Stocks Update: 2023-06-06

Welcome back to my daily blog post where I share updates on the stocks I own. Today, we’ll take a look at the latest financial results from Academy Sports + Outdoors, JOANN, GitLab, CooperCompanies, and Five Below, Inc

Academy Sports and Outdoors, Inc. (Nasdaq: ASO) First Quarter Results Below Expectations

Academy Sports and Outdoors, a leading sports and outdoor retailer, announced their first quarter financial results, with a net sales decline of 5.7%, equivalent to $1.38 billion, compared to $1.46 billion last year. Comparable sales also declined by 7.3%, attributed to the unfavorable weather and macro-economic pressures on customers. Although Academy opened one new store during Q1, it has decreased their plans to open 13 to 15 stores in 2023.

While the first quarter result may look bleak, Executive Chairman, Ken Hicks emphasized the company’s ability to operate effectively and deliver strong results even in challenging environments. Chief Executive Officer Steve Lawrence underlined the company’s actions to drive business in the current economic climate. These actions range from focusing on value-oriented products, maintaining inventory levels, controlling expenses, and supporting growth initiatives.

In my opinion, the earnings release has not been good news for Academy Sports and Outdoors as their net sales and comparable sales have dropped significantly. Despite that, the company has put strong steps to drive growth and maintain financial health in the short and long term. As an investor, I recommend selling the stock for the time being and reassessing the situation in the coming months, taking into consideration any positive developments in the company’s operations.

JOANN’s Focus on Cost Reductions Results in Improvement in Free Cash Flow and Gross Margin

JOANN Inc. (NASDAQ: JOAN), the leading fabric and sewing retailer in the US, has reported a successful first quarter for the fiscal year 2024 which ended on April 29, 2023. The company identified $200 million in targeted annual cost reductions under their Focus, Simplify, and Grow initiative and has shown progress towards delivering their strategic priorities of creating a high-quality in-store and online experience for customers while operating with high efficiency to reinvest and achieve long-term growth.

The company also saw improvements in cash generation as cash used for operations improved $88.4 million, and free cash flow increased $89 million year over year. Their gross margin on a GAAP basis was 52.1%, a 380-basis point year-over-year improvement.

As a shareholder, I am pleased to see JOANN’s promising performance, particularly in their efforts towards cost reductions and cash flow improvement. The first quarter results show that their strategic priorities remain in place, and their customers are engaging healthily with their core sewing and craft businesses.

JOANN’s progress towards their fiscal year 2024 objectives provide a positive outlook for the company’s future. Their strong free cash flow improvement and gross margin puts them in a good position to continue to deliver solid results. I recommend holding onto JOANN stocks as they have a strong potential for long-term growth.

All-Remote – GitLab Inc. Reports 45% YoY Revenue Growth for Q1 FY 2024

GitLab Inc., the DevSecOps Platform, reported an impressive 45% YoY growth in revenue for Q1 FY 2024, ending on April 30, 2023. With an AI-powered DevSecOps platform, the company is positioned to be a leader in software development, security, deployment, and maintenance. Customers benefit from more AI-powered capabilities than any other DevSecOps platform and GitLab accelerates the time it takes to see value from digital transformation efforts.

Brian Robins, Chief Financial Officer of GitLab, provided insights into the company’s financials, noting that non-GAAP operating margin improved by approximately 1,700 basis points YoY. The team successfully addressed customer priorities and improved operating efficiency. They managed to achieve this with macroeconomic uncertainties as the backdrop, with customers looking to GitLab’s AI-powered DevSecOps platform for driving efficiencies, increasing productivity, and accelerating their pace of innovation. GitLab is poised to take advantage of the $40B total addressable market opportunity.

My personal opinion is that GitLab’s growth is strongly correlated with the increased adoption of cloud technologies across the world. The demand for cloud-based solutions is booming, further legitimizing GitLab’s all-remote, cloud-native approach. In addition to the impressive growth in revenue, its AI-powered DevSecOps platform is far ahead of its competition.

Overall, the news is positive, and I recommend buying the stock. With such strong growth figures and a clear position as a leader in its field, GitLab is poised for continued success in the future.

CooperCompanies’ Q2 FY23 Results Show Strong Growth Despite Slump in GAAP EPS

CooperCompanies (NYSE: COO), a global medical device company, announced its Q2 FY23 financial results, revealing solid revenue growth of 6% YoY, totalling $877.4 million. This growth was driven by CooperVision’s (CVI) increase in revenue by 6%, amounting to $589.3 million, along with CooperSurgical’s (CSI) revenue growth by 4%, reaching $288.1 million. However, there was a decline in GAAP diluted EPS by 69% YoY, down to $0.80, while non-GAAP diluted EPS marginally decreased by 5% YoY, amounting to $3.08.

Despite the decline in GAAP diluted EPS, CooperCompanies’ CEO Al White was elated about the company’s stellar Q2 FY23 results. CooperVision’s organic revenue growth had been double-digit for the past nine consecutive quarters, while CooperSurgical’s fertility business witnessed double-digit organic revenue growth for ten quarters in a row.

As an investor, I am satisfied with CooperCompanies’ Q2 FY23 performance. Its increased revenue and strong business growth are positive indicators, offering compelling reasons for investors to hold onto the stock. The company’s GAAP EPS decline could be a short-term issue, but the long-term consistent growth of CooperVision and CooperSurgical businesses may outweigh this concern.

Consequently, I recommend holding onto the COO stock for now, unless there are warning signals about the company’s future performance. Nonetheless, I would recommend a “sell” strategy if future results show a continuing slump in GAAP EPS, while recommending a “buy” strategy if the company continues to show robust growth in its revenue, especially from CooperVision and CooperSurgical.

Five Below Q1 Results Show Strong Growth and Increase in Market Share

Five Below (NASDAQ: FIVE), the retailer that targets teens and pre-teens with affordable products, has announced impressive Q1 results for the fiscal year ending April 29, 2023. Net sales increased by 13.5% to $726.2 million, comparable sales grew by 2.7%, and the company opened 27 new stores.

Furthermore, the company reported a Q1 EPS increase of 13.6% to $0.67, up from $0.59 in the previous year. Operating income remained steady at $42.4 million, and the effective tax rate was reduced by 3.7% from the previous year, resulting in a net income of $37.5 million, up from $32.7 million. The company ended the quarter with 1,367 stores across 43 states, an increase of 11.6% from the same period in fiscal 2022.

CEO Joel Anderson expressed satisfaction with the results, stating that “Our broad-based sales performance and transaction trends demonstrate that we are gaining trips and customers through our amazing value, trend-right products and Five Beyond prototype.”

I believe that Five Below’s Q1 results are highly appealing for investors, particularly given that the company is taking an offensive approach to increase market share. With a record 200 planned store openings throughout the year, the company is showing confidence in its growth strategy.

Given the positive news, I recommend buying FIVE. The company’s impressive financials, store expansion plans, and commitment to meeting customer needs demonstrate its potential for continued growth. While there are macro headwinds to consider, it appears that Five Below is well-positioned to weather these challenges.