Specialty retailer The Tile Shop (TTS) has seen its stock price drop 60% due to disappointing Q3 preliminary results and withdrawn guidance. It seems that a recent report and downgrade by Piper Jaffray was correct and that the company has a product mix problem and that product transitions created uncertainty.
However overall the results were hardly catastrophic. Sales grew 7% and comps were up 1%. Bad news on margins was probably the worst development with gross margins of 66%-67% now expected compared to 70% previously. However if we apply the lower 66% margins to Q2 figures we would knock about $3.6 million off pre-tax profits of $11.2 million. Not the end of the world.
The findings are hardly new with a company that has had significant quarterly earnings volatility, they appear to be a short term issue and the findings have been effectively accepted by management and are being dealt with.
The drop in the stock price is probably not surprising given the company was priced for perfection with a PE of 50. However with the stock now on a PE of 20, a hot housing market and with 15 new stores planned for this year representing a 12% increase, the recent drop may be a good opportunity to jump onboard.
This is not a recommendation to buy or sell. Stocks are not suitable for all investors. Please do your own research.
Submitted October 06, 2017 at 01:41AM by InterestingNews1 http://ift.tt/2yLR3Af
