Facts from the Week: Dec 11, 2021
Highlights from $COST $V $ASO $DBI $SFIX $UNFI $TOL $LOVE $RDFN $RH $FERG $CONN $BRK $AAPL
Costco notes current inflation of 4.5-5.0%, compared to 1-1.5% in March, 2.5-3.5% in May, and 3.5-4.5% in September
Ferguson notes low-teens inflation in the quarter
UNFI noted inflation of 2.5-3%
In housing, Redfin notes the median home-sale price hit a new all-time high of $360,250, up 14% year over year and up 30% from the same period in 2019 while Toll Brothers expects 20% revenue growth in the coming fiscal year
Costco - $COST
About 79% of our import containers are late by an average of 51 days, a few percentage of those are actually a few days early, and many of them are a few days more than 51 late.
For Q1 '22 and talking with our merchants -- senior merchants, we estimate that overall year-over-year price inflation to be in the 4.5% to 5% range. That's a little bit higher of an estimated inflation rate that I discussed a quarter ago, but I think pretty consistent with what you read out there. [NOTE: this compares to 1-1.5% in March, 2.5-3.5% in May, and 3.5-4.5% in September]
And arguably, I can't think of any company that has the buying power per item that we do because we do our roughly $200 billion in sales with 4,000-ish items versus anybody else that's doing it with hundreds of thousands of items or 50,000 items. -CFO
Costco’s 2nd China opening this week: https://www.thenanjinger.com/news/regional-news/costco-chaos-in-suzhou-nanjing-hangzhou-could-be-next/
As a further hint of what was to come, more than 10,000 people applied for a ¥199 membership card back in August, not only surpassing the Shanghai record set 2 years ago, but also breaking Costco’s global record for sales of first-day memberships.
Visa - $V
Visa announced that the U.S. Spending Momentum Index (SMI) was 111.9 in November (seasonally adjusted), up 1.3 points from October, marking the second consecutive month of acceleration in consumer spending momentum. The SMI’s further increase above 100 signals that even more consumers are spending more than they did a year ago.
The Visa SMI is an economic indicator of the health of consumer spending. When the Visa SMI rises above 100, the consumer spending momentum is strengthening and when it falls below 100, the spending momentum is weakening as fewer consumers are spending more relative to the previous year.
“This month’s SMI reading once again reinforces the narrative that consumer spending remains robust to round out this year,” said Wayne Best, Visa’s Chief Economist. “It appears that consumers are looking past the high inflation readings in recent months at least for the time being.”
Academy Sports - ASO
Comparable sales were 17.9% on top of 16.5% last year, making it the 9th consecutive quarter of positive comparable sales. The Company continued to benefit from the strategic initiatives implemented to improve merchandise planning and allocation, operations, customer service and supply chain. As a result of these actions and the continued strong consumer demand for sports and outdoors products, all four product divisions saw significant growth.
Designer Brands - $DBI
The Company has announced new guidance for the fourth quarter of fiscal 2021. Consolidated net sales are expected to be flat to up low-single digits compared to the fourth quarter of fiscal 2019.
Stitch Fix - $SFIX
Looking forward, for Q2, we expect net revenue in the range of $505 million to $520 million representing growth of 0 to 3% year-over-year. We expect adjusted EBITDA in the range of negative $5 million to $5 million or negative 1% to 1% of net revenue. For the full year, we now expect revenue to be in the high single digits year-over-year and adjusted EBITDA margins to be between 1% and 2%.
This guidance reflects our expectation of lower net adds in clients discussed previously as we continue to optimize the client experience and onboarding in advance of accelerating further spend in marketing. It also reflects the ongoing macro impact of global supply chain challenges in the industry. -CFO
UNFI - $UNFI
We saw inflation impact our wholesale net sales by 2.5% to 3%, net of volume and mix changes. Due to the cost-plus nature of the majority of our pricing agreements, inflation is typically a positive driver of top line revenue and margin gains. For Q1, our growth can be looked at as roughly half coming from new business wins, net of expected market contraction, and half coming from inflation. At least for the next several months, we don't see inflation easing. Our procurement and merchandising teams are working closely with our suppliers to offset some of these price hikes with increased promotional activity to help our customers manage through this period.
Vail Resorts - $VAIL
Pass product sales for the North American ski season increased approximately 47% in units and approximately 21% in sales dollars through December 5, 2021 as compared to the period in the prior year through December 6, 2020, without deducting for the value of any redeemed credits provided to certain North American pass holders in the prior period. Pass product sales through December 5, 2021 for the 2021/2022 North American ski season increased approximately 76% in units and approximately 45% in sales dollars as compared to sales for the 2019/2020 North American ski season through December 8, 2019, with pass product sales adjusted to include Peak Resorts pass sales in both periods.
Toll Brothers - $TOL
Demand remains very strong. The housing market continues to benefit from solid fundamentals, including favorable demographics, pent up demand from over a decade of underproduction of new homes, low mortgage rates, a tight resale market, and permanent changes to the way Americans view life, work and home. We believe these trends will continue to drive strong demand for our first-time, move-up and active adult communities well into the future.
“We, like the rest of the industry, continue to be challenged by significant supply chain and labor constraints that are extending delivery times for our homes. Notwithstanding these issues, which we expect to continue for the foreseeable future, we project 20% revenue growth in FY 2022. -CEO
LoveSac - $LOVE
For our fourth quarter, we expect sales growth of approximately 35%, with adjusted EBITDA dollars in the $12 million to $13 million range compared to positive adjusted EBITDA of $25.9 million in the same quarter last year. Adjusted EBITDA is being impacted by expected lower gross margins of approximately 1,000 basis points year-over-year, due to significant supply chain headwinds, most notably current inbound freight rate inflation versus the prior year.
As we look to fiscal 2023, we remain confident in the trajectory of the business. While we are not providing formal guidance for fiscal 2023 at this time, at a high level, we expect healthy net sales growth in the high 20% range and adjusted EBITDA growth to exceed net sales growth. This is despite an expectation that supply chain headwinds persist throughout fiscal 2023. As a result of our continued supply chain headwind mitigation efforts, full year gross margins are expected to be around 50%.
Redfin - $RDFN
The median home-sale price hit a new all-time high of $360,250, up 14% year over year. This was up 30% from the same period in 2019.
Asking prices of newly listed homes were up 11% from the same time a year ago and up 27% from 2019 to a median of $347,500.
Pending home sales were up 5% year over year, and up 49% compared to the same period in 2019.
New listings of homes for sale were down 7% from a year earlier, but up 11% from 2019.
RH - $RH
While we believe a conservative view of revenues in the fourth quarter is prudent due to the uncertainties posed by the new virus variant, the postponed opening of our new San Francisco Gallery until the Spring, and the continued shipping and port delays, the power of our operating model gives us the confidence to raise our outlook for fiscal 2021 for the third time this year.
We now expect fiscal 2021 revenue growth of 32% to 33% versus our prior outlook of 31% to 33%, and adjusted operating margin in the range of 25.3% to 25.5% versus our prior outlook of 24.9% to 25.5%.
When you buy a home, you're kind of furnishing it for years. You're doing stuff to it for years. And now that it's even more important and you're spending more time there and you predict you might be spending more time there in the future, and there might be a risk of another pandemic, I think the home might get a permanent shift here. How big? Is it going to slow down? Sure. Like we're not going to see the same growth rates. I mean -- but then again, if you saw our business plan for last year, it was a lot lower than how we performed because we thought there could be a big giveback after the lift of 2020. And we thought that we give back in 2021. Will there be a giveback in '22? I don't know.
Ferguson - $FERG
The US business grew net sales by 27.1% which comprised 25.2% organic growth and a further 1.9% from acquisitions. Price inflation was in the low teens during the quarter.
Residential end markets, which comprise just over half of our US revenue, remained robust in the first quarter. New residential housing starts and permits continued to grow in the quarter, as did residential repair, maintenance and improvement (“RMI”) which performed strongly. Overall, Ferguson’s residential revenue grew by approximately 24% in the first quarter.
CONN - $CONN
We saw double-digit sales growth across our top product categories. Within our appliance category, sales remained strong as same-store sales increased 21.9% over the prior year.
Furniture and mattress same-store sales increased 18.8% over the prior year.
As a percent of the portfolio, the 60-plus day past due balance was 8.8% compared to 11.5% for the same period last fiscal year. The balance of reaged accounts as a percent of the portfolio was 18.3% compared to 28.2% for the same period last fiscal year. While we expect delinquency and charge-off trends to normalize in the coming quarters, we believe they will remain below pre-COVID levels based on our enhanced credit strategy and current economic outlook. As a result, I believe we are well positioned to target a credit spread of approximately 1,000 basis points going forward.
Starting with retail sales. Early Black Friday pricing, combined with concerns related to product availability caused an earlier start to the holiday season, which we believe pulled forward some retail sales into the third quarter. We believe our marketing and promotions were well positioned to capitalize on these trends, and we continue to expect mid-teens same-store sales growth for the full year.
Odds and Ends
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