RH (RH) Beats Q2 Estimates
Shares of RH (RH) rose more than 2% after the latest quarterly earnings, off the pre-market highs. The company beat second quarter expectations with adjusted earnings per share of $2.70. Revenue grew 2.6% to $922 million.
The beat came largely from a one-time $55 million tariff refund. Tariffs had been a big problem for the company. Margins improved but still face pressure. RH keeps selling the heavy, high-end, more expensive furniture it is known for. The main headwind is the macro backdrop: a weak housing market and fewer home purchases usually mean people buy less furniture. This quarter still beat.
RH is expanding beyond furniture into large-format galleries and international locations in London, Milan, and Paris. It expects the drag on international margins to ease in the second half. Some freight and supply chain risk remains.
Kroger (KR) Tops Earnings, Cuts Sales Outlook
Kroger (KR) shares turned higher, up about 1.5%, after trading under pressure in the pre-market. The company lowered its full-year sales outlook. Kroger came into the day weak, underperforming the broader market year to date and lagging some peers.
Fiscal second quarter sales were $34.62 billion, roughly in line with expectations and touched better than expected on the revenue line. Comparable sales came in weaker than expected. Adjusted earnings beat at $1.09 versus the $1.06 the street expected.
Kroger tied the cut in its sales forecast to lower Medicare prescription drug prices, which weigh on pharmacy revenue. The company competes on price as shoppers look for value through cheaper store brands and promotions. Higher gas prices add to the pressure consumers feel. The read on the consumer: people are still shopping but hunting for value, and they are less loyal to one grocer. Kroger competes on pricing while trying to protect margins.
Novo Nordisk (NVO) Downgraded by Morgan Stanley
The Novo Nordisk (NVO) ADR fell about 1.25%. Morgan Stanley (MS) downgraded it to underweight from equal weight and kept its $40 price target, which signals downside from current levels.
Morgan Stanley sees a hard mix of weak medium-term growth and long-term patent risk. Novo (NVO) still leans heavily on semaglutide, the active ingredient in its blockbuster drugs Ozempic and Wegovy. Even with those blockbusters, Eli Lilly (LLY) has been taking share with Mounjaro. Morgan Stanley estimates semaglutide will make up about 75% of Novo's sales this year, a large chunk.
The patent cliff is the long-term worry. Patent protection is set to expire in Europe in 2031 and in the US in 2032, leaving some time to fill the pipeline. Once Novo loses that exclusivity, it faces competition and generics.
Market Note on the Anniversary
This trading day falls 25 years after the September 11 attacks. Trading did not begin that day. The New York Stock Exchange stayed closed for 4 days, the longest closure since the Great Depression in modern history. On the day it reopened, stocks fell about 7%.
