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FOOL PLATE SPECIAL
An Investment Opinion
by Brian Graney
Fashioning Bidding War
The mud started slinging in early-spring Paris today as the first volleys of what may fast become a bidding war for Italian luxury goods retailer Gucci <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GUC)") else Response.Write("(NYSE: GUC)") end if %> were lobbed out of the fashionable windows of Paris' 8th arrondissement this morning. Gucci was unchanged at $70 this morning after specialty retailer Pinault-Printemps-Redoute announced its intentions to make a strategic $2.9 billion investment in the company. Under the plan, Gucci will issue some 39 million shares, equal to 40% of its outstanding capital, at $75 a share -- a 13% premium over Gucci's average closing price for the last 10 trading days. The cash infusion is intended to allow Gucci to acquire other luxury goods brands.
Taking offense to the transaction was French haute couture purveyor LVMH Moet Hennessy Louis Vuitton <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LVMHY)") else Response.Write("(Nasdaq: LVMHY)") end if %>, which took a 5% and then later a 34.4% stake in Gucci earlier this year. To ward off LVMH's ideas of a possible takeover, Gucci launched an employee stock-option issue that diluted LVMH's holdings to 26%. Not surprisingly, LVMH then filed suit to block the move. But soon after the Pinault-Printemps-Redoute investment hit the wires today, LVMH said it would "preserve its interests as a shareholder" and launched an offer to acquire 100% of Gucci, contingent on the cancellation of Pinault's proposed investment.
Why all of the interest in Gucci, a company that earned $195 million in fiscal 1998 on revenues of just over $1 billion? Despite its stable of brand name products, LVMH and its outspoken chairman and CEO Bernard Arnault may be acting on an impulse to avoid embarrassment in the often-intertwined worlds of retail and finance. As one Italian analyst told Bloomberg News this morning, LVMH had little choice but to launch a full bid for the company. "To the eye of the world [LVMH] would lose their face" if the Pinault transaction went through, the analyst said. As in the world of fashion, LVMH may feel that appearances are the only things that matter on the runway of the luxury goods retailing business.
[Editor's Note: Today's news on Gucci was first reported in Breakfast With the Fool, which is up every day by 9:00 a.m. EST. Join Fool breakfast scribe Yi-Hsin Chang (TMF Puck) each morning as you suck back your oatmeal, or check in at the office before you get your day rolling!]
Desktop publishing software developer Adobe Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADBE)") else Response.Write("(Nasdaq: ADBE)") end if %> climbed $4 7/16 to $54 3/16 after announcing fiscal Q1 EPS of $0.60, up from $0.38 a year ago and ahead of the First Call mean estimate of $0.52. The company said it expects its business momentum to continue for the remainder of the year and said Q2 EPS could be between $0.62 and $0.66, topping analysts' current estimates of $0.55.
Athletic footwear maker Nike <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %> sprinted ahead $4 7/16 to $59 7/16 after posting fiscal Q3 EPS of $0.44 a share, up from $0.25 last year and ahead of the First Call mean estimate of $0.38. CEO Phil Knight said the company is beginning to see "signs of increased consumer demand for our footwear" but he remains "cautious on our prospects for near-term growth." Proof of improving demand came from worldwide futures orders, which slid only 4% compared to a 10% drop last quarter. Both BT Alex. Brown and Hambrecht & Quist upgraded the stock today.
Coronary stent and medical devices maker Boston Scientific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSX)") else Response.Write("(NYSE: BSX)") end if %> added another $2 1/16 to $40 9/16 following yesterday's 13% gain, which was prompted by the appointment of new president and CEO James Tobin. This morning, Morgan Stanley Dean Witter, Donaldson, Lufkin & Jenrette, and ING Baring Furman Selz issued upgrades.
TV show production company Spelling Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SP)") else Response.Write("(NYSE: SP)") end if %> picked up $2 5/8 to $9 3/8 after parent company Viacom <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: VIA)") else Response.Write("(AMEX: VIA)") end if %> offered to buy the 20% stake in the company it does not already own for $9 per share in cash, or roughly $167.4 million.
Teenage clothing and accessories retailer Hot Topic <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HOTT)") else Response.Write("(Nasdaq: HOTT)") end if %> moved up $4 1/2 to $17 3/16 after reporting fiscal Q4 EPS of $0.79, up from $0.67 a year ago and better than the Zacks mean estimate of $0.71. Additionally, the company said same-store sales for the first six weeks of the present quarter are up 8% from last year's levels, which may be due to an earlier-than-usual Easter holiday. BT Alex. Brown raised its opinion on the company to "buy" from "market perform."
Vision care and women's healthcare products maker Cooper Cos. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COO)") else Response.Write("(NYSE: COO)") end if %> eyed a $15/16 gain to $15 1/4 after Business Week's "Inside Wall Street" column speculated that the company may be a takeover target in the eyes of Johnson & Johnson <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JNJ)") else Response.Write("(NYSE: JNJ)") end if %> or Bausch & Lomb <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BOL)") else Response.Write("(NYSE: BOL)") end if %>.
In-store electronic marketing programs provider Catalina Marketing <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: POS)") else Response.Write("(NYSE: POS)") end if %> gained $5 13/16 to $82 15/16 after Morgan Stanley Dean Witter started coverage of the company with a "strong buy" rating and a price target of $98 per share.
Broadband cable TV and telecommunications network operator Cox Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COX)") else Response.Write("(NYSE: COX)") end if %> tacked on $3 1/8 to $80 3/16 after its board approved a two-for-one stock split, which now goes to a shareholders' vote at the company's annual meeting in May.
Drug delivery technologies developer Penwest Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PPCO)") else Response.Write("(Nasdaq: PPCO)") end if %> popped up $2 9/16 to $11 1/16 after the FDA tentatively approved a generic version of Pfizer's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> Procardia XL hypertension treatment jointly developed by Penwest and generic drug company Mylan Laboratories <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MYL)") else Response.Write("(NYSE: MYL)") end if %>. The drug is now awaiting final approval, pending the outcome of a patent suit filed by Pfizer and Bayer against Mylan.
Sporting goods retailer Hibbett Sporting Goods <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HIBB)") else Response.Write("(Nasdaq: HIBB)") end if %> scored a $2 9/16 gain to $20 1/8 after reporting fiscal Q4 EPS of $0.28, down from last year's $0.33 but ahead of the Zacks mean estimate of $0.25. The company said its sales trends "improved significantly" in January and continue to be above plan.
Business computer security services firm Axent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AXNT)") else Response.Write("(Nasdaq: AXNT)") end if %> rose $4 to $31 1/4 courtesy of an ING Baring Furman Selz upgrade to "strong buy" from "buy."
Oak Brook, Illinois-based bank holding company Pinnacle Banc Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PINN)") else Response.Write("(Nasdaq: PINN)") end if %> jumped $3 3/16 to $30 3/8 after Old Kent Financial Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OK)") else Response.Write("(NYSE: OK)") end if %> of Grand Rapids, Michigan agreed to acquire the company for $243 million in stock, valuing Pinnacle at about $32.27 per share.
Party supplies retailer Party City Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCTY)") else Response.Write("(Nasdaq: PCTY)") end if %> got busted this morning, losing $3 5/16 to $4, after it said its year-end audit is taking longer than expected. The company believed earlier this month that it would finish the audit this month. It doesn't think so anymore and doesn't know when it'll be done. As a result, Party City is in default of certain covenants of its $60 million credit facility and is talking with its lenders to work things out; penalties may be involved.
Hardee's and Carl's Jr. quick-serve restaurants operator CKE Restaurants <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKR)") else Response.Write("(NYSE: CKR)") end if %> steamed off $1 1/8 to $17 1/2 after slipping $5 1/8 yesterday on news of fiscal Q4 EPS of $0.25 (excluding a $900,000 extraordinary gain), a penny below the Zacks mean estimate. U.S. Bancorp Piper Jaffray downgraded the stock to "buy" from "strong buy" this morning.
Computer consulting firm Cambridge Technology Partners <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CATP)") else Response.Write("(Nasdaq: CATP)") end if %> dumped $9 1/16 to $11 15/16 after it warned that fiscal Q1 earnings will fall short of expectations. The company anticipates delivering Q1 EPS of $0.12 to $0.14, versus analysts' forecasts of $0.21 to $0.24, and revenues of $148 million to $151 million, compared with analysts' forecasts of $163 million to $170 million.
Drug developer Synaptic Pharmaceutical Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNAP)") else Response.Write("(Nasdaq: SNAP)") end if %> was broken for a loss of $4 15/16 to $6 3/4 after Eli Lilly & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LLY)") else Response.Write("(NYSE: LLY)") end if %> said it will stop commercial development of the migraine compound the two are collaborating on after receiving disappointing data from a recent study. Synaptic said earlier this month that Lilly was holding off on the third and final phase of clinical trials pending a review of study data.
Children's Comprehensive Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KIDS)") else Response.Write("(Nasdaq: KIDS)") end if %>, which operates treatment centers for at-risk and troubled children, calmed $4 3/8 to $6 7/8 after saying it expects fiscal Q3 EPS of between $0.24 and $0.26, missing First Call's $0.33 three-analyst consensus estimate. The company blamed disappointing results at its four new centers, a new billing program at three California programs, and news that two other California districts will stop using the company's services.
Retail and industrial services company SunSource <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDP)") else Response.Write("(NYSE: SDP)") end if %> darkened $2 3/16 to $15 3/4 after last night saying it expects Q1 EPS of between $0.13 and $0.17, while Wall Street currently expects a $0.23 per share profit. The company may also miss last year's mark of Q2 $0.64 -- five analysts surveyed by First Call currently foresee $0.72 -- because of continued weakness at its technology services division.
Insurance holding company Risk Capital Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RCHI)") else Response.Write("(Nasdaq: RCHI)") end if %> lost $1 3/4 to $14 after saying last night it expects Q1 after-tax underwriting losses of about $22 million because of reinsurance provided by its Risk Capital Reinsurance subsidiary.
Philadelphia-based aftermarket auto parts retailer The Pep Boys - Manny, Moe & Jack <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PBY)") else Response.Write("(NYSE: PBY)") end if %> creaked down $1 3/8 to $18 13/16 after announcing fiscal Q4 loss of $0.31 per share, an improvement from last year's $0.45 loss but well below the $0.08 loss forecasted by First Call's 14-analyst panel. Same-store sales jumped 13% during the quarter.
Travel services provider Preview Travel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PTVL)") else Response.Write("(Nasdaq: PTVL)") end if %>, a recent Foolish Trouble, lost $3 1/16 to $18 1/4 following a downgrade to "neutral" from "buy" from PaineWebber Inc., as well as a cut to "hold" from long-term "buy" at Wedbush Morgan. Last night the company named Thomas Cardy, a director since 1991, its CFO and executive vice president.
Consumer electronics retailer Best Buy <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BBY)") else Response.Write("(NYSE: BBY)") end if %>, one of the stars of 1998, lost $2 3/8 to $52 3/8. The company split its stock 2-for-1 after the market's close last night.
Online investment research provider Multex.com Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MLTX)") else Response.Write("(Nasdaq: MLTX)") end if %>, a Wednesday initial public offering, lost $2 7/8 to $28 1/8 this morning.
Internet venture capitalist Safeguard Scientifics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFE)") else Response.Write("(NYSE: SFE)") end if %>, which flirted with $74 per share yesterday after ending last week at $48 9/16, lost $6 3/8 to $67 this morning on a downgrade to "outperform" from "buy" at First Union Capital Markets.
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Contributing Writers Brian Graney (TMF Panic), a Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |