yielding positive results, with better-than-expected comparable sales in Q1, showing a decline of 1.8% compared to analyst predictions of a 3.1% drop. This success prompted a 30% surge in Foot Locker's shares during early Thursday trading. More: Adjusted earnings per share reached $0.22, surpassing the expected $0.12, while revenue matched expectations at $1.88B. Foot Locker reported a net income of $8M, or $0.09 per share, for the quarter ending May 4, down from $36M, or $0.38 per share, in the same period last year. CEO Mary Dillon's turnaround strategy involves renovating stores, improving rewards programs, and bolstering partnerships with brands like Nike. Foot Locker anticipates adjusted earnings per share for the full year to range from $1.50 to $1.70, exceeding projections. The company expects comparable sales to grow between 1% and 3%, surpassing analyst forecasts. Zoom Out: In April, the retailer introduced its "store of the future," a revamped Foot Locker format serving as a blueprint for its store renovations.

2 What the numbers say: Dollar General's same-store sales rose 2.4% in the first quarter, surpassing analysts' estimates, with per-share profit at $1.65 beating expectations. Despite a 12.6% increase in visits, the gross profit margin fell from 31.6% to 30.2%. Relevance:  Dollar General's ($DLTR) strong performance, driven by consumer demand for affordable essentials amid inflation, highlights its competitive edge over Walmart, Target, and Temu. The results indicate U.S. shoppers' resilience and preference for value-driven options despite economic pressures. More data: Dollar General's focus on relevant merchandise, increased staffing, and expanding private-label brands have driven strong customer traffic and market share gains. The company reaffirmed its annual sales and profit forecast despite decreased gross profit margins due to higher markdowns and retail shrinkage.

3 Best Buy ($BBY) fell short of Wall Street's quarterly sales expectations but recorded increased profits and reduced costs, leading to a surge of around 10% in its shares during early trading. Adjusted earnings per share for Q1 reached $1.20, exceeding the expected $1.08, while Q1 revenue totaled $8.85B, slightly below the anticipated $8.96B. More: The company forecasts full-year revenue between $41.3B and $42.6B, with comparable sales expected to range from flat to a 3% decline. Net income for Q1 increased marginally to $246M, or $1.13 per share, compared to $244M, or $1.11 per share, in the previous year. Best Buy faces sluggish sales as softer demand for consumer electronics persists amid ongoing challenges such as inflation and high mortgage rates. The company prioritizes cost-cutting through layoffs and store closures while investing in newer ventures, such as its subscription-based membership program.

4 American Eagle's ($AEO) fiscal first-quarter sales fall short of expectations, but the company experiences a notable surge in profitability, with a 6% YoY increase in revenue to a record high. The company's net income for the quarter ending May 4 nearly quadrupled to $67.8M, or $0.34 cents per share, from $18.5M, or $0.09 per share, in the previous year. More: The apparel company's earnings per share reached $0.34, exceeding the expected $0.28, while revenue amounted to $1.14B, slightly below the anticipated $1.15B. Shares fall approximately 5% in extended trading. Jennifer Foyle of American Eagle highlighted growth in women's apparel, targeting wider age demographics and capturing the social casual dressing trend. American Eagle is revamping its product assortment by removing unpopular items and emphasizing successful categories. Second-half operating income: $445-465M with up to 4% revenue growth; current quarter: $95-100M operating income with high single-digit revenue growth. American Eagle targets 3-5% annual sales growth over the next three years and aims for an operating margin of around 10%.

5 Amazon is integrating Grubhub into its U.S. shopping app and website, offering Prime members direct ordering and a free Grubhub+ membership. This partnership, established in 2022, gave Prime members no-fee access to Grubhub and secured Amazon a 2% stake in the company. More: The agreement extends the annual incentive to loyal Prime members and combines Grubhub membership with Prime. A U.S. Prime membership costs $139 annually, including free delivery, gaming perks, and access to services like Prime Video and Prime Music. Just Eat Takeaway, Grubhub's parent company, disclosed that Amazon holds warrants for 4% of Grubhub's equity, with potential for more based on performance. In 2023, about 71% of U.S. users subscribed to Amazon Prime, totaling roughly 167 million customers, according to Statista.

6 China plans to invest $845M (6 billion yuan) in next-generation EV battery technology, focusing on all-solid-state batteries (ASSBs). Despite their high cost and production challenges, leading companies like CATL, BYD, and Geely will receive government support for developing these safer, more powerful batteries. More: The investment announcement coincides with strained trade relations with the West, marked by new tariffs from the Biden administration on Chinese EVs and batteries. China's EV shipments to Europe are anticipated to be impacted by the European Commission's anticipated tariff announcement. Beijing is investing to increase the manufacturing of EVs to combat economic stagnation and advance the low-carbon economy. Global automakers and tech companies like Toyota, Samsung SDI, and Volkswagen aim to introduce all-solid-state batteries (ASSBs) by 2026-2027.

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Shriram Jeevakumar Freelance Writer Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. This newsletter was edited by Shriram Jeevakumar

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