It's been more than a year since 1-800 Contacts (NASDAQ:CTAC) last reported a "successful" quarter -- one in which it at least managed to match the earnings estimates prepared for it by Wall Street. Can the company break its losing streak? Tune in tomorrow after market-close to find out.

What analysts say:

  • Buy, sell, or waffle? One analyst follows the stock. One analyst says sell it.
  • Revenues & earnings. According to Yahoo! Finance, no analysts have published revenue or earnings estimates for the company.

What management says:
1-800 Contacts' last earnings report, and the reaction thereto by my Foolish colleague Steven Mallas, provide a study in contrast. On one hand, we hear CEO Jonathan Coon boasting that 1-800 Contacts enjoys "18 times the unaided brand recognition of our nearest Internet or mail-order competitor." He argues forcefully that "consumers would rather get the best price from a brand they know and trust than order from a company that they have never heard of."

It's hard to argue with that logic. Customers could indeed love 1-800 Contacts.

What management does:
But even so, it's not translating into particularly impressive results on the financial statements. As Steven pointed out, 1-800 Contacts grew its revenues 3% year over year in Q4, but lost money anyway. Its ClearLab lens-manufacturing business alone lost $4.1 million on sales of $4.7 million, and Coons expected it to lose another $2.5 million to $3 million for the company in the quarter being reported tomorrow. Overall, the last four quarters have seen rolling totals for gross, operating, and net margins all decline.

Margins %

10/04

1/05

4/05

7/05

10/05

12/05

Gross

38.4

38.7

38.5

38.5

38.4

37.3

Op.

0.1

1.6

3.5

4.6

3.8

2.4

Net

(1.4)

(0.3)

0.8

1.3

0.4

(1.1)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
1-800 Contacts continues to devote substantial portions of its earnings releases to discussing the issue of "doctors only" lenses. In the Q4 earnings report, the company came right out and effectively named the manufacturer that is allegedly conspiring with optometrists to have them prescribe only its lenses -- thus preventing consumers from buying equivalent lenses from 1-800 Contacts and other independent vendors.

The offender, which I've identified from the brand name "ProClear" cited in Coons' statement, seems to be CooperVision, an arm of Cooper Companies (NYSE:COO). 1-800 Contacts cites some legislative progress in opening up the sales channels, so that consumers can fill prescriptions tailored to these lenses with other vendors, but nothing has been finalized yet.

Competitors

Suppliers

Bausch & Lomb (NYSE:BOL)

Bausch & Lomb

Johnson & Johnson (NYSE:JNJ)

Johnson & Johnson

Wal-Mart (NYSE:WMT)

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Costco (NASDAQ:COST)



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Fool contributor Rich Smith does not own shares of any company named above.