Way too many stocks in the retail space have been in a bad funk lately. I'm not just talking about the chain stores at the mall. I'm casting a wide net here and covering all retail-oriented companies, from shops to eateries to the companies stocking the shelves.
Since it was a busy week on the news front for many of these out-of-favor, low-priced stocks that don't get a lot of standalone coverage around Fooldom, I figured I'd highlight some of the things going on at a few of these bargain-basement-priced companies.
Let's begin ...
Cheap comfort food is never in short supply at your local Denny's restaurant. And it's not just the food that's inexpensive. The casual-dining chain came through with a report that wasn't all that shabby.
Sure, revenue fell by 6.5% compared with last year, to $241.4 million, but that was the result of selling nearly two dozen company-owned locations to franchisees. In reality, comps rose, the company scored another quarterly profit, and asset sales helped Denny's beef up its balance sheet by buying back some debt.
You may not remember what you ordered the last time you stumbled into a Denny's in the wee hours, but Denny's itself seems to know exactly what it's ordering.
The educational-toy maker used to be the envy of the industry when its LeapPads were jumping off the toy stores' shelves. Then the "me too" products hit the market, and fickle kids moved on to different diversions.
So it doesn't trouble me to see net sales having taken another dip in yesterday's earnings report. What I like here is that losses have narrowed substantially. Don't get me wrong -- this is not a pretty situation. The company is hobbling into the critical holiday shopping season. While I think that some of its products -- like the recently upgraded Fly pentop computer -- are pretty revolutionary, I think you should wait until either net sales start inching higher or profitability returns before you start fishing around for this submerged amphibian.
Pier 1 Imports
Home decor may be dead, but Tuesday's Wall Street Journal had a pretty upbeat article on Pier 1's turnaround prospects. The story reports favorably on some of the moves that recently hired CEO Alex Smith has made.
The company is cleaning house by shaving costs, replacing costly television ad campaigns with targeted mailings, and taking chances with what it stocks in its stores. So is it time for Pier 1 to thrive again? Well, it's going to take a lot to get this home-decor retailer back in the market's good graces. Pier 1 began slumping even when the housing market was going through the roof -- and if you can't hit it out of the park when giddy homebuyers are loading up on new furniture and accessories, when will you do it?
Then again, that's also the point of bringing in someone new at the helm -- especially someone like Smith, who's willing to mix up the wares. Pier 1 remains speculative, but keep an eye on this one as a potential turnaround story. Maybe its fortunes will turn even before those of the housing market do.
Back Yard Burgers
What do you do if you have a private buyout offer set to expire on Halloween -- and it's Halloween? Well, Back Yard Burgers did the right thing. It simply got together with its proposed buyer and extended the deadline until next Monday.
Wall Street is sold that the deal will happen next week. Shares of the charbroiled-hamburger specialist are trading at pretty much the $6.50 cash buyout price. The deal should close on Monday, but don't be surprised if another target extension creeps in.
Unlike Pier 1, Haverty is a more conventional furniture retailer. That makes the company and its 123 furniture showroom a bit more susceptible to the housing market. You saw that in yesterday's earnings report, in which net sales fell as the result of a 12% decline in comps.
The prettier picture in the report is that the company did turn a profit. Haverty had closed every quarter in the black on this side of the millennium until posting a loss during this year's second quarter. The skies haven't cleared at Haverty, but at least it managed to pull itself out of the red rather quickly.
The closeout chain that routinely closes to restock its stores (hence the name -- it reopens on Tuesday mornings) was a winner on Wednesday. It posted ho-hum fiscal first-quarter results after a troubling quarter, but it padded that showing with an upbeat outlook for all of fiscal 2008, which ends next June.
The retailer is now looking to earn between $0.85 and $0.90 a share for the year, as long as comps are at least flat -- though they could go as high as 1.5%. The problem is that comps during the first quarter came in at negative 1.5%. It's going to take healthier gains throughout the year to meet that store-level goal.
Still, have you stacked up the guidance against the share price? Even after Wednesday's climb, Tuesday Morning is fetching just nine times this year's profit guidance.
Single-digit stocks with single-digit price-to-earnings multiples? Let the value hounds drool.