Consumer Discretionary

Report by Quo Vadis Capital

John Zolidis continues to favour discount retailers for Q2, as persistent inflation from tariffs and high gas prices is expected to outweigh any stimulus tailwinds. Within the space, he highlights Five Below as the best unit growth story in retail, while Dollar Tree offers upside from a successful multi-price transition. Dollar General is improving execution, recovering margin and driving traffic with a lot of room to go relative to previous results. Savers Value Village stands out as a mispriced growth story at <7x EBITDA. Beyond discount, Sprouts Farmers Market should see comps recover on affordability, while National Vision remains an early-stage transformation story. Rounding out the basket are Boot Barn, supported by favourable Western wear trends, and Academy Sports, a cheap, heavily shorted name with comps turning positive.

Consumer Discretionary

Report by Quo Vadis Capital

$1bn retailer of non-discretionary product trading at lowest-ever price and multiple. John Zolidis sees comps improving as 1) replacement cycle revs up, 2) remote medicine initiative adds capacity and 3) maturation from recent store openings. Based on his estimates, investors are getting the unit growth for free. Assuming modest comp recovery and MSD EBIT (consistent with low end of guidance) an 8x EV/EBITDA results in a ~40% return vs. 14% downside over the next 12 months. Over 3 years, John estimates a ~90% return. However, if the multiple even modestly re-rates (e.g. to 10x vs. historical average of 16x) a 3-year return could be >140%.

Consumer Discretionary

Report by Two Rivers Analytics

New short idea generated from Eric Fernandez’s ‘Declining Business Model’ - key takeaways from his 25-page report include: 1) Sales have fallen for four quarters. 2) Gross and EBITDA margins have contracted to pre-pandemic levels and Eric expects margin problems to intensify. 3) Remote optometry and automated vision checking are devaluing EYE’s optometry services. 4) The company is plagued by customer complaints. 5) Management’s acquisition and expansion strategies are constrained by debt levels. 6) Multiples are historically high and ignore deteriorating fundamentals.

Consumer Discretionary

Report by Quo Vadis Capital

Opportunity to buy a hardline growth retailer with perhaps the best combination of unit growth, unit level ROIC and economically defensive model in the market - John Zolidis believes the Street is underappreciating the company's ability to benefit from trade-down, the stickiness of higher ticket (which has a margin benefit), as well as conservative guidance (EYE has beaten analyst estimates for 10 consecutive quarters). He also sees some optionality for remote testing to structurally reduce operating costs. 60% upside.