While rising consumer interest in remodeling and renovation activities enabled home improvement companies to profit significantly amid the pandemic-led remote lifestyles, soaring inflation and declining home sales due to increasing mortgage rates have been affecting the industry lately.
Although pending home sales rose slightly in May, rising prices and higher mortgage rates are crimping the enthusiasm of buyers. Nonetheless, growing interest in DIY décor trends should help home improvement companies to stay afloat. The global do-it-yourself (DIY) home improvement retailing market is expected to grow at a 4.4% CAGR to $1.28 trillion by 2030.
However, because of the weak fundamentals of home improvement stocks Leslie's, Inc. (LESL), Stanley Black & Decker, Inc. (SWK), and The Lovesac Company (LOVE), our proprietary POWR Ratings system has recently downgraded them to Sell.
Leslie's, Inc. (LESL)
LESL markets and sells pool and spa supplies and related products and services directly to customers in the United States. The company also provides pool maintenance products, parts, and safety, recreational, and fitness-related products.
It serves residential, professional, and commercial consumers. It markets its products through 952 company-operated locations in 38 states and e-commerce websites.
LESL’s operating loss came in at $3.99 million for the fiscal 2022 first quarter ended April 2, 2022, compared to a loss of $1.31 million in the prior-year period. The company’s adjusted net loss came in at $2.74 million for the quarter, indicating a 1.6% year-over-year decline.
Its adjusted loss per share remains unchanged at $0.01. LESL had $51.97 million in cash and cash equivalents as of April 2, 2022, indicating a 41.4% decline from the end of fiscal 2021. It has lost 31.4% year-to-date to close yesterday’s trading session at $16.23.
LESL’s weak prospects are reflected in its POWR Ratings. Last week, the stock was downgraded from an overall C rating (Neutral) to an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Currently, it has a D grade for Value, Momentum, and Stability. To see additional POWR Ratings for LESL’s Growth, Sentiment, and Quality, click here.
Of the 63 stocks in the C-rated Home Improvement & Goods industry, LESL is ranked #51.
Stanley Black & Decker, Inc. (SWK)
SWK is a global provider of power and hand tools, related accessories, mechanical access solutions (MAS), electronic security, and monitoring systems for various industrial and commercial applications. It also sells automatic doors to commercial customers.
On April 22, 2022, SWK signed a definitive agreement to sell its automatic doors business, Access Technologies, to Allegion plc (ALLE), an American Irish-domiciled provider of security products for homes and businesses for $900 million in cash.
This will help SWK to focus on its Tools & Outdoor and Industrial segments and capitalize on compelling opportunities for multi-year growth and margin expansion.
SWK’s non-GAAP operating profit for its fiscal 2022 first quarter ended March 31, 2022, came in at $512.80 million for the quarter, down 25.5% from the prior-year period. While its non-GAAP net income decreased 25.9% year-over-year to $347.40 million, its non-GAAP EPS decreased 26.3% to $2.10. As of April 2, 2022, the company had $165.80 million in cash and cash equivalents.
Analysts expect the company’s EPS to decline 12.2% year-over-year to $9.83 in its fiscal 2022 ending December 31, 2022. The stock has lost 41.1% year-to-date to close yesterday’s trading session at $110.31.
SWK’s POWR Ratings reflect this bleak outlook. The stock was downgraded to an overall D rating last week, equating to a Sell in our proprietary rating system.
SWK has a D grade for Growth and Sentiment and a C for Stability, Momentum, and Quality. Click here to see the additional ratings for SWK’s Value.
The stock is ranked #50 in the Home Improvement & Goods industry.
The Lovesac Company (LOVE)
LOVE designs, manufactures, and sells furniture like sectionals and accessories comprising drink holders, footsac blankets, decorative pillows, fitted seat tables, and ottomans through its 146 showrooms. The company markets its products primarily through the lovesac.com website, as well as showrooms, in-store pop-up shops, and shop-in-shops.
For its fiscal 2023 first quarter ended May 1, 2022, LOVE’s net loss declined 8.1% year-over-year to $1.90 million. The company’s loss per share came in at $0.12, down 7.7% from the prior-year period. It had $64.38 million in cash and cash equivalents as of May 1, 2022, representing a 30.3% decline from the end of fiscal 2022. The stock has lost 49.7% to close yesterday’s trading session at $110.
LOVE’s weak fundamentals are reflected in its POWR Ratings. Last week, the stock was downgraded to an overall D rating, which equates to a Sell in our proprietary rating system.
The stock has an F grade for Stability, a D for Value, and a C for Growth, Momentum, and Sentiment. Click here to see more of LOVE’s component grades.
LOVE is ranked #49 in the Home Improvement & Goods industry.
LESL shares were trading at $16.19 per share on Monday afternoon, down $0.04 (-0.25%). Year-to-date, LESL has declined -31.57%, versus a -17.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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