The Daily Kill Sheet Picking Off Profits One Stock At A Time!

August 30, 2012

Daily Kill Sheet For August 30, 2012

Filed under: Uncategorized — Administrator @ 10:06 am

June Comp
Comp Versus Expectations
Zumiez (ZUMZ)
Reporting 2nd-quarter EPS tonight…Comp will be reported then.
Stage Stores (SSI)
+320 basis points
Strength in footwear, home & gifts, misses sportswear, petites and plus sizes. 
Bon-Ton Stores (BONT)
+90 basis points
Ladies and special size sportswear, both moderate and better, shoes, children’s home and fine jewelry had strong sales gains.
CATO Stores (CATO)
+170 basis points
Remains cautious regarding the rest of the year.
TJX Companies (TJX)
+180 basis points
Customer traffic drove the comp sales increase across all divisions.  The company is now expecting third-quarter EPS to be near the high end of their previously estimated range of $.56 to $.59. Consensus stands at $0.61. 
Macy’s (M)
+180 basis points
Broad-based strength across merchandise categories, geographies & channels.
Ross Stores (ROST)
+220 basis points
Another strong month. No EPS guidance in release.
Stein Mart (SMRT)
+380 basis points
Linens, ladies’ career and casual sportswear and ladies’ petites outperformed for the month while gifts, dresses, and men’s underperformed. 
Target Corp. (TGT)
+120 basis points
Sales were stronger in the 2nd half of the month, driven by back to school.
Limited (LTD)
+330 basis points
Another comp consensus beat.
Nordstrom’s (JWN)
+980 basis points
The beat reflects a shift in timing of their Anniversary Sale, JWN’s largest sale event of the year. The event started one week later compared with last year. As a result, eight days of the event occurred in August this year compared to one day in 2011.
Costco (COST)
+160 basis points
Gas prices added 100 bps to the U.S. comp, while currency translation hurt International by 200 basis points.
Wet Seal (WTSLA)
-220 basis points
Wet Seal: -18.5%
Arden B: -16.3%
Stinky results all around this month!
The Gap Inc. (GPS)
+350 basis points
The Gap: +9.0%
Banana Rep.: +8.0%
Old Navy: +12.0%
International: -2.0%
Kohl’s (KSS)
+150 basis points
Best performing businesses were footwear, men’s and children’s.
Fred’s Inc. (FRED)
+140 basis points
An increase in late back-to-school sales allowed them to beat recently issued guidance for the month. Pharmacy remained strong, primarily due to ongoing script growth and generic drug introductions.
The Buckle (BKE)
+460 basis points
Comps turn positive after 2 negative months.
Pier 1 Imports (PIR)
Guiding 2nd-quarter EPS to $0.19, consensus stands at $0.18.
Christopher & Banks (CBK)
Reported 2nd-quarter loss of $0.19, $0.06 better than the consensus.
As expected, comps were fairly strong driven by back to school buying. Nordstrom’s comp was unusually strong this month, driven by a shift in timing for their annual anniversary sale. Eight days of the sales fell in August this year compared to only one day last year. The “surprise” seems to have been enough to push the shares to near a new all-time high in the premarket. The stock has had a good run, but likely still has some room to run based off of multiples it has received in the recent past. Indeed, a 20x multiple on the forward consensus estimate would put the stock in the high $70 range and a P/E at about 1.5x their projected year over year earnings growth rate. Unless the stock were to break and close above $58.41 I’d expect to see the shares pullback to retest the $55 – $56 area over the next week or so. While this month’s comp was strong, the solid comp was expected after July’s weak showing due to the timing shift. Even so, investors will soon start to anticipate holiday sales and start to value the stocks more on forward earnings estimates. As this happens, JWN sha
res should easily reach the $72 – $74 dollar area. All said, let’s be patient here and look to initiate a position in the $55 – $56 area. If the stock breaks through and closes above $58.41, I’ll likely reexamine my entry point, otherwise I believe patience will be a virtue here on this trade.   

August 22, 2012

Daily Kill Sheet For August 22, 2012

Filed under: Uncategorized — Administrator @ 10:20 am

I am covering my shorts on the three home builders Toll Brothers (TOL, $32.75) Pulte, (PHM, $13.19), and Lennar (LEN, $32.11). Toll reported third-quarter earnings of $0.25, $0.07 better than the consensus estimate. While the earnings beat in and of itself was not a real surprise, given that EPS is hard to gauge given the timing of closings etc, the really bullish part of the release was the new order activity. Orders rose 57% year over year, off an admittedly low base. Even so, most of the Street was looking for about 30% growth, thus it was a solid beat. Moreover, management stated that deposits were running 59% above the prior year’s level so far in August, implying that the strength is continuing to build. This is contrary to the main thesis of my short call that we would see a slowing in trend as the summer months commenced similar to what we have seen over the past two years. My expectation was that the spring selling season was unusually strong due to the mild winter we had this year and that we would see sequential slowing. That has not happened yet, thus it is best we cover these shorts here. For TOL we exit the trade with a 13.3% loss; for PHM 25.1%; and LEN 7.1%.

August 21, 2012

Daily Kill Sheet For August 21, 2012

Filed under: Uncategorized — Administrator @ 9:24 am

Take a look at Green Mountain Coffee Roasters (GMCR, $24.34) for a trade. The stock has been absolutely killed over the past twelve months dropping over 78% since its September high. The company has an important product (k cups) coming off patent next month and investors are afraid that the company will lose market share and see its margins decline. Margins have already been declining and Green Mountain has a lot of headline risk as competitors announce competing products. Even so, the company recently reported third-quarter earnings $0.03 better than consensus and gave their initial full-year guidance for 2013 of $2.55 – $2.65 a share, well above the consensus of $2.50.

At this juncture, about 26% of the float is held short and the share price is sitting just below a major resistance level near $25.00 a share. If the stock can break through and close above $25.50 a share then it’s likely that we could see a short squeeze since the next major resistance level is the 5/2 – 5/3 gap in its chart between $48.62 and $30.29. With that said, my near-term price target is $30, implying about a 23% return to my target.
Note that the company won’t release earnings until early November, thus it is likely that our main risk will be headline risk over the next month or two. Fundamentally, while it’s likely that the company will give up some market share in the coming months as competing products are introduced the company’s product quality and brand loyalty should help to mitigate some of the impact here. Moreover, both Starbucks and Dunkin Donuts have shown support for Green Mountain and both companies have been experiencing very strong k-cup sales within their stores. At this point, headline risk works both ways for investors as any announcements by the company of new product sponsors could help to drive shorts out of the stock. With that said, I believe GMCR shares represent a solid speculation here. Ideally, I’d like to see stronger volume on any break above $25.50 to signal a short-covering rally. To be safe, I am placing a hard stop just below $22 a share.

August 17, 2012

Daily Kill Sheet For August 17,2012

Filed under: Uncategorized — Administrator @ 9:26 am

I am closing out my short position in Foot Locker (FL, $35.85) with an 8.0% loss. The company reported second-quarter earnings this morning of $0.38 a share, $0.05 better than the consensus estimate. My thesis going into the quarter was that the weak European economies and tough currency translation rates were going to be a drag on both sales and earnings…similar to the last two quarters. Comps came in stronger than expected, however, and drove the beat. Indeed, comps came in up 9.8% against a tough +11.8% last year, well above the +6.1% consensus comp estimate. SG&A; actually declined as a percentage of sales during the quarter, thus the solid comp wasn’t driven by increased sales and promotion. Inventories were well controlled and declined 3% during the quarter versus the 7.2% jump in sales. All said, while the decrease in inventory heading into back to school may be a concern (as it could limit sales upside), today’s results should be strong enough to lift the stock here and take away concerns about weakness in Europe. In sum, my call was that the daunting year over year comp (+11.8%) and weakness in Europe was going to hurt sales and lead to weak EPS. This certainly wasn’t the case here, thus I am closing out the position with an 8% loss.

On a positive note our trading position in Finish Line (FINL) should benefit from the Foot Locker results and will likely approach my near-term price target of $23.50. Given the potential strength in the stock today, I will likely hold the stock til slightly above that level, more into the $23.75 – $24.00 area if it reaches my target at the open I will put out an update email when I believe it should be sold.

August 13, 2012

Daily Kill Sheet For August 13, 2012

Filed under: Uncategorized — Administrator @ 2:56 pm

Take a look at Red Robin Gourmet Burgers (RRGB, $31.11) on the short side. The stock recently gapped up above its 200-day moving average on a $0.02 beat to the consensus when it reported its second-quarter earnings. Even so, the move was likely premature and the stock is likely to dip back below the 200-day moving average.

RRGB‘s earnings beat was low quality. Indeed, the top line came in weaker than expected by the Street. Revenues increased 3.7% to $223.7 million, while the consensus revenue estimate was $225.1 million. Comps for the quarter were up 0.8% marking the second consecutive quarter of sub 1% growth. While the operating margin did increase 30 basis points on a year over year basis, it was driven by a 60 basis point decrease in the “other” category. Meanwhile, cost of goods and occupancy expenses both jumped 20 basis points year over year. Labor expenses dropped 10 basis points. Sustainable cost reductions are usually driven in the labor, cost of goods or occupancy categories.

Looking ahead, management expects the operating margin to run about 50 basis points higher for the full year or at about 20.3%. This implies that they are essentially looking for about 10 basis points of improvement during the second half of the year. Given the recent spike in grain prices food prices in general are likely to move higher and pinch consumers’ pocketbooks. With traffic levels already weak (up less than 1%), anything that hampers the consumer is bad news for Red Robin. Moreover, as the increased grain prices work their way through the commercial food channels, it’s likely that Red Robin will experience food cost inflation in 2013, limiting the chance for both margin expansion and EPS guidance increases going forward.

All said, my near-term price target for RRGB is $28 – $29, implying about 11% – 7% upside to my target (8.7% to the mid point of my range.

August 6, 2012

Daily Kill Sheet For August 6, 2012

Filed under: Uncategorized — Administrator @ 10:25 am

Take a look at Finish Line (FINL, $21.23) for a trade. The stock closed on Friday a nickel above its 200-day moving average. The stock has tested the 200-day four times over the past month and is poised for a breakout. Unlike Footlocker and Nike, FINL has no exposure to Europe and thus no earnings risk due to currency translation. Meanwhile, U.S. trends for footwear remain robust as we enter into the important back to school shopping season.

Operationally, the company has been hitting on all cylinders. Finish Line beat the consensus estimate by a penny last quarter and raised its full-year guidance. They reported an 8% comp on top of a +6.5% comp the previous year. In the upcoming quarter, FINL faces a tough +11.0% comp. Even so, the company has been increasing its on-line presence and has been growing its web-based sales at a double-digit rate. All said, I expect a mid-single-digit comp in the upcoming quarter driven by strong on-line sales and continued strength in athletic footwear sales. (Note I was in the Manchester Mall this weekend and while the mall itself wasn’t busy, Finish Line had a good crowd within its store without the large sale signs that were prevalent at many of the stores I visited.)

On a valuation basis, the shares are trading at 11.2x the forward consensus. Over the past three years the stock has averaged about 15x earnings while trading at a 52-week high and has averaged 22x earnings at a 52-week high over the past 19 years. My near-term price target is $23.50, implying about a 10.5% return to my target. This implies a forward multiple of 12.4x. My target is just inside the 3/29 – 3/30 gap in the stock’s chart between $24.77 and $23.13. This level was barely tested back in May, and with the earnings beat in June, the next test should be more successful, in my opinion. With that said, let’s use the recent push through the 200-day as a signal to initiate a position here and look for about a 10% short-term move. The TRIX indicator has also turned up here, giving more technical support to the near-term outlook. To be safe, let’s put a hard stop in at $20 in case the stock falls back through its 200-day moving average.

August 2, 2012

Daily Kill Sheet For August 2, 2012

Filed under: Uncategorized — Administrator @ 9:43 am

August 2, 2012
June Comp
Comp Versus Expectations
Zumiez (ZUMZ)
-100 bps
Comps weakened during the fourth week of the month.
Stage Stores (SSI)
+320 bps
Most merchandise categories saw comp-store sales increases during July, with accessories, cosmetics, home & gifts, misses sportswear and young men’s exceeding the company average.
Bon-Ton Stores (BONT)
+30 bps
Thin analyst coverage
CATO Stores (CATO)
+30 bps
2nd Qtr EPS to be near high end of original guidance range of $0.53 – $0.57. Consensus $0.53.
TJX Companies (TJX)
+200 bps
Raises 2nd Qtr EPS guidance to $0.55. Prior guidance was $0.52 – $0.53. Consensus $0.53. For the full year, $2.38 – $2.44. Prior guidance was $2.31 – $2.39. Consensus is $2.45.
Macy’s (M)
+160 bps
No earnings guidance on the strong beat…hmmm
Ross Stores (ROST)
+270 bps
Guides 2nd Qtr EPS to $0.80 – $0.81. Consensus stands at $0.79.
Stein Mart (SMRT)
+50 bps
Home, ladies’ accessories and ladies’ career sportswear posted the strongest sales. Dresses, ladies’ plus size sportswear and ladies’ boutique were weaker. 
Saks Inc. (SKS)
-90 bps
SKS added a one-day Electronic Gift Card event in July. Management estimates that this helped July comp-store sales by 200 basis points.
Target Corp. (TGT)
+50 bps
Called consumer environment “quite challenging”.
Limited (LTD)
+580 bps
Declares special dividend of $1 a share. Regular dividend of $0.25 will also be paid. Raises 2nd Qtr guidance range to $0.46 – $0.48 from $0.40 – $0.45. Consensus $0.46.
Nordstrom’s (JWN)
+170 bps
No earnings guidance in the release.
Costco (COST)
U.S. +7.0%
International flat
Gasoline price deflation hurt U.S. results by 100 bps while currency translation hurt international results by 700 bps.
Wet Seal (WTSLA)
-300 bps
Guidance of a loss of $0.06 – $0.07 unchanged after adjusting for a restructuring charge and CEO severance costs.
The Gap Inc. (GPS)
All formats positive including International.
+620 bps
Guides 2nd Qtr EPS to $0.47 – $0.48. Consensus $0.38.
Kohl’s (KSS)
+150 bps
No EPS guidance. Management stated that they have made “significant progress in improving inventory levels”. 
Fred’s Inc. (FRED)
Promotions drove customer traffic.
Raises 2nd Qtr EPS Guidance range to $0.17 – $0.19 from prior guidance of low end of $0.15 – $0.17. Consensus $0.15.
The Buckle (BKE)
+40 bps
2nd negative monthly comp in a row.
Abercrombie & Fitch (ANF)
-10.0% 2nd Qtr
-5.0% U.S.
-26.0% International
Downgraded at Piper and Robert Baird this morning.
Sees 2nd-Qtr EPS of $0.15 – $0.18. Consensus $0.33. For full year, lowers guidance to $2.50 – $2.75. Prior guidance was $3.50 – $3.75. Consensus is $3.39.
American Eagle (AEO)
+9.0% 2nd Qtr
Raises 2nd-Qtr EPS guidance range to $0.19 – $0.21 from $0.13 – $0.15. Consensus was $0.15.
Aeropostale (ARO)
Sales per transaction increased, but store traffic was weaker than expected.
Now guiding 2nd Qtr EPS to breakeven. Prior Guidance was $0.03 – $0.05. Consensus stands at $0.06.
Today I am publishing updated 12-month Hi/Lo price ranges for all of the retailers I cover. I am starting with the hardlines retail category and then moving through to the other parts of retail.

The best way to use these ranges is to think of them as a stop light. Stocks with their prices in the green third of the range are Buys or Overweight positions on a purely valuation basis, while those in the yellow/orange section are Holds or Equal weight positions. The red third of the price line are for source
of funds/underweight positions. Note that these colors signify how the stock looks on a valuation basis only. I will recommend the stock as a Buy when it has a fundamental catalyst, thus a stock in the green area is not necessarily a Nef Value Research Buy Recommendation.

These price ranges should be useful as a guide to how the stock is trading versus its traditional trading range valuations. Below are the Auto Parts Retail, Office Supply, and Sporting Goods valuation ranges. For the record, Nef Value Research only has a buy on Office Max at this point from the stocks listed below. Office Max reported second-quarter earnings today and beat by $0.05.  I will put out more valuation ranges later this afternoon. These are only to get the ball rolling.

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