2 Stocks Giving Wall Street the Monday Blues

Stocks have gotten out to a strong start in 2023, so it’s not surprising to see markets take a breather and give back some of those gains. After giving up some ground on Friday, major stock market indexes looked poised to fall further on Monday morning, with futures contracts suggesting declines of between 0.5% and 1%.

A couple of companies gave investors a little more to worry about, releasing comments about their latest financial results and showing the impact that the volatile economic situation has had on their respective businesses. Both Children’s Place (PLCE -10.21%) and Tyson Foods (TSN -3.98%) were moving lower in premarket trading, and shareholders are still assessing what long-term impact the latest news from the two companies could have.

Children’s Place acts out

Shares of Children’s Place fell sharply in premarket trading Monday morning, with the apparel stock posting a 12% decline. The kid-oriented apparel retailer warned that its fourth-quarter financial results could be considerably weaker than most investors had anticipated.

In its release of preliminary results for the holiday quarter, Children’s Place said that it expects to lose between $52 million and $57 million for the period. CEO Jane Elfers attributed the loss to the weakening macroeconomic environment, which the company hadn’t expected in issuing its most recent guidance to investors. In addition, significantly higher input costs for cotton, as well as ongoing supply chain issues, led Children’s Place to make inventory decisions that hampered margins in the short run.

Children’s Place now expects fourth-quarter sales to come in between $454 million and $456 million, which isn’t that much worse than the $460 million that it had previously offered as guidance. However, the losses for the children’s apparel retailer will be extensive, with the company projecting adjusted losses of $4.02 to $4.41 per share instead of a modest $0.50-$0.75-per-share profit for the period.

Although the company said that its inventory decisions put it in a better position for 2023, Children’s Place chose to defer making formal comments about its outlook for the coming year until its March release of full results. That delay could bring the impressive bounce in Children’s Place stock to a halt.

Tyson faces profit pressure

Elsewhere, shares of Tyson Foods were down 5% early Monday. The meat processing company’s fiscal first-quarter financial results for the period ending Dec. 31 gave some insight into the changing dynamics from consumers looking to balance their budgets in an inflationary environment.

Tyson’s quarterly numbers saw solid sales performance, but profits plunged. Revenue of $13.26 billion was up 2.5% year over year, led by a nearly 10% rise in chicken sales. However, sales of beef and pork were lower, particularly because beef prices dropped sharply without seeing much of an uptick in volume from consumers. As a result, adjusted earnings of $0.85 per share plunged 70% from year-ago levels.

CEO Donnie King remained optimistic that Tyson can recover. By overcoming both adverse market conditions and solving some operational inefficiencies, the company believes that its performance can improve in the second half of fiscal 2023. Moreover, strong retail brands like Jimmy Dean and Hillshire Farm should help overall performance, particularly in areas like the prepared foods segment, where Tyson enjoyed relatively good results during the quarter.

A year ago, Tyson stock was at all-time highs, but meat markets have shifted to become much less desirable for the company. Now, it’s unclear how quickly Tyson might be able to turn things around, and a lot will depend on consumer budgets as inflationary pressures show signs of easing.

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.