For Immediate Release
Chicago, IL – September 18, 2020 – Zacks Equity Research Shares of Williams-Sonoma, Inc. WSM as the Bull of the Day, Tanger Factory Outlet Centers, Inc. SKT asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Gilead Sciences, Inc. GILD, Immunomedics, Inc. IMMU and Jounce Therapeutics, Inc. JNCE.
Here is a synopsis of all five stocks:
Williams-Sonoma has been one of the COVID pandemic winners. This Zacks Rank #1 (Strong Buy) saw online sales soar in its fiscal second quarter as consumer focus turned to food and the home.
Williams-Sonoma is a specialty retailer which makes products for the home. It is more than just its namesake, Williams-Sonoma. It also owns several well known furniture brands including Pottery Barn, Pottery Barn Kids, West Elm, Pottery Barn Teen, Williams Sonoma Home, Rejuvenation and Mark and Graham.
It sells online, through catalogs and its global retail stores.
Williams-Sonoma operates in the US, Puerto Rico, Canada and the United Kingdom and has unaffiliated franchisees which operate stores in the Middle East, the Philippines, Mexico and South Korea.
A Big Beat in Fiscal Q2
On Aug 26, Williams-Sonoma reported its fiscal second quarter 2020 results and blew by the Zacks Consensus by $0.81. Earnings were $1.80 versus the consensus of $0.99.
That's a beat of 81%.
It has an impressive earnings surprise track record. It hasn't missed since all the way back in 2016.
The quarter encompassed parts of the pandemic lock down period in May 2020 so digital sales soared even as stores began to reopen throughout the quarter.
Net revenue jumped 8.8% to $1.491 billion as e-commerce revenue growth rose to 46%.
E-commerce penetration saw an all-time high of almost 76% of the company's total revenue in the quarter as consumers shifted to buying online.
Brand revenue saw growth of 10.5% with Williams-Sonoma leading the way with a record 29.4%. Pottery Barn jumped 8.15 and Pottery Barn Kids and Teen was up 4.8%.
West Elm, it's biggest growth brand, was up 7% but that was on top of a strong growth comp in Q2 2019 of 17.5%. That means West Elm saw brand revenue growth of nearly 25% in just 2 years.
Analysts are Bullish on the Full Year
Williams-Sonoma did not supply any guidance for fiscal 2020 due to the uncertainty with the pandemic.
However, it did re-affirm its long-term financial guidance of total net revenue growth of mid to high single digits.
The analysts are bullish on the year, however.
Pandemic trends of focus on the home are not expected to go away any time soon.
10 estimates have been revised higher over the last month for fiscal 2020, pushing the Zacks Consensus up to $6.18 from $4.61. That's earnings growth of 27.7% as the company made just $4.84 last year.
With the strong growth, it will be hard for companies to continue to comp above it so analysts see a slight decline in fiscal 2021 earnings, down 3.6% to $5.95.
Shares Near 5-Year Highs
The home is hot, and so are the home-related stocks like Williams-Sonoma.
Shares have surged 152% over the last 6 months to 5-year highs.
But they still have attractive valuations, with a forward P/E of 14.8.
Williams-Sonoma has $948 million in cash on hand and it's shareholder friendly, as it's still paying a dividend, which is currently yielding 2.1%.
If you're looking for a way to play the focus on the home, Williams-Sonoma is one to keep on your short list.
[In full disclosure, the author of this article owns shares of WSM and RH in her personal portfolio.]
Tanger Factory Outlet Centers has been at ground zero during the coronavirus pandemic as malls have closed throughout the country. This Zacks Rank #5 (Strong Sell) is expected to see earnings fall over 30% in 2020.
Tanger Factory Outlet Centers is a REIT that owns and operates 39 upscale outlet shopping centers in 20 states and Canada.
It has leased out over 2,700 stores.
Business Update for August
On Sep 14, Tanger provided a liquidity and operational update for August.
Its operations saw positive cash flow in August, following positive cash flow in July. It repaid its unsecured lines of credit in full during August using internally generated cash flow.
Its total liquidity at the end of August was about $606.6 million with $6.6 million in cash and $600 million of unused capacity under its lines of credit.
The improvement in the business continued as rent collections rose to 85% of billed rents, excluding variable rents and lease termination fees. July came in at 81% of rents billed.
As of Sep 13, 98% of total occupied stores in the portfolio were open.
Traffic over the last 6 weeks has averaged 89% of prior year levels. That is up from its second quarter earnings report on Aug 5, which said that traffic was at 85% of its prior year levels over the prior 6 weeks in June and July.
A Big Miss in Q2
On Aug 5, Tanger reported its second quarter results and missed by $0.28. It reported earnings of $0.10 versus the Zacks Consensus of $0.38.
The company has instituted new offerings to attract customers including Tanger Virtual ShopperTM and curbside pick-up programs. Those programs have been popular and will be continued even post-COVID.
Most of Tanger's malls are open-air, which also gives them an advantage.
However, some challenges it faces are the financial problems of its tenants, including bankruptcy, and recapturing space from underperforming tenants.
Brick and mortar isn't going to go away and retailers still see opportunities at outlet malls.
2020 Estimates Cut
Tanger previously withdrew its full year guidance and is not issuing a new one at this time.
Zacks has one analyst in the Zacks Consensus and that was cut in the last 60 days. The 2020 Zacks Consensus has fallen to $1.57 from $1.64 during that time.
That's an earnings decline of 30.8% as Tanger made $2.27 last year.
Revenue is also expected to decline 13.7% for the year as well.
Shares Still Near the Lows
It's been a tough year for Tanger. Shares are still down 55.9% as investors have steered clear of malls and retail.
Gilead Oncology Drug Gets Breakthrough Therapy Designation
Gilead Sciences announced that the FDA has granted Breakthrough Therapy designation to pipeline candidate, magrolimab, for the treatment of newly-diagnosed myelodysplastic syndrome (MDS).
Magrolimab is a first-in-class, investigational anti-CD47 monoclonal antibody. MDS is a type of cancer caused by poorly formed or dysfunctional blood cells in the bone marrow.
The Breakthrough Therapy designation from the FDA expedites the development and regulatory review of investigational treatments for serious or life-threatening conditions that, based on preliminary clinical evidence, have the potential to substantially improve clinical outcomes compared with available therapy.
The FDA granted Breakthrough Therapy designation to magrolimab based on positive results of an ongoing phase Ib study, which evaluated the drug in combination with Vidaza in previously untreated intermediate, high and very high-risk MDS. Data showed that 91% of evaluable patients treated with magrolimab plus Vidaza achieved an objective response, with 42% achieving a complete remission (CR).
We note that magrolimab is currently being studied in the double-blind, placebo-controlled, randomized phase III ENHANCE study in previously untreated higher-risk MDS. The study will evaluate the safety and efficacy of magrolimab, in combination with Vidaza, as measured by CR and duration of CR.
Magrolimab enjoys Orphan Drug status in the United States for MDS and acute myeloid leukemia (AML) and in Europe for AML.
The candidate was added to Gilead’s pipeline through the acquisition of Forty Seven, Inc.
Gilead has been taking strategic steps to strengthen its oncology pipeline in recent times. The company recently announced that it will acquire oncology company, Immunomedics, for $88 per share in cash or approximately $21 billion.
Earlier, Gilead also acquired a 49.9% equity interest in Pionyr Immunotherapeutics, Inc., a privately-held company pursuing novel biology in the field of immuno-oncology. Earlier in the month, Gilead announced an agreement with Jounce Therapeutics, a clinical-stage company focused on the discovery and development of novel cancer immunotherapies and predictive biomarkers, to exclusively license its JTX-1811 program.
The massive decline in sales of Gilead’s HCV franchise has propelled it to focus on its HIV franchise, Yescarta and other newer avenues. The rapid adoption of Biktarvy maintains momentum in the HIV space amid stiff competition. However, the company is looking to diversify its portfolio, given the increasing competition in the HIV space.
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