We wrote about FPH yesterday (results day), see our note here. As a good quality secular growth stock, we are interested.


The numbers were good enough. It is a COVID beneficiary returning to trend as Omicron fades, and hence cycling impossible comps. That’s all fine. The stock is off a lot, and so seeing revenues returning to trend might make you feel like any potential overhang is being removed/reduced.

The issue, perhaps, is inventory. It is chock-a-block.


It makes sense to normalise for sales, and when you do so, you can see it is still full-to-bursting.


It’s not dissimilar to what you see for Target, Walmart, and co. They had inventory builds of ~40% on average, having anticipated the shift from goods demand back to services, but not the speed or magnitude with which it would happen. And so, they are carrying way too much stock.

And, with those, as with FPH, we expect to see some significant price discounting to move all that stock, which doesn’t bode well for future earnings.

The difficulty is knowing whether the market would give it a pass for such a thing. ANN, another high-quality company, most certainly didn’t get a pass on its inventory glut.

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