SFM

Kroger Raises Guidance After Solid Earnings Report

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Image Source: Kroger Co – First Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan Grocers are facing tough year-over-year comparisons due to the pantry stockpiling dynamic seen in 2020 in the wake of the coronavirus (‘COVID-19’) pandemic, though demand for consumer staples products remains healthy. On June 17, Kroger Co (KR) reported first quarter earnings for fiscal 2021 (period ended May 22, 2021) that beat both consensus top- and bottom-line estimates. Kroger’s management team also noted how the grocer views the current inflationary landscape, which we will cover in this note. Earnings Update and Guidance Boost Though Kroger’s same-store sales fell by 4.1% in the fiscal first quarter, on a two-year stack basis (the sum of its same-store … Read more

Walmart’s E-Commerce Growth Supports Long Term Dividend Strength

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Image Source: Mike Mozart By Brian Nelson, CFA On Tuesday, May 18, Walmart (WMT) reported first-quarter 2022 results for the 13-week period ended April 30, 2021. Leading the charge was a 37%, 47%, and 49% leap in e-commerce sales in its Walmart U.S., Sam’s Club, and Walmart International segments, respectively, with management noting that sales through its online channel have “more than doubled over the last two years.” Walmart continues to embrace e-commerce and omni-channel capabilities, and that bodes well for the long-term sustainability of its dividend payout, in our view. Walmart’s shares yield ~1.5% at the time of this writing, and they have years of dividend growth ahead of them, in our view. As one of the largest big … Read more

Recent Data Indicates US Consumer Spending Holding Up Well, Online Sales Surging

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Image Shown: As of this writing, the S&P 500 (SPY) appears ready to end 2020 on a high note, supported by the resilience of the US consumer. By Callum Turcan The ongoing coronavirus (‘COVID-19’) pandemic accelerated the shift towards e-commerce, and that change has long legs. Retailers that previously invested in their digital operations and omni-channel sales capabilities were able to capitalize on this shift while those that relied heavily on foot traffic were hurt badly. Numerous retailers went under in 2020 including J.C. Penney Company Inc (JCPNQ) and Neiman Marcus. Holiday season shopping data indicates that US consumer spending was frontloaded and grew modestly in 2020, aided by surging e-commerce sales, which advanced nearly 50% on a year-over-year basis. … Read more

Walmart’s Digital Strategy Continues to Pay Off

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Image Shown: Walmart Inc continues to distribute its free cash flows back to shareholders via dividends and share repurchases. The retailing giant’s management team has a long track record of being shareholders friendly. However, we still view shares of WMT as generously valued as of this writing, given that the top end of our fair value estimate range sits at $133 per share though WMT is currently trading closer to ~$150 per share. Image Source: Walmart Inc – Third Quarter of Fiscal 2021 IR Earnings Presentation By Callum Turcan On November 17, Walmart Inc (WMT) reported third quarter earnings for fiscal 2021 (period ended October 31, 2020) that beat consensus estimates on both the top- and bottom-lines. As we have … Read more

Amazon Secures Big Win in the Online Grocery Market

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Image Shown: Shares of Amazon have surged over the past year. Compared to their March 2020 lows, shares of AMZN have almost doubled as of this writing on August 10, 2020. By Callum Turcan On July 30, Amazon (AMZN) reported second-quarter earnings for 2020 that beat consensus top- and bottom-line estimates by a mile. As of this writing, shares of AMZN have almost doubled since hitting their March 2020 lows as Amazon’s lines of business were well-prepared to ride out the storm created by the ongoing coronavirus (‘COVID-19’) pandemic, assisted by the firm’s pristine balance sheet. Earnings Overview Amazon grew its GAAP net revenues by 40% year-over-year in the second quarter of 2020, which hit $88.9 billion on the back … Read more

Kroger Fighting for Market Share in the Online US Grocery Business

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Image Source: The Kroger Company – Fiscal 2019 Annual Report By Callum Turcan On June 18, The Kroger Company (KR) released its first quarter fiscal 2020 earnings (period ended May 23, 2020) that beat both top- and bottom-line estimates. Comparable store sales (excluding fuel) grew by 19% year-over-year as consumers flocked to its various grocery stores and supermarkets (under brands such as Fred Meyer, Fry’s Marketplace, Pick ‘n Save, and others) to stock up on consumer staples products as the coronavirus (‘COVID-19’) spread across North America. Kroger’s digital sales surged 92% year-over-year last fiscal quarter as curbside and home delivery options have become increasingly popular during the pandemic. Shares of KR yield ~2.0% and are trading in the upper bound … Read more

Panic Buying of Consumer Goods and Its Impact on Discounted Cash Flow Valuation

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Image:Image: Sam’s Club (Crystal Lake, IL), March 14. Water and toilet paper continue to be completely sold out at most big box retailers as COVID-19 panic buying of consumer goods continues to spread. Fear-induced purchases in the US have also helped drive up investor sentiment toward consumer staples names with a large domestic presence. We caution, however, that near-term earnings bumps emanating from “stockpiling” have little impact on a company’s intrinsic value, which is derived more from normalized conditions, and in most cases, the panic buying of consumer goods is merely pulling demand forward. “You know what’s disappearing from the supermarket shelves? Toilet paper…There’s an acute shortage of toilet paper in the United States.” – Johnny Carson, in 1973, causing … Read more

Sprouts’ Growth Spurt Followed by Weak Operating Margins and Terrible Guidance

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Image Source: Sprouts Farmers Market Inc – IR Presentation By Callum Turcan Sprouts Farmers Market Inc (SFM) is a grocery chain that focuses heavily on selling organic foods, healthy foods, and other higher priced items in nearly two dozen US states through 331 stores as of August 1. The company does not pay out a common dividend at this time, and please keep in mind Sprouts’ fiscal year and calendar are slightly different (fiscal year 2018 ended on December 30). While Sprouts has a lot of room to grow as it enters new domestic markets, we caution that the company is operating in a very competitive industry and shares of SFM already appear fully valued, if not generously valued, as … Read more

Target, Kroger Launch Counterattack on Amazon-Whole Foods; Industry Earnings to Shrink

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Image Source: Valuentum The pricing war has begun, but it may take years before we see the final effects. Only the strongest may come out ahead, and only those already focusing on giving customers the very best value proposition at the lowest prices may retain share. By Brian Nelson, CFA The grocery store business is now on a path of significant change in the wake of news that Amazon (AMZN) would acquire upscale organic grocer Whole Foods (WFM). The online retailing giant has wasted little time in resetting the product pricing environment at Whole Foods, and we expect that other grocers will have to follow. The group had already been on high alert given recent language from Kroger (KR), suggesting … Read more

Stock Market Outlook for 2021

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By Valuentum Analysts February 8, 2021 2020 was one for the history books. We covered our thoughts and reflections on the past year in our “2020 Won’t Soon Be Forgotten” article (link here), and now we are looking towards the future. Global health authorities should be able to bring an end to the ongoing coronavirus (‘COVID-19’) pandemic sooner than many had expected as several vaccines have already been improved for emergency use and several others appear increasingly likely to get approved. Global vaccine distribution activities are currently underway, and this should allow the world to slowly return to pre-pandemic activities. Before then, immense stimulus measures launched primarily in developed nations should support global economic activities until the public health crisis … Read more