Rise and shine, bargain hunters. Christmas shopping season has started (even though the turkey's yet to be plucked), and it's time to get dressed and head out the door if you're to snag the best gifts for your friends and family. And speaking of shopping, investors will want to be up bright and early Friday morning -- maybe not to shop, but certainly to read over the earnings report from Motley Fool Hidden Gems Watch List stock Cost Plus (NASDAQ:CPWM).
It still might not be easy getting a place in line for this one, because even though it's a less-than-$400 million market cap stock, this little company has attracted a huge following in the analyst community. The company sells less than $1 billion worth of stuff in any given year, but it had 19 analysts following it at last count. That's nearly as many as track the fortunes of competitors Pier 1 (NYSE:PIR) and Bed Bath & Beyond (NASDAQ:BBBY), each of which is more than twice Cost Plus' size by both sales and market cap.
Not that all of the analyst attention will necessarily work to the benefit of Cost Plus, or its shareholders. I suspect that much of tomorrow's crowd will be made up more of window shoppers than of smart shoppers. Wall Street isn't voicing a whole lot of confidence in Cost Plus these days -- with good reason.
Projections currently call for Cost Plus to lose $0.12 per share Friday, a reversal of the $0.02-per-share profit the company earned in Q3 2004. Granted, we are talking about a retailer here and, thus, a company that earns most of any given year's profits in Q4. Also granted, the turkey hasn't been carved yet in Q4, so most of those profits are still weeks away from being booked. Final concession: Analysts do believe that by year-end, Cost Plus will end up booking a $1.08-per-share profit.
Those analysts may or may not end up being right when profits according to generally accepted accounting principles are reported next January, but to this Fool, Cost Plus just plain costs too much. The reason: Whatever the GAAP numbers tell you, the simple fact of the matter is that Cost Plus is not making any money for its owners. Over the past 12 months, the company burned through $50.9 million in free cash flow -- orders of magnitude $16.4 million worse than its performance in the 12 previous months, when free cash flow was also negative. Unless and until that trend changes, there's just no reason to invest in this business.
Browse the aisles of past Foolish writing on Cost Plus in:
Fool contributor Rich Smith has no position in any company named above.
