Trader Talk

Is Retail Getting Better?


Dollar index breaking through to new lows as gold hits another high, most commodities also up 1 to 3 percent. Gold stocks up 2 to 3 percent pre-open.


1) Johnson & Johnson down 1 percent pre-open following a Q3 earnings beat ($1.20 vs. $1.13 est.) helped by continued cost cuts. Sales fell 5.3 percent - a bit more than the expected 4.4 percent decline on weak U.S. sales (down 8.1 percent overall) and particularly in U.S. pharmaceutical sales (down 19 percent) on greater competition from generic drugs.

As a result of its strong Q3 earnings beat, the Dow component also raised its full-year guidance to $4.54-$4.59 from $4.45-$4.55, above current estimates of $4.52.

2) Goldman Sachs down 2 percent pre-open, downgraded by Meredith Whitney to neutral from buy, the last buy recommendation she had. Last week Deutsche Bank initiated coverage with a Buy. Mike Mayo at Calyon was also positive on Goldman last week.

3) Is retail getting better? Pier One up 20 percent-pre open. If there was a sick man in retail Pier One was it. A year ago, there was talk that it would be one of the casualties of the Great Credit Crunch. But after the close Pier One said margins were improving because markdown and clearance activity was being reduced. Traffic had improved, as well.

4) Johnson Controls raised its 2010 full-year guidance to $1.35-$1.45 vs. $1.44 est. as its sales are expected to improve to $31 billion vs. $30 billion est. The auto parts maker expects greater automotive production and notes that projects funded by the government's stimulus efforts will "begin to make a meaningful impact" to its top line in 2010.

5) Domino's Pizza topped estimates ($0.17 vs. $0.15 est.) as better margins on reduced costs helped boost its bottom line. Overall sales fell 1.9 percent, however, as a 2.7 percent gain in international same-store sales offset flat comps in the U.S.

6) CIT falls 21 percent to $0.82 after announcing that its Chairman and CEO Jeffrey Peek will retire by the end of the year as the commercial lender continues to battle looming bankruptcy concerns amid its current liquidity crisis.

7) Senate Finance Committee set to vote on the healthcare bill. Since the Democrats have a 13 to 10 majority, it's expected that the bill-backed by Chairman Baucus-will pass. It does not include a public option, but the Sentate Health Committee (chaired by Chris dodd) does, so there will need to be some kind of reconciliation. All three House bills under consideration also have a public option.

8) Another IPO: RailAmerica, which operates short-haul rail lines--priced 22 million shares at $15, below the talk of $16 to $18. They were taken private nearly 3 years ago by Fortress Investment. Half the money will go to Fortress, the other half will go to pay down debt and possible acquisitions for RailAmerica.



Questions?  Comments?