TOP STORY
🤯 Nvidia Sales Jump 101% as AI Hype Continues

This week, Nvidia reported its Q2 earnings, with a major beat on earnings and revenue, particularly in its data center business.

Nvidia, which is the world leader in the GPUs required for generative AI applications, has benefited massively from the AI boom, reporting a staggering 101% YoY revenue growth and a 429% jump in earnings-per-share.

• Revenue: $13.51 billion (vs. $11.22 billion expected) ✅

• Earnings: $2.70 per share (vs. $2.09 expected) ✅

• Data Center Revenue: $10.32 billion (vs. $8.03 billion estimate according to StreetAccount) ✅

While the earnings were notable, many market observers were drawn to Nvidia’s optimistic guidance. The tech behemoth forecasted revenue of $16 billion for Q4, which would represent 170% YoY growth — comfortably beating out estimates of $12.61 billion.

Adding to this positive news, Nvidia also announced a substantial $25 billion share buyback plan for the current fiscal year, further bolstering investor confidence.

Huang further highlighted that major cloud service entities have started deploying Nvidia's H100 AI infrastructures, echoing a sentiment that resonates with the tech industry's giants.

Tesla's CEO, Elon Musk, expressed his intent to adopt as much Nvidia hardware as possible and praised Jensen Huang and Nvidia for their remarkable contributions to the tech domain.

The ripple effect of Nvidia's successful earnings report was seen in the market, as several AI-related stocks, including C3.ai, Palantir, Marvell Technology, and MongoDB, rose after the company's report.

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RETAIL
👟 Retailers Experiencing Shrinkage and a Softer Consumer

This week, another group of retailers reported increased amounts of theft or "shrinkage". This quarter has already seen a surge in theft concerns across the retail sector, with industry giants such as Target, Home Depot, and Walmart all highlighting the challenges posed by "shrink."

Dick's Sporting Goods, Dollar Tree, Footlocker, and Nordstrom reported earnings this week and all alluded to rising costs associated with theft:

💵 Dollar Tree ($DLTR), the value retail giant, reported a weaker-than-expected forecast and a fall in gross margins, which they attributed to increased consumption of low-margin perishables and "elevated shrink." Despite this, the company still beat revenue and earnings targets for the quarter:

• Revenue: $7.33 billion vs. ($7.21 billion expected) ✅ 

• Earnings: $0.91 per share (vs. $0.87 expected) ✅ 
  

The CEO, Rick Dreiling, further explained their "defensive approach to shrink", indicating their intent to relocate certain items behind checkout stands, lock up specific cases, and even remove certain stock-keeping units (SKUs) altogether if theft persisted.

👜 Luxury retailer Nordstrom ($JWN) exceeded its quarterly sales and earnings expectations but signaled caution for the foreseeable future by maintaining its prior full-year forecast, anticipating a 4-6% decline in sales.

• Revenue: $3.77 billion vs. ($3.69 billion expected) ✅ 

• Earnings: $0.84 per share (vs. $0.45 expected) ✅ 

CEO Erik Nordstrom also commented on the increased theft at some outlets, citing that there have been "historical highs in losses from theft" during their recent earnings call.

👟 Foot Locker ($FL) witnessed a significant drop in its shares following a notable 9.9% decline in sales during the fiscal second quarter. This downturn is due to ongoing "consumer softness."

• Revenue: $1.86 billion vs. ($1.88 billion expected) ❌ 

• Earnings: $0.04 per share (vs. $0.05 expected) ❌ 

Further compounding their challenges, Foot Locker has also faced issues with shrink. The company hinted at the financial burden brought about by this shrink, particularly when combined with their ongoing promotions.

To address these issues, Foot Locker is actively re-evaluating its vendor mix with a considerable emphasis on minimizing its dependence on certain key players, notably Nike.

Foot Locker also announced the pausing of its quarterly cash dividend, a step that reflects its cautionary stance.

🛍️ Dick's Sporting Goods ($DKS) shares plummeted after the company reported unexpected losses due to increased incidents of organized retail crime. Consequently, Dick's adjusted earnings per share for Q2 landed at $2.80, substantially underperforming the analysts' forecast of $3.81.

• Revenue: $3.22 billion vs. ($3.24 billion expected) ❌ 

• Earnings: $2.82 per share (vs. $3.81 expected) ❌ 

To add to their woes, this shrink issue is projected to persist, leading the company to revise its full-year profit forecast downward.

Initially aiming for a range of $12.90-$13.80, they've now adjusted their outlook to between $11.50-$12.30 per share.

The retailer's Q2 gross margins have also dipped 5% from the previous year, hitting 34.4%—a stark contrast from the anticipated 36.3%.

Notably, one-third of this decline is credited to shrink, according to CFO Navdeep Gupta.

 FROM THE BLOSSOM APP

🎙 Top Discussions This Week

CANADIAN NEWS
🏦 RBC and TD Bank Kick off Canadian Big Bank Earnings

Royal Bank of Canada ($RY)

Canada's biggest bank, RBC, unveiled its quarterly earnings this week, surpassing estimates on revenue and earnings-per-share.

Revenue: C$14.49 billion (vs. C$13.06 billion expected) ✅ 
Earnings: C$2.84 per share (vs. C$2.71 expected) ✅ 

• Staffing Overhaul: The bank reduced its workforce by 1% since May and intends to implement further cuts of up to 2% in the upcoming quarter, echoing CEO Dave McKay's comments on over-hiring.

• Expense Growth: While RBC experienced a revenue boost, its expenses surged at a greater rate, hitting over C$7.8 billion for the quarter.

• Provision for Credit Losses: The bank allocated C$616 million this quarter for potential bad loans, a provision indicating a substantial 81% increase from the previous year.

Toronto-Dominion Bank ($TD)

Toronto-Dominion Bank (TD)’s Q3 earnings presented a mixed bag of results. While there were bright spots, challenges such as increasing provisions for credit losses hinted at underlying concerns.

Revenue: C$12.78 billion (vs. $12.37 CAD billion expected) ✅
Earnings: C$1.99 per share (vs. $2.03 CAD expected) ❌

• Provision for Credit Losses rose significantly to C$766 million, up from C$599 million in the previous quarter and C$351 million in the same period last year.

• Share Buyback: TD intends to repurchase up to 90 million shares or 4.9% of its outstanding shares, tripling its previous buyback program.

• Segment Performance: While most segments, such as Canadian personal and commercial banking, saw declines, adjusted net income for capital markets witnessed a 39% YoY rise.

• Special Costs: The bank had to absorb costs from the terminated First Horizon transaction and is potentially facing penalties concerning the Bank Secrecy Act’s anti-money laundering compliance program.

🗞️ What else you might’ve missed:

• Disney ($DIS) closed at its lowest level in nearly 9 years.

• Warner Bros. Discovery ($WBD) is betting on live news to increase engagement on Max.

• Charles Schwab ($SCHW) is planning to cut jobs to save $500 million in costs.

• Goldman Sachs ($GS) is weighing the sale of a part of its wealth business.

• Peleton ($PTON) was down 20%+ after announcing a slowdown in subscriber growth and recall.

• Abercrombie & Fitch ($ANF) was up 23% after beating quarterly expectations.