Yahoo Finance Abercrombie & Fitch and Havertys have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 7, 2024 – Zacks Equity Research shares Abercrombie & Fitch Co. ANF as the Bull of the Day and Havertys HVT as the Bear of the Day. In addition, Zacks Equity Research provides analysis on NVIDIA NVDA, Microsoft MSFT and Apple AAPL.
Here is a synopsis of all five stocks:
Bull of the Day:
Abercrombie & Fitch Co. just posted a record first quarter as it remains one of the hottest retailers. This Zacks Rank #1 (Strong Buy) recently raised full year sales guidance.
Abercrombie & Fitch is a specialty retailer of apparel and accessories for men, women and kids. Founded in 1892, Abercrombie & Fitch consists of 5 global brands including Hollister, Gilly Hicks, Abercrombie & Fitch, abercrombie kids and Social Tourist.
It operates 750 stores across North America, Europe, Asia and the Middle East as well as e-commerce sites.
Another Big Beat in Fiscal First Quarter 2024
On May 29, 2024, Abercrombie & Fitch reported its fiscal first quarter 2024 results and blew by the Zacks Consensus Estimate for the fifth quarter in a row.
Earnings were $2.14 which was a 28.9% beat on the Zacks Consensus which was looking for $1.66.
Net sales rose 22% to $1 billion from $835 million last year. It was the highest first quarter net sales in company history.
Abercrombie is crushing it on the comparable-store-sales metric, a key metric for retailers. Comparable-store-sales rose 21% globally year-over-year. In the Americas, they were up 21%, in EMEA up 23% and APAC was up 22%.
By brand, it was Abercrombie which led the charge with comparable sales up 29% and Hollister up 13%. One area that has shown growth is the company's new "Wedding Shop" collection which was launched in March and has rolled out to every store and online. It sells women's dresses and outfits for attending weddings.
The Wedding Shop is already beating expectations and there hasn't even been a full wedding season yet. Abercrombie also launched men's suits in the stores for more formal occasions.
Other metrics also improved. Gross profit rate rose 540 basis points to 66.4%.
And inventories, which had exploded higher at many retailers during the pandemic, remain relatively unchanged year-over-year. As of May 4, 2024, inventories were at $449 million, up from $448 million on Apr 29, 2023.
Raised Full Year Guidance
Given the red-hot start to the year, it's not surprising that Abercrombie raised its full year sales guidance to a gain of 10% up from its prior guidance of growth of 4% to 6%.
The analysts are bullish too as they've been revising their earnings estimates higher since the earnings report.
3 estimates have been raised for fiscal 2024 in the last 7 days. This has pushed the Zacks Consensus up to $9.26 from $8.45. That's earnings growth of 47.4% compared to last year, where the company only made $6.28.
Analysts are bullish on fiscal 2025 too. 3 estimates have been revised higher in the last week there too, but earnings are still expected to fall 1.4%. But it's still very early to be looking at fiscal 2025.
Stock Soars to New Highs
Abercrombie shares have been on a tear for the last year, gaining 402% during that time.
The stock doesn't seem to want to take much of a timeout in 2024. Yet it's also not that expensive on a P/E basis. It trades at 18.7x forward earnings.
For investors looking for the next hot retail name, Abercrombie & Fitch should be on your short list.
Bear of the Day:
Havertys continues to face headwinds as the housing market remains slow. This Zacks Rank #5 (Strong Sell) is expected to see earnings decline by the double digits in 2024.
Havertys is a full-service home furnishings retailer with 124 showrooms in 17 Southern and Midwest states. It has been in business since 1885.
Another Earnings Miss in the First Quarter
On May 1, 2024, Havertys reported its first quarter 2024 results and missed on the Zacks Consensus Estimate. It reported $0.14 versus the consensus of $0.33.
That's a miss of $0.19, or 57.6%.
It was the second miss in a row and the third miss out of the last 4 quarters as the furniture industry remains challenging.
Sales fell 18.1% to $184 million from $224.8 million in the first quarter last year. Comparable store sales, a key retail metric, also plunged 18.5%.
Total written sales were down 12.6% and written comp-store sales declined 13%.
"Our sales reflect the challenges from the ongoing weak housing market. The decline in demand requires exceptional customer engagement and operational flexibility," said Clarence H. Smith, CEO.
In some better news, the company's free, in home design service, grew 10.4% year-over-year and was 32.3% of its total written business.
Gross margins also rose to 60.3% from 59.1%.
Havertys is still planning for the future, when sales rebound. It is on track to open 5 new stores this year and 5 more in 2025. One new store in the Memphis, TN market opened at the end of March.
Three stores which were in-fill opportunities in growing areas of Florida, are expected to open in the second and third quarters of this year. It also expects to enter the Houston market later this year.
No Debt Outstanding
Havertys had cash and cash equivalents on hand, as of Mar 31, 2024, of $117.9 million.
It also had no debt outstanding as of Mar 31, 2024.
Analysts Cut Full Year Earnings Estimates
Despite some green shoots, including the rise in gross profit margin and the in-house interior design business, it's still a tough market for furniture retailers like Havertys as home sales remain depressed.
It's not a surprise that the analysts have cut 2024 and 2025 earnings estimates again.
1 estimate for 2024 has been cut in the last week, pushing the 2024 Zacks Consensus Estimate down to $1.50 from $2.45 just 60 days ago.
That is a 53.9% decline in earnings as the company made $3.25 last year.
They are bearish on 2025 as well as the Zacks Consensus has fallen to $2.78 from $3.53 in the last 60 days.
Shares Slide in 2024
Havertys shares have slid in 2024, falling 25.5% year-to-date.
Because the earnings are falling as well, it's not even a cheap stock on a P/E basis. It trades with a forward P/E of 18.3 and a PEG ratio of 1.5. A PEG ratio under 1.0 usually indicates a company has both growth and value.
Havertys takes great pride in being shareholder friendly. It has paid a cash dividend each year since 1935.
On May 1, 2024, it increased its quarterly dividend for the 12th consecutive year. It raised it 6.7% to $0.32 from $0.30 per share.
That's a yield of 4.7% which while it looks juicy, also reflects that the stock has been battered.
Investors might want to wait on the sidelines to try and time the bottom in the earnings and sales decline. With analysts cutting earnings estimates again just this week, it's unclear when that bottom may be hit.
Additional content:
NVIDIA Splits 10-to-1: Non-farm Payrolls on Deck
Market indices took a breather Thursday. Only the Dow closed in the green on a tepid trading day overall, +0.20%, while the S&P 500 finished -0.02%, the Nasdaq down -0.09% and the small-cap Russell 2000 bringing up the rear at -0.70%. Over the last week of trading, only the Russell is in the red. Same goes for the one-month chart, now that the Dow has put together a decent +2% gain from a week ago. None of the indices are at all-time highs, but the Nasdaq and S&P are closing in once again.
This all takes a back seat to the NVIDIA story from last afternoon. Two weeks ago, when the chipmaker and A.I. leader reported another quarter of stellar earnings, the company announced a 10 for 1 stock split, which has taken place as of today's close. This brings one share of NVIDIA down to roughly $121 per share, a place it hasn't been since October 13, 2022. Which is in itself rather insane — the company shares have already increased ten-fold in 20 months.
This is how you get to be the second-largest company in the world by market cap. NVIDIA sits behind only Microsoft, surpassing Apple just yesterday, to $3 trillion in market value — by going on a valuation run not even seen when Steve Jobs introduced the iPhone 17 years ago. I mean, if this chart were a mountain you couldn't even climb it: NVIDIA was trading under $200 per share in January of 2023 and less than $500 in January 2024. Since then, leading the A.I. bull run, it has risen to $1210 per share.
Also, no one suggests this success is unearned. While NVIDIA's Q1 numbers a couple weeks back displayed a gaudy +560% earnings growth and +260% in revenues (+427% in its Data Center space by itself), the Zacks consensus currently expects +133% growth in earnings for the ongoing quarter and +109% in revenues. As such, this mega-success still carries a Zacks Rank of #1 (Strong Buy), with no fewer than 10 earnings estimate upgrades having been made in the last 30 days alone.
So the $121 price will now get even more takers, presumably. Even casual investors now know NVIDIA's name and what it does, so those lucky enough to have bought NVIDIA back when it had yet to reach its full potential will be sitting even prettier when all those replicated shares start earning on their own, as well. It's a good day to be Jensen Huang. It's a good day to be at all affiliated with this massive powerhouse of a stock.
Friday morning, the nonfarm payrolls and Unemployment Rate come out. The Employment Situation report, from the segment of the federal government called the U.S. Bureau of Labor Statistics (BLS), is expected to bring 190K jobs to the American economy for the month of May, improving on the previous month's reported 175K. Both the Unemployment Rate and year-over-year Hourly Wages are expected to come in at +3.9%, same as the previous month. Can the market take any more good news?
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