The stock often traded in a very narrow intraday range with most time dropping or raising 1%. The chart below shows that SITE has a little wider daily return fluctuations than the market average. Since November 8th last year, SITE has increased 30% while the S&P 500 has increased by 7.8%. SITE is recently outperforming the SP500. While the management has expanded the development team to increase acquisition activity, SITE should work on controlling acquisition costs, especially given that only two deals with added sales of $40M were made. The increase in SG&A was partly due to recent acquisitions, as over half of the increase in SG&A was from acquisitions. As a percentage of net sales, SG&A increased 620 basis points in Q1 to 34.8%. The company's SG&A expenses increased to a record high, suggesting a lack of cost control. SITE's profitability was affected by its high SG&A expenses, despite an improvement in gross margins. These acquisitions further bolster SITE's position in these markets and position the company for continued growth. SITE then proceeded to acquire J&J Materials and Triangle Landscape Supplies this quarter, two leading regional players in landscape supplies and hardscapes in Rhode Island, Southeastern Massachusetts, and Raleigh, NC. In the last quarter, SITE announced its intention to add nursery hardscapes and landscape supplies businesses to its offerings. SITE's ability to maintain its gross margins at current levels bodes well for its future returns, particularly since the company's strategy is to acquire top-performing local retailers to enhance its geographic portfolio. The chart below shows that SITE has consistently improved its gross margins and has surpassed its competitors Lowe's ( LOW) and Home Depot ( HD) after the pandemic. For a retail business, having a gross margin above 30% is very commendable. SITE's management expects a higher-than-anticipated gross margin for the whole year of 2023. Additionally, SITE reduced its costs by improving its efficiency and taking advantage of lower fuel prices. However, SITE benefited from higher gross margins in its acquired businesses of hardscapes and landscape supplies. SITE did not increase its prices this quarter, unlike the previous year. One of the positive results of 2023 Q1 was the impressive growth of the gross margin, which rose by 0.9 percentage points to reach 34.3%. Gross margins continue to perform through acquisitions Whether it's a pause or a longer cycle, we don't know. One of the things we want to keep in mind, though, is we're heading into a down cycle potentially. Additionally, SITE is facing an expected decline in organic sales as mentioned in the last call, stating These conditions had a considerable negative impact on SITE's volume. SITE faced challenges with significant volume declines in western markets due to record rainfall and in northern markets where spring arrived later in 2022. Unfortunately, organic daily sales have actually declined by 2%, which is a tough comparison to the 32% organic sales growth in Q1 2021. In Q1 2023, SITE's net sales growth has slowed with only a 4% increase, and the added revenue is solely from acquisitions with a 7% net sales growth. In my view, SITE is a reliable and sustainable business that continues to execute on its plans well. Despite missing earnings, the market responded positively to SITE's financial performance, resulting in a 6% increase in stock price after the earnings release. SITE recently announced its financial results on May 3rd, with an EPS of -$0.10 which missed the expected earnings by $0.14, but its revenue of $837.4 million beat estimates by $47.6 million. They offer various durable products such as hardscapes, nurseries, and irrigation equipment. ( NYSE: SITE) is a top wholesale distributor of landscaping supplies in the United States and Canada.
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