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FOOL PLATE SPECIAL
An Investment Opinion
by Warren Gump
Seared By Poor Sales
<% ' AvantGo:FoolPlate %>Department store retailer Sears <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: S)") else Response.Write("(NYSE: S)") end if %> was burned for $2 5/8 to $41 15/16 this morning after announcing that same-store sales decreased 3.6% for the four weeks ending November 29th. Compounding the disappointment with this year's weak sales is the fact that the prior year's results were also poor, dropping 0.6%. (Often a retailer will show a bounce in comparable-store sales as weak year-ago periods are compared against.) The company also cautioned that earnings for the year would rise in the low-single digits from last year's $3.27 per share, down from the mid-single-digit increase projected at the time of its Q3 earnings release in October.
The retailer used the age-old excuse of weather as one of the reasons for the decline. Referring to the warm weather, spokesman William Parke was quoted as saying, "you may not be in the mood to buy the clothing you otherwise would." Don't give that excuse to specialty apparel retailer the Gap Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GPS)") else Response.Write("(NYSE: GPS)") end if %>. That company, which operates Old Navy and Banana Republic as well as its namesake stores, has seen same store rise 16% year to date (YTD), while Sears has posted a meager 1.7% rise. (November results for Gap and most other retailers will not be released until tomorrow morning.) Perhaps the problem is more related to merchandising and store design rather than "the weather."
Most of the major nationwide department store chains have posted poor sales results this year. While May Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAY)") else Response.Write("(NYSE: MAY)") end if %> posted a respectable 3.6% gain, Federated Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FD)") else Response.Write("(NYSE: FD)") end if %> and JC Penney <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCP)") else Response.Write("(NYSE: JCP)") end if %> have lagged Sears results with a 1.3% gain and 1.7% reduction in YTD sales. Given the continued proliferation of retail specialty stores, as well as the threat of Internet competitors, department stores are going to have to develop strategies to maintain and increase their market share. Sears had been attempting to increase its exposure to "off the mall" specialty concepts such as Homelife, Western Auto, and neighborhood hardware stores. It has recently, however, sold off Homelife and Western Auto chains "in order to focus on growing [its] core businesses."
With Sears relying on its core businesses for future growth, management needs to find a way to improve results. Roughly 40%-45% of Sears profit is earned during Q4. With a very poor start to the holiday season, it looks like shareholders will have at least a long winter wait before profiting from this beaten down stock.<% ' AvantGo:End %>
<% ' AvantGo:Ups %>Analog and digital integrated circuit maker Analog Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADI)") else Response.Write("(NYSE: ADI)") end if %> gained $2 3/8 to $23 3/8 after reporting fiscal Q4 EPS of $0.16, down from the $0.29 earned last year but a penny better than the First Call mean estimate. President and CEO Jerald Fishman provided a positive outlook for calendar 1999. "We believe we are at the trough of what has been a very difficult period throughout the semiconductor industry, and that conditions will improve in 1999," he said.
Information technology education services provider Computer Learning Centers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLCX)") else Response.Write("(Nasdaq: CLCX)") end if %> bounced back $3/4 to $5 9/16 after falling 25% yesterday on reports that Maryland education authorities might revoke the company's operating license in the state due to numerous complaints. In a press release last night, the company said the license is not in danger of being revoked and that the state's allegations "will be resolved without any material effect on the company."
Electronic payment and collections systems maker CheckFree Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CKFR)") else Response.Write("(Nasdaq: CKFR)") end if %> bounced $1 7/16 higher to $19 1/8 after database software giant Oracle <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORCL)") else Response.Write("(Nasdaq: ORCL)") end if %> said it will fully integrate the company's electronic bill presentation and payment service with Oracle's Internet Bill & Pay solution.
Specialty shipping insurance provider Intercargo Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICAR)") else Response.Write("(Nasdaq: ICAR)") end if %> rose $1 7/16 to $11 9/16 after agreeing to merge with a subsidiary of specialty insurer and reinsurer EXEL Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XL)") else Response.Write("(NYSE: XL)") end if %> in a deal valued at $88 million, or $12 per Intercargo share.
Consumer video conferencing products maker 8x8 Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGHT)") else Response.Write("(Nasdaq: EGHT)") end if %> jumped $3 7/32 to $6 29/32 after releasing four press releases in a little over half an hour this morning, which must be some kind of record. Mixed in among the public relations landslide was news on the Internet telephony front, with the company introducing two new products, forming a broadband cable telephony lab with networking company 3Com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %>, and saying its technology is compatible with the Internet telephony technologies of NetSpeak Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSPK)") else Response.Write("(Nasdaq: NSPK)") end if %> and Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %>.
Educational toy retailer Noodle Kidoodle <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NKID)") else Response.Write("(Nasdaq: NKID)") end if %> moved up $1 5/16 to $9 11/16 after reporting a Q3 loss of $0.20 per share (including $21.4 million in loss carryforwards), which was not quite as bad as the Zacks estimate of a loss of $0.23 per share. Same-store sales jumped an impressive 25% during the quarter compared to a year ago, and sales since last week's Thanksgiving holiday have been "strong."
Teenage apparel direct marketer dELiA*s Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DLIA)") else Response.Write("(Nasdaq: DLIA)") end if %> gained $5 3/4 to $14 after launching websites for its home furnishings and Droog boy's apparel catalogs. The company also introduced its gURLNet Network "portal" site for teenage-oriented content and a new music news content area for its gURL.com site.
Online retailer CyberShop <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYSP)") else Response.Write("(Nasdaq: CYSP)") end if %> rose $3 5/8 to $23 5/8 after the company's egift.com and electronics.net websites secured "anchor and tenant positions" on Microsoft's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> MSN Shopping channel.
Telecommunications enhanced services platform designer Comverse Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMVT)") else Response.Write("(Nasdaq: CMVT)") end if %> climbed $4 1/2 to $62 1/2 after reporting Q3 EPS of $0.62, up from $0.39 a year ago and ahead of the First Call mean estimate of $0.57, on a 27% year-over-year rise in sales to $178.1 million. The company's fiscal 1999 earnings projections were raised by several Wall Street firms this morning, including BancBoston Robertson Stephens, which raised its 1999 estimate to $2.77 per share from $2.63 per share.<% ' AvantGo:End %>
<% ' AvantGo:Downs %>Boeing Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BA)") else Response.Write("(NYSE: BA)") end if %>, the world's largest aircraft maker, dove $5 15/16 to $34 7/16 after it said yesterday it will cut production rates on some commercial plane models and eliminate an additional 20,000 jobs through the year 2000 on top of the previously announced 28,000, combining to represent about 20% of its workforce. News on the expected blow to earnings and more is in today's Breakfast With the Fool
Cereal giant Kellogg <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: K)") else Response.Write("(NYSE: K)") end if %> was crunched for $7/8 to $36 7/16 after it announced plans to cut approximately 525 salaried positions and 240 contracted positions at its headquarters and North American operations. The company anticipates annual cost savings of $105 million beginning in 1999. In the nearer term, Kellogg expects a one-time $0.11 per share charge to Q4 earnings when it reports results in January.
Speech technology company Lernout & Hauspie <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LHSPF)") else Response.Write("(Nasdaq: LHSPF)") end if %> dropped $1 7/8 to $38 1/8 after it said it might have to reduce its in-process research and development write-offs for acquisitions dating back to November 1996 in light of recently published SEC guidelines. Such a reduction could result in a corresponding increase in the amount of goodwill and amortization expense associated with these acquisitions.
Computer workstations and Java programming language developer Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> fell $4 15/16 to $75 after Salomon Smith Barney downgraded the stock to "neutral" from "outperform." Sun cut prices on its SPARCEngine Ultra AXi motherboards by up to 22% yesterday.
Music retailer National Record Mart <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NRMI)") else Response.Write("(Nasdaq: NRMI)") end if %> lost $1 3/4 to $12 1/4 despite announcing plans to join the online music retail fray for the holiday season. Several other Internet stocks were hurt this morning, as yesterday's hero WavePhore <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WAVO)") else Response.Write("(Nasdaq: WAVO)") end if %> crashed $3 9/16 to $11 11/16 while Bluefly <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BFLY)") else Response.Write("(Nasdaq: BFLY)") end if %> buzzed down $2 13/16 to $18 1/8. Recent net-frenzy beneficiary Books-A-Million <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAMM)") else Response.Write("(Nasdaq: BAMM)") end if %> lost $3 to $21 1/2, and November Stock Talk subject NetGravity <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NETG)") else Response.Write("(Nasdaq: NETG)") end if %> was pulled down $1 11/16 to $24 1/16.
French integrated oil company Total SA's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOT)") else Response.Write("(NYSE: TOT)") end if %> American depositary receipts continued to fall this morning, losing $2 1/2 to $53 after yesterday's announcement of plans to buy Belgian refiner Petrofina SA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FIN)") else Response.Write("(NYSE: FIN)") end if %> in a $11.6 billion stock swap. Petrofina's ADRs, which won $8 1/8 yesterday, retreated $1 3/16 to $47 5/8 this morning.
Meanwhile, two leading oil companies were downgraded this morning in the wake of yesterday's blockbuster merger news about Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XON)") else Response.Write("(NYSE: XON)") end if %> and Mobil <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOB)") else Response.Write("(NYSE: MOB)") end if %>. Amoco Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AN)") else Response.Write("(NYSE: AN)") end if %> leaked $1 9/16 to $55 15/16 while British Petroleum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BP)") else Response.Write("(NYSE: BP)") end if %> slipped $2 9/16 to $87 5/16 after Donaldson, Lufkin & Jenrette cut its ratings on the companies to "market perform" from "buy."
Multinational long-distance company IDT Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IDTC)") else Response.Write("(Nasdaq: IDTC)") end if %> fell $3 7/16 to $16 15/16 after reporting fiscal Q1 EPS of $0.14, ahead of last year's $0.08 figure but flat with market estimates after the market closed yesterday. IDT said it is in talks with "a major media conglomerate with extensive holdings in leading Internet companies," seeking an investment in its Internet communications division, with a spin-off or IPO among the possibilities.
Forgings, castings, and commercial airframes manufacturer Wyman-Gordon Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WYMN)") else Response.Write("(Nasdaq: WYMN)") end if %> slid $2 3/8 to $12 15/16 after PaineWebber downgraded it to "attractive" from "buy."
Bank holding company Republic Bancorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RBNC)") else Response.Write("(Nasdaq: RBNC)") end if %> withdrew $1 7/8 to $14 3/4 after it said last night it will acquire D&N Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DNFC)") else Response.Write("(Nasdaq: DNFC)") end if %> in an $286 million stock swap. D&N rose $2 9/16 to $25 7/16 this morning as investors cheered the deal's 30.7% premium to the company's Monday closing price.
Telecommunications services provider ICG Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICGX)") else Response.Write("(Nasdaq: ICGX)") end if %> hung up $1 7/16 to $22 5/8 following a cut to "outperform" from "buy" at Lehman Brothers, which set a 12-month price target of $27 per share.
Semiconductor and electronic components storage and automated handling products maker Peak International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PEAKF)") else Response.Write("(Nasdaq: PEAKF)") end if %> tumbled $1 3/8 to $9 3/8 after it formed a committee of directors to consider strategic alternatives, possibly including the sale of the company to an interested party as previously reported. Peak also announced the termination of President and CEO Richard Brook's employment, naming CFO Jerry Mo to the vacant seats in an acting capacity.<% ' AvantGo:End %>
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |