Small caps last week: Chewy's earnings miss, Signet's best day ever, AE rethinks ads

Last week, American Eagle said it would move away from major ad campaigns and redirect spending toward digital advertising after quarterly sales fell short of Wall Street expectations. Meanwhile, Dyne Therapeutics tumbled after a late-stage trial failure at Novartis raised questions about a similar drug it is developing, while strong earnings sent Signet Jewelers shares up almost 24%. These stories headline our recap of the small-cap space for the week of September 7-11.  

Jeans and apparel retailer American Eagle Outfitters will move away from major ad campaigns, like those featuring celebrities such as actress Sydney Sweeney and Barcelona midfielder Lamine Yamal, and redirect spending toward digital advertising. The company hopes the change will improve its performance: in the second quarter, comparable sales increased 6.0% year over year, while Wall Street had expected growth of 6.7%.

Though celebrity partnerships have helped increase awareness of the American Eagle brand, the company expects digital advertising to drive consumers to make purchases. The first results from the new marketing strategy are expected in the fourth quarter.

Following the earnings release, American Eagle shares fell almost 14% on Thursday. According to MarketWatch data, the stock has 13 “hold” ratings, one “buy,” and one “sell.” The average target price is $18.40 per share, almost 22.5% above Friday’s close.

Quarterly sales from online pet supplies retailer Chewy failed to impress Wall Street. Net sales for the quarter ended August 2 rose 7.3% year over year to $3.33 billion. Adjusted earnings came in at $0.36 per share versus $0.33 per share a year earlier. Neither figure was particularly impressive, both roughly in line with Wall Street’s forecasts, Barron’s writes.

Chewy shares fell 10.8% on Wednesday, their largest one-day decline in a year. Most of Wall Street remains upbeat on the stock: according to MarketWatch data, it has 21 “buy” recommendations versus 10 “hold” ratings. The average target price is $28.32 per share, implying 38.5% upside from Friday’s close.

Shares of mid-cap biotech Dyne Therapeutics fell 16.4% on Tuesday after Swiss pharma giant Novartis reported a trial failure for a drug that uses technology similar to Dyne’s experimental therapy.

Novartis’ del-desiran, meant to treat a type of myotonic dystrophy, performed no better than placebo in a phase III trial. Dyne is developing a treatment for the same disease based on a similar mechanism of action. The company said it would present additional trial data over the next several weeks.

According to MarketWatch data, 16 Wall Street analysts covering the company currently recommend “buy,” while just one rates it “sell.” The average target price is $37.27 per share, implying 102.8% upside from Friday’s close.

Signet Jewelers, the owner of jewelry brands Jared and Kay Jewelers, reported for the quarter ending August 1 a 36% increase in adjusted earnings per share to $2.19. Wall Street had expected $1.74 per share. Signet stock gained almost 24% on Wednesday.

Wall Street is split on the outlook for Signet, with six “hold” ratings versus five “buy” calls. The average target price is $125.56 per share, 25% above Friday’s close.