Dueling Fools
Fruit of the Doomed
The Bull Rebuttal
By
Boxers or briefs? That's what some would boil Fruit of the Loom's prospects down to nowadays. Either the company gets punched around by its recently sluggish operations or -- alas -- it files legal briefs en route to bankruptcy.
Fruit casket? Man, how myopic. Fruit of the Loom has been around since 1856. Does anyone, Paul included, think that after 143 years the company is down to its final days?
Change is coming. You can bet on that. But the company has been a metamorphosing success story. From the rise and fall of Underoos (and I'm man enough to admit I wore them as a toddler) to finicky new markets like Gitano denim and Pro Player sporting merchandise, Fruit has managed to change while always landing on its feet. Paul points out the 1997 highs but doesn't mention that those good times came on the heels of the company selling off its hosiery division the year before. Change has been good to Fruit, and whatever plan the company drums up to see it through has history smiling favorably in its corner.
My buddy Paul seems spooked by obsolete boilerplates. Notice how he cites credit rating fears that the company won't make third-quarter payments while Fruit has since gone on to calm the immediate fears of its creditors.
But you might also have noticed that Paul and I hit on many of the same sour notes. Let's face it: Fruit has soiled itself. Yet will the brand be strong enough to bleach the company clean again? I think so. Paul never did bash the labels did he? He knows that if he and I were to march through Fool HQ on a wedgie brigade we'd be pulling up plenty of Fruit.
So Paul takes shots at what, Fruit's balance sheet? As bad as things might seem, let's take a look at that balance sheet. Current assets still outweigh current liabilities a few times over and total assets are still higher than total liabilities. Is the company leveraged? Sure. Does that bite both ways? Sure. Take a look at how the company has performed, debt load and all, in 1996 and 1998 to see the upside. And, gee, another even year is coming up. How odd.
Like kicking a soccer ball into your own net in gym class, P/E should never hit this low. The opportunities should never be this obvious. Reap the harvest. Check out the low-lying Fruit.
Next: The Bear Responds