Think earnings season is over? Nope.
A number of important retail names and stragglers will report their latest quarterly results this week.
Here's what we're watching.
American Eagle (June 5)
I said back in March that a pullback in American Eagle Outfitters (AEO) stock could be an opportunity. The stock has definitely fallen. The focus now is on those first-quarter results.
American Eagle finished 2018 with a 6% increase in annual revenues to $4 billion. Fourth-quarter earnings of $0.43 per share beat estimates, but did come in lower than 2017's $0.52 per share. Thanks to the extra week in fiscal 2017, the results are a bit askew on a comparative basis.
The company's first-quarter 2019 guidance provided forecasts for earnings per diluted share of $0.19-$0.22. These estimates forgo possible adjustments from restructuring or asset impairments. Last year, American Eagle reported first-quarter earnings of $0.22 on an unadjusted basis. This forecast largely explains the stock's relative weak performance of late. I'll be very interested to see the comp sales figures in the first quarter.
This stock has a nice dividend, and a cheap valuation.
GameStop (June 4)
GameStop (GME) has had declining revenue streams since 2016. The retailer of video games and related products is kind of in an odd space, as so much of its inventory can now be ordered online. Furthermore, many games are now downloadable to systems like the Xbox one as opposed to going to a store to buy a physical disk.
The stock has suffered greatly over the past months as the company reported a net loss of over $794 million last year. That breaks down to a diluted loss of $7.23 per share. More recently, there have been some changes made within management. Still, one has to wonder whether it's all management, or if GameStop is in between markets.
Estimates for the first quarter are for a loss of around $0.03 per share. For the year, analysts think GameStop can poste EPS of $1.54. That estimate makes GME a very cheap equity in terms of forward valuations.
GME is trading at just under 5x full-year earnings estimates. That's very cheap, and surprising news might make for a bounce. Still, there's a lot to be worried about here over the longer term.
Campbell Soup (June 5)
The last few years have been plagued by stagnation for Campbell's Soup Co. (CPB) . The company has struggled to increase sales revenue outside of additions from acquisitions, and forecasts don't paint much of a bull case for the coming months.
Analyst estimates have the company reporting EPS of $2.48 for the fiscal year ending in July, giving the stock a forward P/E multiple of around 14.6x. That's not a bad premium, but there's a reason for that. The trends here have not included a lot of growth, and investors seem less inclined to pay big premiums for the stock. The saving grace for CPB has always been its nice dividend yield that's closing in on 4%.
In their fiscal second-quarter results, Campbell's reported a 24% sales increase stemming from their acquisitions of Pacific Foods as well as Snyder's-Lance. Organic sales were relatively unchanged. It'll be interesting to see whether that story has changed in the fiscal third quarter.
Ollie's Bargain Outlet (June 6)
Perhaps not one of the most commonly talked about retail names, Ollie's Bargain Outlet (OLLI) was a great stock to own over the past five years. It's up nearly 400% in that time frame.
Ollie's has quietly been one of the best-performing names in retail. The company tie into my thesis that discount retailers like Ollie's will drastically outperform more upscale names in the coming years. The cheaper nature of its goods, along with the pride they take in marketing themselves as an inexpensive place to shop, gives Ollie's more of a buffer in a recession or economic slowdown relative to more expensive businesses.
It might not be the glamorous way to do business, but Ollie's success shows in its financial performance. The retailer has reported double-digit revenue growth annually over the past five years. Moreover, net income has increased 364% since 2015.
Of course, as with all great things, there's usually a catch. Ollie's stock is plain old expensive.
Current-year estimates have the company doing about $2.15 per share in earnings. In terms of annual growth, that would mark a slowdown from some of the growth rates in the past, and it would mean the stock is currently trading at around 46x full-year earnings forecasts. That's an expensive premium that seems to come with many names in discount retailing these days.
The merit of Ollie's stock is largely dependent on the continued success of its sales growth.
