Stocks began Tuesday in the red but recovered by the end of the session. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) managed a third straight day of gains.
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Retail stocks did well today, with the SPDR S&P Retail ETF (NYSEMKT: XRT) rising 0.5%.
As for individual stocks, Under Armour (NYSE: UA) (NYSE: UAA) rose after the athletic wear retailer reported earnings, while Henry Schein (NASDAQ: HSIC) and Patterson Companies (NASDAQ: PDCO) fell on news of a complaint by the Federal Trade Commission (FTC).
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Under Armour jumps on strong overseas sales
Under Armour reported fourth-quarter results that exceeded expectations on the top line, and Class A shares surged 17.4%. Revenue grew 4.6% to $1.37 billion and the company broke even on an adjusted earnings per share basis. Wall Street was expecting breakeven adjusted EPS on sales of $1.31 billion.
Revenue to wholesale customers declined 1%, while direct-to-consumer revenue rose 11%. Apparel revenue was up 2% to $952 million, footwear increased 9% to $246 million, and accessories sales grew 6% to $111 million. Revenue in North America fell 4%, but international sales soared 47%, led by a 56% boost in Asia-Pacific.
Gross margin declined 150 basis points; selling, general, and administrative expenses increased 40.7%; and inventory grew 26%. The company announced further cost-cutting restructuring efforts that will result in $110 million to $130 million in charges this year.
Despite continued challenges in the domestic market and a drop in margins, analysts were impressed the progress the company is making, especially in Asia and in footwear with the new Hovr brand. Looking forward, Under Armour expects 2018 to "end up looking similar to 2017," with revenue up low single digits and full-year adjusted EPS of $0.14 to $0.19, compared with $0.19 in 2017 and analyst expectations for $0.22. Another year of low expectations might actually lead to some more positive surprises in coming quarter.
FTC bites down on Henry Shein and Patterson Companies
Shares of dental supply companies Henry Schein and Patterson Companies sank 6.6% and 5.2%, respectively, after the FTC announced it was suing them and privately held Benco Dental Supply for allegedly violating U.S. antitrust laws.
The FTC complaint alleges that the companies conspired to refuse to provide discounts or otherwise serve buying groups, which are comprised of solo and small-group dental practices that join together to increase their purchasing power for dental supplies and get lower prices. According to the FTC, the three accused companies control 85% of the $10 billion market for dental products.
Henry Shein and Patterson Companies both immediately issued denials of the allegations and said they will vigorously defend themselves. Henry Schein, which was named one of "one of the 2018 world's most ethical companies" by the Ethisphere Institute the very same day that the FTC filed its complaint, said in a press release, "Contrary to the FTC's allegations, the Company was a leader in supplying buying groups, has consistently done business with buying groups, has a dedicated team to serve buying groups, and never entered into an agreement with others to refuse to do business with buying groups."
Both companies said the matter will not have a material adverse effect on their financial condition, but investors weren't so sure. The stocks of both have been under pressure in recent months, due to fear that Amazon may step into the market, so it doesn't take much in the way of negative news to bring out the bears.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jim Crumly owns shares of AMZN and Under Armour (C Shares). The Motley Fool owns shares of and recommends AMZN, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.