We hate to be the bearers of bad news, but the corporate landscape is at odds with the surging markets. This week, we present a concise recap of the latest happenings on the frontlines.

 

Banks Struggling to Find Deals

As the quarterly earnings season kicked off, the banking sector found itself navigating a tougher macroeconomic climate. With interest rates on the rise, merger and acquisition activities have come to a screeching halt. As a result, commissions have dwindled, and profit margins have taken a hit.

Let's zoom in on Goldman Sachs. Their revenue contracted by 16%.

However, the blow was even more severe as their net margin plummeted by 66%, amounting to a mere $1.3 billion compared to nearly $4 billion the previous year.

In response, the firm is laying off 3,000 employees and planning to restructure certain divisions. If you happen to be a Goldman employee, brace yourself for a bonus cut of 50% this year.

Morgan Stanley has joined the ranks. Their net income has declined by 40%, and the Investment Banking division's revenue has experienced a 50% slump. suit le mouvement. Résultat net en baisse de 40%. Le chiffre d’affaires de la division Banque d’Affaires décroche de moitié.

 

Retail Losing Steam

Lululemon, the yoga leggings specialist, saw its stock decline by 9% last Monday. The sportswear retailer announced a decrease in gross margin for the last quarter.

This was attributed to higher costs and larger discounts offered to clear inventory (which stood at $1.7 billion at the end of October, twice as much as the previous year).

Fnac Darty also issued a warning to its investors on Tuesday evening. December was a challenging month for them, with sales contracting by 5%. The group had initially projected €500 million in earnings for the 2021-2023 period. Now, they expect to achieve that by 2021-2024, assuming all goes well. The stock took a 7% nosedive yesterday.

To make matters worse, the company's executives chose to remain tight-lipped about January's performance—an ominous sign.

Yesterday's release of US retail sales data further confirms the downtrend: a decline of 1.1% in December, surpassing economists' expectations of a milder decline (-0.9%).

 

A Plethora of Profit Warnings

French video game developer Ubisoft saw a 14% drop in its stock last Thursday after announcing that "holiday season trends, especially during the last weeks of December and early January, were significantly and surprisingly slower than expected."

Meanwhile, Covestro, the German expert in chemistry and materials, also issued a Profit Warning on Friday evening. The company candidly expressed how they have been "undeniably affected by the sharp rise in energy and raw material costs, as well as the weakening global economy."

That's it for today. However, please bear in mind that we approach quarterly results with utmost caution. Therefore, we will be diligently monitoring Netflix's earnings, as they anticipate an additional 4.5 million subscribers for the quarter. Stay tuned.

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Market and portfolio focus

Behaviour:

Throughout the week of January 11-17, our fund experienced a modest decline of 0.29%. While the S&P500 remained stable in the United States, the CAC 40 demonstrated an impressive 2.2% upward surge.

Lines:

Pfizer (3.6% of the fund): We took advantage of the stock's decline to strengthen our position.

Have a great week,
Pierre