Tag Archives: ROST

Five Below Q3 Earnings: Meeting Expectations

Small cap extreme-value retailer (for pre-teens, teens and beyond) Five Below Inc (NASDAQ: FIVE) reportedQ3 2017 earnings after the Thursday close with results meeting expectations after sales and margins were boosted by fidget spinner toys in a previous quarter. Net sales increased by 28.9% to $257.2 million as comparable sales increased by 8.5%. The Company opened 41 new stores and ended the quarter with 625 stores in 32 states for an increase in stores of 20.9% from the end of the third quarter of fiscal 2016.Net income increased by 81.4% to $9.9 million. Out look was given as the following:

For the fourth quarter of fiscal 2017, net sales are expected to be in the range of $491 million to $503 million and assuming a 4% to 6% increase in comparable sales. Net income is expected to be in the range of $60.8 million to $64.6 million, with a diluted income per common share range of $1.09 to $1.16 on approximately 55.7 million estimated diluted weighted average shares outstanding.

For the full year of fiscal 2017, net sales are expected to be in the range of $1.264 billion to $1.276 billion based on opening 103 net new stores and assuming a 5.7% to 6.5% increase in comparable sales. Net income is expected to be in the range of $95.9 million to $99.7 million, with a diluted income per common share of $1.72 to $1.79 on approximately 55.7 million estimated diluted weighted average shares outstanding.

The CEO commented:

We are extremely pleased with our third quarter results that exceeded the high end of our sales, comp and earnings outlook. This quarterly performance reflects a strong customer response to our WOW product, incredible price points, differentiated in-store experience and increasingly targeted marketing efforts. With the strength of our year-to-date performance, as well as our quarter-to-date momentum, we are raising our guidance for the year.

A technical chart for Five Belowshows sharesin an uptrend despite a summer dip:

A long term performance chart shows small cap off-price or value price retailers like Five Belowand Big Lots (NYSE: BIG) along with large capRoss Stores, Inc (NASDAQ: ROST) largely moving higher in positive territoryamidstvolatility:

Finally, here is a quick recap of small cap Five Belows recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History1/30/20174/29/20177/30/201710/30/2017
EPS Est. 0.9 0.14 0.26 0.13
EPS Actual 0.9 0.15 0.3 0.18
Difference 0 0.01 0.04 0.05
Surprise % 0.00% 7.10% 15.40% 38.50%
EPS TrendCurrent Qtr. (Jan 2018)Next Qtr. (Apr 2018)Current Year (2018)Next Year (2019)
Current Estimate 1.09 0.19 1.68 1.98
7 Days Ago 1.08 0.18 1.67 1.97
30 Days Ago 1.08 0.18 1.67 1.97
60 Days Ago 1.08 0.18 1.67 1.97
90 Days Ago 1.08 0.18 1.67 1.97

TJX Companies Inc Stock Is Cheap and for Good Reason

There are two potential concerns when it comes to TJX Companies Inc (NYSE:TJX). The first is the health of the overall off-price space. As with all areas of retail, Amazon.com, Inc. (NASDAQ:AMZN) and other e-commerce providers create a potential competitive threat. The second is TJX’s competitiveness within that space.

TJX Companies Inc Stock Is Cheap and for Good Reasoninvestorplace.com/wp-content/uploads/2016/07/tjxmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/07/tjxmsn-170×93.jpg 170w, investorplace.com/wp-content/uploads/2016/07/tjxmsn.jpg 728w” sizes=”(max-width:300px) 100vw, 300px” /> Source: Mike Mozart via Flickr

So far, the first risk hasn’t really played out. TJX news in terms of traffic has been pretty solid, with the figure rising 2% even in what looked like a disappointing Q3 report last week.

Rival Ross Stores, Inc. (NASDAQ:ROST) saw its customer count rise as well, meaning the defection to online shopping seen in other areas of retail hasn’t played out — yet.

The second risk might not get the same coverage, particularly given TJX’s reputation. But it’s a concern nonetheless. TJX stock has underperformed its space badly of late. Since Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) went public in July 2015, OLLI stock has gained 118%. Burlington Stores Inc (NYSE:BURL) has doubled, and ROST has risen 43%.

In contrast, TJX stock has gained less than 8% in those 26 months. Of course, there are two ways to view that underperformance. It does leave TJX stock relatively cheap and perhaps “due” to catch up with the rest of the space.

But, from here, the weakness of late even in a strong sector is a major concern. If this is how the company performs with its sector healthy and the economy strong, what happens if and when the external environment gets worse?

The Amazon Threat to TJX

It’s worth pointing out that the concern about e-commerce competition for brick-and-mortar retailers like TJX isn’t just a concern about Amazon, or other players, taking all of their revenue.

What’s been seen at mall retailers, for instance, generally is a 10-20% reduction in revenue. But given the fixed expense of rent and the increasing cost of labor, that seemingly modest pressure is enough to decimate profits. Even flat sales, for a retailer, eventually will cause profits to decline as expenses rise and margins erode.

So far, the off-price channel has held up just fine. TJX same-store sales rose a strong 5% in FY17 (ending January) and have gained 1%+ through the first nine months of FY18, even with what the company admitted was a series of merchandise misses in Q3. Other names in the industry continue to grow sales and profits as well.

The question is whether that will change. And I still believe it might, even if a shift to e-commerce so far hasn’t had the same devastating impact seen at department stores and mall retailers. So far, no one really has replicated the off-price model online (not even TJX or Ross, both of whom drive a minimal percentage of revenue through their respective websites). And it’s possible no one will.

But it’s also possible that direct online competition will arise. The obvious, and concerning, potential parallel here is in the auto parts space. A year ago, that sector looked something close to Amazon-proof. Since then, Advance Auto Parts, Inc. (NYSE:AAP) has fallen 44%, and rivals O’Reilly Automotive Inc (NASDAQ:ORLY) and AutoZone, Inc. (NYSE:AZO) have fallen 16-17%.

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Again, the Amazon effect isn’t binary; it’s not a matter of all, or even most, sales moving online. A point here and a point there starts to make a big dent on profit, as retail stocks have shown over the past few years. That’s a potential risk to TJX stock going forward.

The Off-Price Market

To some extent, that risk does seem priced into TJX stock. It still trades for about 18x FY19 analyst estimates, despite guidance suggesting ~8% growth this year (excluding the impact of an extra week) and 6% growth a year ago.

But the broader concern is that TJX is lagging both rival Ross and its younger, smaller peers. Ross has grown comps 4% in each of the last two years, and is guiding toward a similar number this year. EPS is guided to rise roughly 15%.

Burlington grew adjusted net income 33% last year and expects a 28% increase this year. Ollie’s posted 50% non-GAAP earnings growth last year and 32% in the first half of this fiscal year.

Those stocks are more expensive than TJX on an earnings basis, but investors so far have gotten what they’ve paid for. As noted, the company has underperformed.

The key question is: will that change? And, if so, how? TJX’s HomeGoods concept is performing well but generates roughly 10% of revenue. The core “Marmaxx” (Marshalls and T.J. Maxx) banners are losing share. Margins are compressing, albeit modestly.

The trajectory of the business really isn’t that great at the moment. That means there’s a bit of a turnaround already priced into TJX stock, even though news really hasn’t been that impressive of late.

Q3 results showed that issue, with ROST outperforming TJX both in terms of fundamentals and stock price gains. And that gap has to narrow, at least, for the company to see upside. On this site, Nicholas Chahine made a good argument for buying the post-earnings dip in TJX stock. But there’s more to consider here than just the price.

Simply put, TJX isn’t performing as well as it should be, or as well as its reputation suggests. That’s a bigger risk than the one posed by e-commerce, and it’s one I’m not yet interested in taking.

As of this writing, Vince Martin has no positions in any securities mentioned.

12 Stocks To Watch For November 16, 2017

12 Stocks To Watch For November 16, 2017

Some of the stocks that may grab investor focus today are:

Wall Street expects Wal-Mart Stores Inc (NYSE: WMT) to report quarterly earnings at $0.97 per share on revenue of $120.89 billion before the opening bell. Wal-Mart shares slipped 0.26 percent to $89.60 in after-hours trading.
Analysts expect Applied Materials, Inc. (NASDAQ: AMAT) to post quarterly earnings at $0.91 per share on revenue of $3.94 billion after the closing bell. Applied Materials shares rose 0.50 percent to $56.05 in after-hours trading.
Cisco Systems, Inc. (NASDAQ: CSCO) reported better-than-expected profit for its first quarter on Wednesday. Cisco shares gained 5.83 percent to $36.10 in the after-hours trading session.
After the closing bell, Williams-Sonoma, Inc. (NYSE: WSM) is expected to post quarterly earnings at $0.84 per share on revenue of $1.29 billion. Williams-Sonoma shares gained 1.61 percent to $51.60 in after-hours trading.
Analysts are expecting Viacom, Inc. (NASDAQ: VIAB) to have earned $0.86 per share on revenue of $3.23 billion in the latest quarter. Viacom will release earnings before the markets open. Viacom shares gained 0.29 percent to close at $24.61 on Wednesday.
NetApp Inc. (NASDAQ: NTAP) reported stronger-than-expected results for its second quarter and issued strong Q3 guidance. NetApp shares climbed 11.41 percent to $51.05 in the after-hours trading session.

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Before the markets open, J M Smucker Co (NYSE: SJM) is projected to report quarterly earnings at $1.9 per share on revenue of $1.89 billion. Smucker shares gained 1.40 percent to $108.00 in after-hours trading.
Wall Street expects Gap Inc (NYSE: GPS) to post quarterly earnings at $0.55 per share on revenue of $3.76 billion after the closing bell. Gap shares gained 0.56 percent to $27.05 in after-hours trading.
RH (NYSE: RH) increased its outlook for third quarter and fiscal 2017. RH shares jumped 15.67 percent to $96.35 in the after-hours trading session.
Analysts expect Best Buy Co Inc (NYSE: BBY) to report quarterly earnings at $0.78 per share on revenue of $9.36 billion before the opening bell. Best Buy shares rose 1.48 percent to $58.15 in after-hours trading.
After the markets close, Ross Stores, Inc. (NASDAQ: ROST) is estimated to post quarterly earnings at $0.67 per share on revenue of $3.26 billion. Ross Stores shares rose 1.07 percent to $65.30 in after-hours trading.
L Brands Inc (NYSE: LB) reported in-line earnings for its third quarter on Wednesday. L Brands shares dropped 4.34 percent to $47.12 in the after-hours trading session.