Day: November 19, 2020

CATO – Cato Corporation: Q3 Numbers May Finally Confirm A Hard Bottom

Investing in value stocks is all about risk/reward. The cheaper the respective stock is at any given time; the more potential reward may be in play. Value investors though know better than most that patience is key when investing in beaten up stocks. Companies which are trading well below their historic valuations, for example, are cheap for a reason. Furthermore, many times, the downward trend continues far longer than many suspect.

One such stock which we have written about in the past is The Cato Corporation (NYSE:CATO). We actually wrote about this company back in January of this year when we stated that we felt lower lows were on the cards for the company. We stated in this article that too much cash was being siphoned off to the dividend, and not enough investment was being done to improve the fortunes of the company.

Unfortunately, for Cato, its deteriorating fundamentals (coming into this fiscal year) were then thrown the sucker-punch of the coronavirus pandemic. The share price now (almost 10 months later) is down almost 50% since we penned that piece. Shares are now trading just above $8.20 per share, and the dividend has been suspended.

If we look at the daily chart below, however, we see that shares may have finally found some type of meaningful support. We state this because shares bottomed in August and then successfully tested this bottom in late October. Since then, buying volume has been on the increase, which is encouraging. This brings a potential double bottom reversal pattern in play. To confirm the pattern, shares will need to take out the September highs (approximately $9 a share). A rough target would be $12 a share, which is approximately 45% above where shares are trading at present.

If indeed Cato can recover the $12 level, for example, we should be seeing some signs of life in the financials. In the most recent second quarter, for example, the company reported a net loss of $7.2 million on top-line sales of $166.3 million. This means sales are down roughly 40% over the first six months of this fiscal year. Net income for the first six months comes in at -$35.6 million.

These massive swings on the income statement (compared to last year) are what happen when stores get closed on-mass (which occurred in March of this year). Obviously, the lack of positive earnings will be a bone of contention among value investors. Operating cash/flow also (if we look at a trailing twelve-month average) comes in negative at -$40 million. Nevertheless, the two most important valuation metrics, in our opinion, are the book multiple (0.7) and the sales multiple (0.3). Why? Because it is precisely assets and sales which invariably generate earnings and, consequently, share price growth for a company. Suffice it to say, as long as the balance sheet can be protected, earnings growth should eventually return.

If we zone into the second quarter, it is possible that green shoots may be forming. Although the company posted a net loss of $7.2 million, it was able to generate $23.1 million of operating cash flow. On top of this number, $14 million was generated from its investing activities. This positive cash enabled the firm pay down $30 million from its line of credit and add $7 million to its cash balance. Cash & ST investments stood at $137 million at the end of second quarter. Although this number has been declining, remember the market cap of Cato at present is approximately $198 million. Suffice it to say, excluding the property the company presently owns, Cato’s cash balance makes up 69% of the present market price of the firm. Not a bad position to be in.

Furthermore, the company opened 36 new stores in Q2, which should demonstrate to investors the company’s long-term vision for the firm. Equity at the firm came in at $266 million at the end of the second quarter. Yes, book value on the balance sheet has been declining, but it only fell by $5.5 million in the quarter. With a bit of luck, we will see an end to this declining trend in the third quarter numbers which are being announced this month.

Therefore, to sum up, Cato Corporation is expected to announced its second quarter numbers later this month. Shares have lost more than half their value this year, but Q3 numbers may finally confirm a hard bottom here. Around the $9 level would be our buying zone. Remember, price action is predictive in nature, meaning it has already incorporated the salary and cost cutting initiatives into the price. Let’s see what Q3 numbers bring.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CATO over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

DG – Dollar General Stock is a Retail Star and a Buy After Target's Earnings

Dollar General ( has outpaced its larger rivals Target (TGT Free Report) and Walmart (WMT Free Report) in 2020, but it has lagged both the discount retailers in the past three months. Luckily, Target’s recent Q3 results showcased that big retailers are still cruising along during the pandemic. And Dollar General will get its chance to remind Wall Street about its growth and potential when it reports its third quarter financial results on December 3.

Relatively Unique in Retail…

Dollar General isn’t necessarily a direct rival to Walmart, Target, or Costco (COST Free Report) even though they are all often categorized as discount retailers. DG operates nearly 17,000 smaller format stores across most of the U.S., often in more rural and working-class areas. Meanwhile, Target has around 1,900 stores and Walmart has roughly 5,000 in the U.S

DG sells everything from food to motor oil for “everyday low prices,” unlike rival Dollar Tree’s (DLTR Free Report) $1 for everything pitch. And it is not controversial to say that it is much more of a true discount store than Walmart and Target.

Investors should pay close attention to the fact that Dollar General has succeeded in the e-commerce age by expanding its brick and mortar footprint in areas where Amazon (AMZN Free Report) boxes aren’t the norm. This could be vital to its continued growth and expansion for years to come. But Dollar General is, of course, adapting with the times, even though it hasn’t gone all-in on delivery.

Dollar General has improved its digital ecosystem and it’s rolling out offerings like order online and pick up in store. Something that is also likely to resonate with its customers is its relatively new app that allows consumers to scan items as they shop to make sure they stay on budget and help find digital coupons. And in select stores, customers “can pay-in-app and skip the checkout line.”

Other Fundamentals…

DG stock has blown away TGT, WMT, and Dollar Tree over the past five years, up roughly 230%. Dollar General has kept up its outperformance in 2020 as well, up 35% vs. TGT’s 33%.

But as we mentioned at the top, Dollar General has cooled off a bit, down over 3% in the last month. The stock closed regular trading Thursday at $211.21 a share, which puts it about 6% off its mid-October records. This could give it room to climb as Wall Street just pushed Target stock up to new highs for its ability to continue big growth during the coronavirus.

Despite its outperformance, DG trades at a discount in terms of forward 12-month earnings compared to its industry’s 34.7X and Target’s 21.8X at 21.1X. Meanwhile, the company’s 0.68% dividend yield comes in not too far below the 10-year U.S. Treasury’s average. And in a sign of strength amid broader economic uncertainty, DG resumed its share repurchase plan during the second quarter.

Last quarter, DG’s revenue jumped over 24% and same-store sales popped 19%, while its operating profit surged 81% to $1 billion. Peeking ahead, Zacks estimates call for Dollar General’s Q3 sales to jump over 14% to $8 billion to hep lift its adjusted earnings by 39%.

DG’s overall fiscal 2020 sales are projected to jump 19% to come in at roughly $33 billion, with its adjusted EPS expected to soar over 50%. This would represent its strongest growth since 2012’s 14% revenue climb.

Bottom Line

Dollar General easily beat our earnings estimates in the last two periods and its strong bottom-line revisions help it grab a Zacks Rank #2 (Buy) right now. DG also sports “B” grades for Growth and Momentum in our Style Scores system and its industry sits in the top 30%, as we enter the thick of the holiday shopping season.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

PNNT – PennantPark (PNNT) Q4 Earnings and Revenues Miss Estimates

PennantPark (PNNT Free Report) came out with quarterly earnings of $0.14 per share, missing the Zacks Consensus Estimate of $0.15 per share. This compares to earnings of $0.15 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -6.67%. A quarter ago, it was expected that this business development company would post earnings of $0.15 per share when it actually produced earnings of $0.16, delivering a surprise of 6.67%.

Over the last four quarters, the company has surpassed consensus EPS estimates just once.

PennantPark, which belongs to the Zacks Financial – SBIC & Commercial Industry industry, posted revenues of $21.28 million for the quarter ended September 2020, missing the Zacks Consensus Estimate by 10.73%. This compares to year-ago revenues of $27.93 million. The company has not been able to beat consensus revenue estimates over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

PennantPark shares have lost about 45.3% since the beginning of the year versus the S&P 500’s gain of 10.4%.

What’s Next for PennantPark?

While PennantPark has underperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for PennantPark was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.14 on $22.26 million in revenues for the coming quarter and $0.55 on $90.99 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial – SBIC & Commercial Industry is currently in the bottom 25% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

GM – General Motors is investing $27 billion and unveiling 30 new EVs by 2025

2023 Cadillac Lyriq

The Cadillac Lyric and GMC Hummer are just the start of GM’s latest EV onslaught.


That General Motors is keen on investing big into future electric vehicle development is no surprise. We’ve seen its progression from Volt to Bolt, then Ultium technology, and now the Hummer EV and Cadillac Lyriq. Even with all that, though, it seems that we have grossly underestimated GM’s commitment to Sparkle Motion.

What do we mean? Well, GM announced on Thursday that it would be investing upwards of $27 billion in future electric vehicle development, and that it had plans to debut as many as 30 new EVs globally by 2025. If that seems insane, then you’re not used to thinking on a GM scale. What’s even wilder is that the planned investment has actually gone up — not down — since the start of the COVID-19 pandemic.

If that sounds like a crap-ton of money, it is. GM claims that half of its capital expenditures going forward will be on electric and electric-autonomous vehicle development. Part of that will go toward hiring 3,000 people in the fields of electrical system design, infotainment software and controls engineering, and developers for Java, Android, iOS and other platforms.

This renewed EV fanaticism (coupled with continued development on the platform) has led GM engineers to bump their estimates for the maximum range of an Ultium-based EV from 400 miles to 450 miles. That’s not bad, but things won’t stop there. 

There are already plans for a second Ultium generation in development. GM estimates that it will be able to deliver twice the energy density at half the cost of current battery chemistries. What’s wilder still is that it plans to have Ultium 2 ready around 2025 as well. Beyond just purely battery-electric EVs, GM also plans to continue developing its Hydrotec fuel-cell system on which it’s partnered with Honda.

The bottom line is that EVs are likely here to stay, and with his kind of large-scale investment from major automotive manufacturers, they’re probably going to get a lot better in the not-too-distant future.

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GILD – The WHO will not recommend remdesivir for COVID-19 patients, since it doesn't seem to boost their chances of survival


A vial of remdesivir as seen during a news conference at the University Hospital Eppendorf in Hamburg, Germany, April 8, 2020. Ulrich Perrey/Reuters

  • The FDA approved remdesivir as a treatment for severe COVID-19 cases last month, after granting emergency authorization in May.
  • But on Thursday, the World Health Organization announced it will not recommend the drug’s use for COVID-19 patients.
  • “There is currently no evidence that it improves survival or the need for ventilation,” the organization said.
  • Visit Business Insider’s homepage for more stories.

Remdesivir was the first coronavirus treatment to be approved by the US Food and Drug Administration.

Originally developed by pharma giant Gilead Sciences to treat Ebola, the drug got emergency authorization from the FDA in May. A study published the same month found that it shortened recovery times for seriously ill COVID-19 patients. Last month, remdesivir earned full FDA approval. 

But on Thursday, a group of World Health Organization experts published new guidance recommending against the drug’s use.

“There is currently no evidence that it improves survival or the need for ventilation,” the WHO wrote in a press release accompanying the updated guidelines, which were published in the British Medical Journal

Given that, the authors said, “we suggest against administering remdesivir in addition to usual care for the treatment of patients hospitalised with COVID-19, regardless of disease severity.”

Indeed, despite its initial promise, remdesivir has mostly failed to live up to the hype in subsequent studies. A 596-person study in August showed that patients on a 10-day course of remdesivir died at about the same rates as people given other treatments. And the WHO’s own Solidarity Trial found that remdesivir didn’t seem to have much effect on the course of hospitalized patients’ illness or mortality.

FILE PHOTO: Medical workers prepare to intubate a coronavirus disease (COVID-19) patient at the United Memorial Medical Center's coronavirus disease (COVID-19) intensive care unit in Houston, Texas, U.S., June 29, 2020. REUTERS/Callaghan O'Hare

Medical workers prepare to intubate a COVID-19 patient at the United Memorial Medical Center’s COVID-19 intensive-care unit in Houston, Texas, June 29, 2020. Callaghan O’Hare/Reuters

In determining its guidelines, the WHO reviewed data from four studies, including the ones from May and August, as well as its Solidarity Trial. In total, the analysis encompassed over 7,000 patients hospitalized with COVID-19. 

Yet in aggregate, the data did not conclusively show that remdesivir to have any benefit for COVID-19 patients.

“There is no evidence based on currently available data that it does improve important patient outcomes,” the authors wrote. 

The downsides of remdesivir 

Gilead spokesperson Chris Ridley told Business Insider the company was “disappointed” with the WHO guidelines for remdesivir, which he referred to by its brand name, Veklury.

“Veklury is recognized as a standard of care for the treatment of hospitalized patients with COVID-19 in guidelines from numerous credible national organizations,” Ridley said in an email. “These recommendations are based on the robust evidence from multiple randomized, controlled studies published in peer-reviewed journals that demonstrate the clinical benefits of Veklury, such as significantly faster recovery, which can free up limited hospital resources.”

He added that data from one of the studies the WHO used hadn’t yet been peer-reviewed.

However, the WHO’s analysis suggests that any benefits remdesivir might convey do not outweigh its negatives. One of those negatives is that remdesivir is expensive: Gilead announced in June that it would charge governments of developed countries $2,340 for a single five-day treatment course.

Gilead Sciences Coronavirus Remdesivir Biotech Lab

Lab technicians operate a machine to wash empty vials of remdesivir at a Gilead Sciences facility in La Verne, California, March 18, 2020. Gilead Sciences Inc/Handout via Reuters

“Paying a high price for remdesivir without good evidence of mortality benefit is a gamble,” Robin Ferner, a physician and professor of clinical pharmacology at the University of Birmingham, said in a feature accompanying the BMJ article.

What’s more, since remdesivir isn’t widely available, manufacturers would have to make large quantities of it very quickly for most patients to have access. Plus, studies still haven’t ruled out the possibility that remdesivir could cause “important harm” to patients, the WHO wrote. 

Instead of remdesivir, the WHO recommends steroids

The WHO cautioned that this update is part of a “living guideline,” which means it could change as new evidence becomes available. 

But for now, the organization is recommending that healthcare providers stick with other, more evidence-backed treatments like corticosteroids. A September analysis found that COVID-19 patients treated with steroids were substantially less likely to die than patients who didn’t get them. Since September, the WHO has been strongly recommending the use of steroids for patients with severe COVID-19.

FILE PHOTO: A pharmacist displays a box of Dexamethasone at the Erasme Hospital amid the coronavirus disease (COVID-19) outbreak, in Brussels, Belgium, June 16, 2020. REUTERS/Yves Herman/File Photo

A pharmacist displays a box of dexamethasone at the Erasme Hospital in Brussels, Belgium, June 16, 2020. Reuters

Steroids are far cheaper and more widely available than remdesivir. For instance, a six- to 10-day treatment course of the steroid dexamethasone would likely cost most customers between $10 and $13, according to Michael Rea, the CEO of Rx Savings Solutions.

“Clearly, now steroids are the standard of care,” Howard Bauchner, editor-in-chief of the Journal of the American Medical Association, told The New York Times in September. 

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SHC – Sotera Health Announces Pricing of Initial Public Offering

CLEVELAND, Nov. 19, 2020 (GLOBE NEWSWIRE) — Sotera Health Company today announced the pricing of its initial public offering (“IPO”) of 46,600,000 shares of its common stock at a price to the public of $23.00 per share. The gross proceeds of the offering are expected to be approximately $1.1 billion, before deducting underwriting discounts and commissions and offering expenses. The Company has granted the underwriters a 30-day option to purchase up to an additional 6,990,000 shares.
The shares are expected to begin trading on the Nasdaq Global Select Market on November 20, 2020, under the symbol “SHC.” The offering is expected to close on November 24, 2020, subject to customary closing conditions.J.P. Morgan, Credit Suisse, Goldman Sachs & Co. LLC and Jefferies are acting as joint lead book-running managers and as representatives of the underwriters for the offering. Barclays, Citigroup and RBC Capital Markets are acting as joint book-running managers for the offering. BNP PARIBAS, KeyBanc Capital Markets, Citizens Capital Markets, ING, Academy Securities, Loop Capital Markets, Penserra Securities LLC, Siebert Williams Shank and Tigress Financial Partners are acting as co-managers for the offering.The offering is being made only by means of a prospectus. Copies of the final prospectus relating to the offering may be obtained, when available, from: J.P. Morgan Securities, LLC, Attention: Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, by telephone at 1-866-803-9204 or by email at; Credit Suisse Securities (USA), LLC, Attention: Prospectus Department, 6933 Louis Stephens Drive, Morrisville, NC 27560, by telephone at (800) 221-1037, or by email at; Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, NY 10282, by telephone 1-866- 471-2526 or by email at; or Jefferies LLC, Attention: Equity Syndicate Prospectus Department, 520 Madison Avenue, 2nd Floor, New York, NY 10022, by telephone 1-877-821-7388 or by email at registration statement relating to these securities was declared effective as of November 19, 2020 by the Securities and Exchange Commission.This press release shall not constitute an offer to sell, or the solicitation of an offer to buy these securities, nor shall there be any sale of, these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.Forward-looking Statement:Statements in this press release regarding the Company that are not historical facts are “forward-looking statements” that involve risks and uncertainties. Certain of these risks and uncertainties are described in the Company’s registration statement on Form S-1 filed with the SEC, including under the headings of “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the registration statement. Forward-looking statements made in this release speak only as of the date of this release, and the Company undertakes no obligation to update the information contained in this press release to reflect subsequently occurring events or circumstances, except as required by law.About Sotera Health:Sotera Health Company is a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. Sotera Health goes to market through three businesses – Sterigenics®, Nordion® and Nelson Labs®. Sotera Health is committed to its mission, Safeguarding Global Health®.CONTACTS:Source: Sotera Health Company

FRCN – Firemans Contractors Falls Victim to Elaborate Fraud

FORT WORTH, TX, November 19, 2020 – OTC PR WIRE – Firemans Contractors, Inc. (OTC US: FRCN), a non-reporting company since November 7, 2014, due to the filing of a Form 15 with the Securities and Exchange Commission, announced today that the Company has fallen victim to an elaborate fraud with false claims of the Company’s business activity to promote the Company’s stock, which resulted in a substantial increase in the Company’s trading activity.

The Company is investigating this issue and will pursue all avenues to find the perpetrator.  To be clear, Firemans Contractors remains a non-reporting company, has ceased its business activities, has not promoted its stock in any way, and is not a part of any activity intended to promote the Company’s stock, or to affect the trading activity of the Company’s stock.

About Firemans Contractors:

Firemans Contractors, Inc. was formerly a Franchisor offering business-to-business franchises for full-service painting contractors, focused on residential, commercial and industrial parking lot striping, and parking lot maintenance services.  However, the company is not currently operational.

Contact Information:

Renee Gilmore

Phone: (800)-475-1479

Firemans Contractors, Inc.

PO Box 185274

Fort Worth, TX 76118


GILD – WHO tells doctors not to use Gilead's remdesivir as a coronavirus treatment, splitting with FDA

A lab technicians shows the coronavirus disease (COVID-19) treatment drug “Remdesivir”.
Amr Abdallah Dalsh | Reuters

A World Health Organization panel advised doctors Thursday against using Gilead Sciences‘ antiviral drug remdesivir as a treatment for patients hospitalized with Covid-19, saying there is currently “no evidence” that it improves survival or shortens recovery time — standing in stark contrast to U.S. regulatory guidance on the drug.

The WHO Guideline Development Group, a panel of international experts who provide advice to the agency, said its recommendation is based on new data comparing the effects of several drug treatments, including data from four international randomized trials involving more than 7,000 patients hospitalized with the disease.

“After thoroughly reviewing this evidence, the WHO GDG expert panel, which includes experts from around the world including four patients who have had covid-19, concluded that remdesivir has no meaningful effect on mortality or on other important outcomes for patients, such as the need for mechanical ventilation or time to clinical improvement,” the group wrote in a press release.

The recommendation was published in the British medical trade journal The BMJ on Friday in the U.K.

In an emailed statement, Gilead said remdesivir “is recognized as a standard of care for the treatment of hospitalized patients with COVID-19 in guidelines from numerous credible national organizations, including the US National Institutes of Health and Infectious Diseases Society of America, Japan, UK and Germany.”

“We are disappointed the WHO guidelines appear to ignore this evidence at a time when cases are dramatically increasing around the world and doctors are relying on Veklury as the first and only approved antiviral treatment for patients with COVID-19 in approximately 50 countries,” Gilead spokesman Chris Ridley said in a statement.

Remdesivir, under the brand name Veklury, is administered in a hospital setting via an IV. Gilead has said the medication should only be administered in a hospital or in a health-care setting that can provide acute care comparable with inpatient hospital care.

The majority of patients treated with remdesivir receive a five-day course using six vials of the drug. The company is also developing an inhaled version of the medication, which it will administer through a nebulizer, a delivery device that can turn liquid medicines into mist.

The drug received worldwide attention as a potentially effective treatment for the coronavirus earlier in the year after a study funded by the National Institutes of Health found that it modestly reduced the recovery time in some patients who were hospitalized with Covid-19. It was one of the drugs used to treat President Donald Trump, who tested positive for the virus last month.

On Oct. 22, the Food and Drug Administration formally approved the drug for adults and pediatric patients 12 years of age and older who require hospitalization for Covid-19. It is now the first and only drug approved in the U.S. to treat the coronavirus, which has infected roughly 56.4 million people worldwide and killed about1.4 million.

Dr. Anthony Fauci, the nation’s leading infectious disease expert, has praised the drug, saying it would set “a new standard of care” for Covid-19 patients.

Some medical experts note data on the drug’s effectiveness has been mixed. In October, a study coordinated by the WHO indicated that the medication had “little or no effect” on death rates among hospitalized patients. The study was conducted in 405 hospitals across 30 countries on 11,266 patients, with 2,750 given remdesivir.

Gilead has publicly questioned the findings of the WHO study, telling Reuters in October that other trials show the treatment cut recovery time. “The emerging (WHO) data appears inconsistent, with more robust evidence from multiple randomized, controlled studies published in peer-reviewed journals validating the clinical benefit of remdesivir,” Gilead told Reuters.

The WHO panel acknowledged that evidence so far does not prove that remdesivir “has no benefit.”

But it added given the possibility of harm as well as the high cost and resources need to administer the drug, it is an “appropriate recommendation.” The group said it supports continued enrollment in trials evaluating the drug.

INTC – After Apple's M1 launch, Intel announces its own white-label laptop

Its long fruitful relationship with Apple may be sunsetting soon, but Intel’s still got a fairly massive footprint in the PC market. There’s never a good time to get complacent, though (a lesson the company learned the hard way on the mobile front).

This week the chip giant is debuting its own laptop, the NUC M15. More properly, the NUC M15 Laptop Kit; the device is actually a white-label system. It’s essentially a reference design so smaller device makers don’t have to commit to the long and expensive process of building a system from scratch.

It is, as The Verge notes, not the first time the company has created this sort of reference design. It recently created a gaming system to similar ends. But much like the recent MacBooks, the system is designed to offer high performance in a package designed more for productivity.

There are two configurations for the system, featuring either a Core i7 chip coupled with 16GB of RAM or a Core i5 with 8GB of RAM. That will, obviously, be complemented by Windows 10, which will take advantage of the 15.6-inch touchscreen.

Pricing and timing and all of that good stuff will likely depend on which vendors take the system across the finish line.

NGVC – Natural Grocers by Vitamin Cottage, Inc. (NGVC) Management on Q4 2020 Results – Earnings Call Transcript

Natural Grocers by Vitamin Cottage, Inc. (NYSE:NGVC) Q4 2020 Earnings Conference Call November 19, 2020 4:30 PM ET

Company Participants

David Colson – Vice President & Treasurer

Kemper Isely – Co-President

Todd Dissinger – Chief Financial Officer

Conference Call Participants

Spencer Hanus – Wolfe Research


Good day, ladies and gentlemen. Welcome to the Natural Grocers’ Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today’s call is being recorded.

I’d now like to turn the conference over to Mr. David Colson, Vice President and Treasurer for Natural Grocers. Mr. Colson, you may begin.

David Colson

Good afternoon everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage fourth quarter fiscal year 2020 earnings conference call. On the call with me today are Kemper Isely, Co-President; and Todd Dissinger, Chief Financial Officer.

As a reminder, certain information provided during this conference call are forward-looking statements based on current expectations and assumptions and are subject to risks and uncertainties.

Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks and uncertainties detailed in the company’s most recently filed Forms 10-Q and 10-K. The company undertakes no obligation to update forward-looking statements. Today’s press release is available on the company’s website, and a recording of this call will be available on the website at

Now, I will turn the call over to Kemper.

Kemper Isely

Thank you, David and good afternoon everyone. Thank you for joining us today. We faced many challenges and opportunities in fiscal 2020 and our response resulted in a record performance, including achieving over $1 billion in net sales and $0.89 in diluted earnings per share.

Fiscal 2020 was also our 17th consecutive year of positive daily average comparable store sales growth. Our fourth quarter comp was up 13.2% and the full fiscal year comp was 12%. Our strong comp trends have continued through October.

During fiscal year 2020, we also continued to enhance store performance with our margin expansion efforts. Supported by the strong sales momentum, we realized significant improvement to adjusted EBITDA during the year with 28.1% growth in the fourth quarter and 29.1% growth for the full fiscal year.

We are pleased to announce that we are declaring a special cash dividend of $2 per common share in addition to our quarterly cash dividend of $0.07 per common share. The special dividend reflects our strong business performance, financial position, cash flow, and our commitment to return value to our shareholders.

Fiscal 2020 was an unprecedented year, presenting numerous challenges amid the global pandemic and related government mandates. We are very proud of our strong response and performance. Our entire Natural Grocers family adapted quickly and successfully to these challenges, while staying true to our founding principles.

We navigated through the toughest of operating environments, while delivering the highest quality, natural and organic foods to our valued customers. Our strong results in both the fourth quarter and full year reflect our ability to leverage our core competencies and values.

Our long-standing focus on health is an important differentiator and on-trend given the current environment where customers are focused on making informed health and nutrition choices, including an emphasis on strengthening their immune system.

Our quality offerings, coupled with our always affordable value proposition is very relevant in today’s uncertain economic environment. Additionally, customer confidence in our products, store cleanliness and safety measures are driving our growth. Our differentiated model includes; industry-leading quality standards and focus on providing free science-based nutrition education, strong alignment with our customers and communities shared values, only offering 100% organic produce. A prepackaged bulk offering that is more relevant today than ever. A focus on providing ingredients and recipes for healthy cooking at home and a convenient store layout supported by exceptional customer service.

Let me highlight a few of our recent marketing initiatives, which continue to drive customer excitement and interest and contributed to our strong sales performance. In July, we promoted the art of burgering focused on healthy grilling techniques and ingredients.

In August, we celebrated our 65th anniversary with a highly successful anniversary event that featured a Sweepstakes, free products and exciting promotions. This sale was extended to a three-day event this year to facilitate social distancing.

In September, which was national organic harvest month, we highlighted our commitment to organic farming with our organic month event, utilizing special promotional offers, activities and a fundraiser supporting beyond pesticides. Our NPower customer loyalty program continues to contribute to growth, drive loyalty and enhance our ability to market to our customer base.

NPower membership has now reached 1.3 million customers and represented 68% of sales in the fourth quarter. Additionally, our ongoing feature family of four initiative, which is a promotion aimed at feeding a family for under $10 to $16 has been timely and well received. This promotion highlights and educates family so they can cook affordable, high-quality meals even in challenging economic times.

We offer both the ingredients and recipes for families to follow, many featuring our Natural Grocers’ brand products. We are seeing continued growth of our Natural Grocers’ brand products. We have grown our private brand offerings by 54 SKUs during 2020, bringing our total number of Natural Grocers SKUs, including bulk prepackaged products and supplements to over 1,000 at fiscal year-end. In the fourth quarter, private brand sales represented 7.3% of total sales compared to 6.8% in the same period of the prior year.

Our private brand products have been developed and sourced, consistent with our core values and are positioned as a premium quality brand at an always affordable price. We continue to be encouraged by the adoption of our branded products with strong category penetration rates. We believe our Natural Grocers’ brand has significant growth potential in the years to come.

In 2020, we continue to support our communities in many ways. During the fourth quarter, Natural Grocers and our customers partnered to raised over $500,000 for charitable purposes. These efforts focused on many important causes and included raising approximately $250, 000 for local food banks, in addition to our ongoing commitment to donating food.

In September, we launched our Ladybug Love, your neighborhoods partnership with beyond pesticides. In honor of National Organic Harvest month and raised over 120,000 to reduce pesticides in neighborhood parks. As we have discussed before, these recent efforts are just a small part of how Natural Grocers brand is deeply rooted in a history of environmental and social leadership to benefit all stakeholders. At Natural Grocers, we believe the sustainable choices we make today directly impact the world tomorrow, and we work hard to ensure our stores, operations and supply chain reflect these values. We are committed to building a healthy sustainable future for our customers, our good4u crew and our broader communities.

Lastly, I would like to highlight our commitment to our good4u crew during 2020. We’ve been proactive throughout the pandemic, focused on implementing safety measures for our crew. We are supporting our crew through a permanent $1 per hour wage increase for our hourly crew, which was implemented in March 2020, and we have paid periodic discretionary bonuses throughout the pandemic.

Our wage and bonus enhancements represented approximately $3.3 million of incremental expense in the fourth quarter, which was the equivalent of 87% of quarterly net income. For the full year, the pay enhancements were approximately $10.3 million or 52% of fiscal 2020 net income.

In closing, I want to thank each and every crew member for their commitment to helping us deliver the highest quality natural and organic products at always affordable prices. I am confident in our ability to continue to drive growth and value for all of our stakeholders.

With that, let me turn the call over to Todd to discuss our financial results and guidance.

Todd Dissinger

Thank you, Kemper, and good afternoon, everyone. As Kemper mentioned, we had an outstanding fourth quarter and fiscal year amid a challenging operating environment. Our financial results reflect the commitment of our good4u crew to our customers and the communities we serve.

Net sales during the fourth quarter increased 16.3% to $264.2 million, with daily average comparable store sales increasing 13.2%. The fourth quarter comp increase was driven by a 23.7% increase in average transaction size. This strong transaction size was partially offset by an 8.5% decrease in daily average transaction count, reflecting a continuation of the trend of less frequent shopping trips as customers practice social distancing.

Meat, frozen, produce, bulk and dairy categories outperformed the company average comp. Supplements also performed well with a fourth quarter comp of 8%. Additionally, we saw continued penetration of online and delivery sales through our partner, Instacart, although volume moderated compared to the third quarter. We continue to see modest inflation, which was approximately 3% during the fourth quarter.

I would like to also note that we have seen an improvement in vendor out of stocks as our partners continue to adapt to the environment. Gross profit margin during the fourth quarter was 27.4%, compared to 26% in the prior year period. The improvement in gross margin over the fourth quarter 2019 was primarily attributable to higher product margin as a result of reduced promotions.

We also saw improvement in-store occupancy leverage and shrink expense as a percentage of sales. The product margin, occupancy leverage and shrink expense improvements were partially offset by the adoption of the new lease accounting standard, which negatively impacted gross margin by approximately 20 basis points.

Store expenses as a percentage of sales increased to 22.8% during the fourth quarter compared to 22% in the prior year period. The year-over-year increase in-store expenses, as a percentage of sales was attributable to increased labor-related expenses, which were partially offset by lower marketing and depreciation expenses, all as a percentage of sales.

The increase in labor-related expenses was driven by a $1 permanent increase in all hourly wages, which was implemented in March and periodic discretionary bonuses to our hourly crew. Additionally, we are operating with increased store labor hours to support operational requirements to comply with government mandates related to the pandemic.

Net income was $3.7 million with diluted earnings per share of $0.16 in the fourth quarter. This compares to net income of $1.4 million or $0.06 of diluted earnings per share in the fourth quarter of last year.

Adjusted EBITDA was $13.3 million in the fourth quarter, up 28.1% compared to $10.3 million in the fourth quarter of last year. For full fiscal 2020, we generated cash from operations of $66.5 million and invested $29.6 million in net capital expenditures. Capital expenditures included the opening of six new stores and one relocation during the fiscal year. Free cash flow was $36.9 million.

We finished the year in a strong liquidity position with $28.5 million in cash and cash equivalents and no debt. As of year-end, we had $48.7 million available under our $50 million revolving credit facility.

Additionally, we have secured a $35 million term loan facility from our existing lender to provide financial flexibility and support our special dividend. Our balance sheet and liquidity remains strong and positions us to face an uncertain operating environment.

As Kemper noted, our Board of Directors has declared a special cash dividend of $2 per common share or a total of approximately $45 million in the aggregate. Our Board has also declared a quarterly cash dividend of $0.07 per common share. Both dividends will be payable on December 16, 2020, to all shareholders of record at the close of business on November 30, 2020.

Given our strong cash flow, cash position and modest leverage, the special dividend provides an opportunity to return capital and maximize value for our shareholders. To fund the dividend, we will use cash on hand as well as the new $35 million term loan facility.

The new term loan facility preserves our revolver availability to maintain financial flexibility. We expect to continue investing in profitable growth initiatives and anticipate a continued trend of favorable cash flow.

Now, I would like to introduce the company’s fiscal 2021 outlook. Our guidance reflects current trends in light of the rapidly evolving COVID-19 environment and related government mandates.

While the company cannot predict the duration or severity of the pandemic and related government mandates. The company expects these factors will continue to impact our operations and financial performance through fiscal 2021.

For fiscal 2021, we expect to open five to six new stores, relocate three to five stores, achieved daily average comparable store sales growth of between negative 2% and 2%, achieve diluted earnings per share between $0.60 and $0.70, and we expect capital expenditures for the fiscal year in the range of $28 million to $35 million.

Our current expectation for new store growth in 2021 and over the next several years is consistent with recent trends. Our 2021 outlook reflects our expectation that comps in the first quarter and in January and February of the second quarter, will remain consistent with the comp trend in the fourth quarter of 2020.

In March, we will anniversary the start of the COVID-19 pandemic. As you will recall, our comp was over 40% in March of 2020. In the second half of the fiscal year, we anticipate comp to be roughly flat. We anticipate slightly higher year-over-year gross margins in the first half and flat year-over-year margins in the second half of the fiscal year.

We anticipate store expenses as a percentage of sales will be higher as a result of higher labor-related expenses through the second quarter, and then will level off as we anniversary increases implemented in the second half of 2020.

In closing, we had a strong record-setting year that we attribute to our commitment to our principles and values and the dedication of our crew. We are confident in our outlook for 2021.

With that, I would like to open the lines up for questions. Thank you.

Question-and-Answer Session


Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Greg Badishkanian with Wolfe Research. Please go ahead.

Spencer Hanus

Good afternoon. This is Spencer Hanus on for Greg. Congrats on a nice quarter, guys.

Todd Dissinger

Thank you.

Spencer Hanus

So, I guess my question was just on the comp trends that you’re seeing quarter to date. Can you quantify what those are running currently? And then, are you seeing any signs of consumer’s stocking up again as the virus rises in parts of the country? And has the supply chain shown any signs of weakness given the rising cases?

Kemper Isely

Well, currently, comp trends are running similar to how they ran in quarter four. As far as supply chain, we haven’t seen – we’ve actually seen improvement in supply chain in the stock over every month, essentially since about May. As far as people stocking up, they are stocking up slightly, but not significantly compared to how they did when the – when – in March of this year.

Spencer Hanus

That’s really helpful. And then can you talk about the components of the gross margin expansion that you saw during 4Q? And as we look to 2021, how much of the gross margin benefits that you saw in 2020 should we expect to stick next year?

Todd Dissinger

Thank you, Spencer. So, the drivers have been less promotional activity. Most of the promotional activity has been supported by vendors. We see that continuing into the first half of 2021. We would expect to see elevated margins similar to where we were in Q4 through the first half.

And then margins should — when we hit March level off. And March would probably be down on a year-over-year basis because of how strong March of 2020 was. And then the second half of the year, we would expect to be about flat on a year-over-year basis.

Spencer Hanus

Okay. And I think you mentioned that e-commerce sales slowed a little bit on Instacart. Can you talk about what the percent of sales e-commerce represents today? And how sticky do you think those sales will be next year in that channel?

Kemper Isely

Sure, Spencer. So, we don’t give the exact data out on our Instacart sales. It represents a couple percent of our total company sales and that would compare to a little bit less than 1% in the prior year, like I said, fourth quarter. And we’ve seen that moderate in Q4 versus Q3. So, it’s hard to say long-term how sticky that will be. Certainly, while the COVID environment is challenging, there will be some customers opting for delivery.

Spencer Hanus

And then the final one is just on unit growth. I think your guidance calls for five to six new stores next year, which is less than less than 5% growth that you’ve growth that you’ve run in some years in the past. When do you think there’ll be an acceleration in new units? And how are you thinking about the unit growth here?

Kemper Isely

Right at this moment, we don’t anticipate accelerating our growth beyond the five to six units that we’re planning on growing next year. We think that moderated growth is prudent and is helpful to us so that we can make sure that we pick premium sites and that we can keep on giving operational excellence in our new stores.

Spencer Hanus

Great. Thank you guys.

Kemper Isely

Thank you.

Todd Dissinger



[Operator Instructions]

I’m showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Kemper Isely for any closing remarks.

Kemper Isely

Thank you very much for joining us to discuss our fourth quarter results. We remain confident in our business based upon our 65-year history. We look forward to speaking with you on our next call to review our first quarter 2021 results. Please stay healthy and safe and have a great day. Thanks. Good bye.


The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.