The earnings season is mostly winding down, but we still have a slew of retail earnings in the apparel and home categories. On Thursday alone, we have earnings from Dick’s Sporting Goods Inc. (NYSE: DKS), Foot Locker Inc. (NYSE: FL), Gap Inc. (NYSE: GPS), Ross Stores, Inc. (NASDAQ: ROST), Sears Holdings Corporation (NASDAQ: SHLD), The Buckle (NYSE: BKE), The Children’s Place Retail Stores, Inc. (NASDAQ: PLCE), Wet Seal Inc. (NASDAQ: WTSLA), Williams-Sonoma (NYSE: WSM), and Zumiez, Inc. (NASDAQ: ZUMZ).
We have compiled data and analysis here using Thomson Reuters consensus estimates, recent metrics offered by the companies, relative performance, and more. As with what we have seen at most retail and apparel earnings this week and last, many of these are richly valued and probably cannot just hope to please the bulls by meeting estimates on cost cutting and inventory management and then giving cautious guidance.
Dick’s Sporting Goods Inc. (NYSE: DKS) estimates are $0.09 EPS and $961.5 million, both higher than last week’s estimates; estimates for the holiday quarter are $0.57 EPS and $1.27 billion in revenues, both also higher than last week. With shares at $24.60, its 52-week trading range is $9.21 to $26.00. A look at forward annual earnings estimates of $1.13 EPS for Jan-2010 and $1.29 for Jan-2011 will bring up some of the same valuation concerns we have seen elsewhere in retail.
Foot Locker Inc. (NYSE: FL) estimates are $0.13 EPS on $1.19 billion in revenues. For the holiday quarter ahead estimates are $0.28 EPS and $1.29 billion in revenues. The stock is probably not overly expensive at $11 at almost 18-times the $0.60 EPS target for FY Jan-2010 and 14.5-times the $0.73 EPS target for FY Jan-2011. They are not exactly cheap either. The 52-week trading range is $3.65 to $12.95.
Gap Inc. (NYSE: GPS) is in a totally new light as the new CEO has really gotten this longstanding turnaround candidate turned around and heading in the right direction. Things are good enough and not-bad enough that we aren’t calling Old Navy a dead brand thanks to the new efforts. Estimates are $0.44 EPS and $3.57 billion in revenues. Next quarter estimates are $0.43 EPS and $4.15 billion in revenues. The CEO deserves praise, but the question here is one of how to value Gap shares in looking ahead now that it is mature, has managed to get much of a turnaround under its belt considering the economy and peers, and since it is no longer the great growth story it once was. Estimates are $1.50 EPS for FY Jan-2010 and $1.65 EPS for FY Jan-2011. With a $22.20 price, Gap trades at 14.8-times this year’s earnings and trades at 13.5-times next year’s expected earnings. That is not expensive in the current climate, particularly when you consider that it has provided an upside surprise for the last four quarters. We don’t expect it to come any time soon, but we have always had Gap as a break-up candidate where it could break the three major brands apart. The company also noted how October same-store sales were up 4% and the total sales rose 5% after seeing gains over at Banana Republic and Old Navy. The Gap brand continues to drag the ship now.
Ross Stores, Inc. (NASDAQ: ROST) $0.84 EPS and $1.73 billion in revenues. For the holiday quarter those estimates are $0.99 EPS and $1.92 billion in revenues. With shares at $45.65 and with a 52-week trading range of $21.70 to $50.50, this doesn’t sound that expensive or like it has to blow numbers away to keep the bulls happy. The off-price and home accessories retailer trades at 13.5-times expected Jan-2010 earnings estimates of $3.37 EPS and 12.5-times the expected Jan-2011 earnings estimates of $3.67 EPS.
The Buckle (NYSE: BKE) estimates are $0.70 EPS and $231.07 million in revenues; and estimates are $0.81 EPS and $269.94 million in revenues. At $28.96, the retailer of casual apparel, footwear, and accessories for young men and women has a 52-week range of $13.57 to $39.09 and it trades at 11-times both the Jan-2010 estimates of $2.62 and Jan-2011 estimates of $2.63. That sounds cheap, but the lack of growth is probably part of the reason when you consider about 6% top-line revenue growth from fiscal years Jan-2010 to Jan-2011.
Sears Holdings Corporation (NASDAQ: SHLD) estimates are -$1.09 EPS on $9.92 billion in revenues. For the ever-important holiday quarter the estimates are $2.64 EPS and $12.61 billion in revenues. This has a huge premium close to 70-times this year’s expected earnings and about 50-times FY Jan-2011 estimates. The premium is due to the old belief of the value of the dirt underneath the shops and because of brands and trademarks which can be sold or licensed. At $76.00, the 52-week trading range is $26.80 to $79.35. Calling the history here spotty is an understatement, yet shares continue to rally after selling off on bad news.
The Children’s Place Retail Stores, Inc. (NASDAQ: PLCE) still has a discrepancy from source to source on its earnings estimates so that is about all we will add: $1.38 EPS on $461.18 million in revenues; next quarter estimates are $1.05 EPS on $463.78 million in revenues. The largest unquantifiable risk here is what happens in flu season and how protective Mommy is over Junior. With shares around $34.65, and the 52-week trading range is $16.45 to $37.68.
Wet Seal Inc. (NASDAQ: WTSLA) is a young women’s apparel retailer. Normally, we might not cover this one, but it is a retailer that has been very range-bound because of a turnaround and because of its mixed performance metrics. Estimates are $0.03 EPS and $139.79 million in revenues for the past quarter, yet the coming holiday quarter-end estimates are $0.08 EPS and $155.19 million in revenues, yet the company gave guidance of $0.04. We will hold off on forward valuation multiples because each penny in an EPS scenario for a $3.36 stock will skew the ratios. October same-store sales were down 1.3%.
Williams-Sonoma Inc. (NYSE: WSM) is not just in the apparel market, but steadfast in the retail market for middle and upper-middle class spending for the kitchen and house. Its estimates are $0.05 EPS and $686.1 million in revenues. For the important Christmas quarter the estimates are much higher at $0.38 EPS and $949.9 million in revenues. At $20.66 and with a $4.35 to $22.25 52-week trading range, this company absolutely has to knock the cover off the ball here. Otherwise, this trades at 62-times Jan-2010 fiscal estimates and 38-times Jan-2011 fiscal earnings estimates. Meeting estimates and maintaining guidance won’t likely be enough here.
Zumiez, Inc. (NASDAQ: ZUMZ) is the last of the retailers out on Thursday Estimates for the action sports equipment and apparel retailer are $0.15 EPS and $112.01 million in revenues for the last quarter, which is higher than estimates last week. For the important holiday quarter-end ahead the estimates are $0.25 EPS and $131.17 million in revenues, also higher than last week. Unfortunately, its same store sales in October were off by -8.9% and that may erase its habit of beating estimates.
JON C. OGG
NOVEMBER 17, 2009