I'll be keeping an eye on these stocks as the week unfolds.
I have mixed feelings about PLAY, while LULU has momentum, and it will be interesting to see the revenue that the "new" Sears posts.
Dave & Buster's (June 11th)
Dave & Buster's (PLAY) has been working to improve its comparable store sales. 2018 as a whole experienced a 1.6% decline in comparable store sales, but the fourth quarter marked a turn in momentum. Q4'18 comp sales increased 2.9% year over year (on a comparable 13 week basis to 2017). Investors will no doubt be looking to see if that trend continued in the first quarter of 2019.
Guidance provided with their Q4'18 results gave forecasts for FY 2019 comparable store sales growth of 0%-1.5%. A surprise to the upside in the first quarter might give this stock some boost after it gave up more than 10% in May. Full year net income is expected to be between $105 million and $117 million. That marks some stagnation over 2018's income of $117.2 million. Full year analyst estimates have earnings per share of $3.09. That would mean the stock is trading at roughly 16.1x full year earnings potential. I have mixed feelings on the stock, as the company has been relying a lot on new store openings and share buybacks to help with a bad string of comp sales trends. If Q1'19 earnings results can continue what was started in Q4'18, maybe things are getting back in the right direction.
Lululemon (June 12th)
A few years back, I got Lululemon (LULU) entirely wrong. I felt that over-saturation of the "athleisure" industry would limit the company's ability to derive further sales growth. Nothing could have been further from the truth. Lululemon has a five year track record of double digit revenue growth, and with the exception of 2017, good earnings growth to go with it.
In the fourth quarter of fiscal 2018, Lulu reported revenue growth of 26% year over year to $1.2 billion. Comparable store sales increased 7%, while total comparable sales increased 18%. The biggest area of expansion for Lululemon in terms of percentage rate growth is their direct to consumer revenues which increased 45% in the fourth quarter.
Put simply, this stock has a lot of momentum. Lulu's guidance for the first quarter of 2019 includes revenues of $740-$750 million, with earnings per diluted share of $0.68-$0.70. Those revenues would mark good growth from 2018's $649 million, and those earnings would mean good growth over last year's $0.55 per diluted share. For the full year, Lululemon had expectations for revenues of $3.70 billion to $3.74 billion.
If they meet that guidance, it would mark a 12.4% increase year over year. Full year earnings guidance of $4.48 to $4.55 would mean the stock is charging a hefty premium of 38.39x full year forward earnings estimates. LULU has never exactly been a cheap stock and continued growth would likely keep the premiums up. It was one of the reasons I didn't like the stock a few years ago. Ironically, sales and earnings have defied my expectations, and the stock has done exceptionally well.
Sears Holdings (June 10th)
This is more of an academic fascination for me. I wouldn't recommend touching this stock with a 10 foot pool, but Sears Holdings (SHLDQ) will be reporting its first earnings release since coming out of bankruptcy. I'm interested to see what it looks like. Though relatively insignificant these days, this might be one of the most controversial names in equities. Investor Eddie Lampert has taken quite a bit of criticism for his handling of Sears' demise. The retailer sold off most of its quality assets leading up to its bankruptcy, and I'll be interested to see what type of revenue this very different Sears puts up.