Today’s Research Reports on Stocks to Watch: Cedar Fair and At Home

A slow start to the summer had Cedar Fair traders concerned in Wednesday’s trading session, which pushed the stock down almost 8%. Shares of Home Group also fell as President Trump proposal for tariffs on $200 billion worth of Chinese-made goods could lead to rising costs for home retailers.

RDI Initiates Coverage on:

Cedar Fair, L.P.

At Home Group Inc.

Cedar Fair, L.P. shares closed down almost 8% on a little over 1 million shares traded yesterday. The fall came after the theme-park operator reported a slower-than-expected start to the key summer season. Cedar Fair reported that revenue from the start of the year through July 8th, fell 2% to about $563 million, as guest visits slipped 3%. This looked worrisome for Wall Street to digest because this is the period that represents about 40% of the company’s total operating days for 2018. President and CEO Richard Zimmerman said, "We came into this year with a clear focus on enhancing the guest experience and a business plan designed to drive additional attendance, especially in the second half of the year which includes the peak vacation months of July and August and the expansion of our WinterFest events in November and December. Although early-season attendance at our seasonal parks through this past weekend has not met our expectations, we are encouraged by the positive guest response to our new rides and attractions, in particular our new coasters Steel Vengeance at Cedar Point and Hang Time at Knott’s Berry Farm. We are also pleased with the growth of in-park guest spending where we are seeing year-over-year increases in food, merchandise and extra charge attractions."

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At Home Group Inc. shares closed down about 6% on Wednesday with roughly 3.7 million shares traded. The stock saw losses as Wall Street continued to worry over the China trade wars. President Trump is reportedly preparing to put a 10% tariff on over $200 billion worth of Chinese-made goods. This means home good retailers could see rising inventory costs as many get their merchandise from China. At Home Group said in a recent 10-K filing that "approximately 60% of our merchandise was purchased from vendors in foreign countries such as China, Hong Kong, Belgium, Taiwan, India and Vietnam during fiscal year 2018." Goldman Sachs analyst, Matthew Fassler, said, "The biggest negative surprise for our covered consumer sectors vs. our economists’ prior expectations relates to furniture." He wrote, "Note that China supplies 65% of furniture imported into the US. We believe that RH (RH), Williams-Sonoma (WSM), and At Home Group (HOME), are all levered to this outcome, as is Wayfair (W) to some degree. RH, for example, indicated in recent filings that 77% of its dollar volume is imported from Asia, with China constituting the majority of these imports. For a retailer generating 40% of COGS from China, a 10% tariff, in the absence of substitution, would reduce gross margin by 240 bps. Of course, full pass through of tariffs into prices would yield stable margins and higher profits, with the breakeven point in this scenario coming with a price increase of about 6% (which would keep GP $s level, albeit at lower margin levels)."

Access RDI’s At Home Group Inc. Research Report at:

Our Actionable Research on Cedar Fair, L.P. (NYSE: FUN) and At Home Group Inc. (NYSE: HOME) can be downloaded free of charge at Research Driven Investing.

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