Foolish Forecast: Franklin Covey Looks for Motivation

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Franklin Covey (NYSE: FC) operates in the attractive, growing industry of promoting corporate and individual effectiveness via a wide array of retail products and related training and consulting programs. Yet for some strange reason, the company is a case study in a business model gone bad. Tomorrow's third-quarter earnings release will detail whether management has finally learned anything from its acclaimed 7 Habits of Highly Effective People training seminar.

What analysts say:

• Buy, sell, or waffle? Fools are on their own; no analysts have any interest in following Franklin Covey.

What management says:
For as long as investors can remember, Franklin Covey has proven highly ineffective in growing sales and profitability. Management has been closing stores to stem the slide in retail sales but "may continue to experience" lower store traffic, higher-than-expected operating expenses, and inventory losses from unpopular store merchandise.  

What management does:
Total 2006 company sales came in about 16% below 2002 levels, as falling retail sales continue to offset steady catalog and Internet sales and lucrative motivational training and consulting revenue. Even organizational and time-management software that works with Microsoft (Nasdaq: MSFT) platforms and Palm (Nasdaq: PALM) hardware has failed to catch on with consumers. Plus, the company must continually pay hefty preferred stock dividends, although it has been actively buying back preferred shares.

Margins	10/05	01/06	04/06	07/06	10/06	01/07
Gross	59.9%	60.0%	59.9%	60.1%	60.1%	60.1%
Operating	3.7%	3.5%	3.2%	5.3%	5.1%	4.9%
Net*	4.1%	5.0%	4.3%	10.0%	9.5%	7.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Franklin Covey's single-digit trailing price-to-earnings multiple should be a fleeting statistic, since the company has consistently posted bottom-line losses after deducting preferred stock dividends. With no analyst coverage and a dubious track record of positive growth, Franklin Covey looks to be in a constant uphill battle to increase its share of the $15 billion market to improve corporate and consumer effectiveness and productivity.

For more related Foolishness:

• Franklin Covey: Not So Highly Effective
• Microsoft Plays Catch-Up
• Palm Hears Crickets

Microsoft is an Inside Value pick, while Palm got the nod from Stock Advisor. Try any of our Foolish newsletters free for 30 days.

Fool contributor Ryan Fuhrmann is long shares of Microsoft, but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.