Brian Nelson

Dollar Tree’s Strong Fourth Quarter Quells Fears in the Sector

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Wednesday morning, discount retailer Dollar Tree (click ticker for report: ) announced solid fourth quarter results. Revenue jumped 15% year-over-year to $2.3 billion, slightly above consensus estimates. Earnings also exceeded consensus expectations, up 26% year-over-year to $1.01 per share. Same-store sales at the chain increased 2.4% during the quarter, reflecting broad-based geographic and category space. Not surprisingly, comps accelerated in December as the firm’s value proposition drove holiday shoppers into the store. The firm also expanded its frozen goods selection, which was put into 329 new stores in 2012. Management indicated that the company plans on equipping more stores with refrigeration capabilities, which could add incremental higher-margin sales. Gross margins were 10 basis points higher year-over-year during the fourth quarter … Read more

Big 5’s Quiet Success Continues

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Sporting goods retailer Big 5 (click ticker for report: ) announced wonderful fourth quarter results Tuesday afternoon. Revenue increased 7% year-over-year to $243 million, slightly above consensus estimates. Earnings per share were considerably better, as the company was roughly break-even during the fourth quarter of 2011, but earned $0.19 per share in the fourth quarter of this year. For the full-year, earnings per share were 30% higher at $0.69. We profiled Big 5 in June of 2011, and shares have appreciated very nicely since. Same-store sales during the quarter were strong, jumping 6.5% from the same period a year ago. Big 5 admitted to benefiting from the post-Sandy Hook jump in guns and ammunition sales, but we also think the company … Read more

We’re Staying Far Away From First Solar

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Tuesday afternoon, the struggling solar firm First Solar (click ticker for report: ) announced fourth quarter results. Revenue grew 63% year-over-year to $1.1 billion, falling well short of consensus estimates. Earnings, adjusted for restructuring charges, swung to a profit of $2.04 per share, roughly in line with consensus estimates. Gross margins were significantly higher than the year ago period at 27.3%, but were down 110 basis points sequentially. Module manufacturing costs were 11% lower than a year ago at $0.66 per watt. First Solar’s most-efficient facility achieved costs as low as $0.64 per watt, but it remains to be seen if these costs are low enough to compete on a global scale. Regardless, management provided one of the most bearish … Read more

Vitamin Shoppe Falls…Is the New GNC Gold Card Program to Blame?

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Health supplement retailer Vitamin Shoppe (VSI) announced fourth quarter results Tuesday morning. Revenue grew only 2% on a reported basis to $218 million, but the company was lapping a 14 week quarter in the prior year. Therefore, on a comparable basis, we think sales grew closer to 10% year-over-year, though the number was still slightly below expectations. Earnings, excluding certain items including the integration costs of Super Supplements and the impact of Sandy, were $0.40 per share, in line with consensus expectations and 29% higher than the same period a year ago. Same-store sales growth was fairly solid, in our view, up 5.2% year-over-year in spite of a 1.6 percentage point drag from Hurricane Sandy. This lagged competitor GNC (GNC), which … Read more

Target Remains Cautious on 2013; Shares Look Fairly Valued

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Retail powerhouse Target (click ticker for report: ) announced solid fourth quarter results Wednesday morning. Revenue increased 7% year-over-year to $22.3 billion, which fell short of consensus expectations. Earnings per share, when adjusted for expenses related to the Canadian rollout, grew 10% to $1.65, above consensus estimates. Though overall sales growth was solid, same-store sales increased only 0.4% year-over-year during the quarter. The results were a little worse than the growth we saw at Wal-Mart (click ticker for report: ) and also a little worse than the same-store sales growth rate we saw at Dollar Tree (click ticker for report: ), which we would attribute to consumers being very cautious with non-core purchases during the holiday season. In fact, management … Read more

Home Depot Posts a Blowout Fourth Quarter

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Home improvement retailer Home Depot (click ticker for report: ) announced wonderful fourth quarter results Tuesday morning. Revenue rose 14% year-over-year to $18.2 billion, easily exceeding consensus expectations. Earnings also exceeded consensus estimates, growing 36% year-over-year to $0.68 per share. Same-store sales expansion outperformed the 1.9% growth rate we saw at Lowe’s (click ticker for report: ) earlier this week, jumping 7% year-over-year and 7.1% in the US. Management noted that large ticket items were the standout performer, saying: Total comp transactions grew by 1.7% for the quarter, while average ticket increased 5.6%. Our average ticket increase was impacted somewhat by commodity price inflation in lumber and copper, which contributed approximately 80 basis points to comp. Transactions for tickets under … Read more

Taking a Look at Main Street Capital

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Business development companies (BDCs), which help small companies in early stages of development (similar to venture capital firms), have been around in the US since 1980 when Congress amended the Investment Company Act of 1940. The amendment essentially gave individual investors the opportunity to invest in a publicly-traded private-equity firm. Though many are not as prominent as firms such as KKR, Bain Capital, or TPG Capital, there are a number of prominent business development companies that are publicly traded, including Apollo Investment Corp (AINV), American Capital Strategies (ACAS), and Ares Capital (ARCC). Since these investment vehicles have become increasingly popular with income-seeking investors, we’ve decided to take a deep look at the sector, and Main Street Capital (MAIN) in particular. Main … Read more

RadioShack’s Slide Continues; Cash Flow is Terrible

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Electronics retailer RadioShack (click ticker for report: ) reported a terrible fourth quarter Tuesday morning. Sales fell 7% year-over-year to $1.3 billion, below already tempered consensus estimates. Earnings per share were a disaster, falling from $0.12 in the fourth quarter of 2011 to a loss of $0.63 in the fourth quarter of 2012—though this number was negatively impacted by a $67 million non-cash charge. We’re steering clear of shares in the portfolio of our Best Ideas Newsletter. Consistent with what we’ve seen all year, the company’s core business continues to deteriorate, with same-store sales dropping 7% during the fourth quarter. The firm also announced earlier in the year that its mobile-store relationship with Target (click ticker for report: ) has … Read more

Lowe’s Posts a Solid Fourth Quarter…Thanks Sandy

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Home improvement retailer Lowe’s (click ticker for report: ) reported modestly better than anticipated fourth quarter results Monday morning. Revenue fell 5% year-over-year to $11 billion, which was a touch better than expected. Earnings were flat compared to the year-ago quarter, coming in at $0.26 per share, but that figure also exceeded the consensus expectation. Though Lowe’s benefited from an extra selling week in fiscal year 2012 (ended January 2013), the results were solid. Hurricane Sandy rebuilding efforts helped stores remain productive after a decent third quarter, with same-store sales rising 1.9%. In total, management believes hurricane-related purchases added 70 basis points to same-store sales growth, and the firm anticipates Sandy will have a positive influence on fiscal year 2013 … Read more