Facts from the Week: January 16, 2022
Highlights from $JPM $V $CURV $CTRN $FIVE $BIG $TAST $RICK $SHAK $STKS $MAERSK $KBH $SHW $RDFN $FMCC $DAL $FERG Housing, Shipping, Consumer
Summary
Housing demand continues to be strong with inventory in short supply as noted by KB Homes and Redfin (even as mortgage rates rise)
Consumer: Omicron had an impact on retail and restaurants at the end of December and in to January as noted by many companies
Freight rates remain high with Maersk noting “volumes in Ocean decreased by 4% and average freight rates improved by 80% in Q4 2021 compared to previous year.”
Consumer
Retail Sales - US Census - December
Chase Consumer Card Spending - $JPM
Visa Spending Index - $V
the U.S. Spending Momentum Index (SMI) was 108.4 in December (seasonally adjusted), its strongest reading for the month since the start of the index. For the last three months of the year, the SMI was 110.3, also a high for the fourth quarter of the year.
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.
Torrid - $CURV
“We had a strong start to our fourth quarter, however, the spread of the omicron variant negatively impacted performance largely due to labor challenges at both our distribution center and a portion of our stores. While we are not a business heavily dependent on holiday sales, our Torrid cash event in January saw a negative impact from these factors. As a result, we are revising our net sales and adjusted EBITDA to below our initial guidance.” -CEO
Citi Trends - $CTRN
“Following a strong holiday selling period, we have experienced a decline in traffic attributed to macro trends, primarily driven by the increase in COVID-19 cases impacting the broader consumer landscape. Despite the recent decline in traffic, which we believe is transitory in nature, we are experiencing strong conversion rates, indicating that our customers continue to find our assortment compelling. -CEO
Five Below - $FIVE
“It was an outstanding holiday for Five Below, with comparable sales growth of 7.7% on top of a record 10.1% last year, resulting in the highest two-year comparable sales growth rate for the holiday season since going public. Performance was broad-based, with trend items like sensory and Squishmallows® being key contributors. Given this performance, we are pleased to move our guidance near the high end of our previously provided guidance ranges for sales, comps, and EPS, all of which contemplated the comparison against the stimulus-fueled January last year.”
Big Lots - $BIG
Through the end of fiscal December, the company's performance was at the upper end of its expectations. On a quarter-to-date basis through the end of fiscal December, the company achieved a two-year comparable sales increase of approximately 9%.
Since early January, the company has seen a softening of traffic and sales trends which it believes, in addition to adverse weather conditions, has been significantly driven by the rapid spread of the Omicron strain of Covid-19 and its impact on consumer behavior. Based on a continuation of current trends, the company would expect to achieve a flat to low-single-digit percentage two-year comparable sales increase for fiscal January, below prior expectations, and resulting in diluted EPS for the quarter in the range of $1.80 to $1.95.
Tillys - $TLYS
◦Comparable net sales in physical stores increased by 23.2% for the 2021 holiday period compared to a decrease of 12.4% during the 2020 holiday period.
Comparable net sales in physical stores increased by a double-digit percentage in all but one of 14 geographic markets compared to the 2020 holiday period.
◦E-commerce net sales decreased by 5.7% for the 2021 holiday period compared to an increase of 65.2% during the 2020 holiday period.. Compared to the 2019 holiday period, e-commerce net sales increased by 57.4%.
Big Five - $BGFV
For the fiscal 2021 fourth quarter, the Company now expects to generate earnings per diluted share in the range of $0.84 to $0.86, which compares to the Company’s previous guidance for the fourth quarter of earnings per diluted share in the range of $0.55 to $0.70.
“We expect to deliver fourth quarter results solidly above the high end of our earnings guidance, driven in part by a strong margin performance that was considerably ahead of our plan. Our fourth quarter performance highlighted another record year of sales and earnings for Big 5, with 2021 earnings per share expected to surpass last year’s then-record results by approximately 75%. -CEO
Delta Airlines - $DAL
“While the rapidly spreading omicron variant has significantly impacted staffing levels and disrupted travel across the industry, Delta’s operation has stabilized over the last week and returned to pre-holiday performance,” Bastian said. “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel.”
Restaurants
Carrols - $TAST
“Our favorable Burger King comparable restaurant sales performance during the fourth quarter of 2021 was driven by average check growth of 12.1%, inclusive of menu price increases and lower promotional activity, partially offset by a traffic decline of 4.2%. Our Burger King restaurants also demonstrated strong sequential improvement in comparable restaurant sales until the last two weeks of December, when we believe the initial impact of the Omicron variant began slowing sales trends. Compared to the fourth quarter of 2019, the Company’s Burger King quarterly comparable restaurant sales rose 7.0%. From a cost perspective, in the latest quarter we continued to see meaningful headwinds with respect to commodity and labor cost inflation similar to what we experienced during the third quarter of 2021.” -CEO
RCI Hospitality - $RICK
We didn’t experience any noticeable impact from Omicron until late 1Q22 and hope it will cycle through our markets quickly. -CEO
Shake Shack - $SHAK
Same-Shack sales(2) were up 20.8% in the fourth quarter of 2021 versus the same period in 2020, compared to up 24.8% in the third quarter of 2021. Additionally, Same-Shack sales were up 2.2% in the fourth quarter of 2021 versus the same period in 2019, an improvement from down 7.3% in the third quarter of 2021.
"While we are pleased by the fourth quarter, we also saw our operating hours drop in the last week of FY21 and the first two weeks of FY22 as a sharp increase in COVID cases had an impact on our ability to staff and keep all of our restaurants fully open. We expect these trends to continue to impact sales in our Company-owned Shacks and our licensed business.
The ONE Group - $STKS
Comparable sales* for STK increased 60.0% compared to the same period in 2019; and,
Comparable sales* for Kona Grill increased 38.2% compared to the same period in 2019
Shipping
Maersk
Volumes in Ocean decreased by 4% and average freight rates improved by 80% in Q4 2021 compared to previous year.
The strong result in the quarter reflects the continuation of the exceptional market situation within Ocean caused by the global disruptions to the supply chains, which have led to further increase in container freight rates.
Consequently, given the strong performance in Q4 2021 the preliminary full-year figures for 2021 will exceed our previous guidance, as stated in the Interim Report dated 2 November 2021, now reporting an underlying EBITDA of USD 24bn (previous guidance of USD 22-23bn), an underlying EBIT of USD 19.8bn (previous guidance USD 18-19bn) and a free cash flow (FCF) of USD 16.4bn (previous guidance minimum USD 14.5bn).
Freightos Baltic Index (FBX): Global Container Freight Index
The Harpex
Housing
KB Homes - $KBH
Ending backlog value grew 67% to $4.95 billion, the Company’s highest fourth-quarter level since 2005, with each of the Company’s four regions generating increases that ranged from 53% in the West Coast to 106% in the Southeast. Ending backlog grew 35% to 10,544 homes.
•Net order value for the fourth quarter expanded by $184.3 million, or 12%, to $1.77 billion.
•Average monthly net orders per community held fairly steady at 5.5, compared to 5.6, with a 10% decrease in net orders to 3,529 resulting primarily from the Company’s lower average community count, which decreased 9% to 214. The Company’s ending community count declined 8% to 217.
And then right behind that, you have another generation of 70 million people that are now hitting the home buying years that are just now starting their homeownership journey. So we see demand very strong right now. And if rates go up a little bit, I think you'll see demand stay strong. We've analyzed our backlog. And if rates went up 1%, it's not a real impact. And that's if everything stayed the same and rates went up a point, think of the profile I shared with you. Here we are predominantly a first-time builder and our buyers putting down on average $67,000 in down payment. They have all the flexibility in the world to navigate a little bit higher interest rate and they all want a house. And at the same time, you go to the resale side. There is no inventory. There's metropolitan areas with 1,000 homes available for sale in a city of $4 million to $5 million. So there's no product on the market. And as we bring communities to bear in each of these cities, we have waiting lists, or interest lists, I'll say, 300, 400, 500 people waiting. It's not unique to just one submarket. It's a national phenomenon.
Sherwin Williams - $SHW
“While we met our consolidated fourth quarter net sales guidance and demand remains robust, we are disappointed in our weaker than expected earnings results in the quarter,” said Chairman, President and Chief Executive Officer, John G. Morikis. “Our lower than expected earnings relative to our prior guidance is related to a shortfall in The Americas Group, where sales were below our guidance due to slower than expected improvement in raw material availability and COVID-related labor headwinds in December. While availability of some raw materials has improved slightly, others including select resins and additives specific to our professional contractor products remain in tight supply. Logistics and transportation issues have further impacted the supply chain. Additionally, we faced meaningful labor challenges in The Americas Group in December related to the COVID Omicron variant, as our workforce, including store managers, field sales reps and drivers, experienced reduced staff availability and store hours in some locations.
“As we enter 2022, demand remains strong across the majority of our end markets, though we expect raw material availability and COVID-related issues to persist through the first quarter. Raw material and other costs remain elevated, and we continue to respond with pricing actions in every Group to offset higher costs, including a 12% price increase in The Americas Group effective February 1st. We have continued to invest in our business, including adding 50 million gallons of incremental architectural capacity that is now online. Additionally, we opened 79 paint stores in the U.S. and Canada during 2021, including 32 in the fourth quarter. We remain highly confident in our strategy, our people, and our ability to emerge as an even stronger Company following the current near-term disruptions.”-CEO
Redfin - $RDFN - Four week period ending 1/9/22:
The median home-sale price increased 14% year over year to $358,801. For the seven-day period ending January 9, the median price hit $365,000, up 16% from a year earlier and an all-time high.
The median asking price of newly listed homes increased 12% year over year to $344,190.
Pending home sales were up 2.5% year over year.
New listings of homes for sale were down 11% from a year earlier.
Ferguson - $FERG
FreddieMac - $FMCC
Odds and Ends
Wastewater COVID-19 Tracking - Massachusetts Water Resources Authority