It's always amusing to see how companies try to sugarcoat poor earnings reports. American Greetings
American Greetings' sales continue to be in a funk, declining 4.7% compared with the same period a year ago. And because of an impairment charge that amounted to $0.42 per share, for the quarter it earned $0.20 vs. $0.91 this time last year. The biggest drag on revenues was from weak international sales, specifically from Great Britain, and from "softness" in its gift-wrap unit. The company did highlight its online business as a source of strength.
Lagging sales should come as no surprise -- the company's growth hasn't exactly been on the fast track. What was a bit of surprise, however, is that management still identified its greetings card business as a source for potential growth. To capitalize on the perceived opportunity, the company will invest $70 million to $100 million over the next couple years to change the "design" and "display" of its cards. Perhaps there is a Festivus in store for future card shoppers. But current shareholders looking for a party anytime soon will be disappointed to hear that as a result of this effort, earnings next fiscal year will be significantly depressed.
Until its shop doors are finally closed, I'm hesitant to call any company non-salvageable. Apple
In the meantime, my recommendation to Foolish investors is to let the company prove it. American Greetings is maintaining stable gross margins and a strong cash balance (albeit free cash flow remains negative year to date), but the primary problem remains growth. And until it can prove that it has found a successful strategy to kick-start its top line, my Foolish bottom line is to focus your investment efforts on the Apples of Wall Street.
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Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.