For Immediate Release
Chicago, IL – May 21, 2014– Zacks Equity Research highlights Buffalo Wild Wings, Inc. (BWLD-Free Report) as the Bull of the Day and Interface, Inc. (TILE-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on L Brands, Inc. (LB-Free Report), Gap, Inc. (GPS-Free Report) and Tiffany & Co. (TIF-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Looking for a fast growing restaurant chain which wasn ' t impacted by the brutal winter weather? Buffalo Wild Wings, Inc. (BWLD-Free Report) recently raised full year guidance after a strong first quarter and momentum into the second quarter.
Buffalo Wild Wings operates 1,010 Buffalo Wild Wings restaurant locations across the United States , Canada and Mexico . It also recently opened its first PizzaRev franchise in suburban Minneapolis . Buffalo Wild Wings will be operating several franchises of the California-based build-you-own artisanal pizza chain in the Minneapolis area.
On Apr 28, Buffalo Wild Wings reported its first quarter results. Despite polar vortexes and a brutal winter in two-thirds of the United States during the quarter, the company blew by the Zacks Consensus Estimate by 10%. Earnings were $1.49 compared to the consensus of $1.35.
Revenue rose 20.9% to $367.9 million.
Many restaurants and retailers have blamed the brutal winter for lower same store sales comps in the first quarter but that wasn ' t Buffalo Wild Wings ' problem. Same restaurant sales were higher than expected, rising 6.6% system wide with franchises up 5%.
The quarter was aided by the shift to Easter in the second quarter, strong sports viewership and lower wing prices.
Bear of the Day:
Interface, Inc. (TILE-Free Report) got hit by the double whammy of bad weather in the United States and the slowdown in Asia in the first quarter. This Zacks Rank #5 (Strong Sell) missed the Zacks Consensus Estimate by 53%.
Interface is the largest producer of modular carpet in the world. It sells under the Interface and FLOR brands to both commercial and residential buyers.
On Apr 23, Interface reported its first quarter results and missed the Zacks Consensus by 7 cents. Earnings were $0.06 compared to the Zacks Consensus of $0.13.
Sales rose 4.1% to $219 million from $210.4 million a year ago but this was under the consensus.
Even though the company blamed poor weather for decreasing store traffic and lowering consumer sentiment in January and February, FLOR sales still rose 6% year over year. Overall, in the Americas, business held up and improved into March.
Europe also showed continued improvement, with first quarter sales up 15%. They also accelerated into April which is a good sign for the second quarter if that momentum continues.
But Asia-Pacific was hammered, with sales falling 17%. Interface blamed it on a drop in business in Australia as a result of longer lead times and service issues following its 2012 plant fire in Australia. The Chinese New Year holiday also had negative impacts on the quarter.
But April in Asia-Pacific was also supposedly tracking softly again.
3 Retailers to Top Earnings Estimates
The year 2014 opened on a soft note, given the not-so-convincing emerging economies and a severe winter that locked consumers indoors. However, following the improvement in weather conditions through the second half of February and a better job scenario, the business for U.S. retailers started to look optimistic.
The outlook for the U.S. economy appears promising, with recent data indicating at a rebound in growth after the slump in the first quarter. A rebound of economic activity can be witnessed after looking at the current unemployment data and rising home prices.
The unemployment rate fell to 6.3% in April – the lowest level since Sep 2008 and down from 6.7% in March. Moreover, the U.S. employers have added a robust 288,000 jobs in April – the highest in two years.
Separately, the U.S Department of Labor reported that seasonally adjusted initial claims decreased 24,000 to 297,000 in the week ending May 10 from 321,000 in the week ending May 3. The decline in weekly applications for unemployment benefits was also more than the consensus expectation of initial claims decreasing to 317,000.
Furthermore, the Federal Reserve recently lowered its asset buying to $45 billion under its Stimulus Program, marking its fourth straight $10 billion cut. Last week’s U.S. consumer inflation reading of 2% in April 2014 also showed some momentum, pushing it in the Fed’s desired direction.
According to the National Retail Federation’s (NRF) monthly economic review published on Feb 6, 2014, retail industry sales (excluding automobiles, gas stations and restaurants) are projected to grow 4.1% for 2014, modestly higher than the preliminary 3.7% growth registered in 2013. All these factors reinforce the view that the U.S. economy is emerging from the winter slump and is braced to deliver an improved show in the current quarter.
Retail, owing to its huge spectrum, remains a lucrative investment avenue for investors. The sector reflects consumer spending trends, an important parameter to gauge the health of the economy. Thus, betting on future winners from this sector would be a good decision.
How to Choose Right Stocks?
Picking the best stocks from the Non-Food Retail/Wholesale space for one’s portfolio is not a fairly simple task. However, an easy way to narrow down the list of choices during this earnings season is by looking at stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have the best chance to surprise with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
For investors seeking to apply this strategy to their portfolio, we have highlighted 3 Retail/Wholesale stocks that may stand out this earnings season:
L Brands, Inc. (LB-Free Report): This is a Zacks Rank #3 stock with an earnings ESP of +1.96%. The current Zacks Consensus Estimate for first-quarter fiscal 2014 is pegged at 51 cents per share. This Columbus, OH-based apparel retailer had registered positive earnings surprise over the trailing four quarters with an average beat of +4.80%, and has a long-term earnings expectation of 12.3%.
-- The company is expected to report results on May 21, 2014.
The Gap, Inc. (GPS-Free Report): This is a Zacks Rank #3 stock with an earnings ESP of +1.79%. The current Zacks Consensus Estimate for first-quarter fiscal 2014 is pegged at 56 cents per share. This San Francisco-based apparel retailer had registered positive earnings surprise over the trailing four quarters with an average beat of +2.45%, and has a long-term earnings expectation of 12.3%.
-- The company is expected to report results on May 22, 2014.
Tiffany & Co. (TIF-Free Report): This is a Zacks Rank #3 stock with an earnings ESP of +1.30%. The current Zacks Consensus Estimate for first-quarter fiscal 2014 is pegged at 77 cents per share. This New York City-based jewelry retailer had registered positive earnings surprise over the trailing four quarters with an average beat of +16.70%, and has a long-term earnings expectation of 13.3%.
-- The company is expected to report results on May 21, 2014.
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