It’s been a while since a miss did not phase me whatsoever. JNY has been one of our favorite short ideas. But importantly, it is not done. Three considerations…
1) I’d call this a ‘mini-miss’. Yes, numbers are coming down, but are still based in part on ‘strong brand performance,’ selective price increases, and mid-single digit revenue growth. Do you want to give them a free pass on that? Be my guess.
2) There will be another one of these. Keep in mind that JNY values inventory on the lower of ‘cost or market’ and then layers this over FIFO accounting. Translation = gross margin weakness today is using raw materials procured anywhere between 6-12 months ago, and includes ‘rebound demand’ of msd comps.
3) By mid-year we’ll be looking at ‘normalized’ demand, on top of raw materials being purchased today. Then we get to witness first hand the gong show that ensues as the supply chain beats itself up to protect margin, or find some growth.
The point is that no one should use this as an announcement as an indication of ‘ok, the blow ups are here, now I can selectively buy.’ Quite the opposite. The blowups are here, and will accelerate throughout the year.
Here’s a YouTube of JNY’s guidance today vs. 13 weeks back.