• Earnings Preview: Bed Bath & Beyond
    Posted by on April 8th, 2008 at 9:53 am

    Bed Bath & Beyond (BBBY) is set to report its earnings tomorrow. Here’s part of a preview from AP:

    BY THE NUMBERS: Bed Bath & Beyond said it January that it expects to earn 64 cents to 67 cents per share in the fourth quarter, which ends March 1. Analysts polled by Thomson Financial predict earnings of 65 cents per share on revenue of $1.96 billion.
    ANALYST TAKE: Matt Nemer of Thomas Weisel Partners LLC said he is concerned about Bed Bath & Beyond’s bedding and textiles segment, which potentially accounts for up to 40 percent of its revenue.
    “Continued weakness in the category could pressure the top line, and promotional activity could further impact margins,” the analyst wrote in a Friday client note.
    Home furnishings and accessories retailers are being pressured as the housing market sags and consumers curb discretionary spending due to worsening credit problems and high energy costs.
    Nemer anticipates a quarterly profit of 64 cents per share on sales of $1.95 billion.
    Deutsche Bank North America’s Mike Baker said Bed Bath & Beyond’s margins are being squeezed as it deals with higher advertising and postage and paper costs. The company has had to send out more coupons to stay competitive in the latest economic environment, he said. Bed Bath & Beyond is also fighting rising depreciation and a shift toward lower-margin hard goods.
    WHAT’S AHEAD: Nemer anticipates Bed Bath & Beyond will provide a weak fiscal 2008 forecast, due to the current economic climate and management’s cautious view of the market. He estimates 2008 earnings at $2.11 per share.
    Analysts predict full-year net income of $2.15 per share.

  • Mouse Increases Demand on Tiger
    Posted by on April 7th, 2008 at 9:11 am

    From the NYT:

    Yahoo on Monday reiterated its rejection of a takeover offer from Microsoft, again calling it too low.
    The company was responding to a letter from Microsoft that threatened to lower the price of its buyout offer and take it directly to Yahoo shareholders.
    Although Microsoft’s offer was initially valued at $31 a share, a drop in the price of Microsoft shares has reduced the offer to just more than $29 a share.
    Microsoft’s chief executive, Steven A. Ballmer, raised the pressure on Yahoo’s directors on Saturday in a letter warning that Microsoft would begin a proxy fight seeking to oust them if the two companies did not reach a negotiated deal in the next three weeks.
    “Our board’s view of your proposal has not changed,” Yahoo said in a statement. “We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders. Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo. Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal.”
    The statement added: “We consider your threat to commence an unsolicited offer and proxy contest to displace our independent board members to be counterproductive and inconsistent with your stated objective of a friendly transaction. We are confident that our stockholders understand that our independent board is best positioned to objectively and knowledgeably evaluate our company’s alternatives and to maximize value.”
    Senior executives from the companies have met on two occasions since Microsoft made its offer public on Feb. 1, but they have not entered formal negotiations. Yahoo rejected Microsoft’s offer, saying it “substantially undervalues” the company.

  • Inside Sadr City
    Posted by on April 4th, 2008 at 6:49 pm

  • What Happens to Bear’s Lacrosse Team?
    Posted by on April 4th, 2008 at 10:31 am

    If you have any experience with Wall Streeters, you know that these are the most competitive people you’ll ever meet. With the decline and fall of Bear Stearns, we now must ask what will happen to its lacrosse team.

    Among the remaining questions hanging over Bear Stearns Cos. is this: What happens to its lacrosse team?
    On ultracompetitive Wall Street, lacrosse-loving traders are keenly watching the fate of the battered firm’s squad. Bear Stearns vanquished rival Lehman Brothers Holdings Inc. in triple overtime and then upset Credit Suisse First Boston last summer to win bragging rights in the Street’s inaugural Gotham Lacrosse tournament.
    “I had a couple buddies [at Bear Stearns] who gave me a hard time,” says Chad Burdette, Trinity College ’06, who is now at Lehman’s private investment-management division and is the Lehman team’s informal manager. “I guess I got the last laugh now,” he jokes.
    Lacrosse, a contact sport in which players fling a rubber ball from a net attached to the end of a stick, long has been part of Wall Street’s culture. It’s popular in the New York area and at many prep schools and Ivy League colleges. According to one old joke, the only way to get a job on Wall Street is to have high test scores or play lacrosse.
    “Specifically with lacrosse, people hiring on Wall Street have a lot of respect for athletes,” says Bear Stearns’s Pete LeSueur, Johns Hopkins ’05 and an Academic All-American. “There’s definitely a strong correlation between being able to handle pressure as a trader and being able to handle pressure as an athlete.”

  • Perfect Logic
    Posted by on April 2nd, 2008 at 9:30 am

    My post yesterday on gold and if it’s possibly a deflating bubble elicited a number of interesting, and predictable comments from the gold bugs over at Seeking Alpha. My personal favorite came from Gigem77:

    Now let’s look at time. Gold is up 34% year over year despite the recent correction. How is the dow doing year over year?

    So gold can’t possibly be in a bubble. The reason: Because it’s up so much.

  • FT: A Hard Lesson in Bank Management
    Posted by on April 2nd, 2008 at 9:09 am

    The Financial Times looks at the UBS mess. Here are the two last two paragraphs:

    The Swiss bank’s rivals should learn, too, from its failure to identify early on the scale of its exposure to mortgage-related assets. Providing as full a disclosure as possible may well help the share price. At least, it is essential for smoother relations with investors.
    It will take years for UBS to recover from the fix it finds itself in. The new chairman must rebuild relations with investors and stabilise the bank, and find new opportunities for business, perhaps by expanding wealth management. It will be quite a task.

  • Wallstrip Does CLARCOR
    Posted by on April 1st, 2008 at 11:22 am

    Julie profiles CLARCOR (CLC), one of our Buy List stocks.

    Here’s a spreadsheet of Clarcor’s results for the past few years.

  • The End of the Gold Bubble
    Posted by on April 1st, 2008 at 10:17 am

    A few weeks ago, I wrote a post criticizing the fear the something must be done to counteract investment bubbles. I said that one of the problems is, how do we even know if we’re in a bubble? I wrote:

    How can we be sure it’s a bubble when an asset inflates? In the 1950s, stock prices soared and they never really came back down. The phrase “permanently high plateau” hasn’t had a good record since the 1920s, but I think that’s an accurate description of what happened in the 1950s.
    Is gold a bubble right now? What about oil? Or the Euro? Or could it be that we’re simply adjusting to a new era of commodity prices? I don’t know and for now, I’m happy to consider these open questions. I will note, however, that adjusted for inflation, commodity prices have historically plunged.

    Some commenters wrote that I was crazy (as they often do) because it was perfectly obvious (in all caps) that we were in a credit bubble. But no one addressed my concerns that we could be in a gold bubble. In fact, come said that we’re certainly not because of…well, the standard bullish arguments for gold.
    Now it looks like gold’s run may be coming to an end. Again, I’m not saying it is, but look at what’s happening. As I writing this, the contract for June gold is down to $892. That’s a huge drop just in the last two weeks.
    june%20gold%204-1-2008.png

  • W.R. Berkley to Change Ticker Symbol
    Posted by on April 1st, 2008 at 9:54 am

    Here’s a heads-up to BER shareholders. In two weeks, W.R. Berkley Corp. will change its ticker symbol from “WRB” from “BER.” This is the second ticker symbol change for a stock on our Buy List. In 2006, Harley-Davidson switched from HDI to HOG.
    I like HOG a lot better. Personally, I’m a big fan of the fun tickers. Here’s a list of my favorites:
    1. (BUD) Anheuser-Busch
    2. (WOOF) VCA Antech (veterinary services)
    3. (BOOM) Dynamic Materials
    4. (FIZ) National Beverage
    5. (LVB) Steinway Musical Instruments (in honor of Ludwig Van Beethoven)
    6. (ZEUS) Olympic Steel
    7. (CHUX) O’Charley’s Inc.
    8. (TAP) Molson Coors Brewing
    9. (BID) Sotheby’s Holdings
    10. (LENS) Concord Camera

  • Jos. A. Bank Down on Barron’s Article
    Posted by on March 31st, 2008 at 10:38 am

    This week, Barron’s criticized the inventory levels at Jos. A. Bank (JOSB):

    Chief Executive Robert N. Wildrick did a great job of shaking up the century-old retailer after he took charge in 1999. Annual sales have since tripled, to $604 million, while per-share earnings have risen eightfold. The company expects to report about $2.67 a share when it finishes accounting for the fiscal year ended January 2008 (called the 2007 fiscal year, by retailing convention). While adding 50 new stores a year, the chain grew revenues at existing stores. In all but 11 of the past 77 months, the retailer reported higher comparable-store sales — a measure that compares each store’s sales with its sales in the prior-year period. Frequent promotions drive the sales. These discounting binges make monthly comps erratic, varying by an average of seven percentage points around the median increase of 6%.
    But comparable-store growth has been shrinking in the last two years. In fiscal 2005, comps grew more than 10%. In 2007, they grew less than 4%. The 2005 inflection in comps is intriguing, since that’s the year the company stopped using a controversial calculation method that had inflated its comps by not counting stores within 10 miles of a newly-opened store. Barron’s had previously criticized Bank’s comps approach (“Dressed for Success?“ Oct. 13, 2003). That may explain why the chain didn’t respond to our inquiries last week. More disturbing, Bank stopped reporting monthly comps after January of this year.
    Along with softening comps, another sign of sputtering growth is Bank’s inventory accumulation. When we wrote about the company in 2003, it had about 350 days of inventory on hand (with a “day” of inventory equaling the quarter’s cost-of-goods-sold divided by 90 days). As of November 2007, Bank’s inventory had hit the 425-day mark while Men’s Wearhouse’s ending inventory was 292 days. The average of Bank’s starting and ending inventory for its November quarter was 397 days. Holiday sales probably reduced Bank’s number by the end of January, but the company hasn’t yet reported that balance sheet.