24/7 Wall St. » DLTR

24/7 Wall St. Closing Bell — May 17, 2012

Paul Ausick — Thu, 17 May 2012 20:04:49 +0000

The three major US stock indexes opened essentially flat this morning as investors were faced with a flat report on new claims for jobless benefits (our coverage here). Manufacturing data from the Philadelphia Fed came in much lower than expected and the leading economic indicators also weighed the market down (more coverage here). The US dollar index rose slightly today, now up 0.03% at 81.398. The GSCI commodity index is down fractionally at 633.40, with commodities mostly higher again today. Wheat is the big gainer again today, while orange juice futures were down more than -6%. WTI crude oil closed down -0.3% at $92.56/barrel, and Brent crude trades down at -2% at $107.55/barrel. Gold settled up 2.5% today, at $1,574.90/ounce, ending a four-day losing streak.

The unofficial closing bells put the DJIA down 156 points to 12,442.49 (-1.24%), the NASDAQ fell more than 60 points (-2.10%) to 2,813.69, and the S&P 500 fell -1.50% or nearly 20 points to 1,304,87.

There were several analyst upgrades and downgrades today, including Dell Inc. (NASDAQ: DELL) raised to ‘neutral’ at Sterne Agee; IntercontinentalExchange Inc. (NYSE: ICE) raised to ‘strong buy’ at Raymond James; SINA Corp. (NASDAQ: SINA) raised to ‘overweight’ at Barclays; Visa Inc. (NYSE: V) reiterated as ‘buy’ but removed from Conviction Buy List at Goldman Sachs; Deere & Co. (NYSE: DE) reiterated as ‘buy’ with target price of $96 at Argus.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Bon-Ton Stores Inc. (NASDAQ: BONT) is down -7.3% at $4.09; Dollar Tree Inc. (NASDAQ: DLTR) is down -5.6% at $95.60; E-Commerce China Dangdang Inc. (NYSE: DANG) is down -16.6% at $6.25 (more coverage here); GameStop Corp. (NYSE: GME) is down -10.1% at $18.72 (more coverage here); Sears Holdings Corp. (NASDAQ: SHLD) is up 3.9% at $52.84; and Wal-Mart Stores Inc. (NYSE: WMT) is up 4.7% at $61.97 (more coverage here).

On Friday we are scheduled to get earnings from ANN Inc. (NYSE: ANN), Brown Shoe Co. Inc. (NYSE: BWS), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), Progressive Corp. (NYSE: PGR), and Footlocker Inc. (NYSE: FL).

Other standouts from today include the following stocks:

Rosetta Genomics Ltd. (NASDAQ: ROSG) is down -17.7% at $4.11. The medical diagnostics firm priced a secondary offering this morning. More coverage here.

Dendreon Inc. (NASDAQ: DNDN) is down -11.3% at $7.65. The company’s prostate cancer drug got another challenge from a competing product from Johnson & Johnson (NYSE: JNJ). More coverage here.

MEMC Electronic Materials Inc. (NYSE: WFR) is down -21.4% at $1.68 after posting a new 52-week low of $1.63. The solar component maker lost its CFO today. More coverage here.

Stay tuned for Friday. We don’t have anything on the schedule for tomorrow, but that doesn’t mean that we’ll have a quiet day.

Paul Ausick

Filed under: General Tagged: ANN, BONT, BWS, DANG, DE, DELL, DLTR, DNDN, FL, GME, ICE, JASO, PGR, ROSG, SHLD, SINA, V, WFR, WMT

Sears, Walmart Turnarounds?

Paul Ausick — Thu, 17 May 2012 12:21:10 +0000

Neither Sears Holdings Corp. (NASDAQ: SHLD) nor Wal-Mart Stores Inc. (NYSE: WMT) was expected to post big numbers for the quarter just ended. And they didn’t — but the numbers were better than expected.

Lightly followed Sears reported an adjusted EPS loss of -$0.31 for its first quarter, less than half the consensus (three analysts) estimate of an EPS loss of -$0.67. Revenue came in at $9.3 billion, compared with an estimate of $9.15 billion. On a GAAP basis, Sears posted EPS of $1.78.

The gains at Sears are almost entirely due to the dismantling of the company. The company sold $440 million worth of US and Canada leases during the quarter, and is continuing with its plan to spin-off the Outlet and Hometown stores in the third quarter for another gain of $400-$500 million. Sears also closed stores and is planning to spin-off to existing shareholders about 44% of its holdings in Sears Canada, leaving Sears Holdings with a 51% ownership share.

Walmart, far from dismantling itself, touts its 20% growth in operating income from its international operations. That includes its stores in Mexico — ahem. Walmart posted EPS of $1.09 versus an estimate of $1.04, and revenue of $112.3 billion versus a consensus estimate of $110.5 billion. On a constant currency basis, revenue totaled $111.2 billion. Currency transactions cost the company $800 million in the quarter. Walmart guided EPS for its second quarter at $1.13-$1.18, where the consensus had been $1.16.

At Walmart’s US division, operating income rose by 8.1% “due primarily to higher sales, aided by our price investment strategy, our continued focus on productivity and expense management. Walmart U.S. leveraged expenses for the quarter.” Walmart’s short-term borrowing at the end of the quarter totaled $5.8 billion, up from $4.05 billion in the first quarter and much higher than the $3.45 billion in short-term loans in the same period a year ago. The company plans to continue to “leverage expenses” in the coming quarter.

When Target Corp. (NYSE: TGT) reported earnings yesterday it, too, showed a nice gain but the stock price rose less than 1%. J.C. Penney Company Inc. (NYSE: JCP) got slaughtered yesterday for missing estimates, and Home Depot Inc. (NYSE: HD) took its lumps on Monday.

For different reasons, both Sears and Walmart expect to get a share price boost today. No such luck for Dollar Tree Inc. (NASDAQ: DLTR) which met both EPS and revenue forecasts, but guidance for the second quarter came up short, with EPS guided to $0.87-$0.93, below the consensus estimate of $0.95. Another super-discounter, Dollar General Corp. (NYSE: DG) is expected to post EPS of $0.60 on revenue of $3.82 billion when it reports results for its quarter ended in April.

Shares of Sears are up 7.6% in the pre-market this morning, at $54.75 in a 52-week range of $28.89-$85.90. Shares of Walmart are up about 3.5%, at $61.24 in a 52-week range of $48.31-$62.63. Dollar Tree’s shares are getting pummeled, down nearly -6% at $95.30 in a 52-week range of $59.90-$104.08.

Paul Ausick

Filed under: Earnings, Retail Tagged: DG, DLTR, HD, JCP, SHLD, TGT, WMT

24/7 Wall St. Closing Bell — May 16, 2012

Paul Ausick — Wed, 16 May 2012 20:05:52 +0000

The three major US stock indexes opened higher this morning as investors appeared to be reacting to a temporarily stronger euro, which indicated some confidence in the Eurozone generally. But the dollar regained its lost ground by mid-morning and looks to be continuing a run of 12 straight stronger showings, something last seen more than a quarter century ago. US housing data was not encouraging either (more coverage here). The US dollar index rose today, now up 0.14% at 81.336. The GSCI commodity index is up fractionally at 636.10, with commodities mostly higher today, defying the stronger dollar. Wheat was today’s big gainer. WTI crude oil closed down -1.2% at $92.81/barrel, it’s lowest close since November, and Brent crude trades down at -1.66% at $109.60/barrel. Gold settled down -1.3% today, at $1,536.60/ounce, the yellow metal’s lowest close since last July.

The unofficial closing bells put the DJIA down more than 33 points to 12,598.63 (-0.26%), the NASDAQ fell nearly 20 points (-0.68%) to 2,874.04, and the S&P 500 fell -0.44% or nearly 6 points to 1,324.81.

There were several analyst upgrades and downgrades today, including Cisco Systems Inc. (NASDAQ: CSCO) raised to ‘overweight’ at Barclays; Patriot Coal Corp. (NYSE: PCX) cut to ‘market perform’ at FBR; Aetna Inc. (NYSE: AET) cut to ‘hold’ at Argus; Baker Hughes Inc. (NYSE: BHI) cut to ‘neutral’ at JPMorgan; and SandRidge Energy Inc. (NYSE: SD) raised to ‘hold’ at Canaccord Genuity.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: 8×8 Inc. (NASDAQ: EGHT) is down -1.5% at $3.86; Chico’s FAS Inc. (NYSE: CHS) is up 4.2% at $15.28; Deere & Co. (NYSE: DE) is down -3.1% at $74.23 (more coverage here); Eagle Materials Inc. (NYSE: EXP) is down -5.2% at $33.13; LiveDeal Inc. (NASDAQ: LIVE) is up 5.9% at $6.14; and Target Corp. (NYSE: TGT) is up 0.7% at $55.49 (more coverage here).

On Thursday we are scheduled to get earnings from Bon-Ton Stores Inc. (NASDAQ: BONT), Dollar Tree Inc. (NASDAQ: DLTR), E-Commerce China Dangdang Inc. (NASDAQ: DANG), GameStop Corp. (NYSE: GME), Jinkosolar Holding Co. Ltd. (NYSE: JKS), Ross Stores Inc. (NASDAQ: ROST), Sears Holdings Corp. (NASDAQ: SHLD), Teekay Corp. (NYSE: TK), and Wal-Mart Stores Inc. (NYSE: WMT).

Other standouts from today include the following stocks:

J.C. Penney Co. Inc. (NYSE: JCP) is down -19.2% at $26.92. The retailer absolutely failed on quarterly results. More coverage here.

Rosetta Genomics Ltd. (NASDAQ: ROSG) is up 263% at $5.88. The medical test making firm will have one of its tests covered by Medicare. There was also a 1-for-15 reverse stock split. More coverage here.

Abercrombie & Fitch Inc. (NYSE: ANF) is down -13.7% at $39.21 after posting a new 52-week low of $38.26 earlier today. The teen retailer badly missed estimates last night.

Stay tuned for Wednesday. St. Louis Fed President James Bullard is giving a speech. We have also noted the following events on the schedule (all times Eastern):

8:30 a.m. – New claims for unemployment benefits
10:00 a.m. – Philadelphia Fed manufacturing survey
10:00 a.m. – E-commerce retail sales
10:00 a.m. – Leading indicators
10:30 a.m. – EIA weekly natural gas storage report
4:30 p.m. – Fed balance sheet and money supply

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: AET, ANF, BHI, BONT, CHS, CSCO, DANG, DE, DLTR, EGHT, EXP, GME, JCP, JKS, LIVE, PCX, ROSG, ROST, SD, SHLD, TGT, TK, WMT

24/7 Wall St. Closing Bell (AAPL, DELL, MOS, GILD, DNDN, BAS, CYH, LOPE, RRC, CETV, CHS, DLTR, GRMN, NG, RRD, TOL, HSTM, FIRE, THLD, NFX, CELL)

Paul Ausick — Wed, 22 Feb 2012 21:07:33 +0000

US equities markets opened lower this morning following surprisingly weak manufacturing reports from Europe and China. Fitch Ratings’ downgrade of Greek debt to ‘CCC’ could not have been a surprise, but the move highlighted the doubts about whether or not Greece will be able to meet its new obligations. The new home sales report was weaker than expected (see our coverage here) and rising crude oil costs also kept markets on the downside. Indexes remained in negative territory for most of the day and are set to close with modest losses. Crude oil was higher today, with WTI crude up 0.02% at $106.27/barrel and Brent crude up 1.23% at $123.16/barrel. Gold settled up 0.7% at $1,771.30, a three-month high.

The unofficial closing bells put the DJIA down almost 27 points to 12,938.75 (-0.21%), the NASDAQ fell more than 15 points (-0.52%) to 2,933.17, and the S&P 500 fell -0.33% or nearly 5 points to 1,357.66.

There were several analyst upgrades and downgrades today, including Apple Inc. (NASDAQ: AAPL) reiterated as ‘outperform’ and target price lifted to $600 at Credit Suisse; Dell Inc. (NASDAQ: DELL) cut to ‘neutral’ at Citigroup and cut to ‘hold’ at Needham; The Mosaic Co. (NYSE: MOS) raised to ‘buy’ at Canaccord Genuity; Gilead Sciences Inc. (NASDAQ: GILD) cut to ‘market perform’ at Bernstein; and Dendreon Corp. (NASDAQ: DNDN) started as ‘neutral’ at Citigroup.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Basic Energy Services Inc. (NYSE: BAS) is up 0.15% at $19.90; Community Health Systems Inc. (NYSE: CYH) is up 14.3% at $23.61; Grand Canyon Education Inc. (NASDAQ: LOPE) is down -0.95% at $17.67; Range Resources Inc. (NYSE: RRC) is up 3.4% at $66.47; Central European Media Enterprises Ltd. (NASDAQ: CETV) is down -18.5% at $6.93; Chico’s FAS Inc. (NYSE: CHS) is up 16.9% at $14.97; Dollar Tree Inc. (NASDAQ: DLTR) is down -0.76% at $87.34; Garmin Ltd. (NASDAQ: GRMN) is up 9.2% at $48.81 after posting a new 52-week high of $49.93 (more coverage here); Novagold Resources Inc. (AMEX: NG) is flat at $8.75; R.R. Donnelley & Sons Co. (NYSE: RRD) is down -1.8% at $13.00; and Toll Brothers Inc. (NYSE: TOL) is down -4.8% at $22.56 (more coverage here).

Other standouts from today include the following stocks:

HealthStream Inc. (NASDAQ: HSTM) is up nearly 34% at $23.18 after posting a new all-time high of $23.19 earlier today. The Internet-based health learning company beat both EPS and revenue expectations in its most recent quarter.

Sourcefire Inc. (NASDAQ: FIRE) is up nearly 27% at $45.34 after posting a new all-time high of $45.50 earlier today. The Internet security provider handily beat earnings and revenue expectations last night.

Threshold Pharmaceuticals Inc. (NASDAQ: THLD) is up nearly 20% at $6.0. The pharmaceutical maker yesterday announced positive results for its pancreatic cancer treatment.

Newfield Exploration Co. (NYSE: NFX) is down more than -12% at $37.06. The independent oil & gas company missed EPS and revenue estimates last night.

Brightpoint Inc. (NASDAQ: CELL) is down more than -11% at $8.89. The mobile-phone wholesaler has cut its outlook for 2012.

Stay tuned for Thursday. We have noted the following events on the schedule (all times Eastern):

8:30 a.m. – New US claims for unemployment benefits
10:00 a.m. – Federal Housing Finance Agency (FHFA) house price index
10:30 a.m. – EIA weekly natural gas storage report
11:00 a.m. – EIA weekly petroleum status report
11:00 a.m. – Kansas City Fed manufacturing index
1:00 p.m. – 7-year note auction
4:30 p.m. – Federal Reserve balance sheet and money supply

Paul Ausick

Filed under: 24/7 Wall St. Wire Tagged: AAPL, BAS, CELL, CETV, CHS, CYH, DELL, DLTR, DNDN, FIRE, GILD, GRMN, HSTM, LOPE, MOS, NFX, NG, RRC, RRD, THLD, TOL

Taking Dividends to the Dollar Stores (FDO, DLTR, DG)

Administrator — Thu, 19 Jan 2012 20:53:43 +0000

Family Dollar Stores, Inc. (NYSE: FDO) is showing just how a secular trend is still going to rule the roost in retail. It was Dollar Tree, Inc. (NASDAQ: DLTR) hitting new all-time highs yesterday, and now it is Family Dollar’s day to shine (not at all-time highs).

The news is that Family Dollar is hiking its dividend to $0.21 from $0.18 per share per quarter. The gain is a 16% hike and this has Family Dollar shares higher by 2.8% at $55.25. This will take the 1.3% yield indication on the financial screens up to a better yield of about 1.5% for dividend investors.

It may not seem like a high yield, but the company has now claimed to have raised its dividend each year at a compound average rate of approximately 16%.

Dollar stores of today are really stores that sell items under $10.00 in most cases. Family Dollar pays a dividend, while Dollar Tree and Dollar General Corporation (NYSE: DG) do not.

JON C. OGG

Filed under: Consumer Goods, Corporate Governance, Dividend, Retail Tagged: DG, DLTR, FDO

Over 10 Big Stocks Hitting New All-Time Highs (AAPL, DLTR, ECL, MCD, MNST, NKE, PNRA, SBUX, AAP, AZO, ORLY)

Administrator — Wed, 18 Jan 2012 19:52:12 +0000

The logic from technical traders is simple: “Stocks hitting new highs tend to keep hitting new highs.” Eventually that comes to an end, sometimes a painful end. Until that end arrives it sure gives the bulls a lot to cheer about. When these are big companies of $10 billion and more hitting all-time highs, the bulls get even more excited. Here are just some of the all-time highs which have been seen today:

Apple Inc. (NASDAQ: AAPL) hit a new high this morning ahead of next week’s earnings. The new value is almost at $400 billion. The new high is $428.50 for now and the consensus price target from Thomson Reuters is now above $509.00.

Dollar Tree, Inc. (NASDAQ: DLTR) is continuing with the trade-down economy and the secular growth of the dollar store (actually sub-$10) stores. The new high is $85.58 and the consensus price target is $86.27 from Thomson Reuters. Dollar Tree is now worth more than $10 billion in market capitalization.

Ecolab Inc. (NYSE: ECL) is worth almost $14 billion now, and the new high today of $60.45 compares to a Thomson Reuters consensus price target of $61.56.

McDonald’s Corporation (NYSE: MCD) gave solid same-store sales forecast and recently juiced up its dividend. The new high is $101.87 and the market cap is nearing $104 billion.

Monster Beverage Corporation (NASDAQ: MNST) recently announced a stock split and shares hit a new high this morning but have promptly backed off by close to 2%. The new high is $101.67 and the consensus analyst target is close to $105.00. It is hard to imagine, but Monster now has a market value of almost $8.7 billion.

Nike Inc. (NYSE: NKE) keeps doing it. A new high of $100.75 was put in today after a prior 52-week high of $99.44. Its market value now eclipses $46 billion.

Panera Bread Company (NASDAQ: PNRA) is up at stratosphere levels now for its healthier sandwich and destination approach. The new high is $151.93 and the consensus price target from Thomson Reuters is $146.68. Its market cap is now almost $4.5 billion.

Starbucks Corporation (NASDAQ: SBUX) has proven us very wrong on how high the valuation can go back up to. The new high is $48.15 and the consensus price target from Thomson Reuters is just under $48.00 and the market cap is now more than $35 billion.

Advance Auto Parts Inc. (NYSE: AAP) worth over $5 billion, AutoZone, Inc. (NYSE: AZO) worth over $13 billion, and O’Reilly Automotive, Inc. (NASDAQ: ORLY) worth over $10 billion… These all hit record high prices in their stocks on Wednesday. With a record age car fleet in America of more than 10 years, car parts stores and suppliers sure are going to have a lot of car owners to sell parts to that are long past the warranty and insurance coverage.

JON C. OGG

Filed under: HI/LOW, Technical Analysis, Trading Alert Tagged: AAP, AAPL, AZO, DLTR, ECL, MCD, MNST, NKE, ORLY, PNRA, SBUX

24/7 Wall St. Closing Bell (CHK, ENB, LULU, NTAP, QCOM, CSUN, DCI, GME, HP, SJM, SHLD, DLTR, ZOLL, ANGI, RMBS, VIAS, DQ)

Paul Ausick — Thu, 17 Nov 2011 21:11:52 +0000

Traders started off this morning on a bit of a selling spree, but for most of the morning the indexes were roughly flat. In the afternoon, however, selling picked up and all indexes were down sharply by the last hour of trading. A good report on new unemployment claims and some good news on new housing starts and building permits did nothing to put a positive jolt into trading. Gold closed down -3%, at $1,720.20 and silver finished at $31.50, down -7%. Crude oil slid about -3% as well and looks like it will close below $100/barrel today.The unofficial closing bells put the DJIA down nearly 135 points to 11,770.80 (-1.13%), the NASDAQ fell more than 51 points (-1.96%) to 2,587.99, and the S&P 500 fell -1.67% or more than 20 points to1,216.18.There were several analyst upgrades and downgrades today, including Chesapeake Energy Corp. (NYSE: CHK), which was cut to ‘sell’ at Argus. Other action included Enbridge Inc. (NYSE: ENB) raised to ‘buy’ at TD; Lululemon Athletica Inc. (NASDAQ: LULU) raised to ‘buy’ at Stifel Nicolaus; NetApp, Inc. (NASDAQ: NTAP) cut to ‘neutral’ at Collins Stewart; and Qualcomm Inc. (NASDAQ: QCOM) reiterated as ‘buy’ with a $74 target at Canaccord Genuity. See our story on Enbridgeand its acquisition of a pipeline to transport crude oil to the Gulf Coast.Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: China Sunergy Co. Ltd. (NASDAQ: CSUN) is down about -4.6%, at $0.89; Donaldson Co. Inc. (NYSE: DCI) is down more than -4%, at $65.29; Game Stop Corp. (NYSE: GME) is down more than -3%, at $21.79; Helmerich & Payne Inc. (NYSE: HP) is down about -3%, at $53.63; The J.M. Smucker Co. (NYSE: SJM) is down about -2%, at $71.69; Sears Holdings Corp. (NASDAQ: SHLD) is down about -4.7%, at $65.11; and Dollar Tree Inc. (NASDAQ: DLTR) is up a fraction, at $76.09.

Several other standouts from today are as follows…

Zoll Medical Corp. (NASDAQ: ZOLL) is up nearly 23%, at $43.80. The medical equipment maker beat quarterly earnings estimates and announced a $50 million stock buyback program.

Angie’s List Inc. (NASDAQ: ANGI) is up more than 25%, at $16.32. The company had its IPO today, and shares have risen briskly from the $13 offering price.

Rambus Inc. (NASDAQ: RMBS) is up more than 23%, at $8.78. The company’s shares were torched yesterday following an adverse ruling in a patent case. Today’s comeback will help, though its a long ways back to the $18 level the stock was trading at yesterday morning.

Viasystems Group Inc. (NASDAQ: VIAS) is up more than 22%, at $18.25. The company withdrew a proposed offering of 4 million shares.

Daqo New Energy Corp. (NYSE: DQ) is down about -19%, at $1.82, after setting a new 52-week low earlier today. The company’s CFO will leave the company at the end of this month. Shares fell -3% early this week when the solar PV company missed earnings estimates.

Stay tuned for Friday. New York Federal Reserve Bank president William Dudley is speaking tomorrow morning and Dallas Federal Reserve Bank president Richard Fisher is speaking tomorrow afternoon. Here’s a list of other noteworthy events (all times Eastern):

10.00 a.m. – Conference Board index of leading economic indicators

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ANGI, CHK, CSUN, DCI, DLTR, DQ, ENB, GME, HP, LULU, NTAP, QCOM, RMBS, SHLD, SJM, VIAS, ZOLL

Top Analyst Upgrades & Downgrades (AGNC, AAPL, ADM, CALM, CAT, DLTR, FDO, HPQ, KIRK, LNC, MON, NAV, TIF, VECO)

Administrator — Mon, 17 Oct 2011 12:16:50 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Monday morning.

American Capital Agency (NASDAQ: AGNC) Cut to Market Perform at JMP Securities.
Apple Inc. (NASDAQ: AAPL) Reiterated Outperform with $500 target at Credit Suisse.
Archer Daniels Midland Company (NYSE: ADM) Started as Hold at Argus.
Cal-Maine Foods, Inc. (NASDAQ: CALM) named value stock of the day at Zacks.
Caterpillar Inc. (NYSE: CAT) Raised to Buy at Goldman Sachs.
Dollar Tree, Inc. (NASDAQ: DLTR) Cut to Equal-Weight at Barclays.
Family Dollar Stores, Inc. (NYSE: FDO) Raised to Overweight at Barclays.
Hewlett-Packard Co. (NYSE: HPQ) Reiterated Buy with $40 target at Argus.
Kirkland’s, Inc. (NASDAQ: KIRK) Cut to Underperform as bear of the day at Zacks.
Lincoln National Corporation (NYSE: LNC) Added to the U.S. 1 List at BofA/ML.
Monsanto Company (NYSE: MON) Reiterated Outperform as Bull of the Day at Zacks.
Navistar International Corp. (NYSE: NAV) Cut to Sell at Goldman Sachs.
Tiffany & Co. (NYSE: TIF) Started as Buy at Stern Agee.
Veeco Instruments Inc. (NASDAQ: VECO) Cut to Sell at Canaccord Genuity.

JON C. OGG

Filed under: Analyst Calls Tagged: AAPL, ADM, AGNC, CALM, CAT, DLTR, FDO, HPQ, KIRK, LNC, MON, NAV, TIF, VECO

Value Conundrum: Dollar Store M&A Creates High Premium in Sector (NDN, APO, KKR, BRK-A, WMT, DG, FDO, DLTR, BIG, TUES, M, TGT)

Administrator — Tue, 11 Oct 2011 14:25:04 +0000

99 Cents Only Stores (NYSE: NDN) was supposed to be acquired for somewhere between $22.00 and $24.00 per share according to reports in mid-September. The company was supposed to have interest from Apollo Global Management, LLC (NYSE: APO) in a bid that would have topped a prior buyout offer from Leonard Green & Partners at about $19.09 earlier in the year. The dollar store chain is being acquired, but by a group led by Ares Management LLC and Canada Pension Plan Investment Board in a deal valued at $1.6 billion in equity or $22.00 per share in cash. This changes some key observations about the dollar sector: we love the sector, but valuations are starting to look stretched even with its growth opportunities.

24/7 Wall St. has been calling for higher and higher prices in the dollar store sector and we have discussed consolidation in the other discount store and close-out stores. Dollar stores will be a secular winner over the years ahead unless we get a sudden return to a booming economy. We have even gone as far as to showing that dollar store chains are now where Wal-Mart Stores Inc. (NYSE: WMT) was back in the early 1990s. Private equity and other savvy investors like Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) have been active in this space.

Dollar General Corporation (NYSE: DG) remains a Stock to Own for the Next Decade, but we are growing to accept the math here: shares hit a new all-time high of $39.22 today and the consensus price target is only $39.94. We have chatted this one up over and over since the stock was well into the $20 stock handles. Kohlberg Kravis Roberts & Co. (NYSE: KKR) continues to sell stock that it still owns and we would just expect that the firm will continue to sell shares. It is when those price drops occur that you get your chance to enter the stock on the cheap. Please be advised, we expect that Warren Buffett will have added to this position.

There has also been buyout interest in Family Dollar Stores Inc. (NYSE: FDO), up only marginally at $54.05 versus a 52-week range of $41.31 to $56.92. Dollar Tree, Inc. (NASDAQ: DLTR) has also been under private equity interest and its shares are up 2% at $80.92 and its stock hit a new high of $80.99 this morning. Analysts have consensus price targets of $56.87 for Family Dollar and $77.67 for Dollar Tree.

Big Lots Inc. (NYSE: BIG) is a close-out store with many low-priced items but is no dollar store. There was a while where it was also considered takeover bait but that failed to materialize. At $34.33, the 52-week range is $27.82 to $44.44. Tuesday Morning Corp. (NASDAQ: TUES) is another close-out store and it is often overlooked because it has a mere $158 million market capitalization rate. At $3.71 after a 2.6% drop today, its 52-week range is $3.22 to $5.93.

99 Cents only is up 4.2% at $21.36 this morning. The news and the reaction may seem anti-climactic, but this brings an end to what was a long and arduous buyout process that has been going on since at least March of this year.

The growth of discounters and the growth of dollar stores says something awful about America. If these trends continue, it simply means we have more and more of the population at the lower-end of the spectrum seeking deals wherever they can be found. Still, business is business. If Warren Buffett and private equity giants have so much interest in this sector, ask yourself if there is money to be made. Again: Dollar Stores Are The Next Wal-Mart!

The sad thing is that there is now a market premium in the sector. Our favorite remains Dollar General, but it now trades at 15-times 2012 (actually January 2013) fiscal earnings estimates from Thomson Reuters. Another premium is there for Dollar Tree with a forward 2012 ratio of 17.5-times expected earnings. Family Dollar has a different fiscal year-end (august) but if we blend the estimates we get a stock trading at close to 14-times the same earnings estimate periods of the peers.

We will start to grow a bit more cautious on the sector of dollar stores if the price appreciates too much more. The fact that we and others are excited about the dollar store and close-out store sector does not bode for much growth and does not bode well for the middle class. These stocks now trade at richer multiples than many normal retailers: Macy’s Inc. (NYSE: M) trades at 9-times expected 2012 (January 2013) earnings estimates and Target Corporation (NYSE: TGT) trades at 12-times the same period’s estimates. Wal-Mart Stores Inc. (NYSE: WMT) trades closer to 11-times next year’s expected earnings and that is after the stock enjoyed a significant pop of late.

For a comparison, 99 Cents Only at $22.00 per share values the company at about 17.5-times what was the expected 2012 (March 2013) fiscal earnings expectations. This still leaves some room higher for dollar stores, but this is a premium to peers and to the broad market. The secular trend is what is driving the value of dollar stores and investors are willing to pay a premium for that. The questions will start to arise if these premiums grow much further. How much of a premium can a discount sector command?

JON C. OGG

Filed under: Activist Investor, Apparel, Consumer Goods, Corporate Governance, Defensive Stocks, Economy, Editor's Picks, Mergers and Buy Outs, Private Equity, Retail Tagged: APO, BIG, BRK-A, DG, DLTR, FDO, KKR, M, NDN, TGT, TUES, WMT

Hard Times Live On… Layaway Makes a Comeback (WMT, SHLD, TGT, BBY, TJX, LOW, DG, DLTR, FDO)

Administrator — Tue, 04 Oct 2011 12:43:06 +0000

Back in the day, a layaway plan made sense for many consumers who did not have the full purchase price of an item but could pay regular small installments until the item was fully paid for. The store held onto the item until the last payment was made. Easy access to credit cards pretty much killed those layaway programs as consumers were willing — and able — to pay the interest charges for credit. Layaway plans are now popular again as consumers look for ways to save money — and not paying interest is one way to do that.

Wal-Mart Stores Inc. (NYSE: WMT) announced last month that it was re-instituting its layaway plan after a five-year break. Sears Holdings Corp. (NASDAQ: SHLD) Sears and Kmart stores, Target Corp. (NYSE: TGT), Best Buy Co. Inc. (NYSE: BBY), and The TJX Companies, Inc. (NYSE: TJX) TJ Maxx stores also offer layaway plans.

For many large retailers inventories have piled up and margins are threatened because retailers fear that they will have to take larger-than-planned markdowns to move their holiday inventory. Layaway plans at Kmart and Toys ‘R’ Us have helped boost sales through layaway programs, while Target has had success with a branded credit card that offers shoppers a 5% discount on items purchased at the store. Lowe’s Companies, Inc. (NYSE: LOW) has a similar discount credit card at its Lowe’s home improvement stores.

Some super-discounters like Dollar General Corp. (NYSE: DG) and Dollar Tree, Inc. (NASDAQ: DLTR) don’t offer layaway plans, but Family Dollar Stores, Inc. (NYSE: FDO) does.

There are even on-line layaway shops that offer everything from diamonds to fabrics. Payments are made by debiting customers’ bank accounts or by check.

Continuing high unemployment and stagnant wages are probably the biggest reason for the re-appearance of layaway plans. Credit tightening has left many consumers without access to credit cards or they prefer to conserve cash by avoiding high credit card interest rates. Many layaway plans include a small one-time fee for the service, but that’s always lower than 10%+ credit card interest rates.

The re-emergence of layaway plans reflects the desire for retailers to make it as easy as possible for every consumer to make a purchase and the desire among consumers to manage their own cash flows. The programs will last as long as consumer credit is expensive and hard to get, then they’ll fade away until the next time.

Paul Ausick

Filed under: Apparel, Compensation, Consumer Goods, Retail Tagged: BBY, DG, DLTR, FDO, LOW, SHLD, TGT, TJX, WMT