You got the Foolish Forecast on 1-800 CONTACTS
For the fourth quarter, 1-800 CONTACTS saw an increase in top-line revenues of 2.7%, coming in at $55.4 million. There was an operating loss of approximately $0.3 million this quarter versus an operating profit of $3.0 million one year ago. A net loss of $2.3 million ($0.17 per diluted share) compares very unfavorably with the net profit of $1.4 million ($0.10 per diluted share) seen last time around.
For the full year, revenues increased 12.4% to $238 million. Operating income jumped 68.6% to $5.7 million. The company saw a much wider net loss this year of $2.6 million ($0.20 per diluted share) versus a net loss of $0.6 million ($0.05 per diluted share) for the previous fiscal year.
As can be seen, the results were hampered by a lot of costs, expenses, and tax provisions. The company indicated that gross margins for the U.S. retail segment in both the quarter and the full year experienced decreases. In addition, the ClearLab international operation experienced wider losses of $4.1 million and $9.4 million for the quarter and full year, respectively.
Aside from the double-digit revenue and operating-income growth in 2005, 1-800 CONTACTS doesn't seem like any sort of gem at the moment. The operating losses and net losses just don't inspire any sort of confidence. Plus, a check of the latest 10-Q shows that the company's capital expenditures have exceeded its net cash from operations, providing no free cash flow.
One of the problems 1-800 CONTACTS has faced in recent years is a legislative one. It's had to fight to protect its business model from "doctors only" lenses. The company provided an update on this front, highlighting a bill passed in Utah. The company also stated that it will support further legislative initiatives that allow the consumer more choice for lenses, an obvious benefit to its operations.
With the "doctors only" issue, the red ink, and the general malaise of the overall business, 1-800 CONTACTS isn't the kind of stock an individual would want to speculate on in the context of a long-term portfolio -- there's neither a growth nor an income/dividend story here. I have to echo the tone of Rich Smith's aforementioned Foolish Forecast -- I am, unfortunately, a downer on the prospects of this company as an investment idea.