Consumer durables home and kitchenware products maker
Lifetime Brands (NASDAQ: LCUT) stock is has vastly outperformed the benchmark
S&P 500 index (NYSEARCA: SPY) by doublings its pre-
pandemic highs. While Lifetime Brands can be classified as a pandemic benefactor due to the surge in dine-in trends triggered by stay-in-shelter mandates, the Company will continue to capitalize on the emergence of new lifestyle trends that will remain sticky even in a post-pandemic world longer after
COVID-19 vaccines are widely distributed. Isolation mandates have forced consumers to adopt and migrate to both a digital world within the confines of home. Many consumers have discovered enlightenment through lifestyle changes. The pandemic has created a new generation of home chefs,
pet owners,
do-it-yourselfers and
remote workers which is driving the surge in suburban home sales. Prudent investors who understand the appeal of the new normal can monitor shares of Lifetime Brands for opportunistic pullbacks to gain exposure.
Q3 FY 2020 Earnings Release
On Nov. 5, 2020, Lifetime Brands reported earnings-per-share (EPS) profit of $0.65 excluding recurring versus consensus analyst estimates for a profit of $0.43, smashing estimates by $0.22. Revenues grew by 4.3% year-over-year (YoY) to $224.8 million, beating analyst estimates by $6.61 million. Gross margins improved to 35.1% versus $33.8% YoY. Due to COVID-19 uncertainty, Lifetime Brands refrained from providing forward guidance but did declare a quarterly dividend of $0.0425 per shares payable on Feb. 12, 2021 for shareholders of records on Jan. 29, 2021. The Company ended the quarter with $42.7 million of cash plus availability of $164.3 million in credit facilities.
Conference Call Takeaways
Lifetime Brands CEO, Rob Kay, expounded on the successful execution and progression of the Lifetime 2.0 strategic plan. Building out digital marketing and sales tools and increased drop-ship capabilities enabled the Company to meet strong demand. The U.S. geographic segment contributed to a 3.2% net sales increase driven notably by kitchenware products and the reopening of brick and mortar retail stores. Foodservice demand was expectedly down due to COVID impacts. Ecommerce sales grew 59.2% YoY and comprising 16.4% of the quarter’s net sales. Omnichannel drop shipments grew 115% YoY. Operational efficiencies enabled the reduction of distribution costs for over 24% in Q1 to 15.5% by end of Q3 2020, in European operations. As restaurants, hotels and foodservice operations remain stifled during COVID-19, the Company expects the hospitality segment to continue to see “reduced sales activity”. During the question and answering session, CEO Kay noted that due to trucking challenges in the U.S., some “significant sales orders” couldn’t be fulfilled leaving nearly $20 million that “we couldn’t ship”. However, there’s nothing in terms of lost business as it’s expected to ship “without a doubt” in the fourth quarter. This is due to the unseasonably high demand for its products.
Brand Awareness
Lifetime Brands is the largest non-electric housewares company followed by Newell Brands (NASDAQ: NWL). It maintains the number one position in Kitchen Tools and Gadgets, Cutlery, Barware Accessories and Bath Scales category and the number two position across Tabletop categories. The Company owns 80% of its brands and licenses 20% through private label consumer brands. It’s massive portfolio of consumer home products ranging from knives, cutting boards and pans to thermos and bathroom scales to food storage and neoprene travel products under familiar brands including Farberware, Mikasa, Sasaki, Taylor, KitchenCraft, Pfaltzgraf, kamenstein, Sabatier and BUILT. Private label licensed brands include KitchenAid, Food Network, Instant Pot and Williams-Sonoma (NYSE: WSM). These brands continue to penetrate households perhaps more now than before the pandemic. Lifetime Brands is riding on top of the lifestyle transformation adopted by consumers who have discovered (or rediscovered) the enjoyment of being home bodies.
LCUT Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames enables a broader view of the playing field. First off, it should be noted that LCUT is a micro-cap stock with much smaller liquidity with daily trading volumes averaging under 100,000 shares a day. Therefore, patience is an absolute necessity to wait for pullbacks and avoid the urge to chase. The monthly rifle chart has been in a strong uptrend driven by the stochastic mini pup. The monthly rifle chart formed a market structure low (MSL) buy trigger above $8.04. The weekly rifle charts has been on an absolute tear grinding higher with each stochastic coil up through the 80-band. This is typical with thin liquidity stocks. The underlying company is the real deal. By all accounts, shares are expensive as they approach resistance at the $15.32 Fibonacci (fib) level. Prudent and patient investors can wait for opportunistic pullback levels at the $12.89 fib, $12.23 fib, $11.32 fib, $9.84 and the $8.83 fib. Upside trajectories range from the $16.95 fib up to the $21.10 fib. It’s best to avoid chasing a melt-up and wait for pullbacks to gain exposure.
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