ULTA reported 3Q19 earnings after the market close on 12/5. Comps of 3.2% were in-line with Consensus and below our 3.5% but we estimate ahead of buy side expectations (stock was up ~9% post market close). EPS of $2.25 was above Consensus’ $2.13 on better margins.
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On 12/11, HD is hosting its biennial Analyst Day. Historically, while very informative, HD analyst days have had small impacts on the stock with performance of -1% to +1% versus the S&P but with generally better follow through over the +1 month (Exhibit 1). However, this time could be different as HD shares significantly underperformed the market over the past 45 days and there has been investor angst over 2020 growth and margins.
RH reported Q3 2019 results today (12/04/19) post market with total revenue of $677m in-line with Cons. $676m/our $677m. Adj. EBITDA of $116m was above Cons. $103m and our $104m. Q4 guidance was only nudged up slightly but was framed as being conservative.
BBY’s 3Q19 results this morning beat on comps, and along with better than expected SGA control drove a ~10% EPS beat vs Consensus. BBY provided 4Q19 EPS which was ~2% above prior Consensus at the mid-point. BBY shares were up ~10% for the day on the beat and raise.
WSM reported Q3 2019 results on Nov. 21st. Consolidated comps of 5.5% beat consensus of 5.1% and our 5%. At the brand level, Pottery Barn came in better than expected, but West Elm, Williams-Sonoma, and PB Kids each missed consensus slightly. EPS of $1.02 beat consensus of $1.01 and met our estimate. WSM narrowed the low end of its comp, revenue and EPS guides for the full year, but we note that prior consensus had been positioned towards the high end of prior guide.
The timing of CPRT’s capex surge is bullish for industry growth and can likely be used as a risk factor for IAA bears to point to as a sign that CPRT is adding excess capacity under the premise of capturing more Geico business in the future. To provide some historical context, we show LTM capex against Yard additions, Indexed volume, and yard operation costs. While this could be a near-term margin pressure to CPRT as these yards are put into service, empirically the yard costs are more stable than Capex.
Similar to HD, LOW’s is seeing considerable shrink pressure (20bps) versus 10bps last quarter. We believe category resets and self-checkout implementation are likely the key drivers to the rise in shrink. Given shrink is only 50-150bps for most retailers, these are considerable increases. The 40bps of tariff pressure, while handled better than 2018’s cost increases, seems to effectively be the same headwind. LOW has had a harder time mitigating than HD, which unfathomably hasn’t reported pressure.
SSS of 3.6% was below our 4.8% and Consensus 4.7%, although buyside expectations were low due to softer CC data. EPS of $2.53 was slightly ahead of consensus but missed our $2.58. HD lowered its comp outlook for the year but reaffirmed EPS growth guidance. Shares -5.4%.
AAP comps of 1.3% met Consensus of 1.2%, beat our -0.5%, but were short of +1.5% buy-side bar. GM’s missed by 40bps but SG&A beat by 40bps and EPS beat Cons by $0.05 driven by buy-back and tax. A softer implied Q4 comp guide and messaging around GM’s weighed on AAP (-8%).
EPS of $0.35 beat Cons $0.33 but missed our $0.36 as higher revenue and gross profit, was only partially offset by higher SGA dollars. This was the best corporate call we’ve heard in a long time. IAA put to rest Geico concerns (at 30% share loss), added new disclosure to heighten transparency, affirmed going fully digital in 2H 2020, and sounded fired up about new technology and operational improvements. Shares were up 11%.
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