Friday, April 9, 1999
DJIA 10140.81 -56.89 (-0.56%) S&P 500 1341.78 -2.20 (-0.16%) Nasdaq 2576.09 +2.70 (+0.10%) Russell 2000 400.92 +1.03 (+0.26%) 30-Year Bond 97 7/32 +2/32 5.44 Yield

An Investment Opinion
by Dale Wettlaufer

Same-Store Sales Questions

Is the market ever wrong? Some investors take off on the Ben Graham analogy of Mr. Market and treat the market as perpetually bipolar. It's either manic or depressive but never rational. Personally, I don't believe that. I think those emotions are the exception and not the rule. Otherwise, securities prices would be wrong most of the time and only occasionally correct. The market is an efficient mechanism for setting prices over the long-term, but over the short term it can be incorrect, I believe. Which gets me to today's subject: What was with same-store sales in March? Click here for the data.

Due to the interplay of Christian ritual and the lunar cycle, Easter can fall anywhere from late March through late April. Last year, Easter fell on April 12. The commercial ritual of reporting same-store sales, then, is affected by these calendar peculiarities and our own cultural peculiarities of celebrating the holiday. With Easter falling on the fourth of April this year, March same-store sales through April 3 showed a huge jump this year. That's the hypothesis, anyway. Let's first look at drugstores.

March same-store sales Total March sales
(+/- in percentage)

CVS/Revco +16.9 +22.5
Eckerd Drug +16.8 +26.3
Walgreen +15.6 +21.1

Now let's look at the data from last year. Note these are not pro-forma numbers from last year but are as presented last year:

CVS/Revco +3.0 +1.0
Eckerd Drug +4.4 +5.9
Walgreen +4.1 +9.3

So what did these stocks do yesterday? CVS (NYSE: CVS) was up 5%, Eckerd parent J.C. Penney (NYSE: JCP) didn't do much of anything, and Walgreen (NYSE: WAG) was up 2.8%. Was the market wrong on these, or does it adjust for these calendar effects and then re-price the stocks based on outperformance/underperformance of properly adjusted expectations? The distribution of sales of candy and other Easter accoutrements make for unclear data.

On some other retailers that might be affected by the calendar, we saw some big numbers.

March same-store sales Total March sales
(+/- in percentage)

Wal-Mart (NYSE: WMT) +11.3 +18.3
Gap (NYSE: GPS) +21.0 +43.0
Costco (Nasdaq: COST) +8.0 +12.0
Ann Taylor (NYSE: ANN) +21.0 +30.5
Men's Wearhouse
(Nasdaq: SUIT) +9.1 +14.6

And then the stock prices (percentage move) from yesterday:

Wal-Mart +4.5
Gap: +0.9
Costco: -1.7
Ann Taylor: +3.3
Men's Wearhouse: +6.8

For Costco (Nasdaq: COST), however, Easter hurt sales: "This year's five-week period included 34 days of sales compared to 35 days during the year-earlier period, reflecting the timing of Easter, which negatively impacted sales by approximately 2 percent." Apparently, men and women shop for Easter suits in advance of the holiday and people shop for candy and egg decorating things in advance, but Easter's falling early this year hurts some stores' results. The data is pretty unclear to me. If you have industry experience, I'd like to solicit your commentary on the subject -- click here to send me an email. I'll edit out anything that identifies the individual and compile the emails for re-publication, which will benefit anyone wondering how to look at these results properly.


Scalable Internet search and caching software developer Inktomi Corp. (Nasdaq: INKT) added $17 3/8 to $122 after saying its Inktomi Shopping Engine online shopping platform has signed agreements with five new portal sites and over 350 online merchants offering more than 2 million products over the Internet.

Semiconductor automatic test equipment manufacturer Teradyne (NYSE: TER) advanced $2 5/8 to $59 7/8 after chip and mobile communications products maker Motorola (NYSE: MOT) signed a three-year equipment purchase agreement with the company covering all of Teradyne's Semiconductor Test Group's products and services.

Wholesale pharmaceuticals distributor AmeriSource Health Corp. (NYSE: AAS) rose $1 3/4 to $28 after saying it expects its fiscal Q2 earnings to be in line with the $0.40 per share currently expected by analysts. Additionally, the company forecasted at least 20% EPS growth for the second half of fiscal 1999 and beyond.

Online community operator theglobe.com (Nasdaq: TGLO) gained $22 to $81 after announcing a 2-for-1 stock split, effective May 14.

Telecommunications networking services company e.spire Communications (Nasdaq: ESPI) picked up $1 7/8 to $14 7/16 after Business Week's "Inside Wall Street" column speculated that the company might be a takeover target with its share price recently 38% below its 52-week high set last summer.

Electronic payment technologies firm Bottomline Technologies (Nasdaq: EPAY) tacked on $7 5/8 to $68 3/8 after signing an alliance with enterprise resource planning (ERP) software developer PeopleSoft (Nasdaq: PSFT) to provide PeopleSoft's clients with Bottomline's PayBase 32 suite of e-commerce enabling products.

SkyWest Inc. (Nasdaq: SKYW), which provides carrier service for Delta Air Lines' (NYSE: DAL) Delta Connection regional airline, gained $1 11/16 to $25 9/16 after Merrill Lynch boosted its near-term rating on the company to "buy" from "accumulate."


Manufactured housing maker and marketer Oakwood Homes (NYSE: OH) collapsed $5/8 to $12 1/16 after the company said it expects fiscal Q2 EPS of between $0.17 and $0.22, missing the market's $0.27 consensus projection. "Although our business improved steadily with March revenues above plan," said CEO Nicholas St. George, "we were unable to completely make up for the shortfall from expected sales in January and early February."

Biotechnology firm Genentech (NYSE: GNE) lost $1 5/16 to $84 3/16 this morning. The company said late-stage trials of its recombinant human nerve growth factor for use in treating patients with diabetic peripheral neuropathy didn't meet its goals, so it won't be filing a biologics license application with the Food and Drug Administration. Genentech is also in talks with a U.S. attorney regarding a possible $50 million settlement to end the government's investigation into the company's promotion of human growth hormone between 1985 and 1994 for uses that had not been approved by FDA. Any settlement would be recorded as a one-time charge and would not have "any ongoing financial impact."

Healthcare management information systems company Cerner Corp. (Nasdaq: CERN) dropped $3 1/4 to $11 13/16 after saying Q1 EPS is seen between $0.06 and $0.09, missing First Call's $0.16 consensus estimate. The company blamed deferred purchase decisions, much as it did in reporting Q4 earnings two months ago.

Biopharmaceutical company Biogen (Nasdaq: BGEN), a recent Foolish Double, lost $6 3/8 to $113 5/8 after last night reporting Q1 EPS of $0.58, in line with First Call's mean estimate. At least two brokerages downgraded the stock this morning, Hambrecht & Quist to "market perform" from "buy" and BancBoston Robertson Stephens to "long-term attractive" from "buy."

IBM (NYSE: IBM) put down $1 1/8 to $185 7/8 following the news that it will begin selling its full line of personal computers and small computer servers via the Internet starting in May. The company said broadening online sales will help reduce handling costs by about 5% at its PC unit, which lost $992 million before taxes last year. Currently, online sales make up some 20% of sales at IBM's PC unit; the company hopes to raise that number to around 40% in the next two years. More on this in today's Breakfast With the Fool.

Intravascular ultrasound imaging products maker EndoSonics Corp. (Nasdaq: ESON) faded $2 to $5 1/4 after it said Q1 EPS is expected to come in at about $0.05, $0.02 below the First Call mean estimate. Analysts were looking for revenues of about $2 million; the company anticipates an $800,000 mark. CEO Reinhard Warnking said regulatory delays, mainly in Japan, and the need to accelerate WaveWire product revenue are expected to slow EndoSonics' growth rate in the short term.

Music retailer National Record Mart (Nasdaq: NRMI), which said March same-store sales rose 2.5% to $7.5 million, gave back $1 5/8 to $8 7/8 this morning. Total sales for the month were up 22.6% to $9.2 million. For a rundown of March retail sales figures, click here.

Online direct marketing company Xoom.com (Nasdaq: XMCM) slipped $2 1/2 to $67 7/16 after it completed an offering of 4 million shares of company stock for $66 per share, about a 6% discount to yesterday's closing price. The new shares boost the total currently outstanding by about 30%.

Personal finance software developer Intuit (Nasdaq: INTU) shed $4 1/4 to $106 after Credit Suisse First Boston downgraded the stock to "buy" from "strong buy," reportedly because of valuation.

Internet retailer Value America Inc. (Nasdaq: VUSA) lost $3 1/16 to $52 1/8 after picking up $32 3/16 yesterday in its first day of trading. The company sold 5.5 million shares for $23 each.

Consumer textiles company Fruit of the Loom (NYSE: FTL), downgraded to "buy" from "strong buy" at Credit Suisse First Boston, wrinkled $1 1/16 to $9 11/16 this morning.

Chemical company Union Carbide (NYSE: UK) bubbled off $3 to $48 3/8 after Morgan Stanley Dean Witter downgraded the stock to "neutral" from "outperform."


Please see the Motley Fool's Conference Calls page for call information and links to synopses.


Click here for continually updated Portfolio Numbers.

Change the World... work for the Fool.

See something moving a stock that we didn't cover?
E-mail the Fool News Team
and we will start working on the story.
Unfortunately, we cannot answer every e-mail
or respond to individual questions.

Contributing Writers
Brian Graney (TMF Panic), a Fool
David Marino-Nachison (TMF Braden), a new Fool

Brian Bauer (TMF Hoops), another Fool
Bob Bobala (TMF Bobala), a Fool's Fool
Jennifer Silber (TMF Amused), Fool at last