OK, I admit it: There's no such thing as a "perfect" quarter. But if there were such a thing, Lumber Liquidators
) and Whole Foods
) just got as close as it gets. Take a look at how the companies did against expectations, and you'll get an idea for what I'm talking about.
||Revenue, Expected vs. Actual
||Yearly Revenue Growth
||EPS, Expected vs. Actual
||Yearly EPS Growth
||$197M vs. $210M
||$0.29 vs. $0.43
||$2.7B vs. $2.7B
||$0.61 vs. $0.63
Source: Company press releases, SEC filings.
Lumber Liquidators finally uses its leverage
Let's start with Lumber Liquidators. The company has had a rough two years, starting with the botched implementation of an SAP management system that took employees far longer to adjust to than needed.
The macro environment was already hostile toward anything that had to do with housing in late 2010; though it has a better value proposition for hardwood flooring than Home Depot or Lowe's (NYSE: LOW ) , it's never easy for David to go up against Goliath. The fact that orders went missing and employees were flustered only took the situation from bad to worse.
But what a difference two years can make! The company, under the new leadership of CEO Robert Lynch, has done a great job adapting to the marketplace. The company experienced a comparable store bump in sales of 12.4%. That was thanks in part to what the company called a "stabilization ... of a number of factors" in the macro-economic climate.
What really juiced the company's returns, however, were expanding margins. While revenue increased by almost 20%, the cost of sales was only up 14%, while selling, general, and administrative costs were only up 15%. These costs were able to stay down both because of an improved supply chain, and because the stores were designed to operate in low-rent neighborhoods with a lean but well-informed support staff.
Lumber Liquidators capped off its release by upping forward guidance for both revenue and earnings.
If I've said it once, I've said it a thousand times: As our population gets more educated about where its food comes from, grocers with a laser focus on organics stand to be huge winners.
Over the last few weeks, that might've been hard for some investors to remember. When Chipotle (NYSE: CMG ) came out with disappointing earnings, shares of many companies that tailor to high-end shoppers took a hit. This, of course, was on top of disappointing results from fellow grocers like SUPERVALU (NYSE: SVU ) , which had to go so far as to suspend its dividend.
But as yesterday's earnings release shows, Whole Foods is playing a different ball game than SUPERVALU, and it wasn't nearly as high-priced as Chipotle. The most important number the company released was that comparable store sales were up 8.2%.
That's great news, but they threw in an extra tidbit that was even more mouth watering: Comparable store sales for the first few weeks of the current quarter were already up 9.7%. As far as grocery stores are concerned, that's mind-boggling.
If you think the growth story is over, here, think again. The company currently has 329 stores in the U.S. and Canada, but it believes this number can eventually triple. By the end of 2014, Whole Foods is expecting to open or relocate as many as 79 stores.
And just like Lumber Liquidators, Whole Foods announced it was raising revenue and earnings guidance moving forward.
What to do next
As I own both stocks, I clearly think they're worth looking in to. But if you'd like a couple more ideas about companies that aren't yet as prevalent as Whole Foods or Lumber Liquidators, but still have as much promise, check out our special free report: 3 Stocks to Own for the New Industrial Revolution.
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