Retail Earnings – A Bird in the Hand…

 

There’s a important callout to note between the quality of beat and raises we’re seeing in retail this morning. Let’s look at three specifically – WSM, DLTR, and ROST. Sales of the later were already reported on sales day, but both WSM and DLTR reported significantly stronger than expected top-line results, which drove SG&A leverage and earnings upside in Q1. Interestingly, despite more robust sales growth gross margins came in largely as expected – a trend that we’ve been seeing from many retailers with earnings out so far this quarter. Therein lies the callout. On the contrary, ROST reported gross margins up +60bps while growing SG&A relative to Street expectations. All three took up full-year guidance. WSM by the amount of its Q1 beat, DLTR by twice the amount of its beat, and ROST by an incremental 4% on a $0.01 beat in the quarter.

 

With all three companies guiding next quarter to earnings in-line or below consensus, results are becoming increasingly back-end loaded. The primary difference here is that WSM and DLTR are banking on some level of pricing to get there. ROST on the other hand has greater visibility due to its pack-a-away strategy that ensures lower costs product regardless whether or not the consumer decides to accept higher prices in the 2H. As the saying goes, a bird in the hand is worth two in the bush – for that reason we continue to like how ROST is positioned relative to most retailers heading in the 2H.

 

WSM: BEAT

                EPS: 0.30 vs. 0.28E

                Revs: +7.4%

                Inv: +6%

-          Beat driven by leveraging SG&A on stronger sales

-          Comps +6.7% vs. 4.3%E (Guid of +3-5%)

-          Increased FY Guidance by amount of beat

 

Retail Earnings – A Bird in the Hand… - WSM S 5 11

 

DLTR: BEAT

                EPS: 0.82 vs. 0.75E

                Revs: +14%

                Inv: +9%

-          Increasing FY guidance by $0.14 vs. $0.07 beat > taking up FY

-          Took up low end of revs outlook

-          Increased EPS range implying stronger profitability

-          Reaffirming FY comps up LSD-MSD

-          Comps +7.1% vs. +4.9%E

-          Also beat by leveraging SG&A on stronger sales

 

Retail Earnings – A Bird in the Hand… - DLTR S 5 11

 

ROST: BEAT 

                EPS: $1.48 vs. $1.47E

-          Guiding to Q2 below Street

-          Taking FY outlook up $0.20-$0.25 to $5.16-$5.31

-          GM expansion driven by pack-a-way driving results and earnings upside

 

Retail Earnings – A Bird in the Hand… - ROST S 5 11

 

Casey Flavin

Director

 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more