Before the bell: how expensive is life

Investors await the U.S. inflation report while in Belgium, Colruyt’s quarterly figures reveal a loss in market share.

It is December 11, 2024, as we write this, five days after Saint Nicholas’ Day, but for investors, this date is marked on the calendar for a different reason. The U.S. inflation report will play a crucial role in determining the path toward interest rate cuts in the U.S. Analysts anticipate rising prices for the fourth consecutive month. Core inflation (excluding energy and food prices) is expected to increase by 0.3% month-on-month for the fourth time. Such a significant figure could lead the U.S. Federal Reserve to reconsider its interest rate strategy. A likely outcome is an interest rate cut next week, accompanied by a message indicating that further reductions will proceed more cautiously.

The S&P 500 lost 0.3% yesterday, with Nvidia (-2.7%) still under pressure from a Chinese monopoly investigation. The U.S. also blocked the $25 billion merger between Kroger (+5.1%) and Albertsons (-2.3%). D’Ieteren trimmed its dividend but rose more sharply than expected. Investors are keeping an eye on X-Fab, which has been nominated as Company of the Year, although this should have little impact on its stock price. Today, telecom operator Digi launches in Belgium, potentially putting pressure on Proximus and Orange Belgium. Zara’s parent company, Inditex, reported a 7% revenue growth from February to October this morning. Macy’s and Adobe are set to release their earnings later today.

Long Live Savings!

One company that has turned investment norms on their head in recent years is GameStop. Typically, when revenue and profit consistently decline, the share price follows suit. Simple, right? Not for GameStop. The company became heavily shorted by speculators betting on a falling share price, which attracted investors eager to rescue their beloved gaming store, driving the price up instead. GameStop leveraged this elevated stock price to issue new shares, resulting in a debt-free balance sheet and a cash reserve of 4.6 billion dollars. The company now invests this cash in money market funds and bonds to earn interest income in dollars. Despite a revenue drop of 220 million dollars to 860 million dollars, GameStop managed to post a profit, driven by interest income from its massive cash reserves. As long as interest rates remain high—or shareholders keep injecting cash—the company can endure. With its surprise profitability, we anticipate a higher opening for GameStop’s shares today.

Competition Doesn’t Rest

The retail landscape can shift quickly. Analysts had speculated that Delhaize’s recent decision to open on Sundays might impact Colruyt—and they were right. Last night, Colruyt reported that its market share had dropped from 31.6% to 31.2%. Not only did the company lose revenue to competitors, but it also struggled to raise prices amid intensifying competition, which hurt both revenue and profit. Operating profit fell to 245 million euros, about 5% lower than a year ago. Additionally, the company announced the acquisition of fitness chain NRG, which will be merged with its own Jims chain. Investors are keen to see how the market reacts to results that, while in line with analyst expectations, highlight challenges ahead.

Did You Know…

yesterday, Alphabet appeared twice among the top performers on the Nasdaq? The company has two types of shares: A-shares with voting rights and C-shares without. This allows Alphabet to raise funds without diluting the voting power of its founders.

This article was translated from Dutch and was originally published on Spaarvarkens.be.