Last quarter, American Greetings
Sales have been suffering for some time now, and they aren't getting any better. For the fourth quarter of fiscal 2006, the company's top line increased 4.9% year over year. American Greetings continues to struggle on multiple fronts, but its gift-wrap business was once again highlighted as particularly weak.
The card business remains key for American Greetings. Currently, more than 50% of its revenues come from cards, so the company obviously must concentrate its efforts here to have any chance of a turnaround. Last quarter, management indicated that fiscal 2007 would receive $70 million to $100 million in charges to implement the new strategy. In the most recent conference call, it narrowed these charges down to roughly $75 million. Approximately a third of these expenses will be associated with the merchandising and delivery of its new card initiative.
Management also advised shareholders to expect most of these charges in the latter half of the year. But given the dynamics of dealing with so many retail partners, the company cautioned that it is impossible to provide an exact timeline for the rollout. After all is said and done, American Greetings hopes that its revamped product lineup and merchandising strategy will lead to improved top-line results.
How should investors approach this stock while American Greetings implements its turnaround strategy? I recommend that Fools keep looking elsewhere for investment possibilities. But if the greeting card bug has bitten you for some strange reason, consider the following scenario.
American Greetings is planning to reduce its share count 30% by the end of this fiscal year. Couple this with the new-product rollout, which should be in full swing by the holidays, and next fiscal year could benefit from both better-top line performance and significantly improved earnings-per-share results. If this projection becomes reality, shareholders could finally see some relief for this stock.
That said, I'm not willing to call it a comeback -- until I see that American Greetings can actually pull it off.
Fool contributor Jeremy MacNealy does not have any financial interest in any companies mentioned.
