If We're Supposed to Be in a Recession, How Come.....CVS
, FOSL, VSI, ODP in Focus
By Bryan Murphy Aug 7, 2012 6:18:01 AM PDT | No Comment(s) - Post a
If consumers are cash strapped, and if the economy's really heading into another recession, then somebody might want to tell CVS Caremark Corporation (NYSE:CVS), Fossil, Inc. (NASDAQ:FOSL), and Vitamin Shoppe Inc. (NYSE:VSI) that. All three did very well on the earnings front last quarter, though strong income - and strong income growth - is hardly new to any of them. In fact, the only major disappointment on the consumer/retailing front on Tuesday came from Office Depot Inc. (NYSE:ODP), which fell short of a key expectation. Even then, however, there's a silver lining. Here's a quick look at all four companies' results, and then a quick point about the bigger picture they're painting.
Fossil, Inc. was aces last quarter. Net income was up 11.5%, and revenue grew by 14.3% on a year-over-year basis. The per-share income of $0.78 analysts were expecting of FOSL was topped with the actual per-share income of $0.80. Though the company reeled in its Q3 and Q3 sales & earnings guidance, Fossil, Inc. shares are still up 19% in pre-market trading.
Office Depot Inc. - the only sore spot in the bunch - saw its Q2 loss expand. Last year's loss of $0.11 per share in the second quarter became a $0.14 loss this time around. Sales slumped by 7%. For the most part, ODP weren't affected by the shortcoming, even though analysts were expecting only a loss of $0.09 per share, and were looking for Office Depot to generate 3.5% more sales than the office goods retailer did.
Vitamin Shoppe Inc. shares were up firmly, though not excessively, in pre-market activity after the company announced it had earned $0.55 per share, topping estimates of $0.51. VSI also posted a 13.5% increase in year-over-year sales. That growth isn't the amazing part about Q2's numbers though. No, the incredible part of this story is how Vitamin Shoppe Inc. has topped estimates for eleven straight quarters, and beat the year-over-year comparables (income as well as sales) in all of them... most of them by double digits.
Last but not least, CVS Caremark Corporation beat Q2 earnings estimates too. Revenue was higher by 18%, and per-share profits of $0.81 beat estimates of $0.80. Though CVS missed its sales estimates, the top line was only 0.8% short of those expectations. More important, CVS Caremark upped its full-year profit outlook to a range of $3.32 to $3.38 (from $3.23 to $3.33). The prior full-year consensus estimate was $3.33. General merchandise sales were up a bit, but prescription sales were up a hefty 28.2%.
It's an interesting commentary on the heat/confidence of the average American consumer. Many are arguing that the economy is slowing down, largely because individuals just don't have money to spend, and don't want to spend it even if they do have it. Yet, names like Fossil, Inc. (which includes Michael Kors) and Vitamin Shoppe - which clearly fall into the "wants" category rather than the "needs" - seem to be having no problem drawing a bigger and bigger crowd. That said, even the rising sales at CVS Caremark point to a stronger consumer.
Though it's theoretically recession-proof, the healthcare industry had seen a dropoff in the number of patients being served and treated, largely stemming from the impact of the recession... the ill started to think twice about incurring a healthcare cost, even if it was just a deductible. Now, they're not hesitating (insured or not), and it's starting to show (though CVS also did better now that the Express Scripts story is in the past).