You may not be familiar with the company Lifetime Brands (LCUT), but you definitely know their products. And their products may be in for a major tailwind if interest rates ease in 2024, which appears inevitable at this point.
Lifetime Brands owns such iconic brands as Farberware, Pfaltzgraff, Kitchenaid and Instapot…I used mine this weekend in a snowstorm. The company outright owns 80% of its brands, and licenses the rights to another 20% of its products for private label. Lifetime ranks number 1 in the kitchen tools and gadgets segment as well as number 1 in the cutlery segment for U.S. households.
The company also possesses a who’s who of distribution channels. It sells its products through mass market retailers, off-price retailers, supermarkets, warehouse clubs, online…both through Amazon (AMZN) as well as direct to consumer…and through commercial locations like Starbucks (SBUX).
So why should Lifetime continue to move off the bottom it put in in 2023? Because of an uptick in housing and fresh capital in the economy related to owning a home.
Not only do lower rates help new home buyers, but lower rates also allow current owners to refinance, unlocking homeowner capital for such things as remodeled kitchens and additional bathrooms. And, all of those new homes and remodeled kitchens need new appliances and gadgets, like can openers.
As the anticipation of lower rates took hold in 2023, Lifetime Brands stock bottomed around $5. But, as actual rate cuts begin impacting mortgage rates this year, the stock could catch a second wind and vault back over the $10 level, where it was trading post pandemic.
In its latest quarterly report, which again has not seen rates turn yet, though the Fed has been on pause now for several months, the company reported “strong third quarter performance driven by the continued rebound of our core U.S. business and supported by our ongoing focus on actions to drive growth and profitability in a dynamic operating environment.” according to CEO Rob Kay.
Lifetime was also able to increase gross margins, which are now over 35%, and extend a term loan out several years to relieve any financial stress on the company. The company also raised guidance based on what it deemed an increasingly resilient and disciplined business model.
Commenting on future prospects, Kay stated, “As recovery in our core U.S. business accelerates and retailer purchasing behavior continues to normalize, we expect to see sustained positive trends in shipment and ordering activity.”
LCUT is riding in the wake of companies like Home Depot (HD) and Lowe’s (LOW) which have risen above 2023 highs in anticipation of a reigniting of the housing market.
Lifetime Brands has an overall 98.18% rating in our POWR Ratings. Its best component numbers are in the Sentiment category, not surprising, where it outpaces 99.59% of all the companies we track. It also has an excellent score in the Growth component, clocking in at a stellar 98.57%. Both categories align perfectly with the company’s story headed into 2024.
The entire housing sector, and its related parts should see a continued rebound in 2024 as rates ease. And, this should play into the stocks of most companies that sell into a healthy housing sector, or at least rely on housing for growth. Lifetime Brands has shown resilience in 2023 as rates were paused, and should see a nice growth curve as rates ease this year.
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LCUT shares were trading at $7.67 per share on Tuesday afternoon, down $0.46 (-5.66%). Year-to-date, LCUT has gained 14.31%, versus a -0.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Steven Adams
After earning a law degree cum laude with a focus on securities law, Steven worked as a Nasdaq market maker for a large broker dealer, and then as a trader for an arbitrage focused proprietary hedge fund. He subsequently worked as a consultant for a Fortune 500 consulting firm serving both government and commercial clients, including the NYSE, Prudential, FDIC, and NASA.
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