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Gap tops estimates, Salesforce raises guidance, Dell sees printer demand surge

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Myles Udland, Brian Sozzi, and Julie Hyman break down some of Friday’s early earnings, including: GAP and Ulta seeing sales growth from in-store shopping, Salesforce accelerating its growth efforts, and HP and Dell being able to beat expectations driven by the demand of PC consumers.

Video Transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. Just a couple of minutes away from the opening bell, but let's take a look back at some stocks out with-- or some companies out with their results last night. Gap among them, company beating on the top and the bottom line. Stock under a little bit of pressure, but, Sozzi, we mentioned how impressive this turnaround story has been for Gap over the last year or so.

BRIAN SOZZI: Has it, though, Myles? I do-- all right, listen, the stock has come on strong, and the new leadership is best in class. But you go through the quarter at Gap, and I know you had same store sales up 20% in the most recent quarter, up 13% in the first-- in the most recent quarter compared to the same quarter in 2019. We've been using those two-year type of comparisons because the stores were closed down last year. Margins were up, but they got also three congratulations from stock analysts on the call. That's always a good sign you may be doing something right.

But Banana Republic, same store sales down 22%, same store sales on the two-year basis down 4%. And they talk a lot about trying to make Banana Republic and Gap relevant again. And you still don't get the sense that these are top of mind place to go for folks to get apparel. Right now, perhaps yes because we're all trying to rebuild our clothes as fast as possible. And there's a lot of stocks out there in retail. So if you have to go to Gap, great. But you do-- I think investors are starting to question about the long-term durability of the recovery they have seen at the company over the past year.

Worth noting the Kanye West line is expected to drop sometime in June. Maybe that can bring back some relevance for the Gap brand and the overall company. But there are some things to prove here if you're the executives at the company, at least in the back half of this year.

JULIE HYMAN: Yeah, I mean, I think the sustainability is the main question for Gap, right? And its sort of raison d'etre, if you will, or its brand identity when it comes to consumers at the different parts of it, when you talk about, it doesn't feel like, does this portfolio still belong together? They had the spinoff that they then canceled. And I think that those questions are still going to be around, what does this portfolio do for each other, is still something that I think is going to persist as well.

MYLES UDLAND: Yeah, and speaking of the portfolio, there are still questions, a number of questions, on the call about when the Yeezy collab will come out. Didn't get a firm timeline on that. But Sozzi, just coming back to my earlier comment about the successful turnaround, I'm a simple guy. I look at the price of the stock. If the market deems the stock now worth five times what it was worth a year ago, I will give the company the credit on the turnaround, though I take your points on the details there.

Let's talk about another name, Sozz, you follow closely-- Ulta Beauty. Speaking of a name that's really stalled out over the last couple of years, after it was the best performer in the S&P from '09 to 2019, a lot of questions here for management as they try to tell the next leg of their growth story.

BRIAN SOZZI: Yeah, well, there's a CEO coming into the business, no stranger to the business, an internal hire. So that's something to watch moving forward. See, the operating margins 15.8% in the most recent quarter, 13.6% in the first quarter of 2019. Again, that two-year comparison is very telling. And I think we're coming up against the opening bell here-- or the opening bell on this Memorial Day weekend here. But, you know-- there we have it.

And, you know, really, on Ulta, you know, it's interesting. You know, they opened 28 stores in the most recent quarter. Face serums continue to be a top seller at the brand. What is not a top seller, it is prestige makeup or cosmetics. And obviously, that one makes sense, given a lot of folks are still, in fact, wearing masks. I think for this stock for Ulta to work again truly, you're going to need to start to see cosmetics come back, those higher end cosmetics come back later this year.

MYLES UDLAND: They're going to get that A-Rod line in the store. A-Rod, now out with--

BRIAN SOZZI: I'm going to give that a try, actually.

MYLES UDLAND: --his own men's makeup-- yeah, I mean, look, I'll be honest. I got to put something on this face because these lights are a little too bright. But I have so far--

BRIAN SOZZI: Why? It looks so good to me, Myles. It looks great.

MYLES UDLAND: No, I've now been instructed by management to get rid of this shine over here. All right, let's move on to Salesforce. Dow Component out with its results last night. And Julie, a company that we see as a real bellwether for the overall SaaS trade, you know, with how that business is evolving. And we see, again, beat top and the bottom line, as we have seen from the vast majority of companies this quarter.

JULIE HYMAN: Yeah, and this company also came out with a forecast right? So as we've talked about, not every company still feels like they have the visibility to do that. So the company said for the full year, earnings x items will be 379 to 381. Annual revenue going to be as much as $26 billion, which is above what analysts had been looking for. You see the shares are popping in the early going.

You know, Salesforce has just been getting bigger, right? The company bought Tableau in 2019. They bought MuleSoft in 2018. And they commented in interviews and on the call that they have really been instrumental in the company's growth. They're in the process of acquiring Slack. And they say that that will fuel sales growth of more than 25% annually. So, again, just keep getting bigger. And that acquisition, by the way, is supposed to close in the current quarter.

So all of that helping Salesforce, even as, you know, whether it's at home, at the office, whatever it may be, Salesforce is sort of a crossover, right? It can manage employees in any of those environments. So they seem to be benefiting regardless of where employees are situated.

MYLES UDLAND: You know, I saw someone mention that they're in the process of acquiring Slack, like, last week or the week before, and I had completely forgotten that Salesforce--

JULIE HYMAN: You're not only one.

MYLES UDLAND: I mean, like, I know when Slack went public, the stock did nothing. And it was like, someone's got to buy this thing. And I mean, I completely forgot that Salesforce was the eventual buyer for them. So, again, as you mentioned, that deal is set to close in the current quarter. Sozzi, a man of many talents, follows retail, but also enterprise computing. HPE and Dell both out with their results last night. And we see HP's results here, again, beating expectations.

BRIAN SOZZI: Myles, I'm a true diversified portfolio. But, you know, Dell had a good quarter. Lots of notebooks, PCs moving out the door. Stock is down a little bit here in the early going. But I really want to lock in on HP. HP shares are down about 6% here in the early going, despite they smashed earnings estimates, beat handily on sales margins up in both of their segments. Their commercial printing business came back, units up 22% in the most recent quarter. They were down 6% in the preceding quarter. So interesting to see this market sell-off. They also reiterated their full year $4 billion free cash flow goal.

And I'm just looking at a note right now from Deutsche Bank's Sidney Ho. And he's calling out potential gross margin headwinds from increased component costs as a risk to the outlook for the company this year. Also, while HP raised its guidance, Ho is voicing some concern on a slowdown in earnings per share in the back half of this year. Again, maybe that's why the stock is selling off here, some of those concerns sweeping around Wall Street. But I did talk to HP CEO Enrique Lores. We'll have that conversation very soon.

MYLES UDLAND: Just going to mention that that conversation coming up here in about 15 minutes on Yahoo Finance Live.