WWW - 2014 Preliminary Results, 2015 Guidance
Takeaway: Here's a key chart to keep an eye on while watching WWW management try to argue that it's 2015 guidance is not overly conservative. Every single year since at least 2007, WWW has issued initial guidance for the upcoming year in Jan. and every single year it has guided down (with the exception of 2011). And every year sans one, it beat the high end of its guidance. And in 5 years it posted earnings above where they were before the guide-down.
Seriously, the company ended on a great note, with revenue +9%, and Sperry up in the HSD. Cash flow looked outstanding, and debt is now down below 700mm vs 1.2bn in 4Q12.
Revenue guidance looked solid at MSD -- conservative -- but solid in WWW terms. The company is getting better confidence in the contribution of Sperry, Keds, Saucony and Stride Rite outside of the US (the crux of the long call).
But then, lo and behold, the company manages to guide to flat EPS in '15, despite easy comps, better revenue growth, and lower interest expense.
For such a well managed company, WWW either has horrific internal forecast accuracy, or it does not understand the concept of guidance.
Either way, we think that 2015 will come in ahead on both revenue (high-single) and EPS (mid-teens at a minimum).
As a kicker, WWW is likely to buy something in 2H, and while we're not a fan of deals in general, we'd note that a) WWW is very good at them, and b) a new brand will divert attention from Sperry, which can't come soon enough.
Takeaway: Another strong data point to start the year though the 2.8% reading this week was a 70bp deceleration on the two year trend line. As we comp the first 14 Polar Vortex weeks of 2014, comps are relatively easy at 1.9% compared to the balance of the year at 2.7%. Our sense is that this was driven by promotional activity due to greater than usual excess inventory available after the Holiday. That's been supported by the traffic trends we saw during December, where the day after Christmas was the best shopping day of the month according to Euclid Analytics.
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