Once again, we have a week of earnings reports filled with retail names. And it's a week in which we see the earnings damage that the pandemic had on brick-and-mortar. Three big names to watch this week are Best Buy (NYSE: BBY), Dick's Sporting Goods (NYSE: DKS), and Dollar General (NYSE: DG).
Best Buy shifted to online ordering and curbside delivery in the past few months as a way to alleviate the sudden shocks from the COVID-19 pandemic. The results were evident in its first-quarter earnings report, with domestic online sales increasing a whopping 155.4%. This follows the trend we've seen in other names like Walmart (NYSE: WMT) and, of course, Amazon (NASDAQ: AMZN), where shoppers have resorted to ordering online in the time of social distancing and store closures.
Overall, Best Buy still had a hit to overall comp sales of 5.3% in the first quarter. Looking to the second quarter, analysts are looking for around $1.08 per share, with full-year earnings of $5.66. Those earnings would mean that Best Buy is trading at 20 times full-year estimates.
What to watch: The appeal of Best Buy lies in the tech demand created by more remote working. As the trend seems probable to continue, at least to some level, workers will likely need more in terms of computers, printers, etc., in order to operate in this new environment. Attention to further online sales figures will likely be the focal point of its earnings release.
Best Buy is expected to report on Aug. 25.
Dick's Sporting Goods
Dick's Sporting Goods is a company that is fighting the good fight. The retailer of athletic and outdoors equipment is not immune to the onslaught that has been ravaging brick-and-mortar. Nonetheless, revenue has remained largely in growth mode over the last few years, with a 3.72% increase to $8.75 billion last year.
Earnings have been a bit different. With volatile net income growth, Dick's has relied on share buybacks to bolster returns for shareholders. Between fiscal 2016 and fiscal 2020, which ended in January, diluted shares outstanding decreased by 23.7% to 89.07 million.
What to watch: Looking into fiscal 2021, the impact of COVID-19 was pretty visible in the first-quarter results. Consolidated same-store sales decreased by 29.5%, thanks to temporary store closures, while net sales fell 30.6% to $1.33 billion. In all, the company lost $1.71 per diluted share. Things to watch will be whether e-commerce sales come anywhere near the 110% increase put together in the fiscal first quarter and how social distancing is further impacting same-store sales.
Fiscal second-quarter estimates are calling for $0.81 per share, with full-year estimates of $0.51 per share. That would mean the stock is trading at around 90 times full-year earnings forecasts. The company reports on Aug. 26
Dollar General shares have been seemingly unstoppable over the past five years. The stock is up 27% year to date and seems primed to continue. The discount store is positioned in that perfect place of pricing and convenience. In an economic downturn, Dollar General offers appeal to those being careful with money. It's also venturing into more categories such as fresh food, broadening its appeal to a larger consumer base. In many ways, the company is on a path to become a miniature Walmart.
What to watch: Estimates for the second quarter are calling for earnings of $2.41 per share. That would be a 38.5% bump year over year. Full-year earnings are expected to be in the range of $8.96 per share, a 26.15% increase year over year.
Dollar General has been playing the discount retail game as well as anyone. First-quarter revenue jumped 27.6% year over year in a time when a lot of companies saw sales headaches. Assuming full-year estimates are anywhere near accurate, Dollar General is carrying a premium of around 22 times full-year forecasts. That's not bad, but the company will need to keep the growth train going in order for shares to maintain this momentum. Assuming estimates are reasonably accurate, this remains a good investment to consider.
Dollar General is expected to report earnings on Aug. 27.
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