Lululemon’s Transparency Talk Tanks Shares Despite Solid Sales By Investing.com


© Reuters.

By Christiana Sciaudone

Investing.com —  Transparency hasn’t been kind to Lululemon Athletica Inc (NASDAQ:).

The popular retailer of yoga pants and other athletic attire smashed through analyst expectations for its quarterly results, but a cautious tone by the head of the company during the earnings conference call this week prompted a sell-off in the shares, which tumbled 10% on Wednesday. 

“I’d like to reiterate that we are cautiously optimistic with regard to the holiday season,” said Chief Executive Officer Calvin McDonald during the earnings call. “Our starting point is that the environment remains uncertain. COVID is not yet contained in many of the markets where we operate, and while we expect the recovery to advance, we continue to plan for multiple scenarios this fall and particularly for the holiday season.”  

Lulu has navigated through tricky situations before. In 2013, the company was forced to recall pants for being made with see-through fabric. That was followed by founder Chip Wilson placing the blame for the transparent pants on women’s bodies. Those comments helped lead to his departure from the company.

Lululemon reported earnings per share of 74 cents compared to the expected 54 cents on sales of $902.94 million, versus the estimated $842.31 million. 

Peer American Eagle (NYSE:) also reported stellar results, with a loss per share of 8 cents compared to the expected loss of 17 cents, on sales of $884 million versus the estimated $808.77 million. 

Sales were supported by the Aerie brand, which makes activewear, apparel and intimates. 

“In the midst of an unprecedented crisis, we delivered a significant improvement from the first quarter throughout our business,” said Chief Executive Officer Jay Schottenstein in a statement. “Aerie was simply outstanding, fueled by strong demand, with revenue rising 32% and record margins, demonstrating the power of the brand and signaling the vast opportunity ahead. Across brands, digital sales accelerated and we successfully reopened stores during the quarter.”

 

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Amazon.com bans foreign sales of seeds in U.S. amid mystery packages By Reuters


© Reuters. FILE PHOTO: Amazon.com’s logo is seen at Amazon Japan’s office building in Tokyo

(Reuters) – Amazon.com Inc (NASDAQ:) said it has banned foreign sales of seeds in the United States after thousands of Americans received unsolicited packages of seeds in their mailboxes, mostly postmarked from China.

The U.S. Department of Agriculture (USDA) in July identified more than a dozen plant species ranging from morning glories to mustard in the bags of unsolicited seeds. It warned Americans not to plant the seeds.

According to plant experts, seeds from other parts of the world could be non-native varieties that harm commodity crops.

“Moving forward, we are only permitting the sale of seeds by sellers who are based in the U.S.,” Amazon said in an emailed statement on Saturday.

The company changed its policy on seed sales on Wednesday. The policy change was first reported by the Wall Street Journal.

The company added that sellers who do not follow its guidelines will be subject to action, including potential removal of their accounts.

According to Amazon’s policy web page, the ban extends to plants and plant products.

The USDA in July said the packages were most likely part of a “brushing” scam, in which people receive unsolicited items from a seller who then posts false positive customer reviews to boost sales.

In an update on Aug. 11, Osama El-Lissy, a deputy administrator for the USDA’s Animal and Plant Health Inspection Service (APHIS), said the experts analyzing some of the seeds from China found very few problems. El-Lissy added that the two countries were working jointly on the investigation.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Xeris Looks Like A High-Quality Platform Play As Gvoke Sales Increase (NASDAQ:XERS)


Xeris Pharmaceuticals (XERS) is a company that got on my radar about two weeks ago. Xeris is already a commercial stage biotech, and this past week saw a big rally in the stock as sales of its lead product, Gvoke, have started picking up.

Figure 1: Xeris Stock Chart (source: finviz)

Although I wish I had discovered this stock a little sooner, I discuss in this article why I believe Xeris is still a good value-pick for long term investors in the sector.

Xeris’ Non-Aqueous Formulation Technology Has Already Produced One Approved Product

All of Xeris’ developments to date relate to its proprietary technology to allow for non-aqueous solutions and suspensions of small molecules, peptides, biologics, antibodies, etc. for injection. This is important because certain therapies don’t work well in the typical aqueous, or water-containing, solutions used for injections for various reasons like needing refrigeration or reconstitution for example. The company’s XeriSol technology is best suited for small molecules and peptides while XeriJect can handle larger molecules like monoclonal antibodies and biologics.

Figure 2: Xeris’ Two Technology Platforms (source: Xeris’ August 2020 Corporate Presentation)

Xeris says that any therapy developed using this technology is ready-to-use without need for reconstitution and stable at room temperature. As will be seen below with one of Xeris’ pipeline products, this technology can be used to co-deliver products in one injection that would typically take two, and it can also deliver smaller volumes than would sometimes otherwise be practical. Importantly, these injections can take essentially whatever form is required, including both intramuscular and subcutaneous injections as well as infusions. Xeris intends to offer its suspensions commercially in vials, single-use injectors, pre-filled syringes, multi-use pens, and infusion pumps.

Xeris’ technology already carries the ultimate clinical validation as well, through the approval of the company’s lead product, Gvoke. Gvoke comes as a pre-filled syringe or as a single-use autoinjector, both intended for use as a subcutaneous injection. The drug Gvoke delivers is glucagon, which is a hormone produced by the pancreas that raises blood sugar levels.

Gvoke’s initial indication is for severe hypoglycemia in kids and adults with both type 1 and 2 diabetes. Hypoglycemia is a huge problem for diabetics who are using therapies already to lower blood sugar, and severe cases can quickly turn fatal in the wrong circumstances. Traditional glucagon therapy features a powdered form that must be reconstituted and inserted into a syringe before injecting. This is obviously not ideal in an emergency situation, hence the appeal of a ready-to-go syringe or autoinjector.

Gvoke was initially approved in September 2019, but the pre-filled syringe version didn’t launch until November 2019. The autoinjector launched even later in July 2020. Gvoke uptake was fairly slow during these first few months with just the syringe version available, netting $1.6 million in Q4 2019, $1.7 million in Q1 2020 showing some growth despite the pandemic, and now $2 million in Q2 2020.

Figure 3: Glucagon Market Growth (source: Xeris’ August 2020 Corporate Presentation)

As you can see from Figure 3 though, sales appear to have picked up since the release of the autoinjector version at the beginning of July which is likely the cause of the recent share price increase. This chart shows the traditional therapy in red and Gvoke’s main competitor, Baqsimi in blue. Baqsimi is a nasally inhalable powdered form of glucagon that got a jump-start on Gvoke by launching last August. Xeris is quick to point out the overall market growth in addition to Gvoke uptake, and I think this is an important point to note. Xeris suggests this market could potentially exceed $2 billion in the US with full uptake in coming years. I’m not sure I can imagine quite that rosy of a scenario playing out, but the Gvoke peak sales estimates I’ve seen around $250 million seem like they could be conservative with 10%+ glucagon market growth year-over-year at present.

Xeris has also already submitted an MAA in the EU for its glucagon formulation in diabetics. The company should get a decision in 2021 and be able to launch in 2021 if approved. While likely not as large as the US opportunity, this should provide Xeris with meaningful additional cash-flow.

Xeris has good synergy between already approved Gvoke and the rest of glucagon pipeline. Although there’s always some risk, there should be little reason why an approval won’t eventually be reached in these additional indications because glucagon is such a commonly used therapy and Xeris’ XeriSol technology has already been demonstrated as safe and effective in its first indication.

Figure 4: Xeris Pipeline (source: Xeris’ August 2020 Corporate Presentation)

Xeris has actually already received positive Phase 2 results in two additional glucagon indications, post-bariatric hypoglycemia and exercise-induced hypoglycemia. The company has said there will be a meeting with the FDA on next steps for both of these programs that should happen later this year.

Xeris is also developing a singe injection pramlintide-insulin combo for mealtime blood sugar control in type 1 and 2 diabetics. This combo is already used for this purpose, but it has to be given as two separate injections because, using ordinary injection technology, these two compounds cannot be in the same liquid solution. Xeris’ XeriSol technology enables this therapy to be administered as just one injection which is a significant step up from a quality-of-life perspective. This program also has positive Phase 2 data and is awaiting an FDA meeting later this year.

Xeris has also conducted a Phase 1 study aimed at using its XeriSol technology to make a diazepam injectable therapy for both adult and pediatric epilepsy patients. Xeris received post-Phase 1 guidance from the FDA that the therapy could be moved directly to a Phase 3 registrational trial rather than following the usual course. Xeris is now looking to partner with another company to continue advancing this therapy.

Figure 5: Xeris’s Collaboration Strategy (source: Xeris’ August 2020 Corporate Presentation)

Xeris is also looking to partner with big pharma to develop injectable therapies utilizing Xeris’ technology platform, and Xeris says it already has some projects in the works with top-10 pharma companies. This model seems very similar to what is also being done by Antares Pharma (ATRS) that is another long-term holding of mine. From a technology standpoint, Xeris seems largely de-risked, meaning that while we may see substantial volatility, its hard to see failures in the pipeline sufficient to, by themselves, cause permanent loss of capital for investors.

Xeris’ Balance Sheet Is In Good Shape

Xeris’ cash on hand looks good now after a recent raise. Xeris raised $109.4 million in July, $75 million of which was in the form of convertible notes with the rest being in Xeris shares at a price of $2.72/share. Xeris’ prior cash position was $145.8 million at the end of June, so one would now expect that to be in the vicinity of $250 million post-raise.

Xeris’ net loss was $53.3 million in the first half of 2020, so the company should be in good shape for a while. Even without factoring in increased product sales, Xeris’ cash pile should last until late 2022. I think Xeris is likely to need cash at least one more time before becoming sufficiently profitable to sustain its ongoing operations out of cash flow, but hopefully that amount will be small or maybe Xeris can even figure out a way to raise the necessary cash non-dilutively.

Obviously potentially having to dilute substantially more is one of, if not the biggest risks, of investing in a company like Xeris. Despite the strength of Xeris’ technology platform, poor execution or slow sales uptake could lead to dilution large enough to cause a loss of capital for investors; thus, the balance sheet is the biggest risk in my view and should be watched closely for continued good management by Xeris.

Xeris Has Significant Insider Support

Although not the most important consideration in my mind, I do like to see insiders owning a significant amount of shares and more recent open-market buys than sales. This is both because of the shareholder-friendly incentives that insider ownership creates and because I will never know as much about a company as the insiders who are either buying or selling at any given time.

In Xeris’ case, there have been no unplanned sales since February 2019 and a significant amount of open market buys.

Figure 6: Xeris Insider Buys (source: fintel.io)

Some of these purchases were a bit lower than where the stock is now, but the ones at $4.15/share were higher than where the company has been trading lately until last Friday’s rally. This is certainly at least a slightly positive factor in support of other analysis suggesting the company is undervalued.

Xeris’ Current Valuation Leaves Lots Of Room For Upside

Xeris’ valuation is very mispriced right now in my view. Even after last Friday’s 10%+ upward move, Xeris still has a sub-$200 million market cap. If Gvoke is even moderately successful in taking market share, then Gvoke sales alone will likely exceed the current market cap at their peak. This is then putting no value on the European opportunity for Gvoke, the entire rest of the current pipeline, or the high chance of partnerships coming out of the XeriSol and XeriJect technology.

Figure 7: Xeris Revenue and Earnings Estimates (source: Seeking Alpha)

As you can see from Figure 7, analyst estimates of future revenue and earnings similarly support that the current valuation is inappropriately low. If you consider a 5 P/S and a 15 P/E about average, then this leaves a wide gap between the present expectations and the amount of underperformance that would be required for current shareholders to lose much capital over the long-haul.

Figure 8: Xeris Present Value Estimates (source: revenue and earnings estimates from Seeking Alpha and my calculations based on that data)

I went one step further and discounted these revenue and earnings estimates to see if the attractive valuation held up, and as you can see from Figure 8, this exercise resulted in a potential present value more than 4x current levels, again even after the stock rallied 10%+ last Friday.

Figure 9: Xeris Value Proposition (source: Xeris’ August 2020 Corporate Presentation)

I don’t normally pay too much attention to management’s summary slides, but I thought the one here in Figure 9 actually did a great job of summarizing what, in my view at least, makes Xeris such a good value at its current price level.

Xeris fits in perfectly with the type of companies I will be covering in my soon-to-be-launched Marketplace Service, Biotech Value Investing. With a target launch date of October 1, this service will provide in-depth coverage of my approach to finding high-quality, value-oriented companies in the biotech sector. This approach, developed through years of studying the value investing greats, is intended to use the inherent volatility of the biotech sector to my advantage by sticking with high-quality companies for the long-haul and using options to help generate a high compounded return while ensuring optimal entry and exit points.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in XERS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I’m not a registered investment adviser. Please do not mistake this article, or anything else that I write or publish online, as any type of investment advice. This article and anything else that I post online are for entertainment purposes only and are solely designed to facilitate a discussion about investment strategy. I reserve the right to make any investment decision for myself without notification except where required by law. The thesis that I presented may change anytime due to the changing nature of information itself. Despite the fact that I strive to provide only accurate information, I neither guarantee the accuracy nor the timeliness of anything that I post. Past performance does NOT guarantee future results. Investment in stocks and options can result in a loss of capital. The information presented should NOT be construed as a recommendation to buy or sell any form of security. Any buy or sell price that I may present is intended for educational and discussion purposes only. My articles are should only be utilized as educational and informational materials to assist investors in your own due diligence process. You are expected to perform your own due diligence and take responsibility for your actions. You should consult with your own financial adviser for any financial or investment guidance, as again my writing is not investment advice and financial circumstances are individualized.





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Gap posts surprise rise in comparable sales as Old Navy, Athleta boost online demand By Reuters


© Reuters. A Gap Inc. retail store is shown in La Jolla

By Nivedita Balu

(Reuters) – Apparel retailer Gap Inc (N:) reported a surprise 13% rise in quarterly comparable sales on Thursday, as consumers stuck at home due to the COVID-19 pandemic bought more of its Old Navy and Athleta clothing online.

People working or studying from home have been stocking up on comfortable “stay at home” clothes including fleece and activewear, boosting demand for the company’s budget-friendly Old Navy brand, athleisure label Athleta as well as Gap clothing.

Same-store sales rose 13%, compared with analysts’ forecast of a 20.97% fall, according to IBES data from Refinitiv.

The San Francisco-based retailer said it nearly doubled its e-commerce business for the quarter ended Aug. 1, with about 50% online penetration, and added about 3.5 million new customers.

“We won in the value space with Old Navy, and we won in the premium space of Athleta,” Chief Executive Officer Sonia Syngal told analysts, adding that the company sold about $130 million worth of masks alone.

While the company expects demand for the two brands to fuel sales, it plans to close over 225 unprofitable Gap and Banana Republic stores globally as a part of its restructuring plan.

The back-to-school season, one of the busiest periods for the company, could extend longer and Gap is ready with the “right assortment” for kids whether they are learning at home or in a classroom, Syngal said.

Gap reported second-quarter net loss of $62 million, or 17 cents per share, compared to a profit of $168 million, or 44 cents per share, a year earlier.

Net sales fell about 18% to $3.28 billion, but were above expectations of $2.91 billion.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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U.S. Pending Home Sales Top Forecasts, at Highest Since 2005 By Bloomberg


© Bloomberg. 

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(Bloomberg) — U.S. pending home sales rose in July by more than forecast to the highest level since 2005, signaling the housing market’s sharp recovery will continue with borrowing costs to stay low for the foreseeable future.

The National Association of Realtors’ index of contract signings to purchase previously owned homes increased 5.9% from the prior month after a 15.8% jump in June, according to data released Thursday. The median forecast of economists surveyed by Bloomberg called for a 2% gain. Compared with a year ago, pending sales were up 15.4% on an unadjusted basis.

The gauge’s rebound following an initial decline at the pandemic’s start shows that housing continues to be an area of strength for the recovering U.S. economy, in part because people are looking for more space while being stuck at home. That said, unemployment remains elevated and income uncertainty could slow demand for residential real estate.

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” Lawrence Yun, NAR’s chief economist, said in a statement. Anecdotally, agents are saying that “scarce inventory remains a problem,” Yun said.

Pending home sales rose 25.2% in the Northeast and 6.8% in the West. Gains were smaller in other regions, with a 3.3% increase in the Midwest and 0.9% in the South.

The NAR revised its projection for existing home sales this year to 5.4 million units, up from a prior forecast of 5.18 million units. The group also estimates new-home sales of 800,000, up from 704,000.

A separate report on Tuesday showed that purchases of new single-family houses rose to their highest level since 2006 in July, further highlighting the surge in demand for housing.

©2020 Bloomberg L.P.

    

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Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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