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Fly News Breaks for August 11, 2017
AAP, ORLY, AZO
Aug 11, 2017 | 09:53 EDT
Cleveland Research said its checks on auto parts industry trends in July were "slightly" more constructive with modest improvement in late-June through July, but "not overly positive." The checks came back most cautious on Advance Auto Parts (AAP) and pointed to O'Reilly Automotive (ORLY) share gains slightly re-accelerating, while the view on AutoZone (AZO) trends is largely unchanged.
News For ORLY;AAP;AZO From the Last 2 Days
ORLY
Aug 22, 2017 | 09:56 EDT
Jefferies analyst Andy Barish and a team of his peers believe weak spending from Hispanic consumers flagged by several companies this earnings season is mainly due to uncertainty around immigration policy. Given the challenging environment for new legislation, the analyst argued that the weakness may be a short-term phenomenon, with many companies potentially set to benefit from an improvement in spending from this demographic. HISPANICS CONSUMING LESS: During this last earnings season, several companies flagged weak spending from Hispanic consumers, a team of Jefferies' analysts, including Barish, Daniel Binder, Bret Jordan, Randal Konik, Stephanie Wissink and others said in a research note this morning. However, the analysts do not believe the weakness is a result of a deteriorating macro backdrop, but rather is likely due to uncertainty around the White House immigration policy. With Hispanics individuals making up about 18% of the U.S. population, a slowdown in spending can have a big impact, they pointed out, adding that companies with big Texas and California exposure tend to be at the top of the list. Barish and the team also noted that they assume the weakness is a short-term phenomenon given the challenging environment for new legislation. Companies that have been hurt may be due for a rebound, they argued. COMPANIES IMPACTED: While several companies have flagged weakness from Hispanic consumers, others have not cited weakness but have probably been impacted by a slowdown anyway, Jefferies' team contended. Noting that O'Reilly Automotive (ORLY) has 25% of stores in Texas and California, the analysts said they believe the slowdown seen thus far is more driven by weather and cyclical factors. Meanwhile, Wal-Mart (WMT) did not specifically cite weakness in Hispanic spending on its latest earnings call, but about 20% of store locations are in states where over 1/3 of the population is Hispanic and an improvement in spend could help comps, they argued. Additionally, the analysts pointed out that about 24% of e.l.f. Beauty's (ELF) consumers are Hispanic, which may have hurt sales in the first half of the year, but may provide an opportunity given the longer-term opportunity to grow sales through expanded distribution. In a similar position are Ulta Beauty (ULTA) and Jack in the Box (JACK), they said, adding that Foot Locker (FL) did cite weakness in markets with high Hispanic populations and though there are other negatives pressuring the company, an improvement in Hispanic spend would likely offer some relief. Alongside Foot Locker and O'Reilly Automotive, Murphy USA (MUSA), Target (TGT), Valvoline (VVV) and Wingstop (WING) also specifically flagged weakness in Hispanic spend this earnings period, according to Jefferies. "Trump Effect" is The Fly's recurring series of exclusive stories that highlight stocks that are being impacted, or are predicted to be impacted, by the comments, actions and policies of President Trump and his administration.
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