Profit results confirm these 3 companies have rebounded from last year’s losses
The pandemic has been more difficult for some companies than for others. Physical businesses have been among the hardest hit as the world tries to slow the spread of the coronavirus through physical distancing. Three of those businesses that suffered a negative impact were Texas roadhouse (NASDAQ: TXRH), Five below (NASDAQ: FIVE), and Planet Fitness (NYSE: PLNT).
Texas Roadhouse and Planet Fitness have already released results for the first quarter of 2021, which showed strong recoveries for their business. Five below has yet to report on the first quarter, but its latest update shows that its recovery is also well advanced.
1. Texas Roadhouse: Pushing the Limits of the Dining Room
Casual dining company Texas Roadhouse delivered unprecedented sales for the first quarter, which is a remarkable recovery considering how difficult 2020 has been. Annual revenue decreased 13% from 2019 and was comparable to the company’s in 2017. However, as its expenses are now higher by operating more sites (among others), its net profit has been much more affected in 2020. Its earnings per share fell to just $ 0.45 – its lowest earnings per share since 2005.
While Texas Roadhouse shareholders were cautiously optimistic for 2021, their hopes were dashed in February when management revealed comparable restaurant sales fell 18.2% in December after a brief rally in October. This seemed to indicate that casual restaurant stocks were still far from a recovery. However, the company’s first quarter revenue recovered strongly, increasing 22% from the same period last year.
Don’t think that this is just an easy year-to-year comparison. Texas Roadhouse’s revenue also grew nearly 16% from the first quarter of 2019. And indeed, its quarterly revenue of over $ 800 million was a record for the company.
Here’s why a quarterly record is staggering: Texas Roadhouse is still operating with extreme disadvantage. Over 500 locations still have seating restrictions. And in April, less than 19% of sales were takeout. As a result, the chain is reaching record numbers, mainly thanks to restaurant traffic, despite an ongoing limited capacity. For this reason, I think it’s safe to say that Texas Roadhouse is back and better than ever.
2. Five below: The happiest holiday season ever
Like Texas Roadhouse, discount retailer Five Below is also enjoying some historic numbers right now. It was hard to imagine at the start of 2020. For the first quarter of 2020 (which ended May 2, 2020), sales of Five Below fell 45% year over year. Many sites have been shut down by the pandemic (it is not an essential retailer), and the company’s e-commerce operations have historically been very small.
However, for fiscal 2020 (which ended Jan. 30, 2021), Five Below’s net sales actually increased 6.2% from 2019. Fourth-quarter sales did most of the work. for the year. For the quarter, sales grew nearly 25% year-over-year to $ 859 million, thanks to comp growth of 13.8%. Granted, the fourth quarter of 2019 was a bummer, so it was an easy comparison. But comps growth of 13.8% was Five Below’s highest for a fourth quarter in its history.
The company continues to expand its number of stores, a critical part of an investment thesis for this retail stock. Despite a difficult operating environment in 2020, management has not abandoned its expansion plans, opening 120 net stores during the year. For 2021, its expansion plans continue with the opening of a new distribution center this summer. This distribution center will support the growth of new stores in the western United States, with the company entering states such as Utah and New Mexico for the first time this year. In total, it plans to open 170 to 180 new sites in 2021, supporting its goal of growing from 1,050 sites today to more than 2,500 in the long term.
Five Below is expected to release its first quarter of fiscal 2021 results in early June.
3. Planet Fitness: what is the tendency to exercise at home?
Traditional gym company Planet Fitness was at a disadvantage throughout 2020. Gyms were closed for part of the year, and once they started reopening, it still wasn’t a great experience. After all, I don’t think people are eager to get in shape by wearing a face mask and waiting for the equipment to be sanitized. This reality has given rise to a strong trend in home exercise, which has benefited many manufacturers of home exercise equipment.
To understand how difficult 2020 has been, know that Planet Fitness ended the first quarter of 2020 with a record 15.5 million members at 2,039 locations around the world. The company ended 2020 with just 13.5 million members, cutting 2 million memberships in just three quarters. With membership declining, annual revenues fell 41% year-over-year to $ 407 million, while its net income fell from $ 135 million in 2019 to a net loss of $ 15 million. dollars in 2020.
However, Planet Fitness is back on a growth trajectory, regaining 600,000 members in the first quarter of 2021. This proves that people are eagerly returning to the gym, contradicting those who thought gyms were disrupted and replaced by players who exercise at home. In fact, there is probably room for fitness at home and in the gym.
To its credit, management continued to open new gyms in 2020, adding 130 new locations last year. This year, it expects between 75 and 100 more, taking advantage of vacant commercial real estate and struggling competitors. Therefore, with increasing membership and a growing base of gym locations, Planet Fitness appears to be a solid reopening investment in 2021.
Takeaway for investors
Of course, you shouldn’t buy shares of Texas Roadhouse, Five Below, or Planet Fitness just because they have bounced back from tough times. Rather, you need to look to the future and buy stocks in companies that are poised to prosper over the long term. And in my opinion, these three companies are indeed good companies in the long run. Recent results show they have rebounded and I expect current trends to continue in the quarters and years to come.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.