Last week, Home Depot reported 1Q15 results that exceeded consensus estimates and raised the low end of their guidance for the full year. The highlights for the quarter included a 7.1% US comp, online growth of nearly 30%, and continued margin expansion.
Read MoreBed Bath and Beyond's 4Q Disappoints; Potential 1Q Concerns for Other Retailers Highlighted
Bed Bath and Beyond reported 4Q (ending February) yesterday after market close that were in line with consensus estimates, but were worse than they appeared. Primarily, sales were below expectations, and profitability (operating margin) continues to be pressured. Additionally, management's guidance points to just moderate sales growth and continued margin pressure in 2015. As I detailed in a prior post, Bed Bath & Beyond sales and earnings growth is slowing as competition heats up. Management's heavy share repurchases provide some downside protection, but the deteriorating fundamentals are likely to limit any share price appreciation moving forward.
Read MoreResearch Sources: What They Are, Where to Find Them, Why They're Important
I've received a couple questions on where I got the data included in my models. The data is all public, but it comes from a variety of different places. I'll detail the main sources of info and what they're used for in this article.
Read MoreUnderlying Housing Market Remains a Positive for Home-Related Stocks
As I've written in the past, a strong housing market drives results for home-related retailers like Home Depot, Lowe's, Restoration Hardware, Target, and Bed Bath and Beyond. Over the last two days, we've received existing home sales and new home sales data showing continued strength in the housing market. As we move into the all-important spring season, strong housing data should bode well for home-related companies.
Read MoreHome Depot: Risk/Reward Becoming More Balanced After Solid 2014
Home Depot recently reported 4Q results that were above expectations and were well received by investors. The company is executing at a high level and appears to have all of the momentum behind it. However, with the stock up 41% over the last year, Home Depot's stock no longer appears to be an obvious buy as the risk/reward starts to balance out. I'll discuss the details and other thoughts on the strong quarter below.
Read MoreHow Analysts Arrive at Target Prices, and Home Depot's 2015 Outlook
If you follow a major company, you may have noticed that the stock will sometimes move based on an analyst's upgrade/downgrade on the stock. And within that upgrade/downgrade, analysts will often set a mysterious target price for the stock, with no discussion of how they calculated that price. How do they get to it?
Read MoreBed Bath and Beyond: The Under-reported Bear Case
There's a bull case and a bear case for every stock. However, it's not always obvious what the arguments are on either side. In Bed Bath and Beyond's case, the bull thesis is readily apparent: a strong (debt free) balance sheet, high free cash flow generation, strong brand, ramping online sales, and low valuation. In this article, I'll detail the ugly, lesser-known bear argument, which could point to a stock in the low $60 range.
Read MoreStaples and Office Depot Merger Takes Another Step Closer to Reality
The case of Office Depot and Staples is a good example of why investors should be aware of both the bull and bear thesis on a stock. For those who were short Staples at the time, being aware of the bull thesis would have helped frame the risk of a short position in Staples. Since November, that bull thesis has largely played out as both companies are now several steps closer to a potential merger. Office Depot and Staples are now up 78% and 45%, respectively, as the stocks price in the increased likelihood of a combined company.
Read MoreInitial Data Points Suggest a Strong Holiday for Retailers
We've begun to receive initial holiday datapoints from industry observers and retailers...
Read MoreWhy Falling Gas Prices Might Not Necessarily Help Retail Sales
Gas prices have plummeted over the last several months, and the stock market has fluctuated sharply in how to interpret the recent decline.
Read MoreStaples: Bull Case Gets Stronger with Starboard Stake
The bull case for Staples is not well understood by casual investors. However, as I wrote on 11-20, there is a bull case here, and its ultimate home-run scenario is based on a merger between Staples and Office Depot. Today, the bull case took another step towards the home-run scenario as Starboard disclosed a stake in Staples and increased their existing stake in ODP. The stocks for both ODP and SPLS were up significantly on the news. I'll explain why this is an important development for the stocks.
Read MoreWhy the Media Gets the Retail Sales Report Wrong
There are two numbers that census retail sales will report -- a seasonally adjusted number and an unadjusted number. The seasonally adjusted number is the number that the media reports and that a lot of people focus on. As I'll argue, the unadjusted number is the one that really matters when trying to draw stock conclusions.
Read MoreAmazon: The World's Largest Startup, and Why They Shouldn't Have Profits
Amazon's lack of profits is a conscious decision by management, and the right decision given the opportunity ahead of them. The key questions investors should focus on is not whether they are in financial trouble, but what the company will look like in 5-10 years.
Read MoreSears: 3Q Bad as Expected, but Positive Implications for Other Retailers
Sears reported 3Q results this morning that were optically better than expected, but still very bad. The important takeaway is not that Sears is doing badly (which is well understood by investors), but the positive market share implications for other retailers, including HD, LOW, HGG, and BBY.
Read MoreThe Areas of Retail with the Most Upside from a Cyclical Perspective
During the Great Recession, just about every area of the economy became cyclically depressed. Five years later, most areas have recovered from those depressed levels and are now hitting new highs. But which areas have yet to pull themselves out of the recessionary crater, and have further upside in returning to normalized levels?
Read MoreHome Price Appreciation a Positive for Home-Related Stocks
Why is price appreciation and housing turnover so important for home-related stocks? I detailed why housing turnover is important in a previous post. I'll go into the reasons why home prices have a halo effect on housing purchases here.
Read MoreWhy You Need to Ignore Early Holiday Sales Results
With Thanksgiving and Black Friday behind us, we're now starting to get the early trickle of articles reporting on early retailer sales results. Generally, they've been fairly positive. But here's a huge list of reasons on why you shouldn't be making decisions based on these reports:
Read MoreYour Guide to Same Store Sales
Same store sales (also known as comparable store sales, or comps) are the most important metric in the retail industry. Let's talk about what it is and a couple nuances on how to analyze the number.
Read MoreWhat October's Existing Home Sales Report Means for Home-Related Stocks
As I wrote yesterday, existing home sales is a crucial metric for home-related stocks, but it's horribly overlooked by most investors. This morning, October existing home sales was released.
Read MoreAn Underappreciated Metric for Home-Related Stocks
If you own a home-related stock like Home Depot or Williams Sonoma, you may see the stock react sharply around the 25th of each month. You might also see this happen if you own an appliance retailer like Best Buy or a mattress company like Tempur-Pedic. These moves tend to coincide with the release of a macroeconomic data point called existing home sales. What is this metric, and why is it so important for so many companies?
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