BC Business
Kits Eyecare stock, which has beaten analysts' earnings estimates over four consecutive quarters, popped 10 percent Monday after announcing sales of approximately $30 million for the second quarter and an improvement in its balance sheet.
Kits Eyecare stock has delivered over the past year
The stock: Don’t you wish sometimes you could start your life’s work over, only make smarter decisions knowing what you know now? Vancouver entrepreneur Roger Hardy is living that dream. Nine years after he sold his contact lens and glasses e-commerce startup Clearly to Essilor International for $430 million, and following an ill-fated foray into online shoe sales, Hardy’s post-non-compete venture Kits Eyecare (TSX:KITS) is finally getting looks. The stock, which has beaten analysts’ earnings estimates over four consecutive quarters, popped 10 percent Monday after announcing sales of approximately $30 million for the second quarter and an improvement in its balance sheet. It rose another 2 percent Tuesday (July 18) to $5.35.
The drivers: Of course, the online eyewear niche is more mature and competitive than the last time Hardy kicked this particular can. Still out there is Clearly, now part of the merged multinational EssilorLuxottica, not to mention Warby Parker, Walmart, Costco and many more. And investors these days are less inclined than a decade ago to forego profits in the name of grabbing market share.
But for the past year at least, Kits Eyecare has delivered. The net loss had shrunk to $1 million by the first quarter of this year, gross margins are holding at around 33 percent and the company’s largely automated Optical Lab in East Vancouver can handle up to double today’s output without further capital expenditure. Importantly, about 60 percent of orders are coming from repeat customers.
The company defines its market as North American but is cagey about how much of its business comes from the U.S. versus Canada. Having domestic partnerships with the likes of insurer Greenshield Canada, that balance is likely still tipped towards the smaller Canuck market. But even that would allow for ample growth ahead—and likely soon profitability—for this micro-cap.
Word on the street: Roth MKM‘s Matthew Koranda, to date the least bullish of the three analysts covering KITS, raised his target by 50 cents to $7 on the latest news, with a “buy” rating. The consensus target is $7.33.
Coming and going: Another Vancouver-based consumer discretionary stock, Aritzia (TSX:ATZ) surprised investors in the opposite way on July 11, revising its revenue growth guidance for the year to between 2 percent and 7 percent (compared to a previous forecast of 10-14 percent) in a sign of inflation-driven consumer fatigue. The stock fell 24 percent on the day and has since recovered only 4 percent.