Morning Trade Live with Oliver Renick Show Notes

You don't need Super Bowl square footage to sell puppy chow

I got to appear on the Schwab Network for their live segment. It was booked two days ago and the show is unscripted, which means you have to prepare two hours for just five minutes of airtime. (You never know what questions could come your way). Here are my behind-the-scenes notes, including Petco which was not covered live.

• Dollar Tree Inc DLTR -14.56%↓
• Williams-Sonoma WSM 18.85%↑
• Petco WOOF -1.95%↓

Dollar Tree Inc

DLTR -14.56%↓

Est. EPS: ?$2.65

Actual EPS: $2.55 (Miss) Bar is set High, Highest since last two years

Est. Revenue: $8.67B

Actual Revenue: $8.63B

Bulls say: Strong Cash flows supporting stock buybacks (250M last quarter) with stable margins, solid consumer, new store expansion, multi-price offerings

Bears say: Money doesn’t grow on trees. Overspending and cash could be used better elsewhere increasing sales per square foot or increase margins. Would be first hit if consumer slows.

• Closing 600 stores in 2024, another 370 leases to expire, 16,774 total (CVS closed 600 in 2021 over three years)
• No new buybacks, still have $1.3B outstanding remaining
• Remember this is 4th quarter earnings where S&P 500 earnings were up 11% vs. 3% consensus – Everyone was beating 4th quarter earnings
• Reached full resolution with the DOJ supply chain issues- became “Good Distribution Practices” (“GDP”) certified
• JP Morgan Overweight $165, Guggenheim buy $170, Wells Fargo Overweight $180
• Cash is King 3.66 Cash Flow per share Qtr. Vs. Industry average less than one.
• Big spend on Capital Expenditures $660M which is a 38% increase YoY
• Margins look good and stable, reported 32% Gross not impacted by the Bullwhip affect others have experienced
• P/E 28 vs. DG P/E 18, trading in top half, except to trade mid range to comps
• Expanded multi-price Plus offering to 870 additional Dollar Tree stores
• Sensitive Consumer “First line of Defense”

Williams-Sonoma

WSM 18.85%↑

Est. EPS:? $5.14

Actual EPS: $5.44 (Beat)

Est. Revenue: $2.23B – lower that past 2 years 4th quarter

Actual Revenue: $2.28B (Beat)

Bulls say 26% dividend increase, steady dividend payer, Increasing EBITDA greater than Sales, strong operator inventory turnover is picking up, New $1B stock repurchase program

Bears say High End Consumer Growth is shrinking, ?increasing net debt ratios at a rapid pace, rising shipping and fuel costs for home furnishings retailers Gross margin of 42.6% is stretched how much better can they get?

• CEO Laura Alber has done a great job and understands her consumer, but a concern is the fact she has sold roughly $22M over the past year (high % of her personal holdings but still less than 1% of the total float)
• Wells Fargo Equal Weight $240, UBS sell $195, RBC $261
• Over the last four quarters, the company has surpassed consensus EPS estimates 4xx
• P/E 16 fairly valued among specialty retailers
• NYSE order imbalance at close 159,170 shares on the buy side (typically positive for a stock with increasing demand) last minute shoppers.

Petco

WOOF -1.95%↓

Est. EPS:? $0.02

Actual EPS: $-0.08 Missed, back to back negative quarters

Est. Revenue: $1.62B , healthy growth in line with expectations

Actual Revenue: $1.7B

Bulls say: Good intrinsic Book Value, Name brand recognition and goodwill, and high revenue per share

Bears say: You don't need Super Bowl square footage to sell puppy chow. Under short term pressure with Costs of Good sold increasing faster than revenues, ?not much confidence from leadership able to deliver

• On the call, mgmt. literally said profitability of the company is “Unacceptable” (Wow!, not a good look)
• Mobile Vet vehicle growth (why not storefront?)
• Morgan Stanley $3.00, Jefferies Hold $3.11, Goldman Buy $5.00
• Earnings are really the only time this company gets the spotlight because their initiatives haven’t been catching the public’s eye.

Final Word

Thank you for reading and I am grateful and humbled to be able to learn, grow, and invest alongside you at Tuttle Ventures.

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Important Disclosures Here

Best,

Darin Tuttle, CFA

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