ItsMoneyMark Newsletter #75

U.S.A. Retailers, Department Stores, signalling Warning Signs of U.S. Recession 

Dow Jones Industrial Average, pulls back below 33,000 PTS on FED Chairman Comments

Almost all U.S. retailers, department stores, had a disappointing 2nd Quarter, except for Gap Inc (including Old Navy and Banana Republic brands), which surprised to the upside, but also withdrew its remainder of 2022 earnings outlook because of the, changing macroeconomic outlook, lower customer demand, declining customer transaction tickets, significant increase in inventory to close the quarter, & more. 

Other department stores, which got hurt, and inventory swelled to end their respective 2nd quarters, were, Macy’s, Kohl’s, Nordstrom, and so forth. As an example, Nordstrom, revised numbers for 2022, due to weakening customer discretionary spending and other factors, to: 

  • Annual sales: + 5% to 7%, from + 6% to 8% 
  • Adjusted Earnings per Share: US$ 2.30 to US$ 2.60/ share, from US$ 3.20 to US$ 3.50/ share

Besides these warning signs that have been “flaring up” for the past week or so, the U.S. Treasury 10-Year Note, was above 3%, and is now charging above 3.2%, based on the latest FED Chairman comments, to expect some pain as they continue to fight inflation… 

Additionally, the Dow Jones, has been on an up/ down battle but with these numerous negative department store and retail results, FED comments, and U.S. Treasury 10-Year Note yield surge, it continues to spell, “be focused, and be careful, and we head into Q4 2022, and into Q1 2023…” 

Market Moves:

  • K.L.E. Group Limited (JSE: KLE) reported no revenue for its 2nd quarter, June 30, 2022. It raised the question, or called for clarity, or investor relations, is “Tracks & Records (T&R)” still operational. Even if T&R was sold or moved out previously from KLE, Mr. Market may still have this question or wonder… At ItsMoneyMark, we opine that KLE should remind the market for a few quarters of what occurred with T&R as the no revenue at KLE may give the sense to avid stock market investors, analysts that Tracks and Records is no longer or has ceased operations at Marketplace… 

Two (2) positives though coming out of the latest quarter were, (a) KLE reported actual cash & cash balances on its latest balance sheet of approximately J$ 41 million, and (b) by not having, carrying the T&R business, even though the revenue is gone, the P&L is much improved, as the loss for the quarter is much less… As the saying goes in business, “revenue is not profit” so this is a good move by KLE

  • Caribbean Cement Company Limited (JSE: CCC) has “upped” their communication, marketing & public relations in recent months, as they should as the Company needed to improve their “investor relations” given how the, Cemex S.A. royalty methodology was portrayed or received by the minority shareholders of CCC. In fairness, it was only a few who voiced discontent about it, and a particular brokerage, but CCC did not manage its “voice of reasoning” about it well or its position on it well, defined again here, as investor relations. Therefore, it lagged, and the negative views continued for way too long and ultimately impacted the market cap of CCC and still does to, today. 

It is therefore, refreshing to see the finalization of the dividend, even if overly formal done, and well executed corporate actions by Caribbean Cement Company, such as: 

  • Ground-breaking earlier this week, was important, and has clearly resonated well, and come across well… The release stated the largest “mural” commissioned and done in Jamaica! There is no question, Jamaica needs this as it helps to soften the environment, and we have a definitive lack of “green areas.” 
  • On said, day, the capacity push, that CCC has been discussing during 2022, is finally here, and more specifically to the ground-breaking is the 30% increase in production capacity. This is big for CCC

Even though, in the last quarter or two reported by Caribbean Cement Company, cement sales have slowed, the real sector and construction should be good and remain buoyant, CCC’s share price in the J$ 50’s seems to be not considering the real value of the business right now, or the production outlook, but has been beaten up by the pundits around the negative PR surrounding the royalties. 

  • SSL Venture Capital Jamaica Limited (JSE: SSL VC), was no longer sometime ago, given the name change approval to MFS Capital Partners Limited as reported on, their newsroom and by the wider stock brokerage community. By example, if you had typed in the ticker symbol in the JSE Newsroom, SSL Venture Capital Jamaica is no longer accessible, however, MFS Capital Partners is the one. 

The official re-naming ceremony was held on, August 25, 2022, and was live broadcast on the new cable channel of the Jamaica Stock Exchange (“JSE”), the highly touted cable channel, defined as the Caribbean Business Exchange Channel, executed on Flow & Digicel. 

In the latest quarterly report to the JSE, by MFS Capital Partners Limited, it now reveals their “logo,” et al, as carried in their MD&A: management, discussion & analysis, and their growth/ outlook plans. Most importantly, MFS stated that they have entered two (2) MOUs at this stage for potential deals, and the market & shareholders will be looking forward to updates as things move along on this. 

  • U.S. 10-Year Treasury Notes at 3% + yields should be a bigger concern for market players and investors than it is right now. It is not a good sign in ItsMoneyMark opinion, but Mr. Market seems to be taking it lightly as things just seem to be moving forward in the normal course of business… 

Earlier this week, the yields on said notes, settled off around 3.09% and are now 3.20% +. The market of course awaits, the FED formal comments next as usual, but with higher yields, rates, and the assumed continued direction of the FED, the large concern remains, the potential “cooling down or off of the U.S. economy and impact on other economies…” 

  • Peloton Inc (US: PTON) the company with so much historical potential that has turned for the worse in the past six (6) consecutive quarters of reported losses, and every analyst wonders, if a turnaround is really possible, even if the current CEO touts, an aggressive turnaround, it is going to be hard… PTON’s market capitalization has been steady though of late between US$ 3.9 billion to US$ 4.5 billion, so clearly there are still some believers in the share price, the stock and the company. Yes, it is a far, far ways away from its all time high, but it has been steady as of late. 

PTON announced a deal with Amazon, which brought some much-needed life to its share price, but it was a small lived rally, as PTON reported significant financial losses for its 4th quarter and a decline in revenues. By the numbers, PTON reported:

  • Loss of US$ 1.24 billion versus a loss of US$ 313.2 million, year over year in the 4th quarter comparative
  • Revenue declined by 28%, to register US$ 678.7 million in the 4th quarter

Inventory levels at the end of the quarter, June 30, 2022, closed high as well, at around US$ 1 billion. The reality is, PTON is not an easy sell right now…

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