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PAA Research’s Fourth Quarter 2023 Lighting Agent Survey - How long can AYI sustain record gross margins with pricing...

January 8th, 2024

PAA Research surveys lighting agents across the country on a semi-annual basis.  The latest survey was conducted in the first two weeks of December.  17 lighting agents responded to our...

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TREX: Always Consider the Source -Trust this Management Team at Your Own Peril

October 31st, 2023

“I am feeling more positive about the Trex consumer today than I was feeling a year ago” Bryan Fairbanks, President and CEO. Trex Company, Inc. 10/30/23. 3Q23 Earnings Conf. Call Imagine having the unmitigated gall to...

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AYI: Riding Three Unsustainable Trends; The Threat of Mean Reversion (or Worse) in Gross Margins Looms Large

October 5th, 2023

Heading into 2023, we thought the broader industrial complex would be fertile ground for short ideas, particular those companies that generated meaningful revenue, earnings, and cash flow growth through...

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HUSQ.B: Gross Margin Pressure Incoming as Inventory Builds

April 19th, 2023

PAA Research’s April 2023 outdoor power equipment dealer survey

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TREX: Amidst a Rising Tide of Alarming Questions, the Only Certainty Is That Estimates Are Going Lower

February 28th, 2023

I'm pleased to report that, as anticipated, the inventory recalibration was completed by year-end.  With good participation in the early buy season, we entered the year an upcoming season with inventory...

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AYI: Customer Incentives Are Growing Rapidly, Price Reductions Could Come Next

January 9th, 2023

Is anyone else tired of hearing the phrase “product vitality” from this management team?  There were 10 references to “product vitality” during AYI’s 1Q23 earnings conference call, which means if you were...

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AYI: PAA Research's 4Q22 Lighting Agent Survey - Here Comes the Slowdown

December 15th, 2022

Attached is a report outlining feedback from lighting agents across the United States. It appears the lighting industry is headed towards a significant slowdown and the pricing gains that have driven growth for the past 18-24 months are fading...

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TREX: Arrogance Is Fatal; Negative Estimate Revisions and Balance Sheet Questions Only Grow More Frequent from Here

November 1st, 2022

“You think you’re better than me?!!” Now former TREX employee to Bryan Fairbanks, President and CEO. Trex Company, Inc. (Probably) Imagine you worked for TREX at their...

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UFPI: Just a Question of Timing

October 21st, 2022

Heading into UFPI’s 3Q22 earnings release, we thought the company’s quarterly results would show some early cracks and indicators of significant pricing pressure, volume deceleration, and gross margin compression to come.

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HUSQ.B: Falling Demand and Rising Costs; Lowering Price Objective to $50

September 16th, 2022

Attached please find a report which outlines the findings from our latest survey of outdoor power equipment dealers. We are reducing our estimates for FY23 and FY24.  We have lowered our price objective for HUSQ.B to $50, which is based on a...

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UFPI: When Every Trend Is Going Against You It’s Time to Sell; Setting Price Objective of $45

September 1st, 2022

“We believe UFPI is a great long-term investment. I don't want you to wake up 1 day and say, "I wish that Matt had told me more about that UFPI opportunity." Regret can be tough. So I'm telling you...

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TREX: An Earnings Release and Outlook Hemmingway Would Love, Lowering Price Objective to $18

August 9th, 2022

“By all measures, Trex performed exceedingly well in the second quarter.” Bryan Fairbanks, President and CEO. Trex Company, Inc. 8/8/22. 2Q22 Earnings Conf. Call If you have a “Wall of Fame”...

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TREX: An "Econ 101" Driven Cat 5 Storm of Earnings Destruction Could Be Forming

June 24th, 2022

The attached report details our short thesis on TREX and outlines the feedback we received from our latest survey of decking products dealers.

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TREX: How Quickly Can the Channel Go From “Well Stocked” to “Stuffed”?

May 10th, 2022

TREX shares have declined nearly (-60%) thus far this year largely due to a widespread rerating of growth stocks following a near unprecedented increase in interest rates.  Remarkably, even after the enormous decline in TREX shares over...

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HUSQ.B: No Domo Arigoto Mr. Roboto

April 12th, 2022

We introduced HUSQ.B as a short idea a few weeks ago based on our expectation that the outdoor powere equipment industry has experienced significant demand pull forward, the transition to battery powered products could dilute the company's marigns meaningfully, and demand for...

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TREX: The Negative Estimate Revision Cycle Begins, In the Face of Unprecedented Capacity Expansion It Won’t End...

March 1st, 2022

“Fortunately, about half of the additional planned capacity has come online this month, with the balance expected by the end of January -- or excuse me, the end of April 2022. Our continuous...

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HUSQ.B: Time to Cut It Down

February 23rd, 2022

“This shift in relative power from manufacturer to retailer has greatly increased the relative importance of price. This increased the importance of being a low-cost producer and added urgency to our need to achieve our cost goals.” Fred Stratton. Former CEO of Briggs and...

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AYI: The Topping Process Starts with Growth Quality Issues

January 7th, 2022

We imagine that many AYI bulls are highly disappointed with the stock price action in response to what appeared to be on the surface a “blowout” quarter for the company.  However, upon further review, perhaps the quarter wasn’t as strong...

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AYI: Downplaying Price Increases When You’re a Supply Chain Disruption Winner

October 6th, 2021

“So some of the backlog will have different impacts of the price increase. So we had our first price increase announced in March, which was impacting late in the fourth quarter, very, very little, and we saw some of that realization...

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AYI: Lighting Agent Survey - How Long Can Pricing Hold Up?

October 5th, 2021

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TREX: What is “Normal”? Coming to Grips with Reality at Trex

August 3rd, 2021

“Normal is the wrong name often used for average” Henry S. Haskins On TREX’s 2Q21 earnings conference call there were TWELVE references to “normal”, “normalization”, or “normalized”. ...

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AYI: When Mix Shift Is Your Gross Margin Expansion Story

April 1st, 2021

“Given our current gross profit margin improvement, we think that we can achieve the gross profit of above 42% for the balance of the fiscal year.” Karen Holcom, Senior VP and CFO, Acuity Brands, Inc. 3/31/21. 2Q21 Earnings Conf. Call For...

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TREX: Wood Pulp and Polyethylene Boards Don’t Grow to the Sky

February 23rd, 2021

TREX has an $11B+ market cap.  In a market full of excess, this singular data point has us shaking our heads day after day.  After all TREX manufactures composite decking from wood pulp and recycled plastic.  Based on the deluge of...

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TREX: The Four Things That Matter Now That the Setup for Shorts Has Improved Dramatically

November 3rd, 2020

There are better companies whose stocks have been absolutely destroyed over the past few weeks for posting the type of upside that TREX delivered in the third quarter.  Yes, the company generated strong sales growth and...

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TREX: The Unsustainable Trend? TREX Is Starting to Lose Market Share Just as the Industry Ramps Capacity Meaningfully

August 4th, 2020

The strength in sales of products related to the “home” since early March truly has been something to behold. This is particularly true of items that can be used outdoors or can improve the...

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TREX: And Now We Wait

May 5th, 2020

We’re going to keep it fairly short in this note.  Heading into the quarter, the magnitude of bullish sentiment surrounding TREX was simply baffling. Many analysts and investors appeared to be CONVINCED that strong feedback about decking related sales at Home Depot and Lowe’s...

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TREX: The Hard Realities for Composite Decking Manufacturers in a Post Covid-19 World

April 21st, 2020

Attached please find a report which outlines the feedback from a survey of decking dealers that we conducted over the first two weeks of April.

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AYI: What’s the Cost of a Digital Transformation? For Shareholders, It Could Be a Lot; Our Revised Estimates

April 3rd, 2020

               “The recent revenue trends, however, will not fix themselves. There has been industry deflation. We have additional...

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AYI: A perfect storm of demand destruction and continued competition from Asian imports has emerged; Lowering AYI Price...

March 27th, 2020

This note represents the first of what will be a series of reports that we will publish in the coming weeks backed by surveys across a variety of industries.   While there are many...

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TREX: The CEO Exits Stage Right at the Worst Possible Time; More Atrocious Earnings Quality from TREX

February 25th, 2020

“We estimate that composites account for 19% of the North American total decking market and that the enhanced products have further expanded our addressable market to about 60% of the overall decking market...

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Current Ideas

EXPI

SELL/SHORT

$4

HUSQ.B

SELL

$50

UFPI

SELL/SHORT

$45

TREX

SHORT

$18

PRDO

SELL/SHORT

$5

STRA

SELL/SHORT

$42

CWH

LONG

$75

OSTK

LONG

$128

CM

SELL/SHORT

$50

RY

SELL/SHORT

$50

ARC

LONG

$5.50

AYI

SHORT

$50

BIG

SHORT

$28

WWE

LONG

$65

XOXO

LONG

$37

RLGY

PAIR TRADE

$10

RDFN

PAIR TRADE

$30

BCO

LONG

$35

ING.PA

SHORT

$35

TRUP

SELL/SHORT

$10

CTC

SHORT

$101

ATGE

SHORT

$15

HCG.TO

SHORT

$0

RON.TO

SHORT

$9

ESI

SHORT

$0

BGG

PAIR - LONG BGG/SHORT TTC

25%

TTC

PAIR - LONG BGG/SHORT TTC

25%

Z

SHORT

$14.00

NA.TO

SHORT

$22

ZU

SHORT

$15

TRLA

SHORT

$20

MCRS

SHORT

$31

APOL

SHORT

$35

OPEN

SHORT

$30

KNL

PAIR - LONG KNL/SHORT MLHR

25%

CSGP

SHORT

$100

GCA

LONG

$8

IPSU

LONG

$20

MLHR

SHORT

$22

LOOP

PAIR - LONG CSGP/SHORT LOOP

40%

THQI

LONG

$35

WPO

SHORT

$275

COCO

SHORT

$0

HNI

SIG

RGR