Macke's Retail Roundup Articles

Target didn't have to be "Great" today. They didn't even have to be good. 

Since briefly becoming America's retail comfort food during COVID Target has been on an epic run of failure. The misses have only been interrupted only by short periods of optimism which quickly proved to be misplaced. The trend has been irreversibly lower and the stock shows it. Shares are off 65% from the all-time highs of late 2021 and 25% YTD. 

With all that widely known, all Target had to do "beat expectations" this morning was show any type of pulse. 

Instead, Target turned in the worst earnings report of the quarter among the majors. This had something for everyone. Target missed on every metric. Comp-store sales fell 5.7% which is just... holy crap levels of terrible, compared to Walmart or TJX (which also disappointed with comps only up 3%).

The only gains were in Legal Settlements and same-day delivery, which are One Time and Unprofitable, respectively.

Make no mistake, this is a disaster:

Target is going in the wrong direction at an increasing rate. The company looks old, sloppy and out of ideas. Shares might bounce but there's no reason...

Below is my weekly video for members of Macke's Retail Roundup.

If a few weeks ago we had 'The Week From Hell" as I called it, then this week was "The Best Week Ever". 

My Retail Roundup Portfolio ripping right now thanks to the changing market sentiment. And our newest position just had its second-best week as a public company. 

So I'm in a great mood! 

Below is my latest update on the portfolio, as well as a couple of new ideas for stocks that I could be interested in soon.

On had to be perfect going into earnings. Fast growth company and priced accordingly. On isn't cheap. It wasn't a month ago at $35 and wasn't when I bought it yesterday at $50.70. What On has transcends cheap. On has momentum, good management, and a near-perfect business model. It's got the fattest margins in footwear.

After running 40% from the lows, On had to be close to perfect when the company reported this morning.

Here's how I graded it... 

I should probably wait. I might be able to buy a dip. But there's a name I've wanted in the portfolio for months. They report tomorrow. Expectations aren't exactly "low" but you don't get many dips in the good names.

Here's why I'm betting on this hot brand ahead of tomorrow's earnings.

We are so freaking back.

In a turn of events which would have been shocking virutally any other time in American history the administration finally agreed to a firm 90 day pause on the Chinese tariffs. "Firm" and "Pause" and "Deescalation" and, really, every word I'd normally apply to these type of announcements obviously come with a grain of a salt these days. This pause could be declared over by the time this note publishes. 

Regardless, we've got a new playing field. It's time to reassess our situation and how it impacts our stocks.

The Field Position:

The XRT consumer index is gapping higher on Monday morning and now clearly forming what I call an Inverted Batman. Silly name, real chart. The basic idea is stocks plunge, first gradually (consumer stocks started breaking at the end of January) then with a smash (the Liberation Day crash). At that point they grind a bit. The Worst Case Scenario gets priced in. Optimism, guarded and cynical though it may be, builds until, finally, the fever breaks and folks start chasing higher.

To whit:

You can call the chart whatever you'd like but the price moves line-up quite...

Below is my weekly video for members of Macke's Retail Roundup. 

We've entered the retail portion of earnings season. This week I analyzed the reports and reactions from DIS and PTON, two consumer stocks I watch closely for different reasons. 

As usual, I also gave 3 names that are on my radar for potential additions to the portfolio, including when I'd buy them. 

Peloton shares are down pre-market despite the company doing just about anything analysts could have asked from it.

Churn hit 1.2% despite a massive drop in marketing spend. As mentioned in the preview yesterday, if Peloton can retain the lucrative connected fitness subscribers (a decent proxy for customer satisfaction) and maintain disciplined spending you suddenly have a nice little cash flowing company with almost no built-in growth expectations.

A year ago then CEO Barry McCarthy resigned with the turnaround admittedly unfinished. Barry was smart and well-meaning but he was still clinging to the idea of Peloton has a growth company. A reset was needed and that's what Peloton has gotten.

Debt is down huge over the last year, cash flow has been positive 5 quarters in a row and Peloton is finally hinting at getting out of the stores which have been driving me quietly insane for years.

The call is starting but I wanted to get a note out. Barring something very bad from the company on the call Peloton is being punished for a quarter which is, at worst, an A- (Yes, Peloton is graded much easier than, say, Amazon).

Macke portfolio holding Peloton reports in the morning. Officially the Street is looking for a loss of 6c on ~$650mm for the quarter and about $2.5b in revenue for the year, cranking out about $300 to $350 million EBITDA.

But that's not what I'll be watching. I'm grading the company on Churn, Cuts and Cashflow. I don't really care if Peloton is selling a lot of bikes. The head of marketing got fired last week so I suspect they aren't. Bikes and Treads and rowing machines crank out 1/3 of Peloton's revenues but it's only a 13.5% gross margin business. With Tariffs that margins falls to nothing-ish. Peloton runs inventory lean and has China exposure so there could be headlines related to moving product around ahead of the tariffs. Under old management that would be scary. The new team seems quite competent. Both me and the Street will forgive a little inventory kerfuffle.

If Peloton can't get more apparel and decides to close its pointless stores I'll be almost giddy.

So the tariff doesn't scare me.

Investors need to see churn (the number of people who quit) stay low (under 2%). This is a hard time of the year for churn but that's the key to Peloton as an...

Uber is is pulling back premarket, ostensibly on slightly light revenues and solid but not spectacular guide. At least that's going to be the reason analysts will cite for not taking up their ratings on Uber, despite the company crushing on trailing numbers and guiding to just a whisper better than estimates for the current quarter. 

The truth is both more nuanced and quite simple.

1. ) UBER shares are up 42% since April 6th. As discussed on Monday, Uber needed gargantuan numbers across the board. In this economy? Was never going to happen. The stock needed a little rest. We'll see how fast buyers come in:

Yesterday's Pre-Chart:

2.) This wasn't a quarter that was going to change anyone's mind. Uber didn't post terrible news as the stock fell from $80 to $60 earlier this year. It just got dragged down the rest of the flotsam, with a bunch of misunderstood news about autonomous vehicles thrown in on top of it.

Now that Uber has reported huge earnings and cash flow analysts with a bearish take will go back to mumbling about unsustainability and the ever-looming threat of Tesla releasing a fleet of cabs.

At least that's what I suspect...

Disney just beat the crap out of estimates and (surprising part here) guided higher for the year. 

Despite collapsing consumer sentiment, a drop off in US park visits, leaning even deeper into cruises (which might be the only way to vaporize your money faster than going to a theme park) and national disinterest in all things Marvel and Star Wars Disney guided pretty much every higher for just about every segment and hiked the annual estimate by over 30c a share.

Just to flex a little more Disney also raised expected cash flow by more than $2 billion. 

Oh yeah, Disney also added the news of a new park in Abu Dhabi. Which raises a whole bunch of questions

Let's Grade It!

Financials: A

This is why you have a conglomerate. Parks fall off? Entertainment picks up the slack. Cruises are disappointing? Streaming picks up some slack. This is probably the best quarter for Disney since the return of Iger, given the cross-currents.

Consumer: B+

Park profitability went up despite less traffic. I'd like to think that was because the company was controlling traffic levels by raising prices, a...

In late April Dad-Shoe brand Skechers reported decent earnings and pulled all guidance.

We talked about it at the time in my video update. To refresh, Skechers had cash, patience and a good management team with a strong track record. They also source 40% of their product from China. As a results SKX management rather candidly said "we don't know" and yanked guidance for the rest of the year.

At the time my question was whether or not the stock could hold its lows:

The stock held, which was bullish but it would seem Skechers thought the certainty of cash in hand from 3G was better than rolling the dice of adjusting the supply chain on the fly. Today Skechers announced an agreement to be bought for $63/ share. A 30% premium over the price on Friday but below where SKX was trading in February.

It's important that A) Skechers was worried enough to take the cash and B) Private Equity was there to offer a bid. Skechers was looking at reporting for the next 9 months having no idea what the numbers would be. After a quarter century of...

Earnings season is heating up as we get into May. We've heard from plenty of consumer facing names so far (Hasbro, McDonald's, Chipotle) but by time honored tradition the earnings season for retail doesn't start until Walmart reports which won't happen until next Thursday.

It makes sense if you think about it. Walmart is the biggest retailer on earth. They set the standard and the context for all the other retailers. If Walmart reports positive comps and says it sees no problem with scarcity next week that raises the bar for Target. Home Depot reports before Lowe's for the same reason. There's no official law forcing the order. It's just what makes sense.

Once the big box stores are done reporting the floodgates open. Foot Locker, Best Buy, Kohl's, Gap, Ulta will all be on the record by the end of the month. While the economists argue over the long term implications of trade policy the retailers will be telling us what's actually happening in the real world.

I find it much more lucrative to focus on what Walmart is saying consumers are doing than what economists think should be happening.

I'm grading the names that matter and giving select earnings...