TQ Morning Briefing
La-Z-Boy got customs refunds last quarter and a tariff benefit on top of them. It still landed under the bottom of its own sales and margin guidance. What sank it was the furniture its dealers did not take.
US futures are close to flat. The Nasdaq is the only one lower by much.
The Nikkei fell hard overnight as memory and chip equipment names were sold again.
The thirty year Treasury yield went higher again on Tuesday, to its highest since 2007. Both it and the ten year Treasury yield eased back overnight.
The dollar is a little softer. The yen is doing most of that work.
Crude is firmer again this morning. Gold and bitcoin are both lower.
The S&P 500 closed lower again on Tuesday. The volatility index gained on a tape that barely moved.
Market Implication
The selling of the last few sessions came out of the bond market. Today the argument moves indoors, onto a shop floor. The yield curve has nothing to say about what actually leaves a warehouse.
There's a Strategy Behind the Iran War.
I know because I've seen the evidence firsthand.
On March 2nd — three days after the first missiles hit — I sat across from two U.S. Congressmen in back-to-back private meetings.
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This isn't random. It's a calculated Two-Front Economic War.
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The sooner you understand what's really happening — the better positioned you'll be before August 12th.
— Dylan Jovine, Founder, Behind the Markets
The Tariff Was The Tailwind
La-Z-Boy (LZB) builds most of its furniture in the United States. It calls its supply chain "primarily U.S. based" and says that caps its tariff exposure.
It reported last night. Sales came in under the low end of its own guidance. Adjusted operating margin came in under the low end too.
Now read what the company says about that margin. In its wholesale business the tariff line helped. Customs refunds were part of it, and so was pricing net of duty cost.
So the cost everyone has spent a year watching went the right way. The quarter still missed.
What the company blames is duller and worse. It shipped less, and the fixed costs stayed where they were.
La-Z-Boy's own stores delivered more than a year ago. Same-store written orders at those stores rose.
Its wholesale arm, which ships to independent dealers, shrank. That holds even after stripping out a business it sold.
The shopper kept ordering. The dealer stopped taking delivery.
Those dealers carry the furniture into autumn. They are betting on what it will fetch.
La-Z-Boy is also buying them. Management counts dealer acquisitions as one of three pillars of retail growth.
One side of the business is shrinking. The other side is purchasing it.
Structural Setup
An order is a promise. A delivery is a number. Only one of them lands in a margin, and three retailers report theirs before the bell.
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More Homes Sold, Fewer Handed Over
Toll Brothers (TOL) reported after the close. It signed more contracts than a year ago, in houses as well as dollars. Fewer buyers walked away from the ones it already had.
Then look at what shipped. Deliveries fell. The gross margin on them fell further.
The builder sold more homes and handed over fewer.
It still handed over more than it signed. The backlog shrank again.
The tape sorted along a different seam. Energy, staples, health care and property all held up. Semiconductors carried the loss.
Every stock in the Philadelphia Semiconductor Index closed lower. Nothing in that group reported a thing.
A whole index moving one way with no company news is not a verdict on chips. It is a verdict on the price of money.
Sector Read
Watch the gap between what a company books and what it banks. An order book that improves while deliveries fall stops being a cushion. It becomes a schedule of work already sold at last quarter's price.
The Deadline Passed And Nothing Opened
The ceasefire between the United States and Iran ran sixty days. It expired at the start of this week. Trump says no talks are scheduled.
Iran then set its terms in public. The Strait of Hormuz stays closed until sanctions go and the blockade ends.
A projectile hit the engine room of a ship leaving the strait yesterday. The crew took a casualty.
Crude has risen in every session since the deadline lapsed.
The Energy Information Administration reports weekly fuel stocks at 10:30. Diesel sits in the distillate line.
Diesel is inside every delivered sofa, every contractor's truck and every box moving inland from a port.
Watch Signal
Freight is the cost nobody guides on out loud. The distillate line is where it shows up first. A draw this morning would mean diesel is tightening while the waterway stays closed. Any retailer guiding today on flat freight is guiding on a figure that already moved.
Porter Stansberry: This Could Be Bigger Than A Stock Crash or Financial Collapse
A brutal, invisible new force is about to rip America apart… and the resulting civil unrest, political chaos, and cries for radical change will be immense. Unlike any we’ve seen in living memory.
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The Buyer Of Other People's Mistakes
Off-price retail does not order a season ahead. It waits.
Much of what it sells was never imported by the company selling it. It came from the brand or retailer that called the season wrong.
So its cost of goods is made out of the rest of the industry's bad guesses. When everyone else calls it right, the pickings are thin and dear. When everyone else calls it wrong, the racks fill up cheap.
TJX (TJX) reports this morning.
There is a second edge in a tariff year. Goods bought that way are already inside the country. Whoever brought them in paid the duty months ago, at whatever the rate was then.
That part of the buy carries a tariff already sunk into another company's books.
The Read
Merchandise margin is the tell. Widening says the industry called the season wrong and the goods are getting cheap. Flat says the glut has not arrived yet, and last season's cost is still sitting on somebody's shelf.
Economic Data: MBA Mortgage Applications for the week to August 14, 7:00am ET. EIA Petroleum Status Report, 10:30am ET. Treasury 20-year bond auction, 1:00pm ET.
Fed Speakers: None scheduled. Minutes of the July 28-29 FOMC meeting, 2:00pm ET.
Earnings: Lowe's (LOW), Target (TGT), TJX Companies (TJX), Analog Devices (ADI), Estée Lauder (EL) before open | Nordson (NDSN), Wolfspeed (WOLF) after close. Toll Brothers and La-Z-Boy published results Tuesday after the close and hold their calls this morning.
Overnight: Nikkei 225 -3.1%, Shanghai Composite -2.4%, FTSE -0.01%, DAX -0.04%
Everything a retailer sells this morning is already in the building.
There is no backlog to draw on and nothing to defer.
One question settles the quarter. Did the goods move?
If they moved, the shortfall elsewhere is a delivery problem. It clears when the schedule clears.
If they sat, the order was never really there. That takes a markdown first and a lower guide after it.
Walmart (WMT) reports before the open tomorrow. It moves more goods to more Americans than anyone. The rest of the trade has to live inside whatever answer it gives.