Nike, Target, Travel & Housing

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It's Wednesday march. Twenty fifth walking market foolery. I'm Chris Hill joining me the one and only Bill Barker talk to you could be back. How's it going? You know just taking it day by day like everyone is. We've got some earnings news. We've got some guidance news. Let's start with Nike. Third quarter sales for Nike came in higher than expected profits. Were sort of light but this was. This was one of those quarters where the investments that Nike has been making online sales. Really paid off for them. Yeah I think this was A lot of Good signs in this and That's welcome in the market. Today the stock is obviously responding having been beaten down like just about everything else but Primarily this is good news from the China side where the online investments have led to. I think About one hundred percent increase in Online sales in China and You know for the quarter Think sales are only offered like four percent or something like that so I think that This is a playbook that Nike is referring to that it can now roll out for its much larger markets Having gone through The worst of things in China and having learned some lessons quickly and having adapted. I know that yesterday. Pretty much everything. In the market was up and Nike was part of that but they reported after the Bell. shares up about eleven percent today and the stock is up more than twenty five percent in just two days and I think a lot of investors myself. Included are looking for signs of positivity wherever we can find it. I don't shares a Nike but this and I'm not saying it's only gonNA be upside from here but this is a really good quarter you know for for the results that they put up as you said just from a tactical side of things and you know John donahoe been CEO just for a couple of months now but it seems like Nike is in a better position than a lot of other businesses in its industry. Yeah in retail and I would say that I was reminded of a church. Churchill quote On thinking about this and seeing these these results and Thinking that this is not this is not the end of of the problems that are gonNA come from Corona virus. And it's it's not the beginning of the end but what they've sort of gone through is the end of the beginning which is China's quick recovery having implemented Its own playbook for how to address This virus and having so far Corralled the the worst Parts of it and right now Nike. Unlike a couple of other companies it will talk about is is still trading a because of the decline in the price over this year I it's trading at a substantially more attractive valuation compared to the last five years Now that is going to be true across the retail sector for the for the most part but The bounce today is is largely due to this may be the signs of of Kinda normalized results Sooner rather than later And currently attractive price. Well we'll get to The ripple effects of that in terms of the guidance. In a minute. Let's talk about Winnebago for a second because win. Obey goes similar to Nike Second Quarter. Revenue came in higher than expected shares. Winnebago up around ten percent today. Now this is still much like. With Nike Winnebago started the year at fifty dollars a share. It got down to twenty now. It's in the high twenties but Y- This is an interesting one to me because I win. A bego is at the intersection of two large industries travel and housing. And I'm wondering what you think the future holds for the RV industry. Because I hadn't really thought of it until I was looking at Winnebago's report this morning but I thought boy this might be. This might be a good few years for Winnebago and sore industries and other players in the space. Well give you the bull case and the market is buying into a certain amount bullishness today with the stock up fourteen percent as we talk. It'll be different by the time people are listening to this. Because that's the nature of market movements These days I mean it's been slammed this year And so having gone from over sixty dollars a share down to I think below twenty Look two thirds of the price was taken off in the last couple of really weeks and so it is rebounding a little bit from today from that today if you WanNa look on the bowler side. It's it's this people by our vs when the economy is good when they have jobs when they have job security When gas prices are low interest rates are low? That's that's sort of where the perfect storm is for. Rv sales is good interest rates. Good gas prices and good employment numbers. We're not gonNA those good employment numbers and you're not gonNA have a lot of confidence in the economy forbid The other two legs are working out well and if you want to look at something which might be hopeful for. Rv manufacturers that people may turn to spending on a keeping their their families in RV rather than traveling by airplane rather than traveling by crews This is where the discretionary spend for travel and leisure would come in those are some of the main competitors and people might say. Hey I I wanNA have an RV. Next time this comes up. I WANNA be able to hop in my RV and go wherever. I want live wherever I want I don't know I mean that's A. That's a little bit optimistic. I would say because I think the really the employment numbers and the the consumer confidence is GonNa make RV sales of very challenging For this year. So let's move on to Church and Dwight. This is a company we talked about last week. This is the The parent company of Clorox after the market closed yesterday the Church and Dwight came out with a statement. You send it to me and I I read your board. You couldn't find anything interesting in there. It wasn't so much that you just. You sent me this you said. Hey maybe we should talk about this and I read it twice and I was like what? What is the news here? I'm not really sure. The news is Other than a confirmed when their earnings report is coming out in April and they'll be having the customary conference call and all that but your response was i. If if I recall correctly your response was basically church and Dwight is trying to say that businesses really good right now. Is that a fair assessment. Yeah this is sort of as a to peel back the curtain on how we set up story sometimes I fall back on the compare and contrast model a lot like there. There are two pieces of news. Let's compare and contrast because I never really got any further than about fourth grade In my writing and so I think that What I want to compare this to target which is more prominently in the news today and so church and Dwight just has a lot of things with people are buying in extra supply right now. So they're talking about the. The positive side for them is as they mentioned all. Their manufacturing facilities and distribution centers are currently open which distinguishes them from a lot of other businesses. And not only are they open but they are going to be sort of on overdrive because a lot of what they make is cleaning supplies under the arm and hammer and under the oxy clean Names you could also make an argument that Trojan brand is going to do well in this environment. If you WANNA make that argument Al try to keep you from going off the rails on it. Are you gonNA make that argument? No I am going to make the correction because clearly misspoke before when I said that Church and Dwight was the parent. Company of Clorox Clorox is the parent. Company of Clorox wasn't listening. I was that was but we did talk about this last week Because I was a week ago I was saying. Why shouldn't I just by Clorox? I don't even know who they can. You know who's competing with them and that's when you brought up church and Dwight with the oxy clean brand but anyway please continue so a lot of what they have are categorized as sort of essential under the the current guidelines under the essential critical infrastructure. guidance that came out of the Department of Homeland Security And so basically what they're saying is we we. You know we're open for business. We're we're working hard to make as much of this as we can But you know there will be some extra costs along Along with this And you know T- target which is in the news today for having withdrawn its guidance But pointing out that March sales early part of March. I think sales are up. Maybe a twenty percent in the first couple weeks of March so that's sounds remarkably good And it's a part of panic buying and it's it's gotten even even greater but the categories at that panic buying is occurring in four target are the lowest margin parts of the business. The the the things that people are buying there are not the more discretionary higher-margin things like clothing They're buying consumer staples which target is is to be selling right now But is not going to drive the same profitability As as the other merchandise in the store Church into just makes this This stuff that is selling right now so so they're not they're not seeing any of the downside of where sales are not. They're just saying the scene for the most part the upside. I took a walk yesterday afternoon. Down King Street in Old Town. Alexandria walk down to the Potomac River and noticed that a bunch of the restaurants that are on King Street. Which is the main strip in Old Town? Were obviously trying to get business Had SIGNED UP IN THE WINDOW ABOUT. They're doing delivery they're doing take out all that sort of thing and I counted at least three restaurants that we're using as a promotion to encourage people to get takeout or delivery that depending on how much food you buy the restaurant would throw in a free roll of toilet paper. So that's where we are. I think when it comes to the hoarding and and toilet paper specifically as a commodity yeah are you tying that into your tying that into target into target and just because you're right if your target shareholder on the one hand it's like you know that's great to see those types of numbers if your Bryant Cornell running target. One of the things you're trying to do is manage your inventory. And they've tried with varying levels of success to get people to limit the amount of stuff that they're buying. Yeah well the Church and Dwight Participates in that economy sort of But not the part that's being hoarded. They they always have the last couple of years of talked about the success of their Clumping Kitty Litter Really sort of the same thing is the toilet paper but and yet there's run on kitty litter. That's interesting not really but where you would go with that. No you didn't take the bait on Trojan. I was going to throw you the kitty litter stuff and see. If you could come up with any of your comedy stylings. We'd better move on because you're over to we. Well a similar to you missing the mistake I made about saying that. Church and Dwight the parent company of Clorox. I truly wasn't listening when you mentioned the Trojan thing so give me another shot at it. It's a problem of not being in the same room. I think I think our comedy back and forth would be would be better under those circumstances. It's a low bar but I think it would look. Let's go to target though for a second because target you know as you said. They withdrew their guidance. World poll did the same thing we have seen. Other companies withdraw guidance completely mastercard twitter but it is worth noting that the overwhelming majority of companies in the S. and P. Five hundred haven't done that yet. They haven't just gone whole hog and withdrawn guidance altogether. We're going to be entering into earning season next month. Do you expect that to change? And if so to what degree well I think there will be a lot less guidance And I think that those that can confidently give. Guidance are going to get the benefits of that. I think one of the reasons why target may be in front of some others in that withdrawing guidance because that is typically a signal for the market to panic a bit when a company can't tell you now that everybody's got a little bit more leeway because of of the times we're in Target is is Marianne this withdrawing guidance with the information that Same store sales were up Four percent for the preceding four weeks and that for a food and beverage in and other essentials Sales have been up fifty percents. So they're they're sort of saying will things are really good in these. These categories that people were coming in and need us to be open and they're buying in great volume in their panic buying but we don't really know when the panic buying is going to resolve itself and in the meantime we're missing out on a lot of normal discretionary sales people aren't coming in and picking through the the clothing right now so I credit them for saying we can't really give you good guidance. So let's not give you any guidance but it's not all bad and it's it's not all good so a market is taking this as an opportunity to sell off shares Which are really pretty much very very much in the valuation range of the last five years if you look at where they are right now. There's this is not one of the stocks that sold off and created some special opportunity over the last five years it's The average price to sales is is point. Six it's currently at point six six so it's a little higher than the the five year trailing average. It's it's really the for a price to forward earnings fourteen point seven Over the last five years the average has been fourteen point eight so there's not a lot to see in in in today's target price. That's different from you know the average last question that I'll let you go Warren Buffett who we have not heard from his sitting on somewhere in the neighborhood of one hundred twenty billion dollars worth of cash. Where do you think he's looking? Things are much more in the value range than they were at the beginning of the year when she was pretty open about the fact that he's got his elephant gun he's looking to deploy it and this is the environment for him to do that. This is I don't know whether it's going to be necessarily in open market I think they're going to be plenty of opportunities. right now. The devaluation of the market isn't deeply discounted to what I think he would find as as a fair value But where is he looking? He's probably looking the same sorts of categories that he's been looking for most of his life Large brands that are Well known easy to understand and You know I think. He's maybe had his fill of of financials doubt I tend to think he's not looking at the airlines which is where he's made some. You know bigger purchases over the last couple of years There's a lot of speculation. When are we going to hear from him? When is he gonNA come out and say by America Which he did in two thousand and eight but really I think the valuations at the point that he came out. Then we're much more attractive than what we're seeing so far it's interesting you say that because he that was. I believe early October of two thousand nine when buffet came out with his OP. Ed piece and it was. I think you're right. I think the headlines Thousand. Eight to two thousand eight. Excuse me October. Two Thousand Eight and the headline was by American. I am but that wasn't the bottom. Like yes they valuations may have been more attractive than compared to where they are right now but they still went down from October. Two thousand nine two thousand eight. Yeah but they were attractive. I think there are lots of metrics that you can go back and look at the valuation of things in in October. Two Thousand and eight and say just whether you're working off price to book whether you're working off you know priced at trend earnings. Whether you're working off you know anything other than what forward earnings would have been expected. That moment in time That things were attractive is looking back now. You needed the stomach to be able to act on that. And he had it. But I don't think that the valuations that we see today on most of those metrics are yet comparable to what what was available in October. Two Thousand and eight. You can find other people that think think they are but but you know I. I don't think that Things have declined to that extent yet. Bill Barker good talking to you. I promise I'll be sharper next time. I blame myself these. These were not great. Setups they're the best. I could come up with us as always people on the program may have interest in stocks. They talk about in the Motley fool may have formal recommendations for against Saddam by herself stocks. Then what you hear. That's going to do it for this edition of Margaret Fuller shows mixed by Dan Boyd. I'm Chris thanks for listening. We'll see you tomorrow.

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