>>> US Research Calls I

Research Calls I
  • Upgrades:
    • Arm Holdings plc (ARM) upgraded to Outperform from Neutral at Daiwa Securities; tgt $130
    • Ashland (ASH) upgraded to Neutral from Underweight at JP Morgan; tgt lowered to $89
    • Banco Macro (BMA) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $62
    • Ceva (CEVA) upgraded to Buy from Neutral at ROTH MKM; tgt raised to $25
    • Editas Medicine (EDIT) upgraded to Buy from Neutral at BofA Securities; tgt raised to $15
    • Equinor (EQNR) upgraded to Neutral from Sell at UBS
    • Fortinet (FTNT) upgraded to Hold from Sell at DZ Bank; tgt $65
    • Grupo Financiero Galicia (GGAL) upgraded to Buy from Underperform at BofA Securities; tgt raised to $36
    • Grupo Supervielle (SUPV) upgraded to Neutral from Underperform at BofA Securities; tgt $7
    • HubSpot (HUBS) upgraded to Sector Weight from Underweight at KeyBanc Capital Markets
    • Klaviyo (KVYO) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $33
    • Lattice Semi (LSCC) upgraded to Outperform from Mkt Perform at Raymond James; tgt $50
    • Nevro (NVRO) upgraded to Peer Perform from Underperform at Wolfe Research
    • Vornado Rlty Trust (VNO) upgraded to Neutral from Underweight at Piper Sandler; tgt raised to $30
    • Vornado Rlty Trust (VNO) upgraded to Outperform from Market Perform at BMO Capital Markets; tgt raised to $40
    • Wolverine (WWW) upgraded to Overweight from Sector Weight at KeyBanc Capital Markets; tgt $20
  • Downgrades:
    • BP (BP) downgraded to Hold from Buy at HSBC Securities
    • Bumble Inc. (BMBL) downgraded to Underperform from Buy at BofA Securities; tgt lowered to $5.50
    • Bumble Inc. (BMBL) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $8
    • Bumble Inc. (BMBL) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $7
    • Bumble Inc. (BMBL) downgraded to Hold from Buy at Stifel; tgt lowered to $6.50
    • Bumble Inc. (BMBL) downgraded to Neutral from Buy at BTIG Research
    • Celsius (CELH) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $32
    • Charles River (CRL) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $205
    • Charles River (CRL) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $191
    • Compania Cervecerias Unidas (CCU) downgraded to Underweight from Overweight at JP Morgan; tgt lowered to $10
    • Dine Brands (DIN) downgraded to Hold from Buy at The Benchmark Company
    • Envista (NVST) downgraded to Neutral from Overweight at JP Morgan; tgt lowered to $16
    • Fastly (FSLY) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $6
    • Fortrea (FTRE) downgraded to In-line from Outperform at Evercore ISI; tgt lowered to $27
    • Hudson Pacific Properties (HPP) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $6
    • Hudson Pacific Properties (HPP) downgraded to Market Perform from Outperform at BMO Capital Markets; tgt lowered to $6
    • Intel (INTC) downgraded to Neutral from Outperform at Mizuho; tgt lowered to $22
    • International Money Express (IMXI) downgraded to Neutral from Buy at BTIG Research
    • JFrog (FROG) downgraded to Perform from Outperform at Oppenheimer
    • Louisiana-Pacific (LPX) downgraded to Market Perform from Outperform at BMO Capital Markets; tgt $99
    • Outset Medical (OM) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $3
    • PetIQ (PETQ) downgraded to Hold from Buy at Truist; tgt raised to $31
    • Schneider National (SNDR) downgraded to Hold from Buy at Stifel; tgt $25
    • SmartRent (SMRT) downgraded to Neutral from Overweight at Cantor Fitzgerald; tgt lowered to $2
    • Textron (TXT) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt $95
    • Topgolf Callaway Brands (MODG) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $13
    • Topgolf Callaway Brands (MODG) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
    • United Parks & Resorts Inc. (PRKS) downgraded to Neutral from Buy at Goldman; tgt lowered to $53
    • Vestis (VSTS) downgraded to Neutral from Outperform at Robert W. Baird; tgt $13
    • Walt Disney (DIS) downgraded to Neutral from Buy at Seaport Research Partners
  • Others:
    • Constellation Energy (CEG) initiated with an Overweight at Barclays; tgt $211
    • Olin (OLN) initiated with a Neutral at Mizuho; tgt $45
    • Pyxis Oncology (PYXS) initiated with a Buy at Stifel; tgt $10
    • Stride (LRN) initiated with a Buy at Canaccord Genuity; tgt $94
    • Tandem Diabetes Care (TNDM) initiated with a Buy at Canaccord Genuity; tgt $57
    • Udemy (UDMY) initiated with a Buy at Canaccord Genuity; tgt $12
    • Westlake Corporation (WLK) initiated with an Outperform at Mizuho; tgt $170

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • HROW +38.7%, ASPN +22.4%, CMPO +19%, KVYO +18.3%, APPS +16.9%, VSAT +15.2%, FLNC +14%, ZG +13.6%, GNSS +11.3%, TALO +11.1%, LAMR +10.5%, FWRD +9.6%, BOOT +8.9%, HUBS +8.3%, YETI +8%, SVCO +7.8%, CPRX +7.8%, CW +7.8%, AZEK +7.5%, NL +6.9%, SBGI +6.8%, BLBD +6.3%, CXW +6%, IONQ +5.6%, METC +5.6%, CRH +5.6%, LESL +5.1%, HG +5%, MTUS +5%, MKSI +5%, AOSL +4.9%, AMRX +4.8%, JXN +4.8%, JOBY +4.7%, SM +4.4%, DUOL +4.1%, GNK +3.6%, WAY +3.6%, KLIC +3.5%, VTLE +3.4%, SPCE +3.4%, MRVI +3.1%, RAMP +3.1%, TK +3%, CF +3%, ICUI +3%, ABL +2.8%, BBDC +2.5%, STKL +2.5%, OPK +2.3%, DBRG +2.3%, OBDE +2.2%, TFPM +2.2%, BLND +1.9%, APP +1.9%, STAA +1.8%, ODD +1.8%, CACI +1.8%, NUVL +1.8%, INSE +1.7%, PBH +1.6%, PRMW +1.6%, MUX +1.4%, NOK +1.3%, SITM +1.2%, FUN +1.2%, OXY +1.1%, DLB +1.1%, HOOD +1.1%, MFC +1%
  • Gapping down:
    • CDLX -51.3%, OM -46.5%, BMBL -40.1%, FROG -26.6%, FSLY -22.5%, MTW -21.2%, BROS -21%, PGEN -18.8%, SONO -16.5%, HPP -16.2%, MGNI -12.5%, SEDG -12.5%, WBD -12.3%, RYN -10.1%, BLNK -9.9%, BRCC -9.8%, SRPT -8.7%, MNST -8.3%, PACB -7.8%, ELAN -7.1%, MCK -7%, CLNE -7%, UPWK -6.8%, NVST -6.6%, AGO -5.6%, ROOT -5.6%, CORZ -5.4%, KAR -5%, ASLE -4.9%, KIND -4.4%, BHF -3.9%, MIRM -3.7%, EQX -3.5%, MQ -3.2%, GDRX -2.9%, GH -2.8%, EGHT -2.7%, UHAL -2.6%, CDE -2.5%, QSR -2.5%, CPA -2.4%, JAMF -2%, PRGS -1.9%, MUR -1.9%, GBIO -1.8%, RVMD -1.8%, MODG -1.8%, ALLO -1.6%, MRO -1.6%, RGLD -1.6%, COMM -1.4%, OBDC -1.1%, ENS -1.1%

>>> Eli Lilly beats by $1.19, beats on revs, worldwide Mounjaro sales up 216%; s

Eli Lilly beats by $1.19, beats on revs, worldwide Mounjaro sales up 216%; significantly increases FY24 EPS and revenue guidance (772.14)
  • Reports Q2 (Jun) earnings of $3.92 per share, excluding non-recurring items, $1.19 better than the FactSet Consensus of $2.73; revenues rose 36.0% year/year to $11.3 bln vs the $9.96 bln FactSet Consensus.
  • The revenue increase was driven by a 27% increase in volume and a 10% increase due to higher realized prices, partially offset by a 1% decrease from the unfavorable impact of foreign exchange rates. The volume increase was primarily driven by growth from Mounjaro, Zepbound, Verzenio, Taltz and Jardiance, partially offset by the sale of rights for Baqsimi in Q2 2023 and declines in Trulicity.
  • Worldwide Mounjaro revenue was $3.09 billion compared with $979.7 million in Q2 2023. U.S. revenue was $2.41 billion compared with $915.7 million in Q2 2023, reflecting continued strong demand, improved channel dynamics, and higher realized prices due to savings card dynamics.
  • U.S. Zepbound revenue was $1.24 billion. Zepbound launched in the U.S. for the treatment of adult patients with obesity or overweight with weight-related comorbidities in November 2023.
  • Worldwide Trulicity revenue decreased 31% compared with Q2 2023 to $1.25 billion. U.S. revenue decreased 36% to $876.7 million, driven by decreased sales volume primarily due to competitive dynamics and supply constraints, partially offset by improved wholesaler stocking levels on certain doses
  • Co raises guidance for FY24, sees EPS of $16.10-$16.60, excluding non-recurring items, vs. prior guidance of $13.50-$14.00, above the $13.68 FactSet Consensus; sees FY24 revs of $45.4-$46.6 bln vs. prior guidance of $42.4-$43.6 bln, above the $42.93 bln FactSet Consensus.

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:
  • HROW +37.6%, ASPN +25.7%, CRNC +20.3%, KVYO +19.2%, APPS +16.3%, FWRD +15.2%, ZG +12.6% (also promotes COO Jeremy Wacksman to be its new CEO), FLNC +12.4%, COMM +12.2%, TALO +11.1%, XMTR +10.9%, LAMR +10.5%, LLY +10.4%, AOSL +9.7%, BOOT +8.9%, WAY +8.8%, LESL +8.3%, YETI +8%, SVCO +7.8%, UAA +7.6%, JXN +7.4%, SN +7.1%, FOLD +7%, IONQ +6.9%, SBGI +6.8%, WRBY +6.7%, PH +6.5%, VSAT +6.4%, HUBS +6.4%, CRH +6%, STKL +5.9%, AZEK +5.9%, MKSI +5.7%, CXW +5.6%, CLNE +5.4%, ICUI +5.3%, VITL +5.3%, DUOL +4.8%, METC +4.7%, CPRX +4.7%, ROIV +4.7%, BN +4.6%, SM +4.4%, CYBR +4.3%, PENN +4%, BITF +4%, HBI +3.8%, DDOG +3.7%, GNK +3.6%, VTRS +3.6%, KLIC +3.5% (also announces thermo-compression adoption & milestones), VTLE +3.4%, DCBO +3.4%, JOBY +3.3%, SPCE +3.2%, MUR +3.2%, MRVI +3.1%, ET +3.1%, RAMP +3.1%, CF +3%, PAR +2.9%, BBDC +2.8%, HOOD +2.7%, TKO +2.7%, VRNA +2.4%, OPK +2.3%, DBRG +2.3%, USFD +2.3%, CEIX +2.3%, LQDT +2.3%, CPAY +2.1%, RXRX +2%, MFC +1.8%, STAA +1.8%, ODD +1.8%, CW +1.8%, CACI +1.8%, NUVL +1.8%, NVMI +1.8%, FUN +1.7%, APP +1.6%, PBH +1.6%, NRG +1.6%, AXGN +1.6%, NTR +1.5% (also names new CFO), MODG +1.5%, MUX +1.4%, DNUT +1.3%, SITM +1.2%, WPM +1.2%, WPM +1.2%, SEE +1.2%, OXY +1.1%, DLB +1.1%, RDNT +1.1%, VST +1.1%
Other news:
  • APLS +24.4% (Apellis and Sobi announce positive topline results from Phase 3 VALIANT study of pegcetacoplan in C3G and Primary IC-MPGN)
  • CMPO +24.2% (Resolute Holdings to acquire majority interest in CompoSecure)
  • GNSS +17.6% (signs deal with Puerto Rico to implement its Emergency Warning System across 37 dams)
  • HG +8.6% (authorizes new $150 mln share repurchase program)
  • NL +6.9% (declares a special dividend of $0.08/sh)
  • AMRX +5.9% (FDA approves CREXONT for Parkinson's disease)
  • ALDX +5.8% (announces the achievement of the primary endpoint in a Phase 3 randomized, double-masked, vehicle-controlled dry eye chamber clinical trial of 0.25% reproxalap ophthalmic solution)
  • MTUS +5% (receives $3.5 mln in grants from JobsOhio)
  • TK +3% (CFO to step down; CEO to take on the added role of Teekay Tankers' President and CEO)
  • ABL +2.7% (to acquire FCF Advisors)
  • OBDE +2.2% (OBDC and ODBE to merge, with OBDC as the surviving co)
  • TFPM +2.2% (to acquire 3% gold streams; also increases dividend)
  • BLND +1.9% (names new CEO, names new Chairman)
  • INSE +1.7% (new strategic partnership with Mecca Bingo)
  • CNP +1.4% (prices offering of 9,754,194 shares of common stock at $25.63 per share)
Analyst comments:
  • LSCC +1.7% (upgraded to Outperform from Mkt Perform at Raymond James)
  • EQNR +1.2% (upgraded to Neutral from Sell at UBS)
  • ARM +1.1% (upgraded to Outperform from Neutral at Daiwa Securities)
  • ASH +1% (upgraded to Neutral from Underweight at JP Morgan)

TechCrunch : Anduril raises $1.5B at a $14B valuation

Anduril raises $1.5B at a $14B valuation

Defense tech startup Anduril has closed what will almost certainly end up being one of the largest funding rounds of the year: a $1.5 billion deal that values the company at $14 billion.

Anduril has ambitions of becoming the next great American defense contractor, joining a class of companies that has shrunk to just five major firms: Lockheed Martin, RTX, Northrop Grumman, Boeing, and General Dynamics. These companies pull in billions in revenue from business with the U.S. Department of Defense, and their stranglehold on defense production is nearly absolute.

But the Palmer Luckey-founded defense startup is looking to become a serious rival to these longstanding kingpins, and it’s recent wins have started to draw notice. Earlier this year, the company beat out Lockheed, Northrop and Boeing in a program to develop and test small unmanned fighter jet prototypes. Anduril is also betting that it can have an edge in contracts simply by moving faster than its competitors: bringing a Silicon Valley mentality to defense production, which moves notoriously slowly.

This latest round is a massive step up from Anduril’s prior $8.5 billion valuation set in December 2022. The company reportedly told investors that it had doubled revenue to around $500 million last year, which would mean the current valuation is set at a 28 times multiple. This is high by many standards for late-stage startups, but especially so for traditional defense companies: Lockheed Martin’s revenue multiple is about 1.9x, based on its current valuation and last year’s revenues, while Boeing’s is 1.3x. Albeit those lower multiples are on revenues that are billions of dollars higher: Lockheed Martin brought in $18.9 billion in 2023, it reported, and Boeing’s revenues were nearly $78 billion for 2023, it reported.

Anduril’s new funding round was co-led by Founders Fund, which led Anduril’s seed round in August 217 and its Series A, and Sands Capital, which has participated in multiple IPOs since Visa’s public offering in 2008. Founders Fund’s participation is hardly a surprise, though, given the firm’s longstanding bet on Anduril. The company’s co-founder and executive chairman, Trae Stephens, is also a Founders Fund partner. The round also saw new participation from some major institutional investors, like Fidelity Management and Research Company, and Baillie Gifford.

The company said in a statement that the new funding will help scale a new software-defined manufacturing platform called “Arsenal,” starting with the Arsenal-1 factory. That facility will increase Anduril’s production space by over five million square feet in order to manufacture “tens of thousands of autonomous military systems” per year, with a workforce of more than 1,500 people.

A separate manifesto outlines Anduril’s rationale for scaling manufacturing specifically. The company’s aim is to “hyper-scale” defense production, and to produce defense systems at a scale that is not currently possible for exquisite military systems. But Anduril is not focused on making a few very expensive, exquisite systems; it’s focused on producing many times more cheaper products, which can be hyper-scaled with a rebooted factory. Arsenal is meant to be exactly that: an adaptable, replicable model that “scales indefinitely and makes it possible to rebuild the arsenal of democracy.”

Not only that: Anduril says the centrality of software will also make the factory even more efficient over time, with the Arsenal Operating System facilitating faster, cheaper manufacturing. This will no doubt have an effect on the products themselves, which Anduril says will be developed to be less dependent upon highly-specialized labor, it can help maximize the use of readily available components, and make iterative changes to products quickly.

The seven-year-old company’s success with the government and private investors has helped spur a boom of interest in defense tech, a sector that had been previously thought of as nearly un-investable due to the long timelines in government contracting. However, it’s unclear if Anduril’s rising tide will truly lift all boats, or if Anduril will be (as is so often the case in Silicon Valley) the exception, not the rule.

WSJ : Office Loans Are Toxic. Apartment Loans Could End Up Worse.

Office Loans Are Toxic. Apartment Loans Could End Up Worse.
Distress rates are rising for a type of loan that apartment flippers feasted on during the pandemic

“Survive until 25” has become a mantra for landlords who are hanging onto buildings by their fingernails and praying for rate cuts soon. While it is well understood that many offices are a lost cause, apartment loans are in surprisingly bad shape, too.

More than $40 billion of office loans were in distress at the end of the second quarter based on data from MSCI, which is around three times the value of distressed apartment loans.

But the pool of apartment mortgages that could get into difficulty in the future is larger—$56.9 billion are at risk of distress, compared with $50.9 billion for offices. These loans are flashing amber because occupancy rates are falling or the income generated by the buildings is barely enough to meet interest payments, says Alexis Maltin, a vice president at MSCI Research.

One of the rockiest corners of the real-estate lending market is a niche product that apartment flippers gorged on during the pandemic. The distress rate on commercial real-estate collateralized loan obligations, or CRE CLOs, reached 10.8% in July, data released by CRED iQ on Monday show. This includes any loan 30 days delinquent, past its maturity or in special servicing where a third party tries to work out the best outcome for the troubled loan.

There is around $75 billion of CRE CLO debt outstanding, so it is a small part of overall lending. The debt is riskier than commercial mortgage-backed securities or bank mortgages, as they are floating-rate bridge loans for properties that need to be renovated before they can be leased out. As such, there is more uncertainty about where the rental income will ultimately settle and often a dose of wishful thinking in the loan underwriting.

Speculative property investors borrowed heavily from this part of the market during the pandemic to buy tired apartment blocks, particularly in the Sunbelt. Their plan was to fix them up, raise the rents and quickly flip the buildings for profit. CRE CLO loan issuance hit a record in 2021 at $45.4 billion when debt costs were exceptionally low and property valuations were at their peak. As most CLO loans are for three years, this vintage is now maturing.

Interest-rate cuts alone won’t bail out all these owners, as debt costs would need to fall very sharply to give them meaningful relief: In 2021, the secured overnight financing rate, which is typically used to price these floating-rate loans, was around 0.05% compared with 5.33% today.

And the properties aren’t bringing in as much cash as hoped. Strip out the impact of costlier debt and 46% of CRE CLO loans still aren’t generating the net operating income that was baked into the loan underwriting, based on an analysis by CRED iQ’s Chief Executive Officer Michael Haas.

Rent growth forecasts were too optimistic, and operating costs such as insurance have shot up. The apartment market has also become oversupplied. In 2024, 440,000 new units will be completed, pushing up vacancy rates and leaving rents flat at best in many markets, according to real-estate services firm CBRE Group.

Issuers of the CLOs are first on the hook for losses. To encourage sensible lending and avoid a repeat of what happened during the 2008-09 global financial crisis, when securitized subprime mortgages scorched investors, CLO originators keep some loan exposure on their own books, usually the riskiest tranches. Holders of the AAA-rated tranches of these CLOs look insulated though, because of how many others are in line for losses ahead of them.

The heaviest issuers of CRE CLOs in recent years include private lenders MF1 and Benefit Street Partners. Listed players Ready Capital and Arbor Realty Trust also lent billions and have attracted short sellers—38% of Arbor’s stock is on loan, a proxy for short interest.

Few apartment properties have gone into foreclosure yet, which is disappointing for opportunistic investors that hoped to pick up cheap assets in fire sales. Lenders are proving more flexible with apartment loans than offices.

This may be because they think that if the loans can limp along for a few more years, apartment rents should eventually start to rise again. A less charitable take is that CLO lenders at the bottom of the capital structure have so much to lose that they are doing everything possible to keep deeply troubled loans afloat.

A recession would be the final straw for some landlords. Consumers are showing signs of stress, with credit-card delinquencies at their highest levels in more than a decade. A tapped-out consumer doesn’t bode well for apartment owners that are waiting for the first opportunity to raise rents.

Offices will remain the big boogeyman for real-estate lenders, but there is pain on the way for apartments.

WSJ : Goldman Sachs Is Giving Select Clients Access to One of Its Hottest Busine

Goldman Sachs Is Giving Select Clients Access to One of Its Hottest Businesses
Big push into asset-backed loans is part of bank’s plan to roughly double its private-credit assets in next five years

Goldman Sachs GS 0.59%increase; green up pointing triangle is letting some big clients get a piece of one of its hottest businesses.

The Wall Street giant has started allowing certain asset-management clients—namely insurance companies—to invest alongside it when it loans money to borrowers including private-credit funds and nonbank lenders such as mortgage providers.

The move is the first offering involving this type of loan by Goldman’s asset-management arm. It is part of a plan to roughly double its private-credit assets under management to $300 billion in the next five years.

Each year, Goldman makes billions of dollars of asset-backed loans, so called because they are tied to collateral. For example, if a lender it finances goes bust, Goldman could take over a pool of mortgages or other consumer loans.

The asset-backed lending business has surged with the explosive growth of private markets and as regional banks that offered similar loans, such as Signature Bank, have closed.

Goldman holds the least risky pieces of the loans on its balance sheet and, until now, hasn’t given asset-management clients access to them. Goldman’s asset-management business will also give insurance clients access to other asset-backed loans, such as aircraft financings.

The seemingly insatiable appetite of big insurance companies for less-risky debt has been a major driver of the private-credit industry’s growth. Insurers, particularly those that sell annuities, make money by earning more than they are required to pay out. To do that, they need a constant stream of relatively safe debt to invest in.

For years, that meant mostly corporate and government bonds, until investment firms such as Apollo Global Management APO -0.33%decrease; red down pointing triangle, KKR KKR -0.74%decrease; red down pointing triangle and Blackstone BX -2.09%decrease; red down pointing triangle pushed into managing insurance assets by offering the potential for higher returns. Those firms either own or have exclusive asset-management deals with insurers, giving them a constant supply of new assets to manage. Like Goldman, the firms themselves have been doing more asset-backed lending, largely to cater to their insurance investors.

Revenue for FICC financing, the Goldman unit that does this type of asset-backed lending, reached $1.7 billion in the first half of 2024, a 34% jump from a year ago. FICC, which stands for fixed income, currencies and commodities, is part of Goldman’s markets team, and its financing unit includes a broad range of lending that Goldman arranges for clients.

FICC financing and private credit are both crucial to Goldman’s turnaround efforts following its exit from consumer lending. Both aim to generate more recurring revenue to offset the bank’s more unpredictable investment-banking and trading businesses.

The financing team is part of Goldman’s biggest division, global banking and markets, and could use capital from insurance clients in Goldman’s private-credit unit to become a bigger lender. Private credit, meanwhile, is part of Goldman’s second-biggest division, asset and wealth management, and needs to attract more assets to manage.

The private credit team will determine whether to invest clients’ money in these asset-backed loans after the financing team tells them which deals are available.

The cross-divisional effort is part of a long-running push by Goldman Chief Executive David Solomon and President John Waldron to encourage employees to direct business to other units of the bank.

WWD : Ralph Lauren CEO Patrice Louvet Touts ‘Consistency’ as Profits Increase

Ralph Lauren CEO Patrice Louvet Touts ‘Consistency’ as Profits Increase
The CEO told WWD, "We really want people to view Ralph Lauren as a company that you can count on."

Ralph Lauren Corp. had its moment in the spotlight at the Olympic opening ceremony in Paris, where the brand outfitted Team USA.

Now the company is having its moment on Wall Street, with first-quarter results that showed stronger profits and a mild increase in sales, with gains in Europe and Asia outweighing declines at home in North America.

Net income for the quarter expanded 27.6 percent to $168.6 million, or $2.61 a diluted share, from $132.1 million, or $1.96, a year earlier.

Adjusted earnings of $2.70 a share came in 23 cents ahead of the $2.47 analysts had penciled in for the company, according to Yahoo Finance. Even so, shares of the company slipped 3.4 percent to $159.39 on Wednesday.

In an interview with WWD, Patrice Louvet, president and chief executive officer, said the company is striving to be as steadfast as the brand built by Ralph Lauren, who is now executive chairman and chief creative officer.

“We have lunch every week when we’re in the office together and the topic that we consistently talk about is: are we being true to who we are?” Louvet said, drawing back the curtain on his back and forth with the company’s namesake.

“In this industry that is so volatile, that has a number of different trends that come and come, what I think characterizes Ralph Lauren and the man and the company for the past 57 years now, is this clarity, consistency of who we are, what we stand for, what matters to us,” Louvet said.

“Then, obviously, the challenge for us and the work is to make sure that we’re presenting it in a way that’s consistently fresh and engaging, particularly for the younger generations, but also true to who we are,” he said. “And so many brands in this industry lose their way because they follow a trend or they become very, very hot and then they just lose the sense of who they are and then the consumer is confused and, over time, less interested.”

Consistency can work for brands and for companies, as Wall Street, which abhors uncertainty, tends to reward buttoned up firms that are broad enough or have enough stretch to produce results even as the landscape changes.

“The macro environment is obviously on everyone’s mind,” Louvet said. “And in that context, I really want to reinforce that we have built an incredibly durable company and brand. And if you think about it in times of uncertainty as an investor, you want to invest in companies with strong brands and products, a great balance sheet, operational discipline, and proven agility. And that’s Ralph Lauren, durable, reliable, consistent. So we feel we’re very well positioned heading into the key holiday season.”

Revenues for the three months ended June 29 rose 1 percent to $1.51 billion from $1.5 billion. The top line was helped along by the 1.3 million new customers the brand added in the first quarter and by the 6 percent increase in average unit retail prices in the company’s direct-to-consumer business, the company said.

Revenues in North America fell 4 percent to $608 million, as wholesale continued to be a tough spot with a 13 percent decline impacted by the timing of Easter and fewer sales to offpricers.

In Europe, revenues were up 6 percent to $479 million, while Asia was ahead 4 percent.

Louvet highlighted the strength of Ralph Lauren’s DTC business, which represents 66 percent of the company’s sales and saw comparable sales increase by 5 percent in every region.

But wholesale remains in flux — as is the cause for brands across the fashion spectrum.

“What I’m excited about in our wholesale performance is we’re actually growing share in the key places where we play on men’s, on women’s and on children’s,” Louvet said, noting the brand is seeking to elevate at wholesale as well.

“That’s a combination of investing in top doors, continuing to prune the doors that we do not think are right for the brand long term,” he said. “So this quarter, this year, we said we’d shut down about 45 doors in North America and we had similar closures in the prior year. We will continue to work on the elevation of our wholesale presence. Wholesale, strategically, has a really important role to play in our ecosystem because it’s a wonderful place for brand discovery.”

It’s also a market that’s changing rapidly and most dramatically Hudson’s Bay Co.’s $2.65 billion to buy Neiman Marcus and combine it with Saks Fifth Avenue.

“We have great relationships with each of these partners and we’re really looking forward to what that combination of brands and capabilities will look like,” Louvet said. “There’s attractive upside opportunities as they come together.”

It’s a deal, though, that’s brought together some strange bedfellows with both Amazon and Salesforce helping fund the acquisition.

Asked about their involvement, Louvet said, “We’ll need to see how ultimately this plays out.”

While Ralph Lauren navigates the troubled wholesale scene in its home market, the brand continues to expand in China — which has grown to represent 8 percent of sales from about 3.5 percent before the pandemic. Sales in China were up in the high single digits for the quarter.

“By combining the activation of our global platform — think Wimbledon, think our fashion show — with work with local celebrities, local influencers, that is really driving that local relevancy,” Louvet said. “Domestic Chinese consumers are gravitating towards our core products, our icons. And that’s the bulk of the company’s business. Seventy percent of the company’s business is core, so consumers are leaning into our cable knit sweaters and our Polo bear sweaters, they’re leaning into our linen shirts and our linen suits. They’re leaning into our stretch mesh polos.”

At the same time, Chinese consumers are leaning away from many other fashion brands and goods, to the general dismay of the luxury industry.

For the full year, Ralph Lauren continues to see revenues rising in the low-single digits, on a constant currency basis.

“Our brand has always been about inspiring a better life and celebrating the moments that bring us together,” said Ralph Lauren, executive chairman and chief creative officer. “From our intimate runway show at our New York studio this spring to our elegant Salone del Mobile presentation in Milan and this summer’s Olympics, we are inviting people around the world to step into their dreams through authentic, timeless style.”

>>> US After Hours Summary: ZG +12.6%, ASPN +12.1%, BOOT +9.3%, DUOL +6.3%, KLIC



From: Laurent Chekroun (MAKOR CAPITAL MARKET) At: 08/08/24 00:22:37 UTC+2:00
Subject: >>> US After Hours Summary: ZG +12.6%, ASPN +12.1%, BOOT +9.3%, DUOL +6.3%, KLIC
After Hours Summary: ZG +12.6%, ASPN +12.1%, BOOT +9.3%, DUOL +6.3%, KLIC +3.1% higher on earnings; CDLX -45.7%, FROG -28%, BROS -21.8%, FSLY -13.7%, MGNI -13.2%, SONO -13.1%, MNST -11.2% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: HROW +34.4%, APPS +27%, KVYO +17.1%, FWRD +15.6%, FLNC +14.9%, ZG +12.6% (also promotes COO Jeremy Wacksman to be its new CEO), ASPN +12.1%, HCAT +11.3%, TALO +10.1%, BOOT +9.3%, WAY +8.9%, CW +8.2%, HUBS +7.1%, AOSL +7%, VSAT +6.9%, SBGI +6.8%, DUOL +6.3%, JXN +6.2%, AZEK +6.1%, CPRX +6%, BLBD +5.9%, STKL +5.5%, SM +5.2%, CXW +5.1%, AHH +4.9%, LESL +4.7%, LZ +4.7% (also announces restructuring including 15% reduction in workforce), ODD +4.4%, METC +4.3%, JANX +4.3%, APP +4.2%, CLNE +4.1%, DBRG +4.1%, RAMP +3.9%, BBDC +3.4%, SPCE +3.2%, EQX +3.1%, IONQ +3.1%, KLIC +3.1% (also announces thermo-compression adoption & milestones), CF +3%, ICUI +3%, MODG +2.9%, CXT +2.8%, SVCO +2.4%, HOOD +2.2%, WPM +2.1%, GNK +2%, WES +2%, MKSI +1.9%, STAA +1.8%, NTR +1.4% (also names new CFO), JOBY +1.3%, DLB +1.1%, RDNT +1.1%, CHRD +1%, OXY +1%, ET +0.9%, HI +0.8%, MMS +0.3%, KNTK +0.2%, KAR +0.1%, ZIP +0.1% (also acquires Breakroom, UK-based employer review platform)

Companies trading higher in after hours in reaction to news: CMPO +26.4% (Resolute Holdings to acquire majority interest in CompoSecure), AMRX +12.3% (FDA approves CREXONT for Parkinson's disease), GNSS +9.1% (signs deal with Puerto Rico to implement its Emergency Warning System across 37 dams), NL +6.6% (declares a special dividend of $0.08/sh), BLND +3.4% (names new CEO, names new Chairman), INSE +1.7% (new strategic partnership with Mecca Bingo), MTUS +0.1% (receives $3.5 mln in grants from JobsOhio), OBDC +0.1% (OBDC and ODBE to merge, with OBDC as the surviving co)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CDLX -45.7% (also names new CEO), OM -38.2%, BMBL -29.2%, FROG -28%, BROS -21.8%, MTW -18.8%, BRCC -17.1%, FSLY -13.7%, AGO -13.5%, MGNI -13.2%, SONO -13.1%, PACB -11.8%, RYN -11.4%, MNST -11.2%, WBD -9.2%, SRPT -9%, UPWK -8.3%, MCK -7.4% (also increases dividend; approves $4 bln increase to repurchase program), BLNK -7.1%, SEDG -6.7%, HPP -6.4%, UHAL -4.9%, KIND -4.4%, PAAS -4.2%, ASLE -3.8%, CORZ -3.8%, MIRM -3.6%, CPA -3.5%, MRVI -3.4%, KTOS -3.3%, VTLE -3.3%, MQ -3.2%, EGHT -2.7%, NVST -2.6%, BHF -2%, JAMF -2%, RVMD -1.8%, ALLO -1.6%, GH -1.6%, SITM -1.5%, BYND -1.3%, ENS -1.1% (also increases dividend), CDE -0.8%, OPK -0.8%, PRI -0.7% (also increases dividend), UGI -0.6%, EQIX -0.5%, VZIO -0.5%, MFC -0.5%, ESE -0.1% (also reviewing strategic alternatives for the Space business at VACCO), HMN -0.1%

Companies trading lower in after hours in reaction to news: PRGS -1.9% (announces conclusion of SEC investigation into MOVEi), CNP -0.8% ($250 mln stock offering), VFC -0.6% (CEO says turnaround is gaining traction, according to Bloomberg), COST -0.4% (reports July comps), WBA -0.3% (provides VillageMD update; enters into forbearance agreement), OBDE -0.2% (OBDC and ODBE to merge, with OBDC as the surviving co), JNJ -0.2% (NEJM publishes study of pregnant individuals at high risk for early onset severe hemolytic disease), ENLC -0.2% (files mixed shelf securities offering), TK -0.1% (CFO to step down; CEO to take on the added role of Teekay Tankers' President and CEO), HG -0.1% (authorizes new $150 mln share repurchase program), ATS -0.1% (to acquire assets from Heidolph Instruments and Hans Heidolph), TFPM -0.1% (to acquire 3% gold streams; also increases dividend), MRC -0.1% (stock offering by selling shareholder)