earnings are out. Ho-hum is the story.

Indeed. I thought about buying some shares yesterday, hoping for some sign of a turnaround; Mr Market apparently thinks the results are ok, sending shares up a bit, but I don't see anything very encouraging.

Sales are fine, up about 5%, so people keep going there. But "same-store sales in the third quarter of 2024 included growth in the consumables category, partially offset by declines in each of the home, seasonal, and apparel categories." In other words, the kind of sales that are not very profitable went up and profitable sales kept going down, despite the strategy of using the consumables to draw people in to buy more noon-consumable, higher margin stuff.

As a result, operating income hit a new low: until last year, annual operating income was $3-3.5b, but last year, it was about $500m per quarter ($2.1b for the year); this q3 report shows it is now down again, another 25%, from $433m to $324m. Q3 is usually a weak quarter, but the drop from last year's Q3 is not good. They blame hurricanes for $33m of the drop, but that still leaves a $77m that is just lower margin sales and higher operating costs. As a result, operating margins continued to erode, down from 29.0% to 28.8%. Net income was $97m, which is awful. This is a company that was regularly making about $600m per quarter until last year.

Under the hypothesis that some of their problems might get fixed (messy stores, shrink, low-middle income shoppers preferring competitors, stores cannibalizing each other, shoppers going online, new tariffs, etc.), if they were to get halfway back to $600m a quarter, i.e say $350m a quarter, their current share price represents 13 times earnings. But most of their problems seem unsolvable to me - after all, they are still opening new stores, online is not going to go away, tariffs on their non-consumables are probably going to hurt them, low staffing is part of their business model so how are they going to clean up the stores and stop thieves?

I see no green shoorts, and I would not count on the share price reaction to this report holding up - if I had bought shares yesterday, I would probably be selling them today.

DTB