Earlier today (3/26/19), we toured Amazon’s Edison, NJ fulfillment center that opened in October 2017. Codenamed LGA9, the relatively new facility is approximately 1.2mm square feet and employs around 2,000 full-time, part-time and seasonal employees. LGA9 is an AR (Amazon Robotics) sortable building – that is, it only deals with smaller-sized order items (max 18 inches in length and weighing under 25 pounds). The facility deploys 250-pound rechargeable robots that can carry package bins weighing up to 1,500 pounds.
Search Coverage List, Models & Reports
Search Results1-10 out of 712
This week's topics include:
The Consumables Corner: General Mills (GIS, Not Covered) reported results that were well received last week.
Hardline Happenings: Hit Pause. Hit Refresh? Not Yet. A look at existing home sales and the housing market.
Walmart's World: Walmart thinks it has won the price war, we think differently.
A to Z - Amazon Roundup: (1) Amazon’s Prime Video continues its sports streaming binge; and (2) Prime Video movie rentals are being sponsored by CPG, combining two powerful revenue and profit streams for Amazon.
Costco is clearly, in our opinion, a unique, one of a kind franchise that is thriving with the strong consumer backdrop, particularly in the U.S. Indeed, the company’s strong 2Q results reported on March 7th prompted us to take another look at our rating and possible catalysts for further sales/margin upside. Our analysis did yield expectations that core gross margins could be more stable due to indications that its main competitor, Walmart’s Sam’s Club, may have relaxed its price stance to a degree. The idea of better margins, however, appears to have quickly been reflected in the equity price. Further, while we do have a slightly more constructive view of margins in the near-term, if we had a bias over time it would be that margins could see more pressure than expected as some warehouse sales move online and additional omnichannel investments are needed. Balancing a superior business model that is generating strong sales, against a hefty valuation and the longer-term uncertainties around the true cost of the omnichannel efforts, we are maintaining our Peer Perform rating.
This week's topics include:
Target's Tidings: Target’s remodels continue to impress while consumables execution continues to depress!
The Consumables Corner: With too many assets chasing too few sales, the in-home consumables retailing industry remains difficult.
Hardline Happenings: Hardline retailers stand to benefit from both ends of the demographic spectrum, in our view.
Walmart's World: The methods for discounting by consumables retailers appear to be multiplying by the week.
A to Z - Amazon Roundup: (1) Instagram is becoming an ecommerce marketplace...one without private label competition; and (2) Amazon pushes further into consumables with another private label brand.
DG reported 4Q18 earnings yesterday morning (03/14/19) that were relatively in line with estimates. However, the equity sold off hard as strong comp sales were offset by significant gross margin contraction and FY19 guidance introduced by the company came in below expectations. While the near-term appears more challenged as investments into the business pressure gross margin and SG&A, we remain more focused on, in what our opinion, is a robust long-term outlook. Indeed, management is pursuing several initiatives such as the expansion and self-distribution of fresh products, that should grow sales and EBIT per square foot, and improve returns. Combine this with DG’s solid comp performance given the historical countercyclicality of the business versus the strength of the current economy, plus its strong FCF growth and high ROIC, and we see an opportunity knocking. As such, we are strongly reiterating our Outperform rating.
DLTR announced that it would introduce new tests for a multi price-point strategy at Dollar Tree, close 390 underperforming Family Dollar locations, and provided metrics for the 1,000 remodels it plans to introduce to the Family Dollar store base. We view the concession on price strategy as bending the buck, as the test seems as though it will be limited to stores served only by distribution centers with capacity to fulfill both Dollar Tree and Family Dollar. Simultaneously, the company plans to remodel approximately 12% of the Family Dollar stores into the new H2 concept, which includes more refrigerated / frozen foods as well as $1 merchandise. If the H2 models truly drive over 13% comp growth, there may be upside to estimates. However, in the near term, the Family Dollar business is experiencing significantly deteriorating gross margin coupled with rapidly growing inventory, which in our opinion may be indicative of larger issues at the banner. While a good start, it is too early to call a turnaround in Family Dollar based on remodel plans, and we are maintaining our Peer Perform rating on DLTR.
BJ’s 4Q18 earnings this morning were better-than-anticipated as earnings came in above estimates and the company posted comp sales growth of 2.9% in the quarter.
Target reported its 4Q18 earnings this morning (3/5/19) and hosted its analyst day, providing solid FY19 guidance for EBIT and EPS growth. The management team has been on a multi-year path to overhaul its stores through remodeling, unique merchandising, and repurposing its stores to serve as mini fulfillment centers offering customers the ability to shop wherever and however they want. Target’s efforts (along with a strong macro backdrop for consumers) have driven sales growth to the highest they have been in years. With Q4 SG&A rate improving approximately 36 bps y/y, Target is starting to show signs that it can translate the higher sales into higher profitability. With that said, the looming question for us is whether the strong revenue growth can continue into next year and offset the higher cost of doing business, leading to higher EBIT dollars and improving ROIC. We remain Peer Perform rated until we have higher conviction that TGT can continue to lever its operating expenses or gross margin pressures abate.
As we have commented before, it all goes through Bentonville when it comes to pricing in the U.S. consumables industry, and Bentonville (Walmart) appears to be letting prices at retail rise, especially in the heath, beauty and household chemical areas. For retail competitors, in our opinion, this creates a more positive competitive climate and we have moved our rating on the industry to Market Weight from Market Underweight. With that said, conditions remain very challenged due to the continued growth of the deep discounters, especially ALDI, and the need for omnichannel investments. Balancing Walmart’s strategic shift and a very strong U.S. consumer against the still tough operating climate, we have decided it is prudent to nudge up our industry rating. We have left our rating of Food Producers at Market Underweight as our research suggests structural challenges like the Pure Foods Trend and the Golden Age of Private label will likely make it harder for these companies to realize increased pricing/higher volumes even with Walmart’s pricing shift.
The Department of Industrial Policy & Promotion (DIPP) in India released a draft ecommerce policy on Saturday 2/23. Billed as the “National e-Commerce Policy – India’s Data for India’s Development” – this is separate from the Foreign Direct Investment (FDI) in ecommerce ‘rule update’ that went into effect on Feb 1st, though not entirely unexpected (see our notes on the India ecommerce ‘rule update’ here, here and here for reference).
- 1 of 72
- next →