Tag: CC

Here are today’s 52 week lows. home builders all hit new lows today, I just am sick of putting them down everyday. If you own them, assume they hit a new low today and will again tomorrow.

TRMP Trump Entertainment Resorts Inc
TRB Tribune Company
WB Wachovia Corp
SHFL Shuffle Master Inc
SEPR Sepracor Inc
PLCE Childrens Place
PKTR Packeteer Inc
PHM Pulte Homes Inc
PFK Prudential Financial Inc
NFLX Netflix, Inc
JOE St. Joe Company
HSY Hershey Foods Corporation
CC Circuit City Stores

More blood in the streets for homebuilders and regional banks

WBS Webster Financial Corp
WB Wachovia Corp
WAL Western Alliance Bancorp
PHM Pulte Homes Inc
PFS Provident Finl Svcs Inc
LEN Lennar Corporation
KEY KeyCorp (New)
KBH Kb Home
DHI D.R. Horton, Inc
CC Circuit City Stores
BZH Beazer Homes USA, Inc
MTH Meritage Homes Corp
STSA Sterling Financial Corp
SHFL Shuffle Master Inc
CRBC Citizens Banking Corp …
COBZ Cobiz Financial Inc
CHFC Chemical Financial Co
CEBK Central Bancorp Inc Mass
CCBD Community Central Bank
CBSH Commerce Bancshares Inc

The past week and a half I have been doing updates on previous posts ans since Circuit City reported earnings Tuesday, it is as good a time as any to update that post.

In my early May post, I speculated that Circuit City (CC) was “ripe for a buyout”. Has anything changed?

May,11th:

“Shares, now down almost 50% in the past year are priced for a buyout and have great value, sans current Management. CC is sitting on $4.05 a share in cash (after LT debt is subtracted), $2.94 a share in owned inventory and last year generated another $2.11 a share in cash from operations. At today’s price of $16.72, the cash on hand and value of the owned inventory would give a buyer a 42% return almost immediately or, assuming a buyer would have to pay a premium for the shares, CC’s cash and inventory values would more than finance it.”

Now:

Shares have been flat lined since then (currently $15.82) despite the just recently announced $82 million loss (33 cents a share) vs last years $8 million profit (3 cents). What does this mean? Shares do not have much more downside. Cash on hand has been cut in half and debt remains the same, irrelevant and owned inventory levels are the same. Should you buy CC now? I would stay away as long as current management is there. They have withdrawn all guidance for the year. They did this not for the same reason Eddie Lampert at Sears (SHLD) or Julian Day and Radioshack (RSH), they did it because as they said “Combined with an uncertain macroeconomic environment, for the time being, it is difficult to project sales and earnings performance for the balance of the fiscal year. As a result, we are withdrawing financial guidance at this time,” said CEO Philip Schoonover. Translation? We have no idea what is going to happen from here. While I applaud their honesty, they should have an idea of what is going to happen.

As a trade, any good news could vault shares up immediately. But, I do not see the conditions that could create that good news anytime soon. Maybe they could get bought out and that would cause shares to jump, but, I am reluctant to invest on the prayer someone rescues them. An Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now. Why pay a premium to the current price when in bankruptcy he could get it for a fraction of it?

At their current rate CC will be out of cash before Thanksgiving and then the fun really starts. This assumes they do not start ramping up debt to pay for operations and also assumes no further economic slowdown. Should the economy slide even more, see ya…

Best Buy (BBY) reports today, what should we expect? If we believe management, they predict fiscal 2008 earnings of $3.10 to $3.25 per diluted share on full-year sales of $39 billion (9% growth). Broken down, it will consist of an approximately 130 new stores and same-store sales growth of 3% to 5%.

For the current quarter, Q1 for 2008, the street is looking at 50 cents a share vs the 47 they posted last year. Been in a Best Buy lately? Still full of people, still busy and I see no reason they should not beat the expectations. With competition like Circuit City (CC) and Tweeter (who is now in bankruptcy) falling by the wayside so fast you would swear they were racing to get there, Best Buy clearly is the king of the hill.

The only serious competition for shopper’s value left is Costco (COST), Wal-Mart (WMT) and Sears (SHLD) but even they cannot hold a candle to Best Buy in term of selection. Best Buy is in a field of one here now. With the recent announcement that they will provide Apple (AAPL) a “store in store” concept soon, this gap only looks to widen.

Best Buy’s earnings become more important each quarter because if they are not doing well, the entire consumer electronics space is suffering. A word of caution, since they do not issue quarterly guidance, if they do miss, pay close attention to what they say for the rest of the year. If they miss and guide inline for the remainder of the year, don’t worry, it was the analyst who missed, not them.

Should they miss and guide lower? Watch for blood in the retail street today.

Circuit City (CC) released results last Monday an holding true to current managements history, they disappointed. They restated earnings for the past two quarters and revised its guidance for fiscal 2008. The restatement of earnings took a backseat to news of “substantially below-plan sales” of large flat panel and projection TVs in April, resulting in a larger forecast loss from continuing operations before taxes of $80 million – $90m for Q1’08 (ending in May). It withdrew its previous guidance of an H1 loss of $40m – $50m with a “strong recovery in the second half.” Circuit City said if business trends improve and restructuring efforts are effective, then it expects FY’08 earnings from continuing operations (before taxes) as a percentage of sales at the low end of its prior forecast of 1.4% to 1.8%. News now has them replacing the 3,000 highest paid associates.

Shares, now down almost 50% in the past year are priced for a buyout and have great value, sans current management. CC is sitting on $4.05 a share in cash (after LT debt is subtracted), $2.94 a share in owned inventory and last year generated another $2.11 a share in cash from operations. At today’s price of $16.72, the cash on hand and value of the owned inventory would give a buyer a 42% return almost immediately or, assuming a buyer would have to pay a premium for the shares, CC’s cash and inventory values would more than finance it.

Act one of the new buyers would be to show current management the door. Julian Day at RadioShack (RSH) has shown what good management can do for investors and a buyer of Circuit City woulds have the same opportunity. CC has appealing stores in good locations with a nice product mix, they are just abysmally run.