Brian Nelson

Shares of GameStop Look Expensive Even with Strong Guidance

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Retailer GameStop (click ticker for report: ) posted a steep decline in second quarter results that was overshadowed by a positive outlook for the back half of the year. Revenue fell 10.7% year-over-year to $10.4 billion, which was a bit better than consensus expectations. Earnings per share dropped 44% year-over-year to $0.09, which was also better than consensus estimates. Sales have been weak… Image Source: Valuentum, Company Filings Shares of GameStop are up 177% over the past year—a phenomenal increase given the steep same-store sales declines recently (shown above). Weakness didn’t moderate much in the second quarter, with same-store sales dropping 10.7% year-over-year. Of course, the rally in GameStop’s share price has little to do with what happened in fiscal … Read more

Are You Ready for Some Football? Google Is.

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Digital news firm AllThingsD broke the story that Best Ideas Newsletter portfolio holding Google (click ticker for report: ) could be in talks with the NFL over exclusive rights for the NFL Sunday Ticket package, which allows consumers to view every NFL game. Another Best Idea portfolio holding, DirecTV (click ticker for report: ), currently holds exclusive rights for Sunday Ticket through the 2014 season, which costs the firm $1 billion annually. Why It Makes Sense for Google On the surface, such an idea seems interesting for Google. With the exclusive Sunday Ticket package, Google could really make a push into the TV business. Google could even pair the package with a purchase of the Google Chromecast, a portable online … Read more

Ballmer to Leave Microsoft; Market Cheers

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Early Friday morning, Dividend Growth Newsletter portfolio holding Microsoft’s (click ticker for report: ) long-time CEO Steve Ballmer announced that he’ll be retiring within the next year. Despite solid revenue and earnings growth throughout his tenure, investors have called for his job for years as rival Apple (click ticker for report: ) stole the spotlight in the tech world. The Bad While the late Steve Jobs will be known for his hits, Ballmer will be best known for his misses. After Apple dropped the iPod, Microsoft came to market with the Zune after the war was long over. Apple then released the iPhone, and Microsoft wasn’t ever able to fund a credible competitor in the United States, but it did … Read more

The Race to the Bottom

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This week, infamous American department stores JC Penney (click ticker for report: ) and Sears (click ticker report: ) reported terrible second-quarter results. Let’s take a closer look at these failing former industry giants. JC Penney JC Penney continues to suffer from Ron Johnson’s strategy change and subsequent removal. Total sales declined 11.9% year-over-year to $2.7 billion, while the firm lost $2.16 per share on an adjusted basis. Both metrics fell short of consensus estimates. The firm burned through $1.1 billion in free cash during the quarter and has posted negative free cash flow of $2.1 billion year-to-date. The situation at JC Penney continues to be incredibly uncertain, particularly after activist shareholder Bill Ackman resigned from the board of directors … Read more

Guidance Drives Slump at HP

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After mostly pleasing the Street throughout much of CEO Meg Whitman’s tenure, tech hardware giant HP (click ticker for report: ) missed top-line estimates and provided a bleak outlook for fiscal year 2014. During its third quarter of fiscal 2013, revenue declined 8.2% year-over-year to $27.2 billion, while adjusted earnings per share fell 14% year-over-year to $0.86, right in-line with consensus estimates. Free cash flow for the quarter equaled $1.8 billion, or 6.6% of total revenue. Printing Revenue declines in the ‘Printing’ division weren’t too drastic during the third quarter, falling only 4% year-over-year to $5.8 billion, and the company was able to maintain segment margins at 15.6%. This drove operating profit of $908 million. Though the printing business’ top-line continues to … Read more

Huge Improvement in Home Improvement; Lowe’s Losing Market Share

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Earlier this week, the US’ two home improvement giants, Home Depot (click ticker for report: ) and Lowe’s (click ticker for report: ) posted robust second-quarter results, riding the housing recovery to success. Let’s dive into recent performance. Home Depot Home Depot’s second-quarter sales were 9.5% higher than a year ago at $22.5 billion, handily exceeding consensus estimates. Earnings per share jumped 23% year-over-year to $1.24, also higher than consensus expectations. Free cash flow stands at $4.1 billion year-to-date, equal to 9.9% of total revenue. Source: Valuentum, Company Filings Same-store sales expansion at Home Depot during the second quarter was fantastic, as total same-store sales jumped 10.7% year-over-year driven by an 11.4% growth rate in the US. Some sales of … Read more

The Fed Fights Back for Visa and MasterCard

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Wednesday afternoon, shares of Best Ideas Newsletter portfolio holding Visa (click ticker for report: ) recovered modestly on news that the Federal Reserve will appeal US District Court Judge Richard Leon’s ruling that the current cap on debit card transactions of $0.21 was inconsistent with the intent of the Durbin Amendment. Between now and the appeal, it seems likely that debit card caps will remain at $0.21 per transaction. Bad Idea from the Start? Because Visa and rival MasterCard (click ticker for report: ) have often been the target of regulatory scrutiny, it seems unlikely that any government-affiliated organization would show support. However, we think the Fed is well-aware of the unintended consequences of the debit card transaction fee cap. … Read more

Best Buy’s Comparable Sales Decline Moderates

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Electronics retailer Best Buy (click ticker for report: ) posted better-than-anticipated second quarter results Tuesday morning. Revenue was basically flat year-over-year at $9.3 billion, exceeding consensus estimates. Adjusted earnings-per-share was 23% higher year-over-year at $0.32, well above consensus expectations. Year-to-date, free cash flow was negative at $282 million, but we’re not worried considering this figure is much improved compared to the prior-year period. Source: Valuentum, Company Filings In our view, the most encouraging news in the quarter was the firm’s domestic same-store sales, which were down just 0.4% year-over-year. In fact, we can see from the above chart that the two-year trend at the important domestic store base is improving, while online sales continue to grow at a solid rate. … Read more

Mixed Second Quarter Results Across Retail

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Tuesday morning, a variety of retailers reported calendar second quarter results that were decidedly mixed. Let’s take a deeper look. TJX Companies TJX Companies (click ticker for report: ) posted second quarter results marked by top and bottom line expansion. Revenue increased 8% year-over-year to $6.4 billion with same-store sales growth of 4% while earnings per share improved 18% year-over-year to $0.66 per share. Both metrics exceeded consensus expectations. Year-to-date, the firm has generated free cash flow of $314 million, equal to 2% of total revenue. Though the company has 3,119 locations worldwide, the company continues to experience stable comparable same-store sales (“comp”) growth. TJX’s 2-year stacked comp has consistently hovered around 10-11% during the past four quarters. Source: Valuentum, … Read more

Urban Outfitters’ Margin Story Continues

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Monday afternoon, retailer Urban Outfitters (click ticker for report: ) posted solid second quarter results as sales gains helped lift gross margins. Revenue jumped 12% year-over-year to $759 million, a touch below expectations, but solid in what has turned into a lackluster second quarter for retailers. Earnings per share increased 21% year-over-year to $0.51 per share, easily exceeding consensus estimates. Performance at Urban Outfitters was strong across all stores, with same-store sales growth of 38% at Free People, 9% at Anthropologie, and 5% at Urban Outfitters. As we can see from the above chart, the two-year trend at Free People continues to outpace the rest of the company. Sales accelerated at the women’s clothing store, even as the company faced … Read more