TRS is a turnaround, which means for a cluey investor, there is a lot of money to be made if you can see through the noise. Last year their choice of inventory wasn't what shoppers wanted, TRS recognised this and made both changes to their management team (around inventory selection) and also they changed their inventory selection. To make these changes costs money, but they are necessary, so they cancelled the 2H17 dividend, which is what a well-managed company should do in most cases given the situation, rather than raising equity or borrowing money to pay the dividend.
Margins are small, because they are a discount retailer. Amazons margins are small too, but there is plenty of growth in both situations. TRS management have forecast margin expansion over the coming years, so a small increase in profit margin with TRS will make a big difference in profits. Margin expansion should be possible.
Talking of performance in a recession, in 2008 and 2009 during the Global Financial Crisis, TRS had a return on capital (ROC) of 43% & 47% respectively. So yes, they do exceedingly well in a downturn, particularly when people feel like they need to save a buck.
To give you an idea on the investment opportunity here, if TRS hits the lower end of their earnings guidance, it will be 32% increase in EPS Y/Y, on a price-earnings ratio of 10.79 (at todays SP). If they hit their upper end of profit guidance, the picture looks even better, and if they exceed that by 10%, still possible without an earnings upgrade then the picture is more than awesome.
I don't expect the profit growth to be a once off either, due to management targetting margin expansion through cost reduction and strengthened purchasing. Sales should grow too, last year when TRS messed up their inventory selection, their sales were flat. Fixing the inventory should see sales return to growth this year. Double whammy, reduced costs and increased revenue, money to extend leases and to put in shareholders pockets. The future looks bright for TRS.
lol, I'll buy your holding if you're are keen to sell on Monday!
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