Jarden Brief: Cloud computing system takes big slice out of Domino’s

The membership-only warehouse club chain BJ’s Wholesale Club Holdings had stellar results. Photo / Mike Mozart, Creative Commons Attribution 2.0

Keeping you up to date with the latest market moves, in association with Investment firm Jarden.

International

US

BJ’s Wholesale Club Holdings reported its financial results for the 13 and 52 weeks ended January 28, 2023.

The membership-only warehouse club chain achieved US$1 billion in adjusted ebitda for the first time in its history.

The year-over-year comparable club sales increased by 9.8 per cent, membership fee income rose 8.0 per cent, and earnings per diluted share of $0.95 increased by 21.8 per cent.

The company has seen a 22.0 per cent growth in digitally-enabled sales and opened five new clubs since the end of the third quarter.

The investments made by the company have positioned them well for long-term growth and sustainable value creation.

The company has given guidance for fiscal 2023, which includes an expected increase in comparable club sales (excluding gasoline) of 4-5 per cent and a membership fee income increase of 5-6 per cent.

Merchandise gross margins are also expected to improve by around 40 basis points year-over-year. Earnings per share is predicted to stay about the same as the previous year, including a 53rd week benefit of low-teens cents per share.

The company plans to spend approximately US$450 million on capital expenditure.

Data for last week’s applications for US unemployment benefits was published, rising to the highest level since December, with California and New York driving the increase.

Initial claims rose by 21,000 to 211,000, while continuing claims rose the most since November 2021. The figures exceeded all estimates in a Bloomberg survey of economists, indicating some softening in the labour market.

However, the data can be choppy from week to week, and the increase may have been boosted by factors such as severe weather and school holidays.

The Federal Reserve’s decision on interest rates will depend on upcoming economic data, including Friday’s employment report and next week’s inflation data.

Rest of World

Credit Suisse has postponed the release of its annual report due to queries from the US Securities and Exchange Commission (SEC) over cash flow statements dating back to 2019.

The bank’s financial statements for 2022, which were published last month, are unaffected.

The SEC’s feedback was of a technical nature, according to Credit Suisse, and relates to the netting treatment of some securities lending and borrowing activities.

This resulted in balance sheet and cash flow positions being understated, leading to Credit Suisse revising its total assets and liabilities by SFr13bn (NZ$22.7 billion), or 1.7 per cent of its total assets, for 2020.

Domino’s Pizza Group expects to incur about £9 million (NZ$17.5m) in costs for two new cloud-based IT systems in 2023. Its share price fell by up to 10.0 per cent.

However, the company’s collections business has benefited from more buyers collecting their orders to reduce delivery charges, with collection orders in Q4 2022 rising by 28.0 per cent.

Despite the positive news, Domino’s reported a decline in underlying core profit for 2022 due to technology investments, higher costs, and food inflation. The company’s 2023 outlook also flagged higher interest costs and further technology investments.

Commodities

US authorities transferred US$1b (NZ$1.64b) worth of bitcoin recovered from a dark web hack to new wallet addresses, including one owned by Coinbase.

Blockchain security firm PeckShield reported that nearly 10,000 bitcoin were sent to Coinbase-controlled wallets, while roughly 41,000 were directed to government-controlled wallets.

Investors expressed concerns authorities would sell the recovered bitcoin on the open market, potentially lowering the token’s price, causing bitcoin’s price to dip roughly 2.0 per cent, pushing it below US$22,000.

However, fears of an open market sale may be overblown, as the Government usually sells seized assets at auction. The market’s composition will likely influence the extent to which it reacts to potential market-moving events.

Oil prices fell for the third day in a row due to concerns about the economic impact of rising interest rates, which outweighed the positive news of a surprise drop in U.S. crude inventories and hopes for Chinese demand.

The comments made by U.S. Federal Reserve Chair Jerome Powell about the likelihood of interest rates needing to be raised further due to strong recent data also contributed to the fall in oil prices.

Brent crude declined by 0.4 per cent to US$82.32 a barrel, and U.S. West Texas Intermediate crude slipped by 11 cents to US$76.55. The fear of recession is increasing, according to Tamas Varga of oil broker PVM.

Australia

Xero is planning to cut up to 800 jobs worldwide to streamline operations and achieve a better balance of growth and profitability.

The company is also exiting from Waddle, a cloud-based lending platform it acquired in 2020, and expects to incur a write-down of A$30m to A$40m.

Xero’s CEO Sukhinder Singh Cassidy said the restructuring would adjust its operating cost base as it balanced growth and profitability.

Xero’s share price fell in November after it revealed a widened loss, but following today’s announcement, its share price surged more than 7.5 per cent.

Despite reporting an increased loss in its 1H FY23 report, Core Lithium Ltd (ASX: CXO) share price rose by 3.09 per cent to A$1.00 on Thursday, making it one of the top performers in the S&P/ASX 200 Index (ASX: XJO).

The increase in losses was expected as the company has been ramping up investment and operations to begin production at scale, which it has now achieved.

Core Lithium has now transitioned from a mine explorer and developer to a mine operator and producer, making it one of the few ASX lithium companies that are actually producing lithium.

The company is well-positioned to capitalise on the high demand for available battery-grade lithium concentrate to complement its existing binding offtake arrangements with Ganfeng Lithium and Yahua.

The company had A$125 million in liquid capital at the end of the period and is expected to generate revenue now that it’s producing lithium.

New Zealand

In February 2023, retail spending increased in most categories except for apparel.

The highest increases were seen in durables and consumables. However, total seasonally adjusted card spending decreased by 1.7 percent, with non-retail categories being the largest contributor to this fall.

Despite this, in actual terms, total retail card spending increased by 11.7 percent and total card spending increased by 14.9 percent compared to February 2022.

The data only reflects national level values and is not adjusted for price changes. The electronic card transaction data covers credit and debit card usage in both retail and service industries, including online shopping.

Coming up today

There is no scheduled news today for the NZX main board or the ASX main board. The results of the BNZ - BusinessNZ Performance of Manufacturing Index (PMI) for this month will be released later today, providing valuable insights into the activity levels of the New Zealand manufacturing sector.

For more information on the latest market moves, get in touch with Jarden.

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All market pricing and announcements are sourced from Refinitiv, NZX and ASX.