Retail Blowout
Retail Blowout
Investors,
In the next few weeks we will start to get incremental news from all retail companies regarding holiday sales for 2021. This is an important period for any investor who is concentrated in retail stocks (me) as we will get to see how the industry performed during this strange time period of COVID, Omicron, supply chain issues and whatever else the market is freaking out about.
I am pretty bullish on the entire retail industry right now as any retailer that has survived this strange time period now has a lower cost base and less competition. A lower cost base will result in higher operating leverage. Less competition should result in higher revenues. Both of these combinations result in stronger free cash flow.
I have recently highlighted my top position in the retail space, which I frankly think could be a multi-bagger.
There was a piece of bullish news that went out yesterday that caught my eye that I felt worth sharing. Victoria’s Secret announced an accelerated $250 million buyback plan and also reaffirmed their Q4 outlook.
CEO Martin Waters commented, “I am very pleased with our fourth quarter performance to date and believe we have solid plans in place for the balance of this holiday selling season. I was particularly encouraged by our sales growth during the peak shopping days over the Thanksgiving weekend and the large rush of business as we approached December 25th. Our stores are in a good inventory position as we begin our semi-annual sale and anniversary the positive stimulus impact on sales in January of last year. Performance has been broad-based across all of our businesses, and our stores channel has been a position of strength for our results. The teams have executed well and focused on what we can control in this challenging supply chain environment, and I could not be more proud of our efforts. Over the past few months, we have stabilized our business and created a platform for future growth while generating significant cash flow. Our financial stability and cash flow potential are pillars of strength and competitive advantages. With the unanimous support of our Board of Directors, we are announcing our first-ever share repurchase. We believe this share repurchase reflects our confidence in the Company and is another step on our journey to create long-term, sustainable value for our shareholders.”
Victoria’s Secrets was recently spun off from L. Brands and has went straight down — typical movement in a spinoff stock. Victoria’s Secrets will likely continue to rebound from here and approach an $8-10 billion valuation over the mid-term. Yesterday Victoria’s Secrets flew up over 12%.
Overall, the news from Victoria’s Secrets speaks big words for the retail industry. People have money. They want to shop. And they are going in malls.
Hope you have a great start to your day!
-Alpha
THE RUNDOWN:
U.S. holiday retail sales rise 8.5% as online shopping booms -Mastercard: U.S. retail sales rose 8.5% during this year's holiday shopping season from Nov. 1 to Dec. 24, powered by soaring ecommerce sales, a report by Mastercard Inc said on Sunday. U.S. ecommerce sales jumped 11% in this year's holiday shopping season, according to Mastercard Spending Pulse report, yet again underscoring the COVID-19 pandemic's role in transforming customers' shopping habits. Shoppers also rushed to stores amid supply chain concerns as COVID-19 cases surged, sending sales at physical stores up 8.1% compared with 2020, the report added. Read More.
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China met coal, coke futures jump as Omicron woes disrupt imports: Chinese coking coal and coke futures advanced on Wednesday, buoyed by supply concerns, as coal imports from Mongolia were disrupted by the recent outbreak of the Omicron coronavirus variant. Some border cities in China's Inner Mongolia region and Heilongjiang province have halted non-container imports by rail for commodities including coal, iron ore, copper ore and zinc to reduce risk amid a recent resurgence of infections. The most-traded metallurgical coal futures on the Dalian Commodity Exchange , for May delivery, jumped as much as 7.2% to 1,999 yuan ($314.10) a tonne. They ended up 6.1% at 1,978 yuan per tonne. Read More.
Airlines pull back as flight cancellations keep piling up: Airline shares finish broadly lower after COVID-driven staffing issues and winter weather problems in parts of the U.S. cause a potential fifth straight day of flight cancellations. U.S. cancellations rose to ~900 by midday, citing tracking service FlightAware, with more than 400 already scrubbed for tomorrow and following nearly 1,300 cancellations yesterday. Read More.
U.S. crude bounces above $75, lifting energy to top sector standings: The energy sector has rallied ~8% off its low from last Monday, outpacing a 5.5% gain in the S&P 500 during that stretch. Oil prices started under pressure as COVID-related travel disruptions raised fresh questions about demand for energy, but turned around after Saudi Energy Minister Prince Abdulaziz bin Salman said the world faces a 30M bbl/day oil supply shortfall by the end of the decade. Read More.
Braemar Hotels & Resorts to acquire Ritz-Carlton property in Puerto Rico for $186.6M: Braemar Hotels & Resorts agrees to buy the 96-room Dorado Beach, a Ritz-Carlton Reserve in Dorado, Puerto Rico, for a total consideration of $186.6M. The acquisition will be funded with ~$104M of cash, 6M shares of common stock, and the assumption of a $54M mortgage loan. Meanwhile, the purchase price for Dorado Beach represents a capitalization rate of 9.8% on hotel net operating income of $18.2M, and a 10.2x hotel EBITDA multiple, according to the company's preliminary estimates. It expects to realize a stabilized yield of approximately 8% on its investments in the next three to five year. Read More.
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Good morning. Interesting info. I’m “suspicious” of the 8.5% increase and ultimately expecting a downward revision. If one considers that inflation is running (officially) >7% (real inflation is certainly >10%) that makes the real increase <2%. Which is dismal. Time will tell. First look at new unemployment claims today. Betting they are higher than “expectations.” I’ll chime back in if I’m wrong and take my medicine. LOL.