Facts from the Week: Dec 18, 2021
Highlights from $LOW $LEN $FLXS $JPM $FDX $IDEXF $DRI $RICK Housing Consumer Covid
In housing, Lowe’s is expecting a moderation in home improvement in 2022
In consumer spending, US Census data shows an increase in year-over-year growth rates in November compared to October and Inditex reported 10% growth in November + first 10 days of December compared to 2019
In Covid, RCI Hospitality notes that the new variant has not slowed business at all thru mid-December while Cornell University reports a 7.4% positivity rate despite a 97% vaccination rate
Lowe’s - $LOW - analyst day
2022: Comparable sales expected to range from a decline of 3% to flat
In housing, affordability is supported by mortgage rates that are hovering near all-time lows while income continues to rise. But with the onset of COVID last year, several new demand drivers developed that we expect to persist. There's been a longer-term shift in the consumer mindset about the importance of the home. A view of the home as a sanctuary that may need to serve several multiple purposes, residence, office, school, gym and a gathering place for indoor and outdoor entertainment.
And given the extension of remote work, we are expecting a permanent step-up in repair and maintenance cycle. And as a reminder, approximately 2/3 of Lowe's annual sales come from repair and maintenance activity. Finally, we're seeing both younger and older generations more focused on home ownership. Millennial household formation has accelerated at the same time that baby boomers are increasingly looking to age in place in their own homes.
And I'm pleased to report that our quarter-to-date performance is tracking slightly ahead of our guidance. We are expecting total sales of approximately $95 billion in 2021 and comparable sales of approximately 33% on a 2-year basis.
Looking ahead to 2022, the home improvement sector is likely to contract modestly given that the industry benefited from both higher inflation and government stimulus this year. While it still remains difficult to predict the market performance precisely, we are expecting a demand decline of mid-single digits on a mix-adjusted basis. Keep in mind that Lowe's has lower Pro and online penetration relative to the market.
in my prepared remarks, roughly about $2.7 billion or about 260 basis points of comp this year will not -- were overlapping from both a stimulus perspective and an inflation perspective that are kind of headwinds as we think about our progression into next year. Obviously, as we said, the Pro business continues to be kind of our strength from a growth perspective, with that business growing at kind of 2x the market rate at this point in time
As a reminder, 50% of the homes in the U.S. are over 40 years old, and 2/3 of our business is repair and maintenance. And we're looking at the consumer, the homeowner having more disposable income today than historically.
Lennar - $LEN
"Our record fourth quarter results reflect both continued strength in the housing market across the country, and continued housing supply shortage driven by limited entitled land, labor and supply chain constraints, and 10 years of production shortfall. While our new orders grew a controlled 2% compared to last year's seasonally strong fourth quarter, we achieved a homebuilding gross margin of 28.0% and homebuilding SG&A of 6.0%, leading to a 22.0% net margin, all of which are all-time Company records." -CEO
Flexsteel - $FLXS
the Company is anticipating strong sales performance and is increasing the mid-point of its previous revenue guidance range; however, supply chain challenges are driving higher than expected ocean container ancillary expenses, and as a result, near-term profitability is anticipated to be negatively impacted.
Ancillary charges associated with ocean containers, such as demurrage and detention, had escalated to extraordinary levels in our fiscal first quarter and exceeded $5 million. The lack of truck drivers and warehouse workers available to pick up, unload, and return containers, combined with minimal ‘free days’ from shipping carriers, have intensified these ancillary charges. Logjams at railway yards have prohibited timely return of containers and further exacerbated ancillary expenses. While we anticipated lower ancillary costs in the second quarter compared to the first quarter, increased per diem rates, continued supply chain disruptions, and ongoing challenges with driver availability have driven even higher ancillary costs, which we estimate will exceed $10 million in the second quarter.
Retail Sales Data - US Census Bureau
Chase Consumer Card Spending - $JPM
FedEx - $FDX
we are seeing strong levels of volume in our network given unprecedented levels of shopping and shipping this holiday season.
The landscape across the industry remains robust and positions us well for continued profitable growth. We are forecasting that the U.S. domestic parcel market will reach 134 million pieces a day by calendar year 2026, a remarkable 70% growth from 2020. E-commerce is expected to drive 90% of the parcel market growth.
Labor headwinds will persist in Q3, but the labor availability and network inefficiency component will continue to mitigate as we move through the quarter, given our progress to date and plans to address this. In addition, we do not expect a recurrence of approximately $1 billion in notable second half headwinds from a year ago that included the timing of variable compensation expense, historic severe winter weather, a onetime Express frontline bonus and our commitment to the Yale Carbon Capture initiative.
Inditex - $IDEXF
3Q21 sales in constant currency +21% over 3Q20 and +10% above 3Q19
Store sales in CC exceed 3Q19 levels with 11% fewer stores
Store&Online sales in constant currency between 1 November and 10 December 2021 increased +33% (+10% over 2019).
Darden - $DRI
Given the strength of our performance, we are accelerating a commitment we announced earlier this year to increase the minimum hourly earnings for restaurant team members to $12, which includes income earned through gratuities, effective January 1, 2022. With this change, we expect our restaurant team members will earn, on average, approximately $20 per hour."
The Company updated its financial outlook for fiscal 2022 based on year-to-date results and its expected performance for the remainder of the year, assuming no significant business interruptions related to COVID-19.
Total sales growth vs. Pre-COVID1 of 9% to 11%
RCI Hospitality - $RICK [nightclubs and restaurants]
I think people are a little afraid of this new variant at first, but I think that fear is kind of going by as people aren't really getting that sick from it, it seems from the reports that I'm reading, and it hasn't slowed down business at all. We've had a great week last week. And I think as we continue this week, it's going to be a great week for us as well. We run our weeks from the 1 to the 7, the 8 through the 14, and 15 through the 21. And so I think that as we see these weeks coming in through December, we'll have a very strong December, which is going to lead us to a very strong quarter.
Massachusetts Water Resource Authority -Wastewater COVID Tracking
Cornell University Covid Data