People say that hindsight is 20-20. Unfortunately, that's no help to shareholders of 1-800 CONTACTS
Wall Street Wisdom:
- General consensus. One analyst follows the stock. One analyst says sell it.
- Revenues. According to Yahoo! Finance, no analysts have published revenue estimates for the company. 1-800 CONTACTS booked $54 million in sales in the year-ago quarter, and its guidance of four months ago called for a sales decline to $50 million to $51 million in Q4.
- Earnings. Again, Yahoo! has no published estimates on the company. Earnings.com says the expectation is for breakeven results for the quarter ($0.00 profits); Capital IQ says the estimate for the year is a loss of $0.03 per share.
Margin watch:
All the above looks rather depressing, so let's take a different view of the company. According to the chart below, 1-800 CONTACTS' margins have recently been looking quite a bit stronger than they were 12-18 months ago. Although the gross number has barely budged, both operating and net margins are back in positive territory on a rolling basis (considering not just the quarter named, but also the three quarters previous to it.)
Margins % |
7/04 |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
---|---|---|---|---|---|---|
Gross |
38.5 |
38.4 |
38.7 |
38.5 |
38.5 |
38.4 |
Op. |
(1.5) |
0.1 |
1.6 |
3.5 |
4.6 |
3.8 |
Net |
(2.5) |
(1.4) |
(0.3) |
0.8 |
1.3 |
0.4 |
Foolish lookout:
According to 1-800 CONTACTS, though, all of the above numbers pale in significance to the real reason that the company is still only marginally profitable: optometrists prescribing lenses tied to a specific manufacturer -- who only sells them via the optometrist. In its last earnings report, 1-800 CONTACTS devoted two pages of text to describing its numbers -- and four pages to describing the problem of "doctor's lenses," and how it remains unresolved.
Absent news that the legislative situation has changed in the past four months, I suspect that tomorrow's results will look a lot like the numbers shown above.
Competitors:
To lesser and greater extents, 1-800 CONTACTS competes with drugstore.com
Fool contributor Rich Smith does not own shares in any company named above.