Cramer, Starbucks, Best Buy, Bear on Ebay
– Now we catch TheStreet.com altering its website to scrub Cramer’s bullish call on Bear Sterns (BSC) days before its implosion. Deplorable…………
– Get out of the music biz….focus on coffee..
– This is how you build loyalty…. yes Circuit City (CC) missed the boat….. again
First it was Circuit City (CC), then MBIA (MBI) did it and now Washington Mutual (WM) is making sure executives in charge the $1.87 billion dollar Q4 loss don’t feel it in their wallet, unlike shareholders.
Let’s refresh, Washington Mutual’s shares are down 70% in the past twelve months and have not traded at current levels in 12 years. One would think with the Q4 loss and the year to date share price, execs would be worried about their jobs, not thanking the board for a sweet bonus plan.
Here are the egregious portions:
– 30% of cash bonuses will be based on net operating profit, excluding “loan loss provisions other than related to our credit card business” and “expenses related to foreclosed real estate assets,”
– 25% of cash bonuses will be based on non-interest expense, excluding restructuring costs and “foreclosed real estate assets.”
Essentially, 55% of the bonus plans will exclude mortgage and the housing industry.
The Board said in a filing the approved the measure because of a, “challenging business environment and the need to evaluate performance across a wide range of factors.”..
What? The very reason the “business environment” is do challenging is because these dimwits loaned people who had no real ability to pay it back hundreds of thousands of dollars. The “environment” is one that they themselves created. Why are we now crafting a bonus plan to eliminate the performance of that very sector? I am having a hard time understanding why more people are not screaming about this.
Loaning money for mortgages is what they do. This is like McDonalds (MCD) crafting a bonus plan based on net operating profit “excluding the results of food sales”. A bonus plan ought to be based on the success (profit) of the business, not a rewards for showing up for work each day.
Disclosure (“none” means no position): Long MCD, None
Remember just a little while, back when Circuit City (CC) approved multi million dollar awards to executives for just showing up for work, performance be damned? MBIA (MBI) must have thought that was a great idea…
MBIA said in a filing to the Securities and Exchange Commission that it’s making the lowest annual bonus payouts in the company’s history, with some bonuses cut by more than 50%. But it’s realigning salaries, so that some officers will get “significant” increases. MBIA also approved cash retention awards of up to $2.25 million for executives other than Brown.
Well, one has to wonder how any bonuses are being paid at all. What are the metrics? Destruction of profits and shareholder value? Because, that is really the only thing they have accomplished over there this year. Maybe they gave bonuses for the “Best snotty remark towards Bill Ackman”?
Retention awards, why? Let them all go. Bring in a new bunch, could they really do any worse? Really? Have shareholders finally had enough yet?
I really cannot wait to hear what Ackman or Whitney Tilson have to say about this. Feel free to email me if either read this.
Disclosure (“none” means no position):None
Investor Mark Wattles was on CNBC this morning discussing Circuit City (CC).
Check out the video here:
Disclosure (“none” means no position):None
RadioShack (RSH) released results Tuesday and investors ough to be very pleased.
“The Shack” posted a 20% increase in Q4 net income as the retailer’s turnaround effort continues to take hold despite falling wireless-phone sales. Mostly selling accessories, batteries and other gadgets for wireless products, RSH said net income rose to $101 million, or 77 cents a share, from $84.5 million, or 62 cents a share, a year earlier. Net Income was favorably impacted by improved gross margin, a reduction in SG&A, and reduced interest expense when compared to the prior year.”Analysts” had expected 72 cents a share.
Revenue fell 6.4% to $1.36 billion as same-store sales dropped 6.7% on lower wireless and satellite-radio sales. In October, RadioShack predicted a “challenging” fourth quarter because of both weakened demand and competition. If this is “challenging” I would love to see “optimistic”.
CEO Julian Day, a former executive at Sears Holdings (SHLD) said, “I am delighted to announce that our team here at RadioShack once again produced strong improvement in our operating profit for the fourth quarter, and for the year as a whole. It is a testament to the hard work and devotion of everyone concerned, that this result was achieved against a background of difficult and uncertain economic conditions.”
Its cash balance increased $38 million at the end of the fourth quarter of 2007 to $510 million, driven by improved working capital management and cash generated from net income. It was partially offset by $150 million repayment of bonds in September, 2007, and $209 million of share repurchases during 2007.
The best numbers was that the chain generated $300.9 million in free cash flow through the twelve months of 2007 versus free cash flow of $189.9 million for the same period in 2006.
On a day that we see what bad management can do to a company (at Circuit City (CC)), the results at RadioShack (up 16% Tuesday) show us what good management can do.
Disclosure (“none” means no position):Long SHLD, none
Those still holding shares of decimated Circuit City (CC) may finally have a reason to be optimistic….maybe.
Mark J. Wattles disclosed plans to nominate his own slate of five directors at Circuit City Stores Inc., criticizing managers for failing to deliver a turnaround. Finally, a shareholder speaks up!!
In an inteview with the WSJ, “Wattles said he nominated the slate after being rebuffed in recent attempts to meet with Circuit City executives, whom he criticized for worsening the company’s financial picture. He said executives have “lost the faith” of employees and investors, and he expects an election of his slate would help lead to a new management team.”
Hallelujah!!!!!
Wattles said he is “in complete disagreement” with CEO Philip J. Schoonover’s appraisal of the chains situation. “The current CEO has been the president or CEO for three years now,” Wattles said. The company’s annual pretax earnings, once as high as $400 million, are now estimated at a loss of $100 million to $200 million for the fiscal year. Shareholders have lost 80% of their value in that timespan.
According to The Journal, Wattles also took Schoonover to task for what he said was a history of blaming past management and bad retail locations for the company’s problems. “The solution is not in changing real estate. The solution is changing the way they operate in existing real estate,” said Mr. Wattles.
In June of last year I said, “Should you buy CC now? I would stay away as long as current management is there.” This still holds true. Unless Wattles can get control of the board and make management changes, CC shareholders are still in trouble.
Now, can he take control of the Board, and asks Schoonover to “pursue other opportunities”, this company then becomes very interesting. I have said in the past “CC has appealing stores in good locations with a nice product mix, they are just abysmally run.”
Once Schoonover and his “vision” are gone. Shares become attractive. Once we know who will take his place and what the plan is, time to take a real close look.
It will be a log time before CC takes on Best Buy (BBY) or even Wal-Mart (WMT) or RadioShack (RSK) for consumers electronics shopping preference. But, that does not mean they cannot be profitable and make new shareholders very happy.
Disclosure (“none” means no position): Long WMT, None
Some notables from the Wal-Mart (WMT) earnings call
Domestic:
** US capex is projected to be down between approximately $1.4 billion and $2 billion for fiscal 2009 when compared to 2008.
** In fiscal 2008, returned more than $11 billion to shareholders in the form of share repurchase and dividends (5.5% of market cap).
** The company generated $5.4 billion in free cash flow in fiscal 2008 and that compares to $4.3 billion in fiscal 2007, a 25% increase year over year.
** Additional square footage dedicated to entertainment selling space this past year. Entertainment area is clearly becoming the destination for of customers.
** Adding known brands to apparel offerings. These include Garanimals already available in baby and kids. Ocean Pacific or OP coming in the spring across all of apparel and LEI the denim brand for back to school in juniors and girls.
International:
** Strongest underlying sales performance in the quarter came from China, Brazil and Argentina. ASDA in United Kingdom continued with very positive sales results in the fourth quarter.
** Wal-Mart Canada delivered its strongest quarterly sales increase in the year during the fourth quarter.
** $500 million projected increase in International capex in fiscal 2009 when compared to 2008.
Not much new released and to be honest not much was really expected. There were very positive comments about apparel and it has been a long time since I heard that on a call. Even moderate success in this area would be fantastic.
Watch electronics. The local store here just did a remodel and the electronics area is real nice. Based on the stores reputation for pricing, it is becoming a “first on the list” to shop for those items. One has to wonder if recent results at Best Buy (BBY) and Circuit City (CC) may be reflecting that success.
It is too early to tell for sure, but it does bear watching as the upbeat comments at Wal-Mart do contradict those from the other two.
I get a feeling that something rather exciting is in store for the annual meeting this year. It just seems a bit to calm out there now… A nice fat dividend increase would be nice. I asked for 28 cents a share Monday, can we do better? Do not forget the stock repurchase plan was for $15 billion, 1/2 half of that is gone and free cash flow is at record levels. Can we add another $15 billion to it?
Disclosure (“none” means no position):Long Wal-Mart
Jeter, Riot’s, Schoonover, Clemens
– Red Sox fans did not need this to tell you the answer
– Another take on the Circuit City (CC) CEO.
– Adam finds this gem about sportscasters questioning if Clemens has lost his best fastball…… IN 1995!!
Best Buy (BBY) came out and reduced FY earnings and the news sent the stock down over 3% Friday. Knowing Best Buy is well run and Circuit City (CC) is not, investors sent City shares down twice that.
For the fiscal year ending March 1, Best Buy reduced its outlook to per-share earnings of $3.05 to $3.10 from $3.10 to $3.20. Expected same-store sales growth was cut to 2.5% to 3% from 4%, and the company maintained its outlook for revenue of about $40 billion.
CEO Brad Anderson said that although the company’s December results were in line with expectations, “soft domestic customer traffic in January, coupled with our near-term outlook, now indicate that our fourth-quarter revenue will fall short of our planned targets.”
Circuit City has said nothing specific about upcoming numbers (assume the worst) but did do something noteworthy.
After Best Buy, Wal-Mart (WMT) and NetFlix (NFLX) announced they will go exclusively with the “Blue-ray” HD DVD format, Circuit City, apparently the last one in the loop was forced to price cut a stand-alone HD player that plays both Sony Corp.’s Blu-ray disc and Toshiba Corp.’s HD DVD format titles by $100.
I can’t wait to hear CEO Schoonover’s excuse for the latest quarter. Maybe, “Perhaps were overly optimistic about a cash strapped consumers willingness to buy soon to be irrelevant technology”.
Disclosure (“none” means no position):Long Wal-Mart, None
What is god’s name is going on at The Journal? I just finished reading an “interview” with Circuit City’s (CC) CEO Philip Schoonover that was, sad. It reads like it was a press release from the company.
Let’s just put aside Schoonover’s destruction of 80% of the companies value in under two years. First things first, here is the “interview”.
This could only have been a “email me the questions and I will send you answers”. There was no follow-up. It was a series of questions with wholly accepted answers. They actually went as far as to print this:
Now, am I the only one who notices that when Schoonover took over the company’s stock price was at a near decade high? The year prior to Schoonover taking over the company made 31 cents a share and this year losses ought to exceed $2 a share. How is he engineering a turnaround?
Why is he even being spoken to about this subject? Can anyone anywhere show me any evidence of ANY turnaround?
Even in his “5 Tips” above, current actions totally contradict them.
Was Schoonover “listening to employees” (Rule #1) when he fired thousands of high priced but experience ones? The very employees it should be noted they are begging to return due to the precipitous drop in customer satisfaction in the stores?
Circuit City recently approved cash retention bonuses for current executives when it became apparent the current bonus plan was worthless due to the plummet in the stock price. Maybe that would have to perfect time to “refresh management” (Tip #2) and save shareholders several million dollars?
Rule #3, “Embrace Your Heritage” seems more than a little bit the polar opposite of the new “The City” concept being rolled out currently which is simply a reinvention of Radioshack’s (RSH) wheel.
Rule #4, “Protect the Future” actually made me chuckle because at the rate Schoonover is going, the only thing in the company’s “future” is a Chapter 11 filing. The guy does make me laugh.
I will give Schoonover credit for following Rule #5, “Stay the course”. I have seen no evidence that Circuit City has any chance rebounding from its current downward spiral.
Disclosure (“none” means no position): Pity for shareholders (those who are left)
Leave it to Circuit City’s (CC) Philip Schoonover to inject humor into the recent turbulent market. Problem is, I do not think it was his intention to.
Apparently giving up on trying to compete with Best Buy (BBY), Schoonover and crew have decided to open 50-60 smaller well staffed (theres an idea!) locations called “The City”. Early plans have the 20,000 square-foot stores being about 40% smaller than the typical Circuit City, but a redesign eliminating obsolete warehouse space results in having nearly the same amount of selling space. That means CC is sitting on 8,000 sq. feet per location of unnecessary warehouse space? That is a stunning number, if true.
This means either one of two things. Sales are just real dismal and it is not necessary to stock extra items in current locations, hence the “extra space”. Or, CC plans to cut way back on inventory in which case potential customers will constantly hearing these words “we do not have that in stock here, can I call another location for you?” Neither scenario is a good one.
While execs at the failing chain may think “The City” is a novel idea, it has been done before. It was and still is called Radioshack (RSH)!! The problem is that Radioshacks CEO Julian Day could out-manage Schoonover from the grave.
In response to a question about selling the company, “We have a solid plan, we have the capital to continue this multi-quarter turnaround, and management feels that at today’s stock prices it would not be in the best interest of the shareholder to sell the company,” Schoonover told Reuters.
Perhaps it would have been a little over a year ago when they dismissed out of hand an over $20 a share private equity offer? For those of you not keeping track, shares trade at $4.70 currently.
“We have the financial capability (debt) and the access to sustain a multiquarter turnaround,” Schoonover said. “While we’re learning from some of the errors we made, we’re making significant progress on that turnaround, as we think on behalf of the shareholders that at today’s stock price, we’re better off staying the course.”
By staying the course does he mean “making the stock worthless”? I mean it is down 80%.
Here is the kicker, execs said that by the middle of next year, they hope to have a plan for applying some of the best things about The City format to older stores. “Middle of next year”?
Translation? Another dismal year for shareholders. I will say it now for Schoonover before the next earnings call, “clearly we are disappointed by our performance”.
Disclosure (“none” means no position):None, Pity for shareholders
Shares Circuit City (CC) surged over 20% last week on news that Hollywood Entertainment Corp founder Mark Wattles acquired a 6.5% stake.
According to a filing with the SEC, Wattles acquired the stake in Circuit City for “investment purposes and may buy additional shares, encourage the company to enter a merger, or nominate candidates for the board.”
Wattles, who owns 32 stores of the Ultimate Electronics Stores chain and his affiliated companies acquired 11 million shares of Circuit City after they met with management, the filing said. This comes on the heals of the Classic Fund Management Aktiengesellschaft, a Liechtenstein-based asset management company, disclosing it holds a 5.7 percent passive stake in Circuit City.
Wattles filed for a “blank check IPO” in December and wanted to raise up to $200 million “to focus on potential acquisition targets in the consumer products and retail industry.”
Is Circuit City a good takeover target? Yes, but only if current management is set free to “pursue other opportunities”. I have repeatedly written about management’s missteps and until it is clear they are gone, any speculation on the chain’s recovery because of who owns shares is a total gamble. I have said before CC has a great brand, good stores in great locations but they are just abysmally run.
Different people owning shares will not change that.
Disclosure (“none” means no position): None
The TCW Group, formerly Circuit City’s (CC) largest institutional investor, slashed its 10.9% stake (reported in August)in the soon to be bankrupt retailer to .2% according to a Securities and Exchange Commission filing Thursday.
TCW cashed out losing approximately $128 million on its investment since last summer. They did not issue a comment regarding the sale probably because they, like I, are left wondering not only how CEO Schonoover still has a job, but how he managed to get multi-million dollar retention bonuses to the management that has ruined the compnay pass the board.
When you consider Best Buy (BBY) only scratched out a 1.5% sales gain this holiday season which is low when you consider out thirst for electronic devices currently, one has to wonder how many days CC has left. Best Buy is clearly the class of the space and to call CC a “distant second” is really just giving it far too much credit.
I have blogged about CC a bit in the past and will continue to do so until Schonoover is gone.
Why? They should be making money!! They have both the foot traffic and online site traffic to compete yet don’t. They have the locations and the PR to make money yet do not. The ONLY reason shareholders are suffering is due to Schonoover’s incompetence. Period..
With the stock at these levels, a change at the top would turn it around immediately… until that happens… I’m here..
Disclosure: None
UPGRADES
Gold Fields GFI CIBC Wrld Mkts Sector Underperform » Sector Perform
Yamana Gold AUY CIBC Wrld Mkts Sector Perform » Sector Outperform
Agnico-Eagle Mines AEM CIBC Wrld Mkts Sector Perform » Sector Outperform
Kinross Gold KGC CIBC Wrld Mkts Sector Perform » Sector Outperform
Avocent AVCT Needham & Co Hold » Buy
Dime Community DCOM Stifel Nicolaus Sell » Hold
Baxter BAX Citigroup Hold » Buy
Helen of Troy HELE Jefferies & Co Hold » Buy
Western Refining WNR Deutsche Securities Sell » Hold
Dassault Systems DASTY Deutsche Securities Hold » Buy
Hutchison Telcom HTX Citigroup Sell » Buy
Satyam Computer SAY Lehman Brothers Underweight » Overweight
Wipro WIT Lehman Brothers Underweight » Overweight
Infosys INFY Lehman Brothers Equal-weight » Overweight
Avocent AVCT Robert W. Baird Neutral » Outperform
Fed Investors FII UBS Neutral » Buy
Starbucks SBUX Banc of America Sec Sell » Neutral
DOWNGRADES
Teradyne TER AmTech Research Buy » Neutral
Novellus NVLS AmTech Research Buy » Neutral
Lam Research LRCX AmTech Research Buy » Neutral
Kulicke & Soffa KLIC AmTech Research Buy » Neutral
KLA-Tencor KLAC AmTech Research Buy » Neutral
Intevac IVAC AmTech Research Buy » Neutral
FEI Company FEIC AmTech Research Buy » Neutral
Applied Materials AMAT AmTech Research Buy » Neutral
MIPS Techs MIPS Longbow Buy » Neutral
ViaSat VSAT Collins Stewart Buy » Market Perform
Western Digital WDC Caris & Company Buy » Average
Seagate Tech STX Caris & Company Above Average » Below Average
Pharmasset VRUS Stifel Nicolaus Buy » Hold
Circuit City CC Cowen & Co Outperform » Neutral
Best Buy BBY Cowen & Co Outperform » Neutral
Brinker EAT KeyBanc Capital Mkts Hold » Underweight
Intuitive Surgical ISRG Wachovia Outperform » Mkt Perform
Shoretel SHOR Janney Mntgmy Scott Buy » Neutral
Disclosure:
These stats represent the post Christmas rush.
1. www.walmart.com (WMT)= 7.56%
2. www.bestbuy.com (BBY)= 4.76%
3. www.target.com (TGT)= 4.33%
4. www.circuitcity.com (CC) = 3.07%
5. www.sears.com (SHLD)= 2.25%
6. www.jcpenney.com (JCP)= 2.02%
7. www.macys.com (M) = 1.5%
8. www.kohls.com (KSS)= 1.35%
9. www.homedepot.com (HD) = 1.21%
Couple points. Wal-Mart is still the king and actually gained ground on Amazon (AMZN) who saw a significant decline post Christmas (almost two percentage points).
I am still t a lost to understand how Circuit City can be losing money. The traffic was there all season, they had eyes on their products. They just could not sell them. It is not a “sales associate” problem because they do not come into play online, it was a pricing issue. When online, price win because comparative shopping is easy to do. Circuit City just had their items mis-priced. Simple.
Home Depot made the list for the first time since I began tracking which may mean people began their winter indoor projects. This bears watching as a Home Depot climb up the chart is good for the economy as a whole. It would also be a good omen for the housing markets.
Date from Hitwise