As the week unfolds, I'll be looking at J.M. Smucker, Brown-Forman, Ollie's Bargain, Best Buy, and Abercrombie & Fitch.
The J.M. Smucker Co. (August 27th)
J.M. Smucker (SJM) has had a few years of rather stagnant revenue growth. That being said, the manufacturer of various jams, peanut butters, etc., has remained very profitable with a strong 3% dividend. Moreover, the stock has outperformed the S&P 500 over the last 12 months.
I hold a very neutral stance on SJM. The company is an established old time player within the food industry, but it has to start creating some demonstrated growth momentum again or investors might lose patience. The company's balance sheet is good, but cash flow is a little erratic, and J.M. Smucker's latest quarter in April included a fairly heavy decline in net income. It's tough to accept the stock's premium when considering the trend. It's a company I want to like, but it needs to prove itself a bit first.
Brown-Forman (August 27th)
I don't have a ton to say on Brown-Forman (BF.B) but I am very curious to see how various tariffs on spirits have impacted their sales results in the second quarter. An exec from one of their brands was actually quoted as saying that the tariffs had a "significant impact on the business".
Ollie's Bargain (August 28th)
One of the least talked about names in retail, and ironically one of the best performing, Ollie's Bargain Outlet (OLLI) has created double digit revenue growth year after year. Consumers really do like "Good stuff cheap". With the exception of a slower 2018, Ollie's net income has had an even more impressive performance over the last five years.
What's the big hiccup in the stock? Valuation. OLLI trades at a pretty high premium. The bargain retailer's stock has a trailing p/e ratio of 38.5. That is plain old expensive no matter how you try to slice it. In the first quarter, Ollie's provided full year guidance of $2.13 to $2.17 per diluted share. This adjusted forecast excludes gains from insurance settlements and tax benefits. Going off of that guidance, the stock is still trading at a very high valuation on a forward basis. There lies the rub. Whilst Ollie's has been putting up exceptional growth, the market has allowed the stock to overcook a bit.
Best Buy (August 29th)
Coming off of a surprise beat in the first quarter, Best Buy (BBY) is about to have its moment. The tech retailer is really one of the few left of its size, and it does have the opportunity to really consolidate its position. After a few years of stagnation, things picked up in 2017, and we've seen some encouraging developments since then.
Obviously Best Buy is still pitted against a tough battle with names like Amazon (AMZN) and Walmart (WMT) . But the company does offer a well rounded customer experience. Furthermore, they're making moves in the right areas. In particular, I'll be watching online sales growth, as investors are very keyed in on digital growth when it pertains to retailers like this. While good online growth will certainly give the stock a jolt, it's also important for Best Buy to keep the brick and mortar strong. Enterprise comp sales grew 1.1% in Q1 fiscal 2020. That's a marked slowdown from the 7.1% we saw in fiscal 2019. These second quarter results will tell us whether Best Buy is keeping up with names like Walmart, Target (TGT) , and Dick's Sporting Goods (DKS) , which all reported strong comp sales in the second quarter.
Abercrombie & Fitch (August 29th)
Thus far, 2019 has not been Abercrombie & Fitch's (ANF) year. The casual clothing company lost more than 40% of its value in May after the company issued full year guidance that left a lot to be desired. The company reported a loss of $19.15 million in the first quarter despite strength in overall net sales. That, coupled with more planned store closures, created a mixed image for the Abercrombie's prospects.
For the second quarter, the company provided guidance where net sales will be flat to up 2%. Comp sales are expected to be flat, relative to a 3% increase the year prior. Abercrombie did not provide guidance for either second quarter or full year earnings projections. They did however tell us that operating expenses would likely rise 4%-5% in the second quarter thanks to store actions taking place.
Overall, it seems like Abercrombie & Fitch was setting us up for a lackluster second quarter. Don't set your sights too high here.