Schwab Network Live Experience: Darin Tuttle's Insights
You don't need Super Bowl square footage to sell puppy chow $WOOF
Morning Trade Live with Oliver Renick Show Notes
I got to appear on the Schwab Network for their live segment. It was booked two days ago and the show is unscripted, which means you have to prepare two hours for just five minutes of airtime. (You never know what questions could come your way). Here are my behind-the-scenes notes, including Petco which was not covered live.
Dollar Tree Inc DLTR 0.00%↑
Williams-Sonoma WSM 0.00%↑
Petco WOOF 0.00%↑
Dollar Tree Inc
Est. EPS: $2.65
Actual EPS: $2.55 (Miss) Bar is set High, Highest since last two years
Est. Revenue: $8.67B
Actual Revenue: $8.63B
Bulls say: Strong Cash flows supporting stock buybacks (250M last quarter) with stable margins, solid consumer, new store expansion, multi-price offerings
Bears say: Money doesn’t grow on trees. Overspending and cash could be used better elsewhere increasing sales per square foot or increase margins. Would be first hit if consumer slows.
Closing 600 stores in 2024, another 370 leases to expire, 16,774 total (CVS closed 600 in 2021 over three years)
No new buybacks, still have $1.3B outstanding remaining
Remember this is 4th quarter earnings where S&P 500 earnings were up 11% vs. 3% consensus – Everyone was beating 4th quarter earnings
Reached full resolution with the DOJ supply chain issues- became “Good Distribution Practices” (“GDP”) certified
JP Morgan Overweight $165, Guggenheim buy $170, Wells Fargo Overweight $180
Cash is King 3.66 Cash Flow per share Qtr. Vs. Industry average less than one.
Big spend on Capital Expenditures $660M which is a 38% increase YoY
Margins look good and stable, reported 32% Gross not impacted by the Bullwhip affect others have experienced
P/E 28 vs. DG P/E 18, trading in top half, except to trade mid range to comps
Expanded multi-price Plus offering to 870 additional Dollar Tree stores
Sensitive Consumer “First line of Defense”
Williams-Sonoma
Est. EPS: $5.14
Actual EPS: $5.44 (Beat)
Est. Revenue: $2.23B – lower that past 2 years 4th quarter
Actual Revenue: $2.28B (Beat)
Bulls say 26% dividend increase, steady dividend payer, Increasing EBITDA greater than Sales, strong operator inventory turnover is picking up, New $1B stock repurchase program
Bears say High End Consumer Growth is shrinking, increasing net debt ratios at a rapid pace, rising shipping and fuel costs for home furnishings retailers Gross margin of 42.6% is stretched how much better can they get?
CEO Laura Alber has done a great job and understands her consumer, but a concern is the fact she has sold roughly $22M over the past year (high % of her personal holdings but still less than 1% of the total float)
Wells Fargo Equal Weight $240, UBS sell $195, RBC $261
Over the last four quarters, the company has surpassed consensus EPS estimates 4xx
P/E 16 fairly valued among specialty retailers
NYSE order imbalance at close 159,170 shares on the buy side (typically positive for a stock with increasing demand) last minute shoppers.
Petco
Est. EPS: $0.02
Actual EPS: $-0.08 Missed, back to back negative quarters
Est. Revenue: $1.62B , healthy growth in line with expectations
Actual Revenue: $1.7B
Bulls say: Good intrinsic Book Value, Name brand recognition and goodwill, and high revenue per share
Bears say: You don't need Super Bowl square footage to sell puppy chow. Under short term pressure with Costs of Good sold increasing faster than revenues, not much confidence from leadership able to deliver
On the call, mgmt. literally said profitability of the company is “Unacceptable” (Wow!, not a good look)
Mobile Vet vehicle growth (why not storefront?)
Morgan Stanley $3.00, Jefferies Hold $3.11, Goldman Buy $5.00
Earnings are really the only time this company gets the spotlight because their initiatives haven’t been catching the public’s eye.
Final Word
Thank you for reading and I am grateful and humbled to be able to learn, grow, and invest alongside you at Tuttle Ventures.
Vision, courage, and patience leads to successful investing.
Don’t forget to follow Tuttle Ventures on Twitter, LinkedIn, or Instagram.
Check out the website or some other work here.
Best,
Darin Tuttle, CFA
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