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Super-hip clothing retailer Gap Inc. (NYSE: GPS) said same-store sales for March fell 11% compared to a 21% increase last year. The company said March results were hit by the shift of the Easter selling weeks into April, versus March last year. Also, comparable-store sales for Gap's domestic business were hurt by lower markdowns this year. More Foolishness
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The Santa Clara, California company reported that first-quarter net income (excluding one-time charges and gains) more than tripled to $63 million, or $0.10 per diluted share, from $17.7 million, or $0.03 per diluted share, a year ago. Yahoo! beat analyst estimates by a penny, according to First Call/Thomson.
Revenues grew 120% to $228 million from $103.8 million a year ago, ahead of the $204 million to $210 million target analysts expected, according to The Wall Street Journal.
What really wowed investors was traffic growth. Page views jumped 40% to 625 million per day in March from 465 million in December. Yahoo!'s fast-growing market in Japan, which nearly doubled its average daily page views in the first quarter, contributed heavily to the company's page-view growth. Non-U.S. operations (excluding Yahoo! Japan) now represent 14% of total revenues.
What a business model. The company's gross margins stand at 86%. It has $1.2 billion in cash, and owns just $64 million in property, plant, and equipment. Talk about money for nothing.
Still, back out the company's investment income -- which I wouldn't even think of counting as core income -- and the company generated pro forma net income of $53.3 million (The cash flow statement isn't available yet). So Yahoo! has 625 million average daily page views, reaches more than 145 million people every month, operates in 23 countries, and made just $53 million last quarter.
Investors better hope page views multiply like rabbits for a long, long time. How else will Yahoo! ever make enough serious money to reward its expanding investor base? How many average daily page views or individual users will the company need to generate, say, $1 billion or $2 billion in net income? I have a hard time seeing this company earning big money over the long haul with its current business model.
In my opinion, Yahoo! needs to find other sources of revenue to reward shareholders over the next 10 years and to justify its current price. It's looking for those sources, to be sure, but as more and more Internet companies are learning, there's a big difference between talking about monetizing a user base and actually doing it.
Tune in for Matt Richey's in-depth report on Yahoo!'s earnings in tonight's Fool on the Hill column.
To stem a falling stock price and investor fears about liquidity, insurance and financial services company Conseco (NYSE: CNC) issued a statement saying it has adequate liquidity to fund loan originations and meet its cash needs.
Discount retailer Kmart (NYSE: KM) said March sales increased 0.1% to $3.1 billion, compared with $3.050 billion for the same period last year. Total sales decreased 1.2% on a comparable-store basis. "As we expected, Kmart's comparable sales for March declined because of the Easter holiday shift,'' said Floyd Hall, Kmart's chairman, president, and CEO.
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