Harbor Freight Tools USA Inc.

Overview Key strengths Key risks Carries almost exclusively private-label brands with a broad, diversified assortment of tools Niche position in the highly competitive and fragmented tools and equipment retail industry Vertically integrated business model enables lower price offerings and contributes to gross margin benefits over larger peers Aggressive financial policy evidenced by mostly debt-financed dividend payments to shareholders Less cyclical because of lower dependency on housing starts than other traditional home improvement peers. Susceptible to cost inflation (i.e. freight rate, labor) and supply chain issues The company's sales expansion accelerated to 11.2% in the third quarter year-over-year supported by a recovery in same-store sales and the opening of 116 new stores in the last twelve months. The revenue increase was

...We expect Harbor Freight's revenue to resume its strong growth trajectory with new product offerings and continued store expansion although with weaker operating margins. The company's sales expansion accelerated to 11.2% in the third quarter year-over-year supported by a recovery in same-store sales and the opening of 116 new stores in the last twelve months. The revenue increase was based on a higher transaction volume, which increased 12.6% in the quarter, due to new customers and products and better in-stock position, partially offset by a decrease in average retail customer sale. In our view, the company will continue to take market share by pricing competitively and increasing customer loyalty. In addition, we expect the company's business model to show some resilience amid macroeconomic uncertainties due to the trade-down effect as consumers increasingly look for value. We project revenue growth trends to remain high in 2024 because we expect the company will maintain its new store...

Full Report