DJIA 8529.79 -72.86 (-0.85%) S&P 500 1084.49 -8.37 (-0.77%) Nasdaq 1771.41 -26.76 (-1.49%) Value Line ndx 831.93 -13.72 (-1.62%) 30-Year Bond 101 6/32 +3/32 5.42 %Yield
Lunchtime News | |
Related Items | |
|
FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
St. John Knits Snagged
Women's apparel maker and retailer St. John Knits <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJK)") else Response.Write("(NYSE: SJK)") end if %> was quartered this morning, losing $6 5/8 to $19 7/8 after announcing that sales at its Amen Wardy Home stores fell short of expectations in the third quarter. As a consequence, the company expects to report basically flat earnings of $0.43 per share for the quarter, compared with $0.42 last year. That's not really such a big deal, though, as analysts aren't expecting huge things in the near term from the retail division. Investors have been expecting nothing more than a breakeven year from Amen Wardy.
More worthy of concern was the company's comments on inventory at its full price boutiques -- inventories "...exceeded plan, thereby forcing the division to take markdowns and to transfer merchandise to the outlet warehouse to reduce excess inventory." The investment thesis on St. John Knits has been that it is immune to the vagaries of changing tastes in fashion. Like a Brooks Brothers suit, a St. John's dress can be worn five years after purchase without setting off alarms at fashion police headquarters. In addition to the evergreen nature of its fashions, the company's dresses are all of very high quality construction, increasing the product's utility. As a consequence, St. John has been able to raise prices at a steady clip, although the majority of its sales growth comes from unit growth.
That's why the excess inventory is bothersome to investors. It indicates that the company will take a hit on margins and also that unit growth is below trend. Nevertheless, the company's year-over-year sales growth for Q3 will still come in above the targeted 18-20% range. Despite the lack of growth in bottom line earnings, the company will likely report a return on invested capital performance above the majority of S&P 500 companies. The forward-looking spread between return on invested capital and the company's cost of capital is what investors are trying to discount now. With a compression of the company's enterprise value to invested capital ratio to 2.25 and its price/book ratio down to just about the same level, the valuation around $20 looks pretty interesting if St. John can keep its return on capital above its historical level of more than 25%.
Publishing software company Adobe Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADBE)") else Response.Write("(Nasdaq: ADBE)") end if %> picked up $1 7/8 to $26 7/16 after announcing it has told privately held rival Quark Inc. that it intends to stay independent. Yesterday Quark announced that it had proposed acquiring Adobe at an unspecified premium to its present market price.
Full-service seed company AgriBioTech <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABTX)") else Response.Write("(Nasdaq: ABTX)") end if %> regained ground this morning, rising $3/4 to $12 1/16, after issuing a statement attributing recent declines in its stock price to "lies placed on the Internet by short sellers, with no basis in fact." The company said it will not be restating earnings and that its registration statements were declared effective on Aug. 14 following a full SEC review. To listen to a replay of the conference call held by the company this morning, dial (800) 475-6701 (access code: 403509).
Telecommunications equipment maker Tellabs Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %> rose $1 1/16 to $59 1/16 after its board of directors met yesterday to discuss its proposed acquisition of Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> but adjourned without comment.
AC/DC power supplies manufacturer Power-One Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PWER)") else Response.Write("(Nasdaq: PWER)") end if %> powered up $7/16 to $8 1/16 after announcing it will acquire Swiss-based Melcher Group for $42 million in cash and $11 million in assumed debt. Combined sales for the two companies in 1997 would have been $135 million.
Telecommunications cable and wire manufacturer Superior TeleCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SUT)") else Response.Write("(NYSE: SUT)") end if %> rang up $1 3/8 to $36 1/8 after reporting fiscal Q1 EPS of $0.79, up 34% from $0.59 for the year-ago period and a nickel ahead of estimates. Revenues jumped almost 20% to $156.9 million. The company said, "Backlog, order input and other forward business indicators in our North American wire and cable business are strong."
Regions Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RGBK)") else Response.Write("(Nasdaq: RGBK)") end if %> moved up $2 3/8 to $39 1/4 after Standard & Poor's Financial Information Services said it added the company to the S&P 500 Index, replacing DSC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DIGI)") else Response.Write("(Nasdaq: DIGI)") end if %>, which is being acquired by Alcatel Alsthom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALA)") else Response.Write("(NYSE: ALA)") end if %>. Protective Life Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PL)") else Response.Write("(NYSE: PL)") end if %>, which gained $11/16 to $37 1/2, was moved from the S&P SmallCap 600 Index to replace Regions Financial in the S&P MidCap 400 Index. Meanwhile, Florida Rock Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRK)") else Response.Write("(NYSE: FRK)") end if %> took Protective Life's place in the S&P SmallCap 600 Index.
Semiconductor wafer fabrication equipment maker Applied Materials <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> dropped $1 3/4 to $29 11/16 after saying it will cut its workforce by 15% and trim executive salaries by 10% in an effort to cut costs amid the current downturn in the chip biz. The job cuts will result in an unspecified fiscal Q4 restructuring charge, which will result in a net loss for the period.
Asynchronous transfer mode (ATM) network switching products maker Fore Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FORE)") else Response.Write("(Nasdaq: FORE)") end if %> lost $4 3/16 to $20 1/16 after saying it will acquire privately held switching and routing products maker Berkeley Networks for about $250 million in stock and cash milestone payments. Fore said it will take a $1.80 to $2.20 per share charge in fiscal Q2 and will create a $0.05 per share reserve in connection with the deal.
Property and casualty insurer Allstate Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALL)") else Response.Write("(NYSE: ALL)") end if %> slid $1/2 to $41 7/16 as the North Carolina coast prepares for the arrival of Hurricane Bonnie, which is expected to touch land later today.
Pet supplies retailer PETsMART <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PETM)") else Response.Write("(Nasdaq: PETM)") end if %> went to the dogs this morning, dropping $7/16 to $6 5/8 after reporting a fiscal Q2 loss of $0.01 (including legal and severance costs), missing the Street's estimate of breakeven results for the period.
Telecommunications billing and customer service software maker LHS Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LHSG)") else Response.Write("(Nasdaq: LHSG)") end if %> fell $3 to $47 1/2 after saying President Bruce Leonard resigned due to "a family situation." According to Reuters, Leonard also has filed with the SEC over the past week to sell a total of 200,000 LHS shares.
Fitness center operator Bally Total Fitness <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BFT)") else Response.Write("(NYSE: BFT)") end if %> was trimmed $2 3/8 to $18 5/16 after an article in The Wall Street Journal said the company would have lost "significant amounts of money" in its fiscal Q2 if it had used more "conservative" policies for its reserves for doubtful membership fee payments.
Mining and papermaking machinery manufacturer Harnischfeger Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HPH)") else Response.Write("(NYSE: HPH)") end if %> lost $4 to $16 1/4 after reporting a fiscal Q3 loss of $0.83 per share, which was in line with a warning from the company last month. The firm said "depressed" demand for its products will continue into 1999, prompting the company to reduce its workforce by 20% as part of an effort to cut costs by $110 million.
Small business lender Sirrom Capital Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SIR)") else Response.Write("(NYSE: SIR)") end if %> sank $13/16 to $5 5/16 after Morgan Stanley Dean Witter lowered its rating on the company to "neutral" from "strong buy."
Telecommunications, printed circuit board, and computer subassemblies contract manufacturer CMC Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCI)") else Response.Write("(Nasdaq: CMCI)") end if %> dropped $1/2 to $5 3/4 after reporting fiscal Q4 earnings of $0.01 per share versus an $0.08 per share loss a year ago, missing the Street's mean estimate of earnings of $0.08 per share in the period.
Apparel and footwear retailer J. Baker <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JBAK)") else Response.Write("(Nasdaq: JBAK)") end if %> was burned $1 1/16 to $9 7/16 after reporting fiscal Q2 EPS of $0.18 versus $0.14 a year ago, beating the Street's estimate by a penny. However, the company said soft demand for athletic shoes will continue and negatively impact sales in August and early September.
Army vehicle and airline ground support equipment maker Stewart & Stevenson Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SSSS)") else Response.Write("(Nasdaq: SSSS)") end if %> slid $7/8 to $14 9/16 after reporting fiscal Q2 operating EPS of $0.30 versus $0.19 last year, missing the IBES mean estimate of $0.34.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
Click here for continually updated Portfolio Numbers.
ANOTHER FOOLISH THING
See something moving a stock that we didn't cover?
E-mail the Fool News Team
and we will start working on the story.
Unfortunately, we cannot answer every e-mail
or respond to individual questions.
|
Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
Editing |