Stocks moved lower on Tuesday morning, as investors remained concerned about a host of macroeconomic challenges. Interest rates continue to move higher, as the rising prices of oil and other energy products are fueling more worries about potential inflation ahead. Opening losses for major stock market benchmarks amounted to about half a percent, giving back gains from Monday and then some.
Adding to the negative sentiment, earnings reports from United Natural Foods (NYSE: UNFI) and Thor Industries (NYSE: THO) sent their respective shares lower. These two companies are exposed to very different segments of the consumer economy, but both rely on healthy economic conditions to fuel their businesses. Here’s the latest on what United Natural and Thor said.
Shares of United Natural Foods fell 20% early Tuesday morning. The distributor of natural food products reported fiscal fourth-quarter financial results for the period ended July 29 that highlighted the challenges many companies in the food industry face right now.
United Natural reported a 2% rise in net sales in the fiscal fourth quarter, but much of that was driven by price increases related to inflation. Unit volume was down, albeit at a pace somewhat slower than in the previous quarter. United Natural saw more pressure on the bottom line, posting a loss of $68 million that worked out to adjusted losses of $0.25 on a per-share basis.
CEO Sandy Douglas attributed the mixed results to a “challenging year” that included higher levels of shrink, or products lost to theft, spoilage, and other causes. That’s been a theme that large retailers have also seen, with reports of organized crime focusing efforts on shoplifting high-value items.
Unfortunately, Douglas expects further headwinds in the first half of fiscal 2024, as the company starts to lose the ability to pass through inflationary price increases to its customers. United Natural is optimistic about efforts to incorporate technology into its business, but it could take time before the benefits of greater efficiency become obvious in its financial results.
Losses for Thor Industries were more modest, but the stock still fell 4% early Tuesday. The manufacturer of recreational vehicles and similar products reported its fiscal fourth-quarter financial results for the period ended July 31, and the big declines from year-earlier levels made shareholders long for a rebound in the broader economy.
Thor posted net sales of $2.74 billion in the fiscal fourth quarter, down by 28% from year-ago levels. The biggest hit came in Thor’s North American towable RV segment, where sales dropped by nearly half. Motorized RV revenue in North America was also weak, and even sizable gains in the European segment weren’t enough to offset declines elsewhere. Net income fell by two-thirds year over year, and earnings came in at $1.68 per share. Full-year fiscal 2023 figures were similarly disappointing, with sales falling 32% and net income posting a drop of more than 65%.
Thor also doesn’t expect a quick rebound. Full-year fiscal 2024 projections called for sales of $10.5 billion to $11 billion, which would be even less than the final 2023 numbers. Earnings of $6.25 to $7.25 per share would be in line with the $6.95 per share that Thor earned in 2023.
Big-ticket items like RVs have seen pressure as the consumer economy weakens. With the overall economy still not yet in recession, it’s entirely possible that conditions could get worse before they start to improve. That’s not good news for Thor in the short run, or for any consumer-facing business releasing earnings in the next month or two.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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