Guy thought the stock traded okay on Tuesday, and comments on RH. Guy thinks for a trade you can be long HD.
Dan comments on the hangover from the pandemic and the rise in interest rates.
Dan also discusses margin expansion in some of the new staples.
Dan comments on the hangover from the pandemic and the rise in interest rates.
Dan also discusses margin expansion in some of the new staples.
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NewsTranscript
00:00 Home Depot dropping today after delivering its worst revenue miss in 20
00:03 years. The home improvement retailer also saying even high income homeowners
00:06 are cutting back on spending that warning sending William Sonoma and R.
00:10 H. Shares lower today to retailers catering to the higher end home goods
00:14 shopper target reports before the bell tomorrow and it might be in an even
00:18 tougher spot than Home Depot. The retailer is highly reliant a
00:21 discretionary spending only 21% of its revenues come from groceries. Um what
00:27 should we glean from this other than something that we've been saying for a
00:30 long time and that is there has been a tremendous pull forward and when it
00:33 comes to these discretionary items particularly for the home during the
00:36 pandemic. How many oven mitts and pillows do you need in your house?
00:41 Scott, are you buying? Are you buying oven mitts at Home Depot? By the way,
00:44 that explains a lot for like William Sonoma and R. H. And the higher end
00:48 consumer that's buying fancy as many oven mitts as they have to sell me.
00:51 That's a great looking oven mitt. You get the small ones. Nice. Got it baby.
00:58 I'm sorry. Can't even talk. I'll take it from here. So I think in Home Depot's
01:04 case, no one's had a sweeter spot than Home Depot has had. And if you think
01:08 about it again, there's been lumber deflation. Um so as we're speaking
01:12 about small mitts, I mean I think this is something else that I think Home
01:16 Depot is suffering from. They were in the perfect space for two years and I
01:21 actually don't think these numbers are that bad. If you look at their gross
01:24 margin, it's still above a 2019 level. Should you be out rushing to buy Home
01:28 Depot here? No. Was that guy disappointing? Is this shocking for
01:31 Home Depot? But this is hardly, you know, like run for the doors. And in
01:36 fact, they're pro business is part of the reason why they're very resilient
01:39 because there still are a lot of contractors out there filling a lot of
01:42 orders. But you know, it's a sign of the times we're they're never going to
01:46 see that again. Home Depot will never see. And that includes their margin
01:49 profile. That was it. I've composed myself. Thank you. You're welcome. I
01:53 thought the stock actually traded okay today on what wound up being a pretty
01:57 lousy overall tape. I mean, the stock was down four bucks to 75 was still
02:01 support level. We talked about it should have been worse. The restoration
02:05 hardware move was really bad. I mean, they took that out to the woodshed and
02:09 that is this, you know, on valuation, it's actually cheaper than Home Depot.
02:13 So I don't know. I mean, I don't think H. D. Traded particularly bad today.
02:16 Traded a few times normal volume. If you for a trade, I think you belong to
02:20 stock anything that you're gonna need a second mortgage to buy anything that's
02:24 related on interest rates. When you go to Home Depot, people are putting
02:27 extensions on their house. They're doing new bathrooms. They're doing new
02:29 kitchens. If it's a sectional couch, yes, you probably have to finance that
02:34 too. But you have to be a little more cautious. If it's a high end product,
02:39 people who have money might curtail it a little bit, but they're still gonna
02:42 spend it. If you need a second mortgage to buy it, stay away from those. You
02:47 rather be in Home Depot, even if there's a pullback in spending. I think Home
02:52 Depot, I could see those people pulling back because they have to actually take
02:56 out a loan. So anything that needs a loan. But if you're talking about high
03:00 end clothing, I think you could still be there. Yeah, it's interesting. You
03:03 know, guy just said he's surprised how well it traded today. I mean, this stock
03:06 trades in a market multiple. I think we can all agree on this desk that we
03:09 don't think the multiple assigned to the broad market right now is appropriate
03:13 given how fast interest rates have come and what we're starting to see is sort
03:17 of the data from the economy. When you hear a company like this, I think you
03:20 said, well, it was like the worst revenue miss in 20 years. These are not
03:23 one quarter sort of things, you know? And so here's a company that's dealing
03:26 with a hangover from the pandemic. They really benefited from a lot of the
03:30 dynamics that were going on the housing market and low rates and all that sort
03:33 of stuff. And then we think about again the conversation we're having at the
03:36 top of them. You know, you were talking about margin expansion and some of
03:39 these new staples now, like the biggest companies on the planet who have all
03:43 these moats and now they're trading at like 30 times or whatever. So to me,
03:47 there needs to be some sort of like we need to see this kind of spread narrow
03:51 a little bit. And to me, it's just getting further widened right now. Home
03:55 Depot or target Tim
03:57 Home Depot. Yeah, I mean, I again, I think you've had to pull back here.
04:03 Let's see where it goes over the next couple of days. I agree. This doesn't
04:06 turn around overnight, but I'm still going to get, you know, masking tape and
04:10 drop cloths and fertilizer and sure you are and spectra side. And you know,
04:14 that's what I do.