Well, whaddya know? It seems there was a bottom.
For a while there, after the stock of financial and legal consultant Resources Connection
- Fiscal Q1 2008 revenue up 18% to $191.4 million (so far, so good ... )
- International revenue leading the charge, up 31% year over year (OK ... )
- Fiscal Q1 earnings up less than 5% (whoopsy daisy!) to just $0.23 per share.
That makes for -- let me check my calculator -- a 5.9% net margin for the quarter. Which would be cause for popping champagne corks if we were talking about "Always Low Margins. Always" king Wal-Mart, but is a bit less cause for rejoicing at a firm that in fiscal 2005 netted 10.4% profit on its revenue.
Margins slip so employees won't
Indeed, margins were the big story at Resources Connection this quarter, with management blaming its disappointing profits on -- I kid you not -- "increased vacation benefits for a majority of our associates and a decrease in conversion fees which carry a 100% gross margin."
Let's put aside for the moment the question of just what the heck a "conversion fee" is (Hint: Read the 10-K annual report, and you'll learn it's essentially a headhunter's commission that Resources bills for itself whenever one of its clients wants to poach an employee from Resources' employ). I must admit, this is the first time I have ever seen a company blame an earnings miss on: "Our employees needed a nap." But when you get right down to it, I have to say I get where Resources is coming from on this one.
Working in the legal field (my day job), I'm well-acquainted with the phenomenon of highly educated professionals taking highly paid jobs in an effort to repay highly high student loans. Very often, such workers work round the clock, last a year, perhaps two -- and then burn out and quit. I wouldn't be at all surprised to hear that the same thing happens at firms like Resources, BearingPoint
For a firm that is quite literally the sum of its parts (the employees), and that cannot thrive if there is constant turnover in the ranks, Resources must do what it takes to keep those employees happy. Even if that means missing an earnings estimate.